Jun 242017
 
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Fred Lyon San Francisco Cable Car rounding the curve at Jones Street 1946

 

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

 

 

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

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

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

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

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

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

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

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

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

First, Steve Keen…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Two Italian Zombie Banks Toppled Friday Night (WS)

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

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

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

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

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

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

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

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

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

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

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

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May has become a very damaging force in Britain.

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

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

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

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

Corbyn Vows To Force Early British Election (Ind.)

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

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

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

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

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

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

The Fed Needs to Acknowledge the Slowing Economy (DDMB)

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

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

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

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

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

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

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

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

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Hopeless.

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

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

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

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

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

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

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

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

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Greece must refuse.

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

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

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

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

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

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Jun 212017
 
 June 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »
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Fred Lyon Post&Powell Union Square San Francisco 1947

 

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

 

 

The numbers say it.

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

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

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

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

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

The Secret Source of Eternal Australian Growth (Steve Keen)

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

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

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

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

 

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

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

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

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

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

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

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

Where Are The Empty Homes In Kensington? (Whoownsengland)

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

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

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

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

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

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

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

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

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

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

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

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

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

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They’ll pass at some point.

House Republicans Block Russia Sanctions Bill (ZH)

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

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

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

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

We Are Inches From A New World War (Medium)

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

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

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

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

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

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The opposite of what America needs.

Iran Slams Tillerson Call For Regime Change (RT)

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

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

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

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No surprise here.

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

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

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

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

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

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

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

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

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

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

Europe’s Unserious Plan for Greece (BBG)

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

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

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

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While taxes have risen. An endless hole.

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

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

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

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

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

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

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

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Jun 202017
 
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Pablo Picasso Dans l’atelier 1954

 

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)
Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)
Absent Without Leave (Jim Kunstler)
Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)
Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)
Britiain’s Carmakers Face Brexit Cliff Edge (BBC)
UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)
UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)
China Cracks Down On Online Moneylenders Targeting Students (BBC)
China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)
Household Debt Sees Australian Banks Downgraded Again (ABCAu)
296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)
Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)
Could There Be A Bidding War For Whole Foods? (CNN)
Amazon Will Kill Your Local Grocer (BBG)

 

 

Funny how opinions of Russia revert to communism all the time.

Putin: US Routinely Meddles In Russian And Other Elections (Zuesse)

The neoconservative American Jan Wenner’s Rolling Stone magazine headlined on June 16th about these Showtime interviews, «10 Most WTF Things We Learned From Oliver Stone’s Putin Interviews», and sub-headlined: «From denying any involvement with U.S. election hacking to Putin’s love of Judo and Stalin, our takeaways from these truly baffling conversations».

Wenner’s reporter opened: “What’s the Russian equivalent of Kool-Aid? Whatever it is, it’s definitely red – and Oliver Stone has eagerly drunk it down. The trailers for The Putin Interviews, Showtime’s four-part series documenting conversations between Russian President Vladimir Putin and Stone, would have you believe that you’re going to hear some pretty hard-hitting stuff as the autocrat and the filmmaker face off, Frost-Nixon style. What we got instead was a series of softballs lobbed lovingly in the direction of one of the most powerful and dangerous men in the world. Except for a few moments, Stone seems serenely unconcerned with anything beyond flattering his subject – and engaging in some supremely one-sided exchanges about history and policy along the way.”

The term «red» in this context refers, of course, to communism, and alleges that Russia is still a communist country. To allow that type of smear to appear in any ‘news’ vehicle, is to expose itself as being actually a propaganda-vehicle, unless the allegation is backed up by solid documentation, which Wenner’s magazine didn’t do — Wenner’s magazine presented no documentation at all, for the inflammatory allegation. The magazine’s presumption was that their readers will simply believe what Wenner’s operation delivers, to be ipso-facto ‘true’.

But any such reader would be welcoming his own deception by Wenner’s propaganda-operation. Evidently, successful magazines can insult their own subscribers’ intelligence, so long as it’s done in ‘the right way’ — the subscribers won’t despise the publisher for trying to deceive them about such important matters as what countries to invade, or whether to invade, or why to invade. The U.S. military-industrial complex (MIC) can attract cannon-fodder for its operations, by means of such ‘news’ media to produce dupes for that MIC. During the 2016 U.S. Presidential campaign, Mr. Wenner’s propaganda-machine had ardently campaigned for the neoconservative Hillary Clinton against the moderately progressive Bernie Sanders in the U.S. Democratic Party primaries.

And, then, once she (and her friend Debbie Wasserman Schultz who ran the DNC) managed to steal the nomination from her opponent, Wenner’s operation campaigned for Ms. Clinton against her Republican opponent Trump, who claimed (falsely as it turns out, in lies exceeding Clinton’s own) to be opposed to neoconservatives (whom he has actually loaded into his Administration). Trump now relies upon neocons for his support, but perhaps Wenner and Robert Kagan and other neoconservatives won’t be satisfied until the U.S. government takes control over Russia — which cannot happen except upon all of our dead bodies (WW III) — which is precisely what Hillary Clinton was aiming for (and maybe Trump is, too). That’s how insane the U.S. aristocracy (and its PR organs such as Wenner’s) now is – they’re pushing the world toward nuclear Armageddon.

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There will come a point when Russia’s had enough. But they won’t shoot down US planes.

Russia To Consider US Planes In Syria As ‘Targets’ (News.AU)

Russia says it will now consider US planes in Syria as “aerial targets” and cease communications via a military hotline in a rapid escalation of tensions between the two nations. The Russian defence ministry released a statement Monday afternoon, local time, condemning the US for shooting down a Syrian warplane that had dropped bombs near ground forces supported by the US. The ministry said it would now track all US-led coalition jets and drones found west of the Euphrates River in Syria and treat them as targets. This is a significant development because, while it is not uncommon for the two nations to criticise each other politically, Russia stays in contact with the US-led coalition via a military hotline to ensure there is no unintended military conflict between the two powers in the region.

The statement says that Russia will no longer use the communication channel, designed to avoid incidents in Syrian airspace. “The command of the coalition forces did not use the established communication channel for preventing incidents in Syrian airspace,” the defence ministry said in the statement. Russia said it would now “end co-operation with the American side”. “Any flying objects, including planes and drones of the international coalition, discovered west of the Euphrates River will be tracked as aerial targets by Russia’s air defences on and above ground,” it said. [..] The campaign has often put the US at odds with the regime of Syrian President Bashar al-Assad, which is leading its own attack against IS with air cover support from Russia. Syria is also in the grip of a civil war that has claimed more than 400,000 lives, according to the United Nations.

An American F/A-18 Super Hornet shot down a Syrian SU-22 about 7pm on Sunday. The coalition said the Syrian plane had dropped bombs near its allies, the Syrian Democratic Forces, which were fighting IS south of Tabqah. Russia said the shooting down of the plane was an act of aggression against Syria and called for a “careful investigation by the US command” into the incident. “Repeated military actions by US aircraft against the lawful armed forces of a United Nations member state, under the guise of a ‘fight against terrorism’, are a profound violation of international law and, in fact, military aggression against the Syrian Arab Republic,” the Russian Defence Ministry said. “As a result of the strike, the Syrian plane was destroyed. The Syrian pilot catapulted into an area controlled by Islamic State terrorists. His fate is unknown.”

The coalition said the Syrian warplane had been shot down “in accordance with rules of engagement and in collective self-defence of coalition partnered forces”. The deputy chairman of the Russian Senate’s defence committee, Frants Klintsevich, said there was “no defence” for the US shooting down the plane. “Blatant aggression and provocation. To provoke, above all, Russia. It seems that the US under Donald Trump is a source of a qualitatively new level of danger not only in the Middle East but also around the world,” he wrote on Facebook.

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“That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent.”

Absent Without Leave (Jim Kunstler)

After nearly a year of investigating, the FBI, the CIA, the NSA, the DIA, DHS, et. al. haven’t been able to leak any substantial fact about “Russian collusion” with the Trump election campaign — and, considering the torrent of leaks about all manner of other collateral matters during this same period, it seems impossible to conclude that there is anything actually there besides utterly manufactured hysteria. Now, one might imagine that this intelligence community could have manufactured some gift-wrapped facts rather than just waves of hysteria, but that’s where the incompetence and impotence comes in. They never came up with anything besides Flynn and Sessions having conversations with the Russian ambassador — as if the ambassadors are not here to have conversations with our government officials.

You’d think that with all the computer graphics available these days they could concoct a cineplex-quality feature film-length recording of Donald Trump making a “great deal” to swap Kansas for Lithuania, or Jared Kushner giving piggyback rides to Vladimir Putin in the Kremlin. But all we’ve really ever gotten was a packet of emails from the Democratic National Committee and John Podesta of the Clinton campaign gloating about how nicely they fucked over Bernie Sanders — and that doesn’t exactly reflect so well on what has evolved to be the so-called “Resistance.” The net effect of all this sound and fury is a government so paralyzed that it can’t even pass bad legislation or execute its existing (excessive) duties. That might theoretically be a good thing, except what we’re seeing are individual departments just veering off on their own, especially the military, which now operates without any civilian control.

Apparently General Mattis, the Secretary of Defense, pretty much decided on his own to dispatch another 8,000 US troops to Afghanistan to move things along there in the war’s 16th year. Or did he get President Trump to look up from his Twitter window for three seconds to explain the situation and get a nod of approval? Perhaps you also didn’t notice the news item over the weekend that a US-led fighter plane coalition shot down a Syrian air force plane in Syrian airspace. In an earlier era that could easily be construed as an act of war. Who gave the order for that, you have to wonder. And what will the consequences be? Reasonable people might also ask: haven’t we already made enough deadly mischief in that part of the world? With the US military gone rogue in foreign lands, and the intelligence community off-the-reservation at home, and the Trump White House all gummed up in the tarbaby of RussiaGate, and the House and Senate lost in the shuffle, you also have to wonder what anybody is going to do about the imminent technical bankruptcy of the USA as the Treasury Department spends down its dwindling fund of remaining cash money to pay ongoing expenses — everything from agriculture subsidies to Medicare.

That well is going dry in the middle of the summer, and without any resolution to the debt ceiling debate, the country will not be able to borrow more to pretend that it’s solvent. I don’t see any indication that the House and Senate will be able to bluster their way through this. Instead, the situation will compel extraordinary new acts of financial fraud via the central banks and its cadre of Too-Big-To-Fail associates. In the event, the likely outcome will be a spectacular fall in the value of the US dollar, and perhaps consecutively, the collapse of the equity and real estate markets.

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Actual bankers charged? Or is this just more of the sudden anti-Qatar campaign?

Barclays and Four Executives Charged With Fraud In Qatar Case (BBC)

Barclays and four former executives have been charged with conspiracy to commit fraud and the provision of unlawful financial assistance. The Serious Fraud Office charges come at the end of a five-year investigation and relate to the bank’s fundraising at the height of 2008’s financial crisis. Former chief executive John Varley is one of the four ex-staff who will face Westminster magistrates on 3 July. Barclays says it is considering its position and awaiting further details. Mr Varley, former senior investment banker Roger Jenkins, Thomas Kalaris, a former chief executive of Barclays’ wealth division, and Richard Boath, the ex-European head of financial institutions, have all been charged with conspiracy to commit fraud in the June 2008 capital raising. In addition, Mr Varley and Mr Jenkins have also been charged with the same offence in relation to the October 2008 capital raising and with providing unlawful financial assistance.

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The Greeks are the only ones who’ve seen the real face of the EU.

Two-Thirds Of Europeans Believe EU Should Take Hard Line On Brexit (G.)

Two-thirds of Europeans believe the EU should take a hard line with the UK over Brexit, according to a survey. 65% of those questioned in Belgium, Germany, Greece, Spain, France, Italy Austria, Hungary and Poland said the EU, while trying to maintain a good relationship with Britain, should not compromise on its core principles. The Chatham House-Kantar survey showed just 18% of people in the nine countries – compared with 49% of people in Britain – believed the opposite; that the European commission should aim to keep the UK as close as possible, at the expense of its principles, during the talks, which began on Monday. f those surveyed across the nine continental countries, 57% said the EU had been weakened by Brexit, while 46% felt Britain’s departure would be bad for the bloc. By contrast, 70% of Britons felt the EU would suffer from the UK leaving.

The survey interviewed more than 1,000 people in each of the 10 countries including Britain earlier this year before elections in the Netherlands and France and an economic uptick that have significantly bolstered pro-European sentiment. The election of pro-European centrist Emmanuel Macron in France has in particular given the bloc a boost. The eurozone economy, too, is now growing faster than that of the UK or US. Britain’s confusion over what Brexit strategy to adopt have also helped swing EU opinion. A Pew survey last week found markedly higher approval for the EU since the Brexit vote: 63% of respondents in the 10 EU countries had favourable views about the bloc.

The figures mark a sharp increase from spring last year, with favourable opinions up 18 points in Germany and France, 15 in Spain, 13 in the Netherlands – and 10 in the UK. Only 18% of continental respondents wanted their country to leave the EU. Overall, the survey revealed that more than half (58%) of people in 10 countries believed another EU country might leave the bloc within the next decade. Four-fifths of Greeks, hardest hit by the 2008 financial crisis, backed this view, compared with less than half of Hungarians and Poles. Asked about what they considered the EU’s greatest achievements, the freedom to live and work across Europe and the creation of the border-free Schengen zone came top among continental respondents (both on 17%), followed by European peace and the euro (13%) and the single market (8%).

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“..almost a million people were employed across the wider automotive industry.”

Britiain’s Carmakers Face Brexit Cliff Edge (BBC)

The government must secure a transitional Brexit deal to protect the future of the UK car industry, a trade group has said. The Society of Motor Manufacturers and Traders (SMMT) said Britain was highly unlikely to reach a final agreement with the EU by the March 2019 deadline. That meant carmakers could face a “cliff edge”, whereby tariff-free trade was sharply pulled away. It warned the industry would suffer without a back-up plan in place. The EU is by far the UK’s biggest automotive export market, buying more than half of its finished vehicles – four times as many as the next biggest market. UK car plants also depend heavily on the free movement of components to and from the continent.

The SMMT said any new relationship with the EU would need to address tariff and non-tariff barriers, regulatory and labour issues, “all of which will take time to negotiate”. “We accept that we are leaving the European Union,” said chief executive Mike Hawes. “But our biggest fear is that, in two years’ time, we fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior World Trade Organization terms. “This would undermine our competitiveness and our ability to attract the investment that is critical to future growth.” UK car manufacturing generated £77.5bn of turnover last year and accounted for 12% of all goods exports, according to the trade group. It added that almost a million people were employed across the wider automotive industry.

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At least divvy up the monopoly money with a little sense of justice, you’d say. The fall will be hard enough already.

UK Property Owners’ £2.3 Trillion Windfall ‘Created Huge Inequality Gap’ (G.)

A £2.3tn windfall for those lucky enough to own their own homes during the property boom of the 1990s and early 2000s has opened up a deep and widening inequality gap between the generations, a thinktank has warned. Rising house prices that have enriched older generations have priced the young out of home ownership, said the Resolution Foundation, adding that the pattern whereby each generation was wealthier than the previous one had broken down. In a new report, the thinktank noted that the baby boomers born in the 20 years after the second world war were the big beneficiaries of rapidly rising house prices, but had amassed most of the wealth through no skill of their own. Wealth disparities would have “worrying consequences” for the living standards of younger generations, it added.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership. “Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”

The report found that 82% of housing wealth increases between 1993 and 2012-14 were due to the property boom, which saw the average price of a residential property in the UK rise threefold, rather than through any active behaviour – such as buying, moving house or paying off mortgages. At the boom’s zenith in 2003, one in six of all working property-owning adults were earning more from the rising value of their homes than from their jobs.

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What a great idea! Take your money now?!

UK’s Co-op Bank In Advanced Talks To Be Rescued By Hedge Funds (G.)

The Co-operative Group’s stake in the Co-op Bank could fall dramatically under a rescue plan being drawn up by hedge funds. The UK’s largest mutual, which owns supermarkets and funeral homes, has a 20% stake in the bank, which put itself up for sale in February in a search for £750m of extra funding. But under a proposal being discussed by the bank’s controlling hedge fund shareholders, this stake could drop towards zero unless the group decides to pump millions of pounds into the loss-making bank. In April, the group wrote down the value of its stake to zero, taking a further £140m hit on its shareholding that had stood at 100% before the problems at the banking arm were uncovered in 2013.

Four years ago, hedge funds which owned bonds issued by the Co-op bank helped contribute to its rescue and they are again regarded as the most likely source for the extra capital the bank needs to appease the Bank of England. In an update on the sales process on Monday, the Co-op bank, which has 4 million customers, said it was “in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise”. A liability management exercise would involve bondholders agreeing to convert debt into shares. In a previous update to the market, the bank had warned that it would need to undergo a liability management exercise regardless of whether it was sold, signalling that bondholders faced losses under all the options being considered. In the latest announcement, the Co-op Bank said it was still continuing with talks about a sale of the business.

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A few thoughts:

• A) China’s not all that different from the US, is it? Student debt is hot.

• B) This is largely shadow banking, and Beijing has very little grip on it

• C) Well, OK, haven’t heard this from the US yet: “.. borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral.”

China Cracks Down On Online Moneylenders Targeting Students (BBC)

China is cracking down on online moneylenders who target university students, following concerns about the largely unregulated industry. A recent government directive has ordered such lenders to suspend all activities wooing student borrowers. The move follows reports of exorbitant interest rates and unsavoury practices in the industry, including demanding “nude selfies” as collateral. Online peer-to-peer moneylending has grown popular in China in recent years. Known as “wang dai” in Chinese, it sees strangers providing small loans to others via websites and phone apps. The directive (in Chinese) was made by China’s banking, education and social security authorities, according to a copy released by the Jiangxi provincial government on its website on Friday.

It said the measures were needed to address moneylenders “making extortionate loans” and other behaviour that has “severely harmed the safety of university students”. The exact number of online moneylenders in China is not known, but one microfinancing portal called Wangdaizhijia lists at least 500 such platforms. In recent years some moneylenders and loan sharks have begun targeting university students in need of quick and easy credit, according to Chinese reports. Some students have since fallen prey to spiralling debt as a result of high interest rates. In some cases, borrowers were instructed to send naked pictures of themselves, with their identification cards, to the lender as collateral. They would threaten to release the pictures if the student defaulted on their debts. In December the naked pictures and contact details of more than 100 young female borrowers were leaked online, causing an outcry and shining a spotlight on the underground business.

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Silly to suggest this is some new development. China prints funny money, and blows bubbles with everywhere. Been going on for years.

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis” (ZH)

Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse. The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are “wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.

Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system. As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers.” And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.” “OSFI does not dictate what type of collateral (federally regulated banks) can accept,” spokeswoman Annik Faucher said. “Whether the borrower is foreign or domestic, OSFI (allows) financial institutions to compete effectively and take reasonable risks.”

The underlying reason for Canada’s growing, if paradoxical, exposure to Chinese collateral is due to an explosion of Canada’s shadow banking system. An investigation by Cooper found “massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called “shadow banking.” This is similar, if smaller in scale, to the gargantuan $8.5 trillion shadow banking market in China, where “shadow” lenders and creditors bypass conventional banks to provide and obtain funding, often at far higher terms than prevailing rates, an increasingly dangerous proposition at a time when Chinese interest rates, especially on the short-end, are suddenly spiking. The Vancouver Sun adds that as a result of tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver’s market “are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market.”

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First of many. Canada, Denmark, Netherlands et al, there’s a long list.

Household Debt Sees Australian Banks Downgraded Again (ABCAu)

Global ratings agency Moody’s has downgraded the big four banks and eight other institutions over fears about the housing market. Moody’s cut ANZ, CBA, NAB and Westpac by one notch from Aa3 to Aa2. Bendigo and Adelaide Bank and Newcastle Permanent Building Society went from A3 to A2 while Heritage Bank, Members Equity, QT Mutual, Teachers Mutual, Victoria Teachers Mutual and Credit Union went from A3 to Baa1. Moody’s action comes a month after rival agency S&P Global downgraded almost all Australian banks over fears of “a sharp correction in property prices”. Moody’s said while it did not expect a sharp downturn in housing as its key scenario, it could not ignore the risk that high levels of debt and the rapid credit expansion could pose down the track.

“Whilst mortgage affordability for most borrowers remains good at current interest rates, the reduction in the savings rate, the rise in household leverage and the rising prevalence of interest-only and investment loans are all indicators of rising risks,” the Moody’s statement said. The agency worries that while Australians have been taking on record amounts of debt, wages have not increased, while underemployment has. It also did not like “the rising prevalence of interest-only and investment loans” which it believed were indicators of rising risks. Banks are carrying an arsenal of cash, as required now by regulators, in preparedness for any downturn in the economy or problems in the housing market but Moody’s indicates it is not sure whether it will be enough. “The resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private-sector indebtedness,” it said.

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Yellowstone is a huge threat, but specifics must be viewed with extreme caution.

296 Earthquakes Near Yellowstone Supervolcano In Last 7 Days (Snyder)

I spend a lot of time documenting how the crust of our planet is becoming increasingly unstable. Most of this shaking is taking place far away from the continental United States, and so most Americans are not too concerned about it. But we should be concerned about it, because a major seismic event could change all of our lives in a single instant. For instance, a full-blown eruption of the Yellowstone supervolcano would have the potential of being an E.L.E. (extinction level event). That is why it is so alarming that there have been 296 earthquakes in the vicinity of the Yellowstone supervolcano within the last 7 days. Scientists are trying to convince us that everything is going to be okay, but there are others that are not so sure.

The biggest earthquake in this swarm occurred last Thursday evening. It was initially measured to be a magnitude 4.5 earthquake, but it was later downgraded to a 4.4. It was the biggest quake in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it as far away as Bozeman… “The main quake was centered about 5.8 miles underground. The quake and aftershocks occurred just over 8 miles northeast from West Yellowstone, according to the U.S. Geological Service. A witness reported that she felt the building she was in move. Dozens of people reported that they felt it in and around West Yellowstone, Gardiner, Ennis, and Bozeman”. But by itself that one quake would only be of minor concern. What is troubling many of the experts is that this earthquake has been accompanied by 295 smaller ones.

[..] I would like to try to describe for you what a full-blown eruption of the Yellowstone supervolcano would mean for this country. Hundreds of cubic miles of ash, rock and lava would be blasted into the atmosphere, and this would likely plunge much of the northern hemisphere into several days of complete darkness. Virtually everything within 100 miles of Yellowstone would be immediately killed, but a much more cruel fate would befall those that live in major cities outside of the immediate blast zone such as Salt Lake City and Denver. Hot volcanic ash, rock and dust would rain down on those cities literally for weeks. In the end, it would be extremely difficult for anyone living in those communities to survive.

In fact, it has been estimated that 90% of all people living within 600 miles of Yellowstone would be killed. Experts project that such an eruption would dump a layer of volcanic ash that is at least 10 feet deep up to 1,000 miles away, and approximately two-thirds of the United States would suddenly become uninhabitable. The volcanic ash would severely contaminate most of our water supplies, and growing food in the middle of the country would become next to impossible. In other words, it would be the end of our country as we know it today.

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Never privatize basic needs. Always a bad idea.

Drug Prices Far Lower In Countries With Single-Payer Health Systems (IBT)

As the Senate has quietly been toying with the House’s proposed replacement for the Affordable Care Act, a new study, from researchers at Harvard Medical School and the University of British Columbia, found evidence that single-payer systems may lead to lower pharmaceutical prices. Could that data impact U.S. health care reform? U.S. drug prices are so high that the researchers didn’t even factor them into the study, focusing instead on other developed countries. It’s common knowledge that drug prices have been on the steady rise, increasing faster than average wages; at issue is how to push prices back down, or at least slow their escalation.

Examining the roots of high drug expenditures in 10 wealthy countries with universal health care, the study, published last week in the Canadian Medical Association Journal, discovered lower average drug prices in the nations with single-payer systems, which appeared to be better able to negotiate drug prices with pharmaceutical manufacturers. “There is some advantage to having a not-for-profit body, whether it’s a government body, a crown body… running a system without a profit motive,” said Steven Morgan, one of the authors and a professor of economics at University of British Columbia’s School of Population and Public Health. “The blunt instrument of government regulation will not in itself lower drug prices.”

Using drug price and expenditure data for 2015, the researchers established that the 10 countries with universal health care systems examined in the study — New Zealand, the United Kingdom, Canada, France, Germany, Switzerland, the Netherlands, Norway, Sweden and Australia — exhibited relatively little variation in volume of drug price purchases, with a difference as large as 41%. But the disparities in drug prices told a different story, with the two ends of the spectrum differing by 600%. For example, the average price of drug treatment per capita, per day, in New Zealand, which has a single-payer system, stood at just $23, or a third of those of the nine others. Norway, Australia, Sweden and the U.K., the other countries categorized in the study as single-payer, exhibited average daily per-capita drug expenditures of $59, $91, $56 and $81, respectively.

Switzerland, which has a multi-payer, social insurance-based system, had an average per-diem treatment cost of $171, twice as high as the other nine nations. Its fellow multi-payer countries examined in the study — France, Germany and the Netherlands — paid, per capita, on average, $106, $97 and $49, respectively, per day on drug treatments. Canadians, whose health care system the study described as “mixed,” purchased roughly the same volume of drugs as citizens of the other nine countries, but would’ve collectively saved $1.7 billion if their drug prices were comparable to those of the nine other countries, the study noted.

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As long as there’s plenty free money…

Could There Be A Bidding War For Whole Foods? (CNN)

Whole Foods will eventually be part of Amazon CEO Jeff Bezos’s empire. Or will it? Some Wall Street analysts are starting to wonder whether another retailer will come up with a higher offer and start a bidding war. Amazon announced on Friday that it was offering to pay $13.7 billion in cash for Whole Foods – a deal that values the chain of organic grocery stores at $42 a share. But Whole Foods stock closed above $42 on Friday, and it rose again Monday to top $43. That might not sound significant. But any price for Whole Foods stock that is higher than Amazon’s offer could be a sign that Wall Street thinks another company could swoop in with an even better deal. Barclays analyst Karen Short wrote in a report that she “would not be surprised” if other companies make offers for Whole Foods.

She raised her price target on the company to $48 – nearly 15% higher than Amazon’s bid. Short said in the report that “in theory, all retailers that sell food and compete with Amazon” could come up with their own offer for Whole Foods because they may “have too much to lose not to bid.” She said the likely bidders could include Walmart and Target, both of which have big grocery businesses, and the Kroger supermarket chain. She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. Oppenheimer analyst Rupesh Parikh agreed. He raised his price target on Whole Foods to $45 after the Amazon deal was announced. He wrote in a report that “another bid cannot be ruled out” because other big retailers may want to do anything they can to prevent Amazon from getting even more powerful.

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The worst thing you can do is let your food supply be controllled from some point a thousand miles away. But then, Amazon has killed so much community already, and no-one sproke up. It’s labeled ‘progress’.

Amazon Will Kill Your Local Grocer (BBG)

Amazon’s done it to books. And electronics. And clothing. Now it wants to rule the grocery aisles. But Amazon still has a ways to go — the online retailing behemoth has taken a slow, yet calculated approach to attacking the grocery store. After years of testing the AmazonFresh program in its Seattle hometown, it began expanding the grocery delivery service to other cities in 2013. Today, it delivers fresh fruit and meat in parts of New York, New Jersey, Pennsylvania, Connecticut, California, Washington and Maryland. It also delivers food through its Amazon.com website and its Prime Now program. And even though research from Cowen & Co pegs Amazon’s market share of food and beverages sold online in 2015 at about 22 percent, that overall online grocery market in the U.S. is pretty small.

Out of the $795 billion Cowen expects Americans to spend on food and drinks this year, it estimates only about $33 billion of it will be spent online. That’s because it has taken shoppers a long time to grow comfortable with buying their apples, chicken breasts and granola online when they can stop by a physical store on the way home from work and actually touch and smell the food they’re buying. Companies struggle to profit from the very expensive business of picking, packing and transporting fresh food to their customers. It’s much easier to mail a video game or book, which doesn’t have to be kept cold or free of bruises. But for Amazon, the grocery business not only brings more sales, it could also make its business more profitable.

People tend to buy groceries weekly or daily, so getting them hooked on delivery justifies sending trucks out more frequently. Then any general merchandise, like a book or toy, that Amazon sells along with the food adds to profits. And since Amazon will need more trucks for grocery delivery, it could reduce its reliance on shipping companies, which have contributed to soaring costs. For now, Amazon is likely to take added grocery costs on the chin, in hopes it will pay off down the line. Growing its AmazonFresh and Prime Now offerings suggests Amazon is gearing up for the long haul in grocery. Though traditional grocers are not likely to see sales migrate to Amazon right away, that luxury won’t last. And just like bookstores, your local grocer could be toast.

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Jun 192017
 
 June 19, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Kandinsky Capricious Line 1924

 

Britain’s Brexit jam is Brussels’ Too (Pol.eu)
EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)
Pain Without Gain: The Truth About British Austerity (G.)
France Gives Macron Big Majority With Little Enthusiasm (EUO)
German Politicians Hammer the ECB, But Only to Get Votes (DQ)
Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)
Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)
Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)
Goodbye, Yellow Brick Road (Grant)
Australia Has The World’s Most Costly Energy Bills (MB)
Australia’s Haunted Housing Market (BW)
Greece Blocks EU Statement On China Human Rights At UN (R.)
Greece Cracks Down On Voucher Misuse By Employers (EurActiv)
Greek Summer Calm Before The Storm (K.)

 

 

The Brexit talks start today. They should not. Theresa May can start, but she won’t be there to finish them.

Britain’s Brexit jam is Brussels’ Too (Pol.eu)

As Brexit talks start Monday, Britain’s back is hard against a wall. And nobody, not even in Brussels, wanted it that way. Elections in the U.K. were supposed to give Prime Minister Theresa May a stronger hand against the EU and naysayers back home. Instead, her negotiating team will hobble into the talks with May in peril, still working to finalize a power-sharing agreement to allow her to form a minority government. The EU’s stance on major Brexit issues has been ironclad for months, backed by the 27 nations in a disciplined display of unity. Second-guessing about May’s approach has intensified since her election setback, so much so that there have been calls for the EU to avert potential disaster by laying out clear paths for the U.K.’s exit.

The view in Brussels, however, is there is no way to help May short of making clear that Britain is welcome to change its mind — a point reiterated by German Finance Minister Wolfgang Schäuble, French President Emmanuel Macron and European Commission First Vice-President Frans Timmermans, among others. While no one realistically expects such a total reversal, there is unease over the lack of clarity on the U.K.’s goals. “Clearly the Brits are not ready yet and it’s a pity,” a senior Commission official said. “Everybody has sympathy for [May] now because she put herself in an impossible situation,” the official said. “How we can help her? Where she is now, nobody can help her. What she said to the backbenchers, in a way made sense, ‘I put you in this mess. I will take you out of this mess.’ But who else can do anything for her? It’s just hell.”

“And all the questions,” the official added, “Withdrawal? No withdrawal? Now? Later? It’s for them to consider. What can Brussels say?” The EU has published and transmitted to the U.K. its position papers on the two issues Brussels insists take precedence: citizens’ rights and the financial settlement. May’s aides said she wanted to make a “big, generous” offer on citizens’ rights, but so far the U.K. has not published any similar documents laying out its positions.

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Brussels wants an orderly destruction of Britain, not a messy one.

EU Leaders Fear Fragile State Of Tories Will Lead To Brutal Brexit (G.)

European leaders fear that Theresa May’s government is too fragile to negotiate viable terms on which to leave the union, meaning the discussions that officially begin on Monday could end in a “brutal Brexit” – under which talks collapse without any deal. As officials began gathering in Brussels on Sunday night, the long-awaited start of negotiations was overshadowed by political chaos back in Westminster, where chancellor Philip Hammond warned that failing to strike a deal would be “a very, very bad outcome”. The EU side fears that, in reality, the British government will struggle to maintain any position without falling apart in the coming months, because, without support from the Democratic Unionist party, May’s negotiating hand is limited. There are also concerns that any DUP backing to give May a majority in the House of Commons would come with strings attached.

Hammond has been urged to publish the cost of any deals made with the DUP to prop up the government. Shadow chancellor John McDonnell has raised concerns over reports that the DUP wants to end airport tax on visitors to Northern Ireland, which generated about £90m in 2015/16, according to HMRC estimates. The abolition of air passenger duty is one of the DUP’s key demands, as it pits Northern Ireland unfavourably against the Republic of Ireland, where the duty has been abolished. As well as concern over any terms agreed with the DUP, May will have to assuage fears from Ireland’s new taoiseach, Leo Varadkar, when she meets him in Downing Street on Monday, that Brexit will not infringe on the rights of people in Ireland. The taoiseach will also raise the impact of any Tory-DUP deal on power-sharing in Northern Ireland.

The prime minister has said she is confident of getting the Queen’s speech through the Commons, regardless of whether a deal is reached with the DUP by the time of the state opening of parliament on Wednesday. British Brexit negotiators are hoping to shore up confidence in their hardline approach to the start of talks by making early progress on the vexed question of citizens’ rights. [..] Pierre Vimont, a veteran French diplomat, now at the Carnegie Europe thinktank, said lack of clarity did not matter for the opening, which was more about “a first glimpse into their overall attitude and position” and setting the tone. “It will be atmospherics and the way both sides show a genuine commitment to work ahead. I think that will be the most important. “But the British delegation will need to rather quickly put its house in order and to have a clear idea of where it wants to go.”

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We’ve seen that truth in Grenfell Tower.

Pain Without Gain: The Truth About British Austerity (G.)

There are few people in the developed world who still cling to the maxim that “home life ceases to be free and beautiful as soon as it is founded on borrowing and debt”. hese days we can’t afford to take the same view as Helmer, the husband in Ibsen’s A Doll’s House, one of literature’s most cautious budgeters. It’s a nice idea to be free of debt and just spend what you earn. But when a home costs many times the average annual income and life’s running costs often exceed the monthly income, borrowing is not something that can be avoided. The government knows this only too well. This week sees publication of the public borrowing total for May and it is not expected to make pleasant reading.

Together with April’s shocker, when government borrowing was higher than the same month last year, the first two months of this financial year are forecast to show the borrowing requirement for the year is on track to be higher, not lower than last year. When David Cameron and George Osborne were in Downing Street, bringing down the deficit was the main aim of domestic policy. Until just last year, the plan was to cut the deficit to zero by 2020 and start bringing down the debt-to-GDP ratio from this year. The EU referendum vote and Theresa May’s arrival at No 10 changed all that. Once she adopted a hard-Brexit stance, the economy began to turn. Her chancellor, Philip Hammond, was forced to loosen the purse strings. It meant that both of the main political parties went into the election with plans for the deficit to remain at about 2.5%.

Independent forecasts for GDP growth over the next five years are below this figure, meaning that far from cutting the overall debt-to-GDP ratio, both parties were content to push it towards 90% – higher than any government has experienced in 50 years. That’s why so many headlines after the election have declared austerity dead and why the deficit was the dog that didn’t bark when the electorate went to the polls. The pressure on the deficit has only worsened since then. It has become clear to many of May’s advisers and close colleagues that the Tory party might not survive a second election this year without stealing some of Labour’s clothes. There is the possibility she will sanction scrapping, or dramatically reducing tuition fees, to nullify one of Labour’s most popular pledges.

The health secretary, Jeremy Hunt, hinted that the cap on nurses’ pay might be relaxed, while local authority spending may need to increase after the Grenfell Tower fire. Meanwhile, household debts are on the increase. Credit card, car loan and student debt, and borrowing using that most pernicious of loans, the second mortgage, have all risen sharply in the last couple of years. Making matters worse, the proportion of savings in the economy is at rock-bottom levels. It all adds up to an economy running on empty, with everyone, including ministers, borrowing extra each year just to keep the wheels turning.

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Macron won, but his majority is nowhere near as big as predicted. He was expected to get well over 400 seats, and ended up with 308. See the graphs. Next, he’ll be up against the unions. He’s promised to fire 120,000 public workers. Good luck.

France Gives Macron Big Majority With Little Enthusiasm (EUO)

French president Emmanuel Macron won a three-fifth majority in the lower house in the second round of the legislative elections on Sunday (18 June), but less than half of voters cast a ballot. Macron’s political movement, La Republique en Marche (LRM, The Republic on the Move) won 308 seats in the National Assembly, out of 577, after obtaining 43.06% of the vote. Its centrist ally, the Modem party, got 40 seats (6%). While not as big as expected after the first round, LRM’s majority left other parties behind and completed Macron’s destruction of the old political landscape. The conservative Republicans party will be the main opposition faction, with 113 seats (22.2%), down from 192 in the outgoing assembly.

The party leader, Francois Baroin, said he was happy that the Republicans will be “big enough” to “make its differences with LRM heard”. The Socialist Party (PS), which had been the main party with 270 MPs, was left with 29 seats (5.68%). Several ministers who served under former socialist president Francois Hollande lost out to newcomers. The PS leader, Jean-Christophe Cambadelis, who was himself eliminated in the first round, resigned from his position. Some 431 new MPs will enter the assembly and a record 224 of the MPs will be women.

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The ECB has $4.73 trillion in assets. It buys anythng but Greece.

German Politicians Hammer the ECB, But Only to Get Votes (DQ)

These days it’s easy to tell when general elections are approaching in Germany: members of the ruling government begin bewailing, in perfect unison, the ECB’s ultra-loose monetary policy. Leading the charge this time was Finance Minister Wolfgang Schaeuble, who on Tuesday urged the ECB to change its policy “in a timely manner”, warning that very low interest rates had caused problems in “some parts of the world.” Werner Bahlsen, the head of the economic council of Merkel’s CDU conservatives, was next to take the baton. “The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,” he said. “The ECB can only regain trust with the return to a sound monetary policy.” As Schaeuble and Balhsen well know, that is not likely to occur any time soon.

Indeed, like all other Eurozone finance ministers, Schaeuble is benefiting handsomely from the record-low borrowing costs made possible by the ECB’s negative interest rate policy. But by attacking ECB policy he and his peers can make it seem that they take voters’ concerns about low interest rates seriously, while knowing perfectly well that the things they say have very little effect on what the ECB actually does. In short, they are telling their voters what they want to hear. A survey by the CDU’s economic council showed that less than a quarter of its roughly 12,000 members had confidence in the ECB’s current course. 76% said they backed Bundesbank head Jens Weidmann’s monetary policy stance. Herr Weidmann said on Thursday that the ECB is at risk of coming under political pressure because any hint of policy tightening could push yields higher and blow a hole in national budgets.

It’s a probably a bit late in proceedings for such worries, what with the ECB now boasting the largest balance sheet of any central bank on Planet Earth. At last count, it had €4.22 trillion ($4.73 trillion) in assets, which equates to 39% of Eurozone GDP. Many of those assets are sovereign bonds of Eurozone economies like Italy, Spain and Portugal. The ECB’s binge-buying of sovereign and corporate bonds has spawned a mass culture of financial dependence across Europe. In the case of Italy, the sheer scale of the government’s dependence on the ECB for cheap funding is staggering: since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019.

It’s not just governments that are dependent on the ECB’s largesse: so, too, are the banks. In total, European banks have approximately €760 billion of funding from long-term lending schemes, the bulk of which comes from the four rounds of the most recent program launched in March 2016. As of the end of April 2017, Italian banks were holding just over €250 billion of the total long-term loans — almost a third of the total. Spain had €173 billion, while French banks had €115 billion and German lenders €95 billion. As the FT reports, the funding appears to play much less of a role in stimulating economic activity through lending, and a much larger role in mitigating the pain that low interest rates — and poor asset quality — can inflict on banks.

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Propping up zombies.

Central Bank Liquidity Is The ‘IV Drip’ Of The Rally (CNBC)

If it weren’t for liquidity right now, the stock market rally could be ripping apart, according to BMO Private Bank’s chief investment officer. “Any sense that this IV drip of liquidity coming into the market is slowing down at all is going to cause some issues,” Jack Ablin said on CNBC’s “Futures Now.” He emphasized that investors have been encouraged to take on risk due to the trillions of dollars being pumped into the financial system by central banks. Ablin’s comments came a day after the Federal Reserve decided to lift short-term interest rate by a quarter%age point. Even though the rate hike was expected, Ablin admits there was some concern tied to the Fed’s statement.

The Fed put in some new wording, saying that it “expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.” That part left Ablin “a little bit taken aback with the timing,” he said. However, “I think the good news here is, ‘Look, this is a potentially contrived crisis.’ This could be the taper tantrum all over again where [The Fed says] ‘OK, look, we don’t want to cause major upset here. We will continue to pump if equity risk taking takes a hit.'” Ablin said he’s “somewhat optimistic” that the rally will continue. He prefers developed and emerging markets over U.S. stocks, arguing that places like Europe could see bigger gains than in the United States because the economy has been surprising experts to the upside.

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This story gets insaner by the day.

Mueller Has “Not Yet” Decided Whether To Investigate Trump (ZH)

In the biggest political story of the past week, one which was timed to coincide with Donald Trump’s Birthday, the WaPo reported citing anonymous sources, that Special Counsel Robert Mueller was investigating President Trump for possible obstruction of justice. Just a few hours later on Thursday night, the DOJ’s Deputy Attorney General Rod Rosenstein, who is overseeing the Russia probe due to Jeff Sessions recusal, released a stunning announcement which urged Americans to be “skeptical about anonymous allegations” in the media, which many interpreted as being issued in response to the WaPo report. “Americans should exercise caution before accepting as true any stories attributed to anonymous ‘officials,’ particularly when they do not identify the country — let alone the branch or agency of government — with which the alleged sources supposedly are affiliated. Americans should be skeptical about anonymous allegations. The Department of Justice has a long-established policy to neither confirm nor deny such allegations.”

Then on Sunday, the plot thickened further when according to ABC, special counsel Robert Mueller has not yet decided whether to investigate President Trump as part of the Russia probe, suggesting the WaPo report that a probe had already started was inaccurate. “Now, my sources are telling me he’s begun some preliminary planning,” Pierre Thomas, the ABC News senior justice correspondent, said of Mueller on ABC’s “This Week” although he too, like the WaPo, was referring to anonymous sources, so who knows who is telling the truth. “Plans to talk to some people in the administration. But he’s not yet made that momentous decision to go for a full-scale investigation.”On Friday, Trump responded to the Washington Post story by tweeting: “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt.” But also on Sunday Trump’s lawyer Jay Sekulow insisted the president was not literally confirming the investigation but was just referring to the story.

“Let me be clear: the president is not under investigation as James Comey stated in his testimony, that the president was not the target of investigation on three different occasions,” Sekulow said Sunday. “The president is not a subject or target of an investigation.” “Now Mueller faces a huge decision,” Thomas told “This Week” host Martha Raddatz. “Does he believe the president, who says there’s no wrongdoing here, or does he go after the president in the way James Comey wants him to do?” And so, yet another blockbuster media report has been cast into doubt as a result of more “he said, he said” innuendo, which will be resolved only if Mueller steps up and discloses on the record whether he is indeed investiating Trump for obstruction, or any other reason. That however is unlikely to happen, and so the daily ping-ponging media innuendos will continue indefinitely.

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“These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

Cold War Deja Vu Deepens as New Russia Sanctions Anger Europe (BBG)

Russia on Sunday accused the U.S. of returning to “almost forgotten Cold War rhetoric,” after President Donald Trump’s decision to reinstate some sanctions on Cuba. It could have dropped “forgotten.” There’s been a lively debate among historians and diplomats for years over whether the souring of relations between the U.S. and Russia amounts to a new Cold War, and lately the case has been getting stronger by the day. Trump’s restoration on Friday of some of the Cold War restrictions on Cuba his predecessor, Barack Obama, eased just months ago was only one example. Earlier in the week, the U.S. Senate approved a bill to entrench and toughen sanctions on Russia that includes several vivid flashbacks to before the fall of the Berlin wall.

German Chancellor Angela Merkel added her voice on Friday to rising European condemnation of a proposal in the Senate draft that would penalize companies investing in new Russian energy pipelines. Nord Stream 2, a project to double the supply of Russian natural gas to Germany via the Baltic Sea, would be especially vulnerable. President Ronald Reagan used similar sanctions in an attempt to thwart the joint German-Soviet construction of a natural gas pipeline in the early 1980s, only to drop them amid intense opposition from Europe. Again, Germany led the pushback. The Senate bill would also codify a raft of existing sanctions against Russia, so that Trump would need Congressional approval to lift them. That happened in 1974, too, and the measures proved hard to kill.

The legislation wasn’t repealed until a decade after their target, the U.S.S.R., had ceased to exist. The sense of Cold-War deja vu has been building for some time, according to Robert Legvold, a professor at Columbia University and author of “Return of the Cold War.” There’s a renewed arms race, nuclear saber rattling, the buzzing of ships and planes, proxy wars and disputes over whether missile defense systems count as offense or defense. If the trend continues, said Legvold, it will prevent the strategic cooperation between the U.S. and Russia that’s needed to prevent approaching security challenges from spinning out of control: The rise of China, the race to exploit resources in the Arctic, international terrorism and, above all, a world with nine nuclear powers that’s more complex and unstable than in the 20th century. “These two countries are in a very deep hole,” he said. Congress needs to “stop digging.”

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It’s hard to agree on gold. Always has been.

Goodbye, Yellow Brick Road (Grant)

It’s no work at all to make modern money. Since the start of the 2008 financial crisis, the world’s central bankers have materialized the equivalent of $12.25 trillion. Just tap, tap, tap on a computer keypad. “One Nation Under Gold” is a brief against the kind of money you have to dig out of the ground. And you do have to dig. The value of all the gold that’s ever been mined (and which mostly still exists in the form of baubles, coins and ingots), according to the World Gold Council, is a mere $7.4 trillion. Gold anchored the various metallic monetary systems that existed from the 18th century to 1971. They were imperfect, all right, just as James Ledbetter bends over backward to demonstrate. The question is whether the gold standard was any more imperfect than the system in place today.

[..] As if to clinch the case against gold—and, necessarily, the case for the modern-day status quo—Mr. Ledbetter writes: “Of forty economists teaching at America’s most prestigious universities—including many who’ve advised or worked in Republican administrations—exactly zero responded favorably to a gold-standard question asked in 2012.” Perhaps so, but “zero” or thereabouts likewise describes the number of established economists who in 2005, ’06 and ’07 anticipated the coming of the biggest financial event of their professional lives. The economists mean no harm. But if, in unison, they arrive at the conclusion that tomorrow is Monday, a prudent person would check the calendar.

Mr. Ledbetter makes a great deal of today’s gold-standard advocates, more, I think, than those lonely idealists would claim for themselves (or ourselves, as I am one of them). The price of gold peaked as long ago as 2011 (at $1,900, versus $1,250 today), while so-called crypto-currencies like bitcoin have emerged as the favorite alternative to government-issued money. It’s not so obvious that, as Mr. Ledbetter puts it, “we cannot get enough of the metal.” On the contrary, to judge by ultra-low interest rates and sky-high stock prices, we cannot—for now—get enough of our celebrity central bankers.

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Pretty far out.

Australia Has The World’s Most Costly Energy Bills (MB)

In reality, there are three main components of household bills. Whether households actual ultimately pocket these savings will depend on what happens with all three. The first, is the wholesale cost. That’s the cost of actually generating the electricity, be it burning lumps of coal, a gas-fired electricity plant, solar panels, wind turbines or whatever clever ways we may come up with in the future to produce electricity. Today, 77 per cent of Australian electricity comes from mostly brown and black coal, 10 per cent from gas, and 13 per cent from renewable sources. For a long time, this part of the system, of producing the electricity and getting it into the grid, has been going pretty well. Australians have enjoyed a reliable and low-cost supply of wholesale energy.

Basically, we burned ship loads of cheap coal, and to hell with the environment. This is the part of the system that is now utterly falling apart and is in most need of repair – which we’ll get to. The second major component of household electricity bills is the cost of transmission and distribution. The costs involved in building poles and wires and actually getting electricity to your wall sockets makes up about 40 per cent of your total bill. This part of the electricity price equation has been broken for decades, and is the main reason power bills have nearly doubled over the last decade. Power lines are natural monopolies. Traditionally they were all government owned. Jeff Kennett privatised Victorian networks, but until very recently, distribution networks in other states, such as NSW and Queensland, have remained government owned, with regulated pricing.

And basically, they stuffed that up for consumers by deciding to let the networks earn a guaranteed rate of return, based on their costs. That is, the more they spent, the more they earned. …The third and final component of a household’s bill is the margin added by electricity retailers. In theory, anyone can set up a business retailing electricity and there are many suppliers. In reality, pricing structures are so complex consumers do not exercise their power to switch providers, and retail margins remain higher than otherwise.

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Moving towards a very deep black hole.

Australia’s Haunted Housing Market (BW)

Forget all the headlines about the undimmed pace of house price inflation – up 19% in Sydney during March, pushing the median house price in the city to A$1.15 million ($875,000) according to Domain, a property-listings website. House prices, after all, aren’t so much a guide to the state of the housing market as to the 1% or so of homes that bought or sold in a typical year. Even there, they’re less an indicator of supply and demand for housing than of how supply and demand for mortgage credit interact with real estate fundamentals. Splurge on mortgage credit, and even an overbuilt housing market can enjoy price appreciation; cut back on home loans, and the opposite may be the case. That’s why it’s worth looking at the state of rents. Right now, they’re growing at the slowest pace in more than two decades, according to calculations based on Australian Bureau of Statistics data.

This hasn’t completely escaped notice. Philip Lowe, who took over as Governor of the Reserve Bank of Australia in September, has included the same boilerplate reference (with minor cosmetic modifications) in each of the eight monetary policy decision statements he’s put out so far: In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. As Lowe indicates, the reason for the slowdown in rents isn’t hard to discern. For most of Australia’s recent history, building has struggled to keep pace with household formation. Supply of new homes has kept close to demand, and as a result rents have tended to grow more or less in line with incomes.

Compare the Housing Institute of Australia’s forecasts of housing starts and the Australian Bureau of Statistics’ forecasts of household formation, and the glut really comes into focus: The surplus of homes that Australian cities have built over the past five years, based on those numbers, is equivalent to a whole year’s worth of excess supply. That’s a worrying development for those hoping that Australia’s house price boom is sustainable, especially given the way that the country’s regulators look to be finally attempting to raise credit standards after years of laxity. Still, if Australia manages to deflate the housing bubble without seriously damaging its economy, the heroes and villains will be quite different from the popular perception. While governments and regulators spent years adding to the problem with tax breaks and hostility to macroprudential regulation, it may well be property investors and foreigners who helped ease the crisis.

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The EU should look at its own human rights record.

Greece Blocks EU Statement On China Human Rights At UN (R.)

Greece has blocked a EU statement at the UNs criticizing China’s human rights record, a decision EU diplomats said undermined efforts to confront Beijing’s crackdown on activists and dissidents. The EU, which seeks to promote free speech and end capital punishment around the world, was due to make its statement last week at the U.N. Human Rights Council in Geneva, but failed to win the necessary agreement from all 28 EU states. It marked the first time the EU had failed to make its statement at the U.N.’s top rights body, rights groups Amnesty International and Human Rights Watch said. A Greek foreign ministry official said Athens blocked the statement, calling it “unconstructive criticism of China” and said separate EU talks with China outside the U.N. were a better avenue for discussions. An EU official confirmed the statement had been blocked.

“Greece’s position is that unproductive and in many cases, selective criticism against specific countries does not facilitate the promotion of human rights in these states, nor the development of their relation with the EU,” a Greek foreign ministry spokesperson said on Sunday. Presented three times a year, the statement gives the EU a way to highlight abuses by states around the world on issues that other countries are unwilling to raise. The impasse is the latest blow to the EU’s credentials as a defender of human rights, three diplomats said, and raises questions about the economically powerful EU’s “soft power” that relies on inspiring countries to follow its example by outlawing the death penalty and upholding press freedoms. It also underscores the EU’s awkward ties with China, its second-largest trade partner, diplomats said.

[..] Hungary, another large recipient of Chinese investment, has repeatedly blocked EU statements criticizing China’s rights record under communist President Xi Jinping, diplomats said. One EU diplomat expressed frustration that Greece’s decision to block the statement came at the same time the IMF and EU governments agreed to release funds under Greece’s emergency financial bailout last week in Luxembourg. “It was dishonorable, to say the least,” the diplomat said. The Greek foreign ministry spokesperson said that “during the formulation of the common statement there were also other countries that expressed similar reservations” and that Greece participates on an equal footing in setting up the EU’s common foreign policy.

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Many will claim this is employers seeking illicit profits. But for many it’s the only way not to be forced to fire people, to keep them fed.

Greece Cracks Down On Voucher Misuse By Employers (EurActiv)

The growing trend of distributing vouchers to employees to avoid taxes has raised eyebrows in the Greek government, which has moved to crack down on unprecedented levels of tax evasion in the cash-strapped country. The government says vouchers are allowed only as an extra benefit and not as part of a taxable salary. But according to Greek media reports, more than 200,000 workers, mostly newcomers, receive up to 25% in their salary via vouchers, which they use in supermarkets to buy food. The total amount, according to the reports, reaches €300 million annually. Up to a specific amount, the vouchers are tax-free for businesses, which are also exempt from employer security contributions. A source at the Greek labour ministry told EURACTIV.com that replacing any part of the legal wage of employees with vouchers is illegal.

“Vouchers are only allowed as an extra benefit and in no case can they be a substitution for legally defined earnings,” the source noted, adding that all complaints filed with the Labour Inspectorate are being investigated. As of June, companies are required to pay salaries only to bank accounts in order to put a stop to the practice of avoiding paying salaries altogether or paying only a fragment. “The Labor Inspectorate (SEPE) is in constant collaboration with Greece’s Financial and Crime Unit (SDOE), the financial police and the Independent Public Revenue Authority to address all forms of labour market violations and the coordination of their audit work,” the source said. Vouchers are coupons companies distribute to their employees to improve work, health and safety by supporting proper nutrition.

The rationale behind vouchers is that they process will enhance satisfaction and boost productivity levels while improving the employee living standards. For the government, the proper use of vouchers should also result in more tax revenues. The labour market in Greece has been in turmoil after 7 years of austerity-driven bailout programmes. There are cases of employers who have taken advantage of the “flexible” labour relations to impose unusual working conditions. For many, the use of vouchers is seen as a means to improve the atmosphere at work. Sotiris Zarianopoulos, a non-attached MEP from the Greek Communist Party (KKE), has recently asked the European Commission about these practices. The Greek lawmaker noted that this is only a part of a “jungle labour market” created by EU policies and implemented by the leftist Syriza government.

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On the verge of heading back to Greece, I’m wary of what comes after the calm.

Greek Summer Calm Before The Storm (K.)

Even though Prime Minister Alexis Tsipras hailed last week’s Eurogroup deal as step in the right direction, Greece still has many rivers to cross as the agreement secured in Luxembourg fell far short of the goals set by the government. First and foremost, Tsipras will have to deal with dissent emanating from SYRIZA MPs that had agreed to vote through a batch of tough legislation last month with the understanding that, in exchange, Greece will be granted debt relief and access to the ECB’s quantitative easing program. However, contrary to the government’s aims at the Eurogroup, debt relief talks were deferred to 2018, while Greece’s inclusion in the QE seems highly unlikely before that.

Although analysts believe that dissenters may not raise the ante during the summer – due to the tourist season and relief provided by the release of a bailout tranche – the government is expected to come under new pressure in the fall when Tsipras drafts the 2018 budget, which must stipulate a primary surplus of 3.5%. Given the huge difficulties to achieve this target, Athens will find it hard to convince representatives of the country’s creditors that it will able to achieve this target without the need for yet more measures. The Greek PM will also struggle in the fall to clear the hurdles leading to the completion of the country’s third bailout review, which will also involve the IMF. The review’s focus will be on streamlining the Greek public sector, from which SYRIZA has drawn a large chunk of votes in the past and would not like to rock the boat.

Another sticking point could be Tsipras’s promise to bring back growth, when forecasts for 2017 see an anemic rate of 1.5 to 1.8%. According to reports, the left-led coalition is banking on elections taking place in June 2018 at the earliest so that it avoids having to implement pension cuts in 2019, as it had agreed with creditors and passed into law. On the other had, some reports suggest that Tsipras may seek to spring an election surprise this fall or by the end of the year. This, however, will hinge on whether Greece will be given specifics by creditors about what sort of debt relief it can expect after the German elections in September, and on the degree of difficulty it will have to draft the 2018 budget.

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Jun 182017
 
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Fred Lyon Land’s End San Francisco 1953

 

Global Inequality Much Worse Than Previously Thought (Ind.)
The US Is Where the Rich Are the Richest (BBG)
UK Wealth Gap Rises As Home Ownership Falls (G.)
UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)
Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)
Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)
Arrogance: The Greeks Had A Word For It (G.)
Illinois Finances In ‘Massive Crisis Mode’ (AP)
Metastability (Kocic)
Young Greeks Can’t Name EU Achievements (K.)
Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

 

 

It’s like the mob rules the world.

Global Inequality Much Worse Than Previously Thought (Ind.)

The gap between rich and poor across the globe is even wider than we currently think, according to a new analysis. Official estimates of inequality only take into account the money that the tax man sees, according to a recent paper by economists, Annette Alstadsæter, Niels Johannesen and Gabriel Zucman. But recent leaks of vast caches of documents from secretive jurisdictions such as Panama and Switzerland have given a more accurate picture of the sheer scale of global tax evasion – most of it carried out by very wealthy people. The three economists have used this trove of data to make a new assessment of the true wealth of the planet’s richest people, and thus a potentially more accurate measure of just how much richer they are than those at the bottom.

Until now, most assessments of wealth have relied on random tax audits, which do not pick up hidden offshore assets. This would not impact measurements global inequality if the poor dodged paying their dues as much as the rich did. In fact the rich evade many multiples more than the poor, according to Alstadsæter, Johannesen and Zucman. They studied three sets of documents: the Panama Papers, leaked from a Central American law firm which helped people set up tax haven companies; the Swiss Leaks, which revealed the dealings of HSBC’s Swiss subsidiary; and Scandinavian tax records, which give an unusually detailed picture of the income of citizens of that region. By combining the data sets they were able to make an estimate of the true size and scope of tax evasion, and thus inequality.

They found the wealthiest 0.01% in Norway, Sweden and Denmark evaded 30% of their personal taxes on average, compared to just 3% in the total population. In Norway, which has particularly detailed data, the super-rich, ie the top 0.1% of the wealth pyramid, are 30% wealthier than previously thought, when their hidden offshore assets are taken into account. This means they actually own 10% of all wealth, not the 8% previously thought. The authors posit that the scale of tax evasion is likely to be even worse in many other countries which have far less stringent tax disclosure rules. Only when we can truly assess how much personal wealth is stashed offshore will the scale of global equality be known, the economists say.

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It’s also where this won’t last. You CAN go to far.

The US Is Where the Rich Are the Richest (BBG)

It’s an excellent time to be rich, especially in the U.S. Around the world, the number of millionaires and billionaires is surging right along with the value of their holdings. Even as economic growth has slowed, the rich have managed to gain a larger slice of the world’s wealth. Globally, almost 18 million households control more than $1 million in wealth, according to a new report from the Boston Consulting Group. These rich folk represent just 1% of the world’s population, but they hold 45% of the world’s $166.5 trillion in wealth. They will control more than half the world’s wealth by 2021, BCG said. Rising inequality is of course no surprise. Reams of data have shown that in recent decades the rich have been taking ever-larger shares of wealth and income—especially in the U.S., where corporate profits are nearing records while wages for the workforce remain stagnant.

In fact, while global inequality is simply accelerating, in America it’s gone into overdrive. The share of income going to the top 1% in the U.S. has more than doubled in the last 35 years, after dropping in the decades after World War II (when the rich were taxed at high double-digit rates). The tide shifted in the 1980s under Republican President Ronald Reagan, a decade when “trickle-down economics” saw tax rates for the rich fall, union membership shrink, and stock markets spike. Now, those policies and their progeny have helped put 63% of America’s private wealth in the hands of U.S. millionaires and billionaires, BCG said. By 2021, their share of the nation’s wealth will rise to an estimated 70%. The world’s wealth “gained momentum” last year, BCG concluded, rising 5.3% globally from 2015 to 2016.

The firm expects growth to accelerate to about 6% annually for the next five years, in both the U.S. and globally. But a lot of that can again be attributed to the rich. The wealth held by everyone else is just barely growing. Where is all this wealth coming from? The sources are slightly different in the U.S. compared with the rest of the world. Globally, about half of new wealth comes from existing financial assets—rising stock prices or yields on bonds and bank deposits—held predominately by the already well-off. The rest of the world’s new wealth comes from what BCG classifies as “new wealth creation,” from people saving money they’ve earned through labor or entrepreneurship. In the U.S., the creation of “new” wealth is a minor factor, making up just 28% of the nation’s wealth increase last year. It’s even lower in Japan, at 21%. In the rest of the Asia Pacific region, meanwhile, two-thirds of the rise is driven by new wealth creation.

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Whenever you see “rising pension wealth” anywhere these days, feel free to laugh out loud.

UK Wealth Gap Rises As Home Ownership Falls (G.)

A fall in home ownership is fuelling the return of rising wealth inequality across Britain, it has emerged. Booming house prices in the run-up to the financial crisis had led to a decade-long fall in the uneven distribution of the country’s wealth. However, comprehensive new analysis of the UK’s wealth divisions has now found that the trend has gone into reverse. The study by the Resolution Foundation thinktank found that just a tenth of adults own around half of the nation’s wealth. The top 1% own 14% of the total. It warned that even this figure may be an underestimate because of the difficulties in calculating the assets of the super-rich. By contrast, 15% of adults in Britain have either no share of the nation’s record £11.1 trillion of wealth, or have negative wealth. The study found that wealth is distributed far less evenly than earnings or household income.

The thinktank measured wealth inequality using the “Gini coefficient”, with 0 being perfect wealth equality and 1 representing a society where a single person has it all. Wealth inequality was almost twice as high as earnings inequality. Despite the perception that wealth inequality has been rising for decades, the research found that the inequality of net financial and property wealth fell steadily between 1995 and 2005, with the Gini coefficient falling from 0.71 to 0.64. The fall was driven by high and rising home ownership, with more households benefiting from the pre-crisis property price boom. As a result, the proportion of property wealth owned by the bottom four-fifths of adults grew from 35% in 1995 to 40% in 2005.

However, home ownership has been falling steadily since the mid-2000s, with the wealth held by the bottom four-fifths of the population dipping as a result. Since the financial crisis, home ownership among the least wealthy 50% of the population has fallen by about 12%. Meanwhile, it has risen by 1% for the wealthiest tenth. The shift in property ownership further towards the richest has contributed to the widening of wealth inequality. Including private pensions, the Gini coefficient rose from 0.67 to 0.69 from 2006-08 to 2012-14. Total wealth across Britain, which includes private pensions, property, financial and physical wealth, rose in the wake of the financial crisis from £9.9tn in 2006-08 to £11.1tn in 2012-14. This has been fuelled by rising pension wealth. [..] Private pensions account for 40% of the wealth total – the largest share at £4.5tn.

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Add this to all the other issues. A gutted society.

UK Debt Bubble Returns Millions To Days Of 2008 Crash (G.)

Charities and financial advisers are calling on the government to use the Queen’s speech to address the “bubble” of unmanageable debt that households are rapidly accumulating. Unsecured consumer credit – including credit cards, car loans and payday loans – is this year expected to hit levels not seen since the 2008 financial crash. There has been concern in the Bank of England that consumer spending is being underpinned by debt, amid comparisons to the run-up to the financial crash. In addition, figures published last week show inflation reached a four-year high in May, meaning shopping is getting increasingly expensive, further intensifying the squeeze on household budgets.

Debt advisers are urging the government to make good on fulfil a promise in the Conservative manifesto to introduce a scheme where those in serious debt are protected by law from further interest, charges and enforcement action for up to six weeks. Many campaigners would like to see this extended further, to up to a year. “It would be excellent if the government in the Queen’s speech committed to helping households who are struggling with debt. It really is one of the great problems of the time that politicians have to grapple with,” said Peter Tutton, head of policy at debt charity StepChange. “We are seeing more and more households struggling just to make basic ends meet – to pay their rent, to pay their council tax, to pay their gas bill. We would like to see the government say, ‘we need to do something about this’.”

The charity estimates that 2.9 million people in the UK are experiencing severe financial debt in the aftermath of the recession. One reason is that many who lost their jobs found new jobs that were less well paid. Sara Williams, the author of Debt Camel, a blog advising on money problems, said: “The recent large increases in consumer credit … look alarming to debt advisers – very much like a bubble building up.”

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I still want to see who paid for all this. It’s too fast and furious to be spontaneous.

Macron Set To Dynamite Parties That Have Dominated For Half A Century (AFP)

French voters went to the polls on Sunday for parliamentary elections set to hand a landslide victory to the centrist party of President Emmanuel Macron which would complete his stunning reset of national politics. The new assembly is due to be transformed with a new generation of lawmakers – younger, more female and more ethnically diverse – winning seats in the afterglow of Macron’s success in presidential elections last month. The scale of the change is forecast to be so large that some observers have compared the overhaul to 1958, the start of the present presidential system, or even the post-war rebirth of French democracy in 1945. It is also entirely unexpected: Macron was unknown three years ago and initially given little chance of emerging as president, but he and his 15-month-old Republic on the Move (REM) party have tapped into widespread desire for change.

“It’s like a science fiction movie for me,” REM candidate Beatrice Failles, a weapons inspector, writer and community activist, told AFP this week during campaigning in Paris. REM and its allies are forecast to win 400-470 seats in the 577-strong parliament, one of the biggest majorities post-war that would give the pro-EU Macron a free hand to implement his business-friendly programme. Sunday’s voting is the decisive second round of the election after a first round last weekend which was topped by REM. If confirmed, the victory will come at the expense of France’s traditional parties, the rightwing Republicans and Socialists, but also the far-right National Front which faces major disappointment. The Socialists are set to be the biggest victim of voters’ desire to reject establishment figures associated with years of high unemployment, terror attacks and lost national confidence.

Pollsters predict the party faces financial ruin with its strength in parliament falling from nearly 300 seats to around 20 after their five years in power under president Francois Hollande. The main concern for observers and critics is the likely absence of any political counterweight to Macron, leading some to forecast that opposition could be led through street protests or in the media. “Desperately seeking an opposition,” said the front page of Le Parisien newspaper on Saturday. [..] In the first round, REM won 32% of the total number of votes cast, but this represented only about 15% of the total number of registered voters. Around half of REM’s candidates are virtual unknowns drawn from diverse fields of academia, business or local activism. They include a mathematician, a bullfighter and a former Rwandan orphan. “You could take a goat and give it Macron’s endorsement and it would have good chance of being elected,” political analyst Christophe Barbier joked recently.

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Brexit negotiations will be insane. Multiple governments will fall over this.

Secret Plot To Oust Theresa May If She Fails To Deliver ‘Hard’ Brexit (Tel.)

Theresa May will face a “stalking horse” challenge to topple her as Prime Minister if she waters down Brexit, senior Tories have warned. Leading Eurosceptic MPs have told The Telegraph they are prepared to mount an immediate leadership challenge if Mrs May deviates from her original plan. The revelation comes after a torrid week for the Prime Minister in which she faced fierce criticism for her handling of the Grenfell Tower catastrophe. Conservative MPs – including Cabinet ministers – have concluded that Mrs May cannot lead them into the next election and they are now discussing when she could go. Eurosceptic MPs have warned that any attempt to keep Britain in the customs union and single market or any leeway for the European Court of Justice to retain an oversight function will trigger an “overnight” coup.

The plot has been likened to Sir Anthony Meyer’s 1989 challenge against Margaret Thatcher. One influential former minister said: “If we had a strong signal that she were backsliding I think she would be in major difficulty. The point is she is not a unifying figure any more. She has really hacked off the parliamentary party for obvious reasons. So I’m afraid to say there is no goodwill towards her.” They added: “What we would do is to put up a candidate to run against her, a stalking horse. You can imagine who would do it. It would be a rerun of the Margaret Thatcher scenario, with Anthony Meyer. Of course Meyer had no chance at all, but she lost support and she was gone. Bear in mind that she was a hell of a lot more popular than the current Prime Minister.” Another former minister said: “If she weakened on Brexit, the world would fall in… all hell would break loose.”

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Hubris. England.

Arrogance: The Greeks Had A Word For It (G.)

“I’m not absolutely certain of my facts, but I rather fancy it’s Shakespeare – or, if not, it’s some equally brainy lad – who says that it’s always just when a chappie is feeling particularly top-hole, and more than usually braced with things in general that Fate sneaks up behind him with a bit of lead piping.” So says the immortal Bertie Wooster at the start of the PG Wodehouse story Jeeves and the Unbidden Guest, and it is fairly certain that the hapless hero, in introducing his “fairly rummy” anecdote, is raking back through his sketchily absorbed education to reach for the word “hubris”, a word inherited from those brainy lads, the Greeks.

In the past week of political turmoil, “hubris” is a word that has been exercised rather more than usual. So have other Greek words, most notably “chaos” (the inchoate matter out of which the universe was formed, according to the poet Hesiod). And “crisis”, which began life meaning “a picking apart” or “a separation”; also a bringing to trial, or a moment of judgment. Though whether a universe will be formed from the current chaos, whether a judgment or a moment of clear-eyed seeing will drop neatly out of our present crisis, remains very much to be seen.

Bertie Wooster’s definition of hubris is a perfectly good one as far as our rather limited modern usage of the word goes. The lead piping came for the Tories, first in the shape of an exit poll on election night and, since then, perhaps in their slow, shocked and wholly inadequate reaction to the catastrophe at Grenfell Tower. But hubris, like chaos and crisis, began with a rather different meaning. For the Greeks, it did not simply signal that pride goes before a fall but, rather, something stronger and more morally freighted. Hubris described an act intentionally designed to dishonour its victim. Hubris was something expressly calculated to cause shame to the weak. Hubris was tinged with violence. Hubris was excessive and brutal.

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The first of many. I know I’ve said that before, but these things can be hidden, until they cannot.

Illinois Finances In ‘Massive Crisis Mode’ (AP)

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1. Rauner on Thursday said he was calling lawmakers back to Springfield for a special session, after the Legislature adjourned May 31 without approving a state spending plan — the third straight year lawmakers have been unable to agree on a budget. Legislators are due at the Capitol on Wednesday, and Rauner said the session will continue through June 30 or until the two sides have a deal.

Lawmakers from both parties have acknowledged Illinois needs to raise taxes to make up for revenue lost when a previous tax hike expired, leaving the state on pace to take in $6 billion less than it is spending this year — even without a budget. Rauner, a former businessman who is seeking a second term in 2018, wants Democrats to approve changes he says are needed to improve Illinois’ long-term financial health before he’ll support a tax increase. Among them are term limits for lawmakers, a four-year property tax freeze and new workers’ compensation laws that would reduce costs for employers. Democrats say they’re willing to approve some items on Rauner’s list, but that what he’s demanding keeps changing or goes too far and would hurt working families. Senate Democrats also note that they approved a $37 billion budget with $3 billion in cuts and an income tax increase in May. The House has not taken up that plan.

In the absence of a budget, funding has been reduced or eliminated in areas such as social services and higher education. Many vendors have gone months without being paid. And increasingly, they’re filing lawsuits to try to get paid. The courts already have ruled in favor of state workers who want paychecks, as well as lottery winners whose payouts were put on hold. Transit agencies have sued, as has a coalition of social service agencies, including one that’s run by Rauner’s wife. Health care plans that administer the state’s Medicaid program also asked a federal judge to order Mendoza’s office to immediately pay $2 billion in unpaid bills. They argued that access to health care for the poor and other vulnerable groups was impaired or “at grave risk” because the state wasn’t paying providers, causing them to leave the program.

Judge Joan Lefkow ruled June 7 that Illinois isn’t complying with a previous agreement to pay the bills and gave attorneys for the providers and the state until Tuesday to work out a level of payment. Mendoza says whatever that amount will be, it will likely put Illinois at the point where 100% of revenues must be paid to one of the office’s “core priorities,” such as those required by court order. And if this lawsuit doesn’t do it, the next court ruling against the state will. Then, she’s not sure what will happen, other than more damage. “Once the money’s gone, the money’s gone, and I can’t print it,” Mendoza said.

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A very useful concept. Reference to Minsky would be in order, though.

Metastability (Kocic)

Big changes threaten to explode not when uncertainty begins to rise, but when it is withdrawn. Excessive determinism is almost always the biggest enemy of stability. This seeming contradiction is behind the concept of metastability which captures the mode of market functioning in the last years. Imagine you have to balance a long stick on your finger. By placing it vertically on your fingertip, the stick could fall either left or right from its initial position because standing upright is unstable. However, in trying to keep the stick vertical, you instinctively (and randomly) wiggle your finger. The added randomness (noise) acts as a stabilizer of an otherwise unstable equilibrium. So long as the noise is administered carefully, the stick remains vertical, or metastable. The withdrawal of noise becomes destabilizing.

In general, there are three types of equilibria to distinguish: stable, unstable and metastable. The bottom of the valley is stable; top of the hill is unstable; a dimple at the top of the hill is metastable. Metastability is what seems stable, but is not – a stable waiting for something to happen. Avalanche is a good example of metastability to keep in mind – a totally innocuous event can trigger a cataclysmic event (e.g. a skier’s scream, or simply continued snowfall until the snow cover is so massive that its own weight triggers an avalanche). Complacency is a source of metastability. It has a moral hazard inscribed into it. Complacency encourages bad behavior and penalizing dissent – there is a negative carry for not joining the crowd, which further reinforces bad behavior.

This is the source of the positive feedback that triggers occasional anxiety attacks, which, although episodic, have the potential to create liquidity problems. Complacency arises either when everyone agrees with everyone else or when no one agrees with anyone. In these situations, which capture the two modes of recent market trading, current and the QE period, the markets become calm and volatility selling and carry strategies define the trading landscape. But, calm makes us worry, and persistent worrying causes fear, and fear tends to be reinforcing. Persistence of low volatility causes misallocation of capital. This is how complacency leads to buildup of risk – it is the avalanche waiting to happen. For a given level of uncertainty, on the risk/reward curve investors settle at a point that corresponds to their risk limits. This position is determined by the volatility cone on the risk frontier, its width commensurate with volatility.

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Insanely positive still.

Young Greeks Can’t Name EU Achievements (K.)

An 84% majority of Greeks aged between 16-25 say that peace is the most important result of the country’s membership in the EU, according to an upcoming survey, which also found that 24% are unable to name three or more achievements of the 28-member club. The online survey, which will be published in full on Wednesday, was conducted by pro-European think tank To Diktio (The Network) with the help of MAD TV on a sample of 1,173 high-school and university students using a multiple-choice questionnaire. Asked if they think that Greece’s membership of the 28-member bloc improves their daily life, just over 37% gave a negative answer.

Whereas most of those who took part in the poll said they are in favor of closer European integration, only a minority said they consider the establishment of welfare states a significant contribution of the EU process. Meanwhile, 86% agreed it is “very significant” that they can travel, live, study or work freely across the EU, while 72% said it is positive that “we have a common strong currency which makes our transactions easier.” Finally, 83% said that the union can play a key role in “protecting fundamental rights regardless of gender, race, religion, disability or age.” Greece joined the EEC, the predecessor of today’s EU, in 1981.

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Just to add the proper insult, the picture below comes from Yuan Yang on Twitter: “Five min into this international property fair & I’ve already been offered to emigrate to the UK, Australia & get my kids into school in US”.

While Syrians kids face abuse, Greece offers passports and ‘Easy Living’ to wealthy Chinese. Mankind has fully lost its compass.

Abandoned and Abused: Syrian Refugee Children On Greek Detention Island (G.)

Rasha went missing late afternoon last Saturday. Her peers describe hanging out as normal with the 20-year-old Syrian in the Greek refugee detention camp. Then she vanished. Last Tuesday her friend Amira, 15, received a flurry of images on her phone. Rasha was lying naked in bed with a man. Superimposed upon his head were grotesque cartoon faces and an accompanying message from the anonymous caller: “I promise I will kidnap you also.” This was far from being the first threat that the teenage refugee from the Syrian city of Qamishli has received since arriving on the Aegean island of Chios six months ago. Existence in the razor-wire-fenced detention centre, a former factory known as Vial, deep within the island’s mountainous interior, is fraught for a child hoping for a fresh start in Europe, preferably the UK.

Fellow refugees intimidate her routinely. “Men say they will attack me, they try and trap us by saying don’t go to Souda [another refugee camp on the island] or go into the town. They say: ‘If I see you there, I will attack you. I will kidnap you and kill you.’” Amira is among scores of unaccompanied minors on Chios who are eligible to claim asylum in the UK under the so-called Dubs amendment. A year ago the UK government announced it would urgently offer sanctuary to a sizeable proportion of Europe’s vulnerable child refugees, a figure widely understood to be about 3,000 minors until, in February, the Home Office unexpectedly stopped the scheme after helping just 480, one child for every 130,000 UK residents. Not a single unaccompanied minor has been transferred from Greece to the UK under the Dubs scheme.

On Tuesday the last chance to reopen Dubs will be heard in the high court in London, a legal challenge that describes the Home Office’s premature closure of Dubs as unlawful and “seriously defective”. The three-day hearing holds potentially profound ramifications for Chios, which is separated by a slim strip of water from Turkey, so close that Amira can see its summer homes and factories from the island’s coast. Beyond lie the borders with Syria and Iraq from where each day people board a motley flotilla of rubber boats and dinghies to attempt the short but perilous crossing to Europe’s gateway. What those that successfully make the crossing quickly encounter could hardly be further from their aspirations of a civilised and safe world. The child refugees of Chios describe being stabbed by local people, police beatings, attacks by the far right, knife fights among drunken adult asylum seekers, and sleepless nights in flimsy tents on pebble beaches.


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Jun 162017
 
 June 16, 2017  Posted by at 10:02 am Finance Tagged with: , , , , , , , , , , ,  17 Responses »
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Pablo Picasso Dora Maar au chat 1941

 

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)
Angry Trump Decries Being Target Of Russia Probe (AFP)
Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)
Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)
UK Student Loan Debt Soars To More Than £100 Billion (G.)
UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)
Germany, Austria Slam US Sanctions Against Russia (AP)
Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)
Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)
IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)
Have The Greek Bailouts Worked? (BBC)
Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)
Half of Athens’ Ambulances Are Out Of Action (AP)
Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

 

 

Louis Vuitton CEO knows it; where’s the rest?

‘It’s A ‘Scary’ Time With A Global Crisis On The Way’ (CNBC)

A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as “scary”. “For the economic climate, the present situation is…mid-term scary,” Bernard Arnault told CNBC Thursday. “I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.”

Arnault, who is responsible for the world’s largest luxury goods company, couldn’t say whether the crash would be imminent or within the next few years, but he insisted that almost a decade on from the global financial crisis of 2008, one was due. “There has not been a big crisis for almost ten years now and since I’ve had a business I have seen crises more than every ten years, so be careful.” Longer term, however, Arnault said he was “optimistic”, pointing to advances in technology and innovation, which he said would stimulate the economy.

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The echo chamber expands.

Angry Trump Decries Being Target Of Russia Probe (AFP)

President Donald Trump responded angrily to reports he is under criminal investigation Thursday, deriding a “witch hunt” against him led by some “very bad” people. Trump responded to reports he is personally being investigated for obstruction of justice with a characteristic scorched earth defense: claiming mistreatment of historic proportions and calling into question the probity of his accusers. “You are witnessing the single greatest WITCH HUNT in American political history – led by some very bad and conflicted people!” Trump said in an early morning tweet. Trump did not directly address the allegations that he is being probed for possibly obstructing justice – a potentially impeachable offense. Nor did he deny he has entered the miniscule ranks of sitting presidents who have become the subject of a criminal investigation.

“They made up a phony collusion with the Russians story, found zero proof, so now they go for obstruction of justice on the phony story. Nice,” he wrote. Trump’s young presidency has been battered by allegations — under investigation both by Congress and the FBI — that Russia interfered to sway the 2016 election in his favor, in possible collusion with Trump’s campaign team. The FBI probe, now in the hands of special prosecutor Robert Mueller, shifted its focus to allegations of obstruction in the days after Trump fired the agency’s then director James Comey on May 9. The new allegations against Trump center on his own admission that he fired Comey because of the Russia investigation, and suggestions he asked several top intelligence officials for their help altering the direction of the inquiry.

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“..that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend.”

Putin Comey Comment ‘Remark On Circus-like Russia Nonsense Gripping US’ (RT)

Russia wants ties with the US improved, but the American domestic political situation is close to hopeless and while the Russian door is open, no one is going to lose their breath waiting to hold it open, political analyst Adam Garrie said, commenting on Putin’s statement. On Thursday, President Vladimir Putin held his annual live marathon Q&A session with the public, titled: “Direct Line with the president.” During the session, he said Russia was ready to grant former FBI director James Comey asylum. “[Comey] suddenly said that he had recorded a conversation with the president, and then gave the recording of this conversation to the media via his friend. Well, that sounds very strange when a special service chief records a conversation with the commander-in-chief and then gives it to the media via his friend. Then what’s the difference between the FBI director and Mr. [Edward] Snowden? Then he is not the head of the special services, but a human rights advocate who defends a certain position,” Putin said.

Political analyst Adam Garrie described the parallel between Comey and Snowden as “brilliant.” “It was a masterful moment for Vladimir Putin,” he told RT. “With all the lies and disinformation about the Russian president in Western mainstream media, people forget that, like most intelligent men, he’s got a wonderful sense of humor, he can be very cheeky, he can be sarcastic.” “Like Snowden, who thought he was doing a public good, Comey said that he thought he was doing the same. Should things get hairy for Comey, the doors to Russia are equally open to him.

I thought that was a very important remark by Putin on the whole sort of circus-like element of the whole Russia nonsense that’s gripping and probably will grip for some time the pundits in Washington. It just makes it clear that the entire tone of Putin’s statements about America is that we [Russia] want to get on with having good relations. It’s crucial not just bilaterally, but to the wider world, if the two of the three major superpowers do have improved relations, but that the situation domestically in America is close to hopeless – so that while the Russian door is open, no one in Russia is going to lose their breath or their cool waiting to hold it open,” Garrie said.

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She has no authority to negotiate anything anymore. That is a much bigger problem than people seem to think.

Theresa May Is Now Almost As Unpopular As Pre-Campaign Corbyn (YouGov)

New YouGov research highlights just how badly the election campaign and result damaged the public’s view of both the Prime Minister and the Conservative party and how much it boosted Labour and its leader. In April, Theresa May had a healthy net favourability rating of +10. At the end of May, following the campaign and negative reception of the Conservative manifesto, it fell to -5. Following the election result it has plummeted to -34. The Prime Minister is currently about as unpopular as Jeremy Corbyn was in November last year, when he scored -35. Meanwhile, the Labour leader has experienced a remarkable turnaround in public perception. Having experienced increasingly worse favourability ratings since Theresa May took office last summer, Jeremy Corbyn sank to a low of -42 in late April, just after the election was called.

However, the public’s view of the Labour leader improved markedly over the campaign, reaching -14 in the last YouGov favourability survey before election day. Now, following the result, his net favourability score is +0 – meaning that as many people now have a favourable view of him as have an unfavourable view. [..] It is remarkable that there has been such a sharp turnaround for the leaders of the two main political parties. When the election was called, Theresa May was secure in her position and many were speculating over the future of the Labour leader. Now, the roles are reversed, with Jeremy Corbyn having silenced his critics and won over large sections of the public while the Prime Minister faces criticism from across the board.

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Burden the young. An idea with future.

UK Student Loan Debt Soars To More Than £100 Billion (G.)

Student loan debt in the UK has risen to more than £100bn for the first time, underlining the rising costs young people face in order to get a university education. Outstanding debt on loans jumped by 16.6% to £100.5bn at the end of March, up from £86.2bn a year earlier, according to the Student Loans Company. England accounted for £89.3bn of the total. “Lots of prospective and current university students will see these figures and worry about being part of an increasing pool of graduate debt,” said Jake Butler of at money advice website Save the Student. “As fees increase this number will only go up, as more and more money is lent out each year. There is some cause for concern here, mainly for the government, as it is now widely accepted that the majority of graduates will never pay off their whole student loan debt before it is wiped off 30 years after their graduation.”

Sorana Vieru, the vice-president for higher education at the National Union of Students, said student debt had risen to “eye-watering levels”. The rise in student debt has been driven partly by rules introduced in 2012, allowing universities in England to charge up to £9,000 a year in tuition fees. In the year ending 31 March 2012, student debt was less than half the current level, at £45.9bn. Jeremy Corbyn made younger voters a key focus of Labour’s election campaign, promising to scrap tuition fees for new university students. A strong turnout among 18- to 24-year-olds at last week’s election helped the party to win 262 seats, an increase of 30. Sebastian Burnside, a senior economist at NatWest, said student debt was rising at a faster pace than any other form of debt, and eclipsed credit card debt of £68bn. “These latest figures show student debt is becoming of greater priority with every passing year. Student debt is the fastest growing type of borrowing and is rapidly becoming economically significant.”

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Maybe May intends to blame the EU and gather Brits together against them?

UK Gov Still Hasn’t Submitted Brexit Papers For Talks Starting Monday (Ind.)

The British Government has still not sent papers outlining its opening position for Brexit talks to the European Union, despite negotiations beginning on Monday. EU sources told The Independent Brussels had sent its “positioning papers” to London four days ago and while similar documents were expected in return, nothing has arrived as Theresa May’s administration struggles to get on its feet. Brexit Secretary David Davis confirmed on Thursday that talks to pull Britain out of the EU will begin on Monday regardless, despite cabinet splits over how to approach them and Ms May’s withdrawal plans not even being cemented in a Queen’s Speech.

Chancellor Philip Hammond cancelled a speaking event in which he was expected to signal new softer Brexit proposals focusing on jobs, amid fears it might spark an internal row with other Tories demanding Ms May stick to her immigration-centred approach. It came as the Prime Minister confirmed that a Queen’s Speech would go ahead, but only on 21 June – two days later than originally planned. It is still unclear if she has locked in the support of the Northern Irish DUP to prop her up in the House of Commons and give her the majority she needs to pass a vote approving the agenda set out in the Queen’s Speech. Conservatives signalled that talks with the unionists could even continue beyond the start of Brexit talks and the Queen’s Speech, as Sinn Fein’s Gerry Adams warned that any deal struck could breach the Good Friday Agreement that brought peace to Northern Ireland.

On Monday this week, the EU sent to London its positioning papers, officially outlining its negotiating stance ahead of talks, and had expected similar documents to come back in good time before discussions begin. But with the EU’s papers arriving as Ms May staved off a cabinet coup, convinced backbenchers to support her and held talks about realigning Brexit plans, nothing had been sent back to Brussels by Thursday night. One source across the Channel said it was “unbelievable” that the UK had still not sent the “basic” papers for the start of negotiations, with just over three days left before they begin. They added: “The talks are beginning on Monday. There are no positioning papers yet. It’s a basic thing that should happen beforehand. It doesn’t bode well.”

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Haha, Gazprom.

Germany, Austria Slam US Sanctions Against Russia (AP)

Germany and Austria voiced sharp criticism Thursday of the latest U.S. sanctions against Moscow, saying they could affect European businesses involved in piping in Russian natural gas. The United States Senate voted Wednesday to slap new sanctions on key sectors of Russia’s economy and individuals over its interference in the 2016 U.S. election campaign and its aggression in Syria and Ukraine. The measures were attached to a bill targeting Iran. In a joint statement, Austria’s Chancellor Christian Kern and Germany’s Foreign Minister Sigmar Gabriel said it was important for Europe and the United States to form a united front on the issue of Ukraine, where Russian-based separatists have been fighting government forces since 2014.

“However, we can’t accept the threat of illegal and extraterritorial sanctions against European companies,” the two officials said, citing a section of the bill that calls for the United States to continue to oppose the Nord Stream 2 pipeline that would pump Russian gas to Germany beneath the Baltic Sea. Half of the cost of the new pipeline is being paid for by Russian gas giant Gazprom, while the other half is being shouldered by a group including Anglo-Dutch group Royal Dutch Shell, French provider Engie, OMV of Austria and Germany’s Uniper and Wintershall. Some Eastern European countries, including Poland and Ukraine, fear the loss of transit revenue if Russian gas supplies don’t pass through their territory anymore once the new pipeline is built.

Gabriel and Kern accuse the U.S. of trying to help American natural gas suppliers at the expense of their Russian rivals. They said the possibility of fining European companies participating in the Nord Stream 2 project “introduces a completely new, very negative dimension into European-American relations,” they said. In their forceful appeal, the two officials urged the United States to back off from linking the situation in Ukraine to the question of who can sell gas to Europe. “Europe’s energy supply is a matter for Europe, and not for the United States of America,” Kern and Gabriel said.

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It’s getting close to outright lying.

Debt Deal Gives Clarity To Markets – Greek FinMin Tsakalotos (AP)

Greece’s finance minister says financial markets now have “much greater clarity” about the future of Greece’s debts, which will help the country regain market access when its current bailout program ends next year. Speaking after a meeting of the eurozone’s 19 finance ministers, Euclid Tsakalots said the country can “look forward with much greater confidence.” As well as securing €8.5 billion in bailout funds, which will help Greece meet a big summer repayment, Tsakalotos won a promise on future measures to ease the country’s debt burden and possible IMF financial involvement in the coming year. Greece has relied on bailout money for seven years and hopes that it will be able to stand on its own feet when the bailout ends. Tsakalotos said one big benefit from the deal Thursday was that future debt repayments could be linked to Greece’s growth. In essence, that could mean payments could be postponed in the event of an adverse shock.

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No , there are no details on debt relief, that’s the whole story.

Eurogroup Approves Greek Loans, Details Debt Relief, IMF To Join (K.)

Greece’s international creditors agreed on Thursday to approve the disbursement of €8.5 billion in bailout loans and to detail medium-term debt relief measures following talks in Luxembourg. Describing the agreement as “a major step forward,” Eurogroup President Jeroen Dijsselbloem said the deal aimed to get Greece standing “on its own feet again,” noting that debt relief would be linked to the country’s growth rates, in line with a proposal that had been promoted by French officials. The deal also outlined the participation of the IMF in Greece’s third bailout with the Fund’s chief Christine Lagarde saying she would formally recommend the IMF’s participation with $2 billion on a standby basis.

As regards the debt relief aspect of the agreement, Lagarde remarked that it was not the best solution for Greece as it was only an agreement in principle but the “second best” solution. European Commissioner for Economic and Monetary Affairs Pierre Moscovici sought to focus on the positive aspects of the deal. “Tonight, Greece can see the light at the end of its long tunnel of austerity,” he said. “From tonight, the watchwords are jobs, growth and investment.” His comments were echoed by Greek Finance Minister Euclid Tsakalotos who, in a separate press conference, said the deal provided greater clarity, for both citizens and investors, “more light at the end of the tunnel.” A spokesperson for the European Central Bank, whose bond buying program Greece wants to join, described the Eurogroup agreement as “a first step towards securing debt sustainability.”

However it remained unclear whether the deal was adequate to pave the way for the ECB to buy Greek bonds or not. The breakthrough last night came after Athens appeared to have shifted its stance slightly from earlier in the week when tensions between Greece and Germany had peaked and two top government ministers had said publicly that Athens mistrusts German Finance Minister Wolfgang Schaeuble. Speaking from Thessaloniki, where he met Israeli and Cypriot leaders for talks on energy cooperation, Prime Minister Alexis Tsipras remarked to reporters, “The good guys win in the end.” Greek officials have insisted over the past week that Greece has won the right to debt relief.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” President Prokopis Pavlopoulos said in comments published in Germany’s Handelsblatt. He appealed to Schaeuble to abandon his persistent opposition to Greek debt relief. “Anything else would not be worthy of a great European politician,” he said. “It is important for us that our creditors secure the viability of the debt. Otherwise the ECB cannot buy Greek state bonds,” he said, referring to the European Central Bank.

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But the article above said “IMF to join”!

IMF Won’t Fund Greek Bailout Until It Gets More Clarity On Debt Restructuring (CNBC)

The IMF wants Greek debt to become more sustainable before it channels funds into the country’s bailout program, the organization’s managing director Christine Lagarde told CNBC. “For us to engage and for us to participate financially, more needs to be clarified, defined and approved in terms of restructuring,” she said late on Thursday. “What we believe will be needed is a deferral of interests, an extension of maturity, and a mechanism by which there is an adjustment based on growth … this is where further discussion and negotiation is needed.” Lagarde was speaking in Luxembourg after European finance ministers approved a €8.5 billion loan for Athens that will enable the cash-strapped nation to meet a major July repayment deadline.

European countries have been shouldering the burden of Greece’s current €86 billion rescue fund — its third bailout package since 2010. The IMF financially contributed to Athens’ previous bailouts but refused to join the current pact because it believes Greece needed debt relief — something that European creditors aren’t comfortable with. The organization’s absence has been a thorn in the sides of heavyweight European countries, particularly Germany, who view IMF participation as a key credibility factor. For Berlin to continue backing euro zone loans to Athens, Germany’s parliament is now insisting on IMF contribution. On Thursday, the IMF agreed to offer Athens a standby arrangement of less than $2 billion but won’t be disbursing any of the funds until euro zone countries offer more detail on potential debt relief measures in 2018.

“I’ve always said that the (bailout) program walks on two legs: the leg of policies and the leg of debt sustainability,” Lagarde told CNBC on Thursday. Athens has proved its commitment to key structural reforms, which cover pensions, tax, serial procedures, and labor markets, but the second leg of the bailout program — debt restructuring — needs to be further clarified, she continued. “Progress has been made today, no question about it but more is needed.” Lagarde praised Thursday’s loan agreement, stating that Athens would now be protected from future crisis moments because its financial needs in terms of debt service will be low.

“It (Athens) will actually produce a primary surplus and it should be, in terms of liquidity and stability, in a fairly solid situation to develop its economy to cultivate growth, generate investment , and proceed with the privatization that they have agreed to complete.” On the matter of Brexit negotiations, the IMF chief advised European and U.K. officials to adopt a risk-averse approach. “What is more predictable, more certain, can be calibrated, can be anticipated, can be transitioned into, is going to be more reliable and safer for the people and the economy.” Circumstances were still too premature for the IMF to forecast future economic developments, she added.

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They have for Germnay, yes.

Have The Greek Bailouts Worked? (BBC)

As eurozone finance ministers meet in Brussels for crucial talks on Greece, Reality Check looks at whether the bailouts the country has received have secured Greece’s economic survival or just created unsustainable debt. Neither Greece nor its creditors would say they are happy with how it has worked out. In 2010, when the Greek debt crisis started, Greece received €110bn in bailout money. And in 2012, the country received a second bailout of €130bn. These loans, from the eurozone and the International Monetary Fund (IMF), were deemed necessary to stop Greece going bankrupt. In exchange, Greece was required to make deep public spending cuts, raise taxes and introduce fundamental changes to the public sector and labour legislation. In August 2015, the eurozone countries agreed to give Greece a third bailout, of up to €86bn, on the condition of further changes.

The next tranche of that bailout, which Greece needs in order to honour repayments due in July, is being discussed at the eurozone finance ministers’ meeting on Thursday. In 2010, they managed to keep Greece in the euro and prevented the collapse of the common currency. So, from the perspective of the eurozone as a whole, a chaotic “Grexit” did not happen. But seven years on, and many more billions of euros later, was this price worth paying, both from the point of view of Greece’s creditors and of the Greek people? It is impossible to know what the situation would be like now had Greece not received the bailouts, but the consequences of receiving them have been painful. For the Greek people, the bailouts and the austerity measures implemented with them have come at a huge cost.

• Unemployment remains staggeringly high: 22.5% of Greeks were unemployed in March 2017. And almost half of people under the age of 25 were out of work
• Those who do work, earn less. The minimum monthly wage at the beginning of the crisis was €863. It has now fallen to €684
• Pensioners have been hit particularly hard. Pension changes since 2010 mean 43% of pensioners now live on less than €660 a month, according to the Greek government
• Government spending on health was almost halved between 2010 and 2015, while the education budget was cut by 20%

Greece’s creditors, strongly influenced by Germany, demanded that Greece start spending less than it earned. In 2016, for the first time, Greece achieved this. The surplus is small, at €1.3bn or 0.7% of GDP. But this can hardly be seen as a success – the economy has shrunk and the overall debt pile is still going up, not down.

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Tsipras is not going to grow a pair anymore. Rule 1 for every country and society should be: Never give up your water.

Greek Government Sabotages Its People With Water Privatization Scheme (Occupy)

The “fire sale” privatization of Greece started in 2015, following the infamous Syriza referendum in which more than three-fifths of the Greek people voted to reject Troika-imposed bailout conditions – and yet their government, led by Alexis Tsipras, chose to accept the deal anyway. The privatization process reached its peak the next year, when the Greek government sold the public transport giant TrainOSE to the Italian company Ferrovie dello Stato Italiane S.p.A for 45 million euros. This happened after a very brief bidding period and despite considerable employee pushback, including a 24-hour strike that paralyzed the country. Now, a second round of fire sales is taking place ahead of the upcoming third bailout negotiations for Greece, whose current bailout package will expire in August 2018.

Since last year, the sale of the country’s roads, rights to the use of its ports, and other public sector resources have only yielded around €4 billion – a far cry from the projected €50 billion that were promised when the privatization plan was put in motion. At best, it will result in a 6 billion euro profit, nowhere near enough to cover the ailing Greek economy’s massive overhead spending. In 2016, under the EYATH initiative (representing Thessaloniki’s public sector water workers) and activists, Save Greek Water was launched in an attempt to curb the Syriza administration’s efforts to privatize public water reserves. The initiative enjoyed enormous support from the public and media, and seemed to curbing further efforts to move the privatization talks forward. That was until last December, when an article published by Stavroula Symeonidou, president of the Workers Union of DEYA of Drama, revealed that Greece’s public water sector was being purposefully sabotaged by its own government.

“…DEYAs are not financially dependent on the State/Central Government, therefore they do not, in any way whatsoever, contribute to the public debt… however they are equally restricted in (actually barred from) recruiting any new personnel, which means that over time their already limited resources will reach zero,” Symeonidou wrote. The article also warned about the danger of further levies being imposed on Greek farmers using public water sources like ground- and rainwater wells. This dire prediction came to pass last month, when an “irregular water source charge” was imposed on the major rural regions of the country, directly targeting farmers and households in the affected areas. According to a statement released by the Syriza administration, 2.5% of the proceeds from this levy will be invested in the interest of supporting the Greek public sector – but not the DEYA initiative. This is being seen as an obvious attempt to further hobble any resistance to privatization.

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Let me guess, this is part of making the country competitive again? This is criminal.

Half of Athens’ Ambulances Are Out Of Action (AP)

Greece’s financial woes have clobbered spending on state-provided health services, even as demand has spiked because fewer Greeks can pay for private treatment. Some of Athens’ ambulances have up to 1 million kilometers (620,000 miles) — nearly three times the distance to the moon — on the clock, and about half are idle because of a lack of spare parts. At night, fewer than 40 vehicles cover a population of more than 4 million. Paramedic Dimitris Dimitriadis says the service is obliged to respond to every call it receives, even if the callers are just taking advantage of a rule that patients brought to hospitals by ambulance jump the line for treatment. “But then you also get elderly people who can’t afford a taxi fare to the hospital, so they call an ambulance,” he said, driving toward a reported suicide in central Athens. Upon arrival, the crew was told that the injured person had been taken to a hospital by relatives.

Unions say rescuers do their best against the odds, focusing on getting urgent cases to emergency treatment within minutes of receiving a call. But other patients, who may still require hospital treatment, can end up waiting well over an hour. Athens ambulance workers’ union leader Giorgos Mathiopoulos says about 70 of the capital’s 140 ambulances are out of action, and the fleet needs to be doubled in size. “Up to 30% of the immobilized ambulances can’t be repaired” and many are stripped for parts to keep others going, Mathiopoulos said. “When we’re trying to get to an incident as fast as possible … and the ambulance has that many kilometers on the clock, it’s a worry.”

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Something’s going to break.

Uptick In Migrant Arrivals Eyed With Concern By Greece’s Islanders (K.)

Official data on Thursday showed an uptick in refugee and migrant arrivals from Turkey to Greece’s shores, increasing concerns among residents on the Aegean islands that have borne the brunt of the refugee crisis. A total of 151 people were reported as entering Greece in 24 hours on Thursday, 74 of whom landed on Chios, 54 on Lesvos and 23 on other islands, slightly above the 146 arrivals in the previous 24-hour period. According to official figures, the number of migrants and refugees that reached Greece between June 8 and Thursday morning came to 538, a significant rise from May when daily arrivals were in the double digits.

The upsurge is stoking fears on islands such as Chios that are already struggling to cope with thousands of refugees and migrants stranded by slow processing and deportation procedures. Residents of Chios held a rally on Thursday night to protest plans for a pre-departure facility on the island, where authorities said they will temporarily detain dozens of migrants who are not eligible for asylum before they are deported. Protesters say that the official line in favor of the facility, pointing to a decrease in arrivals on Lesvos since a similar center was opened there, are disproved by the uptick observed in recent days. A similar rally was also held on the island of Samos on Thursday.

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Jun 122017
 
 June 12, 2017  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Adam West died last week. This was his phone book listing in Ketchum, ID where he lived.

 

New Economic Woes Put Theresa May Under Fresh Pressure (Tel.)
EU Threatens Year-Long Delay In Brexit Talks Over UK Negotiating Stance (G.)
Donald Trump’s State Visit To Britain Put On Hold (G.)
It’s The Calm Before A Gigantic, Horrendous Storm: David Stockman (CNBC)
The Risk To The “Bull” Thesis (Roberts)
Big Tech Stocks Under Pressure After Apple Shares Downgraded (CNBC)
China’s $5 Trillion Asset Pile Could Still Expand (BBG)
When Currencies Fall, Export Growth Is Supposed to Follow (WSJ)
Aldi Fires $3.4 Billion Shot In US Supermarket Wars (R.)
France’s Macron Set For Landslide Majority In Parliament (R.)
Naomi Klein: ‘Trump Is An Idiot, But He’s Good At That’ (G.)
Chelsea Manning Explains Why She Went to Prison for You (TAM)
Over 2,500 Migrants Rescued In Mediterranean In 2 Days, Over 50 Missing (RT)

 

 

Even the -Tory- Telegraph has turned on the ‘winner’: Another one of their headlines: “Theresa May arrogantly abandoned Thatcherism – this is her reward”.

New Economic Woes Put Theresa May Under Fresh Pressure (Tel.)

Theresa May has been hit by a series of economic blows, with consumers tightening their belts and businesses increasingly showing fears of a sharp slowdown as she attempts to cling on to power. The crucial services sector stands on the brink of a contraction, new data shows, and credit card spending has fallen for the first time in four years. High Street footfall has also gone sharply into reverse and manufacturing and construction companies in the English regions report a widespread slowdown in activity. Most of the gloomy figures published today were gathered prior to Mrs May’s disastrous snap election. It has further undermined confidence, according to the Institute of Directors (IoD). The hung parliament has triggered a massive swing towards negativity among the business leaders.

Before the election, IoD members’ net confidence, which offsets economic pessimism and optimism, was almost balanced at minus three. In the aftermath of the election it has plunged to minus 37. Businesses were increasingly ready to openly criticise Mrs May over the weekend after her interventionist manifesto failed to inspire strong public support. Stephen Martin, IoD director general, said last night: “It was disheartening that the only reference the Prime Minister made to prosperity in her Downing Street statement was to emphasise the need to share it, rather than create it in the first place.” Official figures later this week are expected to show a tightening squeeze on consumers. Economists estimate that wages grew by 2pc the year to April, down from 2.1pc a month earlier. Meanwhile inflation is expected to remain at 2.7pc, with rises to come.

Shoppers are curbing their spending in response, according to data from Visa. The credit card company said household expenditure in May was gown 0.8pc on last year, the first decline since 2013. Consumers cut back on clothing and household goods especially. Visa UK managing director Kevin Jenkins said the data “clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze”.

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All Jeremy Corbyn has to do is tell Europe that he won’t feel bound by anything they negotiate with May.

EU Threatens Year-Long Delay In Brexit Talks Over UK Negotiating Stance (G.)

Theresa May is to be told the EU will take a year to draft a new mandate for its chief negotiator, Michel Barnier, effectively killing the Brexit negotiations, if she insists on discussing a future trade relationship at the same time as the UK’s divorce bill. In a sign of growing impatience with the shambolic state of the British side of the talks, senior EU sources said that if London insisted on talking about a free trade deal before the issues of its divorce bill, citizens rights and the border in Ireland were sufficiently resolved, it would be met with a blunt response. “If they don’t accept the phased negotiations then we will take a year to draw up a new set of negotiating guidelines for Barnier,” one senior EU diplomat said, adding that the EU could not understand Britain’s continued claim that it would be able to discuss trade and the divorce terms in parallel.

The EU’s 27 leaders formally agreed to give Barnier a narrow set of tasks at a summit in April and they have no intention of rethinking the so-called phased approach when they meet May at a European summit on 22-23 June. Formal Brexit talks are due to begin on 19 June, the same day as the Queen’s speech, at which point it will be known whether May has secured the support of a majority of MPs for her policy agenda. The Department for Exiting the European Union (DExEU) sent a note to the European commission on Friday evening to signal that the government was operational and pre-negotiation talks about logistics should begin this week as planned. Olly Robbins, May’s EU adviser, told his European counterparts: “The prime minister has directed that the procedures for preparing the negotiations for the formal withdrawal from the European Union should start as soon as possible.” There is some scepticism in Brussels, however, about the ability of May’s minority administration to make effective decisions.

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But they keep all their own clowns in Parliament? Government, even?

Donald Trump’s State Visit To Britain Put On Hold (G.)

Donald Trump has told Theresa May in a phone call he does not want to go ahead with a state visit to Britain until the British public supports him coming. The US president said he did not want to come if there were large-scale protests and his remarks in effect put the visit on hold for some time. The call was made in recent weeks, according to a Downing Street adviser who was in the room. The statement surprised May, according to those present. The conversation in part explains why there has been little public discussion about a visit.

May invited Trump to Britain seven days after his inauguration when she became the first foreign leader to visit him in the White House. She told a joint press conference she had extended an invitation from the Queen to Trump and his wife Melania to make a state visit later in the year and was “delighted that the president has accepted that invitation”. Many senior diplomats, including Lord Ricketts, the former national security adviser, said the invitation was premature, but impossible to rescind once made.

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“Stockman believes the S&P 500 could easily fall to 1,600, about a 34% drop from current levels.”

It’s The Calm Before A Gigantic, Horrendous Storm: David Stockman (CNBC)

If David Stockman is right, Wall Street should hunker down. “This is one of the most dangerous market environments we’ve ever been in. It’s the calm before a gigantic, horrendous storm that I don’t think is too far down the road,” he recently said on “Futures Now.” Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, made his latest prediction after lawmakers grilled former FBI Director James Comey over whether President Donald Trump tried to influence the Russia investigation. “This is a huge nothing-burger, but you don’t take comfort from that. You get worried about that because the system is determined to unseat Donald Trump,” said Stockman. Stockman argues the latest drama on Capitol Hill is a distraction from the real problems facing the economy.

“If the Senate can involve itself in something this groundless, it’s just more hysteria about Russia-gate for which there is no evidence. If they can bog themselves down in this, then we have a dysfunctional, ungovernable situation in Washington,” he said, noting there are just seven weeks until lawmakers go home for the August recess. Stockman contends it’s unlikely tax reform and an infrastructure package will become reality in this environment — two business-friendly policies seen as a huge benefit to Wall Street. In fact, he warns, the country could see a government shutdown in a matter of months. A scenario like that could wipe out all of the stock market gains since the election and more, according to Stockman.

“I don’t know what Wall Street is smoking. They ought to be getting out of the casino while it’s still safe. Yet there’s this idea that since he [Trump] wasn’t incriminated, that proves that we can move on,” he said. “I think it’s crazy.” Stockman believes the S&P 500 could easily fall to 1,600, about a 34% drop from current levels. He’s made similar calls like this in the past, but they haven’t materialized. “There is nothing rational about this market. It’s just a machine-trading-driven bubble that’s nearing some kind of all-time craziness, mania,” he said.

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Buybacks again. And again.

The Risk To The “Bull” Thesis (Roberts)

Following the election, the markets began pricing in a strongly recovering economic environment driven by a wave of legislative policies. While the market has indeed advanced, the economic and fundamental realities HAVE NOT changed since the election. As noted on Friday: “Economic data is not buying it either. Headline after headline, as of late, has continued to disappoint from new and existing home sales to autos, inventories, and employment. This also puts the Fed at risk of further rate hikes this year. ‘It appears traders are losing faith in the rest of the year as the odds of a hike occurring in December is now above that of September (as both drop to around 25%). As economic data has crashed since The Fed hiked rates in March, so the markets expectations has dropped to just 1.44 rate-hikes this year (one in June guaranteed), well below The Fed’s guidance of 2 more rate-hikes minimum.’”

Another huge risk going forward, as well, is the risk to further stock buybacks to support higher EPS as the lack of legislative reforms to boost the bottom line fade. As noted by Goldman just after the election: “We expect tax reform legislation under the Trump administration will encourage firms to repatriate $200 billion of overseas cash next year. “A significant portion of returning funds will be directed to buybacks based on the pattern of the tax holiday in 2004.” – Goldman Sachs. But it is not just the repatriation but lower tax rates that will miraculously boost bottom line earnings, but as noted from Deutsche Bank tax cuts are the key. “Every 5pt cut in the US corporate tax rate from 35% boosts S&P EPS by $5. Assuming that the US adopts a new corporate tax rate between 20-30%, we expect S&P EPS of $130-140 in 2017 and $140-150 in 2018. We raise our 2017E S&P EPS to $130.”

Maybe not so fast. Here is the problem. While you may boost bottom line earnings from tax cuts, the top line revenue cuts caused by higher interest rates, inflationary pressures, and a stronger dollar (as expected would be the result of tax reform) will exceed the benefits companies receive at the bottom line. I am not discounting the rush by companies to buy back shares at the greatest clip in the last 20-years to offset the impact to earnings by the reduction in revenues. However, none of the actions above go to solving the two things currently plaguing the economy – real jobs and real wages. Economic realities and wishful fantasies eventually reconnect and generally in the worst possible way.

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Bubble? Hell, no.

Big Tech Stocks Under Pressure After Apple Shares Downgraded (CNBC)

After a drop in big technology stocks Friday caused the Nasdaq composite to post its worst week of the year, the shares were likely to come under pressure again on Monday after Apple shares were downgraded. Mizuho Securities’ Abhey Lamba downgraded the iPhone maker to neutral from buy on Sunday, saying the best case scenario is priced into the shares. The analyst echoed a common concern of investors taking profits in big technology stocks last week. “The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out,” wrote Lamba, who cut his 12-month price target to $150, which is about one dollar above where Apple closed Friday.

A Friday selloff pushed the Nasdaq down more than 1.5% last week, but the selling was worse among the biggest stocks. Apple, Alphabet, Microsoft, Facebook and Amazon lost nearly $100 billion in market value on Friday on no specific headlines, but rather investors questioning whether valuations for the names were getting ahead of themselves. Nasdaq-100 futures were lower Sunday evening following the Apple downgrade. [..] Apple, Facebook and Amazon are still up more than 27% so far in 2017. Alphabet is up 20% and Microsoft shares are 11% higher for the year. By comparison, the S&P 500 is up more than 7% year-to-date.

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The graph indicates balance sheet change, not total numbers. Bit misleading when a $5 trillion asset pile, with the Fed at $4.5 trillion, is the topic.

China’s $5 Trillion Asset Pile Could Still Expand (BBG)

Investors who fret about when and how global central banks will run down their crisis-era balance sheets can be relaxed about the biggest of them all – China’s. Whereas the Fed’s $4.5 trillion asset pile is set to be shrunk and the ECB’s should stop growing by the end of this year as the outlook brightens, China’s $5 trillion hoard is here to stay for the time being – and could even still expand, according to the majority of respondents in a Bloomberg survey. The PBOC balance sheet is a fundamentally different beast from its global peers – run up through years of capital inflows and trade surpluses rather than hoovering up government bonds – but it still matters for the global economy. Changes in the amount of base money in the world’s largest trading nation are having a bigger impact than ever, making the variable key for stability in a year when political transition in Beijing is in the cards.

“China is more than a couple of years away from balance-sheet contraction,” said Ding Shuang, chief China economist at Standard Chartered, pointing out that the growth in the broad money supply is still behind the government’s target. The balance sheet has broadly leveled off, and contracted in the first quarter of this year, though that was mostly through seasonal factors related to liquidity operations around the Lunar New Year, when the demand for cash surges. Now, with the Fed set to raise rates this year, the PBOC is still wary of accelerating cash outflows from China and may need to use reserves to support the currency even as trade surpluses keep piling up. Most economists said they predict that the balance sheet will be around the same size or bigger by the end of the year, in the survey of 21 institutions including Bank of China, Nomura and SocGen.

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No, you don’t get inflation from a falling currency. But you just might get higher prices.

When Currencies Fall, Export Growth Is Supposed to Follow (WSJ)

For decades, economics textbooks argued that suddenly weaker currencies are a boon to growth, because they make a country’s exports more competitive or profitable on the global stage, which in turn boosts domestic production and employment. What if that theory no longer holds? Economists and government officials are increasingly wondering if that effect is diminishing, especially among advanced Western economies with shrinking manufacturing capacity and supply chains increasingly interwoven with the rest of the world. The new idea is that much of the benefit from a falling currency is offset by the higher prices paid for components imported from overseas. The U.K. is emerging as a test case for whether globalization has diminished the effect.

Although its currency has been battered by the financial crisis, the Brexit vote to leave the European Union—which took place a year ago June 23—and the country’s fresh bout of political uncertainty, its exporting power hasn’t responded as textbooks might suggest. Chemicals made at Chemoxy’s factory in Middlesbrough are worth about 20% more in the export market after last June’s fall in sterling, given the beefed-up value of the currencies used to buy those goods overseas. Higher costs for imported materials, however, all but erased that advantage. “We have a huge interdependency on international markets,” says Chemoxy Chief Executive Ian Stark. The company exports more than 60% of its products and imports about 85% of its chemical raw materials. A weaker pound, he says, “isn’t revolutionary.”

British businesses ranging from car makers to food processors to lumber mills are discovering the same thing. Adam Posen, president of the Peterson Institute for International Economics, and a member of the Bank of England’s rate-setting monetary policy committee between 2009 and 2012, says the effects of currency moves on exports have faded over time. After the financial crisis in 2008, a big sterling depreciation didn’t result in the pickup in exports “we would have expected,” he says. “You just don’t get as much bang for your pound as you used to,” said Mr. Posen. Whether or how the relationship between a currency’s strength and economic growth still holds has ramifications for international politics.

In the U.S., manufacturers have long complained about the impact of a strong dollar. President Donald Trump has accused Japan and China of keeping their currencies artificially low, hampering U.S. exports. In 1992, the pound fell by around 11% between September and the end of that year after the U.K. crashed out of the European exchange rate mechanism—a precursor to the euro that required a stronger pound than the government could sustain. The U.K. economy then went on an export tear, which turned a trade deficit into a five-year surplus and jump-started a recovery.

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“Aldi’s prices were also up to 50% lower than traditional grocery chains, a move that appeared to follow rival Lidl’s announcement on prices.”

Aldi Fires $3.4 Billion Shot In US Supermarket Wars (R.)

German grocery chain Aldi said on Sunday it would invest $3.4 billion to expand its U.S. store base to 2,500 by 2022, raising the stakes for rivals caught in a price war. Aldi operates 1,600 U.S. stores and earlier this year said it would add another 400 by the end of 2018 and spend $1.6 billion to remodel 1,300 of them. The investment, which raises Aldi’s capital expenditure to at least $5 billion so far this year, comes at a time of intense competition and disruption in the industry. German rival Lidl will open the first of its 100 U.S. stores on June 15. In May, Lidl said it would price products up to 50% lower than rivals. Wal-Mart, the largest U.S. grocer, is testing lower prices in 11 U.S. states and pushing vendors to undercut rivals by 15%. Wal-Mart, the world’s biggest retailer, is expected to spend about $6 billion to regain its title as the low-price leader, analysts said.

The furious pace of expansion by Aldi and Lidl is likely to further disrupt the U.S. grocery market, which has seen 18 bankruptcies since 2014. The two chains are also upending established UK grocers like Tesco and Wal-Mart’s UK arm, ASDA. In May, Aldi CEO Jason Hart told Reuters the chain intended to have prices at least 21% lower than rivals and would focus on adding in-house brands to win over price-sensitive customers. “We’re growing at a time when other retailers are struggling,” Hart said in a statement. Hart added that Aldi’s prices were also up to 50% lower than traditional grocery chains, a move that appeared to follow rival Lidl’s announcement on prices. The latest store expansion will create 25,000 U.S. jobs and make Aldi the third-largest grocery chain operator in the country behind Wal-Mart and Kroger, the German chain said in a statement. Aldi’s 2,500 stores would equal about 53% of Wal-Mart’s U.S. outlets.

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As I said yesterday, highly curious. When he won on May 7, just 5 weeks ago, there were no candidates, no apparatus, and no money: word was the candidates even had to pay for their own campaigns. And look now.

Note: France is still under a state of emergency.

France’s Macron Set For Landslide Majority In Parliament (R.)

French President Emmanuel Macron’s party is set for a giant majority in parliament, opinion pollsters said on Sunday after a first round of voting. According to two pollsters, his Republic On the Move (LREM) party and its ally Modem were set to win well over 400 seats in the 577-seat National Assembly. The two organisations along with others forecast he had won well over 30% of first round votes as voting closed. A poll by Elabe put the number of seats at between 415 and 445, while a poll by Kantar Sofres put it at between 400 and 445. A second round of voting will determine the actual number of seats Macron wins. The first round for the most part eliminates eliminates candidates who have gathered less than 12.5% of registered voters.

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Long interview for Naomi’s new book “No Is Not Enough”.

Naomi Klein: ‘Trump Is An Idiot, But He’s Good At That’ (G.)

The fact that Naomi Klein predicted the forces that explain the rise to power of Donald Trump gives her no pleasure at all. It is 17 years since Klein, then aged 30, published her first book, No Logo – a seductive rage against the branding of public life by globalising corporations – and made herself, in the words of the New Yorker, “the most visible and influential figure on the American left” almost overnight. She ended the book with what sounded then like “this crazy idea that you could become your own personal global brand”. Speaking about that idea now, she can only laugh at her former innocence. No Logo was written before social media made personal branding second nature. Trump, she suggests in her new book, No Is Not Enough, exploited that phenomenon to become the first incarnation of president as a brand, doing to the US nation and to the planet what he had first practised on his big gold towers: plastering his name and everything it stands for all over them.

Klein has also charted the other force at work behind the victory of the 45th president. Her 2007 book, The Shock Doctrine, argued that neoliberal capitalism, the ideological love affair with free markets espoused by disciples of the late economist Milton Friedman, was so destructive of social bonds, and so beneficial to the 1% at the expense of the 99%, that a population would only countenance it when in a state of shock, following a crisis – a natural disaster, a terrorist attack, a war. Klein developed this theory first in 2004 when reporting from Baghdad and watching a brutally deregulated market state being imagined by agents of the Bush administration in the rubble of war and the fall of Saddam Hussein. She documented it too in the aftermath of the Boxing Day tsunami in Sri Lanka, when the inundated coastline of former fishing villages was parcelled up and sold off to global hotel chains in the name of regeneration.

And she saw it most of all in the fallout of Hurricane Katrina in New Orleans, when, she argued, disaster was first ignored and exacerbated by government and then exploited for the gain of consultants and developers. Friedmanites understood that in extreme circumstances bewildered populations longed above all for a sense of control. They would willingly grant exceptional powers to anyone who promised certainty. They understood too that the combination of social media and 24-hour cable news allowed them to manufacture such scenarios almost at will. The libertarian right of the Republican party, in Klein’s words, became “a movement that prays for crisis the way drought-struck farmers pray for rain”.

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Here’s hoping Chelsea has some peace and perhaps even fun.

Chelsea Manning Explains Why She Went to Prison for You (TAM)

Chelsea Manning has given her first interview since being released from prison last month in which she explains her motivations for making public thousands of military documents. Excerpts of her interview with ABC‘s “Nightline” co-anchor Juju Chang aired Friday on the network’s “Good Morning America.” Asked about why she leaked the trove of documents, she says, “I have a responsibility to the public … we all have a responsibility.” “We’re getting all this information from all these different sources and it’s just death, destruction, mayhem.” “We’re filtering it all through facts, statistics, reports, dates, times, locations, and eventually, you just stop,” she adds. “I stopped seeing just statistics and information, and I started seeing people.” Asked by Hing what she would tell President Obama, Manning, choking up, says, “I’ve been given a chance,” she says. “That’s all I asked for was a chance.”

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Stop bombing. Start rebuilding. There is no other solution.

Over 2,500 Migrants Rescued In Mediterranean In 2 Days, Over 50 Missing (RT)

More than 2,500 migrants were rescued off the Libyan coast in the past 48 hours while attempting to cross the Mediterranean in “flimsy dinghies,” the UN refugee agency has said. At least eight people have died and dozens are feared missing. “Eight corpses have been recovered so far and at least 52 people are feared missing from two incidents involving large numbers of people on flimsy dinghies off the coast of Libya on Saturday,” Director of Europe Bureau of the UN Refugee agency (UNHCR) Vincent Cochetel said in a statement, citing the Italian Coast Guard. In all, over a dozen search-and-rescue operations, coordinated by the Italian Coast Guard, were launched over the weekend. The rescued migrants are expected to be disembarked in Italy over the next few days, the agency added.

“UNHCR applauds the rescue efforts by European government authorities, the Italian Coast Guard and NGOs, but is deeply saddened that the death toll continues to rise,” the statement reads. Over 1,770 people are estimated to have perished or gone missing while trying to cross the Mediterranean so far this year, according to agency’s estimates, while more than 50,000 migrants reached Italian shores, most of them through Libya. The death toll among migrants trying to reach Europe is believed to be much higher, according to the UNHCR, though, as many of them presumably die in the Sahara desert without even making it to the Libyan coast. The migrant death toll is expected to spike in the next few months with the beginning of summer sailing season, the agency warns. While urging to strengthen international efforts to save people attempting to cross the Mediterranean, UNHCR stated that the “solutions cannot just be in Italy.” Italy has on numerous occasions said that it does not enough resources to deal with the migrant influx from Libya.

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Jun 092017
 
 June 9, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Labour Campaign Poster 1922

 

Trump Accuses Comey Of Lying About Leaked Memo (ZH)
Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)
Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)
This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)
UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)
The Myth of “Cash on The Sidelines” (Roberts)
US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)
Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)
Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)
Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)
European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)
The Shield of Law and Humanism (K.)

 

 

I know the echo chamber won’t agree, but after watching quite a bit of it, four things stood out for me in the Comey testimony, other than the somewhat too loud remarks about how the entire White House lied about him and the FBI:

1) He admitted to leaking information of his private talk with Trump in the Oval Office. Comey said he didn’t understand why Trump asked everyone to leave the room, but, well, perhaps it’s this: that if anything leaked, it would be clear whodunnit. And leaking info about a private talk with your president is not an obvious thing to do. Illegal? Borderline? Comey stated that he did it because he thought it would lead to a special counsel being appointed. But who is he to ‘promote’ such a thing?

2) He finally said in public that Trump himself had not been under investigation, something the president had asked him to do on three occasions. There was some excuse about not doing it because he might have to walk that back later, but the fact remains: no Trump investigation, and despite all other leaks, no public acknowledgement of that.

3) Comey insisted in no uncertain terms that the entire US intelligence community is convinced that Russia interfered in the 2016 elections, and Russia here means the Kremlin, re: Putin. Well, let’s finally see the proof.

4) He recounted how then-AG Loretta Lynch pushed him to relabel the criminal investigation into the Clinton server as a “matter”, a term the Clinton campaign used. But why would an AG do it too, and push the FBI to do the same? Very odd. And then Comey added that this was a reason to call the press conference in which he advised the Department of Justice not to indict Clinton.

Trump Accuses Comey Of Lying About Leaked Memo (ZH)

As we detailed earlier, during his testimony today, former FBI Director Comey testified that he only leaked the memo about his contact with the President AFTER he saw President Trump’s tweet…
COMEY: I asked — the president tweeted on Friday after I got fired that I better hope there’s not tapes. I woke up in the middle of the night on Monday night because it didn’t dawn on me originally, that there might be corroboration for our conversation. There might a tape. My judgement was, I need to get that out into the public square. I asked a friend of mine to share the content of the memo with a reporter. Didn’t do it myself for a variety of reasons. I asked him to because I thought that might prompt the appointment of a special counsel. I asked a close friend to do it. [..] A close friend who is a professor at Columbia law school.

Pretty clear – it was a response to a tweet. But, as President Trump’s personal lawyer Marc Kasowitz states: “Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President. The leaks of this privileged information began no later than March 2017 when friends of Mr. Comey have stated he disclosed to them the conversations he had with the President during their January 27, 2017 dinner and February 14, 2017 White House meeting. Today, Mr. Comey admitted that he leaked to friends his purported memos of these privileged conversations, one of which he testified was classified.

He also testified that immediately after he was terminated he authorized his friends to leak the contents of these memos to the press in order to “prompt the appointment of a special counsel.” Although Mr. Comey testified he only leaked the memos in response to a tweet, the public record reveals that the New York Times was quoting from these memos the day before the referenced tweet, which belies Mr. Comey’s excuse for this unauthorized disclosure of privileged information and appears to entirely retaliatory. We will leave it the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated”

So the question is – having called President Trump a liar, did Comey just get caught in an even bigger lie… ?

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At least on his personal involvement.

Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)

If you count yourself among the die-hard, disaffected Hillary supporters still holding out hope that President Trump will be impeached for conspiring with Russian spies to stage a coup in the United States, then you may want to sit down because earlier today one of your biggest cheerleaders just threw in the towel on that whole narrative. Yes, MSNBC’s very own Chris Matthews, the same man who confessed he “got a thrill up his leg” from simply watching Obama speak, admitted today that Comey’s testimony pretty much confirmed that “there’s no ‘there’ there” when it comes to Trump colluding with the Russians.

“The assumption of the critics of the President, of his pursuers, you might say, is that somewhere along the line in the last year is the President had something to do with colluding with the Russians … to affect the election in some way. Some conversation he had with Michael Flynn or Pual Manafort or somewhere.” “And yet what came apart this morning was that theory in two regards…the President said, according to the written testimony of Mr. Comey, go ahead and get any satellites of my operation and nail them. I’m with you on that…” “And then also, Comey said that basically Flynn wasn’t central to the Russian investigation.” “And I’ve always assumed that what Trump was afraid of was that he had said something to Flynn and Flynn could be flipped on that and Flynn would testify against the President that he’d had some conversation with Flynn in terms of dealing with the Russians affirmatively.” “And if that’s not the case, where’s the there-there?”

And when Chris Matthews throws in the towel on a liberal narrative, you know the gig is up. Oh, and by the way, this probably doesn’t help your case either… Burr: “Director Comey, did the President at any time ask you to stop the FBI investigation into Russian involvement in the 2016 U.S. elections?” Comey: “Not to my understanding, no.” Burr: “Did any individual working for this administration, including the Justice Department, ask you to stop the Russian investigation?” Comey: “No.”

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Theresa May can stay until the Tories throw her out; she’s proven to be an awful liability, not a leader. Far too risky. How much would she lose next time around? Their problem is there’s no-one else who’s obvious, there must be dirty fights in dark and rainy alleys first.

So: Tories will throw out May, while Corbyn will have to throw the Blairites out of Labour who made his position a living hell.

Most likely seems Corbyn as PM of a minority government. But that’s a big risk going into Brexit talks.

Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)

The UK faces the prospect of a hung parliament with the Conservatives as the largest party after the general election produced no overall winner. With nearly all results in, Theresa May faces having fewer seats than when she called the election. The Tories are projected to get 318 seats, Labour 261 and the SNP 35. Jeremy Corbyn has urged the PM to resign but the BBC understands she has no intention of doing so at this stage and will try to form a government. The prime minister has said the country needs stability after the inconclusive election result and the BBC’s political editor Laura Kuenssberg said Mrs May intended to try and govern on the basis that her party had won the largest number of votes and seats.

Labour is set to make 29 gains with the Tories losing 13 seats – and the SNP down by 22 seats in a bad night for Nicola Sturgeon, with her party losing seats to the Tories, Labour and Lib Dems. The Conservatives are forecast to win 42% of the vote, Labour 40%, the Lib Dems 7%, UKIP 2% and the Greens 2%. Turnout so far is 68.7% – up 2% up on 2015 – but it has been a return two party politics in many parts of the country, with Labour and the Conservatives both piling up votes in numbers not seen since the 1990s. UKIP’s vote slumped dramatically but rather than moving en masse to the Tories, as they had expected, their voters also switched to Labour.

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New elections? One positive for the former Empire: the threat of Scottish independence was wiped out.

This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)

Despite a lot of the good news streaming out of counts everywhere right now, make no mistake: this is going to be chaos. A deep and growing sense of frustration is about to ripple through the country, because what May has essentially done in her arrogance is take a gamble that could cost us decades of stability and prosperity. It is likely that what awaits us over the next few weeks is, to put it bluntly, a mess. Hung parliament. No clear majority. No willingness to form a coalition. A possible resignation from the Prime Minister (whether she’s pushed or jumps is yet to be seen) and then yet another leadership contest. Boris Johnson is said on the Westminster grapevine to already be positioning himself as a candidate, yet his reputation has turned increasingly sour over the last few years.

Many now regard him as a cynical power-grabber without much regard for the people he claims to represent. The Tories have spent the last two years playing Russian roulette with the electorate in the hope of cementing their credibility, and causing utter shambles along the way. Having barely recovered from a referendum result which caused deep divisions and painful rifts within our society, and as Europe watches us scramble for any sort of political legitimacy, who will now head into the talks that will determine our economic and political future? Theresa May has now shoved us off a cliff into political unknowns just when what we actually needed was, ironically enough, some strong and stable leadership.

Any reassurance from Westminster that the lives of ordinary people in this country mattered more than political point-scoring would be welcome. What we’ll get instead, despite the Labour surge, is yet another election, whether that be in two months’ or two years’ time. It feels inspiring and hopeful that we have so many progressive and wonderful MPs back in the Commons. But until we have a government and a plan of how to get ourselves through this, that hope is limited to a symbolic step in the right direction. In the words of one particularly concise campaign poster: strong and stable, my arse.

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It’s going to get terrible no matter what. But for now the EU has no-one to talk to. They’re not going to sit down with May if she may last only a few more weeks.

UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)

The EU will force a humiliated Theresa May to explain her intentions at a face-to-face meeting in Brussels as senior diplomats and politicians warned that the hung parliament resulting from the UK election was a “disaster” that hugely increases the chance of a breakdown in the Brexit negotiations. The result is likely to delay the point at which Michel Barnier, the EU’s chief negotiator, has someone with whom to negotiate. Sources said a meeting of the European council on 22 June was the deadline by which time the EU27 would want to know the prime minister’s plans. Guenther Oettinger, the German member of the European commission, said: “We need a government that can act. With a weak negotiating partner, there’s the danger than the negotiations will turn out badly for both sides … I expect more more uncertainty now.”

It had been hoped that officials from both sides would have informal talks next week over the logistics of the negotiations, before formal talks began on the week starting 19 June. With the prime minister needing to both seek to form a minority or coalition government, as well as potentially revise her goals for the talks in the light of the election result, the original timetable seems unrealistic to officials in Brussels. The EU had, until now, believed it understood that May wanted to take the UK out of both the single market and the customs union, but in the early hours of Friday morning the Brexit secretary, David Davis, had suggested the election result could prompt a rethink.

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All on red.

The Myth of “Cash on The Sidelines” (Roberts)

[..] despite 8-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit: “Underpinning gains in both stocks and bonds is $5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness. This excess cash acts as a backstop for financial assets, both bonds and equities, because any correction is quickly reversed by investors deploying their excess cash to buy the dip,” Nikolaos Panigirtzoglou, the managing director of global market strategy at JPMorgan, wrote in a client note. This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets.

However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and ongoing global Q.E., exactly what will that catalyst be? However, Clifford Asness previously wrote: “There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.” Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs. Since this must be the case for there to be equilibrium to the markets there can be no “sidelines.”

Each month, the Investment Company Institute releases information related to the mutual fund industry. Included in this data is the total amount of assets invested in mutual funds, ETFs and money market funds. As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks. Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history.

Furthermore, with investors once again “fully invested” in equities, it is not surprising to see cash and bond allocations near historic lows. Cash on the sidelines? Not really. Everyone “all in the boat?” Absolutely. Historical outcomes from such situations? Not Great.

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The No Price Discovery Bubble.

US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)

In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs . At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90thpercentiles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America’s financial net worth,

Read more …

Trump and Congress had better go out and do something.

Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)

The opioid crisis that is ravaging urban and suburban communities across the US claimed an unprecedented 59,000 lives last year, according to preliminary data gathered by the New York Times. If accurate, that’s equivalent to a roughly 19% increase over the approximately 52,000 overdose deaths recorded in 2015, the NYT reported last year. Overdoses, made increasingly common by the introduction of fentanyl and other powerful synthetic opioids into the heroin supply, are now the leading cause of death for Americans under 50. And all evidence suggests the problem has continued to worsen in 2017. One coroner in Western Pennsylvania told a local newspaper that his office is literally running out of room to store the bodies, and that it was recently forced to buy a larger freezer. The initial data points to large increases in these types of deaths in states along the East Coast, particularly Maryland, Florida, Pennsylvania and Maine.

In Ohio, which filed a lawsuit last week accusing five drug companies of abetting the opioid epidemic, the Times estimated that overdose deaths increased by more than 25% in 2016. In some Ohio counties, deaths from heroin have virtually disappeared. Instead, the primary culprit is fentanyl or one of its many analogues. In Montgomery County, home to Dayton, of the 100 drug overdose deaths recorded in January and February, only three people tested positive for heroin; 97 tested positive for fentanyl or another analogue. In some states in the western half of the US, data suggest deaths may have leveled off for the time being – or even begun to decline. Experts believe that the heroin supply west of the Mississippi River, traditionally dominated by a variant of the drug known as black tar which is smuggled over the border from Mexico, isn’t as easily adulterated with lethal analogues as the powder that’s common on the East Coast.

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Fake News.

Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)

That $110 billion arms deal President Donald Trump signed with Saudi Arabia isn’t much of a deal at all, according to reports which found the majority of the agreement was based on memos, rather than contracts. On May 20, Trump negotiated an arms deal with Riyadh. The State Department said it was worth nearly $110 billion to support “the long-term security of Saudi Arabia and the Gulf region in the face of malign Iranian influence and Iranian related threat.” White House Press Secretary Sean Spicer hailed it the “largest single arms deal in US history.” The State Department then released a general list of the weapons that were included in the deal. However, many experts have said that most of the arms sales had not been cleared by the State Department, Congress or even the industries themselves.

On Thursday, Defense News released a more detailed list of the weapons included in the deal, according to documents they obtained from the White House. The ‘deal’ lists $84.8 billion under memos of intent (MOI) “to be offered at visit,” and $12.5 billion under letters of agreement (LOA), rather than contracts. NPR also obtained a list of commercial deals from a White House spokeswoman and found that it added up to $267 billion, but said most of the deals were listed as “memoranda of understanding” (MOU). “There is no $110 billion deal,” Brookings Institution Senior Fellow Bruce Riedel wrote in blog post Monday. “Instead, there are a bunch of letters of interest or intent, but not contracts,” Riedel said. “Even then the numbers don’t add up. It’s fake news.”

Read more …

So what did they do to prove that?

Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)

Washington is Greece’s only true international ally, Defense Minister Panos Kammenos insisted on Thursday, and accused the country’s European partners of showing a lack of respect. “The Greek people are well aware that the United States has been the country’s only genuine ally,” Kammenos said. “The others are allies, but they are [allies] only in the form of creditors, without [any sense of] respect and this is because some of them will never forget that they lost World War II to this country,” Kammenos, who is also leader of junior coalition partner Independent Greeks, added during a speech marking the 70th anniversary of the US Office of Defense Cooperation in Athens yesterday. “For this reason, we welcome US support at this very difficult moment for our country,” said Kammenos, who also called for the strengthening of the Hellenic Navy with US help so “that it can operate from Crete to the Suez.”

Bolstering the navy and the country’s military aviation capabilities are necessary, he said, to intercept the flow of drugs, weapons and fuel through which terrorism is funded. He also said that Greece is positively inclined to extend the time frame of the defense agreement between the two countries, adding that Prime Minister Alexis Tsipras and his government are working in that direction. He also referred to the latest developments in the Gulf states and stressed that he supports describing the Muslim Brotherhood as a terrorist organization. Aiming his fire at Turkey, he said that each country must choose “whose side they want to be on.” It is certain, he said, that “Greece will be on the side of the US.” For his part, US Ambassador to Greece Geoffrey Pyatt praised relations between Athens and Washington, adding that as Greece’s economy stabilizes, it will become even more active in its role as a bridge between countries of the region.

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Nobody cares unless you hold their feet to the fire.

European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)

Any countries in the European Union receiving asylum requests from refugees have an obligation to process them irrespective of where the applicants first entered into the bloc, an advocate general at the European Court of Justice said on Thursday. Eleanor Sharpston said in a non-binding opinion that under the “exceptional circumstances” of the refugee crisis, member states should not be bound by the Dublin Regulation’s requirement that first-entry states handle all asylum applications, even after a refugee or migrant has moved on to a different country. “The words ‘irregular crossing’ in the Dublin III Regulation do not cover a situation where, as a result of the mass inflow of people into border member states, those countries allowed third-country nationals to enter and transit through their territory in order to reach other member states,” she wrote.

Sharpston referred to the case of a Syrian national who traveled to Slovenia via Croatia and that of an Afghan family that entered Europe in Greece and then made its way to Austria. Slovenia and Austria should be responsible for examining their asylum applications, she said. “If border member states… are deemed to be responsible for accepting and processing exceptionally high numbers of asylum seekers, there is a real risk that they will simply be unable to cope with the situation,” Sharpston wrote. “This in turn could place member states in a position where they are unable to comply with their obligations under EU and international law,” she added.

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The last thing Greece has left is rumored to be on the way out.

The Shield of Law and Humanism (K.)

It is difficult to believe that after Greece’s judiciary offered protection to eight members of the Turkish military, rejecting Ankara’s request for their extradition, the government would agree to the illegal, secret and inhuman expulsion of people who requested asylum here. Yet unease grows. On Wednesday the government spokesman stated, “The Greek government does not engage in pushbacks.” Let us hope that is so. The Hellenic League for Human Rights cites two instances where groups of Turkish citizens who requested asylum in Greece appear to have been handed over illegally to Turkish authorities. The Council of Europe’s commissioner for human rights, Nils Muiznieks, the UN High Commissioner for Refugees and the head of the Alliance of Liberals and Democrats in the European Parliament, Guy Verhofstadt, have expressed concern at the possibility.

There is also the strange story of three Turkish military men who where arrested in Edirne last month, accused of being part of a group that intended to kidnap President Recep Tayyip Erdogan during the failed coup last July. Turkish media said the men were arrested while on their way to Greece; some Greek lawyers, however, claim that the three had crossed into Greece when they disappeared, only to turn up in Turkish custody. The Citizens’ Protection Ministry in Greece scoffed that the claims were “fairy tales.” The case of the eight servicemen who arrived in Alexandroupoli in a helicopter the day after the coup attempt shows how difficult it is for any country to withstand Ankara’s pressure. It is understandable that no government would like to open a new front with a neighbor who can cause problems at will. But it is of paramount importance that Greece withstand such pressures.

In the past few years, among our country’s very few victories were the welcome provided to refugees and the institutional way in which it dealt with the “Eight.” Our great wound, though, is the lack of strategy, of method, of goals – of follow-up. On the refugee issue, government incompetence undermined the initial, heroic efforts of citizens. In the case of Turkish asylum seekers, the difficulties of handling the case of the Eight should not lead to cynicism, to injustice, to the violation of international conventions. Greece has a responsibility toward its own people and toward the Turkish people, to serve the principles of humanism, to abide by the law. Strenuous defense of these principles is part of the identity we aspire to but also our shield. And it is the best thing that we can offer our neighbors – the hope that there is something better than that which they are now enduring.

Read more …

Jun 062017
 
 June 6, 2017  Posted by at 6:41 pm Finance Tagged with: , , , , , , , , , ,  5 Responses »
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Joseph Mallord William Turner Wreckers, Coast of Northumberland 1834

 

Is it sheer hubris, or is it just incompetence? It’s a question often asked when it comes to politics. And regularly, the answer is both. Still, what the ruling British political class has put on display recently seems to exist in a category all its own. Less than a year go, then-PM David Cameron lost the Brexit referendum that he called himself and was dead sure he would win by a landslide.

His successor Theresa May, Cameron’s Home Secretary and a staunch Remain advocate, lost the Brexit vote as much as her PM did, but stayed on, was promoted, and acted for 11 months like Downing Street 10 was hers by Divine Decree. Then she did the exact same thing Cameron did: she looked at polling numbers and decided to go for the jugular: more power through a snap vote.

In the process, May has succeeded in accomplishing the remarkable feat of rejuvenating her main opponent Jeremy Corbyn and his Labour party, who had been left for infighting dead until she called the election, while at the same time dividing her own Tories so much they now resemble Labour from just weeks ago.

The thing that sort of irks is that the speed and intensity with which it all came down would have been way more impressive if she had meant to do it. Oh, and what also irks is that despite a performance worthy of the Comedy Capers, May may still win, since there was always little time, there’s so little time left till Thursday and there have been terror attacks.

A nice addition to the comedy sphere, and I mean no disrespect to any of the terror victims, they’ve gotten enough of that from May et al, is the story behind the PM’s refusal to appear in public debates with Corbyn and perhaps others. When I first saw a few weeks ago that she had announced that refusal, I immediately thought she did not make that decision. She doesn’t have the savvy for that kind of thing.

Someone did it for her. I presumed there had been American advisers added to her team, but I didn’t read anything about that. Until a few days ago, when I saw that political -presumed- heavyweights like Australian Lynton Crosby and American Jim Messina had joined around the time of the snap election announcement on April 18.

And now of course I can’t help thinking that these guys are responsible for the epic failure that May has been over the past six weeks. But that might be giving them too much honor, she’s quite capable of screwing up the way she has all on her own.

And yes, it’s hard to escape a comparison with Hillary here. It’s not about gender, it’s about competence. And if you manage to -almost or entirely- lose to the likes of Trump and Corbyn, despite having a huge lead in the polls, as both ladies had, you’re simply in the wrong place at the wrong time. Not that Corbyn has won yet, at least not in the election.

Guys like Crosby and Messina get paid the big bucks for their expertise in both clean and dirty tricks. They have plenty experience in both. They don’t have opinions, but they make up voters’ opinions for them. Messina was Obama’s 2012 re-election campaign leader, Crosby did elections in Australia, New Zealand, Canada. Funny thing is if you check their records, they have lost quite a few of these campaigns. Even funnier would be if they lose this one too.

 

But you’re right, it’s not right to be laughing. This past weekend saw another attack on Britain, and another -to put it mildly- far below par performance by Theresa May in its wake. If after this the Britons still hand her a win in Thursday’s general election, give up the country for lost. Stick a fork in it.

May was the one who as Home Secretary was responsible for an investigation into the foreign funding of extremist Islamist groups in the UK that was set to be released a year ago. Instead, we saw last week, she’s actively suppressing its release now that she’s PM, ostensibly because the report mentions Saudi Arabia as a source of such funding, and May recently used her position to help UK arms manufacturers sell billions worth of additional weapons to the Saudi’s.

She’s even on record as saying that arms sales to the House of Saud make Britain more safe, though the report apparently fingers that same House of Saud as funding the very terrorism her country was hit by, three times in a row now, during her stint as PM.

Where does terrorism originate? May won’t admit it’s Saudi Arabia, so she tried, in her first post-attack speech, to deflect the obvious by blaming ‘the internet’. But the internet doesn’t sell arms to countries that support terrorism. Theresa May does.

 

 

As people understandably call for more protection after three hits in a row, May has another thing to suppress: as Home Secretary she has been responsible for cutting some 22,000 jobs in the police force, 20,000 in the army, and 60,000 in the healthcare system. And if she would win on Thursday, more of all that is in the offing. At least, that was what was planned; she may make yet another U-turn on that one.

It’s really quite amusing to see a candidate trying to hide from the very elections she herself called, but -again-, given the short time-frame this hide-and-seek tactic might actually work. Moreover, if the British media and his own Labour MPs had not turned against Jeremy Corbyn the way they did until very recently, would May be anywhere near having a shot at victory? It looks unlikely.

There are already bets going that even if she wins the election, which if it happens is sure to be a very narrow win, she’ll be replaced as PM by Boris Johnson before July 1. But he’s as much of a clown as all other major Tory figureheads are today.

 

 

The problem of course is that the problems for Britain won’t stop on Thursday, no matter who wins. The problems haven’t even started blooming yet, let alone flowering.

If Corbyn might win, he’s have the entire Conservative entitlement class on his back, and that would turn ugly fast. If May wins, she’ll be ousted in no time, she did far too bad of a job. And then in just a few weeks’ time the Brexit negotiations begin. But with what? With a country that’s been divided to the bone, that’s what.

As things are, Corbyn may yet succeed where Bernie Sanders was rejected and suppressed by his own party. The world today needs people like them, not because it needs ‘socialism’ that much, but because the political landscape has been thrown too far out of balance. If the left gets co-opted by neo-liberalism as much as the right is, there is no left left.

And a sound political system needs representation for the people, the poor(er), as much as representation for the richer ruling classes. It’s not about ideology, but about balance. If you allow either one side or the other of the political equation to run rampant, you will inevitably end up with a dysfunctional society.

 

And that is what Britain is today. There are plenty slogans out there after yet another terror attack that say things like ‘Britain Stands United’, “London is United” , but it doesn’t and they are not. It’s not terrorism that has divided the country, it’s the political class. It’s not terrorism that has ‘crippled democracy’, it’s the sense of entitlement that many -on both sides of the aisle- have brought to Whitehall.

You would think that at least Jeremy Corbyn could do something about that if he wins. But he would then face an EU negotiating team that operates with a very similar sense of entitlement. And they’re going to come after the British people the same way they have in Greece. Not exactly an enviable position.

And that’s just Brussels. Then there are the terrorist attacks, and there’s little reason to think they will stop. What Britain refuses to recognize until now, and has for hundreds of years as I said before, is that these attacks in London and Manchester are not where it has all started. They don’t come out of the blue, and they don’t come from people who ‘hate us for our freedom’.

The first step is the UK et al spreading terror in Libya and Syria and Iraq, bombing away and selling weapons to ‘friendly’ regimes, creating utter chaos as a political power tool. If you don’t stop that you don’t stop terrorism. The only way to stop terror directed at you is to stop directing it at others.

Stop bombing these countires with impunity, and use the money you save with that to rebuild what you’ve destroyed. That will take away the main reason why there is terrorism in our streets. It will likely go a long way towards solving the refugee problems as well.

All this seems a long way away. It’ll recede further if the entitlement-laden establishment win on Thursday. But whichever way the vote goes, Britain will face a decade or more of deepening hardship, don’t underestimate that; there is no easy way out, not for the people.

Oh wait, I totally forgot to mention that the housing bubble is going to burst too. Oh, well, when it rains…

 

 

May 302017
 
 May 30, 2017  Posted by at 8:50 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Inge Morath Paris 1954

 

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)
Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)
Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)
The Great US Energy Debt Wall (SRSRocco)
Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)
Draghi Rules Out Including Greece in ECB QE For Now (K.)
Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)
Deposits And Loans At Greek Banks Continue Slide (K.)
EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)
Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)
May Battles Against Complacency as UK Election Lead Slips Away (BBG)
Russia Expects China To Help Resolve Syrian Crisis (DS)
Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)
Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)
The So-Called Resistance (Jim Kunstler)
Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)
Greece, Germany Agree To Slow Refugee Family Reunification (F24)

 

 

After having milked the bubble for all it’s worth…

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)

Australian asset manager Altair Asset Management has made the extraordinary decision to liquidate its Australian shares funds and return “hundreds of millions” of dollars back to its clients, citing an impending property market “calamity” and the “overvalued and dangerous time in this cycle”. “Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, who serves as Altair’s chairman and chief investment officer, said in a statement on Monday. The 30-year veteran of funds management said that he had on May 15 advised all Altair clients that he planned to “sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors”.

Mr Parker said he had “disbanded the team for time being”, including his investment committee of chief economist Steve Roberts, senior healthcare analyst Sally Warneford and independent strategist Gerard Minack. “I would like to make clear this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point,” Mr Parker’s statement said. “We think that there is too much risk in this market at the moment, we think it’s crazy,” Mr Parker said more candidly. “Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that’s after we’ve ticked them up over the past year.” “Now we are asking ‘is there any more juice in these companies valuations?’ and the answer is stridently, and with very few exceptions, ‘no there isn’t’.”

Mr Parker outlined a roll call of “the more obvious reasons to exit the riskier asset markets of shares and property”. They included: the Australian east-coast property market “bubble” and its “impending correction”; worries that issues around China’s hot property sector and escalating debt levels will blow up “later this year”; “oversized” geopolitical risks and an “unpredictable” US political environment; and the “overvalued” Aussie equity market. But it was the overheated local property market that was the clearest and most present danger, Mr Parker said. “When you speak to people candidly in the banks, they’ll tell you very specifically that they are extraordinarily worried about the over-leverage of the Australian population in general,” he said.

Read more …

More looming calamity.

Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)

Snaking queues of thousands of prospective apartment buyers in Hong Kong signaled authorities have made no progress in cooling a red-hot property market, where prices are at records. People were lining up on Friday and over the weekend at Victoria Skye, a luxury project at the former airport site of Kai Tak, and at the Ocean Pride development by Cheung Kong Property and MTR. “Successive moves by the government in recent memory to cool the property market only resulted in it becoming crazier,” The Standard newspaper said in an editorial on Monday. “The result is a sea of madness.” The Hong Kong Monetary Authority has been tightening rules for lenders, including restricting levels of lending to developers, as it tries to limit financial risks and take some of the heat out of the market.

The Centaline Property Centa-City Leading Index of existing homes has advanced 23% in the past year, setting new price records week after week. At a Legislative Council meeting on Monday, HKMA Chief Executive Norman Chan said levels of demand were reminiscent of 20 years ago – before Hong Kong suffered a property bust – and he expressed concern that people with limited financial resources were buying just because they thought prices would only keep going up. [..] Developers sold 8,616 homes in the first five months of the year, already more than were sold in any first half since new purchasing rules were introduced in 2013, the Hong Kong Economic Times reported. K&K Property has offered an additional 200 units at Victoria Skye after it sold 306 flats on Saturday, Ming Pao newspaper reported. Cheung Kong will put another 346 up for grabs after selling 496 in a single day, May 26.

Read more …

Buying too many weapons. The House of Saud is nervous.

Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)

Saudi Arabia’s net foreign assets dropped below $500 billion in April for the first time since 2011 even after the kingdom raised $9 billion from its first international sale of Islamic bonds. The Saudi Arabian Monetary Authority, as the central bank is known, said on Sunday its net foreign assets fell by $8.5 billion from the previous month to about $493 billion, the lowest level since 2011. That brings the decline this year to $36 billion. “Didn’t really see any major driver for such a huge drop, especially when accounting for the sukuk sale,” said Mohamed Abu Basha at EFG-Hermes, an investment bank. Even if the proceeds from the sale weren’t included, “the reserve decline remains huge,” he said.

Saudi Arabia’s foreign reserves have dropped from a peak of more than $730 billion in 2014 after the plunge in oil prices, prompting the IMF to warn that the kingdom may run out of financial assets needed to support spending within five years. Authorities have since embarked on an unprecedented plan to overhaul the economy and repair public finances. But the pace of the decline in reserves this year has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen. Finance Minister Mohammed Al-Jadaan said in April that the government didn’t withdraw from its central bank reserves during the first quarter. He said the decline could be attributed to local contractors paying overseas vendors after the government settled its arrears.

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It’s not (just) the shale companies, it’s their lenders who are in danger.

The Great US Energy Debt Wall (SRSRocco)

While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL. So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations.

As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast. According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year. As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.

Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt: Shale Oil Production, Cost & Profit Estimates For 2018 • REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion. • EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion. If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion. However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.

Read more …

BILD says Greeks have mentioned defaulting on July payments.

Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)

Concerns about a Greek bailout, early Italian elections and comments by the ECB chief about the need for continued stimulus all kept the euro under pressure on Tuesday. European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays. The euro slid 0.3% to $1.1129 in its fourth session of declines. James Woods at Rivkin Securities in Sydney attributed most of the currency’s decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal. “The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Woods said.

However, he cautioned against reading “too much into it” without more details or confirmation, adding it was unlikely Greece would forego the bailout payment at this stage. Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting. Comments by former Italian Prime Minister Matteo Renzi on Sunday in favour of holding an election at the same time as Germany’s in September also pulled the euro lower. So did a statement by ECB President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

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If he includes Greece, it becomes harder for Germany to plunder it. And they’re not done with that.

Draghi Rules Out Including Greece in ECB QE For Now (K.)

ECB chief Mario Draghi took the wind out of the government’s sails on Monday, telling the European Parliament that the ECB will not consider including Greece in its QE program before the conclusion of its bailout review and its debt is made sustainable. “First, let’s have an agreement, a full agreement, and let’s find measures that will make the debt sustainable through time,” Draghi told European lawmakers in Brussels, adding that he regretted that “a clear definition of the debt measures was not reached in the last Eurogroup.” Draghi also said that after creditors agree on what sort of debt relief measures Greece will get, the Governing Council of the ECB will carry out its own “fully independent” analysis to see if the debt would also be sustainable in adverse scenarios.

His comments came as Prime Minister Alexis Tsipras said that Greece was hoping that there will be an initiative in June for “a definitive settlement of the crisis through a clear solution of reducing the debt.” “Let there be a solution and let it come when it comes,” he said after his meeting in Athens with Estonian Prime Minister Juri Ratas, adding that the sooner the matter is solved the better. The tough road ahead for Greece was reflected in remarks yesterday by Finance Minister Euclid Tsakalotos, who said the country’s inclusion in QE is indeed “a difficult issue.” “The ECB, like our Lord, works in mysterious ways,” he told reporters. Draghi’s remarks were seen as another another blow, if not the killer, to the government’s narrative regarding the time frame it had laid out for the country to get on the road to economic recovery.

More specifically, Prime Minister Alexis Tsipras’s roadmap stipulated that after the second review of the country’s third bailout is wrapped up, creditors and the IMF would agree on how to make the country’s debt sustainable, and this would in turn allow Greece join the QE program, which would pave the way for the country’s return to international markets. But with the review all but concluded, and no definitive statements from the creditors on what sort of debt relief measures it can expect – or when – the best the government can hope for now is that the sequence of events outlined in the Tsipras roadmap will take place in the fall at the earliest, and definitely after the German national elections in September. The way things stand now, the most the government can expect from the June 15 Eurogroup is the release of the bailout tranche of more than €7 billion, but not the reassurance it wants in order to join the QE program.

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That’s exactly why these deals keep on being blocked. The EU doesn’t want a Greek recovery. Cart, horse.

Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)

Greece on Monday issued a panic warning that its recovery would be thrown into doubt if Brussels blocked a debt deal at the next meeting of euro area finance ministers. Fearing that Germany will insist on delays to an agreement until at least after elections in September, Athens’ finance minister hinted that the beleaguered nation could be plunged deeper into recession after seeing its economy contract by more than 25% since the start of its financial crisis. With £7.5bn in debt repayments due in July and lenders meeting on 15 June to try and reach an agreement after failing last month, Euclid Tsakalotos made an urgent appeal for clarity on Monday. “It is incumbent on all sides to find a solution,” he told foreign correspondents. “There is very little point in entering a [bailout] programme if the goal is not to leave the programme. And leaving the programme should be the responsibility not just of the debt country but the creditor country as well.”

Athens, Tsakalotos continued, had kept its side of the bargain, legislating highly unpopular reforms to produce savings of 2% of GDP, while the EU and IMF had not kept theirs. “We can’t accept a deal which is not what was on the table,” he said. “What was on the table was if Greece carried outs its reform package then creditors would ensure that there would be a clear runway through clarity for debt.” Instead, the IMF had refused to endorse the proposed solution – saying it fell far short of what was necessary to engender debt sustainability – with the result that Athens had been forced to reject it, Tsakalotos added. The Fund and Berlin – the biggest contributor of Greece’s three rescue programs – have long been in disagreement over how to reduce Greek debt.

Tsakalotos was addressing a hastily arranged press conference. Held in the dining room of the Athens’ mansion that houses the prime minister’s office, it appeared to highlight the mood of nervousness pervading the Greek government. With a debt mountain hovering around €314bn – or 180% of GDP – the Syriza-dominated coalition of Alexis Tsipras has long argued that debt relief is essential to foreign investment and economic recovery. [..] ..time, said Tsakalotos on Monday, was running out. “Our ask is … that everyone keeps their side of the bargain. The position [of creditors] is going to be very difficult to defend. What can they say? That the Greek government did everything but we will send it to the rocks.”

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Which will affect Greek banks, which will affect the state, etc etc. There never was another option.

Deposits And Loans At Greek Banks Continue Slide (K.)

Deposits in Greek banks declined by more than €2.4 billion in the first four months of the year, while credit contraction has continued in 2017 for an eighth consecutive year. Still, April was the second month of credit expansion. The sum of Greek deposits reached almost €118.9 billion at the end of last month, down from about €121.4 billion at end-December 2016, due to the uncertainty that has prevailed over the Greek economy this year. Bank of Greece data show a fresh €313.3 million drop in deposits from end-March to end-April – a result of the €665.3 million decline in the cash flow of corporations, from nearly €20.5 billion in March to almost €19.8 billion last month. In fact the picture of corporate deposits in April looks technically better than it would had it not been for the €620 million share capital increase by Fraport Greece and Sklavenitis’s €400 million bond.

The level of savings has practically reverted to what it was in 2001, when Greece was still using the drachma, and forecasts speak of a stable picture with few fluctuations expected in the rest of 2017. Senior bank officials say the next few months will be difficult despite the projections for more revenues from tourism: The tax obligations starting from July, with income tax and later Single Property Tax (ENFIA) deadlines, are expected to eat further into the savings of households and corporations’ cash flow. Meanwhile the difference between loans issued and old loans paid back has remained in negative territory in 2017, reaching a rate of -0.9% in the first four months. However, April showed a positive flow amounting to €659 million after an expansion of €307 million in March.

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Yeah, they’re going to risk bankrupting German and French carmakers, right?

EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)

The European Union has moved towards cracking down on carmakers who cheat emissions tests by giving the EU executive more powers to monitor testing and impose fines. The European council overcame initial objections from Germany and agreed to try to reform the system for approving vehicles in Europe in the wake of the Volkswagen emissions scandal. The draft now goes for negotiations with the European commission and the European parliament, where the car industry holds a strong influence. “Above all, the objective is building trust and credibility again in the European type-approval system,” said Chris Cardona, the economy minister of Malta, which holds the EU’s six-month rotating presidency.

The VW emissions scandal erupted in September 2015, with the carmaker admitting it had installed software defeat devices in 11m diesel cars worldwide, meaning the vehicles only cut their nitrogen oxide pollution during certification tests. The draft EU rules call for reducing the power of national authorities and empowering the European commission to test and inspect vehicles, to ensure compliance with emissions standards, and to respond to any irregularities. “This will increase the independence and quality of the EU type-approval system,” the council said in a statement. “The commission could also impose fines for infringements on manufacturers and importers of up to €30,000 [£26,000] per noncompliant vehicle.” Under the draft rules, every EU country will be required to check emissions in one in every 50,000 new vehicles based on real driving conditions.

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The EU comes prepared.

Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)

Just 10 days before the general election, the EU published two documents that will affect every person living in Britain for years to come. Despite being dropped into the maelstrom of an election caused by Brexit, there was hardly a murmur. The documents were the most detailed positions yet from the EU’s chief negotiator, Michel Barnier, on the upcoming divorce talks with the UK. In two policy papers, the bloc has elaborated its stance on the Brexit bill and citizens’ rights. [..] The muted reaction can be explained partly by the fact that the texts were published with zero fanfare, when the country was still reeling from the terrorist atrocity in Manchester. Furthermore, the EU documents contain no surprises. The equivalent of dotting the Is and crossing the Ts, they are a reminder the EU has had 11 months to get ready for Brexit.

That is almost one year to assemble squadrons of specialists to pore over EU treaties and legal tomes to map the way ahead. The 10-page paper on the bill does not put a price on the divorce, but sets out in painstaking detail all EU bodies with a vested interest in the spoils – 40 agencies, eight joint projects on new technologies and a panoply of funds agreed by all countries, from aid for refugees in Turkey to supporting peace in Colombia. No detail is too small. Britain is even on the hook for funding teachers at the elite European schools that educate EU civil servants’ children. On citizens’ rights, the EU spells out in greater detail the protections it wants to secure for nearly 5 million people on the wrong side of Brexit – 3.5 million EU nationals in the UK and 1.2 million Britons on the continent.

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Fear is all they have left. Blunt lies about Corbyn.

May Battles Against Complacency as UK Election Lead Slips Away (BBG)

Theresa May began the U.K. election campaign warning that pollsters giving her a 20-point lead could be wrong. With her lead now slashed, she’s hoping they really are. A series of missteps by May and her advisers, along with a populist Labour campaign, have put the prime minister on the defensive. Activists no longer laugh when she raises the prospect of a Corbyn victory at her rallies and some have questioned the wisdom of building a campaign around her own personal brand, urging people to vote for “Theresa May and her team.” Investors have awoken to the fact that May’s promise of “strong and stable” government — never mind a landslide to match Tony Blair’s in 1997 — could be in jeopardy with the pound dipping after a specific poll showed May’s Conservative Party leading the Labour Party by just five points.

“The Tories are right to be worried if the momentum looks to be with Labour, but they can still turn it around,” Andrew Hawkins, chairman of pollsters ComRes, said in a telephone interview. With a nation still in shock over the Manchester bombing and June 8 elections round the corner, May got back to the campaign trail and reverted to her tested lines on Brexit: That Labour leader Jeremy Corbyn cannot be trusted to navigate Britain through two years of talks. “It’s important as people come closer to that vote – that’s only next week – that they focus on the choice that’s there before them,” the prime minister told activists at a rally in Twickenham, southwest London, on Monday. “If I lose just six seats my government loses its majority, that could mean in 10 days time a government in chaos with Jeremy Corbyn in Number 10.”

But gone was the confidence when she stunned Britain by calling a snap election on April 18. On the day of the announcement, an ICM/Guardian poll gave May’s Tories a lead over Labour of 21 points and surveys in the following weekend’s newspapers suggested leads of 24 and 25 points. Now, she is vulnerable to attack. Interviewer Jeremy Paxman quizzed May about her U-turns, in an interview on Sky News on Monday: “You have backed down over social care, and over national insurance. If I was in Brussels, I would think you are a blowhard who collapses at the first sign of gunfire.” Her rival on the other hand has grown more relaxed, holding his own against the same interviewer who has a reputation for being a rottweiler in his style of questioning. In one instance, Corbyn won a big round of applause when asked about whether he’d want to abolish monarchy: “Do you know what? I had a very nice chat with the Queen.”

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US room to move gets smaller fast.

Russia Expects China To Help Resolve Syrian Crisis (DS)

Moscow hopes for China’s help in solving the Syrian crisis and restoring the country, Russian Deputy Foreign Minister Igor Morgulov said Monday. “Our cooperation with China on Syria at various international venues is unprecedented. We blocked six attempts to pass anti-Syrian resolutions in the U.N. Security Council,” Morgulov said at “Russia and China: Taking on a New Quality of Bilateral Relations” international conference. The Russian deputy foreign minister added that Russia values Beijing’s position on the Syrian crisis, and hopes that, “the Chinese partners will continue their efforts to promote a political settlement.”

“Together we call for a peaceful and political-diplomatic solution to conflicts, without double standards, unilateral action or attempts at ousting regimes. Our approaches coincide, among other things, on the uncompromising fight against terrorism,” Morgulov said. Russia and China have repeatedly vetoed U.N. Security Council resolutions imposing sanctions against the Assad regime. Moscow has long-standing links to the Assad regime and is its key ally, while China has an established policy of non-intervention in other countries’ affairs.

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French interests in Russia are substantial. Macron going after RT and Sputnik is a weird way to not offend Merkel.

Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)

Russian President Vladimir Putin and his French counterpart, Emmanuel Macron, had “difficult” but “frank” talks during their first meeting in Versailles. The two leaders vowed to improve relations and jointly address international problems. The first meeting of the Russian and French leaders lasted almost three hours, with Macron saying that “Franco-Russian friendship” was at the heart of the talks. The French president admitted, however, that he has “some disagreements” with his Russian counterpart, but said that the two leaders discussed them openly in a “frank exchange of views.” Putin also said that the two leaders have some differences, but said that they view many issues in a similar way, and that French-Russian relations could be “qualitatively” improved. “We sought … common ground [in dealing] with key issues of the international agenda. And I believe that we see it. We are able to … at least try to start resolving the key contemporary problems together,” Putin said.

The Russian leader went on to say that his talks with Macron helped the pair to find common points in dealing with major international problems, and the that two sides would try to further bring together their views on these issues. Putin also invited his French counterpart to Russia, saying: “I hope that he will be able to spend several weeks in Moscow.” French President Macron said that serious international problems cannot be resolved without Moscow, as he stressed the importance of the role Russia plays in the modern world. “No major problem in the world can be solved without Russia,” he told the press conference. Macron then said that France is interested in intensifying cooperation with Russia, particularly in resolving the Syrian crisis. The French leader went on to say that this issue demands “an inclusive political solution.”

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Pretty brilliant. Much more at the link.

Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)

There I was again, flying first class on my shareholders’ dime from New York to San Francisco, when I was deeply saddened to read about the death of Zbigniew Brzezinski, National Security Adviser to Jimmy Carter. For a moment I thought: “Surely I can find some anti-Putin articles to read rather than this one?” Those always make me so happy! But then I remembered that Zbig was a man after my own heart, because he was one of the West’s greatest Russophobes. Even the New York Times talked of his “rigid hatred of the Soviet Union”. Zbig ended the détente led by Nixon as Carter, not Reagan, restarted good, old-fashioned, American Russophobia: Selling the Soviets computers with bugs for industrial sabotage, the propaganda effort of the 1980 Olympic Boycott, the US grain embargo to try and starve the Russian people, the arming of the Taliban’s forerunners to destabilize a left-wing government in Afghanistan and thus unleashing Islamic terrorism on the world, etc.

Just as American Democrats know for an undeniable fact that Jimmy Carter is our nation’s greatest living man of peace, I contend that Zbig’s anti-Russian stance makes him nearly as great a humanitarian, and certainly a model Democrat in 2017. And Zbig knew, as I and all good Democrats know, that the greatest fight of our generation is the fight against Vladimir Putin. Poverty, starvation, refugees, terrorism, climate change – everyone in America is realizing that if we can just get rid of Putin, everything else will surely fall into line. Surely! So I was pretty sad to read of Zbig’s passing, but that’s when it hit me: Just because he’s gone, it doesn’t mean we have to give up hating Russia! We’ve been hating Russia since November – more than 6 months now – and, frankly…it feels awesome! I don’t how long it takes to make a habit permanent, so let’s all agree to lock in this Russophobia for at least 3.5 more years, possibly 7.5!

It would be a fitting testament to a man whose prophetic Russophobia was misunderstood as “anti-communism”. Say it loud: It’s time for progressive Americans to unite behind hating Russians! Again! Let’s party like it’s 1979! Now, I’m as politically-correct a CEO as was ever made -my allegiance to Hillary proves that – but I can tell that some people think that I should equivocate by writing “hating the Russian government” instead of the “Russians”. Well, it’s bold, but being bold is why we CEOs deserve the big bucks and you deserve our crumbs. Not our table crumbs – those are too good for you – I mean the crumbs that fall around our fine, Italian shoes. Here’s the problem with the Russians: Putin’s approval rating is over 85%. It is a testament to the master of evil that he has duped nearly all 144 million Russian citizens. They said that 50 million Elvis fans can’t be wrong, but 124 million Putin fans clearly are. I don’t know anything about Russian domestic politics, but I don’t have to – that’s my right as an American.

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Hillary posing as the resistance says it all. They don’t even have a narrative left.

The So-Called Resistance (Jim Kunstler)

[..] what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do. The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing.

A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious. But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.

One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened. Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion.

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Election coming up, perhaps?

Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)

Germany has unleashed a volley of criticism against Donald Trump, slamming his “short-sighted” policies that have “weakened the west” and hurt European interests. The sharp words from foreign minister Sigmar Gabriel came after the US president concluded his first official tour abroad taking in Saudi Arabia, Israel, Brussels and then Italy for a G7 summit. Angela Merkel warned on Sunday that the US and Britain may no longer be completely reliable partners. Germany’s exasperation was laid bare after the G7 summit, which wrapped up on Saturday with Trump refusing to affirm US support for the 2015 Paris climate accord. Days earlier, in Saudi Arabia, Trump presided over the single largest US arms deal in American history, worth $110bn over the next decade and including ships, tanks and anti-missile systems.

Gabriel said on Monday that “anyone who accelerates climate change by weakening environmental protection, who sells more weapons in conflict zones and who does not want to politically resolve religious conflicts is putting peace in Europe at risk”. “The short-sighted policies of the American government stand against the interests of the European Union,” he said, judging that “the west has become smaller, at least it has become weaker”. “We Europeans must fight for more climate protection, fewer weapons and against religious [fanaticism], otherwise the Middle East and Africa will be further destabilised,” Gabriel said. [..] The relationship between Merkel and Trump contrasts with the warm ties between herself and Barack Obama. The previous US president last week travelled to Berlin to attend a key Protestant conference. Obama’s participation in a forum with Merkel last Thursday came hours before her meeting with Trump in Brussels at the Nato summit.

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Right, election coming up. Which trumps human rights and international law.

Greece, Germany Agree To Slow Refugee Family Reunification (F24)

Greece and Germany have agreed to slow the reunification of refugee families divided between the two nations during their scramble to safety, according to a leaked letter published Monday. “Family reunification transfer to Germany will slow down as agreed,” Greek Migration Minister Yiannis Mouzalas wrote to German Interior Minister Thomas de Maiziere in a May 4 letter obtained by leftist daily Efimerida ton Syntakton. The Greek migration ministry declined to comment, but earlier this month Mouzalas said the slowdown was due to “technical difficulties.” In the letter, Mouzalas reportedly acknowledges that the move – enacted because of the sheer volume of asylum requests – will affect “more than two thousand people” while some “will have to wait for years” to reach Germany even though their requests have been approved.

Asylum seekers – mostly Syrian refugees in Greece’s case – are entitled to join family members elsewhere in the European Union within six months from the date their request is approved. In his letter, Mouzalas said Berlin and Athens had to agree on a “common line” to address “increasingly desperate and critical comments” so that Athens is not blamed for the delays. He then suggests a joint response: “We understand that asylum seekers are eager to meet with their family, but given that both Greece and Germany have very large asylum seeking populations, delays are inevitable.” Ulla Jelpke, a deputy of German far-left Party Die Linke, earlier this month said Berlin had capped the number of refugees eligible for reunification at 70 people per month. Accordingly, Efimerida ton Syntakton said there were just 70 transfers in April compared to 540 in March and 370 in February.

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