Jan 312018
 
 January 31, 2018  Posted by at 10:58 am Finance Tagged with: , , , , , , , , , , ,  


Paul Gauguin Farm in Brittany 1894

 

Market Euphoria May Turn to Despair If 10-Year Yield Jumps to 3% (BBG)
Forget Stocks, Look At EU Bonds – They Are The Real Problem (Luongo)
The Ticking Time Bomb in the Municipal-Bond Market (Barron’s)
UK Interest-Only Mortgagees Are at Risk of Losing Their Homes
US National Debt Will Jump by $617 Billion in 5 Months (WS)
Trump Urges Congress To Pass $1.5 Trillion In Infrastructure Spending (R.)
Trump Joins Bezos, Dimon, Buffett In Pledge To Stop Soaring Drug Prices (MW)
Trump Says ‘100%’ After He’s Asked to Release GOP Memo (BBG)
Saving Rate Drops to 12-Year Low As 50% of Americans Don’t Have Savings (WS)
U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether (BBG)
Customer Lawsuits Pummel Spanish Banks (DQ)
Britons Ever More Deeply Divided Over Brexit (R.)
The GDP of Bridges to Nowhere (Michael Pettis)

 

 

If central banks and governments have really lost control over bonds, find shelter.

Market Euphoria May Turn to Despair If 10-Year Yield Jumps to 3% (BBG)

It’s getting harder and harder to quarantine the selloff in Treasuries from equities and corporate bonds. The benchmark 10-year U.S. yield cracked 2.7% on Monday, rising to a point many forecasters weren’t expecting until the final months of 2018. For over a year, range-bound Treasuries helped keep financial markets in a Goldilocks state, with interest rates slowly rising due to favorable forces like stronger global growth and the Federal Reserve spearheading a gradual move away from crisis-era monetary policy. Yet the start of 2018 caught many investors off guard, with the 10-year yield on pace for its steepest monthly increase since November 2016. It’s risen 30 basis points this year and reached as high as 2.73% in Asian trading Tuesday.

Suddenly, they’re confronted with thinking about what yield level could end the good times seen since the presidential election. For many, 3% is the breaking point at which corporate financing costs would get too expensive, the equity market would lose its luster and growth momentum would fade. “We are at a turning point in the psyche of markets,” said Marty Mitchell, a former head government bond trader at Stifel Nicolaus & Co. and now an independent strategist. “A lot of people point to 3% on the 10-year as the critical level for stocks,” he said, noting that higher rates signal traders are realizing that quantitative easing policies really are on the way out.

U.S. stocks have set record after record, buoyed by strong corporate earnings, President Donald Trump’s tax cuts and easy U.S. financial conditions. The S&P 500 Index has returned around 6.8% this year, once reinvested dividends are taken into account, and the U.S. equity benchmark is already higher than the level at which a Wall Street strategists’ survey last month predicted it would end 2018. What often goes unsaid in explaining the equity-market exuberance is that Treasury yields refused to break higher last year. Instead, they remained in the tightest range in a half-century, allowing companies to borrow cheaply and forcing investors to seek out riskier assets to meet return objectives.

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It’s all bonds, not even just sovereign bonds. Investors will move from equities into bonds all over the place.

Forget Stocks, Look At EU Bonds – They Are The Real Problem (Luongo)

While all the headlines are agog with stories about the Dow Jones dropping a couple hundreds points off an all-time high, German bunds are getting killed right before our eyes. The Dow is simply a market overdue for a meaningful correction in a primary bull market. And it’s a primary bull market brought on by a slow-moving sovereign debt crisis that will engulf Europe. It’s not the end of the story. Hell, the Dow isn’t even a major character in the story. In fact, similar stories are being written in French 10 year debt, Dutch 10 year debt, and Swiss 10 year debt. These are the safe-havens in the European sovereign debt markets. Meanwhile, Italian 10 year debt? Still range-bound. Portuguese 10 year debt? Near all-time high prices. The same this is there with Spain’s debt. All volatility stamped out. Why? Simple. The ECB.

The ECB’s quantitative easing program and negative interest rate policy (NIRP) drove bond yields across the board profoundly negative for more than a year. [..] the ECB is trapped and cannot allow rates to rise in the vulnerable sovereign debt markets — Italy, Portugal, Spain — lest they face bank failures and a real crisis. The problem with that is, the market is scared and so they are selling the stuff the ECB isn’t buying – German, French, Dutch, Swiss debt. In simple terms, we are seeing the flight into the euro intensify here as investors are raising cash. The euro and gold are up. The USDX continues to be weak even though capital is pouring into the U.S. thanks to fundamental changes to tax and regulatory policy under President Trump. In the short term Dow Jones and S&P500 prices are overbought. Fine. Whatever. But, the real problem is not that. The real problem is the growing realization in the market that governments and central banks do not have an answer to the debt problem.

[..] The U.S. economy is about to be unleashed by Trump’s tax cut law. It will be able to absorb higher interest rates for a while. Yield-starved pension funds, as Armstrong rightly points out, will be bailed out slightly forestalling their day of reckoning. And in doing so, higher rates in the U.S. are driving core-rates higher in Europe. An overly-strong euro is crushing any hope of further economic recovery in the periphery, like Italy. The debt load on Italy et.al. has increased relative to their national output by around 20% since the end of 2016. This will put the ECB at risk of a massive loss of confidence when Italian banks start failing, Italy’s budget deficit starts expanding again and hard-line euroskeptics win the election in March. As capital is drained out of Europe into U.S. equities, the dollar, gold and cryptocurrencies, things should begin to spiral upwards rapidly.

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See? More bonds. Meredith Whitney was 10 years early.

The Ticking Time Bomb in the Municipal-Bond Market (Barron’s)

There’s a looming disaster in the market for municipal debt. Every market participant knows about it, and there isn’t much any of them can do about it. Many state and local governments, even more than corporations, have promised generous pensions they can’t afford. The promises may have looked plausible in the past, especially during the dot-com boom, when money that pension funds put in the markets was doubling. When the market crashed, so did their returns—and, a few years later, the global financial crisis took out another substantial chunk. And with interest rates at historic lows, bonds have failed to deliver the income the funds relied on. While governments delay dealing with the problem as long as they can, analysts and researchers are wondering if we have reached the point of no return. For investors in municipal bonds, it could mean future defaults and losses.

“We are increasingly wary of high pension exposure, especially among state and local credits,” the Barclays muni-research team wrote this month, citing “inflated return targets, low funded ratios, growing obligations, perhaps heavy allocations to equities and compressed tax revenues make for especially adverse conditions.” What’s more, “short-term investment gains won’t be sufficient to plug liability gaps.” Yet many pensions still assume they will be able to generate the returns they saw in the past. New Jersey’s pension and the California Public Employees’ Retirement System have lowered their assumed rate of return to 7%. But with the 30-year Treasury yielding less than 3% and stocks already at record highs, it’s unclear how public markets can generate 7%—which is why many pensions have turned to higher-risk, lower-liquidity strategies, such as private equity.

Muni investors, for their part, are increasingly sensitive to pensions’ widening gap. After the financial crisis and the ensuing recession, they suddenly became interested in pension finances. A report late last year by the Center for Retirement Research at Boston College found that, as pension liabilities grew, spreads between state and local municipal bonds and Treasuries also increased. When such issuers came to issue new debt, they discovered the market was charging them more to borrow. “Pensions have become increasingly relevant to the municipal bond markets and can have a meaningful impact on the borrowing costs of a municipality,” the report says.

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Rising bond yields mean higher mortgage rates. Australia is overflowing with interest only loans. Plenty other countries have loads of it too.

UK Interest-Only Mortgagees Are at Risk of Losing Their Homes

Some borrowers with interest-only mortgages may lose their homes as a result of shortfalls in repayment plans, the U.K.’s Financial Conduct Authority warned. The FCA has identified three peaks in interest-only mortgage repayments, the first of which is currently underway. Defaults are less likely in the present wave of maturities because the homeowners are approaching retirement and have higher incomes. The next two peaks, from 2027 through 2028 and in 2032, are more at risk of shortfalls, the regulator said. Customers are reluctant to discuss with their lenders how they’ll pay off the loans, limiting their options, the FCA found. Almost 18% of outstanding mortgages in the U.K. are interest-only or involve only partial payment of the capital, according to the statement.

“Since 2013, good progress has been made in reducing the number of people with interest-only mortgages,” Jonathan Davidson, executive director of supervision retail and authorization at the regulator, said in a statement. “However, we are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their homes.” The FCA reviewed 10 lenders representing about 60% of the interest-only mortgage market for the study. The supervisor also urged lenders to review and improve their own strategies regarding repayment of the loans.

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Now add some infrastructure.

US National Debt Will Jump by $617 Billion in 5 Months (WS)

While everyone is trying to figure out how to twist the new tax cut to their advantage and save some money, the US Treasury Department just announced how much net new debt it will have to sell to the public through the second quarter to keep the government afloat: $617 billion. That’s what the Treasury Department estimates will be the total amount added to publicly traded Treasury securities — or “net privately-held marketable borrowing” — through the end of the second quarter. This will be the net increase in the US debt through the end of Q2. By quarter: During Q1, the Treasury expects to increase US public debt by $441 billion. It includes estimates for “lower net cash flows.” During Q2 – peak tax seasons when revenues pour into the Treasury – it expects to increase US public debt by $176 billion.

It also “assumes” that with these increases in the debt, it will have a cash balance at the end of June of $360 billion. So over the next five months, if all goes according to plan, the US gross national debt of $24.5 trillion currently – which includes $14.8 trillion in publicly traded Treasury securities and $5.7 trillion in internally held debt – will surge to about $25.1 trillion. That’s a 4% jump in just five months. Note the technical jargon-laced description for this (marked in green on the chart). The flat lines in 2013, 2015, and 2017 are a result of the prior three debt-ceiling fights. Each was followed by an enormous spike when the debt ceiling was lifted or suspended, and when the “extraordinary measures” with which the Treasury keeps the government afloat were reversed. And note the current debt ceiling, the flat line that started in mid-December.

In November, Fitch Ratings said optimistically that, “under a realistic scenario of tax cuts and macro conditions,” the US gross national debt would balloon to 120% of GDP by 2027. The way things are going right now, we won’t have to wait that long. Back in 2012, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. At the end of 2017, gross national debt was 106% of GDP! Over the next six month, the debt will grow by about 4%. Unless a miracle happens very quickly, the debt will likely grow faster over the next five years due to the tax cuts than over the past five years. But over the past five years, the gross national debt already surged nearly 25%, or by $4.1 trillion. So that’s a lot of borrowing, for an economy that is growing at a decent clip.

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Coverage of SOTU proves my point: Moses split the nation.

As for infrastructure, they will go for what provides most short term gain. That is, make people pay. For roads, not public transport, for instance.

Trump Urges Congress To Pass $1.5 Trillion In Infrastructure Spending (R.)

President Donald Trump called on the U.S. Congress on Tuesday to pass legislation to stimulate at least $1.5 trillion in new infrastructure spending. In his State of the Union speech to Congress, Trump offered no other details of the spending plan, such as how much federal money would go into it, but said it was time to address America’s “crumbling infrastructure.” Rather than increase federal spending massively, Trump said: “Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private-sector investment.” The administration has already released an outline of a plan that would make it easier for states to build tollways and to privatize rest stops along interstate highways.

McKinsey & Company researchers say that $150 billion a year will be required between now and 2030, or about $1.8 trillion in total, to fix all the country’s infrastructure needs. The American Society of Civil Engineers, a lobbying group with an interest in infrastructure spending, puts it at $2 trillion over 10 years. Trump said any infrastructure bill needed to cut the regulation and approval process that he said delayed the building of bridges, highways and other infrastructure. He wants the approval process reduced to two years, “and perhaps even one.” Cutting regulation is a top priority of business lobbying groups with a stake in building projects and the U.S. Chamber of Commerce.

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Just the kind of folk you want in charge of your health. With your medical needs standing in the way of their profits.

Trump Joins Bezos, Dimon, Buffett In Pledge To Stop Soaring Drug Prices (MW)

President Trump pledged to bring down drug prices. “One of my greatest priorities is to reduce the price of prescription drugs,” Trump said during his State of the Union address on Tuesday evening. “In many other countries, these drugs cost far less than what we pay in the United States and it’s over, very unfair. That is why I have directed my administration to make fixing the injustice of high drug prices one of our top priorities for the year.” Mark Hamrick, Washington, D.C. bureau chief at Bankrate.com, said the president has made that promise before. “Will his choice of a former drug industry executive, Alex Azar, now the head of Health and Human Services, deliver results on that front?” he said. “I’d prefer to place my bet on the partnership just announced by Berkshire Hathaway, J.P. Morgan Chase and Amazon.”

Earlier Tuesday, Amazon, Berkshire Hathaway and JP Morgan Chase, three of the biggest companies in the U.S., surprised the health-care industry on Tuesday with a plan to form a company to address rising health costs for their U.S. employees. They said it will be “free from profit-making incentives and constraints.” Health-care costs have skyrocketed over the last 60 years, according to the Kaiser Family Foundation, a nonprofit, private foundation based in Washington, D.C. In 1960, hospital costs cost $9 billion. In 2016, they cost $1.1 trillion. In 1960, physicians and clinics costs were $2.7 billion, but ballooned to $665 billion. Prescription drug prices soared from $2.7 billion in 1960 to $329 billion. U.S. health-care spending reached $3.3 trillion, or $10,348 per person in 2016.

The Trump administration has pledged to roll back the 2010 Affordable Care Act, perhaps Barack Obama’s signature achievement as U.S. president. Roughly 1 million people will lose their insurance under Trump’s plans, according to the Congressional Budget Office. Berkshire Hathaway chairman and CEO Warren Buffett didn’t hold back in excoriating the health-care industry. “The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said. Amazon founder CEO Jeff Bezos and J.P. Morgan Chase chairman and CEO Jamie Dimon were more measured in their remarks. “Amazon, Chase and Berkshire Hathaway think they can do it better than the insurance companies,” said Jamie Court, president of Consumer Watchdog. “There’s a lot of frustration with the high cost of health insurance, yet government’s offering almost no systemic solutions. It’s as big a change as I have seen in the market in years.”

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Just do it?! Perhaps it makes sense not to release it before SOTU, it would have been the only talking point.

Trump Says ‘100%’ After He’s Asked to Release GOP Memo (BBG)

President Donald Trump was overheard Tuesday night telling a Republican lawmaker that he was “100%” planning to release a controversial, classified GOP memo alleging bias at the FBI and Justice Department. As he departed the House floor after delivering his State of the Union address, C-SPAN cameras captured Representative Jeff Duncan, a South Carolina Republican, asking Trump to “release the memo.” Republican lawmakers say the four-page document raises questions about the validity of the investigation into possible collusion between Trump’s campaign and Russia, now led by Special Counsel Robert Mueller. “Oh yeah, don’t worry, 100%,” Trump replied, waving dismissively. “Can you imagine that? You’d be too angry.”

Republicans in the House moved to release the memo, authored by House Intelligence Chairman Devin Nunes, in a party-line vote on Monday. The move has been opposed by Democrats, who argue the memo gives an inaccurate portrayal of appropriate actions undertaken by law enforcement, and by the Justice Department, which has said it should remain classified. Releasing the memo has become a cause for conservative congressional Republicans, who say the FBI and the Justice Department pursued the investigation of possible Russian ties to the Trump presidential campaign under false pretenses. Trump has as many as five days to review the document for national security concerns, and White House officials insisted earlier Tuesday he hadn’t yet seen the document.

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Talk about your American Dream: “..households are living paycheck-to-paycheck even if those paychecks are reasonably large and even if life is comfortable at the moment.”

Saving Rate Drops to 12-Year Low As 50% of Americans Don’t Have Savings (WS)

In terms of dollars, personal saving dropped to a Seasonally Adjusted Annual Rate of $351.6 billion, meaning that at this rate in December, personal savings for the whole year would amount to $351.6 billion. This is down from the range between $600 billion and $860 billion since the end of the Financial Crisis. But who is – or was – piling up these savings? Numerous surveys provide an answer, with variations only around the margins. For example, the Federal Reserve found in its study of US households: Only 48% of adults have enough savings to cover three months of expenses if they lost their income. An additional 22% could get through the three-month period by using a broader set of resources, including borrowing from friends and selling assets. But 30% would not be able to manage a three-month financial disruption. 44% of adults don’t have enough savings to cover a $400 emergency and would have to borrow or sell something to make ends meet.

Folks who had experienced hardship were more likely to resort to “an alternative financial service” such as a tax refund anticipation loan, pawn shop loan, payday loan, auto title loan, or paycheck advance, which are all very expensive. Similarly, Bankrate found that only 39% of Americans said they’d have enough savings to be able to cover a $1,000 emergency expense. They rest would have to borrow, sell, cut back on spending, or not deal with the emergency expense. All these surveys say the same thing: about half of Americans have little or no savings though many have access to some form of credit, including credit cards, pawn shops, payday lenders, or relatives. So what does it mean when the “saving rate” declines?

Many households spend more than they make. For them, the personal saving rate is a negative number. This negative personal saving rate translates into borrowing, which explains the 5.7% year-over-year surge in credit card debt, and the 5.5% surge in overall consumer credit. It boils down to this: most of the positive saving rate, with savings actually increasing, takes place at the top echelon of the economy – at the top 40%, if you will – where households are flush with cash and assets and where the saving rate is very large. But the growth in borrowing for consumption items (the negative saving rate) takes place mostly at the bottom 60%, where households are living paycheck-to-paycheck even if those paychecks are reasonably large and even if life is comfortable at the moment.

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Peculiar: $2.3 billion ‘worth’ of a dollar-pegged ‘currency’, backed by nothing much in proof.

U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether (BBG)

U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers. The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer. Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday.

While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there. “We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.” Bitcoin, the biggest cryptocurrency by market value, tumbled 10% on Tuesday. It fell another 3.2% to $9,766.41 as of 9:19 a.m. in Hong Kong, according to composite pricing on Bloomberg. The virtual currency hasn’t closed below $10,000 since November.

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Who’s aiding Spain in keeping its problems hidden? 30,000 complaints in 9 months, and the ECB is silent?!

Customer Lawsuits Pummel Spanish Banks (DQ)

Following a succession of consumer-friendly rulings, bank customers in Spain are increasingly taking their banks to court. And many of them are winning. Last year an unprecedented wave of litigation against banks forced the Ministry of Justice to set up dozens of courts specialized in mortgage matters to prevent the collapse of the rest of the national judicial system. The Bank of Spain, according to its own figures, received 29,957 complaints from financial consumers between January and September 2017 — already double that of the previous year and by far the highest number of complaints registered since 2013, a record year when investors and customers were desperately trying to claw back the money they’d lost in the preferred shares that issuing banks had pushed on their own customers as savings products.

In 2017, eight out of 10 complaints related to one key product: mortgages, and in particular the so-called “floor clauses” contained within them. These floor clauses set a minimum interest rate — typically of between 3% and 4.5% — for variable-rate mortgages, even if the Euribor dropped far below that figure. This, in and of itself, was not illegal. The problem is that most banks failed to properly inform their customers that the mortgage contract included such a clause. Those that did, often told their customers that the clause was an extreme precautionary measure and would almost certainly never be activated. After all, they argued, what are the chances of the Euribor ever dropping below 3.5% for any length of time? At the time (early 2009), Europe’s benchmark rate was hovering around the 5% mark.

Within a year it had crashed below 1% and has been languishing at or below zero ever since. As a result, most Spanish banks were able to enjoy all the benefits of virtually free money while avoiding one of the biggest drawbacks: having to offer customers dirt-cheap interest rates on their variable-rate mortgages. But all that came to a crashing halt in May 2013 when Spain’s Supreme Court ruled that the floor clauses were abusive and that the banks must reimburse all the funds they’d overcharged their mortgage customers — but only from the date of the ruling! Then, on December 21, 2016, the European Court of Justice (ECJ) delivered a further hammer blow when it acknowledged the right of homeowners affected by “floor clauses” to be reimbursed money dating back to when the mortgage contract was first signed. Since the ECJ ruling, law firms are now so confident of winning floor-clause cases that they’re even offering no win, no-fee deals.

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US and UK suffer from the exact same problem.

Britons Ever More Deeply Divided Over Brexit (R.)

The social divide revealed by Britain’s 2016 vote to leave the European Union is not only here to stay but deepening, according to academic research published on Wednesday. Think tank The UK in a Changing Europe said Britons were unlikely to change their minds about leaving the EU, despite the political and economic uncertainty it has brought, because attitudes are becoming more entrenched. “The (Brexit) referendum highlighted fundamental divisions in British society and superimposed a leave-remain distinction over them. This has the potential to profoundly disrupt our politics in the years to come,” said Anand Menon, the think tank’s director.

Britain is negotiating a deal with the EU which will shape future trade relations, breaking with the bloc after four decades, but the process is complicated by the divisions within parties, society and the government itself. Menon said the research, based on a series of polls over the 18-month period since Britain voted to leave the European Union, showed 35% of people self-identify as “Leavers” and 40% as “Remainers”. Research also found that both sides had a tendency to interpret and recall information in a way that confirmed their pre-existing beliefs which also added to the deepening of the impact of the vote. The differences showed fragmentation was more determined by age groups and location than by economic class.

Polls have shown increasing support for a second vote on whether or not to leave the European Union once the terms of departure are known, but such a vote would not necessarily provide a different result, a poll by ICM for the Guardian newspaper indicated last week. The report also showed that age was a better pointer to how Britons voted than employment. Around 73% of 18 to 24-year-olds voted to stay in the EU, but turnout among that group was lower than among older voters. “British Election Study surveys have suggested that, in order to have overturned the result, a startling 97% of under-45s would have had to make it to the ballot box, as opposed to the 65% who actually voted,” the report said.

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How China hides debt through swaps. As US and EU have done for ages now.

The GDP of Bridges to Nowhere (Michael Pettis)

In most economies, GDP growth is a measure of economic output generated by the performance of the underlying economy. In China, however, Beijing sets annual GDP growth targets it expects to meet. Turning GDP growth into an economic input, rather than an output, radically changes its meaning and interpretation. On January 18, 2018, China’s National Bureau of Statistics announced that the country’s GDP grew by 6.9% in 2017. A day earlier, the People’s Bank of China (PBoC) announced that total social financing (TSF) in 2017 had increased to 19.44 trillion renminbi.

[..] I was recently part of a discussion on a listserv that brings together Chinese and foreign experts to exchange views on China-related topics. What set off this discussion was a claim that the Chinese economy began to take deleveraging seriously in 2017. Everyone agreed that debt in China is still growing far too quickly relative to the country’s debt-servicing capacity, but the pace of credit growth seems to have declined in 2017, even as real GDP growth held steady and, more importantly, nominal GDP growth increased. I was far more skeptical than some others about how to interpret this data. It is not just the quality of data collection that worries me, but, more importantly, the prevalence in China of systemic biases in the way the data is collected. Not all debt is included in TSF figures. The table above, for example, indicates a fall in TSF in 2015, but this did not occur because China’s outstanding credit declined.

[..] in 2015 there was a series of debt transactions (mainly provincial bond swaps aimed at reducing debt-servicing costs and extending maturities) that extinguished debt that had been included in the TSF category and replaced it with debt not included in TSF. The numbers are large. According to the China Daily, there were 3.2 trillion renminbi worth of bond swaps in 2015, plus an additional 600 billion renminbi of new bonds issued. If we adjust TSF by adding these back, rather than indicate a decline of 6.4%, we would have recorded an increase of 15.7%. [..] The point is that the deceleration in credit growth implied by TSF data might indeed reflect the beginning of Chinese deleveraging, but it could also reflect the surge in regulatory concern. In the latter case, this would mean that China has experienced not the beginnings of deleveraging, but rather a continuation of the trans-leveraging observers have seen before.

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May 032015
 


Harris&Ewing Hancock’s, the Old Curiosity Shop, 1234 Pennsylvania Avenue 1914

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)
Canada has the Most Overvalued Housing Market in the World (VC)
No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)
Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)
Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)
Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)
Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)
German President Says Berlin Should Be Open To Greek War Reparations (Reuters)
What Does Putin Want? (Rostislav Ishchenko)
Insanity Grips The Western World (Paul Craig Roberts)
China Teaches Top Cadres Western Ideas Despite Backlash (AP)
Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)
Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)
Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)
Italian Army Growing Cannabis To Slash End User Prices (RT)
From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)
Wildlife Decline To Lead To ‘Empty Landscape’ (BBC)

Europe’s bond markets are so distorted everything carries out-of-whack risks.

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)

So it turns out that Jeffrey Gundlach was really thinking out loud when he said he was looking to short negative-yielding German debt. Yes, it’s true he’d really like to. But, as he would subsequently acknowledge, it’s a very difficult trade to execute in today’s European markets. “The mechanics are challenging,” Gundlach wrote in an e-mail on April 29. Earlier this week, the chief executive officer of DoubleLine Capital said in an interview on Bloomberg TV that he’s thinking of amplifying a wager against 2-year German notes using leverage. “It seems to me there’s almost no way to lose,” he said in that interview. “I wonder why people don’t leverage up negative bonds.” There are legitimate reasons why everyone isn’t. For one, there appear to be no negative-yielding derivatives contracts tied to this debt.

And Europe closely regulates short-selling of government bonds. Then, even if you could do it, you may have to park cash at some point in European bank accounts, which make you pay to hold your money because the region’s deposit rates are negative. “You can actually lose money being short negative yielding debt,” said Ashish Shah at AllianceBernstein. “People charge you even more in the short term to hold cash.” Of course, this is an opportunity that seems too good to pass up, and traders are almost certainly trying to figure out the best way to make it happen.

The trade should be – again, in theory – very lucrative. While bonds are normally cushioned from losses due to their regular interest payments, it’s the opposite in this bizarro world of negative-yielding debt. Traders betting against bonds wouldn’t lose money if prices stayed about where they were, because there’s essentially no coupon payment. Yes, prices on this upside-down-inside-out debt could keep rising and yields could get even more negative, leading to some losses. But the chances of that happening appear to be getting smaller as economic data shows inflation and growth starting to pick up in the euro zone.

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Auckland wants that title.

Canada has the Most Overvalued Housing Market in the World (VC)

In every inflating bubble, there’s usually two camps. The first group points out various metrics suggesting something is inherently unsustainable, while the second reiterates that this time, it is different. After all, if everyone always agreed on these things, then no one would do the buying to perpetuate the bubble’s expansion. The Canadian housing bubble has been no exception to this, and the war of words is starting to heat up. On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%).

They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list. Of course, The Economist is not the only fighter on this side of the ring. Just over a month ago, the IMF sounded a fresh alarm on Canada’s housing market by saying that household debt is well above that of other countries. Meanwhile, seven in ten mortgage lenders in Canada have expressed “concerns” that the real estate sector is in a bubble that could burst at any time. Deutsch Bank estimates the market is 67% overvalued and readily offers seven reasons why Canada is in trouble. Even hedge funds are starting to find ways to short the market in anticipation of an upcoming collapse. Canada’s housing situation could give rise to the world’s next Steve Eisman, Eugene Xu, or Greg Lippmann.

On the opposing side of the ring, who will contend that the Canadian housing market is just different this time? Hint: look to the banks and government. Stephen Harper, Canada’s Prime Minister, has tried to dispel fears. He recently told a business audience in New York that he didn’t anticipate any housing crisis in Canada. Just this week, the Bank of Canada also tried its best to deflate housing bubble fears. “We don’t believe we’re in a bubble,” says Stephen Poloz, the Bank’s Governor. “Our housing construction has stayed very much in line with our estimates of demographic demand.” Poloz suggested that housing costs do not necessarily have to contract to match the incomes of Canadians. Instead, he expects growth in the economy to raise wages and make housing more affordable.

Courtesy of: Visual Capitalist

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“..one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave..”

No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)

Greek Finance Minister Yanis Varoufakis insisted Saturday that Greece would not require a new bailout from its international creditors if they would simply restructure its debt. Athens last week resumed talks with its creditors in a bid to unblock €7.2 billion from its EU-IMF bailout before state coffers run dry. But analysts believe that even if it manages to secure the last tranche of aid, Athens may have to obtain a new rescue package to stay afloat. Varoufakis said however that Greece could do without a new bailout. “One of the conditions for this to happen though, is an important restructuring of the debt,” he told the Efimerida ton Sindakton daily in an interview published Saturday.

The radical-left SYRIZA government came into power in January on a campaign promise that it would seek to get part of its debt written off. However, its creditors have reiterated that that is impossible. Varoufakis, whose negotiating style has grated his EU counterparts, also took a swipe at the eurozone in the interview, warning that if it “doesn’t change it will die.” He added that “no country, not only Greece, should have joined such a shaky common monetary system.” Nevertheless, Varoufakis said it was “one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave” because backtracking now would lead to “an unforeseen negative situation.” Asked about reported insults from fellow Eurogroup finance ministers during a tense meeting in Riga on April 24, Varoufakis was also dismissive.

Media reports said he had been branded a “gambler,” an “amateur” and an “adventurist” by his peers. “Those would have surely been heavy offenses if they had been expressed. But they were not,” said Varoufakis. Prime Minister Alexis Tsipras had reshuffled the team handling negotiations with its creditors after relations between Varoufakis and the EU hit a new low during a stormy Eurogroup meeting in Riga last week. Athens is struggling to pay salaries and pensions without the promised loans. Almost a billion euros in debt and interest is also due for repayment to the IMF by May 12. Unless an agreement is reached to unlock the remaining EU-IMF bailout money, the debt-ridden country faces default and a possible exit from the euro. Technical experts from the Eurogroup and the Greek delegation are due to be in contact all weekend, trying to resolve differences concerning sweeping reforms required by Brussels and the IMF to secure the package.

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Who cares if markets waver?

Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)

In an attempt to address its liquidity crunch, Athens has directed 1500 state entities – including local authorities, hospitals and universities – to hand over surplus cash reserves to the central bank. But some entities are resisting this directed, fearing that their funds may not be returned. Meanwhile, the lack of progress in negotiations with Greece’s creditors is unnerving Greece’s households and businesses, who withdrew a further €2 billion from the country’s banks in March, according to the Bank of Greece. This follows withdrawals of more than €7.5 billion in February, just under €13 billion in January, and around €4 billion last December. As a result, household and business deposits fell to €138.55 billion in March, their lowest level in 10 years. Even more worrying, early figures for April suggest that deposit outflows are again accelerating.

To compensate for their dwindling deposit base, Greek banks have stepped up their use of emergency funding provided by the country’s central bank. Last week the ECB, which now reviews the amount which Greek banks can borrow on a weekly basis, raised the ceiling on emergency liquidity assistance by a further €1.4 billion, bringing it to €76.9 billion. This emergency liquidity is playing a crucial role in keeping the country’s banking system afloat. But financial markets – along with top officials in Paris, Berlin and Brussels – are all to well aware that Athens is moving ever closer to a position where it is no longer able to pay its debts, and is forced to “default”, potentially triggering an uncontrollable bank run and a collapse of the Greek banking system.

At that point, either European politicians resolutely adopt special emergency measures to rescue the country, or the situation spirals out of control, leaving Greece with no option but to introduce capital controls and quit the euro zone. Although some European politicians are in favour of allowing Greece to default, Paris and Berlin are fearful that “Grexit” risks destabilising the euro zone and encouraging speculators to target vulnerable countries such as Italy, Portugal or Belgium. For his part, Tsipras is betting that worries about the potential disruption from a “Grexit” will eventually cause the Europeans to back away from their demands for further reforms. Still, it’s a dangerous strategy, because in Greece’s precarious position, a financial accident could occur at any time.

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The benefits of plastic.

Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)

Greece’s tourism chief has appealed to the millions of Britons planning to visit the crisis-hit country this year to use credit cards as much as possible. The move comes as the government in Athens has signalled that it plans to raise VAT rates on some holiday islands. Andreas Andreadis made the plea to what are expected to be record numbers of holidaymakers, saying plastic could play a key role in hindering tax evasion, a perennial drain on the Greek economy. “What we are saying is that on cash transactions above a certain level please use your credit cards,” he told the Observer. “That way it forces services and shops to declare it on the cash register and issue receipts.”

Greece is bracing itself for around 25 million foreign arrivals – more than twice its population – with the vast majority heading for resorts where tax collection is notoriously lax. An estimated 2.4 million Britons will be among them. “In a country where the tax collection system is so inefficient, credit cards are the easiest way of clamping down on evasion,” said Andreadis, who heads the Confederation of Greek Tourism (Sete). “We calculate that around 40% of receipts are not issued in tourist areas to avoid VAT.” The confederation, which represents more than 50,000 enterprises in the sector, was pressing for consumers to be given incentives to use cards. Greece is in a race against the clock to clinch a cash-for-reform deal with international creditors to keep bankruptcy at bay.

Fraught negotiations with the EU and International Monetary Fund have brought the nation close to insolvency with Athens’ radical left Syriza government, voted in on a pledge to end austerity, struggling last week to pay pensions. With Greece shut out of international markets and unable to issue short-term debt, a desperate lack of liquidity has exacerbated the problem. Over the next 10 days, the country must pay two loan instalments to the IMF – including €780m on 12 May – or face the spectre of potentially devastating default. The appeal came days after prime minister Alexis Tsipras suggested credit card use being made mandatory for transactions of more than €70. In his first wide-ranging interview since assuming power in January, he said payment cards made eminently more sense than the proposal of Yanis Varoufakis, his finance minister, to use tourists as undercover tax agents.

“It’s simpler than that other idea involving people with [hidden] cameras, etc,” he told Star TV on Monday. Greece loses up to €20bn in tax evasion every year, according to finance ministry officials. The new government has made cracking down on it a top priority. Taxpayers owe in excess of €70bn to the state – nearly a quarter of its debt. Under pressure to provide reforms to unlock an intermediate €7.2bn in bailout funds held up since August, the government has also signalled it will increase VAT on popular Aegean islands. Isles such as Mykonos and Santorini would see a surcharge on hotel rooms, services and goods. The measure would bring in an estimated €350m. But it has been strongly opposed by the tourist industry, which provides one in five jobs and is by far Greece’s biggest foreign earner.

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“..there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next?”

Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)

A Greek exit from the eurozone would throw the bloc into chaos and put the “whole cohesion of the western alliance in doubt”, a key figure in the country’s private sector debt restructuring has warned. While banks had reduced their exposure to Greece, which represents less than 2pc of eurozone GDP, investors are being too complacent about the implications of a Greek exit, which could have far-reaching political ramifications and amplify the polarisation between the eurozone’s core and periphery, Hung Tran, executive managing director of the Institute of International Finance (IIF), said. Mr Tran, who helped represent private sector bondholders during Greece’s debt haircut in 2012, said he remained optimistic that there was “room for compromise” and that Greece would reach a “last minute deal” to remain in the 19 nation bloc.

However, he stressed that if the country was forced out of the euro, the consequences would be complex and were “not fully understood”. “In the short term, it probably is the case that financial contagion in terms of spreading to borrowing costs of peripheral countries like Spain and Portugal would be more limited this time compared with 2010 or 2012,” he said. “However, there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next? “If Greece exiting the euro area severely strains its relationship with the EU and the West, questions will arise about the alignment of Greece in terms of foreign policy, security policy and so on, and the whole cohesion of the western alliance would be put in doubt.”

Mr Tran said the European Central Bank’s €60bn a month quantitative easing programme had helped to create a false sense of security by “overwhelming” any sense of potential spillover from the Greek crisis and pushing down borrowing costs across Europe. However, he said a Greek exit would only serve to amplify the polarisation that we have already seen in Europe. “There has been a sharp polarisation both on the right and left of the mainstream arguing that the current austerity driven approach of economic policy hasn’t worked … so the failure of reaching an agreement in Greece leading to a exit from the eurozone would make this debate and this polarisation sharper and more problematic.”

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Telegraph wishful thinking?

Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)

Greece was braced for the biggest weekend of civil unrest since its radical Left government assumed power, as tensions over the country’s future in the eurozone are set to reach breaking point in May. Athens was gripped by a throng of anti-austerity protests on Friday, to mark the Labour Day holiday across the continent. Several members of the ruling Syriza party, including embattled finance minister Yanis Varoufakis, took part in rallies, repeating they would not forsake their people and cower to the demands of creditors. In a veiled barb aimed at his paymasters, a defiant Prime Minister Alexis Tsipras tweeted: “We will prevail in our struggles to bolster and protect our rights, our democracy and our dignity”.

Labour market reforms have emerged as one of the main stumbling blocks in Greece’s three-month bail-out impasse, as European powers have pushed the Leftist regime to reverse its promises to raise the minimum wage. But Greece’s Labour minister Panos Skourletis said the policy would go ahead, calling it a “deep and immovable red line” for the government. In a taste of the domestic turmoil that could ensue should the state withold funds from its citizens, hundreds of pensioners in Athens were forced to queue outside banks on Thursday, as pensions payments were temporarily delayed. The government is scrambling to find the funds it needs to avoid defaulting on the IMF on May 6, when it is due to repay a €200m loan. Panic over the pensions payment “suggests that this comparably small IMF payment will be a headache to scrape together and underlines that Greece might well struggle to stay financially afloat much beyond May,” said Robert Kuenzel of Daiwa Capital Markets.

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What do you say to that, Schäuble?

German President Says Berlin Should Be Open To Greek War Reparations (Reuters)

German President Joachim Gauck expressed support on Friday for Athens’ demands for reparations for the Nazi occupation of Greece in World War Two, even though the government in Berlin has repeatedly rejected the claims. Gauck, who has little real power in Germany but a penchant for defying convention, said in an interview to be published in Saturday’s Sueddeutsche Zeitung newspaper that Germany should consider its historical responsibility to Greece. “We are not only people who are living in this day and age but we’re also the descendants of those who left behind a trail of destruction in Europe during World War Two – in Greece, among other places, where we shamefully knew little about it for so long,” Gauck said.

“It’s the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations.” Greece’s demand for €278.7 billion in reparations for the brutal Nazi occupation have mostly fallen on deaf ears, but some legal experts say it may have a case. Many in Greece blame Germany, their biggest creditor, for the tough austerity measures and record unemployment that have followed from two international bailouts totaling €240 billion. Last month, economy minister and vice-chancellor Sigmar Gabriel called the demand “stupid”.

Gabriel said Greece wanted to squeeze some leeway out of its euro zone partners as they set conditions for further financial aid to help Greece avoid bankruptcy. “And this leeway has absolutely nothing to do with World War Two or reparation payments,” he said. German officials have previously argued that Germany has already honored its obligations, not least with a 115 million deutsche mark payment to Greece in 1960. Gauck, a former East German pastor, recently caused a stir by condemning the massacre of 1.5 million Armenians by Ottoman Turkish forces a century ago as “genocide”, a term that the Berlin government had long rejected. Turkey denies the charge.

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Good analysis of US-EU-Russia relations.

What Does Putin Want? (Rostislav Ishchenko)

To understand how, when and on what conditions military activity can end, we need to know what the politicians want and how they see the conditions of the postwar compromise. Then it will become clear why military action turned into a low-intensity civil war with occasional truces, not only in the Ukraine but also in Syria. Obviously, the views of Kiev politicians are of no interest to us because they don’t decide anything. The fact that outsiders govern the Ukraine is no longer concealed. It doesn’t matter whether the cabinet ministers are Estonian or Georgian; they are Americans just the same. It would also be a big mistake to take an interest in how the leaders of the Donetsk People’s Republic (DPR) and the Lugansk People’s Republic (LNR) see the future.

The republics exist only with Russian support, and as long as Russia supports them, Russia’s interests have to be protected, even from independent decisions and initiatives. There is too much at stake to allow [Alexander] Zakharchenko or [Igor] Plotnitzky, or anyone else for that matter, to make independent decisions. Nor are we interested in the European Union’s position. Much depended on the EU until the summer of last year, when the war could have been prevented or stopped at the outset. A tough, principled antiwar stance by the EU was needed. It could have blocked U.S. initiatives to start the war and would have turned the EU into a significant independent geopolitical player. The EU passed on that opportunity and instead behaved like a faithful vassal of the United States. As a result, Europe stands on the brink of frightful internal upheaval.

In the coming years, it has every chance of suffering the same fate as the Ukraine, only with a great roar, great bloodshed and less chance that in the near future things will settle down – in other words, that someone will show up and put things in order. In fact, today the EU can choose whether to remain a tool of the United States or to move closer to Russia. Depending on its choice, Europe can get off with a slight scare, such as a breakup of parts of its periphery and possible fragmentation of some countries, or it could collapse completely. Judging by the European elites’ reluctance to break openly with the United States, collapse is almost inevitable. What should interest us is the opinions of the two main players that determine the configuration of the geopolitical front and in fact are fighting for victory in the new generation of war – the network-centric Third World War. These players are the United States and Russia.

The U.S. position is clear and transparent. In the second half of the 1990s, Washington missed its only opportunity to reform the Cold War economy without any obstacles and thereby avoid the looming crisis in a system whose development is limited by the finite nature of planet Earth and its resources, including human ones, which conflicts with the need to endlessly print dollars. After that, the United States could prolong the death throes of the system only by plundering the rest of the world. At first, it went after Third World countries. Then it went for potential competitors. Then for allies and even close friends. Such plundering could continue only as long as the United States remained the world’s undisputed hegemon. Thus when Russia asserted its right to make independent political decisions – decisions of not global but regional import –, a clash with the United States became inevitable. This clash cannot end in a compromise peace.

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“Clearly, the European Parliament is a great danger to life on the planet.”

Insanity Grips The Western World (Paul Craig Roberts)

The White Media claims, and has claimed since February 2014, that there are Russian tanks and troops in Ukraine. Putin has pointed out that if this indeed was the case, Kiev and Western Ukraine would have fallen to the Russian invasion early last year. Kiev has been unable to defeat the small breakaway republics in eastern and southern Ukraine and would stand no chance against the Russian military. Recently a brave news organization made fun of the White Media’s claim that Russian tanks have been pouring into Ukraine for 14 months. The parody pictured Ukraine at a standstill. All traffic on all roads and residential streets is blocked by Russian tanks. All parking places, including sidewalks and people’s front and rear gardens have tanks piled upon tanks. The entire country is immobilized in gridlock.

Although a few have fun making fun of the gullible people who believe the White Media, the situation is nevertheless serious as it concerns life on planet Earth. There is little sign that Washington and its vassals care about life on Earth. Recently, the largest political group in the European Parliament–the European People’s Party–expressed a cavalier opinion about life on Earth. We know this, because, if we can trust Euractiv, an online EU news source, the majority EU party believes that declaring the EU’s readiness for nuclear war is one of the best steps to deter Russia from further aggression. The aggression to be stopped by Europe’s declaration of its readiness for armageddon is the alleged Russian invasion of Ukraine, and the “further aggression” is Putin’s alleged intention of reestablishing the Soviet Empire.

It must be disappointing to the Russian government to see that leaders of the European Union prefer to endorse nuclear war than to challenge Washington’s propaganda. When I read that the governing party in the European Parliament thought non-existent aggression had to be stopped by a declaration of readiness for nuclear war, I realized that money could buy any and every thing, even the life of the planet. The European People’s Party was speaking in behalf of Washington’s propaganda, not in behalf of Europe. Europe’s nuclear war with Russia would end instantly with the destruction of every European capital. The crazed vice-president of the European People’s Party, Jacek Saryusz-Wolski revealed who the real aggressor is when he declared: “Time of talk and persuasion with Russia is over. Now it’s time for a tough policy.” Clearly, the European Parliament is a great danger to life on the planet.

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Breeding Chinese Goldmanites.

China Teaches Top Cadres Western Ideas Despite Backlash (AP)

In the still, early hours, cadres make their way down tree-lined paths. They walk through a polished lobby, down dim hallways and settle themselves in rows in plain, wood-paneled classrooms. Here, they sit at the vanguard of the Communist Party of China. These rising Communist Party members from across the country have come to the China Executive Leadership Academy Pudong (CELAP) in Shanghai as part of the party’s decade-long effort to introduce its own elite to foreign ideas. Outside these walls, President Xi Jinping’s government is campaigning to scrub Western influence from classrooms, but here some 10,000 party loyalists each year hear from top Western scholars and executives about management techniques, media relations, urban development and innovation.

“It does no harm for top leaders to get to know different ideas in the world,” said Zhang Xuezhong, who was barred from teaching at East China University of Political Science and Law in 2013, after publishing an article critical of the government. “The Communist Party expects the people it rules to be ignorant, but they would not expect themselves to be like this.” As China seeks to play a more decisive role on the global stage, such exposure is becoming more important — at least for those at the forefront of transforming China’s economy and international role. For everyone else, education has become an ideological battleground, where destabilizing Western values must be vanquished lest they weaken the party’s grip on power.

“Young teachers and students are key targets of infiltration by enemy forces,” Education Minister Yuan Guiren wrote in a January essay. Around the same time, he told university officials to bar “teaching materials that disseminate Western values,” state-run news agency Xinhua reported. His remarks came shortly after Beijing issued new guidelines ordering universities to promote loyalty to the party, core socialist values, and the teachings of Xi himself. Meanwhile, Westerners continue to march through CELAP, bringing with them an uncontrollable parade of ideas. [..] “It’s a very unusual institution in China,” said Oxford University’s Nicholas Morris, who has taught at CELAP for a decade. “This institution’s job is to help Chinese leaders understand Western practice.”

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In one day. Where was Europe?

Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)

More than 3,400 migrants were rescued at sea Saturday, mainly off Libya, as Europe seeks ways to deal with the flood of people trying to reach its shores following a series of deadly shipwrecks. A total of 3,427 people were picked up during the operation coordinated by the Italian coast guard. While they said it was a “very busy day”, it was not a record for the coast guard, which coordinated the rescue of 3,791 migrants on April 12 and another 2,850 the following day. French patrol boat Commandant Birot, which was sent to boost EU patrols to deal with the influx of migrant boats in the Mediterranean, picked up 217 people off the coast of Libya.

The migrants – all men – had been on board three boats, the authorities said, adding that two suspected people smugglers were also caught and would be handed over to Italian police. In Italy, the coast guard announced late at night that 16 vessels had rescued a total of 3,427 people on Saturday alone in an operation coordinated from their headquarters in Rome.

In addition to the French patrol boat, the rescue operation mobilised four Italian coast guard ships, two Italian navy vessels, two cargo ships, two Italian customs ships and two tugs. Most notably, the navy said on Twitter that the frigate Bersagliere had rescued 778 migrants while the patrol boat Vega had picked up another 675. Some of the rescued migrants were expected to arrive overnight on the Italian island of Lampedusa, the closest to the African coast, while most of the others are expected to arrive in Sicily or southern Italy on Sunday night. According to the Italian coast guard, the French patrol vessel should land its migrants at a port in Calabria.

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Should have been taken care of a long time ago.

Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)

Greece is to ask the European Union for €30 million of emergency funds to deal with the growing number of undocumented migrants arriving in the country, sources have told Kathimerini. The EU is already due to give Greece €470 million by 2020 for immigration-related matters, such as covering the cost of an asylum service and reception centers. However, this money covers existing operations and cannot be used to tackle problems caused by the spike in migrants reaching Greece over the last few months.

One of the things the government wants to use the emergency funds for is to hire a ferry to transport migrants from islands to reception centers or other facilities on the mainland. The coalition submitted an amendment to Parliament last week allowing authorities to bypass until the end of the year the tender process for immigration-related projects. The government says this will speed up the implementation of schemes aimed at helping migrants.

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Oooh, in-depth reporting from the NYT…

Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)

By now, the unceasing tides of migrants arriving at the ports of Sicily fall into loose national categories. The Syrians usually arrive with money, bearing broken lives in canvas bags, and are able to slip out of Italy, bound for affluent northern Europe. The Eritreans may be far less wealthy but they too are well organized, with networks that move them north as well. Then there are men like Agyemin Boateng and Prince Adawiah, who were scooped out of the Mediterranean this month by an Italian rescue ship. Both are from Ghana, and neither has a plan for a new life in Europe — nor, they say, did either of them ever plan to come to Italy. They were working as laborers in Libya, until life there became untenable and returning to Ghana became unfeasible.

“There are guns and bombs,” said Mr. Adawiah, 25, who worked in Tripoli for nearly three years. “Every day, there is shooting. I’m afraid. That is why I traveled to Italy.” Europe’s migration crisis escalated sharply in April, with the coming of warmer weather to the Mediterranean. Many more smugglers’ boats took to the sea, and a record number of migrants died attempting the crossing — more than 1,700 people so far in 2015, by some estimates. Conflicts in Africa, the Middle East and Central Asia have shaped and reshaped Europe’s migrant flows in recent years, with none more transformative to the Mediterranean smuggling trade than the civil war in Syria. And the tumult in Libya is changing the migration equation once again.

Libyan lawlessness has allowed a haven for smugglers to operate along the country’s coastline, but it has also unmoored many African laborers who were working there as migrants. Many of these men now languish in Italian detention centers without contacts or plans for the future, and their growing numbers are frustrating some Italian mayors and other officials. “We don’t know anything,” said one migrant, Shamsudeen Sawud, 18, who arrived in Italy more than a week ago. “No one is telling us anything.”

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Yes, this is funny.

Italian Army Growing Cannabis To Slash End User Prices (RT)

Italy’s first medical marijuana crop – grown by the country’s military – is “coming along nicely,” according to officials at a government-funded greenhouse outside Florence. “The aim of the operation is to provide users with a product that is not always easily available on the market, at a more competitive price,” Colonel Antonio Medica, the director of the facility, told Italian daily Corriere della Sera. Medical marijuana has been legal in the country since 2013 as pain relief for conditions such as multiple sclerosis and cancer, and as treatment for others, such as glaucoma. However, as there have been no licensed producers, and the state would not pay for the treatment, those with prescriptions have had to purchase it abroad, from the Netherlands and Germany, at prices that reach up to €40 per gram.

This means many patients have simply been buying their drugs off the street, financing drug dealers, who do not pay taxes, and may be engaged in other illegal activities. By producing 100 kg of its own weed, the government hopes to undercut the street dealers. “We’re aiming to lower the price to under €15 euros ($17), maybe even around €5 euros per gram,’ said Medica, who noted that this would be similar to the black market price of the drug. The government chose a military lab, due to existing security and surveillance arrangements. While the innovations will help medicinal users, they are unlikely to undermine the illegal marijuana market in a country where one in five admitted to being smokers of the drug in a survey conducted in 2012.

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And not a word on an investigation.

From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)

Thousands of people in Ukraine, Russia and around the world took to the streets to mark the first anniversary of the Odessa massacre. Last year, 48 activists were killed and over 200 injured as radicals set the local trade unions house on fire. The commemoration ceremonies for those who died in the fire on May 2, 2014 proceeded without serious incident in the Ukrainian port city of Odessa. A huge crowd, including the relatives of the victims, gathered in front of the Trade Unions building and released black balloons and doves in air. According to local media, the rally in Odessa was attended by around 5,000 people. The people held banners reading “fascism won’t pass” and “no to political repressions,” with some carrying photos of journalist Oles Buzina and politician Oleg Kalashnikov, who were assassinated in Kiev last month.

In the Ukrainian capital, Kiev, some 2,000 people marched to honor the victims of the tragedy in an action entitled ‘Kiev Remembers Odessa.’ The people were carrying photos of those who died in the fire, as well as pictures of Buzina and Kalashnikov. Several arrests were made during the demonstration, with the Kiev police saying that they “invited the men to a local police station”. They were later released. March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015.March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015. Earlier, reports emerged on social media that it was the organizers of the rally, who had been detained by the security officials. “The organizers of a peaceful rally have been arrested in Kiev! What for? Show me a single slogan, for which you can be arrested in a democratic ‘European’ country?” Yuri Kot, Ukrainian public figure and journalist, wrote on Facebook.

In Moscow, around 1,000 people gathered in front of the Ukrainian Embassy to Russia to commemorate the Odessa massacre victims. An outdoor photo exhibition, showcasing pictures of the burning Odessa Trade Union House, was organized together with the rally. “It was very hard to not to cry. I didn’t expect so many people to care and feel for the sorrow,” an eastern Ukrainian resident, who attended the event, told RIA-Novosti. At the end, the bell tolled 48 times to commemorate each victim of the last year’s tragedy. Remembrance events were also held in Australia, Poland, the Republic of Ireland, Switzerland, Morocco and other countries. In Italy, a monument to the Odessa tragedy was opened in the northern town of Ceriano Laghetto.

Ukraine authorities deployed over 3,000 law enforcers in Odessa ahead of the anniversary of mass killings on May 2. Odessa’s Kulikovo Field, the square where the bloodiest scenes in the last year’s confrontation unfolded, was cordoned off on Friday. People wishing to lay flowers in front of the Trade Unions building, where dozens of activists met their deaths, have had to pass through metal detectors. The streets are being patrolled by some 2,600 police officers, while 600 special service fighters are on alert, the Interior Ministry reported. Unarmed volunteer activists were also called to Odessa. “There cannot be too much police presence. It’s a demonstration of our presence and strength to those who want to shake the situation in Odessa. There will be a policeman in every square meter,” Ivan Katerhinchuk, the chief of Odessa region’s police force, told the media.

Earlier on Friday, police troops brought in from other regions and their local colleagues gathered in front of the building. CCTV footage showed dozens of trucks and patrol cars parked in rows and columns of security forces marching in the streets.

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“It’s no use having habitat if there’s nothing left to eat in it.”

Wildlife Decline May Lead To ‘Empty Landscape’ (BBC)

Populations of some of the world’s largest wild animals are dwindling, raising the threat of an “empty landscape”, say scientists. About 60% of giant herbivores – plant-eaters – including rhinos, elephants and gorillas, are at risk of extinction, according to research. Analysis of 74 herbivore species, published in Science Advances, blamed poaching and habitat loss. A previous study of large carnivores showed similar declines. Prof William Ripple, of Oregon State University, led the research looking at herbivores weighing over 100kg, from the reindeer up to the African elephant. “This is the first time anyone has analysed all of these species as a whole,” he said. “The process of declining animals is causing an empty landscape in the forest, savannah, grasslands and desert.”

Prof David Macdonald, of Oxford University’s Wildlife Conservation Research Unit, was among the team of 15 international scientists. “The big carnivores, like the charismatic big cats or wolves, face horrendous problems from direct persecution, over-hunting and habitat loss, but our new study adds another nail to their coffin – the empty larder,” he said. “It’s no use having habitat if there’s nothing left to eat in it.” According to the research, the decline is being driven by a number of factors including habitat loss, hunting for meat or body parts, and competition for food and resources with livestock. With rhinoceros horn worth more than gold, diamonds or cocaine on illegal markets, rhinos could be extinct in the wild within 20 years in Africa, said the researchers.

The consequences of large wild herbivore decline include: • Loss of habitat: for example, elephants maintain forest clearings by trampling vegetation. • Effects on the food chain: large predators such as lions, leopards, and hyena rely on large herbivores for food. • Seed dispersal: large herbivores eat seeds which are carried over long distances. • Impact on humans: an estimated one billion people rely on wild meat for subsistence while the loss of iconic herbivores will have a negative impact on tourism. The biggest losses are in South East Asia, India and Africa. Europe and North America have already lost most of their large herbivores in a previous wave of extinctions.

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Apr 302015
 
 April 30, 2015  Posted by at 10:02 am Finance Tagged with: , , , , , , , , ,  


Unknown Medical supply boat Planter, General Hospital wharf on the Appomattox, City Point, VA 1865

Negative Interest Rates Set Up World For Biggest Mass Default Ever (Warner)
German Bunds Are Tanking After Big Investors Say to Get Out (Bloomberg)
The Real Financial Crisis That Is Looming: Consumer Spending (STA)
US Economy Grinds To A Halt In First Quarter 2015 (Bloomberg)
Fed Stays Vague on Rate-Hike Timing, but Sees Slower Growth as Blip (Hilsenrath)
Ignore The ‘Whiff Of Panic’ As US Economy Stalls (AEP)
Fed, White House Fail To Mention The D-Word (MarketWatch)
Firebrand Greek Minister Risks Fresh Schism With Europe (Telegraph)
Greece Close To Minimum Agreement Deal With Creditors: Deputy PM (Guardian)
Reinforced Greek Finance Team Heads To Brussels For Talks (Kathimerini)
Transactions Over €70 On Larger Greek Islands To Be Plastic Only (Kathimerini)
Majority of Financial Pros Now Say Greece Is Headed for Euro Exit (Bloomberg)
Bank Of Japan Keeps Policy Steady In 8-1 Vote (CNBC)
New Zealand Rockstar Economy All Smoke And Noise (NZ Herald)
It’s Now Impossible For Most Poor Australian Families To Find A Home (Guardian)
Who is to Blame for the Tragedy in Yemen? (Viktor Mikhin)
Going Rogue: 15 Ways to Detach From the System (Tess Pennington)
The Last 3 Bornean Rhinos Are in Race against Extinction (Scientific American)
Heaviest Element Yet Known To Science is Discovered: Governmentium (Not PC)

“Both Keynesian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.”

Negative Interest Rates Set Up World For Biggest Mass Default Ever (Warner)

Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate. With the advent of ECB QE, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them. On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it’s 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it’s 17pc.

Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all. What makes today’s negative interest rate environment so worrying is this; to the extent that demand is growing at all in the world economy, it seems again to be almost entirely dependent on rising levels of debt.

[..] The flip side of the cheap money story is soaring asset prices. The bond market bubble is just the half of it; since most other assets are priced relative to bonds, just about everything else has been going up as well. Eventually, there will be a massive correction, in which creditors will suffer sickening losses. Nobody can tell you when that moment will arrive. We live in an “extend and pretend” world in which economies pathetically fight between themselves for any scraps of demand. One burst of money printing is met by another in an ultimately futile, zero-sum game of competitive currency devaluation.

As if on cue, along comes another soft patch in Britain’s economic recovery, with first-quarter growth quite a bit weaker than expected. Like a constantly receding horizon, the point at which UK interest rates begin to rise is pushed ever further into the future. It’s like waiting for Godot. When Bank Rate was first cut to 0.5pc in response to the financial crisis, markets expected rates to start rising again in a year. Six years later, Bank Rate is still at 0.5pc and markets still expect them to rise in a year. In Europe it’s not for four years. Both Keynesian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.

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More negative interest ‘unintended crap’.

German Bunds Are Tanking After Big Investors Say to Get Out (Bloomberg)

Investors gave the clearest sign yet they’re losing patience with the record-low yields on euro-area government bonds in a selloff that spared no market. Yields on Germany’s bunds surged the most in two years as traders shunned an auction of the nation’s debt. Bond titan Jeffrey Gundlach of DoubleLine Capital egged on the declines, saying he’s considering making an amplified bet against the securities. His comments echoed Janus Capital’s Bill Gross, who once managed the world’s largest bond fund. He said bunds were the “short of a lifetime.”

The bond slump reflects growing angst among investors after the ECB’s €1.1 trillion quantitative-easing program sent yields to unprecedented lows from Germany to Spain. Emerging signs of inflation in the 19-nation economy are also hurting demand. “These are influential voices that offer a contrarian view when the German bond market appears to be at an extreme level, so there’s definitely going to be an impact on the market,” said Salman Ahmed, a global strategist at Lombard Odier Investments Managers in London.

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“The problem for the Federal Reserve is in an economy that is roughly 70% based on consumption, when the vast majority of American’s are living paycheck-to-paycheck…”

The Real Financial Crisis That Is Looming: Consumer Spending (STA)

It is important to remember that the total population in the US is currently around 320 million. In other words, more than 1:3 individuals in the United States is currently being supported by some form of government assistance. This is at a time when roughly 70 cents of every tax dollar is absorbed by government welfare programs and interest service on $18 Trillion in debt. Here is the problem with all of this. Despite Central Bank’s best efforts globally to stoke economic growth by pushing asset prices higher, the effect is nearly entirely mitigated when only a very small percentage of the population actually benefit from rising asset prices. The problem for the Federal Reserve is in an economy that is roughly 70% based on consumption, when the vast majority of American’s are living paycheck-to-paycheck, the aggregate end demand is not sufficient to push economic growth higher.

While monetary policies increased the wealth of those that already have wealth, the Fed has been misguided in believing that the “trickle down” effect would be enough to stimulate the entire economy. It hasn’t. The sad reality is that these policies have only acted as a transfer of wealth from the middle class to the wealthy and created one of the largest “wealth gaps” in human history. The real problem for the economy, wage growth and the future of the economy is clearly seen in the employment-to-population ratio of 16-54-year-olds. This is the group that SHOULD be working and saving for their retirement years. With 54% of this prime working age-group sitting outside of the labor force, it is not surprising that in a recent poll 78% of women in the U.S. want a “man with a J.O.B.”

The current economic expansion is already pushing one of the longest post-WWII expansions on record which has been supported by repeated artificial interventions rather than stable organic economic growth. While the financial markets have soared higher in recent years, it has bypassed a large portion of Americans NOT because they were afraid to invest, but because they have NO CAPITAL to invest with. The real crisis that is to come will be during the next economic recession. While the decline in asset prices, which are normally associated with recessions, will have the majority of its impact at the upper end of the income scale, it will be the job losses through the economy that will further damage and already ill-equipped population in their prime saving and retirement years.

With consumers again heavily leveraged with sub-prime auto loans, mortgages, and student debt, the reduction in employment will further damage what remains of personal savings and consumption ability. That downturn will increase the strain on an already burdened government welfare system as an insufficient number of individuals paying into the scheme is being absorbed by a swelling pool of aging baby-boomers.

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“Spending on nonresidential structures, including office buildings and factories, dropped 23.1%..”

US Economy Grinds To A Halt In First Quarter 2015 (Bloomberg)

The world’s largest economy sputtered to a near-halt in the first quarter, choked by a slump in U.S. business investment and exports that dimmed hopes for a meaningful short-term rebound. GDP rose at a 0.2% annualized rate after advancing 2.2% the prior quarter, Commerce Department data showed Wednesday in Washington. After their meeting, Federal Reserve policy makers said some of the headwinds holding back the U.S. will probably fade and give way to “moderate” growth. While the economy is likely to bounce back from the temporary restraints of harsh winter weather and delays at West Coast ports, the harm caused by the plunge in fuel prices and stronger dollar may be longer-lasting.

“There’s not a whole lot of momentum heading into the second quarter,” said Mike Feroli, chief U.S. economist at JPMorgan. “We expect the economy to be better, but some of the details in this report are cautionary.” Stocks fell as investors weighed the timing for a possible Fed rate increase. The Standard & Poor’s 500 Index declined 0.4% to 2,106.85 at the close in New York. The median forecast of 86 economists surveyed by Bloomberg projected GDP would rise 1%. Forecasts ranged from little change to a 1.5% gain. It was the weakest performance since the first three months of last year, when bad weather also damped growth.

Corporate fixed investment decreased at a 2.5% annualized pace in the first quarter, the biggest decline since the end of 2009. Spending on nonresidential structures, including office buildings and factories, dropped 23.1%, the most in four years. The decline reflected weakness in petroleum exploration as oil companies slashed budgets on the heels of plunging crude prices. Spending on wells and mines fell at a 48.7% annualized rate in the first three months of the year, the biggest drop since the second quarter of 2009, when the economy was still in the recession. Halliburton, the world’s second-biggest provider of oilfield services, has said it expects to reduce capital spending by 15% this year and accelerated the pace of job cuts ahead of its takeover of Baker Hughes.

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From the Fed bullhorn himself. It’s a matter of redefining terms. Apparently winter, though there is one every year, is now a ‘transitory factor’.

Fed Stays Vague on Rate-Hike Timing, but Sees Slower Growth as Blip (Hilsenrath)

Federal Reserve officials attributed the economy’s sharp first-quarter slowdown to transitory factors, in effect signaling an increase in short-term interest rates remains on the table for the months ahead although the timing has become more uncertain. The Fed now needs time to make sure its expectation of a rebound proves correct after a spate of soft economic data. That means the chances for a rate increase by midyear have diminished, a point underscored by the Fed’s statement released Wednesday after a two-day policy meeting. “Economic growth slowed during the winter months, in part reflecting transitory factors,” the Fed said.

The Fed also said that although growth and employment had slowed officials expected a return to a modest pace of growth and job market improvement, “with appropriate policy accommodation.” The gathering concluded a few hours after the Commerce Department reported the U.S. economy grew at a 0.2% annual rate in the first quarter. It was the worst performance in a year, pocked with evidence of a slowing trade sector and anemic business investment. The report also showed annual consumer price inflation slowed in the first quarter. For now, the Fed isn’t signaling any shift in its policy stance. It repeated it would keep its benchmark short-term interest rate, the federal funds rate, near zero, where it has been since December 2008.

Officials in March opened the door to rate increases later this year, by removing from the policy statement assurances rates would stay low. The statement said, as it did in March, that the Fed would raise rates when officials become reasonably confident that inflation is moving toward the Fed’s 2% objective and as long as the job market continues to improve. Officials sought to acknowledge the recent economic downshift in their policy statement, while keeping their options open. The pace of job gains moderated, the Fed statement said, and measures of labor-market slack were little changed. Business investment softened and exports declined.

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Ambrose and his opinionsm always fun. But do heed this: “Once you strip out a surge in inventories – often a pre-recession warning – the economy contracted sharply.”

Ignore The ‘Whiff Of Panic’ As US Economy Stalls (AEP)

The US economy has suddenly stalled. A blizzard of shockingly weak figures raise the awful possibility that America’s six-year growth cycle since the Great Recession has already rolled over, with unsettling implications for the world. Worse yet, this apparent exhaustion is taking hold even before the Federal Reserve has begun to raise interest rates or to drain any of its $3.7 trillion of quantitative easing and balance-sheet expansion. Former US Treasury Secretary Larry Summers warned in Davos earlier this year that the Fed typically needs to cut rates by three or four percentage points to combat each cyclical downturn. It is currently at zero. “Are we anywhere near the point when we have 3pc or 4pc running room to cut rates? This is why I am worried,” he said.

“Nobody over the last 50 years, not the IMF, not the US Treasury, has predicted any of the recessions a year in advance, never,” he said. We should not ignore his warnings lightly, yet for once I am an optimist, clinging to the belief that the US will recover from the strange “air pocket” of early 2015. A siege of snow and ice across the North East over the late winter – for the second year in a row, and some say evidence of a drastically slowing Gulf Stream – has obscured the picture. The first flash of data is often wrong, in any case. Yet the latest GDP figures are indisputably atrocious. “It is hard to put lipstick on that pig: This is unequivocally a very weak report,” said Harm Badholz from UniCredit. The slump in the annual growth rate to 0.2pc in the first quarter does not convey the full horror of it.

Once you strip out a surge in inventories – often a pre-recession warning – the economy contracted sharply. Investment in business buildings and factories fell 23pc. “A whiff of panic is in the air,” said the Economic Cycle Research Institute. The putatitve post-winter rebound keeps disappointing. Citigroup’s economic surprise index has tumbled to deeply negative levels. The Conference Board’s index of consumer confidence fell from 101.4 to 95.2 in April. The Fed has clearly been caught off-guard. Bill Dudley, the New York Fed chief, said as recently as last week that the growth rate had probably dipped to around 1.5pc in first quarter but would soon climb back to its two-year trend path of 2.7pc.

It is by now clear that the 15pc surge in the dollar’s trade-weighted index since June – one of the two most dramatic dollar spikes of the post-war era – has done more damage than expected. It has tightened monetary policy through the exchange rate before the Fed has even pulled the trigger. Exports fell 7.3pc in the first quarter, further evidence that the rotating devaluations carried out by one economic bloc after another are doing little more than stealing demand from others in a beggar-thy-neighbour world of quasi-depression.

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“..you won’t find any direct mentions of the strength of the greenback.”

Fed, White House Fail To Mention The D-Word (MarketWatch)

There’s a word that both the Federal Reserve and the White House didn’t mention Wednesday that has played havoc with the U.S. economy this year – the dollar. Search the text of the Federal Open Market Committee’s statement, or the statement put out by the White House after the disappointing first-quarter gross domestic product report, and you won’t find any direct mentions of the strength of the greenback. Part of that is down to politics and the mantra that only the Treasury speaks about the dollar. Because, without mentioning the dollar, the Fed pretty well describes what has happened.

“Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports,” the Fed said. That doesn’t sound like much, but look carefully at the back part of that sentence — the reference to “decreasing prices of non-energy imports.” That’s another way to say that consumers and businesses can buy more stuff and services from abroad for less. And, why is that? Because the dollar is up 26% against the euro over the last 52 weeks, and about 17% vs. a broader set of currencies as measured by the WSJ dollar index. The White House allusion to the dollar is even more subtle.

Written by Jason Furman, the chairman of the Council of Economic Advisers, the White House statement does note that volumes of U.S. exports are sensitive to foreign GDP growth. This weak growth has of course helped the dollar to rise. Furman has previously been on the record about the dollar being a headwind for U.S. growth. Whether the new tone is a result of pressure internally from colleagues at Treasury or more a political shift isn’t clear. Either way, both the Fed and the White House are finding it hard to ignore the biggest elephant in the room.

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They’re going to get homesick for Varoufakis soon.

Firebrand Greek Minister Risks Fresh Schism With Europe (Telegraph)

Hopes that a revamped Greek bail-out team would finally break a two-month deadlock with creditors took a fresh blow on Wednesday, as the Leftist government’s firebrand energy minister pledged “no surrender” to international lenders. Highlighting a deep schism within the ruling party over Greece’s future in the single currency, Panagiotis Lafazanis said there could be “no compromise” with creditor powers, who were seeking “subordination and surrender” from his government. “Our government will not bow down, neither will it surrender,” wrote Mr Lafazanis in a Greek newspaper. “Syriza will not accept an agreement that would be incompatible to its radical commitments.” A popular figurehead of the party’s radical Left Platform, Mr Lafazanis attacked the Troika for “water-boarding” the Greek economy, choking its people into submission.

“If our ‘partners’ and the IMF believe that they will blackmail us using the refusal of financing as a weapon, and that they will terrorise the Greek people forever using the ‘bogeyman’ of default and of a national currency, they are woefully deluded.” The energy minister, who has ties with Moscow, has been one of the fiercest critics of the Troika’s plans to undercut Athens’ promises to address Greece’s “humanitarian crisis” through raising wages and pensions for the poorest. He added the country could gradually get on its feet after a euro exit, but warned monetary union would be “subjected to a grave and mortal wound” should Greece be forced out.

The intervention comes amid hope that Athens was edging closer to agreeing the basis for its reforms-for-cash programme, after a two-month hiatus that has pushed the country towards insolvency. A newly established Greek bail-out team, headed by Oxford-educated minister Euclid Tsakalotos, was due to present a draft reform list to officials in Brussels on Wednesday. The appointment of the softly-spoken Marxist economist came after Brussels had grown increasingly exasperated by the stalling tactics of finance minister, Mr Varoufakis. But insisting he was still at the forefront of talks, the “rock-star” former academic said he remained “in charge of the negotiations with the eurogroup”.

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“[the new head of] the Greek negotiating team in the debt talks said Greece had to keep to its “red lines” on reforms and that any “areas of compromise” should be within the “political plan” of the radical government.”

Greece Close To Minimum Agreement Deal With Creditors: Deputy PM (Guardian)

Greece could seal a deal with its creditors in early May, its deputy prime minister said on Wednesday, as the country prepared a new list of reforms and the ECB provided more support to its beleaguered banks. But Yannis Dragasakis warned it was likely to be only a “minimum agreement” to unlock the delayed funds Greece needed to avoid default. He said: “Now we are going to a minimum agreement with actions that can be taken immediately. But [in the long-term] not just any solution will suffice. The solution has to be viable. After the interim agreement a long discussion about the debt, primary surpluses, investment and growth will follow.”

A eurozone official told Reuters time was running out to reach a deal about releasing the emergency funds, which amount to €7.2bn, since the country needed to begin negotiating a third bailout agreement before the current programme runs out at the end of June. Otherwise it faced the prospect of default or having to leave the eurozone. He said: “We are not talking about weeks any more, we are talking about days.” If the latest Greek proposals were approved, eurozone finance ministers could endorse the deal at their next meeting on 11 May. Greece’s creditors are demanding economic reforms in exchange for more bailout cash. But the impasse could still prove difficult to break, since the new reforms were not expected to offer any major new concessions even though previous plans had been rejected.

Due to be presented to the Greek parliament this week, they are said to include measures to clamp down on corruption and tax evasion, as well as tax and public administration reforms and a delay in plans to raise the minimum wage. But the Syriza-led government will continue resisting significant changes to pensions or reforms of the labour market. Euclid Tsakalotos, the Oxford-educated economics professor who now heads the Greek negotiating team in the debt talks, said Greece had to keep to its “red lines” on reforms and that any “areas of compromise” should be within the “political plan” of the radical government, which was elected on an anti-austerity ticket.

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“Energy Minister Panayiotis Lafazanis cast doubt on whether Greece and its lenders could reach an “honorable compromise.” Alternate Minister for Social Security Dimitris Stratoulis said there was no way the government would accept “painful compromises.”

Reinforced Greek Finance Team Heads To Brussels For Talks (Kathimerini)

A reinforced Greek team is to resume tough negotiations with representatives of the country’s international creditors in Brussels on Thursday, with some new proposals from the Greek side expected to be discussed, in a bid to make some progress toward a deal. According to a senior Finance Ministry official, the Greek delegation to Brussels involves 18 people, ranging from government negotiators to technocrats expected to provide eurozone officials with some of the accounting data they have struggled to obtain to date. The talks are expected to continue until Sunday as time is running short for Greece to conclude an agreement with its creditors before state cash reserves run out.

Meanwhile in Athens, the Cabinet is on Thursday set to discuss the proposed provisions of a multi-bill being drafted by a new “political negotiating team” and which is expected to recommend changes to Greece’s public sector and tax administration but not to tackle key areas of contention such as pensions and the labor market. A government official indicated that the government’s “red lines” would remain in place, noting however that the provisions have not been “written in stone.” The thorny issues of pension and labor sector reforms, along with privatizations and the size of this year’s primary surplus target, are expected to dominate talks in Brussels, however, as creditors are keen for progress in some of these areas. Greek officials are hoping that an extraordinary Eurogroup could be called before the one scheduled to take place on May 11.

A eurozone official told Kathimerini that an agreement at the May 11 meeting was unlikely while stressing that Greece has “days, not weeks” to conclude a pending review. A possible scenario, he said, is that eurozone officials could issue a positive statement. This might encourage the ECB to allow Greek banks to increase their exposure to T-bills. While Deputy Prime Minister Yiannis Dragasakis insisted that an agreement with lenders could be reached at the beginning of May, other SYRIZA ministers appeared more skeptical on Wednesday. In an op-ed published in Crash magazine, Energy Minister Panayiotis Lafazanis cast doubt on whether Greece and its lenders could reach an “honorable compromise.” Alternate Minister for Social Security Dimitris Stratoulis said there was no way the government would accept “painful compromises.”

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The tourist sector, especially on the islands, is one of the main tax evaders.

Transactions Over €70 On Larger Greek Islands To Be Plastic Only (Kathimerini)

A draft plan by the government to increase state revenues, which is to be submitted to the Brussels Group on Thursday, includes increasing the luxury tax by 30%, imposing an accommodation levy on hotels with three stars or more, and the obligatory use of credit or debit cards for transactions of €70 euros or more on islands that have more than 3,000 inhabitants. The latter measure will apply to the islands of Rhodes, Lesvos, Chios, Kos, Samos, Syros, Naxos, Santorini, Limnos, Kalymnos, Thasos, Myconos, Paros, Andros, Tinos, Icaria, Leros, Karpathos, Skiathos, Skopelos, Milos, Patmos and Symi.

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Given the track record of Bloomberg’s economists team, I guess this means there won’t be a Grexit.

Majority of Financial Pros Now Say Greece Is Headed for Euro Exit (Bloomberg)

Greece, mired in a protracted financial crisis and at loggerheads with its bailout stewards, will leave the euro, according to the majority of investors, analysts, and traders in a Bloomberg survey. 52 % of the respondents in the Bloomberg Markets Global Poll believe the cash-strapped country will leave the 19-nation bloc at some point, compared with 43% who see Greece remaining in the euro for the foreseeable future. In answer to the same question in mid-January, just 31% of poll respondents predicted a Greek exit and 61% had the country staying in. The downbeat assessment of Greece’s prospects, more than five years after the country’s first bailout, comes as the country stands on the edge of a financial abyss.

Prime Minister Alexis Tsipras has so far failed to squeeze a loan payment out of his country’s institutional creditors as he sticks to his pledge to dial back austerity, while the nation’s banks stay on ECB life support. “The banking sector is Greece’s Achilles heel, and if the ECB decides to stop funding, then the situation will be even more fragile than it is at the moment,” said Diego Iscaro, a senior economist at research company IHS Global Insight in London. “That could trigger an exit—eventually.” Having lost access to capital markets and being ineligible for the ECB’s regular financing operations, Greece’s banks are reliant on the ECB-approved Bank of Greece Emergency Liquidity Assistance.

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Out of options.

Bank Of Japan Keeps Policy Steady In 8-1 Vote (CNBC)

The Bank of Japan (BOJ) kept policy steady in an 8-1 vote Thursday, maintaining its massive easing program of purchasing 80 trillion yen ($670 billion) worth of assets annually. The BOJ is ignoring signs its efforts to boost inflation toward a 2% target are stalling, Marcel Thieliant, a Japan economist at Capital Economics, said in a note. He had forecast the central bank would step up easing at this meeting. “The bank obviously considers the slowdown in inflation since the autumn to be a temporary phenomenon, blaming it mostly on the plunge in energy prices. In our view, there is more to it than that,” he said.

“The economic recovery is stalling, wages are barely rising, and inflation excluding food and energy is near zero, too.” Analysts had broadly expected the BOJ would leave its easing program intact, but the Nikkei business daily had reported the central bank could lower its median inflation estimate for fiscal 2015 from the current 1% in its semiannual report. The new figure will likely fall somewhere between 0.5-1%, the report said.

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Not a country with an overly elevated general IQ. It fits right in with the rest of the ‘developed’ world.

New Zealand Rockstar Economy All Smoke And Noise (NZ Herald)

With our currency effectively at parity with the Australian dollar and house prices booming everything must be great in the “rockstar” New Zealand economy, right? I’m not so sure. Let’s look at the economic growth achieved in 2014. Headline real GDP growth was a very impressive 3.5%. However, population growth was 1.6% so per capita GDP growth was only about 1.8%. Commodity prices – in particular dairy – had a big run up in 2014 resulting in a positive impact of around $5 billion to nominal GDP. Working out the contribution to real GDP growth is difficult, but if we assume about half of this fed through directly into GDP, then that accounts for about 0.9% of growth. Likewise the Christchurch rebuild got into full swing and probably added a further 0.6%.

So real GDP growth per capita, excluding the one-off effects of surging commodity prices and the Christchurch rebuild, was about 0.3%. Not quite so flash. The big problem is that the quality of our GDP growth has been low. GDP growth per capita is a much better measure of increased prosperity than simple GDP growth because it adjusts for the growth in our population. New citizens place demands on our social and physical infrastructure and the costs of those demands need to be met from the overall economic pie. Given that the media and most economists tend to focus on overall GDP growth, it’s no wonder politicians are hooked on the drug that is immigration: it’s an easy way to boost perceived GDP growth, despite significant cost to our infrastructure.

Those costs tend to be hidden in the short term; pressure on housing, demand for social services and further congestion on motorway and transport systems already at breaking point. Given we are a small, open economy, we need to be smart about what we do. The world is finely balanced at the moment: global growth is tepid and China’s growth in particular is slowing rapidly which may cause serious problems. Government debt levels globally are at record highs, Europe is a mess and Australia is facing real economic challenges as unemployment threatens to rise to 7% by the year’s end. I sense that as a nation we lack a plan and there is a real absence of leadership at both a local and a national level. We need to ask: What sort of economy do we want and how do we achieve it?

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As the rising housing market allows for politicians to hide from sight their failures, the economy spins out of tilt.

It’s Now Impossible For Most Poor Australian Families To Find A Home (Guardian)

A review of housing rental affordability released on Thursday shows that for most people on low incomes, finding an affordable place to rent is impossible. Anglicare Australia’s annual snapshot of rental affordability shows that while there has been a slight increase in affordability for low income households, for the vast majority of those living on benefits – such as Newstart or on the minimum wage – the cost of renting causes significant financial hardship. When we talk about housing affordability the most common discussion is about the cost of buying a house. And yet for 30% of people, while buying a house may be an ambition, the more immediate housing affordability issue is affording to pay rent rather than the mortgage.

For the past five years Anglicare Australia has conducted a national survey of properties to provide a “snapshot of rental affordability”. Rather than survey households, the snapshot looks at the marketplace by examining the cost of renting properties nationwide. This year it involved a survey of some 65,614 properties. The report considers the affordability of these properties for households on different government benefits such as single people on Newstart, those on the single parenting payment, the disability support pension, as well as those on the minimum wage. It considers an affordable property one in which the rent takes up “less than 30% of the household’s income.” This accords with the general view of a household being in “housing stress” if “housing costs are greater than 30% of disposable income and that household’s income is in the bottom 40% of the income distribution.”

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How many guesses did you need?

Who is to Blame for the Tragedy in Yemen? (Viktor Mikhin)

Artificially created by the West and their minion – Saudi Arabia, the Yemen crisis is unfolding according to their pre-planned scenario. Instead of helping the fraternal Yemen in the peaceful settlement of internal disputes, Riyadh has followed the lead of the US and begun to use military means to establish its dictatorship. At first, as planned, the first phase of the plan was carried out, i.e. the bombing of peaceful cities, towns and villages from planes of the so-called Arab coalition, when pilots developed combat experience launching bomb strikes in the absence of any air defense. During this phase, the United States actively helped the Saudis with intelligence, logistics and organization of military air sorties.

But even in such circumstances, Saudi pilots did not particularly trouble themselves over launching attacks on actual militant targets of Houthis, but prefered to bomb major cities such as Sana’a, Aden and many others. “The air raids in which our valiant falcons participated along with our brothers from the countries of the coalition eliminated all threats to the security of the kingdom and neighboring countries by destroying heavy weapons and ballistic weapons, which Houthi groups and forces under the control of Ali Abdullah Saleh had taken over,” reads a statement quoted by state media in Saudi Arabia. However, the fact is that these bombings by “glorious falcons” harmed mostly civilians; women, the elderly and children. According to WHO, as a result of the armed conflict, 944 civilians had been killed and another 3,487 wounded in Yemen from March 19 to April 17, 2015.

Then, according to the plan developed by the Pentagon, Saudi troops began entering the Yemen territory. The coalition of Arab countries announced the launch on the night of April 21 to 22 of a new operation in Yemen called “Restoration of Hope”. According to Saudi media, the goal of the operation is to restore the political process and fight against terrorism, and combat Houthi military activity. The official representative of the coalition command, Brigadier General Ahmed Asiri, said that its forces will continue the naval blockade of Yemen in order to prevent the supply of arms to the rebels. “If necessary, we will again resort to force. Under the new operation, we will do everything to stop all maneuvers by the Houthis,” said Ahmed Asiri.

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“Developing personal dependence is no easy feat and requires resolute will power to continue on this long and rambling path.”

Going Rogue: 15 Ways to Detach From the System (Tess Pennington)

It is much too complicated to get into how the “system” was created. That said, the purpose is to enslave through debt and to create an interdependence that will force you and your family to never truly find the freedom you are seeking. It manipulates and convinces you to continue purchasing as a sort of status symbol to make you think you are living the good life; while all along, it has enslaved you further. Wonder why we have all of these holidays where you have to buy gifts? The system needs to be fed and forces you into further enslavement. If you don’t buy into this facilitated spending spree, you are socially shamed. Collectively speaking, the contribution from our easy lifestyle and comfort level has created rampant complacency and a population of dependent, self-entitled mediocres.

We no longer count on our sound judgement, capabilities and resources. The system keeps everything in working order so we don’t have to depend on ourselves, and furthermore, don’t want to. I realize that many of the readers here do not fall into this collectivism, as you see through the ideological facade and know that the system is fragile and can crumble. Breaking away from the system is the only way to avoid the destruction of when it comes crumbling down. When you don’t feed into the manipulation tactics of the system, or enslave yourself to debt, and possess the necessary skills to sustain yourself and your family when large-scale or personal emergencies arise, you will be far better off than those who were dependent on the system. Those who lived during the Great Depression grew up in a time when self-reliance was bred into them and were able to deal with the blow of an economic depression much easier. Which side of this would you want to be on?

Those who had the patience to learn the necessary skills, ended up surviving more favorably compared to others who went through the trying times of the Depression. Now is the time to get your hands dirty, to practice a new mindset, skills, make mistakes and keep learning. Developing personal dependence is no easy feat and requires resolute will power to continue on this long and rambling path. To achieve this you have to begin to break away from the confines of the system. You don’t have to run off to the woods to be the lone wolf. Simply by asking yourself, “Will your choices and the way you spend your time lead to more independence down the road, or will it lead to greater dependence?”, will help you gain a greater perspective into being self-reliant. As well, consider ignoring the convenient system altogether. This will help you to detach yourself from complacency and stretch your abilities and your mindset.

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Say hello and wave goodbye.

The Last 3 Bornean Rhinos Are in Race against Extinction (Scientific American)

s there any hope of saving the Bornean rhinoceros (Dicerorhinus sumatrensis harrissoni) from extinction? Sadly, the chances of that happening seem to grow slimmer and slimmer. Experts once estimated that the rapidly disappearing forests of Sabah, Malaysia, could have hidden up to 10 Bornean rhinos—a subspecies of the critically endangered Sumatran rhino, of which fewer than 100 remain scattered around Borneo, Sumatra and mainland Malaysia. But this month Sabah’s environmental minister reported some devastating news: It appears that there are no more wild rhinos in the state. There are, however, three Bornean rhinos in captivity in Sabah, all at the Borneo Rhino Sanctuary in Tabin Wildlife Reserve. One of them, a female named Iman, was captured from the wild a little over a year ago after she fell into a pit trap.

When she was rescued, Iman was proclaimed the species’s “newest hope for survival.” Sanctuary veterinarians even suspected she was pregnant at the time. That didn’t turn out to be true. Ultrasound tests conducted soon after Iman’s arrival at the sanctuary revealed that the mass in her uterus wasn’t a fetus. It was a vast collection of tumors that would make it impossible for her to ever get pregnant naturally. A male named Tam and another female, Puntung, also live at the sanctuary. According to WWF Malaysia, Puntung is also incapable of breeding because she has “severe reproductive tract pathology, possibly due to having gone unbred in the wild for a long time.”

So all hope is lost, right? Well, not so fast. Both Iman and Puntung are still producing immature eggs called oocytes. It might be possible to combine those oocytes with Tam’s sperm to produce embryos in the lab, which could then be implanted back into one of the two females or a rhino of another species. Late last month the Malaysian government pledged about $27,700 toward financing artificial insemination techniques for the task. That’s just a fraction of the money the Borneo Rhino Alliance says it needs for the task, but it’s a start.

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Not bad at all!

Heaviest Element Yet Known To Science is Discovered: Governmentium (Not PC)

News from the Scientific World: New Element Discovered 

Victoria University of Wellington researchers have discovered the heaviest element yet known to science. The new element, Governmentium (symbol=Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.  These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called pillocks. Since Governmentium has no electrons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact. 

A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete. Governmentium has a normal half-life of 1 to 3 years (in NZ). It does not decay, but instead undergoes a re-organisation in which a portion of the assistant neutrons and deputy neutrons exchange places. In fact, Governmentium’s mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes. 

This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as a critical morass. When catalysed with money, Governmentium becomes Administratium (symbol=Ad), an element that radiates just as much energy as Governmentium, since it has half as many pillocks but twice as many morons.

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