Mar 092018
 
 March 9, 2018  Posted by at 10:29 am Finance Tagged with: , , , , , , , , , , , , , ,  


Broadway, New York 1954

 

Trump’s Historic Bet on Kim Summit Shatters Decades of Orthodoxy (BBG)
Trump Sets Steel And Aluminum Tariffs; Canada, Mexico Exempted (R.)
There Will Be No Economic Boom – Part II (Roberts)
“Gary Cohn, We Hardly Knew Ya” (David Stockman)
The Risk Lurking In The US Mortgage Market (CNN)
The End of Cheap Debt Will Bring a Wave of – Green- Bankruptcies (Mises)
Tesla Chief Musk Says China Trade Rules Uneven, Asks Trump For Help (R.)
China Will Rely Less On Stimulus As It Battles Risks From Debt – PBOC (CNBC)
UK Retirement Bill Rises More Than £1 Trillion In Five Years (Ind.)
Shares, Profits Of Britain’s Largest Estate Agent Countrywide Plummet (G.)
Toronto Home Builders Just Had Their Busiest February Since 1948 (BBG)
EU Freezes Brexit Talks Until Britain Produces Irish Border Solution (Ind.)
Calais ‘To Be 10 Times Worse Than Irish Border’ After Brexit (G.)
Bitcoin Tumbles Further In Broad Selloff For Cryptocurrencies (MW)
US Is Experiencing The Highest Drug Overdose Death Rates Ever (ZH)
Chinese Panda Conservation Park To Be Twice The Size Of Yosemite (G.)
Discarded Fishing Gear Massacres Whales, Dolphins, Seals, Turtles, Birds (Ind.)

 

 

Question is whether that is a bad thing. Or you could say: Trump brings along his own orthodoxy.

Trump’s Historic Bet on Kim Summit Shatters Decades of Orthodoxy (BBG)

Donald Trump took the biggest gamble of his presidency on Thursday, breaking decades of U.S. diplomatic orthodoxy by accepting an invitation to meet with North Korean leader Kim Jong Un. The bet is that Trump’s campaign to apply maximum economic pressure on Kim’s regime has forced him to consider what was previously unthinkable: surrendering the illicit nuclear weapons program begun by his father. If the president is right, the U.S. would avert what appeared at times last year to be a steady march toward a second Korean War. It was classic Trump, showing an unerring confidence to get the better end of any negotiation.

But it was also Trump in another way: high risk and high reward, with little regard for those in the foreign policy establishment who worry it’s too much, too soon. “He’s taking a risk,” said Patrick Cronin, senior director of the Asia-Pacific Security Program at the Center for a New American Security. “By seizing an opportunity for a summit meeting, a decision that would have taken much more time in another administration, the president has said, ‘I’m going to go right now. And we’re going to test this.”’

Read more …

“If you don’t want to pay tax, bring your plant to the USA..”

Trump Sets Steel And Aluminum Tariffs; Canada, Mexico Exempted (R.)

U.S. President Donald Trump pressed ahead on Thursday with import tariffs of 25% on steel and 10% for aluminum but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier “no-exceptions” stance. Describing the dumping of steel and aluminum in the U.S. market as “an assault on our country,” Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security. “If you don’t want to pay tax, bring your plant to the USA,” added Trump, flanked by steel and aluminum workers.

Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump’s own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy. Within minutes of the announcement, U.S. Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. But that would likely require Congress to muster an extremely difficult two-thirds majority to override a Trump veto. Some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was “past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs.”

Read more …

Perhaps somewhat surprising: The consumer spending part of GDP only rises.

There Will Be No Economic Boom – Part II (Roberts)

When the “tax cut” bill was being passed, everyone from Congress to the mainstream media, and even the CFP’s I spoke with yesterday, regurgitated the same “storyline:” “Tax cuts will lead to an economic boom as corporations increase wages, hire and produce more and consumers have extra money in their pockets to spend.” As I have written many times previously, this was always more “hope” than “reality.” The economy, as we currently calculate it, is roughly 70% driven by what you and I consume or “personal consumption expenditures (PCE).” The chart below shows the history of real, inflation-adjusted, PCE as a percent of real GDP.

If “tax cuts” are going to substantially increase the growth rate of the U.S. economy, as touted by the current Administration, then PCE has to be directly targeted. However, while the majority of consumers will receive an “average” of $1182 in the form of a tax reduction, (or $98.50 a month), the increase in take-home pay has already been offset by surging health care cost, rent, energy and higher debt service payments. [..] But this is nothing new as corporations have failed to “share the wealth” for the last couple of decades.

Read more …

Those crazy earnings numbers WILL come crashing down.

“Gary Cohn, We Hardly Knew Ya” (David Stockman)

That was quick. The trade war scare was over by noon yesterday, and by the market close they were singing “Gary Cohn, we hardly knew ya”. Folks, what more evidence do you need that the financial markets are completely uncoupled from reality and that these feeble bounces between the 50-day and 20-day chart points are essentially the rigor mortis of a dead bull? At the moment, the 50-day stands at 2740 on the S&P 500 and is functioning as “resistance” according to the chart mavens, while the 20-day at 2700 is purportedly acting as “support”. So there’s that, but also this: At the exact mid-point of 2720, the broad market is currently trading at 25.6X reported earnings for 2017.

That’s the nosebleed section of history no matter how you slice it – and most especially in the context of an earnings growth trend that is shackled to the flat line, and which has no prospect of breaking away before the next recession, either. With virtually every company having reported, it turns out that GAAP earnings for 2017 came in at $109.46 per share on the S&P 500. Then again, 40 months earlier in September 2014 reported LTM earnings were $105.96 per share. That tabulates to a 1.0% per year gain during what will surely prove to have been the sweet spot (month #63 to month #102) of the current long-in-the-tooth business expansion.

Read more …

Non-banks. How is that different from China?

The Risk Lurking In The US Mortgage Market (CNN)

Low interest rates. Easy credit. Poor regulation. Toxic mortgages. These were just a few reasons regulators gave for the collapse of the US housing market a decade ago. Since then, regulators have improved the standards that lenders use when Americans apply for mortgages. But today increasing danger lurks in the mortgage market, and economists say it could put the financial system at “even greater risk” when the next recession strikes or too many borrowers fall behind on their mortgage payments. A growing segment of the mortgage market is being financed by so-called non-bank lenders — financial institutions that offer loans to consumers but don’t provide saving or checking accounts.

Borrowers with poor credit have increasingly turned to these alternative lenders instead of traditional banks. The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up. “A collapse of the non-bank mortgage sector has the potential to result in substantial costs and harm to consumers and the US government,” economists at the Federal Reserve and the University of California, Berkeley, write in a paper released Thursday at a Brookings Institution conference. As of 2016, non-bank financial institutions originated close to half of all mortgages. They originated three-quarters of mortgages with explicit government backing, underscoring the risk to taxpayers.

“The experience of the financial crisis suggests that the government will be pressured to backstop the sector in a time of stress,” the authors write. The danger is that non-banks may have fewer resources to weather economic shocks to the mortgage market, like a rise in interest rates or a decline in house prices. “What happens if interest rates rise and non-bank revenue drops? What happens if commercial banks or other financial institutions lose their taste for extending credit to non-banks? What happens if delinquency rates rise and servicers have to advance payments to investors?” the authors write. “We cannot provide reassuring answers to any of these questions,” they write.

Read more …

The entire Green Facade depends on cheap credit. And subsidies.

The End of Cheap Debt Will Bring a Wave of – Green- Bankruptcies (Mises)

The end of the era of cheap money highlights the risk of “Enron-style” bankruptcies in many sectors, including renewable energy. With the path of three rate hikes in the United States in 2018 confirmed by the Federal Reserve and a nervous equity market, the challenges are more evident than ever. The past eight years of massive liquidity and low rates have not helped deleverage, and many companies have used this period to increase imbalances and create complex debt structures. In fact: • Corporate net debt to EBITDA levels is at record highs. About 20% of US corporates face default if rates rise, according to the IMF. • The number of zombie companies has risen above pre-crisis levels according to the Bank of International Settlements (BIS). • This is particularly evident in the renewable sector where, even in the years of high liquidity and low rates, bankruptcies soared.

The renewable sector has undergone an absolutely spectacular transformation in the past eight years. Technology advanced, costs fell and global leaders strengthened when their strategy was to develop an energy model. Understanding that disruptive technologies cannot be more leveraged than traditional ones was key. When technology reduces costs and disrupts inflationary models, basing the business on ever-increasing subsidies and higher prices and financing it with massive debt is suicidal. In the era of cheap money and extreme liquidity, many companies used the “green” subterfuge to implement an extremely leveraged builder-developer model, ignoring demand, costs, and competition. A model whose sole objective was to install for the sake of installing capacity, whether there was a demand or not, and that pursued subsidies while stating that it is very competitive.

Even in a period of falling interest rates and very high liquidity, there have been spectacular bankruptcies, so imagine what can happen when rates rise. [..] If a technology is viable, it does not need subsidies. If it is unviable, no subsidies will change it. Bankruptcies in the solar sector exceed all those of the inefficient coal and fracking companies combined. This domino of bankruptcies, which includes more than 120 corpses of large companies around the world, was self-inflicted. And now, winter is coming. [..] The global renewable sector faces refinancing needs in the next seven to eight years that exceed its entire market capitalization (134 billion euros, Renixx Index).

It is not a problem of technology, it is the addiction to cheap debt and growth for growth sake. And it’s not just a problem in the renewable sector. The combination of lower revenues and increased debt costs is a danger. Cost of debt rises, and cost of equity soars due to higher perceived risk, which in turn can dry up the market for capital increases and refinancing. It is not just renewables, but it is worth highlighting that energy is -again- the most vulnerable sector due to the cyclical nature of its revenues and the perpetuation of overcapacity of the past eight years.

Read more …

Musk is the leader of the Green Facade.

Tesla Chief Musk Says China Trade Rules Uneven, Asks Trump For Help (R.)

Tesla CEO Elon Musk took to Twitter on Thursday to call on U.S. President Donald Trump to challenge China’s auto trade rules, which limit foreign ownership of Chinese ventures and impose steep tariffs on imported cars. In a series of tweets aimed at the president, Musk said he was “against import duties in general, but the current rules make things very difficult. It’s like competing in an Olympic race wearing lead shoes.” Tesla has been pushing hard to build cars in China, the world’s largest auto market, but has hit roadblocks in negotiations with local authorities, in part because Musk is keen to keep full control of any local venture. “No U.S. auto company is allowed to own even 50% of their own factory in China, but there are five 100% China-owned EV (electric vehicle) auto companies in the U.S.,” Musk wrote in another tweet.

Tesla “raised this with the prior administration and nothing happened. Just want a fair outcome, ideally where tariffs/rules are equally moderate. Nothing more. Hope this does not seem unreasonable,” he said. Trump quoted one of Musk’s tweets in his announcement on new tariffs and said American automakers have not been treated fairly by trade rules around the world. Trump announced steep tariffs on steel and aluminum imports on Thursday. Politicians “have known it for years and never did anything about it. It’s got to change,” Trump said, saying he plans to impose a “reciprocal tax” on other countries. “We’re changing things,” Trump added. “We just want fairness.”

Read more …

Yeah, we all believe that.

China Will Rely Less On Stimulus As It Battles Risks From Debt – PBOC (CNBC)

China has moved away from its old growth model which was heavily reliant on investment and will rely less on stimulus to boost the economy in future, People’s Bank of China governor Zhou Xiaochuan said on Friday. Zhou’s comments echoed those of other top officials at China’s parliament this week which suggested that Beijing will be more cautious about spending this year while it focuses on reducing the risks from a rapid build-up in debt. After years of heavy pump-priming, markets worry less generous stimulus could retard the pace of growth not only in China but globally. But analysts believe Beijing will continue to keep the system well supplied with cash to avoid the risk of a sharp slowdown in economic growth, even as they continue to tighten the screws on financial regulations.

“We now emphasize the new normal of the economy, shifting from the past growth model of quantitative growth… referring to the accumulation of capital and investment to boost economic growth,” Zhou told reporters on the sidelines of the annual parliament session. “While pursuing higher quality growth, we will have to reduce our reliance on the old growth model of investment,” said Zhou, in what was likely his last news briefing before his expected retirement this month. Zhou said China needs to improve its regulatory supervision as soon as possible to curb risks to the financial system. He said China has begun to make progress in reducing such risks, but numerous threats remain, such as a lack of transparency at financial holding companies and digital currencies.

Read more …

The Brexit fiasco continues to expose the hidden weaknesses. Which in the case of pensions are global, but mostly remain hidden.

UK Retirement Bill Rises More Than £1 Trillion In Five Years (Ind.)

The UK’s pension funding crisis reached a new crisis milestone this week as the Office for National Statistics revealed the UK’s pension funding liabilities rose to £7.6 trillion at the end of 2015. The figure – the total amount promised to pay Brits’ future retirement income – includes £5.3 trillion of pension entitlements that were the responsibility of central and local government, most of which – around £4 trillion – came from State Pension entitlements. The remaining £2.3 trillion were private sector employee pension entitlements with £2 trillion due to final salary pensions, up from £1.4 trillion in 2010. As things stand, expert commentators suggest there is only around a third of that ‘in the bank’ in company pension funds.

The remainder, it is hoped, will be generated by future working populations. The figures are designed to provide a snapshot of household retirement entitlements, though they don’t include self-invested personal pensions, which have grown significantly in recent years thanks to legislative changes known as pensions freedoms. “While these are obviously large amounts of money, it is important to remember that the payments will be drawn over many years,” says Darren Morgan, head of national accounts for the ONS. “The figures say nothing about the sustainability of our pension system in future.”

In fact, pensions experts have been shocked by the statistics, which come just days after official warnings from the Government Actuary that National Insurance may have to increase by 5% to pay for future state pay outs. “The figures published by the ONS today are astonishing and bring into sharp relief the reasons behind proposed increases in the state pension age,” adds Tom Selby, senior analyst at AJ Bell. “Unfunded state pension entitlements are worth more than double UK GDP – these are promises that will, ultimately, have to be paid for by future generations either through higher taxes, a lower state pension income or a later retirement age.

Read more …

Why not say it like it is?

Shares, Profits Of Britain’s Largest Estate Agent Countrywide Plummet (G.)

Countrywide, Britain’s largest estate agent, has reported a 22.5% fall in core annual earnings and scrapped its dividend, sending its shares to record lows. It pledged to go “back to basics” to return its sales and lettings business to profitable growth after what it described as a disappointing year. “We have got to put our resources back in the front line and not at the head office,” said the executive chairman, Peter Long, adding that restructuring would reduce headcount to 350 from 400. Countrywide said its 2018 property pipeline was “significantly lower” and that it expected a fall of about 36% (£10m) in first-half adjusted earnings before interest, taxation and amortisation (Ebitda).

Its 2017 adjusted Ebitda fell 22.5% to £64.7m while group income fell almost 9% to £671.9m. Shares in Countrywide plunged to a record low of 66.64p before rising to 77p in mid-morning trading, down 13.4% . “The next few months will be messy as new plans are put into place,” Jefferies analysts said in a note to clients. “However, banks are lending their support to the new plan and we believe those equity investors who choose to do the same will have their patience rewarded.”

Read more …

As sales are down 35%.

Greater Toronto Home Sales Down 35% From February 2017

Toronto Home Builders Just Had Their Busiest February Since 1948 (BBG)

Toronto developers had one of their busiest months on record in February in another sign the condo market is alive and well in Canada’s biggest real estate market, even amid a broader slowdown. Builders began work on 5,677 units during the month, most of them multiple-unit projects like condos, the Canada Mortgage and Housing Corp. said Thursday in Ottawa. That’s the strongest February, and the sixth-highest figure for any month, in records back to 1948. The bulk of Toronto condo units are typically sold before construction begins, so the latest surge may simply reflect past sales. But the report also suggests developers are betting the condo market will be less affected by headwinds including higher borrowing costs and tighter mortgage qualification rules that are currently hitting Toronto housing.

“It’s probably lagging a little bit. Historically you tend to see supply follow demand,” said Robert Kavcic, an economist at Bank of Montreal. “The other nuance here is that a lot of the policy changes we’ve seen over the last year, they really had a bigger impact on the higher end of the single detached housing market.” [..] Construction is picking up in Toronto just as sales begin to slide, after various levels of government and regulators took measures to curb surging prices. Most recently, tougher mortgage guidelines came into play on Jan. 1, making it harder for prospective buyers to qualify for loans. Many buyers rushed into the market in December to get ahead of the rules.

Transactions fell 35% in February from a year earlier to 5,175 units, according to data released Tuesday by the Toronto Real Estate Board. It was the weakest February for sales since 2009. Prices are holding up better, particularly in the condo segment, which has gained consistently over the past year and is up 20% since last February. Prices for single-detached homes have fallen 12% since reaching a record last year. Fundamentals that favor condos seem to be at work, as rising immigration levels drive demand. And since the net effect of the new regulations is to limit the size of mortgage credit, the tougher rules may be buoying the less-expensive condo market.

Read more …

Thumbscrews.

EU Freezes Brexit Talks Until Britain Produces Irish Border Solution (Ind.)

The EU has thrown down an ultimatum to Theresa May in Brexit talks, warning that it will not open discussions about trade or other issues until the Irish border question is solved. Speaking in Dublin alongside the Irish Prime Minister Leo Varadkar, European Council President Donald Tusk said talks would be a case of “Ireland first” and that “the risk of destabilising the fragile peace process must be avoided at all costs”. “We know today that the UK Government rejects a customs and regulatory border down the Irish Sea, the EU single market, and the customs union,” the Mr Tusk said. “While we must respect this position, we also expect the UK to propose a specific and realistic solution to avoid a hard border.

“As long as the UK doesn’t present such a solution, it is very difficult to imagine substantive progress in Brexit negotiations. “If in London someone assumes that the negotiations will deal with other issues first before the Irish issue, my response would be: Ireland first.” British negotiators have long been keen to move to discussions about trade and had hoped to do so after the March meeting of the European Council in two weeks, but Mr Tusk’s latest ultimatum suggests further delays could be in store. The EU says a withdrawal agreement must be negotiated by October to give it time to ratify the deal before the UK falls out of the bloc in March 2019.

Mr Tusk recalled that the Good Friday Agreement, whose 20th anniversary is next month, had been “ratified by huge majorities north and south of the border”. “We must recognise the democratic decision taken by Britain to leave the EU in 2016 – just as we must recognise the democratic decision made on the island of Ireland in 1998 with all its consequences,” he said, in a play on the rhetoric used by Brexiteers regarding the 2016 EU referendum. The EU27 nations granted the UK “sufficient progress” to move to the rest of Brexit talks in the December meeting of the European Council after the UK made a commitment to avoid a hard border on the island of Ireland at all costs.

Read more …

30-mile lines of waiting trucks. That was reason no. 1 to establish the EU. Well, they’re back.

Calais ‘To Be 10 Times Worse Than Irish Border’ After Brexit (G.)

The boss of the port of Calais has said there could be tailbacks up to 30 miles in all directions and potential food shortages in Britain if a Brexit deal involves mandatory customs and sanitary checks at the French ferry terminal. Jean-Marc Puissesseau made an impassioned plea to Theresa May and Michel Barnier to put plans in place immediately to avert congestion in Calais and Dover, where bosses have already warned of permanent 20-mile tailbacks. At the same time a leading politician for the Calais region said the problems in France would be 10 times worse than at the Irish border. At a private meeting at the European parliament, Xavier Bertrand, a former French health minister and the president of the Hauts-de-France political region, said politicians needed to grasp the magnitude of the problem.

“I know Ireland is going to be a real problem, but please remember the economic issues in Ireland are 10 times smaller than what is going to happen here,” he said. “This is a black scenario, but it is going to get darker and darker,” he said, urging politicians in Brussels and London to take urgent action by setting up working groups and listening to business. Bertrand angrily denounced those who had power to influence the Brexit outcome. It was not right that economic operators should be expected to “sit on their hands waiting very anxiously for something to happen”.

At the same meeting, Puissesseau said both sides would be affected by the problems at the ports, with suppliers from the UK trying to get their goods through strict EU controls treated no better than those from a developing country. “The UK is part of the 21st century. But this takes us back 100 years. This is sad,” he said. “From Brexit day, 100% of our traffic will be from outside the EU. I tell you honestly that GB will be a third country, this frightens me. There’s such a long history between the UK and EU.” “At the moment, 70% of food imported comes from the EU. Even if that goes down to 50% after Brexit because of controls, it still needs to flow smoothly; people still need to eat,” he said.

Read more …

$8,500 as I write this, -8.46%.

Bitcoin Tumbles Further In Broad Selloff For Cryptocurrencies (MW)

Selling intensified for digital currencies on Friday, as the price of the No.1 cryptocurrency bitcoin pushed below $9,000. The price of a single bitcoin fell 4.8% to $8,847.85, but bounced off a low of $8,370.80, according to CoinDesk. In a week, bitcoin has dropped around 20%. Losses were widespread across cryptocurrencies. Ether was down 4.5% to $671.66, bitcoin cash slid 6.4% to $970.66 and Litecoin fell 6.2% to $166.22, according to CoinDesk. Ripple tumbled 10% to $0.78, according to CoinMarketCap. The moves build on sharp drops on Thursday, which some suggested were due to technical factors.

Read more …

Winning.

US Is Experiencing The Highest Drug Overdose Death Rates Ever (ZH)

Across the United States, government officials are struggling to combat the next wave of the opioid epidemic, which is expected to deliver a massive blow to the heartland. A new report from the Centers for Disease Control and Prevention (CDC) confirms the opioid crisis has dramatically worsened since the second half of 2016. Raw data from hospital emergency rooms show a significant increase in drug overdoses across the U.S. In a press briefing on Tuesday, CDC Director Anne Schuchat, M.D., warned that the U.S. is currently experiencing the highest drug overdose death rates ever.

In the newly issued report, which examined data from 16 states, emergency department visits for suspected opioid overdoses jumped 30% from July 2016 through September 2017. In some regions of the country, overdoses were far more significant, but overall, data from most areas showed the opioid crisis is worsening, despite President Trump’s new initiative to tackle the epidemic.

Read more …

Save the symbols?!

Chinese Panda Conservation Park To Be Twice The Size Of Yosemite (G.)

The Bank of China has pledged at least 10bn yuan (£1.1bn) to create a vast panda conservation park in south-west Sichuan province, the Chinese forestry ministry has said. The Sichuan branch of the central bank signed an agreement with the provincial government to finance the vast national park’s construction by 2023. The park aims to bolster the local economy while providing the endangered animals with an unbroken range in which they can meet and mate with other pandas in order to enrich their gene pool.The ministry said the park will measure 2m hectares (5m acres), making it more than twice the size of Yellowstone national park in the US.

Zhang Weichao, a Sichuan official involved in the park planning, told the state-run China Daily the agreement would help alleviate poverty among the 170,000 people living within the project’s proposed territory. Plans for the park were initiated in January last year by the ruling Communist party’s central committee and the state council, the China Daily reported. Giant pandas are China’s unofficial national mascot and live mainly in the Sichuan mountains, with some in neighbouring Gansu and Shaanxi provinces. An estimated 1,864 live in the wild, where they are chiefly threatened by habitat loss. Another 300 live in captivity.

Read more …

By treating the oceans as our garbage bin, we will make it exactly that.

Discarded Fishing Gear Massacres Whales, Dolphins, Seals, Turtles, Birds (Ind.)

The world’s biggest seafood firms are all contributing to the deaths of more than 100,000 whales, dolphins, seals, turtles and seabirds that are killed in agony every year by discarded fishing equipment, according to a new report. Many of the creatures are drowned, strangled or mutilated by plastic gear lost or abandoned at sea, while others suffer “a prolonged and painful death, usually suffocating or starving” either because they cannot fish or their stomachs are full of plastic. Campaigners believe the fishing litter problem is becoming so bad that the oceans could end up unable to provide any catches for humans to eat.

They say “ghost gear” has become a huge but overlooked threat to marine life, and 640,000 tons of it are added to the oceans each year – a rate of more than a ton every minute. A new study analysed the approaches to fishing equipment of the world’s 15 biggest seafood companies, to rank them in five categories – but found that none could be ranked in the top two as having “best practice” or making “responsible handling” of their fishing gear integral to their business strategy. [..] The report, entitled Ghosts beneath the Waves, says abandoned and lost gear is four times more likely to trap and kill creatures than all other forms of marine debris combined, and more than 70% of visible plastic in the sea is fishing-related.

Microplastics – minuscule pieces – were found in the digestive tracts of 80% of seals tested off the coast of Ireland, while other research cited found that plastic accounted for 69% of the debris ingested by whales. Other studies said 98% of whale entanglements involved ghost gear, while 82% of North Atlantic right whales have become entangled at least once. “This is a huge crisis of animal suffering, yet hardly anyone is talking about it,” said World Animal Protection. In one deep water fishery in the north east Atlantic 25,000 nets have been recorded as lost or discarded each year, according to the report. “Even within small areas, the amount of ghost gear can be staggering,” it said. “The Florida Keys National Marine Sanctuary, for example, is estimated to be littered with 85,000 active ghost lobster and crab pots.

Read more …

Jan 192018
 
 January 19, 2018  Posted by at 10:37 am Finance Tagged with: , , , , , , , , , , , , , , ,  


Vincent van Gogh Red Vineyards at Arles 1888

 

The Most Sustainable Stock Market Bubble Ever (MW)
Global Debt Growing Three Times Faster than Global Wealth (Schiff)
US House Passes Stopgap Funding Bill and Sends It to Senate (BBG)
Conservatives Bring Russia Probe Demand to Shutdown Talks (BBG)
FISA Memo Set To Rock DC, “End Mueller Investigation” (ZH)
Hackers Have Walked Off With About 14% of Big Digital Currencies (BBG)
Blockchain Eyed for Mortgage Bundling That Caused 2008 Crisis (BBG)
SEC Says Bitcoin Funds Raise ‘Investor Protection Issues’ (R.)
Oliver Stone’s “Ukraine On Fire” Documentary Released In The West (Quinn)
Blood Test Could Use DNA To Spot Early-Stage Cancers (G.)
Adolescence Now Lasts From 10 to 24 (BBC)
Varoufakis Reveals Outburst Against ‘Stupid’ Tsipras (GR)
Greece Compliance Report Due Friday Ahead of Monday’s Eurogroup (R.)
UK and France Must Stop ‘Systematic Violation’ Of Calais Refugees (Ind.)
HRW Blames Greek Authorities For Abysmal Conditions At Hotspots (K.)

 

 

We’re having to find new semantics. Once sustainable bubbles become acceptable, anything goes…

The Most Sustainable Stock Market Bubble Ever (MW)

Is this the most sustainable stock market bubble ever? It’s rare to find the words “sustainable” and “bubble” in the same sentence, but the stock market rally from November 2016 until now has been relentless enough to at least discuss the notion of a “sustainable bubble.” In February 2016, the S&P 500 recorded three consecutive daily gains of more than 1.5%. The Profit Radar Report highlighted that this happened only eight other times. A year later, the S&P 500 was up 19.16%. The February 2016 kickoff rally continued to build momentum. One way to quantify momentum was shown in the Nov. 19, 2017, Profit Radar Report: “The S&P 500 was higher 8 of the first 9 months of 2017. This has only happened 8 other times (1936, 1950, 1954, 1958, 1964, 1995, 1996, 2006). 2, 3, 6, and 12 months later, the S&P was higher every time but one (0.7% loss 2 month later in 1964).

Such strong momentum readings (and they are seen across all time frames) are extremely rare. As mentioned in December 2016 and March 2017, stocks rarely top out at peak momentum. We have to go back to 1995/1996 to find similarly strong and persistent upside momentum. The stock market infrequently finds the delicate and potent balance between being hot, but not too hot. Tempered relentlessness best describes this market. How relentless? The S&P 500 has not closed more than 1.5% below its all-time high since Aug. 21, 2017. The only other time the S&P 500 has been similarly glued to its all-time high was in 1965. The S&P 500 has not dropped more than 5% below its all-time high since June 27, 2016, and has been above its 200-day simple moving average (SMA) since June 28, 2016.

How tempered? The S&P 500 has traded above its 200-day SMA for 391 days, but, until Jan. 5, also never traded more than 10% above its 200-day SMA. This “sweet spot” range is illustrated by the chart below. For the first time ever, the S&P 500 broke such a “controlled range-bound rally” streak (there’ve been two similar rallies in the 1960s and 1990s) by surging higher instead of falling lower.

Read more …

Once debt is subtracted, there’s very little wealth growth left. It’s a mirage.

Global Debt Growing Three Times Faster than Global Wealth (Schiff)

Global wealth increased to a new record of $280 trillion in 2017, according to Credit Suisse Global Wealth Report 2017. That seems like pretty good news until you consider global debt is increasing nearly three times as fast. According to the Wealth Report, total global wealth rose at a rate of 6.4%, the fastest pace since 2012 and reached $280 trillion, a gain of $16.7 trillion. This reflected widespread gains in equity markets matched by similar rises in non-financial assets, which moved above the pre-crisis year 2007’s level for the first time this year. Wealth growth also outpaced population growth, so that global mean wealth per adult grew by 4.9% and reached a new record high of $56,540 per adult.”

Increasing global wealth is one of the trends the World Gold Council identifies as a positive for the gold market in the next year. That’s all well and good. But we have to also look at the other side of the equation. The Institute of International Finance recently released its latest global debt analysis. It reported that global debt rose to a record $233 trillion at the end of Q3 2017. That is split up between $63 trillion in government debt, $58 trillion in financial sector corporate debt, $68 trillion in non-financial sector corporate debt, and $44 trillion in household indebtedness. In just nine months, there was an increase of $16 trillion in worldwide debt.

You really can’t talk about wealth without talking about debt. SRSrocco took a look at both factors in the equation. Even if global wealth surged in 2017, so did world debt. According to the data, global wealth increased by $16.7 trillion in 2017 while global debt expanded $16 trillion… nearly one to one. However, this is only part of the story. If we look at the increase in total world debt and total global wealth over the past 20 years, we can see a troubling sign, indeed: Since 1997, total global debt increased from $50 trillion to $233 trillion compared to the rise in global wealth from $120 trillion to $280 trillion. When you do the math, you find global debt has increased 366% vs. 133% increase in global wealth since 1997. That means net wealth was $70 trillion in 1997 versus $47 trillion in 2017.

Read more …

Shaky. A government shutdown could well be imminent.

US House Passes Stopgap Funding Bill and Sends It to Senate (BBG)

The House passed a spending bill Thursday to avoid a U.S. government shutdown, but Senate Democrats say they have the votes to block the measure in a bid to force Republicans and President Donald Trump to include protection for young immigrants. The 230-197 vote came just over a day before current funding is set to run out at midnight Friday. The bill would keep the government open through Feb. 16 while all sides negotiate on longer-term funding for defense and domestic programs. The Senate took an initial vote to advance the bill late Thursday, but was headed toward an additional procedural step requiring 60 votes, which Democrats say they will be able to block. The Senate adjourned until Friday morning without taking further action.

Shortly before the House vote, Trump wrote on Twitter: “House of Representatives needs to pass Government Funding Bill tonight. So important for our country – our Military needs it!” In a show of strength, House Republicans had enough support within their own ranks to pass the measure without help from Democrats. Some members of the conservative House Freedom Caucus withheld their support through much of the day Thursday, but reached a last-minute agreement with Speaker Paul Ryan to hold votes later on a conservative immigration bill and a measure to boost defense spending without increasing non-defense spending.

Still, Senate Democrats said they have the votes to block the measure in their chamber. At least 10 of the 18 Democrats who voted for a temporary funding measure in December have publicly announced their opposition, and a Democratic aide said there won’t be enough party members who support the House bill. Republicans would need at least a dozen Democratic votes to get the bill, H.R. 195, through the Senate after at least three of the 51 Republicans in the chamber said they would vote against it.

Read more …

The gloves are coming off.

Conservatives Bring Russia Probe Demand to Shutdown Talks (BBG)

House conservatives negotiating with GOP leaders over how to avert a government shutdown brought a fresh demand to the last-minute talks: release classified information they say raises questions about the origins of the FBI’s probe into President Donald Trump’s possible connections to Russia. A Republican lawmaker said they tried to pressure Speaker Paul Ryan to allow a vote on making public a document they say shows Justice Department and FBI misconduct and political bias in the investigation into Russian meddling in the 2016 presidential campaign and whether anyone close to Trump colluded in it. The facts contained in the memo from Republicans on the House Intelligence Committee are “jaw-dropping and demand full transparency,” said Matt Gaetz, a Florida Republican.

The top Democrat on the Intelligence Committee, Adam Schiff of California, criticized the move. He dismissed the committee document as “talking points” drafted by Republican staffers that he said were “profoundly misleading” and “rife” with inaccuracies. The odd juxtaposition of issues – tying the Russia inquiry to the debate over a stopgap spending bill – came as much of the government faced a threatened shutdown on Friday at midnight. Gaetz said the effort was led by Freedom Caucus Chairman Mark Meadows of North Carolina and caucus co-founder Jim Jordan of Ohio. Jordan confirmed that some conservatives had “highlighted” in continuing resolution talks that it was “extremely important” that the memo go public. He said it was not something they were requiring of the Republican leadership in return for votes.

“But it was something we definitely talked about – that needs to happen,” Jordan added. Meadows earlier referred to “subplots” of promises the Freedom Caucus was able to extract from the leadership before he agreed to support the continuing resolution. “Mr Meadows and Mr. Jordan and many conservatives want to include in this negotiation a requirement that the House make public intelligence documents that highlight the unfair treatment of the president” by the FBI and the Justice Department, Gaetz said. Gaetz said he couldn’t describe the contents of the entire memo put together by the House Intelligence Committee “because to do so would reveal classified information, in the absence of a vote to do so,” he said. “Just 218 votes and the American people can read this intelligence information that goes to the fundamentals of our democracy.”

Read more …

So let’s see it.

FISA Memo Set To Rock DC, “End Mueller Investigation” (ZH)

All hell is breaking loose in Washington D.C. tonight after a four-page memo detailing extensive FISA court abuse was made available to the entire House of Representatives Thursday. The contents of the memo are so explosive, says Journalist Sara Carter, that it could lead to the removal of senior officials in the FBI and the Department of Justice and the end of Robert Mueller’s special counsel investigation. “These sources say the report is “explosive,” stating they would not be surprised if it leads to the end of Robert Mueller’s Special Counsel investigation into President Trump and his associates.” -Sara Carter. A source close to the matter tells Fox News that “the memo details the Intelligence Committee’s oversight work for the FBI and Justice, including the controversy over unmasking and FISA surveillance.”

An educated guess by anyone who’s been paying attention for the last year leads to the obvious conclusion that the report reveals extensive abuse of power and highly illegal collusion between the Obama administration, the FBI, the DOJ and the Clinton Campaign against Donald Trump and his team during and after the 2016 presidential election. Lawmakers who have seen the memo are calling for its immediate release, while the phrases “explosive,” “shocking,” “troubling,” and “alarming” have all been used in all sincerity. One congressman even likened the report’s details to KGB activity in Russia. “It is so alarming the American people have to see this,” Ohio Rep. Jim Jordan told Fox News. “It’s troubling. It is shocking,” North Carolina Rep. Mark Meadows said. “Part of me wishes that I didn’t read it because I don’t want to believe that those kinds of things could be happening in this country that I call home and love so much.”

“Rep. Peter King, R-N.Y., offered the motion on Thursday to make the Republican majority-authored report available to the members. “The document shows a troubling course of conduct and we need to make the document available, so the public can see it,” said a senior government official, who spoke on condition of anonymity due to the sensitivity of the document. “Once the public sees it, we can hold the people involved accountable in a number of ways.” The government official said that after reading the document “some of these people should no longer be in the government.” -Sara Carter

Read more …

And there’s no guarantee this won’t continue.

Hackers Have Walked Off With About 14% of Big Digital Currencies (BBG)

Digital currencies and the software developed to track them have become attractive targets for cybercriminals while also creating a lucrative new market for computer-security firms. In less than a decade, hackers have stolen $1.2 billion worth of Bitcoin and rival currency Ether, according to Lex Sokolin at Autonomous Research. Given the currencies’ explosive surge at the end of 2017, the cost in today’s money is much higher. “It looks like crypto hacking is a $200 million annual revenue industry,” Sokolin said. Hackers have compromised more than 14% of the Bitcoin and Ether supply, he said. All told, hacks involving cryptocurrencies like Bitcoin have cost companies and governments $11.3 billion through lost potential tax revenue from coin sales and illegitimate transactions, according to Susan Eustis, CEO of WinterGreen Research.

The blockchain ecosystem – the decentralized “distributed ledgers” that track crypto transactions – is also vulnerable. Those losses could snowball as more companies and investors rush into the white-hot cryptocurrency market without weighing the dangers or taking steps to protect themselves. Blockchain records are shared, making them hard to alter, so some users see them as super-secure. But in many ways they are no safer than any other software, Matt Suiche, who runs the blockchain security company Comae Technologies, said. And since the market is immature, blockchains may even be more vulnerable than other software. There are thousands of them, each with its own bugs. Until the field is winnowed to a few favorites, as happened with web browsers, securing them all will be a challenge. “Each implementation is going to have its own problems,” Suiche said. “The more implementations, the harder it is to cover all of them.”

[..] In a Dec. 25 paper, researchers at the Institute of Electrical and Electronics Engineers outlined ways hackers can spend the same Bitcoins twice, the very thing blockchains are meant to prevent. In a Balance Attack, for instance, hackers delay network communications between subgroups of miners, whose computers verify blockchain transactions, to allow for double spending. “We have no evidence that such attacks have already been performed on Bitcoin,” the IEEE researchers said. “However, we believe that some of the important characteristics of Bitcoin make these attacks practical and potentially highly disruptive.”

Read more …

Predictable. Securitizing hasn’t exactly benefitted Jill and John, has it?

Blockchain Eyed for Mortgage Bundling That Caused 2008 Crisis (BBG)

A group of big financial institutions wants to use the blockchain to help resurrect the packaging of home mortgages into securities, a business that almost destroyed the global banking system in 2008. Credit Suisse, U.S. Bancorp, Wells and Western Asset Management. said Thursday that they successfully tested the distributed ledger technology as a way to make it easier to track securitized home loans. Before the 2008 crisis, bundling home loans together and then selling those baskets to investors was a huge profit center for banks. But this was the primary cause of the meltdown after many borrowers couldn’t repay their debt and the value of the securitized loans crashed, causing trillions of dollars in losses.

The business then shrank dramatically. There were about $823 billion of securitized private-label residential mortgage bonds outstanding in early 2017, according to the Securities Industry and Financial Markets Association, down from a peak of $2.7 trillion in 2007. “Structuring securities is complex, involving many different parties, manual processes, duplicated documents and data in different formats,” David Rutter, chief executive officer of blockchain startup R3, which is organizing the consortium, said in a statement Thursday. While the group is starting with residential mortgages that aren’t backed by the U.S. government, it plans to expand to other types of asset-backed securities. The next step is delivering a commercially viable product, R3 said.

Read more …

Any regulation will need to concern all crypto, not just bitcoin. Does the SEC have the knowledge to do that?

SEC Says Bitcoin Funds Raise ‘Investor Protection Issues’ (R.)

The U.S. securities regulator on Thursday raised alarm about the safety of bitcoin-themed investments, telling the fund industry they want answers to their concerns before endorsing more than a dozen proposed products based on cryptocurrencies. A top division chief at the U.S. Securities and Exchange Commission detailed the agency’s concerns about the wild-trading investment in a letter to two trade groups representing fund managers who unleashed a range of proposals for funds holding bitcoin or related assets. The SEC’s division of investment management demanded answers to at least 31 detailed questions about how mutual funds or exchange-traded funds based on bitcoin would store, safeguard, and price that asset. They also asked whether investors can understand the risks and how to address concerns that bitcoin markets could be manipulated.

“There are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to investors,” said the letter signed by Dalia Blass, the SEC’s director of investment management. Bitcoin’s 1,500% surge last year stoked investor demand for any product with exposure to the red-hot asset. A host of companies are jostling to launch exchange-traded funds which would open up the cryptocurrency to a broad retail market. The SEC in March denied a request to list an ETF from investors Cameron and Tyler Winklevoss, owners of the Gemini bitcoin exchange. The Winklevoss fund is seeking to invest in bitcoin directly. Other fund firms staked their hopes on recently launched U.S.-listed bitcoin futures contracts, which promised a more stable base for ETFs than the largely unregulated virtual currency spot market. Many of those proposals were withdrawn last week at the request of the SEC.

Read more …

Haven’t watched it yet.

Oliver Stone’s “Ukraine On Fire” Documentary Released In The West (Quinn)

Oliver Stone’s seminal documentary Ukraine on Fire has finally been made available to watch in the West. Investigative journalist Robert Parry reveals how US-funded political NGOs and media companies have emerged since the 1980s, replacing the CIA in promoting America’s geopolitical agenda abroad. As Russia-Insider details, Ukraine on Fire provides a historical perspective for the deep divisions in the region which led to the 2004 Orange Revolution, the 2014 uprisings, and the violent overthrow of democratically-elected Yanukovych. Covered by Western media as a ‘popular revolution’, it was in fact a coup d’état scripted and staged by ultra-nationalist groups and the US State Department.

Executive producer Oliver Stone gained unprecedented access to the inside story through his on-camera interviews with former President Viktor Yanukovych and Minister of Internal Affairs Vitaliy Zakharchenko, who explain how the US Ambassador and factions in Washington actively plotted for regime change. And, in his first meeting with Russian President Vladimir Putin, Stone solicits Putin’s take on the significance of Crimea, NATO and the US’s history of interference in elections and regime change in the region. The film was originally released in 2016, but unsurprisingly, Stone came up against problems distributing the film in the US and western countries. A Russian-dubbed version was available almost immediately and was aired on TV in Russia, but people in the ‘free world’ were left without access to the full film.

Read more …

Seems quite obvious. If you can train dogs to discover cancer early on, why not DNA?

Blood Test Could Use DNA To Spot Early-Stage Cancers (G.)

Scientists have made a major advance towards developing a blood test for cancer that could identify tumours long before a person becomes aware of symptoms. The new test, which is sensitive to both mutated DNA that floats freely in the blood and cancer-related proteins, gave a positive result approximately 70% of the time across eight of the most common cancers when tested in more than 1,000 patients. In the future, such a test could be used in routine screening programmes to significantly increase the proportion of patients who get treatment early, at a time before cancer would typically show up on conventional scans. “The use of a combination of selected biomarkers for early detection has the potential to change the way we screen for cancer, and it is based on the same rationale for using combinations of drugs to treat cancers,” said Nickolas Papadopoulos, professor of oncology at Johns Hopkins University and senior author on the paper.

The test could also identify the form of cancer that a patient had, a goal that previous cancer blood tests have failed to achieve. It works by detecting free-floating mutated DNA, released into the bloodstream by dying cancer cells. The test screened for the presence of errors in 16 genes that are frequently mutated in different kinds of cancer. The blood of patients was also tested for eight known protein biomarkers which are seen to differing degrees depending on where in the body a tumour is located. In blood samples from 1,005 patients, the test detected between 33% and 98% of cases of disease. Ovarian cancer was the easiest to detect, followed by liver, stomach, pancreas, oesophageal, colorectal, lung and breast cancers. For the five cancers that currently have no screening tests – ovarian, liver, stomach, pancreatic and oesophageal cancers – sensitivity ranged from 69% to 98%.

Read more …

They’re all still living with mom and dad anyway.

Adolescence Now Lasts From 10 to 24 (BBC)

Adolescence now lasts from the ages of 10 to 24, although it used to be thought to end at 19, scientists say. Young people continuing their education for longer, as well as delayed marriage and parenthood, has pushed back popular perceptions of when adulthood begins. And changing the definition is vital to ensure laws and government policy stay appropriate, they say in the Lancet Child & Adolescent Health journal. But another expert warns doing so risks “further infantilising young people”. Puberty is considered to start when the part of the brain known as the hypothalamus starts releasing a hormone that activates the body’s pituitary and gonadal glands. This used to happen around the age of 14 but has dropped with improved health and nutrition in much of the developed world to around the age of 10.

As a consequence, in industrialised countries such as the UK the average age for a girl’s first menstruation has dropped by four years in the past 150 years. Half of all females now have their period by 12 or 13 years of age. There are also biological arguments for why the definition of adolescence should be extended, including that the body continues to develop. For example, the brain continues to mature beyond the age of 20, working faster and more efficiently. And many people’s wisdom teeth don’t come through until the age of 25. Young people are also getting married and having children later. According to the Office of National Statistics, the average age for a man to enter their first marriage in 2013 was 32.5 years and 30.6 years for women across England and Wales. This represented an increase of almost eight years since 1973.

Lead author Prof Susan Sawyer, director of the centre for adolescent health at the Royal Children’s Hospital in Melbourne, writes: “Although many adult legal privileges start at age 18 years, the adoption of adult roles and responsibilities generally occurs later.” She says delayed partnering, parenting and economic independence means the “semi-dependency” that characterises adolescence has expanded.

Read more …

The 3.5% surplus is the opposite of what’s good for Greece; there should be a 3.5% deficit, with all 7% of it invested in the economy.

Varoufakis Reveals Outburst Against ‘Stupid’ Tsipras (GR)

Former Greek Finance Minister Yanis Varoufakis has revealed he accused Prime Minister Alexis Tsipras of being “totally stupid” in accepting a demand by Greece’s creditors for big primary surpluses. During an interview with Greece’s Parapolitika radio, Varoufakis said when he learned that Tsipras in 2015 accepted, without consulting him, a primary surplus target of 3.5% he confronted the premier: “I told him: ‘Are you totally stupid? What have they given you in return?’ And he replied: ‘Oh, maybe I was stupid. I will retract from the promise’.” Varoufakis said he actually used a stronger word than “stupid”.

In the same interview, the former finance minister repeated claims that Tsipras did not really want to win in the infamous July 2015 referendum on the bailout. Varoufakis said he remembered that everyone at the prime minister’s office that evening was sad. “I do not know when exactly Tsipras decided to capitulate,” he added. Referring to his successor, Euclid Tsakalotos, he said: “I can no longer recognize him.” “Euclid became a yes man on July 6 [2015] .. The case of Euclid hurts, because I was an eyewitness of his total transformation,” he added. Varoufakis also confirmed that he still has in his possession recordings of the Eurogroup meetings of the turbulent first half of 2015.

Read more …

And also, the 3.5% surplus is a perfect way to make Greece a debt slave forever.

Greece Compliance Report Due Friday Ahead of Monday’s Eurogroup (R.)

Eurozone finance ministers could decide on Monday, or soon afterward, to release the next tranche of bailout loans to Greece after the country pushed through a batch of laws to meet reform agreements with its creditors, a senior European Union official has said. Finance ministers from the 19 countries sharing the euro meet for monthly talks on Monday and a review of Greek reforms is one of the top items on the agenda. Last Monday, the Greek Parliament approved a bill for fiscal, energy and labor reforms requested by international lenders. This is likely to complete the third and penultimate review of Greek reforms, unlocking new loans. “We are extremely well on our way towards the completion of the third review,” the senior EU official said.

“There are a number of administrative measures to be taken still. As of yet we cannot say that all the preconditions [for disbursements] have been successfully completed simply because the time lines are as they are,” the official said. Lenders’ experts, who are now translating and checking the Greek laws, are to issue a report on their compliance with the bailout’s requirements on Friday. The new loans would be between 6 and 7 billion euros, disbursed to Greece in more than one tranche, the official said. Greece would use the money to redeem maturing debt, pay arrears and create a cash buffer for when it leaves its third bailout in August. “We can be confident that the disbursements will… start in February, probably in the second half,” the official said.

Read more …

It’s not about people, it’s about money and politics. Welcome to the real Europe.

UK and France Must Stop ‘Systematic Violation’ Of Calais Refugees (Ind.)

The UK and France must urgently put an end to the “systematic violation” of refugees in Calais, a group of charities has warned. In a letter shared exclusively with The Independent, eight aid organisations urged leaders Theresa May and Emmanuel Macron to uphold their commitment to human rights law, as conditions for the thousands living on the border become increasingly perilous. The group, which includes l’Auberge des Migrants, Help Refugees, Safe Passage and Utopia56, wrote to the leaders on the same day Ms May welcomed the French President to the UK-France Summit at the Royal Military Academy in Sandhurst. “We are writing to ask that any new agreement relating to the French-British border bear in mind the human rights of displaced people currently residing in Calais,” the letter states.

“We are deeply concerned that the human rights of refugees and displaced people in northern France are being systematically violated on French territory. We moreover lament the heightened risk of sexual violence, exploitation and trafficking to which children and youth in Calais are exposed, as well as the many avoidable deaths occurring at the border.” Ahead of the visit, the Prime Minister announced the UK will take more child refugees from Calais and spend £44.5m on additional security at the French port. Ms May and Mr Macron subsequently signed a deal on migrants called the Sandhurst Treaty, designed to ease the suffering of some of the thousands of people camped near the French port who currently wait six months to have their cases settled. However, No 10 was keen to play down suggestions that Ms May had agreed to accept more refugees, insisting it would simply speed up the process of settling claims.

Read more …

And Germany now blames the island mayors.

HRW Blames Greek Authorities For Abysmal Conditions At Hotspots (K.)

In its annual review for 2018, Human Rights Watch (HRW) said the failure of Greek authorities to properly identify vulnerable asylum seekers for transfer to the mainland has “impeded their access to proper care and services.” The watchdog group also said that policy formed under the deal between the European Union and Turkey to stem the flow of migrants to the continent has led to thousands being “trapped in Greece in overcrowded and abysmal conditions, while denying most access to adequate asylum procedures or refugee protection.” “The policies, conditions, uncertainty and the slow pace of decision-making contributed to deteriorating mental health for some asylum seekers and other migrants on the islands, while creating tensions that sometimes erupted into violence,” it said.

More than 50,000 refugees and migrants are stranded in Greece. Meanwhile, five eastern Aegean island mayors are calling for a meeting with the German ambassador in Athens after coming under fire from German Interior Minister Thomas de Maiziere, who said on Wednesday that they were to blame for the appalling living conditions of refugees and migrants trapped in the hotspots. De Maiziere accused the island mayors of not making use of the aid that is being offered in order to force the government to transfer them to the Greek mainland.

Read more …

Nov 012016
 
 November 1, 2016  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle November 1 2016


Unknown Magazine and cannonballs at Battery Rodgers, Alexandria 1863

Donna Brazile’s Sins A Microcosm Of Biased Media (BH)
FBI Finds No Clear Link Between Trump and Russia (NY Times)
FBI Speeds Up Clinton Email Investigation After Criticism (LATimes)
Halloween Nation (Jim Kunstler)
Global Bond Markets See Worst Rout in 3 Years (BBG)
A Little-Noticed Fact About Trade: It’s No Longer Rising (NY Times)
US Trucking Companies Pare Down Fleets Amid Tepid Shipping Demand (WSJ)
October Mergers Smash All Records With $500.1 Billion In Deals (ZH)
Asset Bubbles From Stocks to Bonds to Iron Ore Threaten China (WSJ)
China Shows a Cheap Currency Doesn’t Pack the Same Punch Anymore (BBG)
Air Quality Worsens In Greece As People Burn Anything To Stay Warm (G.)
A Parting Gift To Athens From Obama (Kath.)
Creating Child Poverty For A Whole New Generation (G.)
Calais ‘Jungle’ like ‘Lord of the Flies’, With 1500 Abandoned Children (Ind.)
QPR To Bring Over 1,000 Children To UK In Kindertransport-Style Mission (G.)

 

 

Spot on from Adriana Cohen. CNN fires Brazile after she provided Clinton with debate questions. But she’s still head of the DNC, and Obama praises her: “..she is a person of high character..” What??

Donna Brazile’s Sins A Microcosm Of Biased Media (BH)

CNN was asking for it when it let Donna Brazile take a seat on the pundit desk. A plugged-in Brazile, now the interim chairwoman of the Democratic National Committee, seized on the opportunity and leaked questions to Hillary Clinton’s camp — one on Flint’s toxic water disaster before a CNN Michigan town hall in March and another a few days later on the death penalty before an Ohio showdown. CNN revealed yesterday – after WikiLeaks kept pointing out the embarrassing journalistic sins – that Brazile was no longer employed by the station. Unfortunately, it’s too late for Bernie Sanders. It’s also too late for voters hoping for an even playing field. There’s nothing wrong with having strong political opinions — I certainly have mine — but at least don’t cheat.

To put how serious this is into context, if Brazile traded stocks off inside information, the SEC would toss her in jail faster than you can say Martha Stewart. Yet, despite all of the above, the White House yesterday praised her integrity. You read that right. When asked about the hacked emails White House spokesman Josh Earnest said, “No, the president believes she has done a fine job stepping in during a very difficult situation to lead the Democratic Party … she is a person of high character. She is a true professional who is a tenacious and effective advocate for Democrats.” Guess rigging a debate is just being a good advocate. Talk about a lack of ethics. But after the targeting of conservatives via the IRS — and recent undercover videos showing how Democratic operatives deployed paid agitators to disrupt Donald Trump rallies — who’s surprised?

But that’s not all Donald Trump and other candidates are up against when challenging the almighty Democratic machine. In a study conducted by Media Research Center of TV coverage during this election, a whopping 91% of Trump coverage was hostile toward the businessman compared to a small fraction of negative stories on Clinton. If that’s not a stacked deck, what is? Can you imagine in the World Series if the umpires made 91% of bad calls against one team and not the other? A biased media is risking its lifeblood — followers — by giving an unfair advantage to the candidate of their choice. A week from today voters will decide if they’ve had enough.

Read more …

It’s full tard insane and disgusting that this is still a story. This shallow-to-flat Clinton camp narrative would have been discarded many months ago if media like the NY Times had been just a little bit more impartial. And even this is not a real mea culpa; the article is still full of insinuations and innuendo that leaves plenty traces of the empty narrative alive.

FBI Finds No Clear Link Between Trump and Russia (NY Times)

For much of the summer, the F.B.I. pursued a widening investigation into a Russian role in the American presidential campaign. Agents scrutinized advisers close to Donald J. Trump, looked for financial connections with Russian financial figures, searched for those involved in hacking the computers of Democrats, and even chased a lead – which they ultimately came to doubt – about a possible secret channel of email communication from the Trump Organization to a Russian bank. Law enforcement officials say that none of the investigations so far have found any conclusive or direct link between Mr. Trump and the Russian government. And even the hacking into Democratic emails, F.B.I. and intelligence officials now believe, was aimed at disrupting the presidential election rather than electing Mr. Trump.

Hillary Clinton’s supporters, angry over what they regard as a lack of scrutiny of Mr. Trump by law enforcement officials, pushed for these investigations. In recent days they have also demanded that James B. Comey, the director of the F.B.I., discuss them publicly, as he did last week when he announced that a new batch of emails possibly connected to Mrs. Clinton had been discovered.

Read more …

They can’t really not say anything by next weekend.

FBI Speeds Up Clinton Email Investigation After Criticism (LATimes)

The FBI accelerated its timeline for reviewing emails potentially linked to Hillary Clinton on Monday amid growing public pressure over the agency’s surprise announcement that it had found them in an unrelated case. Investigators had planned to conduct the review over several weeks but, after a torrent of criticism over the weekend, began scrambling to examine the trove of emails, according to law enforcement officials. The FBI hoped to complete a preliminary assessment in the coming days, but agency officials have not decided how, or whether, they will disclose the results of it publicly, and officials also could not say whether the entire review would be completed by election day.

The uncertainty did not stop Donald Trump from charging into the vacuum with ominous speculation that a Clinton victory would spark national upheaval. Clinton repeated that she was confident the FBI had no case against her and that voters had already made up their mind on her use of a private server while she was secretary of State. [..] FBI Director James B. Comey, a former Bush administration official appointed to run the bureau three years ago by President Obama, has come under heavy criticism from Democrats and Republicans alike for disclosing the investigation to Congress so close to the election.

Iowa Sen. Charles E. Grassley, a Republican who heads the Judiciary Committee, demanded that Comey release more information about the review by Friday. “While I disagree with those who suggest you should have kept the FBI’s discovery secret until after the election, I agree that your disclosure did not go far enough,” Grassley wrote to Comey. “Unfortunately, your letter failed to give Congress and the American people enough context to evaluate the significance or full meaning of this development.” “Without additional context, your disclosure is not fair to Congress, the American people, or Secretary Clinton,” Grassley added. He also renewed concerns that the FBI’s initial email investigation may have been hampered “by political appointees at the Justice Department.”

Read more …

Jim wrote to compliment me on my Throw Huma Under the Bus? article on Saturday. Compliments right back at you.

Halloween Nation (Jim Kunstler)

What was with James Comey’s Friday letter to congress? It looks to me like the FBI Director had to go nuclear against his parent agency, the Department of Justice, and Attorney General Loretta Lynch, his boss, in particular. Why? Because the Attorney General refused to pursue the Clinton email case when more evidence turned up in the underage sexting case against Anthony Weiner, husband of Hillary’s chief of staff, Huma Abedin. Over the weekend, the astounding news story broke that the FBI had not obtained a warrant to examine the emails on Weiner’s computer and other devices after three weeks of getting stonewalled by DOJ attorneys. What does it mean when the Director of the FBI can’t get a warrant in a New York minute? It must mean that the DOJ is at war with the FBI.

Watergate is looking like thin gruel compared to this fantastic Bouillabaisse of a presidential campaign fiasco. One way you can tell is that The New York Times is playing down the story Monday morning. Columnist Paul Krugman calls the Comey letter “cryptic.” Krugman’s personal cryptograph insinuates that Comey is trying to squash an investigation of “Russian meddling in American elections.” Senate Minority Leader Harry Reid chimed in with a statement that “it has become clear that you [Comey] possess explosive information about close ties and coordination between Donald Trump, his top advisers and the Russian government.” How’s that for stupid and ugly? It’s the Russian’s fault that Hillary finds herself in trouble again?

Earlier this week, lawyers at the DOJ attempted to quash a parallel investigation of the Clinton Foundation. They must be out of their minds to think that story will go away. Isn’t it about time that a House or Senate committee subpoenaed Bill Clinton to testify under oath about his June airport meeting with Loretta Lynch. He doesn’t enjoy any special immunity in this case. Speaking of immunity, when will we learn what kind of immunity Huma Abedin may have been granted in previous cycles of the email investigation? Plenty of other Clinton campaign associates got immunity from prosecution earlier this year, rendering bales of evidence on their own laptops inadmissible in the email server case.

Read more …

Central banks losing grip.

Global Bond Markets See Worst Rout in 3 Years (BBG)

When German bond markets sneeze, U.S. Treasuries catch a cold. That’s the conclusion drawn by analysts at TD Securities as global bonds march towards their worst streak of monthly losses since 2010. There’s a distinct rhythm to the selloff, according to the Canadian investment bank. Rising yields on benchmark bunds, and to a lesser-extent gilts, have driven the jump in long-dated Treasuries this month, strategists at TD Securities argue. They cite rising rate-market correlations, elevated selling of Treasuries during European trading hours, and market fears the ECB might moderate its monetary accommodation as factors that suggest international forces largely account for the rise in benchmark 10-year yields, which flirted with a five-month high of 1.88% on Friday.

“We believe that much of the recent rise in U.S. rates has been driven by bunds and gilts,” analysts at TD Securities, led by Priya Misra, wrote in a report on Friday. Rising U.S. Treasuries have been accompanied by an uptick in market-implied inflation expectations, combined with fears that investors are saddled with outsize duration risks. But tightening Treasury-bund spreads since September 30, in fact, throw into sharp relief the external drivers for the rout in the U.S. rate market, the strategists note. “Our analysis shows that since 2010, greater than a one-standard deviation increases in 10-year Treasury yields tend to result in a widening in Treasury-bund and Treasury-gilt spreads. However, this latest move has actually resulted in a tightening of US-Germany and U.K. spreads,” which suggests global rate-markets are dancing to a similar beat, the analysts write.

Read more …

Little-noticed? I have been writing about it for ages.

A Little-Noticed Fact About Trade: It’s No Longer Rising (NY Times)

During the 1990s, global trade grew more than twice as fast as the global economy. Europe united. China became a factory town. Tariffs came down. Transportation costs plummeted. It was the Walmart Era. But those changes have played out. Europe is fraying around the edges; low tariffs and transportation costs cannot get much lower. And China’s role in the global economy is changing. The country is making more of what it consumes, and consuming more of what it makes. In addition, China’s maturing industrial sector increasingly makes its own parts. The IMF reported last year that the share of imported components in products “Made in China” has fallen to 35% from 60% in the 1990s.

The result: The I.M.F. study calculated that a 1% increase in global growth increased trade volumes by 2.5% in the 1990s, while in recent years, the same growth has increased trade by just 0.7%. Hanjin, like other big shipping companies, bet that global trade would continue to expand rapidly. In 2009, the world’s cargo lines had enough room to carry 12.1 million of the standardized shipping containers that have played a crucial, if quiet, role in the rise of global trade. By last year, they had room for 19.9 million – much of it unneeded. India is not China redux. Most trade flows among developed nations. The McKinsey Global Institute calculates that 15 countries account for roughly 63% of the global traffic in goods and services, and for an even larger share of financial investment.

China joined this club the old-fashioned way: It used factories to build a middle class. But the automation of factory work is making it harder for other nations to follow. Dani Rodrik, a Harvard economist, calculates that manufacturing employment in India and other developing nations has already peaked, a phenomenon he calls premature deindustrialization. The weakness of the global economy is exacerbating the trend. Infrastructure investment by multinational corporations declined for the third straight year in 2015, according to the United Nations. It predicts a further decline this year. But even if growth rebounds, automation reduces the incentives to invest in the low-labor-cost developing world, and it reduces the benefits of such investments for the residents of developing countries.

Read more …

Overcapacity.

US Trucking Companies Pare Down Fleets Amid Tepid Shipping Demand (WSJ)

Big trucking companies have spent the second half of the year shrinking their fleets in hopes of changing an imbalance between the supply of rigs on the road and tepid shipping demand that has flattened industry earnings. They will learn in the coming weeks, as retailers stock up at stores and distribution centers for the holidays, whether efforts to slim down capacity have produced the rate increases that trucking companies say they need to increase profitability and to expand fleets next year. Trucking-industry reports in the coming week will take the pulse of a market at a critical point in the fourth quarter, when companies look to build off momentum in the consumer and manufacturing arenas to set business plans for 2017.

Industry data groups ACT Research and FTR are due to report this week on new heavy-duty truck orders for companies in October, a critical month for setting fleet plans for the coming year after several months in which orders have plummeted to historically low levels. DAT Solutions, which measures freight rates in the industrial-trucking market, will report the next week on whether carrier efforts to rein in capacity amid tepid demand are pushing up prices as hoped. DAT says prices for spot-market freight hauls and shipments moving under long-term contracts have been slipping for most of the year, and that rates in September were down 6.4% from the same month a year earlier. “We haven’t seen any difficulty in finding trucks,” said Ken Forster, CEO of logistics company Sunteck, that finds and books trucks for freight shippers. “It’s clear that overcapacity has driven down pricing.”

Read more …

Desperate insanity: “Low growth – which is bad for most things, but it’s good for M&A because that’s how you get growth..” No, it’s how you fake growth.

October Mergers Smash All Records With $500.1 Billion In Deals (ZH)

Last week David Rosenberg pointed out that mega Merger Manias like the one we are experiencing “invariably takes place at or near cycle peaks, as companies realize that they can no longer grow their earnings organically. We have just witnessed five multi-billion dollar deals this past week alone — $207 billion globally (AT&T/Time Warner; TD Ameritrade/Scottrade) in what has been the most active announcement list since 1999 … what do you know, near the tail end of that tech bull market too.” And now that October is officially over, we can close the books on what has been an unprecedented month for M&A.

According to Bloomberg, in the month when a chill was sent through the spines of corporate CFOs and their investment bankers over fears that rates are about to rise and thus make debt-funded deals more expensive, the scramble to acquire competitors went off the charts, leading to an all time high in global M&A with almost half a trillion dollars of mergers and acquisitions announced globally. CenturyLink’s $34 billion acquisition of Level 3 Communications, as well as General Electric’s deal to combine its oil and gas division with Baker Hughes, pushed October’s deal volumes to about $489 billion. That’s the highest amount for at least 12 years, topping the previous record of $471 billion in April 2007, the data show.

Deallogic had a slightly different higher October deal total, calculating that the value for mergers and acquisitions for October actually surpassed the half a trillion mark, hitting $500.1B, but the idea is the same and adds that global deal volume has only been higher during five other months in records going back to 1995. More than half of the deals have been based in the US, where M&A volume has already hit a monthly record of $321.2 billion. That’s about a third higher than the next biggest month on record, according to Dealogic. Cited by Bloomberg TV, Bob Profusek, partner and chair of the global M&A practice at law firm Jones Day said that “every weekend recently has been busy.”

According to the Jones Day lawyer “the fundamental drivers are still there,” Profusek said. “Low growth – which is bad for most things, but it’s good for M&A because that’s how you get growth – and very accommodating capital markets.” More important, however, are concerns that the period of low interest rates is coming to an end, prompting corporations to scramble and issue debt now while it is still cheap.

Read more …

“China’s money supply has quadrupled since 2007, and the new cash is largely trapped inside the country by government capital controls.”

Asset Bubbles From Stocks to Bonds to Iron Ore Threaten China (WSJ)

A succession of asset bubbles has formed in China, caused by a torrent of speculative money sloshing from stocks to bonds to commodities. The biggest apparent bubble is in housing, but prices have surged for niche assets, too, such as calligraphy, antiques and art. In May, futures prices for soybean meal, used as pig feed, jumped 40%. The trading volume of 600 million tons was nine times higher than China’s annual consumption. The pipe-making material PVC is up 40% so far this year on the Dalian Commodity Exchange. The world’s second-largest economy is slowing. Easy credit and successive fiscal stimuli, designed to keep China aloft, mean it is awash in money that is chasing an increasingly small number of investment opportunities.

China’s money supply has quadrupled since 2007, and the new cash is largely trapped inside the country by government capital controls. [..] The debt binge began with a crisis-related stimulus package. China’s public and corporate debt then grew threefold to about $22 trillion as Communist Party leaders used freer credit to support struggling state-owned firms and meet annual economic-growth targets. The downside of so much cash washing from one asset type to the next burst into view with a stock-market crash in the summer of 2015 that wiped out $5 trillion, or 43%, of value in Chinese stocks at one point. The Shanghai market had doubled from June 2014 to June 2015 as investors borrowed 2 trillion yuan ($300 billion) to buy stocks. To steady the stock market, authorities restricted short selling, and a “national team” of investors relied on by the Chinese government to support its stock market stepped in to purchase beaten-up shares.

Money then flowed into bonds. Many investors bought them by borrowing money against bonds they already owned, repeating the process over and over again. Such borrowing grew to 2.5 times the size of the $7 trillion bond market, according to bond-market analysts. The surge slowed only when yields tightened enough that bonds looked less attractive than other asset types. In this year’s first quarter, China’s total credit surged by another $690 billion, equivalent to about three times the economy of Ireland. Then came a bout of commodity speculation, which pushed prices for some products out of sync with economic fundamentals. Iron-ore futures surged 50% from January to April even though Chinese ports were piled with iron ore. Prices slumped in May.

Read more …

Again: world trade is shrinking.

China Shows a Cheap Currency Doesn’t Pack the Same Punch Anymore (BBG)

Chalk up China as another example where a cheapening exchange rate is failing to lift exports. As already seen in Japan in recent years, what textbooks say should happen when a country’s currency falls – its exports gain – isn’t. Bathroom accessories maker Dongguan City XinChen, in the southern Chinese province of Guangdong, is among those seeing one step forward, two steps back when it comes to the exchange rate. “The support from a weaker yuan is negligible compared to the pressure we face from rising labor and materials costs,” said owner Sandy Chang. “Foreign demand is already down. When growth is slow in our major markets, people just don’t buy.”

That tepid demand – on display in September data that showed China’s exports fell 10% from a year earlier – means factories are yet to get a sustained shot in the arm from a currency that’s weakened 9% against the dollar since August 2015. On a trade-weighted basis, the declines this year have been even more marked, with the yuan down 6.7% versus its 4.1% drop against the dollar in 2016. “China’s not going to get much out of anything from further currency depreciation in a weak global economy,” Stephen Roach, a senior fellow at Yale University and former Morgan Stanley non-executive chairman in Asia, said. “You can cut your relative prices through depreciation, but if you don’t have the external demand the impact is going to be limited.”

Read more …

Mad Max is here: “Along with chemicals from wood burning, scientists found lead, arsenic and cadmium particles, showing that people are burning painted and treated wood, and also their rubbish, to keep warm.”

Air Quality Worsens In Greece As People Burn Anything To Stay Warm (G.)

Greece’s financial recession is leaving its footprint on the environment. This follows twenty years of huge improvements in Greece’s air pollution. While most European countries struggle with the consequences of failure to control exhaust pollution from diesel vehicles, Greece benefitted from long-standing bans on diesel cars in the two biggest cities, Athens and Thessaloniki. This allowed the country to reap the full benefits of technologies to control petrol exhaust, without these being offset by the poor performance of diesel cars. As a consequence nitrogen dioxide from traffic approximately halved alongside Greek roads between 1996 and 2006, in contrast to the lack of improvement elsewhere in Europe. Lifting the diesel car ban in 2012 and lower taxes on diesel fuel acted as a huge incentive for those struggling with travel costs.

Amongst new car sales diesels leapt from less than 20% (around zero in Thessaloniki) to over 60%, but, so far, economic pressures have reduced traffic volumes averting a possible deterioration in air pollution. However, a tripling in the cost of heating oil brought about larger changes as hard-pressed Greeks have switched to burning wood. Wintertime particle pollution increased by around 30% in Thessaloniki in 2013 and air toxicity worsened on evenings when fires were lit. Analysis of wintertime air in Athens shows that it is not just logs that are being burnt. Along with chemicals from wood burning, scientists found lead, arsenic and cadmium particles, showing that people are burning painted and treated wood, and also their rubbish, to keep warm.

Read more …

Greece will get nothing from Obama.

A Parting Gift To Athens From Obama (Kath.)

[..] the key players in the euro area consistently kept the US at arm’s length when it came to dealing with the crisis, particularly in Greece. We should not forget that in February 2010, about three months before Greece’s first bailout was signed, the US Treasury secretary at the time, Timothy Geithner, had warned eurozone state leaders and ministers during a G7 meeting in Canada that they could not make moral hazard the driving force of their crisis strategy. “You can put your foot on the neck of those guys [the Greeks] if that’s what you want to do… but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece,” he said, according to the raw transcripts of his memoirs, which were published under the title “Stress Test.”

“They just wanted to take a bat to them,” added Geithner. “But in taking a bat to them, they were feeding a fare that was in its early stages.” The eurozone was not particularly interested in Washington’s message at the time, and has been similarly unimpressed by the US government’s interventions since. Washington’s position is weakened in European eyes because it does not have “skin in the game,” in other words it does not stand to lose financially or politically from any Greek debt relief, especially as the money owed to the International Monetary Fund, of which the US is the largest member with a 17.5% quota, has “super-senior status” and cannot be restructured.

To see a more recent example of US proposals for a change in approach on Greece not having an impact in the eurozone, we only need to wind back to the end of January 2015 and Obama’s comment in the wake of the SYRIZA-led government’s first election win. “You cannot keep on squeezing countries that are in the midst of a depression,” he told CNN. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits,” he added, pointing out that it is difficult to carry out structural reforms when people are seeing their living standards plummet. “Over time, the political system and society cannot sustain it,” he concluded.

Read more …

Britain does to its own children, too, what it does to refugee kids. What’s the last you heard Corbyn say about this? Where the f*ck is he?

Creating Child Poverty For A Whole New Generation (G.)

In a little council house in Birkenhead, Steve is panicking over how he’ll find an extra £304 rent money a month. He has just days to magic up an answer. If he can’t, he can guess what will happen. “Eviction. Come the end of November, I won’t have a roof.” As a single parent, Steve won’t be the only one slung out. His four boys, aged from three to eight, would also lose their home and probably be taken from their dad. “I’d be fed to the dogs.” Everything I’ve tried so hard for …” – a snap of his fingers – “Nothing.” It’s not a landlord doing this to Steve; it’s our government. It’s not his rent that’s going up; it’s his housing benefit that’s getting cut. And he’s not the only one; on official figures, almost 500 households in the borough of Wirral face a shortfall of up to £500 a month.

From next Monday 88,000 families across Britain will have their housing benefit slashed. They will no longer have the cash to pay their rent. Among all those whose lives will be turned upside down will be a quarter of a million children. That’s enough kids to fill 350 primary schools, all facing homelessness. Those figures come directly from the Department for Work and Pensions. Plenty dispute them, which is unsurprising since DWP officials keep changing their minds. Some experts believe the number of children at risk could total 500,000. This is the biggest benefit cut that you’ve never heard of. The newspapers will waste gallons of ink on Candice Bake-Off’s lipstick and Cheryl’s apparent baby bump. But about a government policy that could disrupt hundreds of thousands of lives, there is near silence.

So allow me to explain. From next week Theresa May’s government will extend the cap on household benefits. Poor families in London will not be allowed more than £442 a week. Those outside the capital will be cut to £385 a week. In some areas the cuts will be brought in straightaway; in others with a slight delay. But in the end, families above the limit will be hit twice over. First, they will be pushed further into poverty. And, like Steve, their housing benefit will be docked, so they will be left scrabbling just to make the rent and keep a roof above their heads. How those families will manage is anyone’s guess. When Steve opened the letter at the end of July he had a “panic attack”. All that went round his mind was one question: “How the hell am I going to pay this?” Then came what he calls “a depressive state” that lasted nearly two months. Now he bottles it up, for the sake of his boys. “When they’re not around, that’s when I cry. When they’re out at school, when they’re asleep: that’s when I break down.”

Read more …

Given their approach to this simple and easy-to-solve non-issue, people like Holland and May should obviously be nowhere near any decision making positions. Perhaps more than anything else, letting children perish for your own petty political reasons says you’re a sociopath.

Calais ‘Jungle’ like ‘Lord of the Flies’, With 1500 Abandoned Children (Ind.)

The Calais ‘Jungle’ has become like ‘Lord of the Flies’, with 1,500 children left unsupervised, sleeping in bare containers and free to roam the adjacent camp site, close to heavy machinery being used to dismantle and remove the wreckage, volunteers have told The Independent. Taps supplying drinking water to the children’s compound have been turned off, and food for the young refugees, who are mostly boys aged between 10 and 17, is not being supplied by the authorities, aid organisations claim. Nobody is allegedly allowed inside the containers except for a handful of security guards, raising serious concerns about the safety of the ‘Jungle’s’ most vulnerable occupants.

A small group of volunteers from three tiny charities told The Independent they are working “round the clock” to distribute bottled water, food, and blankets to the children, in a bid to support them. The task is extremely difficult, they said, because the organisations have only been given about 20 passes between them permitting access to the razed ‘Jungle’ site. Members of the grassroots aid organisations Refugee Community Kitchen, Calais Kitchens, and Little Ashram Kitchen, said they have had to distribute supplies from the roadside by the fenced-off compound. Only French officials can access the restricted container site, volunteers said, but they have not been present on a day to day basis. Volunteer Steve Bedlam told The Independent: “They’ve left them with no support whatsoever. They’ve just left these 1,500 kids since Friday and gone.”

No official organisations are distributing water, Mr Bedlam said, leaving the three volunteer-run organisations sending in thousands of litres everyday. Food is also extremely limited. “There’s running water in the toilets, but the sinks have been turned off,” Mr Bedlam said. “This has been confirmed by several of the kids. When we bring water in a truck it goes crazy. People are grabbing at it, like they want to get six bottles.” A French organisation was supplying one hot meal a day, Mr Bedlam said, but it was not nearly enough food for a teenage boy, leaving the camp occupants reliant on volunteers. Many of the children also had no blankets or shoes, he said, and some unregistered refugees are still sleeping outside in the “freezing cold”. Another volunteer told The Independent she believes there are 12 children in each container, and she said one boy told her he had slept on a table.

Read more …

Bless you.

QPR To Bring Over 1,000 Children To UK In Kindertransport-Style Mission (G.)

Queens Park Rangers (QPR), the football club, has offered to help bring refugee children stranded in France to the UK. The Championship club is part of a new plan for more than a thousand refugee children that emerged on Monday night. QPR has put a fleet of coaches on standby to go to France to collect the children. And Hammersmith & Fulham council – QPR’s local council in west London – says it has volunteer social workers ready to travel to France in the next couple of days to assess and support the children. Lord Alf Dubs, who has led plans to bring child refugees to the UK in a Kindertransport-style mercy mission, announced the plan in a letter to the home secretary, Amber Rudd, and the French ambassador, Sylvie Bermann, on Monday.

In his letter, Dubs writes: “I formally request that the French government allows us to send in coaches and social workers to collect those refugee children that have a right to be here in the UK. We will need assistance with travel documents out of France. We have people arranging the coordination of this.” Dubs added: “I am also writing the British government and hope that this intervention can bring the assistance the refugee children so desperately need. Given the urgency of this matter I should be grateful for a quick response.” The home secretary made a statement to parliament saying that the UK government had only been granted access to the camp by the French authorities and permitted to bring over Dubs-amendment children very recently. They are children with no relatives in the UK but who are deemed eligible to travel to the UK as a result of their vulnerability.

Read more …

Oct 282016
 
 October 28, 2016  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 28 2016


Theodor Horydczak Washington Monument 1933

China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)
Unacceptable Cures for the Days Ahead (Dent)
Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)
Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)
The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)
Xi Jinping Becomes ‘Core’ Leader Of China (R.)
Waking Up in Hillary Clinton’s America (Nomi Prins)
Donald Trump Has Won, Even If He Loses The US Election (Malmgren)
Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)
Assange First Interview Since Being Censored (JJ)
Wither Democracy (Lessig)
Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

 

 

“The worry is a “negative feedback loop between a weakening yuan and capital flight”.

China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)

Capital outflows from China are accelerating. The hemorrhage has reached the fastest pace since the currency panic at the start of the year. The latest cycle of credit-driven expansion has already peaked after 18 months. Beijing has had to slam on the brakes, scrambling to control property speculation that the Communist authorities themselves deliberately fomented. How this episode could have happened is astonishing, given that premier Li Keqiang has warned repeatedly that excess credit is becoming dangerous and will ultimately doom China to the middle income trap. It will be clear by early to mid 2017 that the economy is rolling over and that the underlying ‘quality of growth’ has deteriorated yet further. “We think the recovery will run out of steam early next year,” said Chang Liu from Capital Economics.

This stop-go rotation – an all-too familiar pattern – coincides with an incipient liquidity squeeze in global finance as dollar LIBOR and Eurodollar rates ratchet upwards. A rate rise by the US Federal Reserve will clinch it. Since the commodity rebound is in great part driven by demand for Chinese industry and construction – and by a touching belief that China’s economy will sail majestically through 2017 – this looming slowdown spells trouble. Stress is already visible in the capital account. Morgan Stanley estimates that net outflows reached $44bn in September. Capital Economics thinks the figure was closer to $55bn, led by a surge in purchases of off-shore securities through the Shanghai-Hong Kong Stock Connect Scheme.

This does not yet match the capital flight seen late last year when a mismanaged shift in exchange rate policy set off outflows averaging $70bn a month, and triggered the global equity rout of January and February. But it is nearing a neuralgic threshold for currency traders. Beijing is clearly alarmed. Nikkei’s Yusho Cho reports that the authorities have ordered banks in Shanghai and Guangzhou to restrict access to foreign currency, and have imposed a “gag order” to keep it quiet. Institutions must now justify why they need foreign exchange. The worry is a “negative feedback loop between a weakening yuan and capital flight”. The central bank (PBOC) spent roughly $50bn defending the yuan last month, but this has not stopped the exchange rate sliding to 6.77 against the dollar – the weakest in six years.

The PBOC has burned through $800bn of foreign reserves since mid-2014, when they peaked at $4 trillion. It still has ample fire-power but bond sales automatically tighten China’s internal monetary policy since it is hard to sterilize the effect, and tightening may the last thing they want if the economy is slowing hard next year. “Our view is that the RMB (yuan) will depreciate 20pc against the US dollar to 8.1 by the end of 2018 as deflation of the property bubble leads to more capital outflows,” Zhiwei Zhang from Deutsche Bank. “This is deflationary for global trade.”

Read more …

Velocity of money is the no. 1 Deflation indicator.

Unacceptable Cures for the Days Ahead (Dent)

Then Dr. Lacy Hunt took the stage… As I was telling Boom & Bust subscribers in their 5 Day Forecast email on Monday, he’s the only economist (outside of Steve Keen from Australia, who’s currently in hibernation in London) that I recommend you to follow. He’s classically trained and deeply knowledgeable, and goes beyond the theoretical nature of his chosen field. He understands how debt and financial bubbles build and deleverage, a rarity among economists today. And he has possibly the best explanation of money velocity. Basically, it’s a sign of how productive investment in the economy is. Productive investment creates more profits, jobs and expansion, and hence, greater M2 velocity. Speculation, stock buybacks or empty buildings do not. His money velocity chart was my favorite of the conference.

With this single chart, Lacy shows the level and falling trends for money velocity across the U.S., Europe, Japan and China. And as you can see, the most unproductive investment is in China! See, solid proof from perhaps the most competent economist in America! Building stuff for no one isn’t productive for the economy. This is the most concrete proof yet of something that should be obvious. Despite 6-10% growth rates, China’s money velocity is even lower than Japan’s most dismal “coma economy” that is surviving solely on endless QE as they age and see exponential growth in debt levels… Do you get this? China is worse than Japan when you reflect the truth of money velocity. You can also see why we are the best house in a bad neighborhood. Our money velocity, despite continually slowing since 2000, is 50% stronger than the euro and three times that of Japan and China.

Read more …

The end of Abenomics nears..

Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)

Japan’s consumer prices fell for a seventh straight month and household spending slumped again in September, underscoring the challenges Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda face in trying to revive the world’s third-largest economy. The downbeat inflation and spending data came despite an increasingly tight labor market. The unemployment rate slipped to 3% in September, equal to the lowest since 1995. The low jobless figure hasn’t yet resulted in significant wage gains, a key element of efforts to reflate Japan’s economy.

Read more …

…and that is also the end of Kuroda.

Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)

As his term winds down, Bank of Japan Governor Haruhiko Kuroda has retreated from both the radical policies and rhetoric of his early tenure, suggesting there will be no further monetary easing except in response to a big external shock. In a clear departure from his initial “shock and awe” tactics to jolt the nation from its deflationary mindset, he has even taken to flagging what little change lies ahead, trying predictability where surprise has failed. This new approach will be on show next week, when the BOJ is set to keep policy unchanged despite an expected downgrade in forecasts that could show Kuroda won’t hit his perpetually postponed 2% inflation target before his five-year term ends in April 2018. “The days of trying to radically heighten inflation expectations with shock action are over,” said a source familiar with the BOJ’s thinking. “No more regime change.”

Kuroda told parliament last week that while the BOJ might again stretch the timing for its inflation target, he saw no need to ease at the Oct. 31-Nov. 1 policy meeting. “There may be some modification to our forecast that inflation will hit our 2% target during fiscal 2017,” he said, the first time he has offered hints on upcoming projections. In the past, the market has learned to expect the unexpected. In 2013, when the BOJ deployed its massive asset-buying program, dubbed “quantitative and qualitative easing” (QQE), his shock therapy boosted stocks and weakened the yen. Further surprises came with an expansion of QQE in October 2014, and then the switch to negative rates early in 2016, which he had denied was an option just days before. But the law of diminishing returns bought him less bang for each buck.

Read more …

Nice research, the graph shows hoe German data hide the sinking of Europe. Quite poorly reported, though.

The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)

The beautiful but rubbish-strewn streets of Catania, Sicily’s second-biggest city, are a world away from swanky Trento, in the country’s richer north. About a quarter of Sicilians are “severely materially deprived”—meaning that they cannot afford things like a car, or to heat their home sufficiently—compared with just 5% in Trento. Italy is not unique. In many places, the divide within countries appears to be getting worse. According to an analysis by The Economist, the gap between richer and poorer regions of euro-zone countries has increased since the financial crisis. Our measure of regional inequality looks at the average income per head of a country’s poorest region, expressed as a%age of the income of that country’s richest part. The weighted average for 12 countries shows that regional inequality was declining in the years leading up to the financial crisis of 2007-08, but has increased since then (see chart).

The poorest area in Slovakia, the euro zone’s most geographically unequal economy, now has an income per person of just 28% of the richest, a slight fall from before the crisis. In Calabria, Italy’s poorest region, income per person as a share of the country’s best-off part, the province of Bolzano, was 45% in 2007 but is only 40% now. Elsewhere poor regions of the euro zone have seen income falling in both relative and absolute terms. An exception is Germany: in its once-communist east, excluding Berlin, GDP per person reached 67% of that in former West Germany last year. (Most of the catch-up took place in the early 1990s, but continues more slowly.) Deindustrialisation is partly to blame. Most of the euro zone’s 19 members have fewer manufacturing jobs than in 2008.

Manufacturing employment is high in many of Europe’s poorer countries, but they have lost international competitiveness in part because of an overvalued euro. Tight public spending also plays a role. Since 2008 the number of civil servants in the euro zone has fallen by about 6%. This has often hurt needy regions most. Cuts in welfare benefits also hit harder. A paper by Luca Agnello, Giorgio Fazio and Ricardo Sousa, three economists, found that austerity led to higher regional inequality in 13 European countries between 1980 and 2008. This suggests that the problem will continue: public funds will be tight for years to come, while weak public spending on education and infrastructure will crimp future growth. Even if the euro zone starts to grow strongly again, the geographical scars will be plain to see.

Read more …

China will be calling out loud for a strong leader as its economy grinds to a halt.

Xi Jinping Becomes ‘Core’ Leader Of China (R.)

China’s Communist party has given the president, Xi Jinping, the title of “core” leader, putting him on par with previous strongmen Mao Zedong and Deng Xiaoping, but signalled his power would not be absolute. A lengthy communique released after a four-day meeting of senior officials in Beijing emphasised the importance of collective leadership. The system “must always be followed and should not be violated by any organisation or individual under any circumstance or for any reason”, the party said. But all members should “closely unite around the central committee with comrade Xi Jinping as the core”, said the document, released through state media. The core leader title marks a significant strengthening of Xi’s position before a key party congress next year, at which a new standing committee, the pinnacle of power in China, will be constituted.

Since assuming office almost four years ago, Xi has rapidly consolidated power, including heading a group leading economic change and appointing himself commander-in-chief of the military, though as head of the central military commission he already controlled the armed forces. While head of the party, the military and the state, Xi had not previously been given the title “core”. Deng coined the phrase “core leader”, and said he, Mao Zedong and Jiang Zemin were core leaders, meaning they had almost absolute authority and should not be questioned. Xi’s immediate predecessor, Hu Jintao, was never called the “core”. The plenum meeting paves the way for a congress, held every five years, in autumn 2017, at which Xi will further consolidate his power and which could indicate who may replace him at the 2022 congress.

Read more …

Nomi’s very mild and polite.

Waking Up in Hillary Clinton’s America (Nomi Prins)

To date, $10 trillion worth of assets sits on the books of the Big Six banks. Since 2008, these same banks have copped to more than $150 billion in fines for pre-crisis behavior that ranged on the spectrum of criminality from manipulating multiple public markets to outright fraud. Hillary Clinton has arguably taken money that would not have been so available if it weren’t for the ill-gotten gains those banks secured. In her usual measured way, albeit with some light admonishments, she has told them what they want to hear: that if they behave – something that in her dictionary of definitions involves little in the way of personalized pain or punishment – so will she.

So let’s recap Hillary’s America, past, present, and future. It’s a land lacking in meaningful structural reform of the financial system, a place where the big banks have been, and will continue to be, coddled by the government. No CEO will be jailed, no matter how large the fines his bank is saddled with or how widespread the crimes it committed. Instead, he’s likely to be invited to the inaugural ball in January. Because its practices have not been adequately controlled or curtailed, the inherent risk that Wall Street poses for Main Street will only grow as bankers continue to use our money to make their bets. (The 2010 Dodd-Frank Act was supposed to help on this score, but has yet to make the big banks any smaller.)

And here’s an obvious corollary to all this: the next bank-instigated economic catastrophe will not be dealt with until it has once again crushed the financial stability of millions of Americans. The banks have voted with their dollars on all of this in multiple ways. Hillary won’t do anything to upset that applecart. We should have no illusions about what her presidency would mean from a Wall Street vs. Main Street perspective. Certainly, JPMorgan Chase CEO Jamie Dimon doesn’t. He effectively endorsed Hillary before a crowd of financial industry players, saying, “I hope the next president, she reaches across the aisle.” For Wall Street, of course, that aisle is essentially illusory, since its players operate so easily and effectively on both sides of it. In Hillary’s America, Wall Street will still own Main Street.

Read more …

“Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes.”

Donald Trump Has Won, Even If He Loses The US Election (Malmgren)

Donald Trump has already won the US presidential election and Hillary Clinton has already lost it, even if she emerges with the title of commander-in-chief. It is already apparent that Trump will not skulk off the global stage. Nor will he have to. Consider what happens if he loses the presidential race. He will most likely launch a reality TV show that will undoubtedly attract a record number of viewers. From this ridiculously unconstrained and lucrative perch, he’ll relentlessly attack President Clinton, the Republican Party and the Democratic Party alike. In retrospect, it will be clear that his entire campaign was a trailer for the blockbuster show that follows. In this way he will continue to influence, if not dominate, public opinion.

[..] he won’t go away. Neither will the forces that swept him to the top of politics: the anger, the loss, the sense of unfairness, the inability of the traditional parties to deliver a better outcome for most Americans. Meanwhile, the expectation that a Clinton presidency could conquer these forces is also likely to be proved false. The Oval Office is a highly constrained place that limits the influence of its occupant especially in the face of broader political disarray. She can try and set the tone but the rest of the political establishment looks too dysfunctional, and largely unwilling, to be able to help her. Her presidency seems set to open with high expectations and low approval ratings. Trump, however, could move to the next phase of his career with low expectations and high TV ratings.

Both have faced threats of prosecution throughout this long and increasingly ugly campaign. But, does Trump care if the courts or the government put his tax returns or the sexual allegations against him to the test? He won’t. Will he care if his emails are leaked? No. The real “public prosecutor” for Trump is the Fourth Estate – the media. It will prosecute him just as relentlessly if he becomes commander-in-chief but probably with the same limited impact. Will it matter to Clinton if her emails, from the past or future, are displayed to the public? Will it matter if the Clinton Foundation faces further allegations of “crooked” behaviour? But, we live in the internet age. The real “public prosecutor” for Clinton is and will remain Julian Assange and Wikileaks. His sights will continue to be firmly set on her. He does not care about Trump and Trump doesn’t care about him. Once again, Trump wins.

Trump’s only real threat of looking like the loser comes if the polls are wrong and he ends up winning. Many wonder whether he really wants the job. After all, the Oval Office is the political equivalent of a straightjacket. In theory, Trump won’t be able to shoot words from the hip so freely once he is sitting in the big shiny chair with his finger on the literal and metaphorical button. But, Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes. In the meantime, he will “win” in his effort to redefine America’s political landscape. As president, it won’t matter to him if the House and Senate block him. He is not concerned with process. His job is to break down the traditional political establishment.

Read more …

“Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors..”

Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)

The American people are fed up with war, but a concerted effort is being made through fearmongering, propaganda, and lies to prepare our country for a dangerous confrontation, with Russia in Syria. The demonization of Russia is a calculated plan to resurrect a raison d’être for stone-cold warriors trying to escape from the dustbin of history by evoking the specter of Russian world domination. It’s infectious. Earlier this year the BBC broadcast a fictional show that contemplated WWIII, beginning with a Russian invasion of Latvia (where 26% of the population is ethnic Russian and 34% of Latvians speak Russian at home). The imaginary WWIII scenario conjures Russia’s targeting London for a nuclear strike.

No wonder that by the summer of 2016 a poll showed two-thirds of UK citizens approved the new British PM’s launching a nuclear strike in retaliation. So much for learning the lessons detailed in the Chilcot report. As this year’s presidential election comes to a conclusion, the Washington ideologues are regurgitating the same bipartisan consensus that has kept America at war since 9/11 and made the world a decidedly more dangerous place. The DC think tanks provide cover for the political establishment, a political safety net, with a fictive analytical framework providing a moral rationale for intervention, capitol casuistry. I’m fed up with the DC policy elite who cash in on war while presenting themselves as experts, at the cost of other people’s lives, our national fortune, and the sacred honor of our country.

Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors and a statement of the lobbying connections of the report’s authors. It is our patriotic duty to expose why the DC foreign-policy establishment and its sponsors have not learned from their failures and instead are repeating them, with the acquiescence of the political class and sleepwalkers with press passes.

Read more …

“As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side..”

Assange First Interview Since Being Censored (JJ)

“Wikileaks is one of the fighting dogs that has a lot of energy and runs around fighting all the time. It is built to fight it loves nothing more than to fight. And so when my internet was cut off we had long ago made strategic contingency plans for exactly this situation. So despite bombs raining down on us from statements by high US officials, media and so on this is exactly the sort of situation we enjoy so there was not even one day pause. We just continued on publishing the next day even though I was cut off from my team.” “As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side and we can see it in terms of polling.

If someone like Donald Trump – who has a great many problems I’m sure all of you are aware of it – but if he managed to get up to the 48% or 50% level in the polling which he has just on two occasions across the different polls united, immediately those big media networks and the funders get together and smash him back down. So I don’t think there’s any chance of Donald Trump winning the election. That would probably be bad inside the United States. It would probably be good outside the United States. Even with the amazing material we have published and will continue to publish because even though we publish it and there’s a lot of people reading it on the internet directly, most of the media originations in the United States are very strongly aligned with Hillary Clinton.

Two reasons really, a lot of them are owned by big businesses which are owned by banks which like Hillary Clinton. And the other is a class reason. Most journalists and media workers are very middle class and Donald Trump represents in their minds, white trash. So to do anything that looks to be like it might be supporting Donald Trump looks like you’re supporting white trash. And to those rivals that they have within their class they are white trash. So it lowers their social status and that’s a very dangerous thing to do in an institution, to have your social status lowered, because someone might get your job or the job that you want to have within the institution. So there is a lot of conformity and fear around criticizing Hillary Clinton in any way at all and it reduces the impact of even very significant material that is being released.”

Read more …

Can Iceland give the world back its lost democracy?

Wither Democracy (Lessig)

On the eve of the Icelandic Elections… WITHER DEMOCRACY, by Professor Lawrence Lessig, speaking from the University of Iceland. Lessig explains how democracy has failed the US and other citizens of the world, and how Iceland is on the brink of implementing an entirely new and improved system, based on a PEOPLE’S CONSTITUTION. Yes, it’s a world first, but then Iceland was the first country ever to form a parliament. Lester Lawrence “Larry” Lessig III is an American academic, attorney, and political activist. He was the co-founder, with our beloved Aaron Swartz, of Creative Commons. He is the Roy L. Furman Professor of Law at Harvard Law School; and the former director of the Edmond J. Safra Center for Ethics at Harvard University.

Read more …

Our moral bankruptcy in all its splendor.

Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

Scores of children have been left out in the cold, after French authorities flattened the make-shift migrants camp in Calais, in northern France, earlier this week. Journalists report that around a hundred children were sleeping rough on the remains of the camp, among burned-out shacks and riot police. The Guardian spoke to children who had been lured off the camp site, with promises of being transferred to reception centres where their asylum claims would be assessed. Instead, riot police cornered the group while bulldozers razed the camp. Media and NGO reports of the children’s treatment triggered protests of British home secretary Amber Rudd, who told her French counterpart, Bernard Cazeneuve, on Thursday, that children remaining in Calais had to be properly protected.

Cazeneuve later issued a statement saying he was surprised by Rudd’s declaration. He said France had given shelter to 1,451 minors since 17 October recalling that Britain had a legal duty to take those children that have a link to the UK, for instance through family. 274 children have been allowed to travel to the UK in the last two weeks. The decision to clear the camp came from French president Francois Hollande, calling it a ”humanitarian emergency” during a visit in September. French authorities started evacuating the camp, also known as the Jungle, on Monday (24 October) and said they had relocated almost all of the 6,000 people estimated to have been living there to other parts of France. [..] British baroness Shas Sheehan, who has been working as a volunteer teacher in the camp prior to its dismantlement, accused France and the UK of human rights violations, pointing to official assurances by both sides that the site wouldn’t be demolished before all the children were safeguarded.

Read more …

Oct 092016
 
 October 9, 2016  Posted by at 8:54 am Finance Tagged with: , , , , , , ,  


NPC Balloon at Shriners convention, Washington DC 1923

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)
The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)
World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)
Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)
Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)
Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)
US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)
UK MPs Demand Vote On Hard Brexit Plans (G.)
Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

 

 

Recovery in all its glory.

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)

According to a new survey, people in their 20s and 30s are having trouble “adulting,” or achieving financial independence. Conducted by Bank of America and USA Today, the report says less than half of the 22-26-year-olds surveyed pay their own rent (47%), health insurance (41%), or contribute to a retirement account (27%). One thing they learned from the survey of Millennials (born in the early 1980s to mid ‘90s) and Generation Z’ers (born in the mid-1990s to early 2000s) said Andrew Plepler, the bank’s Enterprise, Social and Governance executive, was that “adulthood” defined by people in their 20s isn’t about age or milestones such as getting married or buying a home. “Instead, the majority said that adulthood really begins when you’re financially independent – when you can find a job, pay your own bills, cover your own rent and stop relying on mom and dad for financial support,” he said.

Indeed, the respondents who did report feeling like adults said it’s because they had help preparing from their parents (60%), because they have a job (60%) or they had a role model to guide the way (49%). They’re also thinking ahead about the economy in the wake of the presidential election : • 65% say economic issues are more important to them than social issues (34%) • Most would choose a candidate that’s best for the country (79%) over one who would improve just their own financial situation (21%) • Job growth/unemployment (27%), health care costs (25%) and college affordability/student debt (24%) rose to the top as young voters’ top campaign issues in this election. • Among those with student debt, nearly 25% say it will impact the way they vote “a great deal”

Read more …

Yeah, maybe net worth vs energy use is a good way to measure reality.

The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)

As the Financial Circus continues today, pushing down the precious metals prices, millions of Americans are going to get wiped out when the collapse of U.S. net worth begins in earnest. Anyone with a tad bit of common sense realizes these financial markets today are totally disconnected from reality. With new stories of 40 million Russians to take part in “Nuclear Disaster” drill, the Philippine President telling President Obama “To Go To Hell”, he’s buying weapons from Russia, U.S. Suspends Diplomatic Relations With Russia on Syria, U.S. Ends Fiscal 2014 With $1.4 Trillion Debt Increase: Third Largest In History, Deutsche Bank Troubles Raise Fear of Global Shock, it’s completely hilarious that the gold and silver prices are selling off big time today.

With 90% of the U.S. media now in control by six large mega-corporations, Americans have no idea just how bad the U.S. financial system has become. News stories today that would have caused a stock market crash and a spike in the precious metals years ago… no longer are a realistic barometer of the market today. Instead, the broader Stock, Bond and Real Estate Markets where 99% of Americans are invested, continue to be propped up. How propped up? Well, let’s say by a staggering $31 trillion in the past six years. According to the wonderful folks at the Federal Reserve, U.S. net worth increased from $57.9 trillion Q2 2010, to a stunning $89 trillion Q2 2016:

I would imagine a lot of wealthy Americans believe they are living life “High On The Hog” today. However, that $31 trillion in additional wealth is a nothing more than a “Digital Mirage.” For wealth to grow, more energy must be burned and positive economic activity must be generated. This is the foundation of all economic principles. Unfortunately, Americans did not burn more energy to create this additional $31 trillion in U.S. net worth. Matter-a-fact, total U.S. energy consumption in 2016 will likely turn out to be less than it was in 2010. This chart is very simple to understand. The left axis shows U.S. net worth in trillions of dollars while the right axis indicates total U.S. energy consumption in quadrillion Btu’s (that’s one hell of a lot of energy). As we can see, total U.S. energy consumption has fluctuated a bit, but has been relatively flat for the past six years.

[..] How the U.S. GDP increased nearly 25% in six years while its energy consumption remained flat is one for the record books. Now, this wasn’t always the case. U.S. energy consumption nearly tripled from 34 quad Btu’s in 1950 to 98 quad Btu’s in 2000. Thus, U.S. GDP increased as total energy consumption increased.

Read more …

Obsolete.

World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)

World finance leaders pledged Saturday to use more resources to try to bolster economic gains as they confront stubbornly slow growth and a rising backlash against globalization. The policy committee for the 189-nation IMF said the world has “benefited tremendously from globalization” but that protectionism is a threat. Increasing anger over globalization dominated the annual meetings of the IMF and its sister lending agency, the World Bank. The unhappiness is evident in Britain’s vote in June to leave the EU and in the U.S. presidential campaign of Republican Donald Trump. Trump has said millions of Americans have lost jobs or seen wages stagnate because of unfair trade practices of countries such as China and Mexico. He is vowing to impose penalty tariffs if those practices are not halted.

The British vote sent shockwaves through financial markets this summer, and there were further troubles Friday when the British pound plunged by 6% against the dollar before recovering. Investors worry whether there will be more turbulence if the British exit proves to be messy and prolonged. IMF Managing Director Christine Lagarde said “growth has been too low for too long, benefiting too few,” and that’s what officials need to address. In their statement, IMF officials committed to designing and putting in place policies “to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.”

Read more …

Raising more debt to pay for legal costs….

Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)

Deutsche Bank CEO John Cryan failed to reach an agreement with the U.S. Justice Department to resolve a years-long investigation into its mortgage-bond dealings during a meeting in Washington Friday, Germany’s Bild newspaper reported. The meeting was meant to negotiate the multi-billion-dollar settlement the bank will have to pay to resolve alleged misconduct arising from its dealings in residential-mortgage backed securities that led to the 2008 financial crisis, according to a Bild am Sonntag report. The German lender is still considering seeking damages against Anshu Jain and Josef Ackermann, who are both former CEOs of the bank, the newspaper reported. Bild said the bank froze part of the millions in bonus payments to Jain and other former top managers.

Concerns about Deutsche Bank’s ability to pay the $14 billion opening settlement bid from the Justice Department sent the lender’s stock to a record low last month. The bank, which set aside €5.5 billion ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including one into a money-laundering probe tied to its Russia operations. Analysts at Barclays speculate that could cost the bank as much as €2 billion. Cryan, a Briton who speaks fluent German, has sought for the last three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health.

The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise €5 billion, people with knowledge of the matter said this week. Qatar’s royal family is also considering increasing its stake in Deutsche Bank to as much as 25%, according to people with knowledge of the matter. Cryan has said the lender may fail to be profitable this year after posting the first annual loss since 2008 last year. With plans to eliminate thousands of jobs and cut risky assets, he called 2016 a peak restructuring year.

Read more …

The state of the German economy: selling off assets.

Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)

On September 15, the Justice Department in the United States ordered the company to pay a $14 billion fine to settle accusations of fraud in Deutsche Bank’s packaging and sale of mortgage-backed securities in the free-wheeling days that led to the global financial crisis. Speculators and politicians have been in a state of near panic since the announcement, with open speculation about the possibility of a government bailout for the prestigious bank. An atmosphere of frustration and depression is currently prevailing inside the bank and Cryan is trying to combat it with messages of perseverance. For a time, Deutsche Bank’s market value plummeted below €15 billion, down from €35 billion a year ago.

Large-scale investor HBJ and his cousin – the former Emir of Qatar, Sheik Hamad bin Khalifa al-Thani, who he has since brought in as an investor as well – are believed to have lost more than a billion euros – on paper, at least. This summer, the two increased their holdings to just under 10% of the company, but Deutsche Bank’s market capital has since continued to slide. And yet, it appears that the low share price is encouraging the sheikhs to invest even more now that it wouldn’t take more than a few billion for them to gain control of Deutsche Bank. Information obtained by SPIEGEL indicates that the al-Thani cousins are considering propping up the bank with a fresh capital infusion and purchasing a blocking stake of 25% together with other investors.

To do this, they could partner with sovereign wealth funds, some of which are apparently willing to invest in the company. But the information obtained by SPIEGEL also suggests that HBJ and the former emir would only be willing to take that risk if they could have a strong say in business decisions at Deutsche Bank. They are said to be deeply frustrated over the fact that the bank has been unable to maneuver itself out of its defensive position. The Qataris are said to be increasingly unhappy with Cryan’s current management team and believe the company’s present course is dangerous. The problems can’t be fixed through cost saving measures alone, they believe, particularly with eroding revenues and profits could. This displeasure manifested itself through the appointment in July of attorney Stefan Simon to the supervisory board. He represents the Qataris’ interests inside the company.

Read more …

Might as well have said 2029. Useless and hollow.

Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)

Inflation in the euro area should return to the European Central Bank’s target by early 2019 at the latest, ECB President Mario Draghi said. “Our inflation rate will pick up during the course of 2017, and then will continue moving in 2018 toward the objective which is close but below 2%,” Draghi said on Saturday at a press conference during the annual meeting of the IMF in Washington. “This is predicated on maintaining the extraordinary support of our monetary policy.” While the ECB hasn’t met its own definition of its mandate on inflation since early 2013, an unprecedented wave of stimulus measures during Draghi’s tenure including the current asset-purchase pace of €80 billion per month has helped keep the currency bloc away from outright deflation.

Draghi’s comments imply that fresh staff forecasts due in December – which build-in the impact of current stimulus – will show a 2019 inflation rate in line with the goal. Achieving that target would mark the end of Draghi’s fight against the euro area’s stubbornly low inflation after more than six years. The ECB has deployed negative rates, asset purchases and cheap long-term loans to banks to rein in inflation. The December round of staff forecasts may serve as the basis for a decision on whether the ECB intends to continue its quantitative easing program at the current rate beyond the end date in March 2017, whether the program will be wound down gradually after that, or if it could be stopped completely.

Read more …

Update. No escape. No velocity.

US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)

The national unemployment rate rose slightly to 5% in September, the Labor Department reported Friday. But relying on that one headline number as an indicator of the economy’s direction leaves a lot of important information below the surface. Every month on “Big Jobs Friday,” the Bureau of Labor Statistics releases a boatload of data, each point of which provides its own unique perspective on a facet of the nation’s employment situation. Economists look past the official unemployment rate — that 5% figure, which is known as the “U-3” rate — to other metrics that provide their own nuanced views of the state of jobs. One of those figures is called the U-6 rate, which has a broader definition of what unemployment means. That figure remained unchanged at 9.7% in September.

The official unemployment rate is composed of “total unemployed, as a% of the civilian labor force,” but doesn’t include a number of employment situations in which workers might find themselves. The U-6 rate is defined as all unemployed, plus “persons marginally attached to the labor force, plus total employed part time for economic reasons, as a% of the labor force.” In other words: That’s the unemployed, the underemployed and the discouraged. The U-3 rate has in the past few months returned to the prerecession levels that economists consider full employment. The U-6 rate has remained above precession levels, though it has seen significant improvement in the past few years. Economists expected 176,000 jobs to be added in September, according to a late Reuters estimate. The report showed that the market added 156,000 jobs.

Read more …

I see busy lawyers in your future…

UK MPs Demand Vote On Hard Brexit Plans (G.)

Theresa May is under massive cross-party pressure to grant MPs a vote on any decision to leave or limit UK involvement in the European single market, amid growing outrage at the prospect that parliament could be bypassed over the biggest economic decision in decades. Tory MPs joined forces with former leaders of Labour and the Liberal Democrats, the SNP and Greens to insist that parliament have a say and a vote, pointing out that, while the British people had backed leaving the EU, they had not chosen to leave the biggest trading market in the western world. Former Labour leader Ed Miliband held discussions with pro-EU Tory MPs on Saturday, and was said to be considering tabling an urgent question in the Commons, demanding that May appear before parliament to explain its future role in Brexit decisions, when MPs return on Monday.

The SNP and pro-EU Tory MPs Nicky Morgan and Anna Soubry were also considering tabling questions, while former Lib Dem leader Nick Clegg, now the party’s Brexit spokesman, said it would be appalling if detailed terms of Brexit, including the UK’s future relations with the single market, were not voted on by MPs. Miliband told the Observer: “Having claimed that the referendum was about returning sovereignty to Britain, it would be a complete outrage if May were to determine the terms of Brexit without a mandate from parliament. “There is no mandate for hard Brexit, and I don’t believe there is a majority in parliament for [it] either. Given the importance of these decisions for the UK economy … it has to be a matter for MPs.”

Clegg said: “My great worry is that while there will be a vote on repealing the 1972 European Communities Act, which is about the decision to leave the EU, it will be left to the executive alone to decide the terms of Brexit. That would not be remotely acceptable.”

Read more …

It’s becoming a lovely nation.

Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

The Home Office has refused to respond to official requests from the French authorities to accept unaccompanied child refugees stranded in Calais who are eligible to come to Britain, the British Red Cross has said. With the planned demolition of Calais’s refugee camp only weeks away, the Red Cross says the Home Office is turning down “take charge” requests by the French on often pedantic grounds. Once such a request has been accepted by the UK government it is in effect responsible for a child who is seeking asylum. In some cases British officials claim to have “misplaced” requests from the French to help children, raising questions over Britain’s approach to what humanitarian experts call an urgent child protection issue.

The camp is scheduled to be demolished this month, with no provision agreed by the British and French for most of the 1,000 unaccompanied minors there, of whom at least 400 are eligible to enter the UK. A new report damningly articulates the Home Office’s intransigence, with research by the Red Cross revealing it takes up to 11 months on average to bring a child to the UK under an EU scheme to reunite families. Lawyers say there is no reason why the process should take more than several weeks. The report also identifies “problems ranging from basic administrative errors causing severe delays to a shortage of human resources on the French side”. It accuses the Home Office of unnecessarily forcing vulnerable children to stay in the camp for months after their case is rejected because of a basic administrative error or lack of documents. “Insufficient discretion or consideration is made for the child’s vulnerability and circumstances,” says the report, No Place For Children, released on Sunday.

Read more …

Sep 072016
 
 September 7, 2016  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , , ,  


Harris&Ewing “Congressional Union for Woman Suffrage” 1916

Why More QE Won’t Work: Debt Is Cheap But Equity Is Expensive (BBG)
ECB Set To Extend QE Well Into Next Year As It Fights Deflation (CNBC)
Could the ECB Start Buying Stocks? (WSJ)
Now Companies Are Getting Paid to Borrow (WSJ)
Message to the Fed: We’re not in Kansas Anymore (Farmer)
China Grabs Bigger Slice Of Shrinking Global Trade Pie (BBG)
Why China Isn’t a Financial Center (Balding)
Time to Worry: Stocks and Bonds Are Moving Together (WSJ)
First Factories, Now Services Signal Cracks in US Economy (BBG)
New Zealand Tops World House Price Increase (G.)
EU Ethics Watchdog Intervenes Over Former EC Chief Barroso’s Goldman Job (G.)
How Snowden Escaped (NaPo)
Greece Overhauls Refugee Center Planning As Islands Appeal For Help (Kath.)
UK Immigration Minister Confirms Work To Start On £1.9 Million Calais Wall (G.)
Nearly Half Of All Refugees Are Now Children (G.)

 

 

Pretending you can save an economy by buying already overpriced stocks is absolute lunacy.

Why More QE Won’t Work: Debt Is Cheap But Equity Is Expensive (BBG)

As central banks in Europe and Japan gear up to further expand quantitative-easing policies, market participants have issued a flurry of stark warnings about the potentially-negative unintended consequences, from the hit to pension funds to the risk of fueling market bubbles. But the more-prosaic prognostication — that further easing simply won’t stimulate slowing economies by reviving enfeebled corporate investment — may be the hardest-hitting retort from the perspective of central banks in the U.K., euro-area and Japan. While a clutch of reasons for moribund business investment in advanced economies have been advanced, central banks would do well to wake up to another typically over-looked cause, according to a new report from Citigroup.

Corporate investment faces a financing hurdle as the weighted-average cost of capital for companies (known as WACC) remains elevated thanks to the stubbornly high cost of equity, Hans Lorenzen, Citi credit analyst, said in a report published this week. The report pleads with central banks to forgo further asset purchases, citing diminishing returns from such stimulus programs and their questionable efficacy more generally. Corporates aren’t feeling the financing benefits offered by the global fall in real long-term interest rates thanks to a historically-high equity risk premium — which, in simple terms, is the excess return the stock market is expected to earn over a perceived risk-free rate, Lorenzen said.

Although companies typically aren’t dependent on equity issuance to fund investment programs – relying instead on fixed-income markets – the equity risk premium is an important factor influencing investment decisions made by company boards. The higher the cost of equity, the higher the theoretical overall cost of capital for corporates. In other words, investments that don’t on paper appear to make returns materially greater than the company’s WACC will face financing challenges.

Read more …

Only thing is, we know it’s useless-at least for what it purports to be aimed at.

ECB Set To Extend QE Well Into Next Year As It Fights Deflation (CNBC)

The ECB is expected to extend its trillion-euro bond-buying program beyond March 2017 and announce to expand the universe of eligibile bonds as part of its seemingly never-ending struggle to kickstart the euro zone’s economy. The central bank and its President Mario Draghi has been trying to push inflation back to its goal of below but close to 2 percent with a plethora of measures and instruments ranging from negative deposit rates to spur lending, a QE program that has been buying €80 billion ($89 billion) in bonds every month and interest rates close to zero – but without a breakthrough success. Analysts believe the ECB’s governing council has its work cut out when it meets to decide on monetary policy Thursday.

The headline rate of inflation remained unchanged at 0.2% in August. Core, or underlying inflation, which excludes energy, goods, alcohol and tobacco, fell from 0.9% in July to 0.8%, according to Eurostat. The eurozone economy slowed slightly in August as Germany’s services sector faltered, according to surveys of purchasing managers, expanding at the weakest pace in 19 months. Amid the factors for the cooling of the economy is the UK’s decision to leave the EU which may have dampened the currency area’s modest recovery. “We think the ECB will expand the duration of its QE programme from March 2017 currently to September 2017,” Nick Kounis at ABN Amro writes. “The ECB will most likely also need to announce changes to its QE programme to increase the universe of eligible assets as it will not be able to meet even its current targets under the current structure.”

Read more …

It could, but it’s the worst thing it could do.

Could the ECB Start Buying Stocks? (WSJ)

Central banks have become some of the biggest investors in bond markets. Now some in the financial markets think stocks should benefit more from their largess. Some economists say the ECB, which meets Thursday to decide if it should expand its current bond-buying program, should invest in equities. The reason: It is running out of bonds to buy. A move by the ECB into equities would have big implications for Europe’s stock markets, which have been rocked by a series of shocks this year, from volatility in China to Britain’s vote to leave the EU. The prospect of billions of euros flowing into equities could prop up prices, much as ECB bond purchases have done for debt securities. The signaling effect from the ECB’s unlimited money-printing power may also limit downturns in equities.

Stock purchases don’t appear to be on the near-term agenda. But ECB officials haven’t ruled them out, and the idea could gain steam if they continue to undershoot their 2% inflation target. Some central banks already invest in equities. Switzerland’s central bank has accumulated over $100 billion worth of stocks, including large holdings in blue-chip U.S. companies such as Apple and Coca-Cola. If the ECB decides to raise its stimulus by extending its current bond program, as many analysts expect, fresh questions will be raised about how it will continue to find enough bonds to buy. The bank is already purchasing €80 billion a month of corporate and public-sector bonds to reduce interest rates across the eurozone. Its holdings of public-sector debt reached €1 trillion last week, the ECB said Monday.

Read more …

The ECB is keeping sick companies alive, destroying price discovery in the process.

Now Companies Are Getting Paid to Borrow (WSJ)

Investors are now paying for the privilege of lending their money to companies, a fresh sign of how aggressive central-bank policy is upending conventional patterns in finance. German consumer-products company Henkel AG and French drugmaker Sanofi each sold no-interest bonds at a premium to their face value Tuesday. That means investors are paying more for the bonds than they will get back when the bonds mature in the next few years. A number of governments already have been able to issue bonds at negative yields this year. But it is a rare feat for companies, which also ask investors to bear credit risk.

Yields on corporate debt have plunged in recent months as investors have pushed up prices in the scramble for returns. Roughly €706 billion of eurozone investment-grade corporate bonds traded at negative yields as of Sept. 5, or over 30% of the entire market, according to trading platform Tradeweb, up from roughly 5% of the market in early January. [..] Tuesday’s deals, however, are among just a handful of corporate offerings that have actually been sold at negative yields. They include offerings of euro-denominated bonds earlier this year by units of British oil giant BP and German auto maker BMW, according to Dealogic. Germany’s state rail operator, Deutsche Bahn, also has issued euro-denominated bonds at negative yields.

The ECB launched its corporate bond-buying program in early June and had bought over €20 billion of corporate bonds as of Sep. 2. Most of its purchases came in secondary markets, where investors buy and sell already issued bonds. The central bank meets Thursday and will decide if it should expand its current bond-buying program. The purchases have helped set off a burst of issuance following the traditional summer lull in local capital markets. Last month was the busiest August on record for new issuance of euro-denominated, investment grade corporate debt, according to Dealogic.

Read more …

Kansas is all they know.

Message to the Fed: We’re not in Kansas Anymore (Farmer)

There is a lasting and stable connection in data between changes in the interest rate and changes in the unemployment rate. Past data suggest that if the Fed were to raise the interest rate at its next meeting, unemployment would increase and output growth would slow. It is fear of that outcome that causes central bank doves to be reluctant to raise the interest rate. But although an interest rate increase has preceded a slowdown by approximately three months in past data, there is a connection at longer horizons between inflation and the T-bill rate. That connection, sometimes called the Fisher relationship after the American economist Irving Fisher, arises from the fact that, risk-adjusted, T-bills and equities should pay the same rate of return.

The one-year real return on a T-bill is the difference between the interest rate and the expected one-year inflation rate. The one-year real return on holding the S&P 500 is the gain you can expect to make from buying the market today and selling it one year later. Economic theory suggests that the gap between those two expected returns arises from the fact that equities are riskier than T-bills, and importantly, the gap cannot be too big. Therein lies the policy maker’s conundrum. To hit an inflation target of 2%, the T-bill rate must be 2% higher than the underlying risk adjusted real rate: policy makers call this rate r*. There is some evidence that r* is currently very low currently, possibly zero or even negative. But if the Fed were to raise the policy rate to 2% at the next meeting, they are terrified that they might trigger a recession.

Let’s examine that argument. The fact that a rate rise caused a slowdown in past data does not mean that a rate rise will cause a slowdown in future data. This time really is different. It is different because in 2008 the Fed expanded its policy options. Before 2008 the interest rate set by the Fed was the Federal Funds Rate (FFR). That is the overnight rate at which commercial banks can borrow or lend to each other. Before 2008, there was a large and active Fed funds market used by commercial banks to meet reserve requirements. Commercial banks are required to hold roughly 10% of their balance sheets in the form of reserves. In the past, because reserves did not pay interest, banks kept them to a minimum. Excess reserves for much of the post-war period were essentially zero. Firms and households hold cash because they need liquid assets to facilitate trade. But cash is costly to hold because a firm must forgo investment opportunities. In the parlance of economic theory, we say that the FFR is the opportunity cost of holding money.

Read more …

Trade wars and currency wars a-coming.

China Grabs Bigger Slice Of Shrinking Global Trade Pie (BBG)

China is eating up a larger chunk of the world’s shrinking trade pie. Brushing off rising wages, a shrinking workforce and intensifying competition from lower cost nations from Vietnam to Mexico, China’s global export share climbed to 14.6% last year from 12.9% a year earlier. That’s the highest proportion of world exports ever in IMF data going back to 1980. Yet even as its export share climbs globally, manufacturing’s slice of China’s economy is waning as services and consumption emerge as the new growth drivers. For the global economy, a slide in China’s exports this year isn’t proving any respite as an even sharper slump in its imports erodes a pillar of demand.

Those trends are likely to be replicated in August data due Thursday. Exports are estimated to fall 4% from a year earlier and imports are seen dropping 5.4%, leaving a trade surplus of $58.85 billion, according to a survey of economists by Bloomberg News as of late Tuesday. While China’s advantage in low-end manufacturing has been seized upon by Donald Trump’s populist campaign for the U.S. presidency, the shift into higher value-added products from robots to computers is also pitting China against developed-market competitors from South Korea to Germany. A weaker yuan risks exacerbating global trade tensions, which became a hot button issue at the G-20 meeting in Hangzhou over cheap steel shipments.

“All the talk we have heard over the last few years about China losing its global competitive advantage is nonsense,” said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. “This will all further fuel increasing trade tensions as already evident in the U.K. with the Brexit vote and in the U.S. with the support for Trump’s populist protectionist platform.”

Read more …

Many voices proclaim that China’s foray into SDRs will lead to the end of the USD. Balding sees it differently. SDRs signal China’s weaknesses.

Why China Isn’t a Financial Center (Balding)

Amid all the buzz about China’s hosting the G-20 summit in Hangzhou – all the accords, arguments and alleged snubs – another symbolically significant event was largely obscured. Last week, the World Bank issued bonds denominated in Special Drawing Rights, or SDRs, in China’s interbank market. Beginning in October, the yuan will be included in the basket of currencies used to set the SDRs’ value. To China, this symbolizes its status as a rising power. I’d argue that it instead symbolizes why China is struggling to become a global financial center. Beijing conceived of SDRs as something of a compromise. It would like the global monetary system to be less reliant on the U.S. dollar and more favorable toward its own currency.

Yet it continues to impose capital controls, which limit the yuan’s usage overseas, and it doesn’t want to let the yuan’s value float freely, which would be a prerequisite to its becoming a true reserve currency. China saw SDRs as a way to split the difference, to create a competitor to the dollar and maintain a fixed exchange rate at the same time. The problem is that there’s almost no conceivable reason to use them. SDRs were created as a synthetic reserve asset by the IMF decades ago, under the Bretton Woods system. No country uses them for normal business, and no government is likely to issue bonds denominated in them except for political reasons, as the World Bank is doing. Companies won’t use them either. If a firm wants to borrow to build a plant in Japan, it will issue a bond in yen so it can repay in yen.

If its customers are global, surely an ambitious investment bank would be willing to build a customized currency portfolio index that would match its needs. Rather than using the SDR’s weighting of currencies, the company could sell a bond in a synthetic index of anything: a 25% split between dollars, euros, yen and reals, say. No customer pays in SDRs; why bind yourself to repaying debts in them? The reason China is pushing SDRs is that it hopes to gain the prestige of a global currency without facing the financial pressure to let the yuan float freely or to loosen capital controls. It wants the benefits of global leadership, in other words, but would prefer to avoid the drawbacks. This is precisely the attitude that’s hindering China’s rise as a global financial center.

Read more …

Distortion is all we have left.

Time to Worry: Stocks and Bonds Are Moving Together (WSJ)

Wall Street traders and fund managers returning from the summer break are likely to focus on the obvious: a series of central-bank meetings in coming weeks and the imminent U.S. election. They also should be paying close attention to some unusual behavior in the market, where the changing relationship between bonds and stocks may be a sign of trouble ahead. A generation of traders have grown up with the idea that stock prices and bond yields tend to rise and fall together, as what is good for stocks is bad for bonds (pushing the price down and yield up), and vice versa. This summer, the relationship seems to have broken down in the U.S. Share prices and bond yields moved in the same direction in just 11 of the past 30 trading days, close to the lowest since the start of 2007.

This is far from unprecedented. But since Lehman Brothers failed in 2008, such a swing in the relationship has been unusual and suggests prices are being driven by something other than the balance of hope and fear about the economy. It has tended to coincide with times of deep discontent in markets, notably the 2013 “taper tantrum,” when bond yields briefly surged after Federal Reserve officials signaled they would soon end stimulus, and last year’s brief bubble in German bunds. The simplest explanation is that expectations of interest rates being lower for longer—some central bankers have suggested lower forever—pushes the price of everything up, and yields down.

When the focus is on the discount rate used to value all assets, bond and stock prices rise and fall together, creating the inverse relationship between bond yields and shares. Such a focus on monetary policy isn’t healthy. It leaves markets more exposed to sudden shocks, both from changes in policy and from an economy to which less attention is being paid. “It’s a somewhat mercurial thing, but there are big shifts [in correlations], and being on the right side of those big shifts is important,” said Philip Saunders at Investec Asset Management. “You do see some brutal price action at these correlation inflection points.”

Read more …

What? We have enough waiters?

First Factories, Now Services Signal Cracks in US Economy (BBG)

Some cracks could be starting to appear in the picture of an otherwise resilient U.S. economy. An abrupt drop in the Institute for Supply Management’s services gauge on Tuesday to a six-year low is the latest in a string of unexpectedly weak data for August. Other less-than-stellar figures include an ISM factory survey showing a contraction in manufacturing; a cooling of hiring; automobile sales falling short of forecasts; and an index of consumer sentiment at a four-month low. While there is hardly any evidence that growth is falling off a cliff, the run of disappointing figures make it tougher to argue that the underlying momentum of the world’s largest economy is holding up.

It also potentially complicates the task of Federal Reserve policy makers, who are debating whether to raise interest rates as soon as this month; traders’ bets on a September move faded further after the report on service industries, which make up almost 90% of the economy. “The latest set of ISM numbers is shockingly weak,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “It certainly gives the doves at the Fed more ammunition. It makes the Fed’s conversation at the September meeting that much more contentious.” The ISM’s non-manufacturing index slumped to 51.4, the lowest since February 2010, from 55.5 in July, the Tempe, Arizona-based group reported. The figure was lower than the most pessimistic projection in a Bloomberg survey.

The ISM measures of orders and business activity skidded by the most since 2008, when the U.S. was in a recession. Readings above 50 indicate expansion. Stocks fell, bonds climbed and the dollar weakened against most of its major peers after the data were released.

Read more …

AKA New Zealand has world’s biggest housing bubble.

New Zealand Tops World House Price Increase (G.)

New Zealand has the world’s most frenetic property market, with prices in Auckland now outstripping London, and possibly dashing the hopes of British buyers hoping to escape Brexit. In a global ranking of house price growth by estate agents Knight Frank, New Zealand was second to Turkey, but once the impact of inflation was stripped out it came top with 11% annual growth. Canada was the only other country to see price growth of 10% or more over the past year. It also recorded the fastest price rises of any country over the past three months. Meanwhile once white-hot property markets in the far east are cooling fast. Taiwan saw price falls of 9.4% over the past year, putting it at the bottom of Knight Frank’s ranking. Hong Kong and Singapore have also seen significant reductions in house prices.

Auckland is at the centre of an extraordinary property boom, with separate data revealing that the city’s average house price last month hit NZ$1m (£550,000) for the first time. The country’s QV house price index found that the typical Auckland home was valued at NZ$1,013,632 in August, an increase of 15.9% over the year. That’s just under £560,000 and higher than the average London property price of £472,384 according to data. Spiralling prices – up NZ$20,000 a month over the past quarter – and the falling pound are likely to deter Britons hoping to emigrate.

Read more …

After the fact.

EU Ethics Watchdog Intervenes Over Former EC Chief Barroso’s Goldman Job (G.)

The EU’s ethics watchdog is to look into the former European commission president José Manuel Barroso’s new job with Goldman Sachs, which includes advising the investment bank and its clients on Brexit. In a letter to Barroso’s successor, Jean-Claude Juncker, the EU ombudsman, Emily O’Reilly, said Barroso’s appointment as non-executive chairman of Goldman raised widespread concerns. She cited “understandable international attention given the importance of his former role and the global power, influence, and history of the bank with which he is now connected”. Her intervention comes after EU staff launched a petition calling on EU institutions to take “strong exemplary measures” against Barroso including the loss of his pension while he works for Goldman.

The petition now has more than 120,000 signatures. O’Reilly told Juncker that public unease will be exacerbated by the fact that Barroso is to advise Goldman Sachs on Britain’s exit from the EU. She warned of the danger of a breach of ethics in his interaction with former colleagues, including the EU’s chief Brexit negotiator, Michel Barnier, a former special adviser to Barroso. O’Reilly said new guidance was needed to ensure that EU staff were “not affected by any possible failure on Mr Barroso’s part to comply with his duty to act with integrity”. Barroso joined Goldman less than two years after leaving office at the European commission, but after the 18-month cooling-off period stipulated by European rules.

Read more …

Great story from an unlikely source, Canada’s right-wing National Post.

How Snowden Escaped (NaPo)

Edward Snowden, a former U.S. intelligence contractor, became the most wanted fugitive in the world after leaking a cache of classified documents to the media detailing extensive cyber spying networks by the U.S. government on its own citizens and governments around the world. To escape the long arm of American justice, the man responsible for the largest national security breach in U.S. history retained a Canadian lawyer in Hong Kong who hatched a plan that included a visit to the UN sub-office where the North Carolina native applied for refugee status to avoid extradition to the U.S.

Fearing the media would surround and follow Snowden — making it easier for the Hong Kong authorities to arrest the one-time CIA analyst on behalf of the U.S. — his lawyers made him virtually disappear for two weeks from June 10 to June 23, 2013, before he emerged on an Aeroflot airplane bound for Moscow, where he remains stranded today in self-imposed exile. “That morning, I had minutes to figure out how to get him to the UN, away from the media, and out of harm’s way with the weight of the U.S. government bearing down on him. I did what I had to do, and could do, to help him,” Robert Tibbo, the whistleblower’s lead lawyer in Hong Kong told the Post in a wide-ranging interview, the first detailing the chaotic days of Snowden’s escape three years ago. “They wanted the data and they wanted to shut him down. Our greatest fear was that Ed would be found.”

The covert scheme to dodge U.S. attempts to arrest Snowden could have been ripped from the pages of a spy thriller. The fugitive was disguised in a dark hat and glasses and transported by car at night by two lawyers to safe houses on the crowded and impoverished fringes of Hong Kong. Snowden hunkered down in small, cluttered, dingy rooms where as many as four people shared less than 150 square feet. Batteries were removed from cellphones when they gathered, burner phones were used to place calls, SIM cards were exchanged and sophisticated computer encryption was used to communicate when face-to-face meetings were not possible. Snowden rarely ventured out, and only at night where he could easily be lost among the many other asylum seekers. “Nobody would dream that a man of such high profile would be placed among the most reviled people in Hong Kong,” recalled Tibbo, a Canadian-born and educated barrister who has practiced law for 15 years. “We put him in a place where no one would look.”

Read more …

It is criminal that Europe doesn’t reach out to help. But we still do. Click here and Please Help The Automatic Earth Help The Poorest Greeks And Refugees! This works! No governments, no NGOs. Thats means no overhead, no salaries, just help.

Greece Overhauls Refugee Center Planning As Islands Appeal For Help (Kath.)

Government officials on Tuesday determined which reception centers for migrants across the country are to close and where new, improved facilities are to open but did not determine a time-frame, even as authorities on the Aegean islands warn of dangerously cramped and tense conditions in local camps. More than 12,500 migrants are currently living in reception centers on five Aegean islands – Lesvos, Chios, Kos, Leros and Samos – and hundreds more are arriving every day from neighboring Turkey. Spyros Galinos, the mayor of Lesvos, which is hosting 5,484 migrants, wrote to Alternate Migration Policy Minister Yiannis Mouzalas on Tuesday to express his concern about the “extremely dangerous conditions” on the island.

He asked the minister for the immediate transfer of migrants from Lesvos to other facilities on the mainland “to avert far worse developments.” However, decongesting facilities on the islands is part of the government’s broader overhaul of a network of reception centers spread across the country. An aide close to Mouzalas determined on Tuesday which camps in northern Greece will close and which will be improved but did not say when this would happen. Among the facilities that are to close are those in Sindos and Oraiokastro, near Thessaloniki, and in Nea Kavala, near Kilkis. Reception centers in Diavata and Vassilika, also in northern Greece, are to be upgraded.

A new reception center for minors is to start operating at the Amygdaleza facility, north of the capital, next Monday. Meanwhile, sources said on Tuesday that child refugees will start attending Greek schools at the end of this month. The 22,000 child refugees currently in Greece will be inducted into the school system in groups. Those aged between 4 and 7 will attend kindergartens to be set up within migrant reception centers. Children aged 7 to 15 will join classes at public schools near the reception centers where they are staying. And unaccompanied minors aged 14 to 18 will be able to join vocational training classes if they so desire.

Read more …

A tangible monument to incompetence and spectacular failure.

UK Immigration Minister Confirms Work To Start On £1.9 Million Calais Wall (G.)

Work is about to begin on “a big, new wall” in Calais as the latest attempt to prevent refugees and migrants jumping aboard lorries heading for the Channel port, the UK’s immigration minister has confirmed. Robert Goodwill told MPs on Tuesday that the four-metre high wall was part of a £17m package of joint Anglo-French security measures to tighten precautions at the port. “People are still getting through,” he said. “We have done the fences. Now we are doing the wall,” the new immigration minister told the Commons home affairs committee. Building on the 1km-long wall along the ferry port’s main dual-carriageway approach road, known as the Rocade, is due to start this month.

The £1.9m wall will be built in two sections on either side of the road to protect lorries and other vehicles from migrants who have used rocks, shopping trolleys and even tree trunks to try to stop vehicles before climbing aboard. It will be made of smooth concrete in an attempt to make it more difficult to scale, with plants and flowers on one side to reduce its visual impact on the local area. It is due to be completed by the end of the year. The plan has already attracted criticism from local residents who have started calling it “the great wall of Calais”.

Read more …

What do you call a world that refuses to protect its children?

Nearly Half Of All Refugees Are Now Children (G.)

Children now make up more than half of the world’s refugees, according to a Unicef report, despite the fact they account for less than a third of the global population. Just two countries – Syria and Afghanistan – comprise half of all child refugees under protection by the United Nations High Commissioner for Refugees (UNHCR), while roughly three-quarters of the world’s child refugees come from just 10 countries. New and on-going global conflicts over the last five years have forced the number of child refugees to jump by 75% to 8 million, the report warns, putting these children at high risk of human smuggling, trafficking and other forms of abuse.

The Unicef report – which pulls together the latest global data regarding migration and analyses the effect it has on children – shows that globally some 50 million children have either migrated to another country or been forcibly displaced internally; of these, 28 million have been forced to flee by conflict. It also calls on the international community for urgent action to protect child migrants; end detention for children seeking refugee status or migrating; keep families together; and provide much-needed education and health services for children migrants. “Though many communities and people around the world have welcomed refugee and migrant children, xenophobia, discrimination, and exclusion pose serious threats to their lives and futures,” said Unicef’s executive director, Anthony Lake.

“But if young refugees are accepted and protected today, if they have the chance to learn and grow, and to develop their potential, they can be a source of stability and economic progress.”

Read more …

Mar 022016
 
 March 2, 2016  Posted by at 10:21 am Finance Tagged with: , , , , , , , , , ,  


Christopher Helin Flint auto, Ghirardelli Square, San Francisco 1924

China To Lay Off 5 To 6 Million Workers (Reuters)
Deflation Defeats Impotent Central Banks (A. Gary Shilling)
Smells Like Subprime (BBG)
China Credit Outlook Cut to Negative by Moody’s (BBG)
China’s Secret Weapon: Used Car Salesmen (FT)
China Reserve Ratio Cut ‘No Signal Of Impending Large-Scale Stimulus’ (Reuters)
Debts Rise At China’s Big Steel Mills, Consumption Falls (Reuters)
Natural Gas Prices Plunge To 17-Year Lows (CNBC)
Europe’s Biggest Oil Hub Fills as Ship Queue at Seven-Year High (BBG)
UAE Says Oil Collapse Will Force All Producers to Cap Volumes (BBG)
Negative Rates … Negative Outcomes (Corrigan)
Trumpocalypse Now (Guardian)
Euro Depression Is ‘Deliberate’ EU Choice, Says Mervyn King (Telegraph)
Why Austria’s Asylum Cap Is So Controversial (Economist)
EU Nations Urged To Lift Border Checks To Save Passport-Free Zone (Guardian)
Rights Groups Accuse France Of Brutality In Calais Eviction (AP)
Greece Seeks EU Aid For 100,000 Refugees (AFP)

Big risk for Xi. He must be desperate.

China To Lay Off 5 To 6 Million Workers (Reuters)

China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said, Beijing’s boldest retrenchment program in almost two decades. China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years. The overall figure is likely to rise as closures spread to other industries and even more funding will be required to handle the debt left behind by “zombie” state firms. The term refers to companies that have shut down some of their operations but keep staff on their rolls since local governments are worried about the social and economic impact of bankruptcies and unemployment.

Shutting down “zombie firms” has been identified as one of the government’s priorities this year, with China’s Premier Li Keqiang promising in December that they would soon “go under the knife”.. The government plans to lay off five million workers in industries suffering from a supply glut, one source with ties to the leadership said. A second source with leadership ties put the number of layoffs at six million. Both sources requested anonymity because they were not authorized to speak to media about the politically sensitive subject for fear of sparking social unrest. The ministry of industry did not immediately respond when asked for comment on the reports. The hugely inefficient state sector employed around 37 million people in 2013 and accounts for about 40% of the country’s industrial output and nearly half of its bank lending.

It is China’s most significant nationwide retrenchment since the restructuring of state-owned enterprises from 1998 to 2003 led to around 28 million redundancies and cost the central government about 73.1 billion yuan ($11.2 billion) in resettlement funds. [..] China aims to cut capacity gluts in as many as seven sectors, including cement, glassmaking and shipbuilding, but the oversupplied solar power industry is likely to be spared any large-scale restructuring because it still has growth potential, the first source said. The government has already drawn up plans to cut as much as 150 million tonnes of crude steel capacity and 500 million tonnes of surplus coal production in the next three to five years. It has earmarked 100 billion yuan in central government funds to deal directly with the layoffs from steel and coal over the next two years, vice-industry minister Feng Fei said last week.

The Ministry of Finance said in January it would also collect 46 billion yuan from surcharges on coal-fired power over the coming three years in order to resettle workers. In addition, an assortment of local government matching funds will also be made available. However, the funds currently being offered will do little to resolve the problems of debts held by zombie firms, which could overwhelm local banks if they are not handled correctly. “They have proposed this dedicated fund only to pay the workers, but there is no money for the bad debts, and if the bad debts are too big the banks will have problems and there will be panic,” said Xu Zhongbo, head of Beijing Metal Consulting, who advises Chinese steel mills.

Read more …

Nothing they could ever do. Deflation must and will have its day.

Deflation Defeats Impotent Central Banks (A. Gary Shilling)

Central banks are deadly fearful of deflation. That’s why the Federal Reserve, the European Central Bank, the Bank of Canada, the Bank of Japan and Sweden’s Riksbank, among others, have 2% inflation targets. They don’t love rising prices, but they worry about the consequences of a general decline in consumer prices, so they want a firebreak. Unfortunately, they seem powerless to meet their targets in the current economic environment. The guardians of monetary policy are riveted by Japan, where consumer prices have declined in 48 of the last 83 quarters. This pattern of deflation long ago convinced Japanese buyers to hold off purchases in anticipation of lower prices. But the result is excess inventories and too much productive capacity, which force prices even lower.

That confirms expectations, resulting in yet more buyer restraint. The result of this deflationary spiral has been a miserable economy with an average growth in real GDP of just 0.8% at annual rates since the beginning of 1994. Central banks also fret that in a deflationary environment, debt burdens remain fixed in nominal terms, but the ability to service them drops along with falling nominal incomes and waning corporate cash flows. So bankruptcies leap, while borrowing, consumer spending and capital investment all weaken.

As I argued on Monday, deflation remains a clear and present danger. Worryingly, the remedies central bankers are using aren’t working. First, in reaction to the financial crisis, they knocked their short-term reference rates down to essentially zero, and bailed out their stricken banks and other financial institutions. That may have forestalled financial collapse but it did little to stimulate borrowing, spending, capital investment and economic activity. Creditworthy borrowers already had ample liquidity and few attractive spending and investment outlets; slashing borrowing costs to record lows stimulated asset prices such as equities, with little economic benefit.

Furthermore, banks were too scared to lend. And as they resisted attempts to break them up and eliminate the too-big-to-fail problem, regulators bereaved them of profitable activities such as proprietary trading and building and selling complex derivatives. That forced them back toward less lucrative traditional spread lending – borrowing short-term money cheaply and lending it for longer at a profit – just as the shrinking gap between short- and long-term funds made that business even less attractive. With the amount of capital banks are obliged to set aside against their trading activities also leaping, they’re now regulated to such an extent that many of them probably wish they had been broken up.

Read more …

And Beijing claims Kyle Bass is wrong?

Smells Like Subprime (BBG)

Chinese bankers often pride themselves on having studied in the U.S. or the U.K and true to form, they’re bringing home a lot of the intricate financing that helped people overseas get loans for homes, cars and education. But these financiers are taking creative structures one step further.On Monday, Bloomberg News reported that China will allow domestic banks to issue as much as 50 billion yuan ($7.6 billion) of asset-backed securities that would be paid back using the proceeds from nonperforming loans. (Yes, you read that correctly.) The structure they’re employing is similar to the method that was used to repackage subprime mortgages in the U.S. ahead of the global financial crisis. But when bankers in America were bundling those low-doc mortgages into AAA-rated bonds, they still expected most of the loans would be repaid.

In this case, the debt has already gone bad. Considering hardly any Chinese asset-backed securities have ever received a less than AA score from a local rating company to date, chances are these ones will be awarded the same grade. Of course, investors buying these bonds should be aware they’re backed with debt that’s already soured, regardless of its credit score. Yet, the move is worrying because it’s the latest in a string of revivals in China of dangerous structures that were common in the West before being all but abandoned after 2008. Many of the instruments are helping banks disguise or unload their exposure to troubled companies in the same way issuance of asset-backed securities helped U.S. and British lenders mask their exposure to souring home payments as loans became delinquent.

Ironically, China had pretty much banned asset-backed securities until 2013 because of what happened during the credit crisis. Since authorities began allowing them again, they’ve spread like wildfire. Official data indicate that 593 billion yuan of ABS were sold last year, 79% more than in 2014. Less comprehensive Chinabond data show some 678 billion yuan being issued over the past two years. The first quota of 50 billion yuan is just a test. If there’s enough demand you can bet there will be plenty more of these repackaged bad-loan bonds floating around China in coming years. The amount of debt classed as nonperforming at Chinese commercial banks jumped 51% from a year earlier to 1.27 trillion yuan as of Dec. 31, the highest since June 2006, data from the China Banking Regulatory Commission showed last month.

Read more …

CDS look very ugly.

China Credit Outlook Cut to Negative by Moody’s (BBG)

China’s credit-rating outlook was lowered to negative from stable at Moody’s Investors Service, which highlighted the country’s surging debt burden and questioned the government’s ability to enact reforms just days before leaders gather to approve a five-year road map for the economy. The government’s financial strength may come under pressure if it takes on liabilities from troubled state-owned companies, while capital outflows have limited policy makers’ scope to stimulate the weakest economy in a quarter century, the ratings company said in a statement on Wednesday. State intervention in equity and foreign-exchange markets has heightened uncertainty about the leadership’s commitment to reform, Moody’s said.

While markets shrugged off the outlook cut on Wednesday, it highlights concern among global investors that the ruling Communist Party will struggle to overhaul Asia’s largest economy at a time when capital is flowing out of the country and debt levels have climbed to an unprecedented 247% of GDP. Chinese leaders will begin nearly two weeks of policy meetings on Saturday to map out how to tackle the nation’s economic challenges and meet the government’s goal of doubling per-capita income by 2020. “The government’s ability to absorb shocks has diminished and we want to signal this in the negative outlook,” Marie Diron, a senior vice president at Moody’s, said in an interview on Bloomberg Television. Authorities “have stepped backward in their reform steps and so that is creating some uncertainty.”

Read more …

Growth market. Next up: scrapyards.

China’s Secret Weapon: Used Car Salesmen (FT)

You have probably read, in the Financial Times and elsewhere, that China is the world’s largest car market. It is not. It is the world’s largest new car market, with sales of 21.1m units last year compared with 17.4m in the US. When used cars are included, the US auto market swells to more than 40m units, against less than 30m total passenger car sales in China. In value terms, the gap between the two markets is even larger. In 2014, the overall value of US car sales was almost $1.2tn, more than twice as large as China’s $470bn. This is not surprising, considering that two-thirds of cars on Chinese roads are less than five years old and 80% of all buyers are first-time drivers. The latter fact explains why crossing an intersection in China can be a harrowing experience for pedestrians.

Put another way, an industry that most Americans, Europeans and Japanese have grown up with and now take for granted does not yet even exist in China. Dismiss a shady character as a “used car salesman” and most Chinese people will not understand the reference. As Chinese leaders gather at their annual parliamentary session later this week, it is worth bearing in mind that they are doing so in a country where one cannot very easily buy a used car. That fact should reassure Chinese politicians and multinational executives worried about the pace of growth in the world’s second-largest economy, which will be a topic of much discussion at the National People’s Congress.

Government officials insist that the rising “new economy” will balance out the declining “old economy”, allowing the country to grow at an average rate of 6.5% through 2020. The creation of entirely new industries will further support growth. The inevitable rise of what will soon be the world’s largest used car market is one such example. While its emergence will initially cannibalise some new car sales — primarily those of cheap domestic brands — the potential for growth is huge. In most developed auto markets, there are at least two used car sales for every one new car sale. In China the ratio is inverted, with roughly three new car transactions for every used car sold.

Read more …

Just a signal of panic.

China Reserve Ratio Cut ‘No Signal Of Impending Large-Scale Stimulus’ (Reuters)

China’s move to cut banks’ reserve requirement ratio (RRR) indicates a slight easing bias in China’s “prudent” monetary policy, but that is by no means a signal of any coming large-scale stimulus, the official Xinhua news agency said in a commentary late on Tuesday. The Xinhua commentary follows rising market expectations that China could implement a version of the massive stimulus it adopted during the global financial crisis, launching in late 2008 a 4 trillion yuan ($610 billion)stimulus package to boost the economy. The news agency said strong stimulus was not needed because China still had monetary policy tools available and China’s economy was growing at a reasonable rate, with no signs of chaos or crisis in the global economy. Xinhua stated that because China would stick to its prudent monetary policy, there would be no changes in the way the government adjusted liquidity, which would be kept at a reasonable and flexible level, it said.

That meant China’s lending and total social financing would grow at a steady and reasonable rate, Xinhua noted. Xinhua’s view was echoed by state-owned People’s Daily, which reported on Wednesday, citing economists, that the RRR cut was not stimulus, but only reflected increasing policy flexibility aimed at supporting economic development. Late on Monday, the People’s Bank of China announced a cut in the amount of cash that banks must hold as reserves – the reserve ratio requirement (RRR) – by 50 basis points. It frees up an estimated $100 billion in cash for new lending. Hong Hao at BOCOM International said the RRR cut was largely liquidity neutral, because the move was intended to offset the decline in China’s foreign currency reserves and to accommodate more than 1 trillion yuan of open market operations facilities due this week.

Read more …

So they can’t go broke, right?!

Debts Rise At China’s Big Steel Mills, Consumption Falls (Reuters)

China’s major steel mills added to their debt pile in 2015 while consumption of steel products fell for the first time in two decades, a senior official said on Wednesday, adding to the industry’s difficulties as it tries to tackle a crippling glut. The debt ratio of major steel mills rose 1.6 %age points to 70.1% from a year ago, taking the big mills’ debt to 3.27 trillion yuan ($499 billion), Li Xinchuang, the vice secretary general of the China Iron & Steel Association (CISA), told a conference. At the same time, steel product consumption in China fell 5.4% to 664 million tonnes in 2015 from a year ago, the first drop since 1996, said Li, who is also head of the China Metallurgical Industry Planning and Research Institute.

China is trying to rein in its bloated steel sector, and aims to cut crude steel capacity by 100 million to 150 million tonnes within the next five years, as well as ban new steel projects and eliminate so-called “zombie” mills. However, slower demand and rising debt will put further pressure on the industry, with prices already at multi-year lows. China’s major steel mills produced a combined 601 million tonnes of steel last year, accounting for nearly three-quarters of the country’s total output, Li said. CISA earlier said the country’s total annual crude steel capacity now stands at 1.2 billion tonnes. Total production reached 803.8 million tonnes last year, down 2.3%, the first drop since 1981. The drive to cut industrial capacity will force China to lay off probably 1.8 million workers from coal and steel sectors, and the central government will allocate 100 billion yuan to deal with job losses and tackle debt.

Read more …

“..Australian LNG production is expected to grow 50% in the five years through to 2020..”

Natural Gas Prices Plunge To 17-Year Lows (CNBC)

Natural gas prices have crashed to 17-year-lows in the past week, underscoring burgeoning supply in the global market just as U.S. exports its first ever shale gas cargo. On Monday, natural gas prices on the New York Mercantile Exchange settled 4.5% lower to their lowest level since 1999 after U.S. weather forecasts signaled warmer weather in the weeks ahead, curbing demand for natural gas used for heating. The decline brought February losses in natural gas to 26%. Prices recovered on Tuesday but the outlook remains depressed. Japan, the world’s largest importer of natural gas, is restarting its nuclear reactors six years after the 2011 Fukushima disaster, with three out of 43 nuclear reactors brought back online since August and more expected to come.

Japan is likely to bring back more reactors online, which will make the country less dependent on LNG for electricity generation. In January, shipments of LNG into Japan fell the most in more than six years, according to Bloomberg calculations. This does not bode well for Australia, which has pumped more than $160 billion in LNG investments just before the commodities rout that has taken oil prices down 70% since the summer of 2014. Australian LNG production is expected to grow 50% in the five years through to 2020 even as certain producers cut capital expenditures and reduce spending on upstream activities, said Fitch Group unit BMI Research in a note last week.

Read more …

“..people will be filling up their “swimming pools” with it this year.”

Europe’s Biggest Oil Hub Fills as Ship Queue at Seven-Year High (BBG)

The queue of ships waiting outside Europe’s biggest port and oil-trading hub of Rotterdam has grown to the longest in seven years as a global supply glut fills storage capacity. As many as 50 oil tankers, twice as many as normal, are waiting outside Rotterdam because storage sites are almost full, the port’s spokesman Tie Schellekens said by phone on Tuesday. “This is a clear sign of the oversupply filling up storage to the brim,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “People are preferring to store oil rather than cut production. These are bearish signs.” The world is so awash with oil that BP CEO Bob Dudley said last month people will be filling up their “swimming pools” with it this year.

Traders are taking advantage of a market contango, where forward prices are higher than current prices, by buying oil cheap, storing it and selling the commodity later. As onshore storage fills up, companies could start stockpiling at sea in a repeat of a strategy last seen in 2008 and 2009. Crude oil in storage tanks in Rotterdam stood at 51.3 million barrels on Feb. 19, the highest for the time of year in data starting in 2013, according to Genscape, which monitors inventories. Royal Vopak NV, the world’s largest oil-storage company, last week reported a fourth-quarter occupancy rate of 96% at its 11 terminals in the Netherlands compared with 85% a year earlier. The situation in Rotterdam mirrors that in the biggest U.S. storage hub of Cushing in Oklahoma, where stockpiles are at a record high.

“In Cushing and probably Rotterdam storage is filling up very quickly,” said Giovanni Staunovo at UBS in Zurich, Switzerland. “In China, given high oil imports, there are too many ships and the infrastructure seems not be able to handle that.” Saudi Arabia, the world’s biggest oil exporter, said last month it won’t cut production to ease global oversupply, while Iran has pledged to increase output after sanctions were lifted in January. Still, oil climbed on Tuesday from the highest close in more than seven weeks on speculation that monetary stimulus in China could help revive flagging economic growth in the world’s second-biggest fuel consumer.

Read more …

It will bankrupt them first.

UAE Says Oil Collapse Will Force All Producers to Cap Volumes (BBG)

The oil-price collapse will compel all producers to freeze output and no early OPEC meeting can take place without such a move, the United Arab Emirates’ energy minister said. “This is the reality,” Suhail Al Mazrouei said Tuesday in Abu Dhabi. “Current prices will force everyone to freeze production; stubbornness doesn’t make sense.” Saudi Arabia – the world’s largest crude exporter – Russia, Venezuela and Qatar have proposed that producers cap production at January levels to bolster prices that have tumbled almost 70% in two years. OPEC member Iran, which is ramping up output following the removal of sanctions in January, has said the plan is “ridiculous” and saddles it with “unrealistic demands.”

Venezuela is among members of the Organization of Petroleum Exporting Countries to call for a meeting of oil producers this month, while Saudi Arabian Oil Minister Ali al-Naimi has said he hopes for such a gathering. The group’s next scheduled meeting is in June. Mazrouei said he hasn’t received an invitation for an early meeting and a summit won’t be necessary if producers don’t agree in advance to freeze output. That runs counter to Iran’s plans to increase volumes by 1 million barrels a day this year. “The idea of bringing a lot of production in a short period is not practical,” Mazrouei said.

Read more …

Laws of nature.

Negative Rates … Negative Outcomes (Corrigan)

There has been much head-scratching of late as to why, with interest rates lower than they have been since the Universe first exploded out of the Void, businesses are not undertaking any where near as much investment as that hoped for beforehand by the academic cabal whose ‘effective demand’ and ‘transmission channel’ fixations have helped drive rates to today’s mind-boggling levels. This is obviously a complex topic in which there are many different factors at work – not the least of which is that the prevalence of overly-low interest rates for much of the recent past has meant that all too much of such investment as is now desired has not only already been done, but done in what has turned out to be so misguided a fashion, that there is less appetite – as well as fewer means, in many cases – to undertake much more of it today.

If the cure for higher prices – as the saying in commodity markets goes – is higher prices, then the cause of lower rates is almost certainly lower rates! Be that as it may, on a more fundamental level, it might also be possible to tease out at least one aspect of the answer to the conundrum with the aid of a little straightforward logic, as we shall now attempt to do here. In theory, positive interest rates reflect the primal truth that goods fit for our enjoyment today are worth more to their potential consumer than those same goods which are only available tomorrow. Moreover, since producer goods are otherwise inedible, unwearable, uninhabitable, etc., in their present form, they only derive their value in respect of their quality of being innate consumer goods-to-be.

Hence, the means of producing the day’s goods for some future date are always to be discounted back using that same ratio (which is none other than the natural rate) as the one which prevails between consumables-now and consumables-then. Doing so gives us a positive IRR (or, if you prefer, assuring that NPV>0) for the process. Here it goes without saying that since the natural rate is inherently unobservable, the market interest rate will be used in its place – an unavoidable substitution which demands that this latter quantity be subject to as few falsifications as possible (a vexed topic suitable for a forthcoming, much deeper treatment).

Read more …

Oh, wait, Drumpfocalypse.

Trumpocalypse Now (Guardian)

There will be those in the Republican and conservative establishment who will try to spin the Super Tuesday results. Some among the GOP chattering classes will tell you that Trump didn’t get the knock-out punch he wanted – that there is still a chance to restore order. Don’t believe it. The numbers make it clear that, for the Republican party, it’s Trumpocalypse Now. While Ted Cruz won his home state of Texas as well as Oklahoma, and Rubio ran him close in Virginia and actually managed to win Minnesota, Trump dominated elsewhere. His success extended from Massachusetts to Georgia to Alabama to Tennessee to Oklahoma. He won in Ted Cruz’s south, and he won in the north-east, where a more establishment-friendly candidate like Marco Rubio was supposed to prevail.

Trump is winning with men and women, moderates and conservatives, with the young and the old. Trump is winning despite a weekend of unforced errors – after failing to repudiate former Klu Klux Klan Grand Wizard David Duke. Trump is winning even after taking political napalm from Marco Rubio since last week’s debate – with Rubio ridiculing his rival on the trail for days. Trump is winning despite the fact that the Republican speaker of the House and majority whip in the Senate both criticized him this week. He is winning in spite of the fact that almost every big name Republican officer-holder and mega-donor is lined up behind his opponents. The race is not technically over. While Trump will win the lion’s share of delegates tonight, both Cruz and Rubio will pick up delegates and spend the next couple of weeks trying to convince voters and donors that they can stop the frontrunner – that they have a path to the nomination.

Whether or not either of these men can really achieve that at this point – and I remain highly skeptical, despite Cruz’s two-state win – the day of reckoning for the Republican party has arrived. Whatever happens, what neither Cruz nor Rubio nor anyone else can do is to stop the forces that Trump’s candidacy has unleashed. It’s no longer possible to say the Republican party is a conservative party. You can’t even say the Republican party’s base is conservative. It appears that a new, populist-nationalist wing has wrested control of the of the GOP away from its familiar constituency. This is no longer the party of William F Buckley and Jack Kemp. It’s now the party of Pat Buchanan and Ross Perot.

Read more …

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.”

Euro Depression Is ‘Deliberate’ EU Choice, Says Mervyn King (Telegraph)

Europe’s deep economic malaise is the result of “deliberate” policy choices made by EU elites, according to the former governor of the Bank of England. Lord Mervyn King continued his scathing assault on Europe’s economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment. Speaking at the launch of his new book, Lord King said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe’s shores in the modern age. But the fate of Greece since 2009 – which has suffered a contraction eclipsing the US depression in the inter-war years – was an “appalling” example of economic policy failure, he told an audience at the London School of Economics.

“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem. “I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece. “It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”. Lord King – who spent a decade fighting the worst financial crisis in history at the Bank of England – has said the weakest eurozone members face little choice but to return to their national currencies as “the only way to plot a route back to economic growth and full employment”.

“The long-term benefits outweigh the short-term costs,” he writes in The End of Alchemy. The former Bank governor has said popular disillusion with EU economic policies are likely to lead to disintegration of the single currency rather than a move towards “completing” monetary union. Two of the eurozone’s debtor nations – Ireland and Spain – are currently locked in electoral stalemate after their pro-bail-out governments failed to win the backing of voters. But the European Commission has defended itself against claims that punishing austerity measures have made incumbent European regimes unelectable, arguing that Brussels’ economic policy represents a “virtuous triangle” of austerity, structural reforms and investment.

Read more …

Nobody cares about the laws they signed up for.

Why Austria’s Asylum Cap Is So Controversial (Economist)

Europe is divided on how to handle the largest number of refugees since the second world war. Still, Austria’s move to cap asylum claims at 80 per day at its southern border and limit the daily number of people travelling through Austria to seek asylum in Germany to 3,200 has sparked outrage. After Austria, which lies on the migrant route from the Balkans into Germany, announced its plan, Dimitris Avramopoulos, European Commissioner for migration, home affairs and citizenship, wrote to Austria’s interior minister to protest. The move, he said, was “plainly incompatible” with EU law. The minister replied, on television: “they have their legal adviser and I have legal advisers.” The Geneva Convention and the EU Charter of Fundamental Rights clearly state that asylum is a right.

Human-rights activists argue that a cap runs counter to the spirit of these texts; lawyers know that, as fundamental as they are, rights are never absolute. But Austria would seem to be flouting some EU directives. One (which was voted for by Austria) says that asylum applications must be officially registered (that is, given a number) no more than ten days after they have been lodged; a daily limit would seem to make following that difficult. Last year, around 700,000 migrants entered Austria and around 90,000 applied for asylum. According to another rule, refugees are supposed to apply for asylum in the first “safe country” they are in, rather than moving on to another. EU rules have been woefully stretched by Europe’s immigration crisis already of course. In 2011, European judges criticised Greece for failing to register asylum applications at the border.

All applications, they said, were being made on one day a week at one police station in Athens. More recently, the European Commission criticised Greece for not being able to control its border and letting people hike up north. In 2011, Italy issued thousands of temporary residency permits, which allow immigrants to travel around Europe, to Tunisians who had arrived on its shores. In response, France closed its border with Italy. No action was taken. Mr Avramopoulos is adamant that Austria’s measures are unlawful, but it is not clear what he intends to do about it. The European Commission’s legal services are building up their case but judges might never hear it. Further angry exchanges seem more likely than legal action. Meanwhile, Austria’s move has led to border slowdowns for migrants across the Balkans. EU leaders have announced they will hold a summit in early March with Turkey to attempt to seek fresh solutions to the crisis.

Read more …

Never mind. Schengen’s long dead.

EU Nations Urged To Lift Border Checks To Save Passport-Free Zone (Guardian)

European Union countries are being urged to lift internal border controls before the end of the year, to save the “crowning achievement” of the passport-free travel zone from total collapse, according to a draft report by the European commission. Walls, fences and border checks have returned across Europe as the EU struggles to cope with the biggest inflow of refugees since the end of the second world war. Since September 2015, eight countries in the 26-nation passport-free Schengen zone have re-instated border checks. These controls “place into question the proper functioning of the Schengen area of free movement”, according to the draft report seen by the Guardian, which will be published on Friday. “It is now time for member states to pull together in the common interest to safeguard one of the union’s crowning achievements.”

Separately, the European commissioner for humanitarian aid is expected to announce on Wednesday that €700m (£544m) will be spent over three years in helping refugees in the western Balkans. Much of the money is destined for Greece, as EU leaders scramble to help Athens deal with its own crisis. 24,000 refugees are in need of permanent shelter and 2,000 people are arriving on Greek shores each day. EC president Donald Tusk has described helping Greece as “a test of our Europeanness”. The passport-free travel zone, which stretches from Iceland to Greece but does not include the UK or Ireland, has been under unprecedented pressure; its collapse could unravel decades of European integration. The commission wants member states to lift border controls “as quickly as possible” and with “a clear target date of November 2016”. But Brussels also wants tighter control of the EU’s external border and will repeat warnings that Greece could be kicked out of Schengen if it fails to improve border management by May.

[..] Greece is under growing pressure to hand over management of its borders to the EU, as it struggles to cope with the numbers. According to this latest plan, EU authorities will carry out an inspection of Greece’s borders in mid April to determine whether controls are adequate, with a final decision on Greece’s place in Schengen to be taken in May. The EU executive also reaffirms its intention to overhaul rules governing asylum claims. Under the current rules, known as the Dublin system, asylum seekers have to lodge their claim in the first country they enter. The Dublin regime was effectively finished last year when the chancellor, Angela Merkel, opened Germany’s borders to any Syrian who wanted to claim asylum there, regardless of where they arrived in the EU. In mid-March the commission will set out a list of options for reforming EU asylum policy. The favoured idea is a permanent system of relocation, where refugees are shared out around the union, depending on the wealth and size of a country.

Read more …

Second hand citizens.

Rights Groups Accuse France Of Brutality In Calais Eviction (AP)

More than a dozen humanitarian organizations on Tuesday accused authorities of brutally evicting migrants from their makeshift dwellings in a sprawling camp in northern France, as fiery protests of the demolition continued. Thousands of migrants fleeing war and misery in their homelands use the port city of Calais as a springboard to try to get to Britain on the other side of the English Channel. However, authorities are moving to cut short that dream by closing a large swath of the slum camp in the port city of Calais. In the stinging accusation at the close of the second day of a state-ordered mass eviction and demolition operation, the organizations charged that authorities have failed to respect their promise of a humane and progressive operation based on persuading migrants to vacate their tents and tarp-covered homes.

“Refugees, under threats and disinformation, were given one hour to 10 minutes to leave their homes,” a statement said. Police pulled out some who refused, making arrests in certain cases, while others were not allowed to gather their belongings or identity papers, the statement charged. Migrants and pro-migrant activists protested against the eviction Tuesday, some climbing onto shanty rooftops to briefly stall the tear-down, and others by starting a night fire. Tents and tarp-covered lean-tos were also set afire on Monday and earlier Tuesday. The protesting organizations alleged that police aimed flash-balls at the roof protesters, then clubbed them and made some arrests. Tear gas, water cannons and other tactics have been used excessively, the statement charged.

Organizations respected for their humanitarian work with migrants, such as Auberge des Migrants (Migrants’ Shelter), GISTI and Secours Catholique were among the 14 who signed the list of charges. The mass evictions from the southern sector of the camp were announced Feb. 12 with promises by Interior Minister Bernard Cazeneuve that there would be no brutality. However, the Monday start of operations came as a surprise. The regional prefecture in charge of the demolition says the hundreds of police present are needed to protect workers in the tear-down and state employees advising migrants of their options. France’s government has offered to relocate uprooted migrants into heated containers nearby or to centers around France where they can decide whether to apply for asylum. Officials have blamed activists from the group No Borders for the ongoing unrest. But many migrants resist French offers of help, afraid of hurting their chances of reaching Britain.

Officials say the evictions concern 800-1,000 migrants, but organizations working in the camp say the real number is more than 3,000.

Read more …

Crazy they even have to ask.

Greece Seeks EU Aid For 100,000 Refugees (AFP)

Greece has asked the EU for €480 million ($534 million) in emergency funds to help shelter 100,000 refugees, the government said Tuesday, warning that the migrant influx threatened to overwhelm its crisis-hit resources. “Greece has submitted an emergency plan to the European Commission .. corresponding to around 100,000 refugees,” government spokeswoman Olga Gerovassili told reporters. “We cannot bear the strain of all the refugees coming here… these are temporary measures, there needs to be a permanent solution on where the refugees will be relocated,” she added. “Greece has made it clear that it will use every diplomatic means available to find the best possible solution,” Gerovassili said.

With Austria and Balkan states capping the numbers of migrants entering their soil, there has been a swift build-up along the Greek border with Former Yugoslav Republic of Macedonia (FYROM). Athens had previously warned that it could be stuck with up to 70,000 people trapped on its territory. Gerovassili said there were 25,000 migrants and refugees currently in the country and that FYROM was only allowing “a few dozen” through every day. Over 7,000 people – many of them stranded in near the Idomeni border crossing for days – spent a freezing night and awoke under wet canvas among sodden wheat fields.

Read more …

Feb 212016
 
 February 21, 2016  Posted by at 9:58 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle February 21 2016


Wyland Stanley Boeing 314 flying boat Honolulu Clipper. 1939

BofA: ‘Shanghai Accord’, Massive Central Bank Intervention Imminent (ZH)
I Don’t Know What The Bulls Are Smoking: Stockman (CNBC)
China Lenders’ Foreign-Exchange Holdings Omitted From PBOC Data (BBG)
Sensitive Financial Data ‘Missing’ From PBOC Report On Capital Outflows (SCMP)
Xi Jinping Demands ‘Absolute Loyalty’ From Chinese State Media (AP)
The Only Thing Worse Than Oil? Investing in It (WSJ)
A Furious Turkey Says US Is “Acting Like An Enemy” (ZH)
TPP, Abe Set To Demolish Japan’s Small Scale Agriculture Model (FT)
EU-US TTIP Talks Seen By The French Threatening Small Farms (BBG)
Calais ‘Jungle’ Eviction Postponed Because Of Risk To Lone Children (G.)
Razor Wire Fence Fails To Keep Refugees, Migrants Out Of Hungary (BBC)
Despite Aegean Rescuers’ Best Efforts, Not All Migrants Are Saved (NPR)

Shanghai Accord to be like Plaza Accord, mass devaluation of the yuan, to “reset global monetary policy stability if only for a few more months”…

BofA: ‘Shanghai Accord’, Massive Central Bank Intervention Imminent (ZH)

Any time the relative performance of global financials to US Treasuries has stumbled as far as it has, as shown in the chart below, it has meant one thing – a major central bank intervention was imminent. At least that’s the interpretation of BofA’s Michael Hartnett, who shows that in order to provide the kick for the bounce in this all too important “deflationary leading indicator”, central banks engaged in major unorthodox easing episodes, whether QE1-3, or the ECB’s QE.

Why intervene now? Here are the problems according to Hartnett:
• Problem 1: US economy in “bad Goldilocks”, i.e. US economy not hot/strong enough to lift global GDP & EPS; but not cold/bad enough to induce global coordinated response
• Problem 2: global policy-maker rhetoric in recent days shows “coordinated innocence” not stimulus, all blaming global economy for weak domestic economies (“Overseas factors are to blame”…Japan PM Abe; “drag on U.S. economy from greater-than-expected-slowdown in China & other EM economies“…FOMC minutes; “increasing concerns about the prospects for the global economy”…ECB Draghi; “the change in China’s growth rate can be attributed in part to weak performance of the global economy”…PBoC)

Problem 2 is static, meant for media propaganda and jawboning; it can easily be removed once the global economy takes the next leg lower. Which incidentally would also resolve the gating factor of Problem 1 – as we have said for months, the Fed and its central bank peers need the political cover to launch more stimulus.

And in a reflexive world, where the “economy is the market”, this means just one thing – a big leg lower in stocks is the necessary and sufficient condition to once again push stocks higher, as policy failure is internalized, and global risk reprises from square 1. This is Bank of America’s summary, warning that unless a major policy intervention is enacted, the market will then sell off to the next support level, below the 1,812 which has proven so stable since August. Stabilization of “4C’s” (China, Commodities, Credit, Consumer) allowed SPX 1800 to hold/bounce to 1950-2000; weak policy stimulus in coming weeks could end rally/risk fresh declines to induce growth-boosting policy accord.

Here is a summary of the near-term events which stocks are betting on do not disappoint: G20 Shanghai (February 26-27); ECB (March 10), BoJ (March 15) & FOMC (March 16). And as documented previously, the one main near-term event Hartnett is focusing on is the Shanghai meeting next weekend. Recall: “We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations (currently heading sharply south – Chart 1) and credit conditions.”

In other words, Hartnett expects a “Shanghai Accord” to be unveiled next weekend, one where like the Plaza Accord three decades earlier, the Yuan will be massively depreciated, which ironically would halt all piecemeal Yuan devaluation on expectation of future devaluation (as it will have already happened), and reset global monetary policy stability if only for a few more months. Said otherwise, if next weekend the G-20 disappoints and unveils nothing, the next big leg down in the selloff will have arrived.

Read more …

“They should have the good graces to resign. They are lost. None of this is helping the economy..”

I Don’t Know What The Bulls Are Smoking: Stockman (CNBC)

Anyone who believes that the global economy isn’t crashing must be delirious, according to David Stockman. The former director of the Office of Management and Budget argues that a rapidly deteriorating economic environment is going to send stocks and oil prices spiraling even lower than they already have. “I think your traders are smoking something stronger than what I can legally buy here in Colorado,” Stockman said Thursday on CNBC’s “Futures Now.” The S&P 500 has fallen 6% year to date, and crude oil has plunged more than 17%. However, Stockman still sees a long way to go.

He expects the S&P 500 to drop to 1,300 before making any new highs, and sees oil falling below $20. Investors have been too optimistic about the U.S. economy because they are not factoring in global risk, said Stockman, who expects to see a recession by the end of the year. “Everywhere trade is drying up, shipping rates are at all-time lows,” he said. “There is a recession that’s going to engulf the entire world economy, including the United States.” Contributing to the turmoil is the ineptitude of central banks, he said. While Stockman doesn’t expect the Federal Reserve to adopt a negative interest rate policy, he said monetary policymakers have exhausted all other options.

“They should have the good graces to resign. They are lost. None of this is helping the economy,” he said. Add in the 2016 presidential election, and Stockman said the markets will find themselves in a situation similar to that of the global financial crisis. “The out-of-control election process will feed into and create an environment that we haven’t seen since the fall of 2008,” he said. Of course, this isn’t the first time Stockman has been bearish. For years, he has been predicting a crash worse than 2008. Stockman headed the White House OMB during President Ronald Reagan’s first term.

Read more …

Creative accounting 2.0. Don’t like what you see? Just stop reporting it. The US learned this trick a long time ago.

“..the slide in foreign-currency assets held by Chinese financial institutions “is typically much larger than the decline in foreign reserves..”

China Lenders’ Foreign-Exchange Holdings Omitted From PBOC Data (BBG)

China’s central bank omitted details of financial institutions’ foreign-exchange holdings from monthly data that sheds light on the scale of its intervention to support the yuan. The change took effect in its report for January, when the currency’s slide to a five-year low roiled global financial markets and prompted the People’s Bank of China to step up efforts to boost the exchange rate amid record capital outflows. While the authority announced a $99.47 billion slide in its foreign-exchange reserves for last month, less than December’s record $107.9 billion drop, the figure may not represent the true extent of dollar sales if state-owned lenders were also used to intervene. “Sometimes it’s the commercial banks that sell a lot of dollars when the PBOC wants to prop up the yuan,” said Zhou Hao at Commerzbank in Singapore.

When this happens, the slide in foreign-currency assets held by Chinese financial institutions “is typically much larger than the decline in foreign reserves,” he said. In September, the assets dropped by a record $117 billion – almost triple the $43.3 billion decline in the nation’s reserves – as large state banks sold borrowed dollars for yuan and used forward contracts with the central bank to hedge those positions. Historically, the numbers tend to be broadly in line with one another. China used intervention, verbal warnings and a tightening of capital controls in its bid to quell speculative attacks on the yuan in the offshore market last month. The measures, which caused overnight borrowing costs for the currency to surge to an unprecedented 66.82% in Hong Kong, enjoyed some success and the offshore exchange rate has strengthened 3.6% to 6.5244 a dollar since sinking to a five-year low on Jan. 7. The onshore rate gained 1.2% to 6.5201 in Shanghai.

Read more …

More detail on this creative outburst in China. Funny thing is, this will backfire. Analysts have other ways of getting the data, and they will do so now with a lot more scrutiny and suspicion.

Sensitive Financial Data ‘Missing’ From PBOC Report On Capital Outflows (SCMP)

Sensitive data is missing from a regular Chinese central bank report amid concerns about capital outflow as the economy slows and the yuan weakens. Financial analysts say the sudden lack of clear information makes it hard for markets to assess the scale of capital flows out of China as well as the central bank s foreign exchange operations in the banking system. Figures on the “position for forex purchase” are regularly published in the People’s Bank of China’s monthly report on the “Sources and Uses of Credit Funds of Financial Institutions”. The December reading in foreign currencies was US$250 billion. But the data was missing in the central bank s latest report. It seemed the information had been merged into the “other items” category, whose January figure was US$243.9 billion a surge from US$20.4 billion the previous month.

Another key item of potentially sensitive financial data was altered in the latest report. The central bank also regularly publishes data on the forex purchase position in renminbi, which covers all financial institutions including the central bank. The December reading was 26.6 trillion yuan (HK$31.7 trillion). But the January data gave information on forex purchases made only by the central bank, detailing the lower figure of 24.2 trillion yuan. China’s foreign exchange reserves shrank almost US$100 billion last month as the central bank sells dollars and buys renminbi to shore up the country s weakening currency. It followed a record US$108 billion drop in December. Optimism for the yuan has taken a hit from continuous capital outflows amid growing concern about China s economic outlook.

The central bank has been criticised for contributing to the panic through its poor communication with the market and its foreign counterparts. PBOC governor Zhou Xiaochuan last week told Caixin the central bank was “neither a god nor a magician”, though it was very willing to improve communication with the public. This is not the first time the PBOC has tweaked items in its financial reports, but the unannounced changes come at a sensitive time as Beijing tries to stabilise the yuan exchange rate. “Its non-transparent method has left the market unable to form a clear picture about capital flows,” said Liu Li-Gang, ANZ’s chief China economist in Hong Kong. “This will fuel more speculation that China is under great pressure from capital outflows. It will hurt the central bank’s credibility.”

Read more …

He can bully his own people, unlike foreign investors.

Xi Jinping Demands ‘Absolute Loyalty’ From Chinese State Media (AP)

The Chinese president, Xi Jinping, has made a rare and high-profile tour of the country’s top three state-run media outlets, telling editors and reporters they must pledge absolute loyalty to the Communist party and closely follow its leadership in “thought, politics and action”. His remarks are the latest sign of Beijing’s increasingly tight control over the media and Xi’s unceasing efforts to consolidate his power as head of the party. Xi overshadowed the propaganda chief, Liu Yunshan, who accompanied him on his visits to the newsrooms of the party newspaper People’s Daily, state-run news agency Xinhua, and state broadcaster China Central Television (CCTV). At CCTV, Xi was welcomed by a placard pledging loyalty. “The central television’s family name is the party,” the sign read, anticipating remarks made by Xi at a later meeting.

“The media run by the party and the government are the propaganda fronts and must have the party as their family name,” Xi told propaganda workers at the meeting, during which he demanded absolute loyalty from state media. “All the work by the party’s media must reflect the party’s will, safeguard the party’s authority, and safeguard the party’s unity,” he said. “They must love the party, protect the party, and closely align themselves with the party leadership in thought, politics and action.” Willy Lam, an expert on elite Chinese politics at the Chinese University of Hong Kong, said Xi is raising standards for state media by requiring they obey the will of the Communist party’s core leadership, which is increasingly defined by Xi himself in another sign of how he has accrued more personal authority than either of his last two predecessors.

“This is a very heavy-handed ideological campaign to drive home the point of total loyalty to the party core,” Lam said. “On one hand, Xi’s influence and power are now unchallenged, but on the other hand, there is a palpable degree of insecurity.” Lam said Xi faces lurking challenges not only from within different party factions but also from among a disaffected public, who are unhappy with the slowing economy and a recent stock market meltdown. Zhang Lifan, a Beijing-based independent historian and political observer, said the tour of state media further added to Xi’s burgeoning personality cult. “I am afraid we will see more personal deification in the media in the future,” Zhang said. “I think Xi is declaring his sovereignty over the state media to say who’s really in charge.”

Read more …

Gentlemen, count your losses.

The Only Thing Worse Than Oil? Investing in It (WSJ)

One of the few assets performing worse than oil is a set of products used to bet on it. The $3.86 billion United States Oil Fund LP, an exchange-traded fund that goes by the ticker USO, is down 22% so far this year, while the $575 million iPath S&P GSCI Crude Oil Total Return Index exchange-traded note, known as OIL, is down 26% in that period. In comparison, U.S. crude-oil futures for March delivery settled at $29.64 a barrel on Friday, down 20% this year. The poor returns illustrate the difficulty of making such bets, particularly on oil prices, which have confounded investors by continuing to sink in 2016. Even after oil’s fall over the past year, investors in products that track crude have something else dragging on returns: it’s more costly to make long-term bets.

A glut of oil has shifted the dynamics of the futures market, which reflects the cost of holding oil, and that has further weighed on the performance of some of the products in recent weeks. Many commodity-investment products hold or track the nearest-month futures and regularly rebalance into the following month’s contracts. If the nearer-term contract costs less than the further-dated one, a condition known as contango, the rotation involves getting rid of cheaper contracts to buy more expensive ones. The bigger the difference between the two, the more this so-called roll cost drags on performance. Crude has been in contango since mid-2014, but the differential has risen sharply recently. The difference in the settlement price between March and April oil futures contracts has more than doubled since the end of last year.

At Thursday’s settlement, it cost $2.16 more to buy a barrel of West Texas Intermediate oil for April delivery than oil for March delivery, compared with 96 cents at the end of 2015. The differential was as high as $2.62 on Feb. 11. If left unchanged at Thursday’s settlement prices, the difference between the two contracts implies a monthly loss of 7.02% simply from roll costs, according to FactSet. It “hurts returns,” said Alan Konn at Uhlmann Price Securities, a wealth-management firm in Chicago. The firm has investments tied to the Rogers International Commodity Index, which tracks a basket of 37 commodities. The index is down close to 6% this year and more than 29% over the past 12 months.

Read more …

A longer quote than usual for a Debt Rattle of Tyler Durden describing how convoluted the position of the US, EU and NATO is becoming because of their support for Erdogan. Then again, our main export these days is failed states. I added the graph (Who fights what in Syria) from another source.

A Furious Turkey Says US Is “Acting Like An Enemy” (ZH)

As you might have noticed, Turkish President Recep Tayyip Erdogan is about to lose his mind with the situation in Syria. To be sure, the effort to usurp the Bashar al-Assad government wasn’t exactly going as planned in the first place. Regime change always takes time, but the conflict in Syria was dragging into its fifth year by the time the Russians got directly involved and although it did indeed look as though the SAA was on the verge of defeat, the future of the rebellion was far from certain. But to whatever extent the rebels’ fate was up in the air before September 30, the cause was dealt a devastating blow when Moscow’s warplanes began flying sorties from Latakia and while Ankara and Riyadh were initially willing to sit on the sidelines and see how things played out, once Russia and Hezbollah encircled Aleppo, it was do or die time.

The supply lines to Turkey were cut and without a direct intervention by the rebels’ Sunni benefactors, Moscow and Hassan Nasrallah’s army would ultimately move in on Aleppo proper and that, as they say, would be that. The problem for Turkey, Saudi Arabia, and Qatar is optics. That is, everything anyone does in Syria has to be justified by an imaginary “war on terror.” Turkey can’t say it’s intervening to keep the rebels from being defeated by the Russians, and similarly, Saudi Arabia, Qatar, the US, France and everyone else needs to preserve the narrative and pretend as though this all doesn’t boil down to the West and the Sunnis versus the Russians and the Shiites. Here’s what we said earlier this month: somehow, Turkey and Saudi Arabia need to figure out how to spin an attack on the YPG and an effort to rescue the opposition at Aleppo as an anti-ISIS operation even though ISIS doesn’t have a large presence in the area.

Well it turns out that’s an impossible task and so, Turkey has resorted to Plan B: a possible false flag bombing and the old “blame the Kurds” strategy. The attack on military personnel in Ankara this week was claimed by The Kurdistan Freedom Hawks (an offshoot of the PKK) in retaliation for Turkey’s aggressive campaign in Cizre (as documented here), but Erdogan has taken the opportunity to remind the world that the PKK and the YPG are largely synonymous. That is, they’re both armed groups of non-state actors and if one is a terrorist organization, then so is the other. Erdogan’s anti-Kurd stance is complicated immeasurably by the fact that both the US and Russia support the YPG out of sheer necessity. The group has proven especially adept at battling ISIS and has secured most of the border with Turkey.

As we noted way back in August, it was inevitable that Washington and Ankara would come to blows over the YPG. After all, the US only secured access to Incirlik by acquiescing to Erdogan’s crackdown on the PKK, but some of the missions the US was flying from Turkey’s air base were in support of the YPG. The whole thing was absurd from the very beginning. Well now, Turkey is not only set to use the fight against the YPG as an excuse to intervene in Syria on behalf of the Sunni rebels battling to beat back the Russian and Iranian advance, but Ankara is also demanding that the US recognize the YPG as a terrorist group. If Washington refuses, “measure will be taken.” “If the Unites States is really Turkey’s friend and ally, then they should recognize the PYD — a Syrian branch of the PKK — as a terrorist organization.

If a friend acts as an enemy, then measures should be taken, and they will not be limited to the Incirlik Airbase, Turkey has significant capabilities,” Erdogan advisor Seref Malkoc told Bugun newspaper. So yeah. Turkey just threatened the US. It’s notable that Malkoc specifically said actions would go “beyond Incirlik,” because pulling access to the base would be the first thing any regional observers would expect from Ankara in the event of a spat with Washington. For Turkey to say that measures will go beyond that, opens the door for Erdogan to become openly hostile towards his NATO allies. “The only thing we expect from our U.S. ally is to support Turkey with no ifs or buts,” PM Ahmet Davutoglu told a news conferenceon Saturday. “If 28 Turkish lives have been claimed through a terrorist attack we can only expect them to say any threat against Turkey is a threat against them.”

In other words, Turkey is explicitly asking the US to support Ankara’s push to invade Syria and not only that, Erdogan wants Washington to sanction attacks on the YPG which the US has overtly armed, trained, and funded. “The disagreement over the YPG risks driving a wedge between the NATO allies at a critical point in Syria’s civil war,” Reuters wrote on Saturday. “On Friday, a State Department spokesman told reporters Washington would continue to support organizations in Syria that it could count on in the fight against Islamic State – an apparent reference to the YPG.”

Right. “Washington will continue to support organizations in Syria that it can count on in the fight against Islamic State.” So we suppose that means the US will support Russia. And Iran. And Hezbollah. But most certainly not Turkey, who is the biggest state sponsor of the Islamic State on the face of the planet.

Read more …

Japan ag works fine, so that should be destroyed.

TPP, Abe Set To Demolish Japan’s Small Scale Agriculture Model (FT)

It is a source of national angst: why is Japan — culinary superpower and undisputed champion of the Michelin guide — so terrible at exporting food? In 2014, Japan’s food exports were about $5bn. The Netherlands, a country with a fraction of Japan’s population, exported food worth $103bn — with all the delights of sushi, green tea and wagyu beef generating about the same export sales as Edam cheese. For the government of Prime Minister Shinzo Abe, a missed economic opportunity is now colliding with the political imperative to help Japan’s farmers survive the Trans-Pacific Partnership trade deal, which will slash tariffs on ultra-efficient farmers in the US and Australia. The government has set a goal of more than doubling agricultural exports to Y1trn from 2012 to 2020.

Despite an emerging market slowdown that is hurting Japan’s exports overall, this week trade minister Nobuteru Ishihara said there was a chance of hitting the target early. In yen terms, food exports surged by 24.3% to Y599bn last year, even as overall exports rose by a disappointing 3.5%. Masayoshi Honma, professor of agricultural economics at the University of Tokyo, said the reason for low exports is not complicated. “Japanese exports are so low because they’re expensive,” he says. “There’s a huge differential between the Japanese price and the overseas price.” Japan’s obsession with rice production, a longstanding focus on national self-sufficiency in food and the low productivity of its small-scale, highly-subsidised farms all contribute to high prices.

For years, the importance of rural votes to the ruling Liberal Democratic party meant agriculture was sacred, but as the farming population ages — the average farmer is now 70 — it is one area where Mr Abe has proved willing to grasp the nettle on reforms. One of the few measures his government hopes to pass before upper house elections this summer will permit corporate ownership of agricultural land. That is regarded as crucial to allowing more efficient, large-scale agriculture. Mr Honma is cautious about the Y1trn exports target. “It’s not really agricultural exports because it includes marine and processed products,” he says. Most of Japan’s existing agricultural exports are seafood caught by its vast fishing fleet.

Read more …

And the same goes for France.

EU-US TTIP Talks Seen By The French Threatening Small Farms (BBG)

For Bruno Dufayet, the latest round of trade talks between the European Union and the U.S. could sound the death knell for France’s small cattle farms. “For a beef farmer in Europe now, the biggest threat is massive imports of U.S. beef produced in feedlots,” said Dufayet, who notes that his 50 beef-cattle farm in south-central France is typical for the country. “The end could be nigh for this type of livestock farm in France.” French farmers and lawmakers fear free-trade talks with the U.S. will pit Europe’s small family operations against intensive American animal farming. Dufayet is a member of French meat lobby Interbev, which hosted senators and members of parliament at a meeting in Paris on Tuesday that finished over beef canapes and red Bordeaux wine.

European farmers would be unable to compete with a “massive opening” of the region’s markets to U.S. operations that handle thousands of animals at a time, the lobby said. The 12th round of negotiations on the Transatlantic Trade Investment Partnership, or TTIP, starts in Brussels on Feb. 22. The contents of any proposed deal are still to be discussed, and there will be no full liberalization for agricultural products, said Daniel Rosario, a spokesman for the EC. The trade concerns come as farmers across France, Europe’s largest agricultural producer, are protesting against plunging prices of everything from pork to milk. The EU needs to protect its family-owned livestock farms based on extensive grazing and beef should be excluded from the talks, Jean-Paul Denanot, a member of the European Parliament and a substitute member on its agriculture committee, said at the Interbev meeting.

“This is a face-off between systems that have nothing in common,” Jean-Pierre Fleury, who heads the beef working group at EU farm lobby Copa-Cogeca. In addition to differences in scale, the EU tracks animals from birth, while U.S. traceability only applies to livestock moving interstate and exempts beef cattle under 18 months. While the EU banned antibiotics as growth promoters in animal feed in 2006, many U.S. states still allow the routine use of the drugs to promote growth in cows, chickens and pigs. There’s also the argument of higher animal welfare standards in the EU than in the U.S., according to the U.S.-based Humane Society International.

Read more …

The French were ‘only’ some 300% off in their estimates. That tells you something about their priorities.

Calais ‘Jungle’ Eviction Postponed Because Of Risk To Lone Children (G.)

The forced eviction of thousands of migrants and refugees from the sprawling “Jungle” camp on the outskirts of Calais has been put on hold by the French authorities, the Observer has learned. French courts have postponed Tuesday’s planned eviction after a census conducted by the charity Help Refugees found that far more refugees were living in the area of the camp earmarked for demolition than French authorities had calculated. Researchers for the charity counted 3,455 people living in the southern stretch of the Jungle, which is scheduled to be destroyed. Of these, 445 were children and 315 were without their parents, the youngest was a 10-year-old Afghan boy. By contrast, French authorities had estimated between 800 and 1,000 people were living there.

The eviction has been placed on hold until a judge visits the camp on Tuesday morning to re-assess the situation, with the case being heard in Lille later that afternoon. Under the previous expulsion order, refugees had been ordered to remove their makeshift homes and possessions by 8pm on Tuesday, while camp shops, cafes, churches and mosques would be razed. Josie Naughton, co-founder of Help Refugees, said: “Hopefully it’s all going to be OK. The judge will decide yes or no, so we hope they show compassion. The figures highlight the brutality of destroying these homes before proper child protection schemes have been put in place. These children have post-traumatic stress, you can’t just put them on a bus, they are going to be in danger.”

George Gabriel of Citizens UK, a group involved in the growing campaign calling for children stranded in the jungle to be allowed into the UK said: “It’s great news that the French courts have put the breaks on the demolition of wide sections of the Jungle. Day after day we find more refugee children living in that terrible camp and risking their lives each night as they try to reach their families. “They have a full legal right to do so, and so for as long as the British and French governments refuse to properly implement the law, it’s vital those boys aren’t dispersed away from the legal advice they so badly need.” However Naughton warned that if the judge does decide that the eviction can go ahead as French authorities want, then the bulldozers would arrive at the Jungle on Wednesday morning.

Read more …

How long does it take to figure this out?

Razor Wire Fence Fails To Keep Migrants Out Of Hungary (BBC)

Police in Hungary say increasing numbers of migrants are breaching a razor wire fence built to stop them crossing the border from Serbia. In January, 550 people were caught getting through – up from 270 in December. More than 1,200 were caught in the first 20 days of February. Hungary caused controversy with the 4m barrier, completed in September. However, several other countries have since introduced tough border controls to stop the influx of migrants. The number of people crossing from Serbia dropped after Hungary built the fence along the 175km border with its neighbour last year. But police say migrants are now increasingly getting through, mostly by cutting through or climbing over the barrier. Most are from Pakistan, Iran and Morocco, who are no longer admitted through other routes.

It follows moves by Austria, Slovenia, and Balkan countries to limit the nationalities and the numbers of those being allowed through. More than a million people arrived in the EU in 2015, creating Europe’s worst refugee crisis since World War Two. The majority of migrants and refugees have headed for countries like Germany and Sweden via Hungary and Austria after crossing from Turkey to Greece. Many are fleeing the conflict in Syria. Far fewer migrants are entering Hungary than Austria but the sharply increasing trend of people breaching the border fence is alarming the authorities, reports the BBC’s Central Europe correspondent, Nick Thorpe.

More people crossed from Serbia into Hungary in the first 20 days of February than in the same period in 2015, before a fence was even contemplated, our correspondent adds. Once in Hungary, they face criminal charges or deportation. Meanwhile Interior Minister Sandor Pinter has renewed the closure of three railway crossings to Croatia, for fear that migrants and refugees will again start walking down the tracks into Hungary. On Friday Austria introduced a daily cap on the number of migrants and refugees allowed into the country. Just 80 asylum applications will be accepted each day at the country’s southern border, in a move condemned by critics as incompatible with European law.

Read more …

Oh God almighty… How do we sleep?

Despite Aegean Rescuers’ Best Efforts, Not All Migrants Are Saved (NPR)

It’s just before midnight on a February night when the crew of the Responder gets word from the Greek coast guard that a boat with migrants aboard is nearby. It’s in trouble somewhere in Greek territorial waters in the Aegean Sea. “There’s a light, a flash,” says Eugenio Miuccio, a 38-year-old Italian doctor, pointing to a flicker in the pitch-black sea. He and an Italian nurse, 27-year-old Roberto Pantaleo, pull on red life jackets as the ship heads toward the light. Iain Brown, a volunteer rescue diver from Scotland, is also ready. He’s listening, trying to make out people’s voices. “We can hear them screaming before we see them,” he says. “The boats they are in are so thin. We can hear them breaking up.” They’re ready to jump into a small speedboat piloted by Dominic “Mimmo” Vella, a 44-year-old father of three from Malta and a member of the Responder’s crew.

“If something happens and people fall in the water,” Vella says, “with the big boat, we cannot go near them, so we go with the small ones.” The Responder arrives where the migrant boat is supposed to be. But there is no boat, no people. Just empty sea. “False alarm,” Brown says. “We found nothing,” Vella says. “So we’re going to keep on patrolling.” The Responder, a 167-ft. search and rescue tug vessel has been patrolling these waters for the past two months. False alarms come with the territory, but the dangers for which the crew remains prepared are real. The boat is leased by a Malta-based nonprofit called the Migrant Offshore Aid Station (MOAS). An American businessman, Christopher Catrambone, and his Italian wife, Regina, started MOAS in early 2014 to help rescue asylum seekers crossing the Mediterranean between Libya and Italy.

Then, last September, 3-year-old Alan Kurdi washed up on a Turkish beach. The Syrian toddler had drowned trying to reach Greece with his family. The image of his lifeless body jolted the world’s empathy. Donations flooded into MOAS. The charity leased the Responder, hired a crew and recruited volunteers. The Responder arrived in the Aegean at the end of December. The two speedboats aboard are named after Alan and his 5-year-old brother, Galip, who also drowned in September. Brown, the diver, heard about MOAS on the news. He’s 51 and volunteers with the Coast Guard back home in Ayr, Scotland. “I couldn’t stand it anymore, sitting at home while kids were drowning here,” he says. “So I [took] time off and came here. I can help. I understand the sea.”

The Responder patrols a stretch of the Aegean Sea between Turkey and the tiny Greek islet of Agathonissi, just south of the larger island of Samos. The distance between Greece and Turkey is relatively short, as close as 8 miles here. But the sea can look deceptively calm to migrants. “They could leave from a sheltered bay,” says MOAS search and rescue operations officer John Hamilton, as he monitors a radar on deck. “Once they get out of this bay, they come across rough seas.” More than 400 people fleeing war and poverty have died or gone missing in the Mediterranean since the beginning of this year, according to the U.N. refugee agency. At least 311 have drowned in the Aegean, according to the International Organization for Migration. The Responder has been backing up the Greek coast guard in the southern Aegean Sea, and has rescued 739 people here so far. And since 2014, MOAS crews have rescued nearly 12,000 people.

But the crew can’t stop thinking about a boat that capsized on January 15. “That night, we got a call that there was a boat,” Vella says. “And when we arrived to where the boat was supposed to be, we didn’t find the boat. But we found the people. They were screaming.” As the boat sank, people hung onto its blue-and-white hull, moaning loudly for help. “It was so cold that night, so very cold,” Vella says. “I prayed there were no kids in the water.” Miuccio, the Italian doctor, did too. He worried about hypothermia. “Children and babies can only stay in such cold water for a few minutes,” he says. A diver jumped into the sea and swam to the people clinging to the hull. “Children? Children?” the diver screamed. “Babies?”

The first baby was a chubby-cheeked little boy, no more than 2-years-old. Miuccio, on the speedboat that night, remembers that the little boy’s face was blue and he was foaming at the mouth. He had no pulse. “I gave him CPR for 15 minutes,” he says. “But nothing worked.” Pantaleo, the nurse, tried to revive another little boy, also to no avail. A third child, a 4-year-old girl, was also found dead. Then two more children, a boy and a girl, arrived — unconscious but with a pulse. “They responded immediately [after] CPR,” Miuccio recalls. “They started crying, which is a good sign. We took off their wet clothes and immediately wrapped them in isothermal blankets.”

[..] The morning after the three children died in January, Mimmo Vella called his own kids back in Malta. He told them he loved them so much. He told them they were lucky to be safe at home. As MOAS begins yet another patrol, he calls them again. His youngest son’s tiny voice rises above the wind and the waves.

Read more …

Aug 202015
 
 August 20, 2015  Posted by at 9:37 am Finance Tagged with: , , , , , , , ,  


NPC “Largest electric locomotive and Congressman John C. Schafer” 1924

China Stocks Slump Again Despite Government Support (Reuters)
China Strengthens Yuan By Most In 2 Months; Massive Liquidity Injection (ZH)
China Central Bank Injects Most Funds Since February (Bloomberg)
Is This The Great Crash Of China? (Steve Keen)
China’s August Scare Is A False Alarm As Fiscal Crunch Fades (AEP)
Should We Be Afraid Of China’s ‘Value Chain’? (CNBC)
Eurozone: The Case Against ‘Cash For Reform’ (Martin Sandbu)
Greece’s First Privatization Deal Since Third Bailout Hits Snag (Bloomberg)
Fresh Doubts Raised Over Privatization Of 14 Greek Airports (Xinhua)
Stiglitz: “Deep-Seatedly Wrong” Economic Thinking Is Killing Greece (Parramore)
Dutch Lambast Greece For Creating ‘Complete Chaos’ (Telegraph)
European Bailout Fund To Disburse First Greek Tranche On Thursday (Reuters)
The Fisherman’s Lament – A Way of Life Drowned by Greece’s Crisis (WSJ)
Get Used To Cheap Oil, Derivatives Markets Say (Reuters)
As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms (Bloomberg)
Cheap Oil’s Making It Tough for Ethanol to Pay the Bills (Bloomberg)
Banks Have Treated Our Housing Market Like A Ponzi Scheme (David)
Rebels In Ukraine’s Donetsk Plan Referendum On Joining Russia (Xinhua)
China’s Building a Huge Canal in Nicaragua, But We Couldn’t Find It (Bloomberg)
British Police Head To Calais To Stymie Migrant Smuggling Activity (Guardian)
Refugee Chaos in Macedonia: ‘Life-Threatening for Women and Children’ (Spiegel)

Shanghai closed down another 3.42%. Capital is taking the Concorde out of the country.

China Stocks Slump Again Despite Signs Of Government Support (Reuters)

China stocks tumbled again in late trading on Thursday, underscoring fragile investor confidence in the market as worries about the world’s second largest economy persist. Trading volumes were thin, suggesting many investors stayed on the sidelines. Shares were marginally lower in the morning, as statements by a slew of companies that the government had invested in them boosted some counters. But in mid-afternoon, prices began to drop. The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 3.2%, to 3,761.45, while the Shanghai Composite Index lost 3.4%, to 3,664.29 points.

The SSEC is now down about 7% since China devalued the yuan by nearly 2% on Aug. 11. On Wednesday, the indexes had reversed sharp losses to end higher, as roughly 30 Chinese listed companies, many small caps, disclosed holdings by government-backed investors in an apparent attempt to sooth market panic following the previous session’s 6% tumble. “Even as the government has the will to put a floor under the market, whether it has the ability to do so is in doubt,” said Hou Yingmin, analyst at AJ Securities, citing adversities including an anaemic economy, capital outflows and ugly technical patterns. “Without fresh money inflows, any rebound is not sustainable.”

Most sectors fell, with transport and real estate shares leading the decline. Analysts have said further yuan depreciation would trigger fresh capital outflows, putting pressure on the property market. But investors nevertheless bet on companies with investments from state-backed investor Central Huijin, and state margin lender China Securities Finance Corp (CSFC), which was tasked with propping up share prices during crisis.

Read more …

Not looking good for Beijing.

China Strengthens Yuan By Most In 2 Months; Massive Liquidity Injection (ZH)

The PBOC set the Yuan fix 0.08% stronger – the biggest ‘strengthening in 2 months, which is interesting because following The IMF’s confirmation of a delay to Yuan inclusion in the SDR basket to Oct 2016 (pending a year-end decision and asking for more flexibility), Offshore Yuan forwards notably devalued (shifting 350pips higher to 6.65, the highest/weakest Yuan in a week) pricing a 20 handle (or 3%) devaluation by August 2016. Overnight saw another CNY110bn liquidity injection rescue from The PPT in the afternoon session (saving SHCOMP from a close below the 200DMA) and tonight we see promise to recap Ag Bank along with another CNY 120bn reverse repo injection. Shanghai margin debt declined for a 2nd day in a row and Chinese stocks look set to open weaker.

Read more …

“Authorities have to walk a thin line between boosting exports and satisfying the IMF’s requirements for the yuan to obtain reserve status, while at the same time ensuring financial stability.”

China Central Bank Injects Most Funds Since February (Bloomberg)

China’s central bank injected the most funds in open-market operations since February as intervention to prop up the yuan strained the supply of cash and drove a key money-market rate to a four-month high. The People’s Bank of China pumped a net 150 billion yuan ($23 billion) into the financial system this week, data compiled by Bloomberg show. That’s the most since before the Chinese New Year holiday, when seasonal demand for cash spikes. The authorities are providing another 170 billion yuan through loans and an auction of deposits. The injections come after China surprised investors by devaluing the yuan last week and shifting to a more market-oriented exchange rate. Under the new system, PBOC intervention has partly replaced the daily reference rate’s role in guiding currency moves.

Yuan purchases risk driving borrowing costs higher at a time of slowing economic growth unless the monetary authority releases additional cash. “Front-end rates have been edging up, likely resulting from tighter liquidity conditions amid intervention,” said Frances Cheung at Societe Generale in Hong Kong. “The PBOC needs to step up its open-market operations to offset the liquidity withdrawal on the foreign-exchange side.” Authorities have to walk a thin line between boosting exports and satisfying the IMF’s requirements for the yuan to obtain reserve status, while at the same time ensuring financial stability. The overnight repurchase rate, a gauge of liquidity in the banking system, rose three basis points to 1.80% as of 1 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the highest since April 23 and reflects increased demand for cash.

Read more …

“..it is more heavily indebted than America was when its crisis began—even relying on official statistics which undoubtedly understate the real situation..”

Is This The Great Crash Of China? (Steve Keen)

Banks in the West effectively ignore what the government wants: in the West, the political class is effectively subservient to the financial class. But in China, despite its economic transformation, the political class remains dominant: any Chinese entity that ignores a government directive does so at its peril. Things are not as they were in the 1980s, when every answer to every question that I and my group of touring Australian journalists asked began with “We followed the directives of the Central Committee of the Communist Party of China”.

But it’s still not good for your health to flout Central Committee policy. So the Chinese banking system and its satellites lent like crazy to any company and many individuals, and one of the biggest credit bubbles in history—possibly the biggest ever—took off. In 2010, the increase in private debt in China was equivalent to 35% of GDP. That dwarfs the rate of growth of credit in both Japan and the USA prior to their crises: Japan topped out at just over 25% per year, and the USA reached a “mere” 15% of GDP per year.

As I have argued for a decade now, crises begin when the rate of growth of credit slows down in heavily indebted countries. China was not heavily indebted in 2008, which is why it could take the credit growth path out of the Global Financial Crisis. But now it is more heavily indebted than America was when its crisis began—even relying on official statistics which undoubtedly understate the real situation—and the momentum of debt may well carry it past the peak level reached by Japan after its Bubble Economy collapsed in the early 1990s.

So China is having its first fully-fledged capitalist crisis. To date its response to it has been to try to sustain the unsustainable: to transfer the bubble from housing to the stockmarket, and to keep the stockmarket rising like some production target for wheat from the bad old days before the fall of the Gang of Four. It can’t be done. At some point, the Chinese government is going to have to make the transition from generating a credit bubble to trying to contain its aftermath.

Read more …

Ambrose is the odd one out.

China’s August Scare Is A False Alarm As Fiscal Crunch Fades (AEP)

The situation in China is desperate but not serious, to borrow an old Viennese saying. Countries with a tight exchange controls and state banking systems may come to grief in the long-run, but they do not face the sort of financial collapse seen in the US and Europe in 1931 or 2008. China’s central bank (PBOC) has already warned that it will deploy the coercive might of the Communist regime to stop anybody smuggling money abroad under false pretexts, invoking laws covering “money laundering and terrorist financing.” It said violators will be “severely punished”. They will be sent to the proverbial asbestos mines of Sichuan. This is the sort of liberalisation that Xi Jinping does best. Given the sanctions and given that China has a trade surplus of $600bn or 6pc of GDP – and is therefore accumulating foreign exchange at blistering pace, ceteris paribus – there is no chance whatsoever that reserve losses will spin out of control.

Jens Nordvig from Nomura says China has $3.65 trillion reserves to cover foreign currency debts of $1.135 trillion, a ratio of 322pc. This a far cry from the East Asia Crisis in 1997-1998 when the ratio was 59pc in Malaysia, 33pc in Thailand, 27pc in Indonesia, and 22pc in Korea. All these countries had current account deficits. China most emphatically does not. “We think the authorities will remain in control of the situation. This may mean that the worst shock effect is behind us, although ultimately the economic data will provide the final verdict,” he said. On cue, the economy is already coming back to life after hitting a brick wall over the winter. Credit growth jumped to a 31-month high in July. The monetary base has grown at a 20pc rate over the last three months, implying an economic spike later this year.

It is worth remembering what has just happened in China. The country is recovering from a ferocious monetary and fiscal shock. The authorities refused to react as falling inflation caused one-year lending rates to ratchet up to 5pc in real terms from zero in late 2011. This was deliberate, of course. Premier Li Keqiang intended to break the back of the property bubble and wean the country off its $26 trillion credit dependency. But pricking bubbles is no easy task. The authorities overshot. The crunch came just as fiscal policy went awry. Budget spending contracted in the first quarter. This was certainly not intended. While details remain murky, it appears that banks refused to roll over short-term loans used by local governments to finance a raft of existing projects.

They feared that these loans were no longer covered by a state guarantee under new rules. “It caused huge disruption,” said Capital Economics. At the same time, the regions saw a sudden-stop in lending for new projects as well. Local governments were prohibited from fresh bank borrowing in January. Under the so-called “debt swap” plan there was supposed to be a seamless transition from loans to bond issuance, but the bond market was not up and running until May. This is why China crashed into a recession in the first half of the year. Wisely or not – depending on your economic religion – the Communist Party has now reverted to stimulus as usual. The local governments issued almost $200bn of bonds over the two months of July and August. Beijing coyly describes its fiscal spending as “proactive”. Turbo-charged would be another way of putting it.

Read more …

I’m not.

Should We Be Afraid Of China’s ‘Value Chain’? (CNBC)

The devaluation of the yuan may have a tougher impact on global companies than previously imagined, as China’s drive to produce and consume higher-quality goods intensifies. The shockwaves of the People’s Bank of China’s devaluation of its currency are still resonating around the world’s markets, but in the medium to long-term, it’s manufacturers who may hurt the most. Western companies from Apple to Burberry will face a tough time finding out whether they can rely on their cachet in China even when their goods becoming more expensive. China’s wealth has grown by leaps and bounds since the gradual opening up of its economy began in the 1980s.

Its per capita GDP in 2014 was $12,608.87, when adjusted for purchasing power, more than double what it had been just a decade before. The Chinese leadership’s current five-year economic plan (2011 to 2015) is specifically aimed at moving the economy’s fast-paced growth away from the low-cost manufacturing it had become famous for, towards consumption. Tactics included greater investment in research and development, higher-end manufacturing, and services targeted at the country’s burgeoning middle class.

In May, the Made in China 2025 plan has been billed by Premier Li Keqiang as an attempt to “redouble our efforts to upgrade China from a manufacturer of quantity to one of quality.” He pledged in May to “seek innovation-driven development, apply smart technology, strengthen foundations, pursue green development” – all of which is aimed at avoiding the “middle income trap”, where a country gets stuck at a certain level of economic development. Worryingly for those countries which have done well out of exporting to China in recent years, the plan includes sourcing 70% of key components within China’s borders by 2025.

Read more …

“Euro area policymakers have lived on one myth after another..”

Eurozone: The Case Against ‘Cash For Reform’ (Martin Sandbu)

“Euro area policymakers have lived on one myth after another,” says Ashoka Mody, a former deputy director at the International Monetary Fund. “A process of groupthink coalesces around these myths: ‘We know it’s not going to work but we need to make it work and we need to seem supportive’ — and before you know it they start to believe it. And because there is no democratic accountability, they are free to make one error after another in terms of economic and political logic.” The eurozone establishment has largely internalised the idea that “cash for reform” is necessary to keep the euro together.

The most direct challenge to it, from Greece’s Syriza party, was defeated when other countries — most notoriously Germany — made clear they would rather force Greece out of the euro than consider alternatives to offering refinancing in return for control over fiscal and reform policies. The idea that “there is no alternative” also motivates the efforts to “complete” Europe’s economic and monetary union. These efforts at deeper integration, epitomised most recently in the so-called “Five Presidents’ Report” — written by the heads of the most influential eurozone and EU institutions — proceed from the notion that the euro was flawed at birth and needs significant repairs to function properly. [..]

This article examines four widely-held preconceptions about Europe’s single currency. First, that the euro eroded the export competitiveness of the weaker countries. Second, that the resulting debt made official bailouts necessary. Third, that a monetary union can work only in the presence of a “fiscal union” — large budget transfers between countries to insure against downturns. And fourth, that the weaker countries must undergo deep structural reforms to be able to stay in the euro.
Each of these claims has had an outsize influence on policy. The research reported below shows that they should not be taken for granted.

Read more …

Fraport is rumored not to have paid its Greek VAT in many years.

Greece’s First Privatization Deal Since Third Bailout Hits Snag (Bloomberg)

Greece’s first privatization agreement since the country’s third bailout hit a snag just one day after the government announced the deal’s approval. A government council overseeing state asset sales said on Tuesday that Fraport AG and a unit of Greece’s Copelouzos Group had won a 40-year concession to operate 14 regional airports for €1.2 billion. Fraport commented afterward that the decision was “not tantamount to the conclusion of a contract but rather offers a basis for the resumption of negotiations.” The Greek government said Wednesday that it had approved the contract based on previous agreements, and that any effort to seek a renegotiation “wouldn’t be limited to the issues raised by the company.”

Fraport is “working toward a positive outcome,” said Joerg Machacek, a company spokesman. The airport deal is meant to be the first in a series of privatizations that Prime Minister Alexis Tsipras agreed to undertake in return for the third bailout package worth as much as €86 billion. The most pressing matter is obtaining funding to avoid a default Thursday when Greece must pay €3.2 billion to the ECB. Under the current proposal, Fraport would invest €1.4 billion to upgrade the airports by the end of the concession. The German company would also pay an annual lease of €22.9 million for the airports, which include the holiday islands of Mykonos and Santorini.

Read more …

It’s simply a bad bad deal. Strike it.

Fresh Doubts Raised Over Privatization Of 14 Greek Airports (Xinhua)

Fresh doubts were raised on Wednesday after the government finalized a €1.23 billion deal with the German consortium Fraport-Slentel on Tuesday to privatize 14 regional airports in Greece. The sale of the airports’ operation rights for 40 years was the first privatization to be concluded under the third bailout that was ratified by the Greek parliament on Friday. It was also the first privatization to be carried out since the left-led government coalition assumed power after the general elections in January. The announcement sparked mixed reactions in Greece. Some members of opposition parties welcomed the deal as a step towards boosting development. At the same time, they criticized the government for wasting precious time by delaying decisions for months.

Meanwhile, the ruling SYRIZA party’s hardliners denounced the “sell off” in a statement. Left Platform accused the government of “handing a great gift to the German government in return for the new catastrophic bailout.” The president of the Federation of Greek Civil Aviation Workers (OSYPA), Vassilis Alevizopoulos, warned of strike actions and lawsuits in Greek and European courts to “safeguard Greek public interests,” speaking to local VIMA radio station on Wednesday. Critics argued that the funds the German consortium would invest in the upgrade of the airports under the contract were insufficient and the cost will undoubtedly be transferred to travelers. In this climate of prolonged economic and political uncertainty in Greece, the German investors would most likely seek “more guarantees” from the government, Kathimerini reported.

However, Greek government sources stressed that if the consortium should wish to renegotiate the contract, there would be an in-depth dialogue on all issues. The agreement on the concession of the 14 airports that included the airports of Thessaloniki in northern Greece, and airports on islands such as Corfu and Mykonos, was initially scheduled to close in late 2014, but was frozen in the pre-election period. SYRIZA, which initially opposed the entire privatization program since the beginning of Greek bailouts in 2010, had previously said that the terms of the tender would be reviewed. But according to Tuesday’s official announcement, no amendments were made on the finalization of the privatization. [..]Greek ministers argued that privatizations would take place under changed conditions in comparison to the past “to benefit Greek economy and people.”

Read more …

“..the MoU is really a “surrender document” that eclipses the country’s economic sovereignty and ensures that Greece’s depression — already deeper than America’s Great Depression — will get worse.”

Stiglitz: “Deep-Seatedly Wrong” Economic Thinking Is Killing Greece (Parramore)

Bad economic ideas inflict untold human suffering. When they come cloaked in a fog of Orwellian obfuscation, their poison and effects can spread with little hindrance. The public is misled. Power plays are hidden from view. In Greece, where suicide rates have risen sharply in the wake of austerity measures, people lose hope. Joseph Stiglitz, who has been following the Greek crisis closely and is recently returned from Athens, sets himself to the task of cutting through the fog. His plain English and fearless use of moral language to expose the ugliness behind economic and political abstractions lend clarity to a situation that is not just bringing a nation to its knees, but threatening to destroy the European project and bring on a future of conflict and hardship.

In discussing Greece’s Third Memorandum of Understanding (MoU) and its draconian terms, Stiglitz observes that the MoU is really a “surrender document” that eclipses the country’s economic sovereignty and ensures that Greece’s depression — already deeper than America’s Great Depression — will get worse. An economy that is seeing youth unemployment reaching up to 60% is likely to lose another 5% in GDP. That is over and beyond the 25% plunge in GDP the country has been hit with since the imposition of austerity measures. Socially conservative Germans, Stiglitz warns, are doubling down on the discredited notion that austerity policies help economies recover in times of crisis.

In reality, the insistence on keeping wages down, stripping away bargaining power from workers, forcing small business owners to pay taxes a year in advance, and cutting pensions will only hamper demand and lead to a deepening spiral of debt. (Stiglitz emphasizes that hardly any of the money loaned to Greece has actually gone to help the Greeks themselves, but rather private-sector creditors – namely German and French banks). Reflecting on a recent panel at Columbia University with Finance Minister Wolfgang Schäuble followed by a dinner, Stiglitz said, “My heart goes out to Greece, even more so after meeting Schäuble.”

Read more …

The Dutch are clueless. They blame SYRIZA for what’s ailing Greece. For Pete’s sake, get a life.

Dutch Lambast Greece For Creating ‘Complete Chaos’ (Telegraph)

German MPs voted to back a third bail-out for Greece on Wednesday as Dutch prime minister Mark Rutte fought back a no confidence vote over his decision to support the €86bn rescue plan. After a three-hour debate, Berlin’s Bundestag approved a new rescue package for Greece with a majority of 454 votes to 113. Eighteen MPs also abstained, marking Angela Merkel’s biggest insurrection during her decade in office. Of her ruling CDU/CSU parliamentarians, 63 MPs voting against the package, more than the 60 coalition MPs who voted “no” in an initial vote in July. But the approval was enough to secure the disbursement of €13bn from the European Stability Mechanism (ESM) – the eurozone’s bail-out fund.

However, less than €1bn will go directly to the Greek government and €3.2bn will be used to immediately pay back a maturing bond held by the ECB on Thursday. It is the first injection of rescue cash to the Greek economy since August 2014 after eight months of ill-tempered talks and political crisis in the eurozone. EU policymakers hailed the agreement on Wednesday evening. Pierre Moscovici, the euro’s economics chief, said the deal would mark a “new chapter based on reforms, fairness and shared trust” between Greece and its creditors. Ratification from the German parliament was crucial in securing the deal. Wolfgang Schaeuble, Germany’s finance minister, told lawmakers that a deal was in the “interest of Europe”, but admitted that backing for a third bail-out deal was “not easy” and there was “no guarantee of success”.

“If Greece stands by its obligations and the programme is completely and resolutely implemented, then the Greek economy can grow again,” he said. “The opportunity is there. Whether it will be used, only the Greeks can decide.” Dutch finance minister Jeroen Dijsselbloem, who is also president of the Eurogroup, said reaching an accord was difficult. “Greece has seen decades of bad policies and six months of complete chaos,” he told his parliament. The Dutch backlash was led by right-wing politician Geert Wilders, who has called for the Netherlands to withdraw from the European Union. “Today we are here to prevent Dutch PM Rutte from indulging in his favorite hobby: sending money to Greece, this time €5bn,” Mr Wilders told the Dutch parliament on Wednesday.

Mr Wilders said Mr Rutte had reneged on a pledge in September 2012 that “enough is enough” and that Greece would get no more financial help from the country. “He’s the Pinocchio of the low countries. This is betrayal,” said Mr Wilders. “We need this money to support health care and the elderly. This government hates the elderly.” Mr Rutte said he took “responsibility” for his comments, but defended the government’s decision to back a bail-out, claiming that “no-one could have foreseen” in 2012 how the situation in Greece would evolve. “The new Greek government has caused great damage,” he said.

Read more …

Crucial for Greece: bank recapitalization. The rest is circle jerk only.

European Bailout Fund To Disburse First Greek Tranche On Thursday (Reuters)

The European Stability Mechanism will disburse the first tranche of funds from Greece’s bailout loan on Thursday, the Greek finance ministry said after the ESM board approved a rescue of up to €86 billion on Wednesday. Athens will receive €13 billion on Thursday morning, the ministry said, of which about €12 billion will be used to pay down debt, including an earlier bridge loan and money owed to the ECB. “Nearly one billion euros will be made available to the Greek state, a sum that can be used to pay arrears,” the finance ministry said in a statement.

The new bailout package of up to €86 billion for 32.5 years includes up to €25 billion to recapitalize Greek banks, of which 10 billion will be immediately available, according to the ministry. Athens needed the funds in time to make a €3.2 billion debt payment to the ECB on Thursday. The initial €13 billion tranche will be paid in cash, while the €10 billion euros for the recapitalization of banks will be sent to a segregated account in the form of ESM notes.

Read more …

“..economic pain was designed into the Greek rescue. Unable to devalue Greece’s currency, the bailouts’ architects—other eurozone countries and the IMF—tried to push down prices and wages in a process called “internal devaluation.”

The Fisherman’s Lament – A Way of Life Drowned by Greece’s Crisis (WSJ)

Dimitris Stathakis, 75 years old and wearing no shoes, is at work on the aft deck of the North Aegean, a fishing boat docked in the Greek port of Nea Michaniona. The boat’s 14-man crew is prepping for a night at sea. Bags of ice are tossed aboard. Someone brings a delivery of white Styrofoam boxes. It is baking hot. Mr. Stathakis has his shirt on his head to keep the sun off. He is mending nets with flicks of a plastic shuttle and assessing the state of a profession he took up in his teens. “This is the end,” he says. “This is the worst. There is no life anymore.” The fisherman’s lament is as old as the seas. And Greeks have earned a living from fish for eons. It is the country’s second-largest agricultural export, behind fruit and nuts but ahead of olive oil and cheese.

Six years of economic crisis, however, have left this way of life in a shambles. A collapse in household buying power has demolished demand for fish, and with it fishermen’s income. Aquaculture companies, once a shining star in the marine economy, are drowning in debts. Fish processors are struggling with high costs for finance and relentless price pressure among strapped shoppers. Few think the woes will end soon. The Greek government has signed up to a new bailout, with more years of belt-tightening ahead. The first notches came last month, in laws rushed through parliament at the behest of Greece’s creditors: Fishermen face higher pension contributions, while fish processors face new, higher taxes on processed food.

Meantime, Greek banks are only dribbling out cash to customers—further strangling already weak demand. Sales at North Aegean Sea Canneries SA, one of Greece’s largest fish processors, dropped 20% at the beginning of the crisis. The company is facing a long recovery. Nikolaos Tzikas, an owner, says he had hoped to crawl back to 2011 levels this year. “Now,” he says, “I don’t know.” The travails of Greece’s fish industry show how years of crisis and bailouts have left the country’s economy in worse shape than before—and why the next episode may well meet the same fate. In a way, economic pain was designed into the Greek rescue. Unable to devalue Greece’s currency, the bailouts’ architects—other eurozone countries and the IMF—tried to push down prices and wages in a process called “internal devaluation.”

The hope was that lower costs would make Greek industries nimbler and more competitive, juicing a sustained economic recovery. Instead, the loss of income has killed consumption. People are too poor to buy stuff and the banks too weak to give them credit, and the effects ripple up the economic chain. “Internal devaluation did not do any good for the Greek fishing, aquaculture and processing sector,” says Lamprakis Avdelas, a fishing expert at a government-affiliated institute in Athens.

Read more …

“..the price of oil in five years’ time has collapsed in recent months.”

Get Used To Cheap Oil, Derivatives Markets Say (Reuters)

Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth. Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers. That has led many analysts to predict that oil – on average around 5% of companies’ costs – will see price rises later this year or in 2016, pushing up inflation. But oil derivatives tell another story. Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil in five years’ time has collapsed in recent months.

U.S. crude now costs around $42 a barrel for delivery next month, and only about $20 more for delivery in 2020. Prices of oil for future delivery are usually much more stable than volatile near-term prices, holding their value even when the spot market crashes. But the recent oil-price rout looks different. Prices for all futures months for years to come, also known as the futures price “curve”, have come down sharply. “The curve is saying prices will stay low for some time,” said Amrita Sen, oil analyst at consultancy Energy Aspects.

Read more …

All that’ll be left is the lethal tailings ponds.

As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms (Bloomberg)

Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices. Trican Well Service, Canada’s largest fracking service provider, said last week it may be unable to continue because it’s in danger of breaching the terms of its debt. It’s the latest firm to see crude’s descent to a six-year low sap the cash flow needed to meet financial obligations. Oil’s plunge has pushed a measure of the average debt burden among Canadian energy firms to the highest since at least 2002, and another measure of their ability to make interest payments to the third-lowest level in a decade, according to data compiled by Bloomberg.

Facing some of the highest production costs in the world and carrying more debt than U.S. peers, the Canadian industry has become ripe for acquisitions. “Your ability to be an ongoing entity is certainly decreased,” said Jason Parker, head of fixed-income research at Bank of Montreal. “You’ll see larger, more financially affluent entities coming in and picking away at those properties.” Energy companies in the Standard & Poor’s/TSX Composite Index had an average of 3.1 times more debt than earnings as of their latest quarterly report, the highest ratio in Bloomberg data going back to the middle of 2002. That measure, a gauge of a firm’s ability to repay its obligations where a higher number indicates greater difficulty, has surged this year amid the global oil glut that’s depressed prices and earnings.

Another ratio, measuring how much greater earnings are than interest expenses, plummeted to the third least in a decade at the end of last year, suggesting there’s less money to service the borrowings. The heavy crude that many Canadian firms pump sells at almost the widest discount in a year relative to the U.S. benchmark. At $24.22 per barrel on Wednesday, the price is below the cost of production for many companies. For James Jung, who rates the debt of Canadian oil companies at DBRS Ltd. in Toronto, that divides the country’s industry into winners and losers, with those who have stronger balance sheets and lots of cash in a position to take advantage as more peers struggle with debt.

Read more …

That’s one Ponzi industry I wouldn’t mind seeing killed off.

Cheap Oil’s Making It Tough for Ethanol to Pay the Bills (Bloomberg)

Cheap crude oil may make it hard for ethanol companies to pay their bills on time. The lowest oil prices in six years are hitting biofuel producers two ways: They’re making ethanol less attractive as a blend for gasoline, and emboldening the arguments of petroleum backers who say the U.S. law mandating consumption of the fuel alternative is obsolete, Standard & Poor’s Ratings said in a report Wednesday. “The most noteworthy trend in the energy industry during the past year has been the precipitous decline in commodity prices, and chief among these has been plummeting oil prices,” Michael Ferguson, a credit analyst at S&P, wrote. “The lower oil prices may present a difficult rationale for blending ethanol.”

Crude oil has fallen 57% in the past year to $40.80 a barrel on the New York Mercantile Exchange, the lowest since March 2009. Gasoline has plunged 42% and ethanol has dropped 31%. Regulatory support has also waned. In May, the Environmental Protection Agency proposed reducing the amount of ethanol required to be mixed with gasoline from statutory levels set in 2007, citing changing driving habits and fuel use since then. That’s not reason enough to abandon the policy, according to Growth Energy, a Washington-based trade group. “Cheap gas and cheap oil is never a certainty, and often it is the exception,” Tom Buis, chief executive officer of the lobby, said in an e-mailed statement.

The Renewable Fuels Association, also a Washington-based trade group, said the S&P report “is really out of step with the realities of the market place today.” Low-priced crude oil lowers gasoline costs and makes ethanol less attractive for blending beyond government mandates. An additive, ethanol is used to boost gasoline supply and lower prices. “Consumers are saying, ‘I’ve already got cheap gas, why do I need this ethanol?’” Ferguson, the report’s author, said in a telephone interview Wednesday.

Read more …

Australia.

Banks Have Treated Our Housing Market Like A Ponzi Scheme (David)

Australia’s big four banks are among the largest and most profitable financial institutions in the world. Despite this, it is mathematically impossible that these banks, primarily focused on domestic retail operations, could be as big and profitable as they currently are without one of the following taking place: either each of these banks, in their individual capacity, has solved (at the same time, in the same country, and as a first in the history of banking) the ultimate recipe for infinitely profiting from an exponentially-growing stock of private debt; or they are all engaged in activity which is incredibly risky. Looking at the balance sheets of these four banking leviathans they have clearly taken on abnormal sums of risk to invest in a single, all-in, one-way bet on the housing market.

As my colleague Philip Soos and I told the House of Representatives’ economics committee inquiry into home ownership last week, the evidence suggests that on the back of irrational exuberance, Australia is experiencing what can only be described as a classic debt-financed speculative housing bubble with every metric that evidenced the bubble in the US and Ireland present within our economic system today. Between 2002 and 2015, the mortgage books of National Australia Bank, ANZ, Commonwealth Bank and Westpac grew by 388%, 435%, 475% and 554% respectively. Put another way, the big four’s mortgage books escalated from a combined $242bn to a whopping $1.13tn, surging at such a consistent rate it would make Bernie Madoff proud.

What the Australian banking system has developed is an uninterrupted growth model which shares a similar risk profile as a Ponzi or pyramid scheme by lending ever-larger sums of debt to homebuyers and property investors year after year. If this growth model is interrupted, however, and banks cannot expand their mortgage books further, housing price inflation halts and will then plunge.

Read more …

Only choice left that will stop the shelling.

Rebels In Ukraine’s Donetsk Plan Referendum On Joining Russia (Xinhua)

Leaders of the self-proclaimed “Donetsk People’s Republic” are planning to hold a referendum on seceding from Ukraine and joining Russia, the Donetsk-based Ostrov news agency reported Wednesday. The referendum is scheduled to be held in two to four weeks after the Oct. 18 local elections, said the news agency. The ballot papers for the referendum designed in the colors of the Russian flag have already been printed, it said. Neither the rebel leadership nor the Ukrainian authorities have commented on the report yet.

In July, leaders of pro-independence insurgents in Donetsk region said they would hold local elections on Oct. 18 without Kiev’s supervision as they believed that the Ukrainian government has not fulfilled its obligations under the Minsk peace agreement. Last week, violence in eastern Ukraine has sharply escalated after several weeks of relative calmness. On Sunday night, at least 11 people, including nine civilians, were reportedly killed in Donetsk region, marking the worst casualties in the conflict since early June.

Read more …

Hilarious.

China’s Building a Huge Canal in Nicaragua, But We Couldn’t Find It (Bloomberg)

Deep on the southeastern side of Lake Nicaragua, along a bumpy dirt road that climbs gently through lush-green forest, sits the tiny town of El Tule. It is quintessential rural Central America: Chickens roam outside tin-roofed homes while pigs stand tied to trees, awaiting slaughter; the sound of drunk locals singing along to ranchera music greeted visitors on a recent rain-soaked afternoon. The village, if you listen to Nicaraguan officials, is a key point in what will be the biggest infrastructure project the region has ever seen, the construction of a $50 billion canal slated to run 170 miles from the country’s east to west coast. Awarded two years ago by President Daniel Ortega to an obscure Chinese businessman named Wang Jing, the concession calls for El Tule to be ripped up, erased essentially, in order to make way for the canal right before it plunges into the lake and then meets the Pacific Ocean a few miles later.

The idea is that the waterway will attract many of the larger vessels that the Panama Canal — located just 300 miles to the southeast — has historically struggled to accomodate. A construction deadline of 2020 has been set. Yet a four-day tour through El Tule and surrounding areas slated for crucial initial development only seemed to corroborate the belief, harbored by many analysts inside and outside Nicaragua, that this project isn’t going to get done. The townspeople haven’t seen any signs of canal workers in months. And the work that was done was marginal. A handful of Chinese engineers were spotted late last year making field notations on the east side of the lake; early this year, a dirt road was expanded and light posts were upgraded at a spot on the west side where a port is to be built.

Juharling Mendoza, a 32-year-old local entrepreneur, is so convinced that the project won’t proceed that he’s constructing a two-story house with three guest rooms and an attached convenience store just outside of El Tule. He says bluntly: “There isn’t going to be a canal.”

Read more …

These people are completely nuts. Sending dogs on refugees says it all.

British Police Head To Calais To Stymie Migrant Smuggling Activity (Guardian)

British police will be deployed to Calais to target people-smuggling gangs as part of a new agreement aimed at alleviating the ongoing migrant crisis at the French port. In the first visit to Calais by a UK government minister since the crisis escalated at the start of the summer, home secretary Theresa May will travel to the town on Thursday to confirm a joint declaration with Bernard Cazeneuve, the French minister of the interior. Their deal will see officers from the UK based in a new command and control centre in Calais alongside their French counterparts and Border Force personnel. The work of the police contingent will be led by two senior commanders – one from the UK and one from France. They will report regularly to May and Cazeneuve on the extent of immigration-related criminal activity on both sides of the Channel.

Officials said the move was aimed at disrupting organised criminals, who attempt to smuggle migrants illegally into northern France and across the Channel into Britain, by ensuring intelligence and enforcement work is more collaborative. Britain and France will also work jointly to ensure networks are dismantled and prosecutions are pursued, sources said. Fresh measures included in the new agreement include: • The deployment of extra French policing units and additional freight search teams, including detection dogs • The investment of UK resources including fencing, CCTV, flood lighting and infrared detection technology to secure the Eurotunnel railhead • The tightening of security within the tunnel itself, with Eurotunnel helping to increase the number of guards protecting the site • The creation of a new “integrated control room” covering the railheads at Coquelles • A security audit to be carried out by specialist French and British police teams to underpin the design of the improvements.

Read more …

The moral bankruptcy of Europe.

Refugee Chaos in Macedonia: ‘Life-Threatening for Women and Children’ (Spiegel)

A dangerous bottleneck has formed in the Macedonian border town of Gevgelija, an important hub for refugees traveling to Western Europe. Those trying to reach the trains here face extreme heat, dangerous crowds and police bullying. It’s Monday, earlier this week, and what can be seen unfolding along the route to Macedonia is no less than mass migration, with around 200 people making their way along the Balkans route to Western Europe on this day alone. They have come here from Aleppo, Homs, Kobani, Tartus, Hama and Damascus. Indeed, much of Syria’s population appears to be fleeing at the moment, as they attempt to make their way to safety. The group walks along the railway tracks that lead from the Greek village of Idomeni to the town of Gevgelija in Macedonia.

“Good luck, Kobani!” a family from Damascus calls out as they pass by a group of Syrian Kurds. “Good luck, Damascus,” they respond. But they don’t make it very far. They soon encounter five Macedonian police officers waiting along the tracks on the dusty, trampled earth. They order the people to wait without telling them why or for how long. The Syrians take off their backpacks and set them on the ground. Women and children look for a place in the shade. Over the next five hours, the waiting group swells to around 400 people. Not all are Syrians. A few Iraqis have also made it here. Some are now claiming to be Syrian, which would give them greater chances of success with their asylum applications and expedited procedures. A Syrian man points to eight young men and women from Africa.

“Everyone here is from Syria now, even those people over there,” he says, grinning. The people here all have at least one thing in common: They arrived in Europe during recent days via one of the Greek islands located near the Turkish coast – Kos, Lesbos or Chios. Each day, around 1,000 to 1,500 people arrive on the islands, a greater number than ever seen before. Most want to continue on to Western Europe as quickly as possible. The massive surge of refugees has created a dangerous bottleneck on the main route through the Balkans.

Read more …

Aug 022015
 
 August 2, 2015  Posted by at 11:01 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing Boy Scout farm 1917

Who Needs The Fed? The Rate Hike Cometh On Its Own (Reuters)
China Central Bank Official Sees Downward Pressure On Economy Persist (Reuters)
China’s Naked Emperors (Paul Krugman)
China’s Stock Markets: Nearly 25 Years of Wild Swings (WSJ)
Fears For Chinese Economy As Shares Fall (Observer)
Commodities Slide Deeper Into a Rut (WSJ)
In Favour Of Varoufakis’ Plan B (Paul Tyson)
James Galbraith on Greek Plan B (TRN)
Greece May Seek Up To €24 Billion In First New Aid Tranche (Reuters)
Greece May Miss ECB Payment As Germany Says Bailout Timeline Not Realistic (ZH)
Italy’s Anti-Establishment Five Star Party Ready To Govern (AFP)
Liar Loans Pop up in Canada’s Magnificent Housing Bubble (WolfStreet)
MtGox Bitcoin Chief Arrested In Japan (BBC)
In Hideaway for Brazil’s Rich, a New Scandal Emerges (Bloomberg)
Africa’s Biggest Gold Deposit Becomes Burden as Prices Plunge (Bloomberg)
We’re Looking In The Wrong Place To Solve Calais Migrant Problem (Independent)
Bishop Attacks David Cameron’s Lack Of Compassion Over Refugee Crisis (Guardian)

While you were sleeping…

Who Needs The Fed? The Rate Hike Cometh On Its Own (Reuters)

As traders, market pundits and economists jaw over whether the Federal Reserve this year will lift its benchmark lending rate for the first time in almost a decade, several corners of the U.S. bond market are not waiting around. A wide range of short-term interest rates, which tend to be the most sensitive to Fed policy expectations, has been quietly grinding higher for weeks, or in some cases much longer. Several have even surpassed their levels of two years ago during the bond market’s “taper tantrum,” when prices dropped steeply and yields shot up as the Fed pondered whether to halt its massive asset-purchase program.

Banks, money market mutual funds and other investors do not want to be stuck with low-yielding debt when the U.S. central bank finally does begin raising interest rates, something it last did in June 2006. Generally positive comments about the economy by the Fed at the conclusion of its latest policy meeting on Wednesday signaled to many that a rate rise could come as early as September. “The confidence is starting to rise about a rate hike,” said Gennadiy Goldberg, interest rate strategist at TD Securities in New York. “You want to be compensated for at least one hike.” For example, overnight bank borrowing rates have been inching up for the better part of a year and are around 36% more costly than in May 2014, when they fell to a record low.

Yields on investment-grade corporate bonds are holding near recent two-year highs, and the premium paid for holding them relative to Treasuries is the steepest since September 2013. And even as yields on bond market benchmarks such as the 10-year Treasury note and 30-year T-bond have seen only intermittent upward pressure, those on shorter-dated Treasuries are decidedly higher. The yield on two-year Treasury notes, at 0.73% on Thursday, was just a tick from a four-year high and more than three times that of May 2013. Rates on T-bills with durations of less than a year are at their highest so far this year. Yields, or rates, move inversely to the price of bonds.

Read more …

All that comes from China officials is politicized nonsense.

China Central Bank Official Sees Downward Pressure On Economy Persist (Reuters)

Downward pressure on China’s economy will persist in the second half of the year as growth in infrastructure spending and exports is unlikely to pick up, a senior central bank official was quoted as saying. Chinese companies are not optimistic about business prospects according to the central bank’s second-quarter survey, Sheng Songcheng, the director of the statistics division of the People’s Bank of China (PBOC), was quoted as saying by the National Business Daily on Saturday. Pressured by uneven domestic and export demand, cooling investment and factory overcapacity, China’s economic growth is expected to slow to around 7% this year, the lowest in a quarter of a century, from 7.4% in 2014.

A plunge in the country’s share markets since mid-June has added to worries about the economy, and reinforced expectations that policymakers will roll out more support measures in coming months to avert a sharper slowdown. The PBOC has already cut interest rates four times since November and repeatedly loosened restrictions on bank lending in its most aggressive stimulus campaign since the global financial crisis. Sheng warned about the risks of local government debt, saying that 2 trillion yuan ($322.08 billion) in bond swaps may not be able to fully cover maturing debt, according to the report. Sheng said the PBOC needs to step up the monitoring of local government financing vehicles given the current downturn in property market and limited local government revenues.

Sheng also said he expected second-quarter net profit growth for banks to fall, adding that banks’ exposure to risk “has become clearer”. But he said the real-estate market could rebound in the second half and provide support for the economy. Sheng said he still expects economic growth this year of around 7%, an inflation target of around 1.5% and growth of M2 – a broad-based measure of money supply – of around 12%.

Read more …

I’ve said this a lot: “China’s economic structure is built around the presumption of very rapid growth.” Beijing’s trying to make a supertanker change course on a dime.

China’s Naked Emperors (Paul Krugman)

Politicians who preside over economic booms often develop delusions of competence. You can see this domestically: Jeb Bush imagines that he knows the secrets of economic growth because he happened to be governor when Florida was experiencing a giant housing bubble, and he had the good luck to leave office just before it burst. We’ve seen it in many countries: I still remember the omniscience and omnipotence ascribed to Japanese bureaucrats in the 1980s, before the long stagnation set in. This is the context in which you need to understand the strange goings-on in China’s stock market. In and of itself, the price of Chinese equities shouldn’t matter all that much. But the authorities have chosen to put their credibility on the line by trying to control that market — and are in the process of demonstrating that, China’s remarkable success over the past 25 years notwithstanding, the nation’s rulers have no idea what they’re doing.

Start with the fundamentals. China is at the end of an era – the era of superfast growth, made possible in large part by a vast migration of underemployed peasants from the countryside to coastal cities. This reserve of surplus labor is now dwindling, which means that growth must slow. But China’s economic structure is built around the presumption of very rapid growth. Enterprises, many of them state-owned, hoard their earnings rather than return them to the public, which has stunted family incomes; at the same time, individual savings are high, in part because the social safety net is weak, so families accumulate cash just in case. As a result, Chinese spending is lopsided, with very high rates of investment but a very low share of consumer demand in GDP.

This structure was workable as long as torrid economic growth offered sufficient investment opportunities. But now investment is running into rapidly decreasing returns. The result is a nasty transition problem: What happens if investment drops off but consumption doesn’t rise fast enough to fill the gap? What China needs are reforms that spread the purchasing power — and it has, to be fair, been making efforts in that direction. But by all accounts these efforts have fallen short. For example, it has introduced what is supposed to be a national health care system, but in practice many workers fall through the cracks.

Read more …

But there are no markets left these days. There’s only QE.

China’s Stock Markets: Nearly 25 Years of Wild Swings (WSJ)

In the two years after China opened its stock markets, shares soared 1200% and twice fell by half. Investors seeking IPO shares rioted, overturning cars and smashing windows, leading police to use tear gas and fire their guns in the air to quell the disturbance. China will celebrate the 25th anniversary of the opening of its stock markets later this year, and not much has changed since their founding. They vacillate between big government-driven rallies and equally dramatic selloffs that leave once-euphoric investors disillusioned and angry. “China’s stock markets have developed quickly and their accomplishments are great, but they are very irregular,” Zhu Rongji, China’s premier at the time, said in 2000. “If they are to receive the people’s trust, the investors’ trust, then they have a lot of work to do.”

Stocks are down by 29% from their peak in June, and investors have continued to sell shares despite the strongest efforts ever by Beijing to prop up prices. The current bear market—defined as a fall of 20% or more from a peak—is the 27th that investors have suffered in the past 25 years. It is the 21st worst in terms of losses. Shares have lost half their value three times, and plummeted by two-thirds once, in 1993-1994, when the Shanghai Composite Index fell by 67% from its peak to its low point. The 27 bull markets have been equally dramatic, though none has come close to the initial 1200% gain. The market has gained more than 100% on eight occasions. The most recent bull market, which began in December 2012 and stretched until June, making it the longest in China’s history, clocked in at 164%.

The reopening of the Shanghai market, which dated to the 1860s and had been closed since the Communist takeover in 1949, signaled a victory for economic reformers led by Deng Xiaoping. The Shenzhen market, created in 1990, was a boost for the southern Chinese city that was home to some of the most far-reaching economic overhauls. Still, the government maintained heavy control over the markets. Investors based their buy and sell decisions on what they thought Beijing would do next. The 1992 riots, in a tense period just three years after the Tiananmen Square crackdown, highlighted the perception among investors that the government effectively ran the stock markets. Hundreds of thousands of people lined up over a hot August weekend to get applications to invest in initial public offerings, which they believed would soar because every IPO had to be approved by the government.

Read more …

Can we have a bit more depth from the Observer next time?

Fears For Chinese Economy As Shares Fall (Observer)

[..] there are growing concerns about what the stock price rollercoaster reveals about the health of the world’s second largest economy. Christine Lagarde, the managing director of the IMF, played it cool when asked about the Chinese market gyrations in a press conference on Wednesday. She pointed out that the market was still up an extraordinary 80% over the past year, and added she was not surprised the government in Beijing was intervening to prevent the “disorderly functioning” of markets. “That is the duty of central authorities,” she said. “The fact that they want to maintain a level of liquidity that is commensurate with an orderly process is quite good.”

In other words, while some have condemned Beijing’s efforts to arrest the share slide as clunky and authoritarian, Lagarde saw it as little different to the scramble by western governments during the 2008 crisis to prevent their financial systems from seizing up. She was relaxed, too, about the potential impact of the share price slide on China’s real economy – the shops, factories and farms that create jobs and generate growth. “We believe that the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the markets,” she said. Yet many analysts believe that as well as the bursting of a financial bubble, the downturn in the stock market reflects a wider economic slowdown.

Robert Shapiro, a former economic adviser to Bill Clinton, who now works at US consultancy Sonecon, says: “The Chinese leadership have had a fundamental policy of driving growth sufficiently great to generate employment for about 10 million people a year. The main way they’ve done this is through public investment, or semi-public investment. A lot of these projects are now going bust, because there’s nobody to purchase the apartments, and there are no businesses to rent the offices.”

Read more …

This is a trend far from finished.

Commodities Slide Deeper Into a Rut (WSJ)

Commodity prices tumbled anew, plunging the S&P GSCI Total Return index to its worst monthly loss since November 2008 and deepening a yearslong rout that few observers expect to moderate. The index, which tracks a basket of commodities, fell to its lowest level since 2002 on Friday, according to data from S&P Dow Jones Indices. All but one of the 24 index components posted losses for July. Investors in commodity markets are confronting threats from a slowdown in China, an anemic global economy and the prospect of higher U.S. interest rates from the Federal Reserve.

The dollar, which has rallied this summer on expectations of tighter U.S. monetary policy, is also pressuring prices of raw materials, which are traded in the U.S. currency and become more expensive for buyers in other countries when the buck rallies. Hopes that China has seen the worst of its economic slowdown were spurned after the country’s stock market dived in July, notching its worst month in six years. China is the largest consumer of raw materials, and investors now fear that problems in its equity market will reverberate across the economy in coming months as cash-strapped consumers abort purchases of new cars, homes and other goods. Europe is battling to stave off another economic downturn. A weaker euro hasn’t buoyed exports from the region, and growth and inflation remain stubbornly low.

This dims any prospect of higher demand for raw materials from the region. Commodity prices are also under pressure as supply of many raw materials runs ahead of global demand. Companies that grow soybeans or mine for coal outside the U.S. are opting to keep up production because weaker domestic currencies keep their costs low, while a stronger dollar means they bring home larger profits despite falling prices. Against this backdrop, many investors are choosing to give commodities the cold shoulder. “Folks are being very cautious in terms of where they want to apply their capital, we’ve seen that in commodities…it just continues to be an area that people want to avoid,” said Dan Farley at State Street Global Advisors.

Read more …

Excellent write-up. The term ‘financial realism’ must be a keeper.

In Favour Of Varoufakis’ Plan B (Paul Tyson)

Mr Varoufakis’ plan B, including the mode in which he developed this plan, is a function of his rejection of the social and political unaccountability of foreign financial power within the Greek nation. Perhaps it may also be a moral rejection, under extreme circumstances, of the validity of laws that facilitate the destruction of the Greek finance sector by the troika. Given that Varoufakis was given political authority by his Prime Minister to pursue this plan, then perhaps his mode of pursuit should be evaluated in relation to the political agendas he was politically authorized to advance. The salient evaluation questions are then would this plan save, in some form, the personal savings of the Greek people, and would it facilitate an operational finance sector for Greece, after Grexit?

I think there can be little doubt that Varoufakis’ plan B would have been the best practical option for the Greeks if they had of been forced out of the Eurozone after June 5 referendum, if Syriza had held fast to its original platform. In thinking about the rules of finance outside of the box mandated to him by the troika, Varoufakis acts out of a concern to promote the wellbeing of the Greek people. Such free and creative thinking, and such motivations, are an affront to the financial realism of the troika because Greece is a small and indebted player in someone else’s financial game, ridiculously seeking to operate outside of the rules that those in power have set in place to suit themselves. This Greek rule-bending ambition, from a position of weakness, violates the basic principles of financial realism.

It is true, Varoufakis defies the laws of financial realism. However, he does not take this stance up out of naivety. Indeed, Varoufakis is all too aware of how financial realism operates. What makes him such a political anomaly is that he is also aware of three other things. Firstly, as an “erratic Marxist” and a gifted mathematician and political economist, Varoufakis is aware that indeterminacy is a basic feature in all human arenas of belief and action. This gives him a philosophical awareness of the dialectic between necessity and freedom which enables him to believe in politics rather than simply in power. This delineates him from the blind determinacy and complete political indifference of dedicated financial realists, both in Brussels and in the mainstream media.

Secondly, he is aware that financial realism violates the basic principles of democratic accountability, national sovereignty and moral responsibility. As he believes in that which financial realism violates, he must reject financial realism. Thirdly, he is aware that the rules of finance do not have to be set up to function in financial realist terms. He is intelligent enough to be able to think outside the box, and morally and philosophically courageous enough to make practical plans on the basis of genuinely creative initiatives. In today’s very conformist world of power, this sort of leader is very hard to find. These three factors make Varoufakis a potentially radical political non-conformist in the Eurozone, who just might upset the whole apple cart of the financial realist status quo.

This is why the likes of Schäuble loathe Varoufakis. Yanis threatens the very philosophical foundations of their power. In order to preserve the power of the financial realists, Varoufakis simply must not be taken seriously. Hence, all this patronising media dribble about his clothes, motorbike and hair. Hence, all these relentless media beat-ups about any action he takes that is not coherent with financial realism. Hence all these red herrings about how undiplomatic he is without comment on how sensible and genuinely interested in constructive outcomes he is. The media loves to analyse his style and manner, but seldom has any serious interest in the substance of what he says.

Read more …

” In that respect, and that’s a very important respect, the parliament in Greece is no longer even remotely a sovereign entity.”

James Galbraith on Greek Plan B (TRN)

PERIES: So James, let’s begin with what your role was in deriving Plan B. GALBRAITH: Well, I had to do background research and to assemble experiences of other countries and other situations, including some of the experiences in the United States during the depression, to basically to put together for the use of the Greek government of a list of problems, challenges that would have to be faced if Greece were forced against its will to exit the eurozone. This was contingency planning, it was precautionary.

PERIES: And did it include a process to deal with printing the drachma, and reviving the mint? GALBRAITH: Well you know, if you have to completely go over to a new banknote you’re going to have a considerable time lag before it becomes available. So we were concerned, for example, with how you handle the need for cash liquidity during that intervening period. That was a substantial challenge, for example.

PERIES: Okay. Could you expand on some of the intricacies of what Plan B looked like? GALBRAITH: That’s a discussion I think for another time, but there were a great many things that you would worry about. Fundamentally if you’re, have to transition currency you have a considerable cost of making that transition. The challenge is how to protect the most vulnerable people in society from those costs. How to protect, for example, retirees. How to protect people who are in need of healthcare. And after that immediate transition has passed there’s a question of how you manage the new currency, how you in particular control foreign exchange transactions and the exchange rate.

PERIES: Let’s get to the, so the relationship with Europe and the Troika here. In this op-ed that Varoufakis penned in FT he complains, and I quote, there is a hideous restriction of national sovereignty imposed by the Troika. Here he is complaining about being denied access to departments of his own ministries which he says is pivotal in implementing innovative policies. So I guess the question is, who does collect the taxes and who has access to the tax system and tax collection data in Greece? GALBRAITH: We were not engaged in anything that was internal to the operations of the finance ministry. But there are issues in which the, in the dictat that was imposed on Greece in July, for example, there are further inroads on the sovereignty of the Greek state, the imposition of requirements that major offices, including the Statistical Office, be taken basically out of the control of Greek government and placed more or less directly in the hands of the creditor institutions.

And that’s problematic. The most problematic thing of all along that line is the requirement in the terms that were dictated to Greece that new proposals to the parliament not even be made by the government unless they’ve been previously approved by the creditors. So that is in some sense a blatant, a flagrant violation of the basic principle of the European Union, which is that it’s built upon representative democracy. In that respect, and that’s a very important respect, the parliament in Greece is no longer even remotely a sovereign entity.

Read more …

But nothing for the Greeks.

Greece May Seek Up To €24 Billion In First New Aid Tranche (Reuters)

Greece may seek €24 billion in a first tranche of bailout aid from international lenders in August to prop up its banks and repay debts falling due at the ECB, a pro-government Greek newspaper said in its early Sunday editions. Athens is now in talks with the EC and IMF to secure up to €86 billion in bailout aid. It will be its third bailout since 2010. Avgi newspaper, which is close to the leftist Syriza government, said Greek authorities expected to conclude talks with lenders by mid-August. The first tranche of €24.36 would be used to channel €10 billion as an initial recapitalization to Greek banks, €7.16 billion to repay an emergency bridge loan, €3.2 billion toward Greek bonds held by the ECB and other payments, Avgi said.

It has been estimated that Greek banks may require up to €25 billion to be recapitalized, a shortfall exacerbated by an outflow of deposits when a stalemate with lenders threatened Athens’ place in the euro zone. The flood of money leaving the country culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown. In exchange for funding Greece has accepted reforms including making significant pension adjustments, increasing value added taxes, overhauling its collective bargaining system, and measures to liberalize its economy and limit public spending. If the talks are not completed in time, European authorities may have to provide further temporary financing as they did with a July bridge loan, though Avgi said that possibility had not been discussed with lenders.

Read more …

1000 things could go wrong.

Greece May Miss ECB Payment As Germany Says Bailout Timeline Not Realistic (ZH)

Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete. Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.

Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that “were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum.” Lafazanis refused to go along with the idea. “How many referenda are we going to hold? We’ve already done one and we won with 62% of the vote”, he said. Ultimately, the party approved a September congress. This gives Tsipras some “breathing space,” FT notes, “but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a ‘Grexit’ from the euro, would continue to oppose a fresh bailout.”

And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday, FT reported that according to “strictly confidential” minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece “has the institutional and political capacity to implement economic reforms.” Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it’s either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government.

The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks. Now, according to Focus magazine, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says.

Read more …

Keep your eye on them. They don’t sit still.

Italy’s Anti-Establishment Five Star Party Ready To Govern (AFP)

Italy’s anti-establishment Five Star party, founded in 2009 by former comedian Beppe Grillo, is itching to govern and has a man primed for the top job. The movement celebrated a shock success in 2013’s general election when it snapped up a whopping 25.5% of the votes, becoming the second biggest political force behind the centre-left Democratic Party. “Today we are ready, much more than in 2013,” Luigi di Maio, one of Five Star’s most prominent members, told AFP. Di Maio, 29 years old and the youngest deputy president of the lower house of parliament in Italian history, has become the new face of the movement, displacing its loud and truculent founder, who is now rarely seen in public.

The pair could not be more different: where bearded, wild-eyed Grillo, 67, shouted abuse to rouse the crowds, Di Maio, who hails from Naples and studied law, speaks quietly but firmly and dresses in an impeccable suit and tie, never a hair out of place. He has tried to restore credibility to the Five Star (M5S) after a fallout within the party forced the ex-comic to take a step back. While Grillo called last October for the country to leave the euro “as soon as possible”, Di Maio is more prudent – perhaps having watched Greece teeter on the edge of a “Grexit”, which some warned could force the country to exit from the EU. “Our line doesn’t foresee a straightforward exit from the euro”, he says, insisting that it would only ever be considered if the common currency “continues to strangle our economy”.

The party would like a reformed eurozone but believes centre-left Prime Minister Matteo Renzi lacks “the authority” in Europe to make that happen. Renzi, 40, is the Five Star’s main adversary in the run-up to the next general election, scheduled to be held in 2018. And Di Maio – who began following Grillo back in 2007 – is often named by political watchers as the man to challenge the PM. [..] The Five Star party “continues to grow because Italian politics continues to be a ‘rubber wall'”, he says, describing the way the hopes and ambitions of the population appear to bounce straight off the walls of power and disappear into nothing.

Polls published this week show the Five Star gaining ground on the Democratic Party, with 25% of those polled now favouring the anti-establishment movement compared to 34% for Renzi’s party, which has dropped in popularity since last year. The movement is keen to seize the moment to make its mark – especially now that even the left has been hit by corruption scandals. “It seems to us that we are elected when the Italians see all the nastiness the (mainstream) political world is capable of,” he says. His mobile phone beeps. A breaking news alert tells him that the Senate has just voted to protect a centre-right senator suspected of graft, fraud and racketeering, by refusing to strip him of his political immunity.

The vote passed thanks to several members of the centre-left Democratic Party, who were afterwards accused of having saved the senator’s skin because they had received favours from him when he was chair of the budget committee. “You see, things never change,” Di Maio says with a smile.

Read more …

Quelle surprise!

Liar Loans Pop up in Canada’s Magnificent Housing Bubble (WolfStreet)

For a long time, the conservative mortgage lending standards in Canada, including a slew of new ones since 2008, have been touted as one of the reasons why Canada’s magnificent housing bubble, when it implodes, will not take down the financial system, unlike the US housing bubble, which terminated in the Financial Crisis. Canada is different. Regulators are on top of it. There are strict down payment requirements. Mortgages are full-recourse, so strung-out borrowers couldn’t just mail in their keys and walk away, as they did in the US. And yada-yada-yada. But Wednesday afterhours, Home Capital Group, Canada’s largest non-bank mortgage lender, threw a monkey wrench into this theory.

Through its subsidiary, Home Trust, the company focuses on “alternative” mortgages: high-profit mortgages to risky borrowers with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. They include subprime borrowers. So it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September: “falsification of income information.” Liar loans. Liar loans had been the scourge of the US housing bust. Lenders were either actively involved or blissfully closed their eyes. And everyone made a ton of money.

So Home Capital revealed that it has suspended “during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers,” who’d together originated nearly C$1 billion in single-family residential mortgages in 2014. That’s 5.3% of the company’s total outstanding loan assets, and 12.5% of its total single-family mortgage originations in 2014. That’s a big chunk. The company, however, didn’t disclose why it took so long to disclose this. It said an “external source” had warned it about income falsification on mortgage applications submitted by a number of brokers. Its investigation did not find any evidence of falsified credit scores or property values, it said.

Read more …

Not a trust booster.

MtGox Bitcoin Chief Arrested In Japan (BBC)

Japanese police have arrested the CEO of the failed company MtGox, which was once the world’s biggest exchange of the virtual currency, bitcoin. Mark Karpeles, 30, is being held in connection with the loss of bitcoins worth $387m last February. He is suspected of having accessed the exchange’s computer system to falsify data on its outstanding balance. MtGox claimed it was caused by a bug but it later filed for bankruptcy. Japan’s Kyodo News said a lawyer acting on Mr Karpeles’ behalf denied his client had done anything illegal. Mr Karpeles is suspected of benefiting to the tune of $1m, the agency said. In March 2014, a month after filing for bankruptcy, MtGox said it had found 200,000 lost bitcoins. The firm said it found the bitcoins – worth around $116m – in an old digital wallet from 2011. That brings the total number of bitcoins the firm lost down to 650,000 from 850,000. That total amounts to about 7% of all the bitcoins in existence.

Read more …

Brazil’s economy has already conceded defeat.

In Hideaway for Brazil’s Rich, a New Scandal Emerges (Bloomberg)

Just south of Rio de Janeiro, along a strip of coastline known for its white-sand beaches and high-end resorts, Brazil’s next big corruption scandal is starting to unfold. This one bears striking similarities to the colossal bribery case that has engulfed state-run oil giant Petrobras pushed Brazil toward its worst recession in a quarter century and left President Dilma Rousseff fighting for her political survival. That’s no coincidence: Many of the players are the same. At the center of this story is another state-run company, Eletrobras, and its Angra III project, a nuclear power plant tucked into a bay with jungle-covered islands that have become something of a playground for Brazil’s rich and famous. Five of the builders whose executives have been jailed on allegations they bribed officials at Petrobras also won contracts to build the 14.9 billion-real ($4.4 billion) nuclear plant.

“The model is the same as Petrobras,” said Adriano Pires, head of CBIE, a Rio de Janeiro-based energy and infrastructure consultant. “Brazil’s government created a system in which big state-owned companies are used for political objectives and are in charge of these big infrastructure consortiums. It’s an atmosphere that favors corruption.” The sweeping investigation into Petrobras – dubbed “Carwash” by prosecutors after a gas station used to launder money – has helped make Brazil’s real the world’s worst-performing major currency this year, wiped out $33 billion in the market value of Petrobras in the past year and tanked the bonds of builders including Odebrecht and OAS. This new phase has earned the nickname “Radioactivity.”

Federal Police on Tuesday arrested the former head of Eletrobras’s nuclear unit, Eletronuclear, and the president of builder Andrade Gutierrez’s energy unit. The arrest warrants were among 30 court orders issued based on testimony by Dalton Avancini, the CEO of builder Camargo Correa SA, who said his firm and others won contracts for Angra III by paying kickbacks, police Chief Igor Romario de Paula told reporters in Curitiba, Brazil. Camargo Correa didn’t respond to requests for comment. In the same testimony, Avancini also pointed his finger at another Eletrobras project, the 30 billion-real Belo Monte hydroelectric dam deep in Brazil’s Amazon Jungle, a person with direct knowledge of the matter told Bloomberg News in March.

Read more …

Sure, gold will recover. Question is what will happen in the meantime.

Africa’s Biggest Gold Deposit Becomes Burden as Prices Plunge (Bloomberg)

After production delays and fatal accidents, the plunging price of bullion is making Africa’s richest gold deposit the biggest burden for owner Gold Fields. And the bond market’s taking note. The 81 million-ounce resource at South Deep near Johannesburg is still burning cash after Gold Fields bought it for $3 billion in 2006. The mine has helped lift the company’s break-even price to $1,105 an ounce, according to Moody’s Investors Service. Yields on the company’s bonds climbed to a six-month high during July as gold fell 6.7% to $1,093 an ounce. “You’ve got a perfect storm now, with a low gold price environment and the potential for South Deep to continue to consume cash,” Douglas Rowlings at Moody’s said.

“The question on everybody’s mind is how much more cost can sustainably be taken out of South Deep and other mines?” The failure to exploit South Deep profitably is hastening the decline of South Africa’s gold-mining industry, which has produced a third of all the world’s bullion over 120 years. The country is today ranked sixth in the world among gold producers, down from first just eight years ago. South Deep, with the potential to produce 700,000 ounces a year costing as little as $900 an ounce for the next 70 years, may change that. Yet its complex ore body has so far proved too difficult for Gold Fields to extract profitably, even after $1 billion of investment over nine years.

Read more …

Britain looks everywhere BUT the right place.

We’re Looking In The Wrong Place To Solve Calais Migrant Problem (Independent)

Parkinson’s Law declares that work expands to fill the time available for its completion. But its author, the British historian Cyril Northcote Parkinson, coined a second less well-known adage. Parkinson’s Law of Triviality took the example of the committee asked to approve a new nuclear reactor, a new bike shed for the clerical staff and a rise in the price of coffee in the canteen. It asserted that people will always spend most time talking about the smallest issue, because the big one is generally beyond their comprehension. The Triviality Principle clearly applies to what is being called “the Calais migrant crisis”. So the biggest row has been over whether David Cameron should use words like “swarm” when describing the migrants trying to board UK-bound trucks coming through the Channel Tunnel.

Secondary stories include how terrible it is that British holidaymakers are having the start of their holidays delayed – and how useless the French are at maintaining law and order. But there is very little focus on the real problem. Perhaps that is because the real problem is so intractable. Politicians and press – committed as they are to facile solutions and easy scapegoating – are reluctant to acknowledge their impotence in the face of an issue of international complexity. That is why David Cameron, after Friday’s crisis committee meeting, was unable to come up with anything better than: “We rule nothing out in taking action to deal with this very serious problem. We are absolutely on it. We know it needs more work.” Indeed it does. His critics were not impressed.

The current moral panic about illegal migrants is based on two facts that are comparatively minor in the wider context of a global movement of refugees that is now bigger than at any time since the Second World War. The first is that the number of migrants at Calais has risen from around 600 in January to 5,000 today. The second is that this larger figure has caused the migrants’ tactics to change; stealthy attempts to slip unnoticed aboard lorries bound for England have given way to an ability to surge through police lines by sheer weight of numbers. Hence the word swarm. There is a new, brazen aggression in the attitude of the migrants that one police officer put down to the grimness of the ordeal so many of them have endured in the perilous crossings of the Mediterranean, which have increased dramatically over the past year.

Lorry drivers fear the Stanley knives that the men wield to cut their way through the tarpaulins of their trucks – though it has to be said that the only deaths around Calais this year have been those of nine desperate migrants. Yet the 5,000 migrants camped out in Calais are a drop in the tide of human misery that has flowed from the massive dislocation in countries like Syria, Iraq, Libya, Somalia, Eritrea and Sudan. War has now uprooted half the entire population of Syria. More than four million Syrians are refugees in neighbouring countries. Only a small percentage have made it into Europe. Around 170,000 migrants arrived in Italy last year. This year Greece has taken the most of any country, with 63,000. Last year Germany gave asylum to 41,000; Sweden took 31,000; and France 15,000. The UK accepted 10,050. At the last summit on how Europe should share the burden of incomers the British government announced it would take none.

Read more …

As I said yesterday.

Bishop Attacks David Cameron’s Lack Of Compassion Over Refugee Crisis (Guardian)

The Church of England has made a dramatic intervention in the migrant crisis, delivering a stern rebuke to David Cameron for his “unhelpful” rhetoric. Speaking with the backing of the church, the bishop of Dover accused senior political figures, including the prime minister, of forgetting their humanity and attacked elements of the media for propagating a “toxicity” designed to spread antipathy towards migrants. After another tense day in Calais, following a night in which fewer migrants tried to enter the Eurotunnel terminal in northern France, the bishop, the Right Rev Trevor Willmott, urged Cameron to ameliorate his rhetoric. “We’ve become an increasingly harsh world, and when we become harsh with each other and forget our humanity then we end up in these standoff positions,” he said.

“We need to rediscover what it is to be a human, and that every human being matters.” On Thursday the prime minister drew international opprobrium when he described migrants trying to reach Britain as a “swarm” and promised to introduce strong-arm tactics, including extra sniffer dogs and fencing, at Calais. On Saturday No 10 announced it had also agreed with France to bolster security around Eurotunnel, with reinforcements joining the 200 guards already on patrol. Extra CCTV, infra red detectors and floodlighting will also be funded. Throughout Saturday disquiet continued to rise over Cameron’s handling of the issue.

Willmott said: “To put them [migrants and refugees] all together in that very unhelpful phrase just categorises people and I think he could soften that language – and that doesn’t mean not dealing with the issue. It means dealing with the issue in a non-hostile way.” Save the Children also voiced dismay at the way political discourse had taken a “sour turn”. In a piece published online by the Observer, Justin Forsyth, chief executive of the international charity, echoed Willmott’s call to remember the fact that the migrants were humans and many were refugees fleeing horrific abuse or extreme danger. “We are in danger of shutting our hearts to the desperation of the people pleading at the door, refugees not economic migrants,” he said, adding that Britain needed to pull its weight in accepting more refugees.

Read more …