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Will Austerity Be the Straw that Breaks the EU AND the UK?

May 102015
 
 May 10, 2015  Posted by at 7:30 pm Finance Tagged with: , , , , , , ,  3 Responses »


Jack Delano Worker inspecting locomotive, Proviso Yard 1942

From where we’re sitting, the biggest victory in the May 7 British election will turn out to be not that of the Conservatives, but of the SNP, the Scottish nationalists. The party took 56 out of 59 Scottish seats in the United Kingdom’s Westminster parliament in London (with just half of the total votes..). Perhaps even more significant is the increased divide between Scotland and ‘the rest of the UK’.

While Cameron’s ‘unexpected’ victory marks a sharp turn to the right, the SNP’s landslide win sets the Scots on a course that’s close to a 180º opposite, even sharper turn to the left. Or in other words: while Britain voted for more of the same, Scotland voted for change. And never the twain shall ever see eye to eye again?! The left side of the spectrum was represented by the SNP, not by Labour, who Tony Blair now claims should run even more to the right – which he calls center.

Perhaps it’s nice to start off with a more philosophical angle about the future viability and/or inevitable fate of the United Kingdom. Just to set the overarching and underlying tone. Ian Jack had this for the Guardian yesterday:

Did The End Of The British Empire Make The Death Of The Union Inevitable?

.. what some of us were in Denmark to consider is the now almost-conventional wisdom about British identity: that it rose and fell with the empire, and with the empire’s going the United Kingdom will almost inevitably break up. Stuart Ward, professor of global and imperial history at Copenhagen University, reminded us of this theory’s several advocates, from Tom Nairn, writing presciently in 1977, to Linda Colley in her book Britons, published in 1992.

David Marquand took the idea to the extreme when he announced in 1995 that shorn of empire, Britain had “no meaning” and it was therefore impossible “for Britain as such to be post-imperial”. In a what-goes-up-must-come-down way, it looks a plausible argument. The logic is, as Ward said, that if you can demonstrate that the empire forged an idea of Britain, then Britain’s vanishing two centuries later “is merely a question of the laws of physics – remove the load-bearing pillar, and the structure falls”.

Is Britain destined to fall to pieces? Are all empires? How long can the center hold?

There are more interesting angles besides these, not least of which is the similarities between Greece vs Eurozone and Scotland vs United Kingdom. The keyword in this is ‘austerity’. The Greek people voted en masse to end it, and so did the Scots. Here’s what SNP leader Nicola Sturgeon had to say post-election:

Nicola Sturgeon Tells Westminster: ‘Scotland Will No Longer Be Sidelined Or Ignored”

“Scotland has given the SNP a mandate on a scale unprecedented for any political party, not just in Scotland but right across the UK. “We will use that mandate to speak up for and protect the interests of Scotland. “Let us be very clear, the people of Scotland on Thursday voted for an SNP manifesto which had ending austerity as its number one priority, and that is the priority that these men and women will now take to the very heart of the Westminster agenda.” Ms Sturgeon said: “After Thursday, and as I told the Prime Minister when I spoke to him yesterday, it simply cannot be and it will not be business as usual when it comes to Westminster’s dealing with Scotland.”

Sturgeon has hinted that she aims to end austerity across the UK, not just in Scotland. That may be a bit much to ask given that her mandate is limited, but at the same time it’s hard to see how ending austerity only in some parts of a union would work out in practice. The EU certainly doesn’t seem eager to grant Greece an austerity-free status, and how Cameron would tackle this mandate issue is unclear. Can he abandon austerity in Scotland and continue it in the rest of the UK? And if he can’t do it in Scotland, then how can he in Wales?

Cameron thinks he’s riding a major victory, and he will now be called upon to deliver on his election promises, which just so happen to include a deepening and acceleration of austerity measures. At a time when we can see even such sworn antagonists as Steve Keen and Paul Krugman agree on the failure of austerity as a financial/fiscal policy measure, David Cameron insists on inflicting more of it on Britain in the exact same way that the Troika insists on more of the same for Greece. And he’s not kidding.

Here are two British pieces on the topic; first the Mirror:

100 Days Of Tory Cuts Carnage As George Osborne Plans To Fast-Track £12 Billion In Savings

George Osborne is preparing to drastically speed up the pace of £12 billion in brutal spending cuts. Before the election, Tories feared proposals to slash cash from the welfare bill would have to be watered down under any coalition deal. But now the party has a majority, the Chancellor plans to race ahead with his austerity cuts to meet his pledge of eliminating the deficit by 2018. Senior Tories revealed how ministers would try to push through the majority of the welfare cuts within two years instead of the original three-year timescale.

But Prime Minister David Cameron hopes to kick it off with a 100-day policy blitz. One senior party source admitted: “When it comes to cuts, we want the pain to be out of the way long before the next general election. Without the restraint of the Lib Dems, it means we can go further and faster when it comes to controlling the welfare bill.” The new Conservative Government is due to present its programme of legislation to Parliament through the Queen’s Speech on May 27. But officials are already drawing up worrying plans to squeeze a host of benefits.

Ministers are looking at means testing unemployment benefits like Jobseeker’s Allowance, according to a document leaked earlier this year. Other proposals to slash the £125 billion welfare bill include limiting Child Benefit payments to the first two children and taxing Disability Living Allowance and Personal Independence Payments. The Tories also want to reduce the maximum any household can receive in benefits from the current £26,000 a year to £23,000. Other cuts include a £3.8 billion raid on tax credits, which are relied on by millions of families on low wages.

The number of people who get Carer’s Allowance could also fall by 40%. Such moves are likely to pile the pressure on food banks and charities as the cost of living crisis deepens. Senior Labour MP John Mann warned: “People don’t realise what’s going to hit them. The entire benefits system is going to crumble and almost everyone will lose out apart from private landlords who will remain untouched. It will be a return to the Victorian age.” “Everyone will have to stand on their own two feet, even people with no legs.”

And second, this is from Here Is The City:

Tories Weigh Up Options For £12 Billion Welfare Cuts

Either the poorest in society or the “hard-working people” courted by the Conservatives face being targeted under the party’s commitment to £12bn of welfare cuts, experts have said. One way of achieving the £12bn goal could be by reducing the £38bn cost of out-of-work payments to working-age families, for example by cutting entitlements to a third of the recipients, according to John Hills at the London School of Economics.

“But that would mean hitting lone parents and disabled people and create pressure on food banks and hardship on a scale that would be hard to imagine,” Hills said. “Alternatively you could take it from hard-working families who rely on housing benefit and tax credits. That’s a lot of pain from a large number of people who have just voted for you.”

[..] To justify the cuts, the Tories are likely to employ a narrative of skivers v strivers, suggesting a clear division between a large, permanently welfare-dependent group and the rest of the population who pay taxes to support it. The Tories know this is a fiction, but it is a politically useful one. Welfare is mainly about taking money from those of working age – when incomes are high on average – and giving cash and services to older people, and families with children.

A DWP paper setting out options was leaked to the BBC in March. [..] if the BBC’s document is any guide, George Osborne – reappointed as chancellor – could look to strip £1bn from carers’ allowances; means-test national insurance-backed unemployment benefits, saving another £1.3bn; and tax disability benefits to raise another £1.5bn. Then there’s limiting child benefit to two children – affecting a million families to save another £1bn.

The Institute For Fiscal Studies noted: “These may well not be the decisions that a future Conservative government would make. But it is likely they would have to make changes at least as radical as this to find £12bn a year.” Not all these changes would require a new bill, but if past form is anything to go by then the Tories would want to lay a trap for their opponents with new legislation so as to paint anyone who votes against it – such as the anti-austerity Scottish Nationalists – as pro-welfare parties prepared to spend lavishly on the idle poor.

How this will not end badly and ugly is hard to see. As we quoted in an earlier article, the number of foodbanks in Britain went from 66 to 421 in the first 5 years of Cameron rule. How many more need to be added before people start setting cities on fire? Or even just: how much more needs to happen before the Scots have had enough?

Very much like the Greeks, the Scots unambiguously voted down austerity. And in very much the same fashion, they face an entity that claims to be more powerful and insists on forcing more austerity down their throats anyway. It seems inevitable that at some point these larger entities will start to crack and break down into smaller pieces. As empires always do. Now, the EU was of course never an empire, there’s just tons of bureaucrats dreaming of that, and Britain is a long-decayed empire.

Larger entities like empires are more powerful only for a limited period of time, for as long as the center can make the periphery benefit; once the center starts feeding off the periphery, the endgame starts. This can take a while, but it will happen, it’s a law of nature. When periphery regions figure out they have nothing to lose by splitting off, they will elect to stand on their own two feet and be their own boss.

And it’s not as if either Scotland or Greece lack a history of fighting for their independence. Just a reminder.

What’s next for Greece is by now anybody’s guess. And a whole other story too. What’s next for Britain and Scotland is or seems -for now- somewhat less convoluted.

Nicola Sturgeon will have conversations with Cameron. Who will offer her more ‘autonomy’ for Scotland. But the budget, also for Scotland, is decided in London, not in Edinburgh. How Cameron’s austerity 2.0 can be made to fit with the SNP’s anti-austerity message, their number 1 priority in last week’s elections, is hard to fathom. Label us curious to see what happens.

It would seem that there are two referendums in Britain’s future. First, the EU in-or-out referendum Cameron promised his voters. It looks like the majority of British voters will opt to leave the EU, or at least partially; things may change if or when Cameron convinces Brussels to change the entire concept of the Union to ‘pacify’ the UK. But that majority will probably come from England only. Scotland, Wales and Northern Ireland will -almost certainly- choose to remain in the EU. And it just so happens that Sturgeon addressed the issue in the Guardian in no uncertain terms:

There are huge issues and challenges ahead – not least the looming question of the UK and Scotland’s place in Europe. A key requirement of the prime minister’s in-out referendum should be a “double-lock” requiring the assent of all four UK home nations before any withdrawal from the EU..

It doesn’t look like there will a general endorsement for the Tories’ vision for leaving the EU. So what’s your run of the mill Cameron to do? Ignore the Scottish demand for that ‘double-lock’? That wouldn’t be very democratic, and it would raise the chance of the UK falling to pieces. No easy choices, no easy pieces for David.

The other referendum, brought closer, as time passes, by Cameron’s multiple conundrums, is of course about Scottish independence. If London holds on to its position on austerity, it’s hard to see how there can not be another of these plebicites, soon.

Granted, it would depend on how much of a warrior Nicola Sturgeon is. Just like in Greece, the outcome of the Syriza vs Troika battle depends on how much chutzpah each side carries. And how much integrity. That last one should be an easy contest. London and Brussels have none, Athens and Edinburgh may yet find some.

All in all, yours truly is going for the center cannot hold.

Britain: A Functioning Democracy It’s Not

May 082015
 
 May 8, 2015  Posted by at 6:39 pm Finance Tagged with: , , , , , , ,  9 Responses »


Jack Delano Long stairway in mill district of Pittsburgh, Pennsylvania 1940

We at the Automatic Earth always try to steer clear of elections as much as possible, because there are no functioning democracies left in the west -no more than there are functioning markets-, and no journalists reporting on them either. Interesting question, by the way: how can a journalist report on a democracy that isn’t there? And where in that setting does news turn to mere opinion, and where does opinion then become news ?

Still, of course we caught some bits of the UK elections along the way regardless. The decisive moment for us must have been when Jeremy Paxman interviewed David Cameron at the BBC, and asked him if he knew how many foodbanks had been added in Britain since he took office 5 years ago.

Cameron, well duh obviously, had no idea, and instead of answering the question he started a flowery discourse praising the many volunteers who work in the foodbanks he didn’t know existed. Paxman cut him short and said there were 66 when Cameron came to power, and 421 now. Apparently in Britain, volunteers are needed to take care of the needy, they’re not going to pay people to do that. You would think that takes care of Cameron’s candidacy, but you couldn’t be more wrong.

At least Paxman seemed to try, but interviews like his should take place on the eve of an election, not 6 weeks before them like this one. That leaves far too much time for spin doctors to repair damage done by their candidate’s ignorance and gullibility. It’s crazy enough that party leaders can refuse to discuss each other, let alone the public, in public. Then again, that too would only be significant if there would be an actual democracy in Britain.

As things are, they might as well have put the royal baby in charge as soon as she was born, or for that matter the newborn macaque in Japan that ‘stole’ her name (at least there was an honest public ballot for that). Or perhaps the adorable little monkey can take over polling in the UK, since we can’t imagine any British pollsters still being employed tomorrow morning, not with the degrees to which they missed any and all election outcomes today.

A whole bunch of ‘leaders’ will leave too, but there’s plenty of shades of dull grey humanoids waiting in the wings to replace them. Besides, though Nigel Farage has often been dead on in describing, in the European Parliament, the inherent failures of Brussels, at home he’s never been more than a sad lost clown. I had to think hard about LibDem Clegg’s first name, even needed to look it up -it’s Nick- , and that sort of says it all: he would do well to change his name to Bland.

And perhaps Ed Milibland should do the same. Can anyone ever really have believed that this lady’s underwear salesman could have won this election? Or did they all just fudge the numbers so they had material to print? Ed Milibland never stood a chance. And Russell Bland can now go lick his wounds from supporting the guy, and no, Russell, saying now that you’re just a comedian won’t do the trick. You’ve been tainted. If it’s any consolation, you screwed up the same way Springsteen did when he played Obama’s support act. No surrender, no excuses.

Milibland, by the way, had one last no-no to offer in stepping down. He tweeted: “I am grateful to the people who worked on our campaign and for the campaign they ran. The responsibility for the result is mine alone.” Sorry, boyo, but that just ain’t so. The responsibility lies at least as much with the people who put you in the leader’s chair that doesn’t fit you, and with those who kept you in that chair throughout the campaign.

All Brits should feel blessed that they’re not in America, where these campaigns, which are equally hollow and devoid of democratic principles, last ten times as long. If your blessings are few, do count them.

But then, we all get what we deserve. If the Brits want to be governed and gutted by the same people who raised the number of foodbanks the way they have, by a factor of seven in five years, and who fabricated the pretense of a functioning economy by blowing the biggest bubble in British history in selling off London town to monopoly money printing Chinese, Russian expat oligarchs and other such impeccable and blameless world citizens, if that’s what the Brits want, then let them have it.

One things’s for sure: Cameron and his ilk, now that they have a majority, will let them have it. And then some. In reality, though, even if they deserve what they get, there’s no vox populi here: the people have not spoken, the people have done what the press told them to do. Like in so many countries, there effectively is no press anymore in Britain, at least not in the sense that we used to knowl; the press no longer asks questions. Which begs yet another question: what is first to go, the media or the democratic values?

Peter Yukes wrote this for Politico just before the election:

The British Press Has Lost It

For months polls have put Conservatives and Labour close with about third of the vote each, and smaller parties destined to hold some balance of power. But there has been no balance in the papers. Tracked by Election Unspun, the coverage has been unremittingly hostile to Ed Miliband, the Labour challenger, with national newspapers backing the Conservative incumbent, David Cameron over Labour by a ratio of five to one.

Veteran US campaign manager David Axelrod finds this politicization of the print media one of the most salient differences with the US. “I’ve worked in aggressive media environments before,” he told POLITICO, “but not this partisan.” Axelrod may have ax to grind as he advises the Labour Party, but even a conservative commentator and long-serving lieutenant of Rupert Murdoch has been shocked. “Tomorrow’s front pages show British press at partisan worst,” Andrew Neil, former editor of the Sunday Times rued. “All pretense of separation between news and opinion gone, even in ‘qualities.’”

Excuse me, but how is ‘this politicization of the print media one of the most salient differences with the US’? Which US paper has not long been grossly politicized? It’s a shame Yukes devalues his article with such statements.

And that’s the difference. The whole newspaper industry seems to be affected by the tabloid tendentiousness trade-marked by Murdoch’s best-selling the Sun when it roared, in 1992, “It’s the Sun Wot Won It.” The Daily Mail specializes in political character assassination and the ‘Red Ed’ tag was predictable. But when the paper went on from attacking Miliband’s dead father to a hit-job on his wife’s appearance, the politics of personal destruction sank from gutter to sewer.

In this precipitous race to the bottom, perhaps the Daily Telegraph had the steepest fall. Known as a bastion of the Tory thinking, it had long been respected for separating fact from comment. During this election cycle is was caught sourcing its front pages direct from Conservative Campaign HQ, seeming to confirm the parting words of its senior political commentator, Peter Oborne, that it was intent on committing “a fraud on its readership.”

Well, at least it’s no surprise that the Telegraph does what it’s always done. Nobody expects them to be impartial.

The paper of record, The Times, fared a little better, in that there has been two vaguely positive front pages about Miliband — compared to 18 for Cameron.Meanwhile, the publication that arose in rebellion to Murdoch’s acquisition of the Times in the 80s, The Independent, shocked most its staff and readership by backing a continued Lib Dem/Tory Coalition. Reports said the endorsement was a ‘diktat’ from the wealthy Russian-born owner, Evgeny Lebedev, causing many to mock its original ad slogan “The Independent: It’s Not. Are You?” or renaming it ‘The Dependent’.

Even the sober, tight-lipped Financial Times, which once supported Blair and endorsed Obama, lost credibility. The paper said it backed another Conservative-led coalition because Ed Miliband was too “preoccupied with inequality.” But that magisterial tone was undermined when it emerged the leader writer, Jonathan Ford, was pictured in the notorious 1987 photo of Oxford’s elite hard drinking Bullingdon Club next to the Tory mayor Boris Johnson and just below David Cameron.

A bigger problem would seem to be that Milibland can’t have been far from that club; he attended much of the same educational institutions the other ‘leader elites’ did. Yukes is on to something, but he’s missing the point.

Therein lies the problem, and an indication the newspaper world is a microcosm of a wider malaise. The Conservative politician John Biffen once said “whenever you find a senior politician and a powerful media owner in private conclave, you can be certain that the aims of healthy, plural democracy are not being well-served.” This election that conclave looks like an exclusive club.

Rarely have the economic interests of the handful of wealthy men who own most the press (nine men own 90% of all national and regional titles) appeared so brutally transparent. Most of the conservatives among them don’t like Cameron’s modernizing project, or the fact he looks set to fail to get a majority for a second time. But they fear Miliband with a passion because he threatens their power in several ways.

They fear(ed) Milibland? I don’t believe that for a second. I think it’s much more likely that they’ve all intentionally exaggerated Milibland’s poll numbers to make it look like there was an actual race going on. That they were only too happy to have a guy run against theirs that everybody could see from miles away would never be a contender (maybe if his first name would have been Marlon? or Stanley?)

Plus they have the outdated and somewhat inane electoral system, in which for instance the Green Party got – roughly – one million votes and 1 seat, while the Conservatives accumulated 10 million votes and 331 seats. If you can work that system in your favor, you’re half way home. Moreover, if and when you hire the cream of the crop American spin doctors, as the Cons have certainly done, who love purchasing media, you’re way past halfway.

The system can certainly be given some sort of name, but a functioning democracy it’s not. If anything, a democracy is “A system of government in which power is vested in the people”. Makes us wonder how many clients of the 421 foodbanks and counting have voted Con. and figured they were proudly doing their democratic duty.

Debt Rattle February 25 2015

Feb 252015
 
 February 25, 2015  Posted by at 10:09 am Finance Tagged with: , , , , , , , ,  5 Responses »


Wyland Stanley “J.A. Herzog Pontiac, 17th & Valencia Sts., San Francisco.” 1936

• Yellen Removes Another Obstacle To An Eventual Rate Hike (MarketWatch)
• US Government’s ‘New Rule’ Allows Banks To Completely Make Sh#t Up (Simon Black)
• Greek Finance Chief: We Want To Regain EU’s Trust (CNBC)
• Greek Finance Minister’s Full Letter To The Eurogroup (Kathimerini)
• Greece Has Lost The Gamble But Can Still Come Up Trumps (Guardian)
• How Addiction To Debt Came Even To China (Martin Wolf)
• China Readies Measures to Counter Housing Market Slump (Bloomberg)
• Britain To Send Military Advisers To Ukraine, Announces Cameron (Guardian)
• UK Military Training In Ukraine: Symbolic Move That Risks Russian Ire (Guardian)
• IMF Package for Ukraine: Some Pesky Macros (Constantin Gurdgiev)
• Kiev Cash-For-Gas Fail Could Cost EU Its Supply In 2 Days – Gazprom (RT)
• East Ukraine Artillery Withdrawal In Focus – As Poroshenko Buys UAE Weapons (RT)
• Lure of Wall Street Cash Said to Skew Credit Ratings (Bloomberg)
• Militants, Migrants And The Med: Europe’s Libya Problem (BBC)
• Lester Brown: ‘Vast Dust Bowls Threaten Tens Of Millions With Hunger’ (Guardian)
• The Amherst Cauldron: The Donbass in New England (Albert Bates at ClubOrlov)
• Kick-The-Can Has Morphed Into A Blatant Farce (David Stockman)
• “Remove From Governments The Ability To Interfere With [Our] Rights” (Snowden)
• London: A Set Of Improbable Sex Toys Poking Gormlessly Into The Air (Guardian)

All these financne guys don’t think she’ll do it without letting them know well in advance. But that would defeat the very purpose.

• Yellen Removes Another Obstacle To An Eventual Rate Hike (MarketWatch)

Federal Reserve Chairwoman Janet Yellen on Tuesday took another step closer to the first rate hike since 2006. In testimony to the Senate, Yellen signaled to financial markets the Fed would soon drop the word “patient” from its forward guidance. She softened the blow with several dovish comments that suggest no hurry about actually moving. Markets had expected that when the Fed dropped “patient” from its policy statement that it would mean the a rate hike would follow in the next couple of meetings. That interpretation came from signals Yellen had sent in December. Now, however, Yellen stressed that the Fed wasn’t on automatic pilot and only wanted the flexibility to move “on a meeting-by-meeting basis.”

Several analysts said a June rate hike remained on the table if the Fed decides to drop the word “patient” from its policy statement on March 17-18. Several Fed officials have said they want to drop “patient” from the Fed’s next policy meeting scheduled in mid-March. Minutes of the January meeting released last week showed Fed officials were concerned with how the market might react if “patient” was dropped. Tom Simons, an economist at Jefferies in New York, said Yellen had effectively neutered the word so it no longer even matters whether the word stays or goes in the Fed’s next policy statement. “Now ‘patient’ doesn’t mean a whole lot,” Simons said.

Read more …

No end to insanity.

• US Government’s ‘New Rule’ Allows Banks To Completely Make Sh#t Up (Simon Black)

Banks still use accounting tricks to hide their true condition. Bloomberg showcased one such technique last year, exposing the way that many US banks are rebooking their assets from “available for sale (AFS)” to the “held-to-maturity (HTM)” designation. This is a very subtle move that means nothing to most people. But to banks, it’s a highly effective way of concealing losses they’ve suffered in their investment portfolios. Banks ordinarily buy bonds and other securities with the purpose of generating a return on that money until they have to, you know, give it back to their depositors. That’s why they’re called “available for sale,” because the bank has to sell these assets to pay their depositors back. But here’s the problem– many of these investments have either lost money, or they soon will be. And banks don’t want to disclose those losses.

So instead, they simply redesignate assets as HTM. It’s like saying “I don’t care that these bonds aren’t worth as much money as when I bought them because I intend to hold them forever.” Thing is, this simply isn’t true. Banks don’t have the luxury of holding some government bond for the next 30-years. This is money they might have to repay their customers tomorrow, which makes the entire charade intellectually dishonest. That doesn’t stop them. JP Morgan alone boosted its HTM mortgage bonds from less than $10 million to nearly $17 billion (1700x higher) in just one year. This is a huge shift. Nearly every big bank is doing this, and is doing it deliberately. This is no accident. And there’s only one reason to do it—to use accounting minutia to conceal losses. But the accounting tricks don’t stop there. And in many cases they’re fueled by the government.

One recent example is how federal regulators created a new ‘rule’ which allows banks to consciously reduce the risk-weighting they assigns their assets. The Federal Financial Institution Examination Council recently told banks that, “if a particular asset . . . has features that could place it in more than one risk category, it is assigned to the category that has the lowest risk weight.” This gives banks extraordinary latitude to underreport the risk levels of their investments. Bankers can now arbitrarily decide that a risky asset ‘has features’ of a lower risk asset, and thus they can completely misrepresent their investments. Bottom line, it’s becoming extremely difficult to have confidence in western banks’ financial health. They employ every trick in the book to overstate their capital ratios and understate their risk levels. This, backed by a central bank that is borderline insolvent and a federal government that is entirely insolvent.

Read more …

All the right words.

• Greek Finance Chief: We Want To Regain EU’s Trust (CNBC)

Greece’s new government wants to re-establish trust with the rest of Europe, the country’s finance minister told CNBC, as Athens obtained a four-month extension of its bailout program. “The reason why we have this four-month period is to re-establish bonds of trust between us and our European partners as well as the IMF in order to build a new contract between us and our partners so as to put an end to this debt inflationary spiral,” Yanis Varoufakis said in an interview in Athens. On Tuesday, euro zone finance ministers accepted a list of Greek reform proposals, but warned that the reforms must be expanded in detail before new bailout funding would be released. IMF managing director Christine Lagarde called the proposals “sufficiently comprehensive to be a valid starting point” but said they lacked “clear assurances.”

Varoufakis said implementing new legislation concerning corruption and tax evasion is his top priority. As to whether European officials will approve each and every measure passed in parliament, he said “there is going to be a great deal of toing and froing between us and the institutions and our partners.” The trained economist was also critical of the tense negotiation process with euro zone finance ministers, saying they were dominated by “legalisms.” “You know what I think the main problem is, European finance ministerial meetings are seldom about finance, they’re more about process and rules…and I’m not good at that. I think that when we’re talking about macroeconomics, when we’re talking about Greece’s recovery, I don’t think we have the moral right to talk as if this is applying rules.”

Leftist political party Syrzia’s principal task of reducing Greece’s $366 billion debt has been flatly rejected. Several Greeks, noticeably senior politician Manolis Glezos, claim the party has bent too much to European creditors, making it no different from the previous administration. But Varoufakis rejected the notion that Syrzia has been unfaithful to Greeks: “We got elected to renegotiate Greece’s deal with our partners. What is a negotiation; it’s an attempt to find a compromise. The fact that we compromised is not a U-turn. A U-turn would have been to have led this negotiation to an impasse, and we didn’t do that because we’re interested in a mutually beneficial agreement.”

Read more …

Click the link to see all the specific proposals for Syriza to comply with EU demands, while keeping its promises to voters. It will undergo a thousand changes, but at least everyone can see now what has been put on the table.

• Greek Finance Minister’s Full Letter To The Eurogroup (Kathimerini)

Dear President of the Eurogroup: In the Eurogroup of 20 February 2015 the Greek government was invited to present to the institutions, by Monday 23rd February 2015, a first comprehensive list of reform measures it is envisaging, to be further specified and agreed by the end of April 2015. In addition to codifying its reform agenda, in accordance with PM Tsipras’ programmatic statement to Greece’s Parliament, the Greek government also committed to working in close agreement with European partners and institutions, as well as with the International Monetary Fund, and take actions that strengthen fiscal sustainability, guarantee financial stability and promote economic recovery. The first comprehensive list of reform measures follows below, as envisaged by the Greek government. It is our intention to implement them while drawing upon available technical assistance and financing from the European Structural and Investment Funds.

Truly Yanis Varoufakis, Minister of Finance, Hellenic Republic=

Read more …

No broad vision at the Guardian.

• Greece Has Lost The Gamble But Can Still Come Up Trumps (Guardian)

Tsipras and finance minister Yanis Varoufakis have been criticised for sending out mixed messages, referencing Nazi Germany, longingly gazing towards Russia, and even their untucked shirts. But Greece’s liquidity weaknesses were clear long before Syriza won the elections, and were exploited to the fullest by its lenders. The country’s fragility lies in the fact that it cannot fund itself and is shut out of international bond markets. Between this and the absence of a credible plan to exit the euro, even for use as a negotiating tool, Tsipras and Varoufakis were left with very few options. Whether they blundered into a deal or secured it with clever cajoling is a trivial matter at the moment.

Athens’ diplomatic indiscretions and a helter-skelter approach to negotiations have been matched by stubbornness and contempt in other European capitals. In this environment, everyone can shirk their responsibilities. Greek leaders can substitute progressive policymaking with populist bluster, while their European counterparts can continue to peddle the myth that Greeks have received European solidarity but given nothing in return. If all sides withdraw to these positions over the coming months the Greek people, who have experienced the worst economic downturn since the 1930s and the sharpest fiscal adjustment western Europe has ever seen, will pay an even heavier price than they have over the past five years. There is a great historical responsibility on all those involved to ensure that punishment on one side and retribution on the other are not the main policy drivers over the months to come.

There remains a small window of opportunity in which Syriza can change the narrative. One of the most important concessions it gained in Brussels was to be the main author of its own reform programme – previous governments were merely handed a checklist of changes from its lenders. Of course, the creditor nations will still push for some unpopular measures. But Tsipras and Varoufakis will have a unique chance to show if they are truly committed to tackling Greece’s chronic problems brought about by its decaying institutions, including the public administration and judicial system. These changes could have broad appeal among Greeks, and may also help alter the sour mood that has emerged between Greece and the eurozone over the past few weeks.

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Worse for the others than it is for China.

• How Addiction To Debt Came Even To China (Martin Wolf)

Balance sheets matter. This is the biggest lesson of the financial crises that have rolled across the world economy. Changes in balance sheets shape the performance of economies, as credit moves in self-fulfilling cycles of optimism and pessimism. The world economy has become credit addicted. China could well be the next victim. If we think about balance sheets in the world economy of today, four questions arise. First, what determines vulnerability? Second, where are vulnerabilities now appearing? Third, how are countries coping with the legacy of old debt crises? Finally, can the world economy cope with the new vulnerabilities? Start with the sources of vulnerability. In economies with liberalized financial sectors, the driver towards disaster is far more often private than public imprudence.

Rising property prices and expanded mortgage lending drive many credit booms. A deterioration in the public sector’s balance sheets usually then follows crises. Failure to recognize this link between private excess and public borrowing is wilful blindness. In an update of work on debt and deleveraging, McKinsey notes that between 2000 and 2007, household debt rose as a proportion of income by one-third or more in the US, the UK, Spain, Ireland and Portugal. All of these countries subsequently experienced financial crises. Indeed, huge increases in private sector credit preceded many other crises: Chile in 1982 was an important example of this connection. Ruchir Sharma of Morgan Stanley argues that the 30 most explosive credit booms all led to a slowdown, often a crisis.

A rapid change in the ratio of credit to gross domestic product is more important than its level. That is partly because some societies are able to manage more debt than others; it is partly because a sudden burst in lending is likely to be associated with a sudden collapse in lending standards. Thus, in seeking new vulnerabilities, we need to look for economies that have had sharp rises in private debt. China leads the pack, with a rise of 70 percentage points in the ratio of corporate and household debt to GDP between 2007 and 2014 . If we add financial sector debt, the rise in gross private indebtedness is 111 percentage points. With government debt included, it is 124 percentage points.

China’s huge credit boom has several disquieting features. Much of the rise in debt is concentrated in the property sector; “shadow banking” — that is lending outside the balance sheets of the formal financial institutions — accounts for 30% of outstanding debt, according to McKinsey; much of the borrowing has been put on off-balance-sheet vehicles of local governments; and, above all, the surge in debt was not linked to a matching rise in trend growth, but rather to the opposite. This does not mean China is likely to experience an unmanageable financial crisis. On the contrary, the Chinese government has all the tools it needs to contain a crisis. It does mean, however, that an engine of growth in demand is about to be switched off. As the economy slows, many investment plans will have to be reconsidered. That may start in the property sector. But it will not end there. In an economy in which investment is close to 50% of GDP, the downturn in demand (and so output) might be far more severe than expected.

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More bigger bubble.

• China Readies Measures to Counter Housing Market Slump (Bloomberg)

China is preparing measures to counter a housing market slump and will roll them out if the economy needs support, people with knowledge of the matter said. The government could reduce down-payment requirements for second-home purchases, the people said, declining to be identified as the information isn’t public. Another possible step would be to let homeowners sell properties without paying sales tax after two years, down from five years. China’s new-home prices posted a record year-on-year decline in January, according to Bloomberg Intelligence analysis of government data tracking 70 cities.

Implementation of the new easing policies will depend on whether an economic downturn continues or worsens, the people said. An interest-rate cut in November and the removal of some curbs have failed to revive the property industry. In September, the central bank allowed lower down payments and mortgage rates for some people applying for loans for second homes. As a result of past efforts to curb property speculation and rein in price gains, minimum down payments for second homes are now at least 60%.

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On course for dying British boys and girls.

• Britain To Send Military Advisers To Ukraine, Announces Cameron (Guardian)

Britain was pulled closer towards a renewed cold war with Russia when David Cameron announced UK military trainers are to be deployed to help Ukraine forces stave off further Russian backed incursions into sovereign Ukraine territory. The decision – announced on Tuesday but under consideration by the UK national security council since before Christmas – represents the first deployment of British troops to the country since the near civil war in eastern Ukraine began more than a year ago. Downing Street said the deployment was not just a practical bilateral response to a request for support, but a signal to the Russians that Britain will not countenance further large scale annexations of towns in Ukraine.

The prime minister said Britain would be “the strongest pole in the tent”, and argued for tougher sanctions against Moscow if Russian-backed militias in eastern Ukraine failed to observe the provisions of a ceasefire agreement reached this month with the Ukrainian president, Petro Poroshenko. Downing Street said some personnel would be leaving this week as part of the training mission. Initially 30 trainers will be despatched to Kiev with 25 providing advice on medical training, logistics, intelligence analysis and infantry training. A bigger programme of infantry training is expected to follow soon after taking the total number of trainers to 75. They will not be sent to the conflict zone in eastern Ukraine. Personnel involved in the training elements could spend one or two months in the country, with a command and control deployment lasting up to six months. [..]

He said there was no doubt about Russian support for the rebels. “What we are seeing is Russian-backed aggression, often these are Russian troops, they are Russian tanks, they are Russian Grad missiles. You can’t buy these things on eBay, they are coming from Russia, people shouldn’t be in any doubt about that. “We have got the intelligence, we have got the pictures and the world knows that. Sometimes people don’t want to see that but that is the fact.” He added: “If there was major further incursion by Russian-backed forces and effectively Russian forces into Ukraine, we should be clear about what that is. That is trying to dismember a democracy, a member of the United Nations, a sovereign state on the continent of Europe, and it’s not acceptable.”

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The level of dumb-f#cked-ness is deafening.

• UK Military Training In Ukraine: Symbolic Move That Risks Russian Ire (Guardian)

Britain’s decision to dip its toe into the Ukraine crisis is hardly likely to have a decisive impact on the outgunned and struggling Ukrainian army, but it serves the symbolic purpose of taking a stake in the country’s defence. The 75 British trainers bound for Ukraine in the coming days will provide instruction in command procedures, tactical intelligence, battlefield first aidand logistics, and assess the national army’s infantry training needs. The overall aim, said UK defence sources, was to “improve the survivability” of Ukrainian troops who have been pummelled by heavy artillery, reportedly from weapons such as self-propelled howitzers supplied by Russia in support of the separatists, some of which appear to have been being fired from Russian soil.

The British trainers will be deployed well away from the frontlines, in western Ukraine, to eliminate the risk of British and Russian soldiers inflicting casualties on each other. But it is likely the move will be seized on in Moscow as proof of President Vladimir Putin’s claims that the Russian-backed separatists are fighting a Nato ‘foreign legion’. American advisers will be arriving in spring to train four companies of the Ukrainian National Guard at the Yavoriv training area near the Polish border. The British effort appears to be coordinated with that mission, and by getting its soldiers on the ground first, David Cameron’s coalition government will seek to counter recent criticism that it has been marginalised in the international diplomacy aimed at stopping the war.

It was a Franco-German initiative that led to the latest ceasefire agreement in Minsk between Putin, Angela Merkel and François Hollande earlier this month. That truce shows little sign of taking hold, and sanctions so far do not seem to have dissuaded Putin from intervention in eastern Ukraine, leaving western capitals struggling to come up with other methods of demonstrating their resolve to resist Russian encroachment. For now, training is seen as being of more long-term value than supplying arms to Ukrainian troops, and less directly confrontational with Moscow. “I think it’s obvious that the prime minister was seriously stung by the domestic political response to his absence from the Minsk diplomacy, and therefore feels compelled to take a strong position,” said Shashank Joshi, senior research fellow at the Royal United Services Institute. “I also think it reflects a not-unreasonable judgment that the Minsk agreement is breaking down, and that further coercive diplomacy is inevitable.

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Debt prison. The entire nation.

• IMF Package for Ukraine: Some Pesky Macros (Constantin Gurdgiev)

Ukraine package of funding from the IMF and other lenders remains still largely unspecified, but it is worth recapping what we do know and what we don’t.Total package is USD40 billion. Of which, USD17.5 billion will come from the IMF and USD22.5 billion will come from the EU. The US seemed to have avoided being drawn into the financial singularity they helped (directly or not) to create. We have no idea as to the distribution of the USD22.5 billion across the individual EU states, but it is pretty safe to assume that countries like Greece won’t be too keen contributing. Cyprus probably as well. Ireland, Portugal, Spain, Italy – all struggling with debts of their own also need this new ‘commitment’ like a hole in the head.

Belgium might cheerfully pony up (with distinctly Belgian cheer that is genuinely overwhelming to those in Belgium). But what about the countries like the Baltics and those of the Southern EU? Does Bulgaria have spare hundreds of million floating around? Hungary clearly can’t expect much of good will from Kiev, given its tango with Moscow, so it is not exactly likely to cheer on the funding plans… Who will? Austria and Germany and France, though France is never too keen on parting with cash, unless it gets more cash in return through some other doors. In Poland, farmers are protesting about EUR100 million that the country lent to Ukraine. Wait till they get the bill for their share of the USD22.5 billion coming due.

Recall that in April 2014, IMF has already provided USD17 billion to Ukraine and has paid up USD4.5 billion to-date. In addition, Ukraine received USD2 billion in credit guarantees (not even funds) from the US, EUR1.8 billion in funding from the EU and another EUR1.6 billion in pre-April loans from the same source. Germany sent bilateral EUR500 million and Poland sent EUR100 million, with Japan lending USD300 million. Here’s a kicker. With all this ‘help’ Ukrainian debt/GDP ratio is racing beyond sustainability bounds. Under pre-February ‘deal’ scenario, IMF expected Ukrainian debt to peak at USD109 billion in 2017. Now, with the new ‘deal’ we are looking at debt (assuming no write down in a major restructuring) reaching for USD149 billion through 2018 and continuing to head North from there.

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Maybe the Russians will just do it and have the charade over with.

• Kiev Cash-For-Gas Fail Could Cost EU Its Supply In 2 Days – Gazprom (RT)

Russia will completely cut Ukraine off gas supplies in two days if Kiev fails to pay for deliveries, which will create transit risks for Europe, Gazprom has said. Ukraine has not paid for March deliveries and is extracting all it can from the current paid supply, seriously risking an early termination of the advance settlement and a supply cutoff, Gazprom’s CEO Alexey Miller told journalists. The prepaid gas volumes now stand at 219 million cubic meters. “It takes about two days to get payment from Naftogaz deposited to a Gazprom account. That’s why a delivery to Ukraine of 114 million cubic meters will lead to a complete termination of Russian gas supplies as early as in two days, which creates serious risks for the transit to Europe,” Miller said.

Earlier this month, Russian Energy Minister Aleksandr Novak estimated Ukraine’s debt to Russian energy giant Gazprom at $2.3 billion. In the end of 2014, Kiev’s massive gas debt that stood above $5 billion, forced Moscow to suspend gas deliveries to Ukraine for nearly six months. On December 9, Russia resumed its supplies under the so-called winter package deal, which expires on April 1, 2015. [..] On Monday, Ukrainian state energy company Naftogaz accused Gazprom of failing to deliver gas that Kiev had paid for in advance. Naftogaz says Russia has broken an agreement to deliver 114 million of cubic meters of natural gas to Ukraine by delivering only 47 million cubic meters.

During a meeting with President Vladimir Putin on February 20, Russian Prime Minister Dmitry Medvedev expressed concern about an increase in daily applications by Ukraine for the supply of gas, TASS reports. He noted that “Ukraine’s consumers have requested a larger supply; the volume has increased by 2.5 times. This means that the prepaid volumes left are enough for no more than two to three days.”

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Kiev is not capable of saying anything true.

• East Ukraine Artillery Withdrawal In Focus – As Poroshenko Buys UAE Weapons (RT)

While the foreign ministers of France, Germany, Russia and Ukraine were meeting in Paris to talk about the Eastern Ukraine peace settlement, it was revealed that the Ukrainian president has struck a deal on arms supplies from the UAE. The four ministers agreed on the need for the ceasefire to be respected, as well as on the need to extend the OSCE mission in Eastern Ukraine, reinforcing it with more funding, personnel and equipment. It’s important for Kiev troops and the rebels to start withdrawing heavy weapons right now, without waiting for the time “when not a single shot is fired,” Russian Foreign Minister Sergey Lavrov said after the meeting.

He added that his German and French counterparts thought it a positive development that the Donetsk and the Lugansk rebels had started to pull their artillery back. “The situation has significantly improved, that was acknowledged by my partners,” Lavrov said. “However, sporadic violations are being registered by the OSCE observers.” The withdrawal of heavy weaponry by Kiev troops and the rebels is part of the ceasefire deal struck in Minsk earlier in February. The Donetsk militia has announced it is complying. “Today at 9 am our units continued the pullback of heavy weaponry from the separation line,” said Eduard Basurin, spokesman for the self-proclaimed Donetsk People’s Republic, Tass news agency reported. [..]

Ukrainian President Petro Poroshenko has meanwhile reached an agreement on weapons supplies from the United Arab Emirates. That’s according to a Facebook post by advisor to Ukrainian Interior Minister, Anton Gerashchenko. The deal was struck with the Crown Prince of Abu Dhabi and deputy supreme commander of the UAE Armed Forces, Mohammed bin Zayed bin Sultan Al Nahyan. “It’s worth emphasizing that unlike Europeans and Americans, the Arabs aren’t afraid of Putin’s threats of a third world war starting in case of arms and ammunition supplies to Ukraine,” Gerashchenko wrote. He also said he believed the UAE blamed Russia for the drop in oil prices. “So, this is going to be their little revenge,” the adviser said.

Gerashchenko said the types of weapons to be delivered and the volume of the supplies could not be disclosed. The UAE supplying weapons to Ukraine could be part of a US covert operation, former US diplomat James Jatras told RT. “This discussion in Washington about supplying weapons has been going on for some time. Usually that indicates that some kind of a covert program is already in operation and that we already are supplying some weapons directly,” he said. Jatras added that it is hard to believe that UAE would sell these weapons to Ukraine “without a green light from Washington.”

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Nobody expects anything other than a stink on Wall Street anymore. Pecunia DOES olet.

• Lure of Wall Street Cash Said to Skew Credit Ratings (Bloomberg)

Michelle Choi, an analyst for Moody’s Investors Service, gave a credit rating to bonds issued by a New Jersey town in September. In October, she switched sides and started working for the town’s underwriter, Morgan Stanley. Choi is one of hundreds of employees at Moody’s and other credit-rating companies, including Standard & Poor’s and Fitch Ratings, who’ve gone to work for Wall Street since the 2008 financial crisis exposed the conflicts at the heart of the ratings business. While there’s no evidence that Choi’s job-hunting influenced the grade she gave Evesham Township’s debt, the rising number of job changes in the industry raises a question: can credit analysts be impartial about grading bonds while looking for employment at banks that underwrite them? The ratings companies say the answer is yes.

An academic study by longtime industry observers suggests otherwise. “The fact that analysts can get employed by the issuers is a problem and the SEC should be doing something about it,” said Marcus Stanley, policy director at Americans for Financial Reform, a Washington-based coalition of 200 advocacy groups. Ratings analysts can work for issuers immediately because there’s no rule about a waiting period like there is in other industries. Accountants, in some cases, must wait one year before working for a company they audited. Choi’s new job at Morgan Stanley is “an internal risk function and is not part of the underwriting group,” said Mary Claire Delaney, a Morgan Stanley spokeswoman. Since 2008, more than 300 analysts have left the major ratings companies for jobs at banks and other debt issuers, according to U.S. SEC data.

Last year alone, more than 80 people made the switch, the most since the SEC began compiling such data in 2006. That’s out of a total of about 4,000 analysts employed by the ratings firms, according to SEC data. The migration shows that the credit graders and Wall Street banks are as close as ever. Their symbiotic relationship first came to widespread attention in the aftermath of the 2008 credit bust, when Moody’s and S&P were accused of inflating the rankings of mortgage bonds in order to win and keep business from underwriters. The U.S. Justice Department has been investigating the role the two played in the fiasco, and this month S&P agreed to pay $1.5 billion, without admitting guilt, to settle cases with state and federal authorities. The investigation into Moody’s continues.

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More threats.

• Militants, Migrants And The Med: Europe’s Libya Problem (BBC)

Islamic State militants in Libya have vowed to attack Europe. Meanwhile, boatloads of migrants flee the collapsing state for European shores. Could the Mediterranean migration mask an influx of militants? Italy and Egypt have warned that Islamic State (IS) militants could hide among thousands of migrants rescued by European patrols. Both countries are troubled by the situation in Libya and have an interest in influencing it. However, neither has given any evidence to support its warnings. The migrants are mostly from Syria and sub-Saharan Africa. The idea that they pose a threat evokes a vicious logic at odds with humanitarian imperatives: refugees bring conflict, as conflict breeds refugees. What threat do the migrant boats pose? And what – if anything – can be done about it? Last week, Libyan militants allied to IS released a video that appeared to show the beheading of 21 Egyptian prisoners. The choreography echoed videos shot in Iraq and Syria.

However, instead of desert, the prisoners were positioned on a beach, against the grey Mediterranean Sea. Addressing the camera, a masked man promised attacks in Europe. “And now we are south of Rome, on the land of Islam, Libya,” he said, “sending you another message.” The video is thought to have been filmed near Sirte, a Libyan coastal town where Islamic State has gained a foothold. A few miles off that coast last week, an Italian operation rescued some 2,000 migrants from stormy waters. As one of the empty vessels that had carried the migrants was being towed away, a speedboat swept off the Libyan shore. The men aboard it were armed with assault rifles and, according to Italian officials, they wanted their boat back. The confrontation was the latest sign that some of the armed groups thriving in the Libyan chaos are also involved in human-trafficking.

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Kudos to the man. A giant.

• Lester Brown: ‘Vast Dust Bowls Threaten Tens Of Millions With Hunger’ (Guardian)

Vast tracts of Africa and of China are turning into dust bowls on a scale that dwarves the one that devastated the US in the 1930s, one of the world’s pre-eminent environmental thinkers has warned. Over 50 years, the writer Lester Brown has gained a reputation for anticipating global trends. Now as Brown, 80, enters retirement, he fears the world may be on the verge of a greater hunger than he has ever seen in his professional lifetime. For the first time, he said tens of millions of poor people in countries like Nigeria, India, Pakistan and Peru could afford to eat only five days a week. Most of the world was exhausting its ground water because of overpumping. Yields were flatlining in Japan. And in northern and western China, and the Sahel region of Africa – an area already wracked by insurgency and conflict – people were running out of land to grow food.

Millions of acres of were turning into wasteland because of over-farming and over-grazing. “We are pushing against the limits of land that can be ploughed and the land available for grazing and there are two areas of the world in which we are serious trouble now,” Brown said. “One is the Sahel region of Africa, from Senegal to Somalia. There is a huge dust bowl forming now that is actually stretching right across the continent and that dust bowl is removing a lot of top soil, so eventually they will be in serious trouble,” he said. In areas of China, villagers were abandoning the countryside because the land was too depleted to raise flocks or grow food. “At some point there will be a reckoning,” he said.

“They will be abandoning so much land, both for farming and for grazing, that it will restrict their efforts to expand food production.” The result would be far worse than anything America saw in the 1930s. “Our dust bowl was serious, but it was confined and within a matter of years we had it under control … these two areas don’t have that capacity.” Brown has previously used his broad vision and his fluency with data to identify and explain major developments in the global food system and environment – as a junior analyst for the US Department of Agriculture, founder of the first US environmental thinktank, the Worldwatch Institute, and now as founder and president at the Earth Policy Institute. This latest warning – that demand for food is fast outstripping supply – may be one of his last as an institutional insider.

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Great piece by Albert the Über-Hippie. I finally get to post something by him.

• The Amherst Cauldron (Albert Bates at ClubOrlov)

Wall Street Bankers watch warily from their penthouse eyries the power that populist movements like Occupy is gaining, especially in Albany but also in the New England States. Determined to thwart them, lest a revolt gather momentum against their interests, they decide to funnel millions of dollars to right wing rabble, to cause massive trouble… and to then wrest order out of the ensuing chaos (this part of their plan was always a bit sketchy, but they couldn’t think of anything better). Unfortunately, the only psychologically normal right-wing rabble they can find wouldn’t pass the physical due to weight issues and is permanently glued to giant plasma TV screens with their mouths stuffed full of cheese doodles, and so they have to go with the rejects: skinheads, neo-Nazis, gun freaks and prepper wing-nuts.

A State Department official is tasked with feeding and herding these rejects together. After a sudden and severe downturn in the stock market, the economy goes into free-fall and events spin out of control. Anarchist rallies take place throughout New England. A prominent Goldman Sachs broker’s Connecticut estate is overrun and videos posted to YouTube show pearled chandeliers and gold faucets. Throughout New England, grassroots efforts drive legislators to enact sweeping reforms. A new “uniform code” of banking reforms, designed to break finance cartels and prosecute fraud, takes hold among the states, snatching the initiative away from the bureaucratic heel-draggers at the federal level.

Then comes the great day that changes everything. It starts as a small protest march in Albany, to which the State Police predictably overreact. But then a group of snipers, of unknown provenance, kill a hundred or so people, both protesters and police among them. After that incident, a group of rioters, some secretly in the pay of Wall Street and coordinated by the US State Department, seize the Capitol in Albany. Much to everyone’s surprise, the New York National Guard defects to the rebel side. Despite impassioned pleas from the Canadian Premier, Washington does not send in troops to restore order. In the anarchy that is Albany, a slate of fresh faces wins a statewide referendum and forms a new state government.

It is quickly endorsed by other parts of the emergent “New England Federation” of states, all of which want to push back against the Wall Street bankers and their corruption by enlarging the scope of the uniform code. But the federally-funded wing-nuts also move quickly to consolidate their power, pushing through a wide-reaching agenda of oppressive laws. Some states in New England try to distance themselves, while others serve as apologists. Maine surprises everyone when it decides that it wants nothing to do with any of this and votes to secede and join Canada. Washington vows to take Maine back but it is trying to walk a narrow line with Canada, whose fossil fuel resources it views as indispensable.

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David is right of course, but not everyone can afford his lack of patience.

• Kick-The-Can Has Morphed Into A Blatant Farce (David Stockman)

Kick-the-can has morphed into a blatant farce. Everywhere in the world central banks and financial officialdom are engaging in desperate, juvenile maneuvers to buy time – amounting to hardly a few weeks at a go. Never before has the debt-saturated, speculation-ridden global casino rested upon such a precarious foundation. This week, for instance, Janet Yellen will again waste two days of Congressional hearings in forked-tongue equivocations about an absolutely stupid issue. Namely, the exact date when money market interest rates will be permitted to blip upward from the zero bound by even 25 basis points. But this “lift-off” drama is flat-out surreal.

How could it possibly matter whether ZIRP will have been in place by 80 months or 83 months from its inception point way back in December 2008? There is not a single household or business on main street America which will change its behavior in the slightest during the next year regardless of whether the federal funds rate is 5 bps, 30 bps or 130 bps. The whole Kabuki dance in the Eccles Building is about hand signals to Wall Street carry traders; its a reflection of the desperate fear of our monetary politburo that having inflated for the third time this century the mother of all financial bubbles, they must now keep it going literally one meeting at a time—lest it splatter again and destroy the illusion that an egregious spree of money printing has saved the main street economy.

Likewise, it now transpires that the bruising political war of words between the Germans and the “radical” Greek government has been suspended for another few weeks. And the reason is a pathetic fear that unites the parties despite their irreconcilable substantive policy differences. Namely, that the markets will crater upon even a hint that a real solution is on the table, and that the way to keep the beast at bay is to cover their eyes, kick-the-can and hope something turns up to avert the next crisis a few weeks down the road. Still, this is getting beyond juvenile. If there were any adults in the room they would focus on quickly shaping a workable Greek default and exist—-not on perpetuating the lie that Greece can ever recover from its debt servitude to the EU superstate and IMF.

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“We will remove from …”

• “Remove From Governments The Ability To Interfere With [Our] Rights” (Snowden)

If people lose their willingness to recognize that there are times in our history when legality becomes distinct from morality, we aren’t just ceding control of our rights to government, but our agency in determing our futures. How does this relate to politics? Well, I suspect that governments today are more concerned with the loss of their ability to control and regulate the behavior of their citizens than they are with their citizens’ discontent. How do we make that work for us? We can devise means, through the application and sophistication of science, to remind governments that if they will not be responsible stewards of our rights, we the people will implement systems that provide for a means of not just enforcing our rights, but removing from governments the ability to interfere with those rights.

You can see the beginnings of this dynamic today in the statements of government officials complaining about the adoption of encryption by major technology providers. The idea here isn’t to fling ourselves into anarchy and do away with government, but to remind the government that there must always be a balance of power between the governing and the governed, and that as the progress of science increasingly empowers communities and individuals, there will be more and more areas of our lives where—if government insists on behaving poorly and with a callous disregard for the citizen—we can find ways to reduce or remove their powers on a new—and permanent—basis. Our rights are not granted by governments. They are inherent to our nature. But it’s entirely the opposite for governments: their privileges are precisely equal to only those which we suffer them to enjoy.

We haven’t had to think about that much in the last few decades because quality of life has been increasing across almost all measures in a significant way, and that has led to a comfortable complacency. But here and there throughout history, we’ll occasionally come across these periods where governments think more about what they “can” do rather than what they “should” do, and what is lawful will become increasingly distinct from what is moral. In such times, we’d do well to remember that at the end of the day, the law doesn’t defend us; we defend the law. And when it becomes contrary to our morals, we have both the right and the responsibility to rebalance it toward just ends.

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Brilliant article by Ian Martin.

• London: A Set Of Improbable Sex Toys Poking Gormlessly Into The Air (Guardian)

I wonder what in 100 years from now it will be, London. The city that privatised itself to death. Abandoned to nature, maybe, the whole place a massive, feral version of that mimsy garden bridge over the Thames currently being planned by the giggling classes. Poor London, the ancient and forgotten metropolis, crumbling slowly into an enchanted urban forest. Imagine. In 2115, all the lab-conjured animals in Regent’s Park Jurassic Zoo are free to roam, reliving their evolution. A diplodocus there, grazing in the jungled Mall. Look, a stegosaurus asleep in the ruins of Buckingham Palace. High above the forest canopy, a lone archaeopteryx soars, where once hundreds of drones glided through YouTubed firework displays.

Perhaps eminent historians will study London in the early 21st century, see how its poorer inhabitants were driven out, observe how its built environment was slowly boiled to death by privatisation. And they will wonder why people tolerated this transfer of collective wealth from taxpayers to shareholders. And they will perhaps turn their attention to Eduardo Paolozzi’s fabled mosaics at Tottenham Court Road underground station. Back in 2015, a debate has bubbled briefly, after some of these lovely, publicly owned mosaic murals were quietly dismantled as part of the station’s thorough £400m Crossrail seeing-to. I say “debate”; it was really only that polarised quackbait thing we have now: Click If You Think The Mosaics Are Great, We Should Save What’s Left Of Them v Smash Them Up They’re Ugly, Anyway Who Cares It’s Just Patterns On A Wall.

Arguments about the aesthetics of Paolozzi’s mosaics missed the point, it seemed to me, which has less to do with the merit of the art itself and more to do with what, in the long run, it turned out the art was for. Paolozzi’s legacy had stood intact for three decades. Not just as 1,000 sq m of charming, optimistic art, but as 1,000 sq m of commercial retardant. You can’t paste an ad on to a wallful of public art. You can’t fix one of those irritating micromovies over it, telling a vacuous five-second story about investments or vitamins or hair. The Paolozzi mosaics went up as decorative art, just as privatisation was about to explode like a dirty bomb all over the public realm. What survives at Tottenham Court Road station is a brave, forlorn little seawall set against a stormtide of corporate advertising.

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How Far Is It From Kiev To Athens?

Feb 252015
 
 February 25, 2015  Posted by at 3:18 am Finance Tagged with: , , , , , , , , , , , ,  8 Responses »


Gordon Parks “New York, New York. Scene in Harlem area.” 1943

Riddle me this, Batman. I don’t think I get it, and I definitely don’t get why nobody is asking any questions. The IMF and EU make a lot of noise – through the Eurogroup – about all the conditions Greece has to address to get even a mild extension of support, while the same IMF and EU keep on handing out cash to Ukraine without as much as a whisper – at least publicly.

The Kiev government, which has been ceaselessly and ruthlessly attacking its own people, is now portrayed as needing – monetary and military – western help in order to be able to ‘defend’ itself. From the people it’s been attacking, presumably. And hardly a soul in the west asks what that is all about.

Why did Kiev kill 5000 of its own citizens? Because there are people in East Ukraine who had – and still have – the guts to say they don’t want to be ruled by a regime willing to murder them for saying they don’t want to be ruled by it. And just in case there’s any confusion left about this, yes, that is the regime we are actively supporting, in undoubtedly many more ways than are made public. All the doubts about the western narrative are swept aside with one move: blame Putin.

Of the two countries, Greece, despite its humanitarian issues, is by far the luckiest one. Ukraine is quite a few steps further down the hill. One can be forgiven for contemplating that the west, aided by President Poroshenko and the Yats regime in Kiev, is dead set on obliterating the entire nation.

There are again peace talks under way, with no – direct – Anglo-Saxon involvement, but as the Foreign Ministers of Russia, Ukraine, France and Germany meet, Britain announces it’s sending military personnel into Ukraine and Poroshenko buys weapons from UAE, which is the same as saying from America. Where does he get the money? Chocolate sales? Had a good Valentine’s campaign?

Baltic states reinforce their armies (Lithuania just launched conscription), as NATO expands its presence there. The constantly repeated message is that Putin will attack them. It’s a made-up story. Poroshenko says he wants Crimea back, even as he knows full well that’s not going to happen.

What part of the fresh round of IMF/EU loans will go towards arms purchases? Can Brussels please supply a run-down ASAP? Don’t Europeans have a right to know where their money goes?

To start with, here’s a – partial – overview of loans from Constantin Gurdgiev:

IMF Package for Ukraine: Some Pesky Macros

Ukraine package of funding from the IMF and other lenders remains still largely unspecified, but it is worth recapping what we do know and what we don’t.Total package is USD40 billion. Of which, USD17.5 billion will come from the IMF and USD22.5 billion will come from the EU. The US seemed to have avoided being drawn into the financial singularity they helped (directly or not) to create. We have no idea as to the distribution of the USD22.5 billion across the individual EU states, but it is pretty safe to assume that countries like Greece won’t be too keen contributing.

Cyprus probably as well. Ireland, Portugal, Spain, Italy – all struggling with debts of their own also need this new ‘commitment’ like a hole in the head. Belgium might cheerfully pony up (with distinctly Belgian cheer that is genuinely overwhelming to those in Belgium). But what about the countries like the Baltics and those of the Southern EU? Does Bulgaria have spare hundreds of million floating around? Hungary clearly can’t expect much of good will from Kiev, given its tango with Moscow, so it is not exactly likely to cheer on the funding plans… Who will?

Austria and Germany and France, though France is never too keen on parting with cash, unless it gets more cash in return through some other doors. In Poland, farmers are protesting about EUR100 million that the country lent to Ukraine. Wait till they get the bill for their share of the USD22.5 billion coming due.

Recall that in April 2014, IMF has already provided USD17 billion to Ukraine and has paid up USD4.5 billion to-date. In addition, Ukraine received USD2 billion in credit guarantees (not even funds) from the US, EUR1.8 billion in funding from the EU and another EUR1.6 billion in pre-April loans from the same source. Germany sent bilateral EUR500 million and Poland sent EUR100 million, with Japan lending USD300 million.

Here’s a kicker. With all this ‘help’ Ukrainian debt/GDP ratio is racing beyond sustainability bounds. Under pre-February ‘deal’ scenario, IMF expected Ukrainian debt to peak at USD109 billion in 2017. Now, with the new ‘deal’ we are looking at debt (assuming no write down in a major restructuring) reaching for USD149 billion through 2018 and continuing to head North from there.

In other words, the loans are only and exclusively making Ukraine’s position worse. The Greeks may feel like debt slaves, but Ukrainians face a far darker feudal situation. They’re going to be -debt -prisoners in their own country. And that has nothing to do with Putin, it’s the ultimate shock doctrine. The distinct impression to me is the country will be turned into a testing ground for NATO and western military industries. Which is why ‘we’ have been so intent on engaging Russia in the Ukraine conflict.

But back to the loans first:

The point is that the situation in the Ukrainian economy is so grave, that lending Kiev money cannot be an answer to the problems of stabilising the economy and getting economic recovery on a sustainable footing. With all of this, the IMF ‘plan’ begs three questions:

  1. Least important: Where’s the European money coming from?
  2. More important: Why would anyone lend funds to a country with fundamentals that make Greece look like Norway?
  3. Most important: How on earth can this be a sustainable package for the country that really needs at least 50% of the total funding in the form of grants, not loans? That needs real investment, not debt? That needs serious reconstruction and such deep reforms, it should reasonably be given a decade to put them in place, not 4 years that IMF is prepared to hold off on repayment of debts owed to it under the new programme?

Why indeed? One thing seems certain: reconstruction is not in the cards. All assets will be sold for scrap, and most citizens ‘encouraged’ to cross one of many borders Ukraine has. Britain is next up in the escalation process. Again, as German/French talks with Russia continue.

Britain To Send Military Advisers To Ukraine, Announces Cameron

Britain was pulled closer towards a renewed cold war with Russia when David Cameron announced UK military trainers are to be deployed to help Ukraine forces stave off further Russian backed incursions into sovereign Ukraine territory. The decision – announced on Tuesday but under consideration by the UK national security council since before Christmas – represents the first deployment of British troops to the country since the near civil war in eastern Ukraine began more than a year ago. Downing Street said the deployment was not just a practical bilateral response to a request for support, but a signal to the Russians that Britain will not countenance further large scale annexations of towns in Ukraine.

The prime minister said Britain would be “the strongest pole in the tent”, and argued for tougher sanctions against Moscow if Russian-backed militias in eastern Ukraine failed to observe the provisions of a ceasefire agreement reached this month with the Ukrainian president, Petro Poroshenko. Downing Street said some personnel would be leaving this week as part of the training mission. Initially 30 trainers will be despatched to Kiev with 25 providing advice on medical training, logistics, intelligence analysis and infantry training. A bigger programme of infantry training is expected to follow soon after taking the total number of trainers to 75.

That’s simply war-mongering, and precious little else. We may wonder about the timing, but not the intention. Cameron goes on to make some really bizarre statements:

He said there was no doubt about Russian support for the rebels. “What we are seeing is Russian-backed aggression, often these are Russian troops, they are Russian tanks, they are Russian Grad missiles. You can’t buy these things on eBay, they are coming from Russia, people shouldn’t be in any doubt about that. “We have got the intelligence, we have got the pictures and the world knows that. Sometimes people don’t want to see that but that is the fact.”

No, Mr. Cameron, the problem is, the world does not know that, because it has never been shown either the intelligence or the pictures. Why not provide them? Because you don’t have them, is the only reason I can think of after a full year full of alleged activity of which there is not one shred of proof, but a million tons of accusations and innuendo. It’s literally a propaganda war, with the other side hardly firing back at all. And then there’s this from RT:

East Ukraine Artillery Withdrawal In Focus – As Poroshenko Buys UAE Weapons

While the foreign ministers of France, Germany, Russia and Ukraine were meeting in Paris to talk about the Eastern Ukraine peace settlement, it was revealed that the Ukrainian president has struck a deal on arms supplies from the UAE. The four ministers agreed on the need for the ceasefire to be respected, as well as on the need to extend the OSCE mission in Eastern Ukraine, reinforcing it with more funding, personnel and equipment. It’s important for Kiev troops and the rebels to start withdrawing heavy weapons right now, without waiting for the time “when not a single shot is fired,” Russian Foreign Minister Sergey Lavrov said after the meeting.

He added that his German and French counterparts thought it a positive development that the Donetsk and the Lugansk rebels had started to pull their artillery back. “The situation has significantly improved, that was acknowledged by my partners,” Lavrov said. “However, sporadic violations are being registered by the OSCE observers.” The withdrawal of heavy weaponry by Kiev troops and the rebels is part of the ceasefire deal struck in Minsk earlier in February. The Donetsk militia has announced it is complying.

Ukrainian President Petro Poroshenko has meanwhile reached an agreement on weapons supplies from the United Arab Emirates. That’s according to a Facebook post by advisor to Ukrainian Interior Minister, Anton Gerashchenko. The deal was struck with the Crown Prince of Abu Dhabi and deputy supreme commander of the UAE Armed Forces, Mohammed bin Zayed bin Sultan Al Nahyan. “It’s worth emphasizing that unlike Europeans and Americans, the Arabs aren’t afraid of Putin’s threats of a third world war starting in case of arms and ammunition supplies to Ukraine,” Gerashchenko wrote. He also said he believed the UAE blamed Russia for the drop in oil prices. “So, this is going to be their little revenge,” the adviser said.

Curious. Now it’s the Russians who are to blame for the oil price plunge? Weren’t they supposed to be the major victims? And when did Putin threaten with WWIII? There’s more to this:

[..].. former US diplomat James Jatras told RT: “This discussion in Washington about supplying weapons has been going on for some time. Usually that indicates that some kind of a covert program is already in operation and that we already are supplying some weapons directly,” he said. Jatras added that it is hard to believe that UAE would sell these weapons to Ukraine “without a green light from Washington.”

I would think the same thing: plenty forces in Washington who want nothing more than to supply weapons to Kiev, and there’s always a way. Note that Germany and France, the western partners in the peace talks, have so far managed to prevent direct arms supplies. They’ve now been blindsided, or so it would seem. Maybe it’s time for Merkel to pull her weight here, and a bit less on Greece. Germany doesn’t want an escalating warzone on its doorstep.

Meanwhile, the gas delivery issue is heating up again (pun intended). Ukraine continues to provoke Russia, but it will have to pay eventually. Unless escalation is the real goal, and freezing Eastern Europeans will be deemed a justifiable sacrifice.

Kiev Cash-For-Gas Fail Could Cost EU Its Supply (In 2 Days) – Gazprom

Russia will completely cut Ukraine off gas supplies in two days if Kiev fails to pay for deliveries, which will create transit risks for Europe, Gazprom has said. Ukraine has not paid for March deliveries and is extracting all it can from the current paid supply, seriously risking an early termination of the advance settlement and a supply cutoff, Gazprom’s CEO Alexey Miller told journalists. The prepaid gas volumes now stand at 219 million cubic meters. “It takes about two days to get payment from Naftogaz deposited to a Gazprom account. That’s why a delivery to Ukraine of 114 million cubic meters will lead to a complete termination of Russian gas supplies as early as in two days, which creates serious risks for the transit to Europe,” Miller said.

Earlier this month, Russian Energy Minister Aleksandr Novak estimated Ukraine’s debt to Russian energy giant Gazprom at $2.3 billion. In the end of 2014, Kiev’s massive gas debt that stood above $5 billion, forced Moscow to suspend gas deliveries to Ukraine for nearly six months. On December 9, Russia resumed its supplies under the so-called winter package deal, which expires on April 1, 2015. [..] On Monday, Ukrainian state energy company Naftogaz accused Gazprom of failing to deliver gas that Kiev had paid for in advance. Naftogaz says Russia has broken an agreement to deliver 114 million of cubic meters of natural gas to Ukraine by delivering only 47 million cubic meters.

During a meeting with President Vladimir Putin on February 20, Russian Prime Minister Dmitry Medvedev expressed concern about an increase in daily applications by Ukraine for the supply of gas, TASS reports. He noted that “Ukraine’s consumers have requested a larger supply; the volume has increased by 2.5 times. This means that the prepaid volumes left are enough for no more than two to three days.”

Overall, there seems to be little left that can be done to de-escalate the situation. The Donbass rebels may retreat some heavy weapons, but they won’t want to risk being defeated by a freshly replenished Ukraine/US/UK army. The make-up of which is ever harder to envision, since a few hundred thousand potential soldiers have already fled the country. Unless they extend the draft to 12- to 80-year-old women, what Ukrainians will be left to fight? And who will want to? Except for the private battallions of questionable make-up, that is.

Ukraine will at some point in the not too distant future be so impoverished that a new Maidan type revolution may be inevitable. There should really be elections in the country as soon as possible, but that doesn’t look likely to happen. Why Yatsenyuk is still PM should be a mystery, he was elected by a parliament at gunpoint. And he’s a US puppet, who’s recently invited three US citizens into key positions in his cabinet. Ukrainians may be scared to speak up, but if they don’t, things could get much worse real fast.

It’s once again time for the people to take to the streets. But that risks turning into an awful bloodbath that could make Kiev look like the Dresden. Unless all international parties retreat from Ukraine, there doesn’t seem to be a solution that would benefit the people.

The World Is Run By Fools, And We Let Them

Nov 162014
 
 November 16, 2014  Posted by at 10:25 pm Finance Tagged with: , , , , , , , , ,  6 Responses »


Dorothea Lange Negro woman carrying shoes home from church Mississippi Delta July 1936

Dumb and Dumber To, the sequel after 20 years, was released recently. Unfortunately for Jim and Jeff and the Farrelly brothers, unintended humor will always be funnier than the scripted kind, no matter how hard Hollywood tries. Case in point: the Dumber slapstick was easily upstaged over the past few days by the G20 summit in Brisbane.

Not only did the pedantic Anglo-Saxon power hungry freak show of Harper, Cameron and Abbott (nobody even noticed Obama) give Vladimir V. Putin a good laugh with their empty chest thumping, entirely spin doctor scripted and entirely aimed at their domestic media and audiences, these so-called leaders also came up with no less than 800(!) measures they claim will boost global economic growth by 2.1%, or $2 trillion. Over 5 years, or some useless and opaque number like that (2018?).

It would seem to be painfully obvious that what the world needs really urgently badly today is not so much economic growth, but growth in the dendrites, synapses and neurons in the heads of both our leaders and of those who put them where they are, ourselves. No use holding your breath. As things are, none of us are any smarter than either Dumb or Dumber.

As Brussels and the leaders of the allegedly healthy economies in the North sacrifice southern Europe on the altar of their megalomania, the G20 does the same with emerging economies and the even poorer rest of the world. The formerly rich part of the world has gotten stuck in its own dreams and faulty models, and the only place left to eke out any semblance of growth is weaker nations. The Roman empire revisited.

If the G20 nations could have ‘grown’ growth at a 2.1% clip with the sort of ease with which their reports were issued this weekend, they would have done so already, all along, long ago. The fact that they haven’t, it doesn’t get any simpler, implies that they can’t this time either. It’s all hot air, and perhaps that’s too positive still, make that tepid.

Still, when the Anglo-Saxon dipshits are together they have the guts to make such claims, just as when they’re together they have the guts to ‘shirtfront’ Putin. Canada’s Harper reportedly shook hands with Putin and told him to get out of Ukraine. Nobody present wanted to quote the reaction he got, but I’m thinking a simple ‘You first’ is a distinct possibility. None of these guys have anything on Putin, and they all know it. So does he.

Meanwhile, their home media have cooked up the Putin is Bad story to such heights that they can’t be seen as doing nothing, even if proof for any of the allegations concerning what Russia is supposed to be guilty of is still sorely lacking. The Anglo-Saxons need enemies to make their stories stick, so the ‘he probably shot down that plane’ line is awfully helpful.

And that dumber-ass approach is the same one they use for their economic, what shall we call it, ‘policies'(?), it’s the exact same thing. It’s the surface that counts, not what’s underneath it. It’s the storyline, not the veracity of it. Who in the west still doubts that Putin is a bad man? Very few. Though he hasn’t done anything for which the west has provided any proof.

It’s a tale in the spirit of Little Red Riding Hood, and just as credible. The 2.1% growth story doesn’t even attain that level of credulity, because it’s made up out of nothing at all. It would sound cute to say that the nonsense that emanated from the G20 summit is unrivaled, but it’s not. These boyos rival their own emptiness at every single occasion they get.

All they do is make sure that their access to the public (our) coffers is used to garner profit for their paymasters, at the cost of the taxpayer (again, us). That’s both their mission and their MO. And we all know that once you’ve been PM or FM and you served your superiors well, your life will be comfortable ever after.

That said, there is no vision, there is nothing. There’s a desire to amass power, and then to hold on to it and serve the bankrupt system, but none of it has anything to do with the people these guys and dolls are supposed to represent. And it can only lead to things like what the London School of Economics claims in a new report:

How The UK Coalition Has Helped The Rich By Hitting The Poor

A landmark study of the coalition’s tax and welfare policies six months before the general election reveals how money has been transferred from the poorest to the better off, apparently refuting the chancellor of the exchequer’s claims that the country has been “all in it together”. According to independent research to be published on Monday and seen by the Observer, George Osborne has been engaged in a significant transfer of income from the least well-off half of the population to the more affluent in the past four years.

That whole growth target is nothing but a way to justify more of what the LSE has noticed. A way to take away more money from the poor, through austerity, and through so-called reform IMF-style, after which the conclusion will be that the policies have failed, but the reality will be that the poor have gotten poorer and the rich have gotten richer. In the eyes of the G20 policy makers that will mean a success, even if it will be 180º different from what their public utterances have been.

We’re not only being fooled all the time and wherever we look, we’re being fooled by a bunch of stupid spin-scripted programmed assclowns. But we are the ones who put them where they are. As long as we hang on to our existing procedures for electing our leaders, only megalomaniac assclowns will float to the surface.

And they will, to a man, use their positions to rob us blind while pretending to have our best interests at mind. It’s what allowing money to enter your political system will always lead to: you can elect only made men. Which leads to Tony Blair, Bill Clinton, Obama, and Jeb Bush or Hillary. What about how this works is not clear?

The OECD even wants to do the G20 one better, they want 4% growth. I’ll tell you one thing: the western world will NEVER have a 4% growth rate again. Or at least not this century. And not before many millions of Europeans and Americans have gone down in hunger and misery.

We Need To Ramp Up Global Growth: OECD

The global economy should be growing at a much faster pace, the chief economist of the Organization for Economic Co-operation and Development (OECD) warned on Sunday, as world leaders agreed on hundreds of measures they hope will boost expansion. “As the emerging markets become a greater share of the global economy, we really ought to be seeing the global economy growing at 4% or more, so the tone is dour,” said OECD Chief Economist Catherine Mann, speaking to CNBC at the G-20 summit in Brisbane over the weekend.

Growth of 4% is well behind the group’s projected global gross domestic product (GDP) of 3.3% for this year. In its latest Economic Outlook, published earlier this month, the OECD warned of “major risks on the horizon” for the world’s economy, such as further market volatility, high levels of debt and a stagnation in the euro zone recovery.

Mann’s comments come as world leaders at the G-20 agreed on measures they said will equate to 2.1% new growth, inject $2 trillion into the world economy and create millions of jobs. The Paris-based OECD has previously outlined a target of adding around 2 percentage points to global GDP by 2018, relative to the 2013 level. [..]

Mann was optimistic that job creation would increase in tandem with global growth, as countries ramped up infrastructure investment. “We know that there’s usually a relationship between growth and jobs. It’s not always a tight relationship. There’s always an issue about the distribution, where the jobs are being created, what sectors, what countries and some of the disconnect there can be,” she said. “Mismatch can be a problem, but I do think we are going to see job creation go hand in hand with global growth.”

Need I say more after reading that? The lunatics are guiding us off the cliff. I know most people feel there’s nothing they can do to change the course their countries and governments have taken, but I also think that perhaps all these people need to realize they don’t have much of a choice anymore. If getting up from your couch for your own sake isn’t enough of a incentive, how about doing it for your kids and grandkids? How about doing it just because it feels right, because silently supporting assclowns while gobbling up cheese doodles in your comfy chair should never have been your thing? Didn’t you once have promise?

Debt Rattle Sep 9 2014: The Black Swan Of Scotland

Sep 092014
 
 September 9, 2014  Posted by at 9:49 pm Finance Tagged with: , , , ,  14 Responses »


Matson Photo Service Palmyra (Tadmur, Syria). The Turkish castle. Kala’at Ibn Na’an 1935

Got a mail from a friend in Scotland late last night that got me thinking. “Unfortunately, using Ireland as a model of fracture, we may start blowing up each other.” I’ve been reading a lot lately, in between all the other things, about Scotland, as should be obvious from my essay (Jim Kunstler tells me I can use that word) yesterday, Please Scotland, Blow Up The EU, and sometime today a thought crept up on me that has me wondering how ugly this thing is going to get. I think it can get very bad.

What I get from it all is that if anything is going to win this for the independence side, it must be the arrogance the London government has exhibited. That alone could seal the deal. But now of course London has belatedly woken up. Even David Cameron is scheduled to – finally – visit Scotland in the course of the contest. And if push comes to shove, they’ll throw in a royal baby. Or a Queen. Mark my words.

Cameron’s visit is funny in that he never thought it necessary until now because he thought he would win no matter what until a few days ago, and also funny because he must easily be the least popular person in all of Scotland, so a visit is a substantial risk. He had his bellboy Alistair King do a TV debate recently, and King flunked that thing so badly he may have single-handedly propelled the Yes side into the lead.

The knifes are being sharpened and soon they will be drawn – there’s only 9 days left. Question is, who will end up hurt? Bank of England Governor Mark Carney picked today of all days, 9 days before the referendum, to at last get more specific about his rate hike plan: it’s going to be early 2015. Because the UK economy is doing so great…

Only, wages will have to rise, and that will have to happen through British workers ‘earning’ pay hikes by ‘boosting their productivity and skills’. These workers have about 6 months to do that. You’re pulling my leg here, right, Mark? In any case, it seems obvious that Canadian Carney will be used as a tool against the Scottish independence movement. That’s just more arrogance.

Carney also spoke out directly on Scotland, saying there can’t be a currency union between the Scots and the Brits. Oh yeah, that should scare ’em!

The pound sterling is falling, but that doesn’t mean much. What does is that the entire financial world, of which the City is a large part, was caught on the wrong foot as much as the UK government. And both will now, until September 18, pull all the stops to cover their – potential – losses. With all means at their disposition. Some of which will be brutal, or at least appear to be.

Billions of dollars have already been lost in just a few days, since everybody realized the UK may actually split up. Many more billions will be lost in the coming week, as measures of volatility go through the roof. Neither the Yes side nor the No side have gone into this thing terribly prepared; there are a zillion questions surrounding the independence issue that won’t be solved before the vote takes place. Passports, currencies, central banks, monetary unions, there’s too much even to mention.

Somewhere, emanating from the old crypts and burrows in which Britain was founded, I fear a hideous force may emerge to crush the Scottish people’s desire for self-determination, if only because that desire is a major threat to some very rich and powerful entities who found themselves as unprepared as Downing Street 10.

I don’t know if, as my friend fears (though he’s much closer to the action than I am, so who am I to speak), it will lead to people blowing up each other, but then also, who am I to rule that out? The UN charter on self-determination looks good on paper and in theory, but when reality comes knocking, there’s mostly not much left of the lofty ideals and intentions, or is that just me, Catalunya?

Still, there’s an added dimension in Scotland: the fact that the City of London is the number 1,2 or 3 (take your pick) most important finance center on the planet. If and when anybody rattles that kind of cage, other forces come into play. It’s no longer about politics, but about money (and no, I’m not too think to see how the two are linked).

So I hold my breath and my prayers for both my Scottish and my British friends – and I happen to have lots of them – and I hope this is not going to get completely out of hand. The reasons I think it may get out of hand regardless is that 1) there is not one side that was ever prepared for the situation in which they find themselves today and 2) there is an enormous supra-national interest that resides in the UK financial world which is in a semi panic mode about how much money can be lost not just because of a UK break-up, but because of the uncertainty surrounding that potential break-up.

And there’s something in all of that which is definitely scary. London, and the Queen, will do all they can not to lose part of their ’empire’. The City of London will do even more not to lose a substantial part of their wealth. And this time around I don’t think they properly hedged their bets: the surge of the Yes side is as close to a black swan as we, and the City of London, have seen.

• Bank of England Governor Mark Carney Signals Spring Rate Rise (WSJ)

The Bank of England will likely meet its inflation and jobs goals if it starts to raise its benchmark interest rate early next year, Gov. Mark Carney said Tuesday in his clearest statement yet on the probable timing of a first move toward unwinding crisis-era stimulus. In a speech to labor union members in Liverpool, Mr. Carney said the rate at which wages rise over coming months will be key to the exact timing of the first move, and repeated his assurance that a rise in the benchmark rate will be “gradual and limited.” Mr. Carney said the U.K.’s economic recovery has “exceeded all expectations” and “has momentum.” Against that background he said the time for interest rates to “normalize” is nearing, and that in recent months the decision on whether to raise or leave policy unchanged “has become more balanced.” Most investors expect the BOE to raise its benchmark interest rate from a 320-year low of 0.5% in the first quarter of 2015, and Mr. Carney appeared to validate that expectation.

“Our latest forecasts show that, if interest rates were to follow the path expected by markets—that is, beginning to increase by the Spring and thereafter rising very gradually—inflation would settle at around 2% by the end of the forecast and a further 1.2 million jobs would have been created,” he said. “In other words, we would achieve our mandate.” Should it raise its benchmark interest rate early next year, the BOE would likely become the first major central bank to start to remove the unprecedented levels of stimulus provided to the economy since the financial crisis struck in late 2008. The U.S. Federal Reserve is expected to start to raise its key rate later in the year, while the European Central Bank Thursday provided additional stimulus in the form of rate cuts and new bond buying programs. With the Japanese economy struggling to recover from an April hike in the sales tax, the Bank of Japan may yet provide more stimulus.

Read more …

And counting.

• Billions Of Pounds Wiped Off Value Of Scottish-Linked Firms (Guardian)

Billions of pounds were wiped off the value of companies with Scottish links and the pound was pummelled as markets took fright at the increasing prospect of Scotland voting next week to break away from the United Kingdom. Investors on Monday dumped companies with exposure to Scotland, including the Royal Bank of Scotland and Lloyds Banking Group, which owns Bank of Scotland. They also ditched sterling, which at one point fell to its lowest level against the dollar for 10 months. “Be afraid, be very afraid,” Deutsche Bank analysts warned its clients after the Sunday Times YouGov poll had showed a small lead for the yes campaign.

American Nobel prize-winning economist Paul Krugman echoed the analysts’ view, warning Scotland it was unsafe to vote yes while uncertainty about the country’s currency remained. “If Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled,” Krugman wrote in the New York Times. “The risks of going it alone are huge. You may think that Scotland can become another Canada, but it’s all too likely that it would end up becoming Spain without the sunshine.” Elsewhere, a leading City banking expert warned that companies and individuals were likely to withdraw their cash from banks if the vote was in favour of a split from the union, while another economist warned independence could “easily derail the UK recovery”.

Initially almost £4.8bn was wiped off the stock-market value of companies with exposure to Scotland. As well as RBS and Lloyds, companies to be hit included engineering group Weir, insurer Standard Life, fund manager Aberdeen Asset Management and energy company SSE. By the end of trading the losses had been pared back to £2.6bn after RBS kickstarted the sale of its US arm. The taxpayer remains heavily exposed to Lloyds and RBS, which are both registered in Scotland, following the 2008 bailouts. The mood among City professionals has changed markedly in recent days: the FTSE 100 hit a 14-year high last week and until recently there had been concerns about a strong pound hurting exports. The blue chip index slipped back to 6,834 on Monday while the currency is weakening.

Read more …

Word.

• Ex-Chief Economist Stark: ECB Is Turning Into European ‘Bad Bank’ (Reuters)

The European Central Bank is turning into a European “bad bank” by loading up on bundled-up loans, and its record-low interest rates will not do anything to promote lending in the euro zone, former ECB chief economist Juergen Stark said. Stark, a former ECB executive board member and an arch-hawk, quit the bank in 2011 to protest its policies. Now he says the September rates cut would be “ridiculous, if the matter was not so serious”. The ECB cut its main interest rate to 0.05 percent on Thursday and pledged to buy asset-backed securities (ABS) on top of its four-year loan offer, or TLTROs, in a fresh attempt to ward off deflation and stimulate the euro zone economy. “The ECB is taking enormous risks onto its balance sheet with the purchases of ABS – of whatever quality – and is turning itself into a European bad bank,” Stark wrote in a guest column for the German newspaper Handelsblatt, which is to be published on Tuesday.

He said the rate cut could be seen as a “symbolic” move, if it had not been driven for the first time by a pursuit of an exchange rate target. Its goal was a targeted weakening of the euro exchange rate, he said, which had been demanded repeatedly by French and Italian politicians. “Zero-interest-rates will, however, not produce a single euro in additional lending, and this inefficiency will in the long term among other things further undermine the ECB reputation,” Stark wrote in his piece. The ECB has said many times that it does not have an exchange rate policy target but aims only for price stability. His comments come after an ally of German Chancellor Angela Merkel in a rare public attack, criticised the ECB’s ABS programme, saying it would scare Germans.

Read more …

In lieu of QE.

• Germany, France Push $400 Billion EU Investment Program (Bloomberg)

Germany and France are poised to take the first step toward a European investment program, as the euro area’s two biggest economies seek to resolve differences and spur growth without resorting to stimulus spending, government officials said. The proposals, which enlist the European Investment Bank for loans to companies, aim to pave the way for a €300 billion ($388 billion) investment plan outlined in July, according to three euro-area government officials who asked not to be named because the document is in draft form. Germany and France plan to present the initiative at a meeting of European finance ministers in Milan, Italy on Sept. 12. Germany’s emerging endorsement marks an attempt to shift the debate away from austerity and acknowledge the European Central Bank’s efforts to prod governments into action to combat low inflation and a weak economic outlook.

It’s also intended to deter ECB President Mario Draghi from resorting to purchases of sovereign bonds and asset-backed securities to increase bank lending, a move viewed with anxiety in Germany. Draghi “threw the kitchen sink” at German Chancellor Angela Merkel, Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said in an interview after the ECB’s policy decisions on Sept. 4. “Draghi’s message was plain: my back’s to the wall — do something to push fiscal stimulus now or watch me buy bonds.” With Merkel opposed to fiscal stimulus, German backing requires avoiding pledges of cash and any suggestion that pressure on France and Italy to make their economies more competitive is easing, one official said.

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And that took 8 weeks?!

• MH17 Broke Up In Mid-air Due To External Damage – Dutch Prelim. Report (RT)

The MH17 crash was a result of structural damage caused by a large number of high-energy objects that struck the Boeing from the outside, the preliminary report into the Malaysia Airlines disaster in Ukraine said. “Flight MH17 with a Boeing 777-200 operated by Malaysia Airlines broke up in the air probably as the result of structural damage caused by a large number of high-energy objects that penetrated the aircraft from outside,” the Dutch Safety Board said in its preliminary report. Dutch investigators added that “there are no indications” that the tragedy was triggered “by a technical fault or by actions of the crew.” [..] The plane was “split into pieces during flight,” the investigators said, based on the analysis of the pattern of wreckage on the ground.

The Dutch investigators said that “available images show that the pieces of wreckage were pierced in numerous places.” The report emphasizes that investigators haven’t yet had the chance to recover the components for forensic investigation. However, the photos taken from the wreckage “indicated that the material around the holes was deformed in a manner consistent with being punctured by high-energy objects,” the report said. “The characteristics of the material deformation around the puncture holes appear to indicate that the objects originated from the outside the fuselage.” The fact that the plane was damaged from the outside “also explains the abrupt end to the data registration on the recorders, the simultaneous loss of contact with air traffic control and the aircraft’s disappearance from radar,” the report says.

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So why not blame Kiev for spreading lies?

• Hagel ‘Not Aware’ Of Secret Deal To Supply Kiev With Lethal Weapons (RT)

US Defense Secretary Chuck Hagel said he was not aware of a secret deal to supply Ukraine with lethal weapons. His words contradict earlier statements by an aide to President Petro Poroshenko that the US is backing Kiev’s military with arms. “I’m not aware of any kind of a secret deal that was made in Wales about supplying lethal weapons to the Ukrainians,” Hagel told journalists on a visit to Turkey’s capital, Ankara. Earlier, Poroshenko aide Yury Lutsenko wrote on his Facebook page that the US, along with France, Italy, Poland and Norway, will supply modern weapons to Ukraine. The agreements were reached at the Sept. 4-5 NATO summit in Wales, Lutsenko wrote, adding that the West will also send military advisers to Ukraine. However, Hagel later denied the report Sunday, saying that Washington has not made an offer of “lethal assistance” to Ukraine.

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Brussels is a pool of fools.

• Here’s Why Europe Launched The ‘Nuclear Option’ Against Russia (Zero Hedge)

Europe’s leaders, we assume under pressure from Washington, appear to be making a big weather-related bet with their taxpayers’ lives this winter. As they unleash funding sanctions on Russia’s big energy producers, Europe has pumped a record volume of natural gas into underground inventories in an effort to ‘outlast’ Russia and mitigate any Napoleonic “Winter War” scenario. The plan appears to be to starve Russian energy firms of cashflow – as flows to Europe are already plunging – and remove their funding ability, potentially forcing severe hardship on Russia’s key economic drivers. As Bloomberg reports,

Europe’s reliance on Russian natural gas shipments via Ukraine is declining after the region pumped a record volume of the fuel into underground inventories, minimizing the risk of shortages during the coming winter. [..] Natural gas flows from Russia to the EU haven’t been affected in the current crisis. Storage sites in Slovakia, which had to seek emergency imports after its supplies were cut in 2009, were 92 percent full on Sept. 4, according to Gas Infrastructure Europe.

So Europe is stocking-up – which makes perfect sense – just in case Russia pulls the plug… but has now taken the situation to “11” on the Spinal Tap amplifier of escalating tensions by planning sanctions on Russia’s energy providers.

The plan appears clear:
• stock-up now (to survive the winter)…
• starve Russian firms of cashflow (thanks to stockpiles)…
• cut off their funding source (sanctions)…
• force Putin’s economy into a tailspin…
• Putin folds and it all ends happily ever after

There appear to be 3 problems with this plan…

1) What if the weather is considerably colder than normal this winter? (i.e. they need more supply)
2) Russia has already committed to supporting the sanctioned firms (and we would hardly be shocked if China chipped in)
3) What happens in Spring? German industrials need energy?

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• Finland Wants EU to Go Slow on Russia Sanctions (WSJ)

Finland thinks the European Union should wait in implementing its new economic sanctions against Russia, Finland’s prime minister said Monday. The EU launched on Monday the process to adopt formally a set of new measures that will slightly stiffen the EU’s response to Russia for its role in the Ukraine crisis. The new sanctions were adopted by the EU members including Finland on Monday, but the actual timing for their implementation was left to be decided later, Finland’s Prime Minister Alexander Stubb told Finnish media at a press briefing in Helsinki shortly after 1900 local time (1600 GMT).

“Finland in general isn’t of the opinion that now is the right time [for the sanctions],” Mr. Stubb said, adding that EU diplomats were negotiating in Brussels on Monday night over when the sanctions would actually be put into force. To come into force the sanctions have to be entered in the EU’s official journal, “but there are still discussions at which stage [the sanctions] will be published in the official journal,” Mr. Stubb said. Mr. Stubb said the schedule for implementing the new sanctions has been “fast and challenging” because Russia and Ukraine have made progress in their negotiations aimed at putting a stop on fighting in eastern Ukraine. Finland shares a 1,300-kilometer land border with Russia and has profited from tourism and trade with its huge eastern neighbor. In the past during the Ukraine crisis Finland has been among the EU members that have had reservations about ramping up economic pressure on Russia.

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Stand down Shinzo, stand down please …

• The Wrath of Abenomics Crushes Japanese Consumers (WolfStreet)

Abenomics soothsayers and apologists are worried: the August debacle is hard to explain away, even for them. It just sits there, a nagging, dark reality. In April, after the broad-based consumption-tax hike from 5% to 8% had taken effect, retail sales collapsed 20% from March. Total vehicle sales collapsed 56% to the worst level since December 2012, and December is usually the worst month of the year in Japan. April was terrible. It was much worse than feared by the Abenomics soothsayers and apologists. But the shock didn’t last long, and soon the soothsayers and apologists were at it again. In May, car sales were worse than a year earlier, but not much worse (-1.2%); and in June, car sales were actually a smidgen better (+0.4%) than a year earlier, and hopes were being propagated that this would all somehow work out.

But in July sales dropped 2.5% year over year, and other data points were going to heck as well. Then August happened. In August, vehicle sales as measured by registrations swooned, according to the Japan Automobile Manufacturers Association. All categories were down: sales of new cars, including minis (cars with tiny 500cc engines) plunged 9.4% year over year to 281,326 units; sales of new trucks of all sizes, including minis dropped 7.2% to 51,165 units. And total vehicles sales, retail and commercial, cars, trucks, and buses plunged 9% to 333,471 units. It was worse even than that terrible April, though in recent years, August had been better than April. It was worse even than December 2012. It was the lowest level since August 2011, the time when the consequences of the Great East Japan Earthquake and tsunami that had killed over 19,000 people were still paralyzing Japanese commerce, and when countless aftershocks were still rattling buildings and nerves on a daily basis.

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Line of the day: ” … the Fed’s policies have rewarded financial engineering at the expense of job creation … ”

• There Are Still 1.4 Million Fewer Full-Time US Jobs Than In 2008 (Lee Adler)

Let’s cut to the chase: There were 1,446,000 fewer people working full time in August 2014 than in August 2008, according to the Bureau of Labor Statistics household survey (CPS). That’s after an increase of 210,000 full-time jobs in August. That’s the actual count, not the seasonally adjusted abstraction. So we have to compare that with past Augusts to get an idea if its any good or not. August is a swing month, sometimes up, sometimes down. The average change over the prior 10 years, which included a couple of ugly years in the recession, was -63,000. So this number wasn’t bad. It was slightly better than August of last year and 2012, but come on…. It’s still 1.4 million below 2008? In 2008, the economy was in full collapse mode. The Fed has expanded its balance sheet by $3.7 trillion since August 2008 and there are fewer full-time jobs now than then? Remind me again what that $3.7 trillion has bought! Since August 2009, near the bottom of the recession, the US economy has added 6.25 million full-time jobs, a 5.5% increase.

That amounts to $588,000 in Fed QE per added full time job. But that’s ok. It’s been great for bankers, securities brokers, and hedge funds. While the number of full time jobs increased 5.5%, stock prices soared 175%. It’s all good! Or not. I have argued for a long time that the Fed’s policies have rewarded financial engineering at the expense of job creation. The Fed has made it profitable for corporations to borrow free money to buy back the stock options that they issue to their executives rather than investing in expanding their businesses and creating jobs. The Fed’s policies have enabled corporate executives and their financial enablers to conduct a massive skimming of the US economy and wealth transfer at the expense of everybody else. By promoting this behavior, not only has Fed policy been ineffective in stimulating real growth, it has been a moral outrage, decimating the middle class and robbing the elderly of their life savings as they’re forced to consume principal.

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Stand down François, stand down please.

• Hollande Hits Rock Bottom In Poll : 85% of French Oppose 2nd Term (RT)

A poll in France has revealed 85% of the population does not want President Francois Hollande to seek a second term in 2017. His approval ratings have hit an all-time low, with just 13% of those asked saying he is doing a good job. The survey was conducted by IFOP for the French weekly La Journal Du Dimanche and it made uncomfortable reading for Hollande. Fifty% of those polled did not think that the French president was delivering on his promises. Unemployment is approaching a record high and is currently over 10%. However, the under fire president has no plans to quit, saying at the recent NATO summit in Cardiff that he will not step down and will stay in office until his term runs out in 2017. His approval rating of just 13% makes him the most unpopular French president since the Second World War, in another poll conducted by TNS-Sofres. Lambasted for his failure to get the economy up and running, his misery was compounded when a former partner published a tell-all book.

Valerie Trierweiler described the 60 year-old as being dismissive of the poor, which contradicts his status as a socialist president. “With the release of every new poll, I watched him disintegrate,” Trierweiler wrote. “He needs to find someone to blame for the drop. It could never be him, so it had to be others and me.” Hollande has lost many of his core supporters from the left of the political spectrum, and has also suffered from discontent within his own cabinet. In late August, the French government was dissolved despite having being formed just 4 months earlier. They quit after ministers slammed President Francois Hollande’s plans for taxation and cuts, while also being critical of Germany’s austerity program. Led by former economics minister, Arnaud Montebourg, they chastised Hollande for being fixed on high taxes and spending cuts, who they say should have be looking to cut taxes so as to increase spending power and help revive the economy.

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The miracle is gone.

• Brazil’s ‘New Middle Class’ Turns On President Rousseff (Reuters)

The streets of Jardim São Luis, a poor and violent neighborhood near the edge of São Paulo, have not been this quiet in years. And that is exactly why Valeria Rocha is so worried. Arms folded, she scans the racks of baby clothes in her small store before flicking a glance towards the empty sidewalk. “Just a year ago this area used to be packed with shoppers but nowadays it’s all empty, my store included,” she said. After a decade of economic growth and welfare policies that lifted more than 30 million Brazilians out of poverty, Jardim São Luis and other tough neighborhoods across Brazil had high hopes for the future. But a faltering economy and mounting frustration over poor public services are dimming the outlook for Brazil’s “new middle class.”

As that happens, leftist President Dilma Rousseff is watching a once-loyal base – and her chances of re-election next month – slip away. Her main rival, environmentalist Marina Silva, has surged in the polls and is favored to win a likely second-round runoff against Rousseff. Last month, 13 of 14 people interviewed in Jardim São Luis said they were sure they would not vote for Rousseff, but could not point to a clear alternative. Just a week later, after the first televised debate between the candidates, 8 of 10 people interviewed said they had already decided to vote for Silva or would strongly consider it. The other two were still unsure. Silva, who grew up poor on a rubber plantation, has emerged as the anti-establishment candidate in this campaign. Within three weeks of entering the race late following the death of her party’s original candidate, she is in striking distance of becoming the first Afro-Brazilian woman to lead Brazil.

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Sure.

• FX Traders Said to Be Surprised by Scope of BOE Probe (Bloomberg)

Foreign-exchange traders interviewed as part of the Bank of England’s probe into whether its staff knew of currency-rate rigging have expressed surprise at the narrow scope of the questioning focused on one meeting, according to people with knowledge of the inquiry. The U.K. central bank called for an investigation after a senior trader turned over notes of an April 2012 meeting in which BOE officials were said to have told dealers it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a global probe into alleged manipulation. The BOE said at the time its review would be broader than that one meeting and examine whether staff knew of wrongdoing between July 2005 and December 2013.

Anthony Grabiner, the lawyer leading the probe, has questioned at least two traders in recent weeks, according to the people, who asked not to be identified because the matter is private. His questions were largely confined to what they recalled of the April 2012 meeting, they said. The people said the traders agreed to appear voluntarily, thinking they could discuss how they and other dealers operated without risking self-incrimination. Both said they were taken aback at how narrow Grabiner’s questions were and had prepared for a broader discussion of the rigging allegations. Grabiner, 69, didn’t give any indication whether the traders would be called back or who else would be interviewed, they said.

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Word.

• ‘Default The Only Solution For The Greek Debt Crisis’ (RT)

Default is highly possible in Greece because it is impossible for the country to repay all its debts, Aris Chatzistefanou, “Debtocracy” filmmaker, told RT. The Greek debt crisis erupted in 2009 and the economy is still struggling to generate growth and reduce high levels of unemployment. Long-term unemployment in Greece will reach almost 27% in 2015, according to an OECD report published on Wednesday. Greece has also seen one of the biggest drops in real wages since the beginning of the crisis, the OECD data shows.

RT: Greece’s debt ratio is much higher that before the crisis began. What is the situation in the country at the moment and how do citizens deal with the crisis?

Aris Chatzistefanou: Greece has become the best example of a country that was invaded by financial institutions of the Central European countries mainly Germany and France. And what they managed to do by imposing strict austerity measures for almost five years now was to increase the debt, not only as a%age of GDP but also as an absolute value. So in 2009 we started with a debt of 115% of GDP and right now just a few days ago we learned that our debt had skyrocketed to 175% of GDP. So it was a nightmare for the Greek people who were bailing out banks from France and Germany while at the same time they were the victims of the huge social genocide. Just to let you know, that in that so-called salvation period, we have lost almost 25% of GDP. And if you ask any historian he will tell you that there is no precedent in time of peace that a country can lose 25%. We are now the champions of unemployment with 30% and almost 60% for the younger people. The average family has lost almost 35% of its purchasing power. It is a real nightmare for the people in Greece.

RT: Is there any possibility of default in Greece in the current situation?

AC: It is highly possible because it is impossible for Greece to repay these debts. As long as they talk about haircuts and renegotiating the debt the problem remains, and that might be a cause for a domino effect in the eurozone. In my opinion default at the moment is the only solution for the debt crisis in Greece. We have seen positive examples in other parts of Europe like Iceland, even Russia, or in Latin America with Ecuador and Argentina where even when they had some problems it was a success story in comparison with what happened in Greece.

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• G20 Handed Gloomy Jobs Market Report (Guardian)

There is another gloomy assessment of the world’s jobs market On Tuesday. The International Labour Organisation, the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have produced a labour market update for the G20 employment and labour ministers’ meeting in Melbourne. It highlights “large employment gaps remain in most G20 countries”, the grouping of the world’s biggest developed and emerging market economies. The authors also say that “the quality of employment remains a concern” and that “the deep global financial and economic crisis and slow recovery in many G20 countries has resulted not only in higher unemployment but also in slow and fragile wage gains for G20 workers.” The paper concludes: “Seven years after the onset of the global financial and economic crisis, the economic recovery may be strengthening but remains weak and fragile.

The employment challenges across most G20 countries are still very sizeable both in terms of a persistently large jobs gap and low quality of many available jobs. “The current growth trajectory, if unchanged, will not create enough quality jobs – giving rise to the risk that the jobs gap will remain substantial, underemployment and informal employment will rise, and sluggish growth in wages and incomes will continue to place downward pressure on consumption, living standards and global aggregate demand. Underlining these challenges is the fact that income inequality continues to widen across the G20 countries. “The G20 commitment to boost GDP by more than 2% by 2018 over and above the baseline projections is certainly a welcome step, although it will be important to ensure that this additional growth is job-rich and inclusive.”

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• Down the Memory Hole (Jim Kunstler)

The memory hole is working overtime in the USA zeitgeist these days. Shit happens and a week or so later, it unhappens — at least it seems that way as manifested by the front page of The New York Times or the flapping of Anderson Cooper’s gums on CNN. Anyone remember that Malaysian airlines plane that went down in July in Ukraine killing 283 persons? US government officials were jumping up and down trying strenuously to blame Russian Donbass separatists. The trouble was, they had no evidence whatsoever and their exertions were looking ridiculous (making the USA look ridiculous, of course). Last thing we heard, there were questions about two Ukrainian air force jets chasing it, and photos of entry and exit cannon holes in the pilot’s cabin. Recorded communications between the crew and traffic controllers were shoved into storage bin in the Netherlands, never to be made public.

The whole story vanished from the news media like the legendary D.B. Cooper — anyone remember him? — and hasn’t resurfaced since. Anyone remember the outbreak of World War Three in Ukraine two weeks ago? The USA was trying — again, strenuously — to promote the idea of a Russian invasion — minus any evidence of the actual Russian troops, you understand. That didn’t go over so well. All this was occurring, remember, because the USA was determined to make Ukraine a NATO member, contrary to explicit agreements reached with Russia following the collapse of the Soviet Union to not expand NATO eastward. Anyway, there was no Russian invasion and the US State Department and the White House were left holding a pig in a poke that nobody wanted to buy. End of story, as Tony Soprano liked to say.

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• Australia Gives Up on Australia as Investment Dwindles (Bloomberg)

Australia’s biggest companies are giving up on growth. Investment by businesses in the benchmark stock index will probably slip below rising dividend payouts within two years, according to data compiled by Bloomberg. Wesfarmers Ltd., the country’s biggest private-sector employer with operations spanning retail, mining and manufacturing, returned a record A$2.75 billion ($2.58 billion) to shareholders last year. Reserve Bank of Australia Governor Glenn Stevens, who slashed borrowing costs to a record low, is relying on companies to recover their “animal spirits” and take risks to reignite the economy. Yet firms grappling with an overvalued currency and high costs that leave them unable to compete in export markets are opting to play it safe.

“Only a large real depreciation of the Australian dollar will change this reality,” said Ross Garnaut, a professor of economics at Melbourne University and former economic adviser to Prime Minister Bob Hawke. “Capital spending in the traded goods and services industries is catastrophically weak because few investments look profitable in the current cost and exchange rate environment.” The pattern is repeated across industries, slowing growth in an economy where the unemployment rate exceeded the U.S. level in July for the first time since 2007, and company profits dropped in the second quarter by the most in five years. Australia, which has expanded for 23 years, is losing its developed-world-beating status as the mining investment boom that powered it through the global financial crisis wanes.

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Ongoing story.

• Drillers Piling Up More Debt Than Oil Hunting Fortunes in Shale (Bloomberg)

A decade into a shale boom that has made fracking a household word and Wilson a rich man, drillers are propping up the dream of U.S. energy independence with a mountain of debt. As oil production hits a 28-year high, investors and politicians are buying into the vision of a domestic energy renaissance. Companies are paying a steep price for the gains. Like Halcon, most are spending money faster than they make it, an average of $1.17 for every dollar earned in the 12 months ended on June 30. Only seven of the U.S.-listed firms in Bloomberg Intelligence’s E&P index made more money in that time than it cost them to keep drilling. (Results for two companies included only the first six months of 2014.) These companies are plugging cash shortfalls with junk-rated debt. They owed $190.2 billion at the end of June, up from $140.2 billion at the end of 2011. (Six of the 60 companies that didn’t have records available for the full period weren’t included.)

Standard & Poor’s rates the debt of 41 of the companies, including Halcon’s, below investment grade, meaning some pension funds and insurance companies aren’t allowed to invest in them. S&P grades Halcon’s bonds CCC+, which the rating company describes as vulnerable to nonpayment. Money manager Tim Gramatovich sees disaster looming in the industry. “I have lent money to nobody in this space, and I don’t plan to. This thing is absolutely going to blow sky-high,” says Gramatovich, chief investment officer of Peritus Asset Management LLC in Santa Barbara, California. The firm manages investments of about $1 billion, including the debt and equity of oil and gas companies that aren’t drilling shale. Halcon’s recent lousy run shows how quickly a bright future can dim. Like many of its peers, Halcon uses two sets of numbers to describe its outlook. To the U.S. Securities and Exchange Commission, the company reports what’s known as proved reserves.

The SEC requires an annual tally and limits these calculations to what the firm is reasonably certain it can extract from existing wells and other properties scheduled to be drilled within five years, based on factors such as geology, engineering and historical production. To investors and lenders, Halcon also highlights a much higher figure that it calls resource potential. These estimates, while loosely defined by industry guidelines, don’t follow the SEC rule or timeline. In fact, as Halcon notes, the SEC forbids companies from making resource-potential claims in official reserve reports. The agency doesn’t regulate what companies say at investor conferences, in press releases or on their websites. No one does. Discrepancies between proved reserves and resource potential are common in the industry, and investors can get duped, says Ed Hirs, a managing director at Hillhouse Resources. “There’s a lot of ways to make money in the oil and gas business, and not all of them involve drilling for oil,” he says. “You just drill investors’ pocketbooks. When investors are willing to throw money at you, you can just make money on that. It’s a time-honored tradition.”

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Exponentially is not a good word when it comes to epidemics.

• Ebola ‘Spreads Exponentially’ In Liberia, 1000s More Cases Expected (Reuters)

Liberia, the country worst hit by West Africa’s Ebola epidemic, should see thousands of new cases in coming weeks as the virus spreads exponentially, the World Health Organization (WHO) said on Monday. The epidemic, the worst since the disease was discovered in 1976, has killed some 2,100 people in Guinea, Sierra Leone, Liberia and Nigeria and has also spread to Senegal. The WHO believes it will take six to nine months to contain and may infect up to 20,000 people. In Liberia, the disease has already killed 1,089 people – more than half of all deaths reported since March in this regional epidemic. “Transmission of the Ebola virus in Liberia is already intense and the number of new cases is increasing exponentially,” the U.N. agency said in a statement. “The number of new cases is moving far faster than the capacity to manage them in Ebola-specific treatment centers.”

Fourteen of Liberia’s 15 counties have reported confirmed cases. As soon as a new Ebola treatment center is opened, it immediately overflows with patients. “In Monrovia, taxis filled with entire families, of whom some members are thought to be infected with the Ebola virus, crisscross the city, searching for a treatment bed. There are none,” it said. In Montserrado County, which includes the capital Monrovia and is home to more than one million people, a WHO investigative team estimated that 1,000 beds are urgently needed for Ebola patients, the statement said. Motorbike-taxis and regular taxis have become “a hot source” of Ebola transmission. Liberia’s government announced on Monday it was extending a nationwide nighttime curfew imposed last month to curb the spread of the disease. Sierra Leone last week ordered a four-day countrywide “lockdown” starting Sept. 18 as part of tougher efforts to halt the spread of Ebola.

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“20% of the world’s unfrozen surface freshwater”

• Lake Baikal, World’s Deepest Body Of Freshwater, Turning Into Swamp (RT)

The world’s oldest and deepest body of freshwater, Lake Baikal, is turning into a swamp, Russian ecologists warn. They say that tons of liquid waste from tourist camps and water transport vehicles is being dumped into the UNESCO-protected lake. One of the natural wonders and the pearl of Russia’s Siberia, Lake Baikal has recently been a source of alarming news, due to an increased number of alien water plants which have formed in the lake waterlogging it, ecologists said at a roundtable discussion recently held in the city of Irkutsk. A recent scientific expedition discovered that 160 tons of liquid waste are produced every season in Baikal’s Chivyrkui Bay, said the head of Baikal Environmental Wave, one of Russia’s first environmental NGOs, according to SIA media outlet. Locals have complained to ecologists that the waste easily drains into the lake, SIA reported. The growing number of tourist camps in the area are unwillingly contributing to the pollution.

The report elaborates that the camps pass on waste to special organizations, but disposal vehicles often don’t reach the facilities and instead end up dumping the waste into Baikal or rivers that flow into the lake. The waste dumped into the lake sparked the growth of water plants such as Spirogyra and Elodea Canadensis, which have never grown there before. Researchers found a significant accumulation of water plants and dead lake mollusks on the northern coast of Lake Baikal, according to report. They monitored the coastline from the mouth of the River Tia to Senogda Bay, finding rotting water plants down the coast. An increased level of pollution was also discovered in Listvenichesky Bay.

(Baikal is a rift lake in the south of Siberia which contains roughly 20% of the world’s unfrozen surface freshwater – the greatest in the world by volume. It is 1,642 meters deep and among the clearest of all lakes. At 25 million years old, it is also thought to be the world’s oldest lake. In addition, a large contributing factor to the contamination of the lake is water transport vehicles. Ships, boats, yachts, and other vessels produce 25,000 tons of liquid waste annually, but only 1,600 of them end up at the proper disposal facilities, according to the head of Baikal Environmental Wave.)

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‘Unparalleled acceleration’ …

• Greenhouse Gas Levels Rising At Fastest Rate Since 1984 (BBC)

A surge in atmospheric CO2 saw levels of greenhouse gases reach record levels in 2013, according to new figures. Concentrations of carbon dioxide in the atmosphere between 2012 and 2013 grew at their fastest rate since 1984. The World Meteorological Organisation (WMO) says that it highlights the need for a global climate treaty. But the UK’s energy secretary Ed Davey said that any such agreement might not contain legally binding emissions cuts, as has been previously envisaged. The WMO’s annual Greenhouse Gas Bulletin doesn’t measure emissions from power station smokestacks but instead records how much of the warming gases remain in the atmosphere after the complex interactions that take place between the air, the land and the oceans. It could be that the biosphere is at its limit but we cannot tell that at the moment” About half of all emissions are taken up by the seas, trees and living things.

According to the bulletin, the globally averaged amount of carbon dioxide in the atmosphere reached 396 parts per million (ppm) in 2013, an increase of almost 3ppm over the previous year. “The Greenhouse Gas Bulletin shows that, far from falling, the concentration of carbon dioxide in the atmosphere actually increased last year at the fastest rate for nearly 30 years,” said Michel Jarraud, secretary general of the WMO. Atmospheric CO2 is now at 142% of the levels in 1750, before the start of the industrial revolution. However, global average temperatures have not risen in concert with the sustained growth in CO2, leading to many voices claiming that global warming has paused. “The climate system is not linear, it is not straightforward. It is not necessarily reflected in the temperature in the atmosphere, but if you look at the temperature profile in the ocean, the heat is going in the oceans,” said Oksana Tarasova, chief of the atmospheric research division at the WMO.

The bulletin suggests that in 2013, the increase in CO2 was due not only to increased emissions but also to a reduced carbon uptake by the Earth’s biosphere. The scientists at the WMO are puzzled by this development. That last time there was a reduction in the biosphere’s ability to absorb carbon was 1998, when there was extensive burning of biomass worldwide, coupled with El Nino conditions.

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But who cares about birds, right?

• Climate Change Puts Half of North American Birds at Extinction Risk (NatGeo)

Climate change could force more than 300 North American bird species out of most of their current ranges by the end of the century, according to a new study from the National Audubon Society. “Half of the birds of North America are at risk of extinction,” says Gary Langham, Audubon’s chief scientist. That estimate is based on the 314 bird species, out of 588 studied, that could lose more than half of their current geographic range. Nearly 200 of these threatened species may find hospitable conditions elsewhere, but for 126 species there will be nowhere else to go, Audubon estimates in a report released on Monday. Scientists have known for some time that species of all kinds will have to move—and in some cases are already moving—to adapt to the changes wrought by a warming planet. “What’s important about this particular study,” says Joshua Lawler, an ecologist at the University of Washington who was not involved in the study, “is that it’s built with a really solid data set.”

Audubon did not examine all of the more than 800 bird species that can be found in North America, but focused on those for which reliable data were available. The new study combines 30 years of citizen science—bird observations across North America in winter and breeding seasons—with projections of future climate to see where suitable ranges might shift for different species. The citizen science comes from Audubon’s own Christmas Bird Count and the U.S. Geological Survey’s North American Breeding Bird Survey; the climate models are from the Intergovernmental Panel on Climate Change. The results are “deeply worrying,” says Stuart Butchart, head of science for BirdLife International. “They add to a body of studies elsewhere in the world showing that climate change is going to have major impacts. Species are going to have to shift their ranges, and many overall are going to suffer range contraction.”

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