Apr 302017
 
 April 30, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Pablo Picasso Self portrait 1965

 


Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)
US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)
All the Plenary’s Men (BestEvidence)
The National Blues (Jim Kunstler)
‘Taxation Is Theft’ Meme Goes Mainstream (TAM)
Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)
ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)
Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)
Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)
Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)
Matteo Renzi Tries The Macron Approach (Pol.)
EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)
Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)
PwC: Greece Must Reform Or Forget Recovery (K.)

 

 

“On April 28, HOOPP CEO Jim Keohane told BNN in an interview that “for every $1 we lend Home Capital, they’re going to provide us with $2 of mortgages as collateral. That’s where we get our protection from.” So the C$2 billion loan would be backed by C$4 billion in mortgages. In other words, in the eyes of Keohane, these mortgages might be actually worth, when push comes to shove, 50 cents on the dollar.”

Are Canada’s Homes and Mortgages Worth Just 50 Cents on the Dollar? (WS)

Home Capital is Canada’s biggest “alternative” mortgage lender. It’s not a bank – which today is part of its problem because it cannot create money to lend out; it has to obtain it first by attracting deposits and borrowing money through other channels. Through its subsidiary, Home Trust, it specializes in high-profit mortgages to risky borrowers, with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. This includes subprime borrowers. Since revelations of liar loans surfaced in 2015, things have gone to heck. Now it’s experiencing a run on its deposits. Teetering at the abyss, it obtained a $2 billion bailout loan on Thursday. The terms are onerous. And on Friday, the crux of the deal emerged – the amount of mortgages it has to post as collateral. It’s a doozie.

It sheds some light on what insiders think mortgages and the homes that back them are worth when push comes to shove. A bone-chilling wake-up call for the Canadian housing and mortgage market. This is when the whole construct started falling apart: On July 15, 2015, Home Capital announced that originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured mortgages had plummeted 55%, and that it had axed an unspecified number of brokers. Shares plunged 25% in two days. On July 30, 2015, it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September 2014 into “falsification of income information.” Liar loans. It suspended 45 mortgage brokers who’d together originated in 2014 nearly C$1 billion in residential mortgages, or 12.5% of its total.

The scandal festered. Short sellers circled in formation. On April 26, 2017, Home Capital announced that it’s experiencing a run on its deposits. As of the end of March, its subsidiary Home Trust sat on about C$2 billion in high-interest savings accounts (HISA) it is offering to regular savers. But these folks were pulling their money out, it said, and the pace of the run was accelerating. It also disclosed that it was finalizing a $2 billion bailout loan from the Healthcare of Ontario Pension Plan (HOOPP) which has about $70 billion in assets. The loan would “have a material impact on earnings….” So an expensive loan.

Home Trust would pay a non-refundable commitment fee of $100 million; would be required to make an initial draw of $1 billion at an interest rate of 10%; and would pay a 2.5% standby fee on undrawn funds. So the initial $1 billion for the first 12 months would cost it $225 million in fees and interest, a juicy 22.5%! Once the credit line is fully utilized, the cost of the loan would drop to 15%. Its shares collapsed by 65%. On Friday, April 28, it announced that another C$290 million in deposits were yanked out on Thursday, after C$472 had been yanked out on Wednesday. Its HISA deposits were down to C$521 million, having plunged 75% since late March.y

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Kept the lights on for 100 days.

US Congress Does Bare Minimum to Keep Government Open Next Week (BBG)

Congress gave itself one more week to agree on a spending bill to fund the U.S. government through September, leading into President Donald Trump’s 100th day in office Saturday by keeping the lights on. The 382-30 House vote Friday was followed quickly by unanimous Senate passage of the stopgap spending bill hours before the shutdown deadline. Trump signed the bill Friday evening, according to a White House official. “We feel very good” that lawmakers will be able to pass a full spending bill next week, White House press secretary Sean Spicer told reporters earlier in the day. Leaders of both parties say they’re close to agreement on a broader spending plan after Republicans signaled they would accept Democratic demands that the Trump administration promise to continue paying Obamacare subsidies and to drop its bid for immediate funds for a wall on the Mexican border.

“You shouldn’t create artificial deadlines,” Alabama Republican Representative Gary Palmer said in support of the short-term measure. “If there are things we need to work through, we need to take the time to work through them.” Vermont Senator Patrick Leahy, the top Democrat on the Appropriations Committee, said both sides have made progress on issues including more funds for the National Institutes of Health, opioid funding for states, Pell college grants and money for transit. But he said the talks remain snagged over Republican demands for policy “riders.” “Let’s not govern by partisan manufactured crisis,” he said on the Senate floor. “Stop posturing,” he added as he called for a speedy resolution on the bill sometime next week. “This is no way to govern,” Leahy said before the Senate vote.

Sixteen House Republicans voted against Friday’s stopgap measure. The short-term fix to ward off a government shutdown – on a deadline set months ago – shows the stubborn dysfunction of Congress even with a unified Republican government. House GOP leaders on Thursday abandoned efforts to vote this week on their plan to repeal and replace Obamacare for lack of support in their party. A vote is still possible next week.

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Eye-opening to say the least. Make the coffee extra strong before viewing. Lots of ground gets covered, quickly. And don’t mothball those pitchforks and torches just yet.

All the Plenary’s Men (BestEvidence)

“The King can do no wrong.”
—William Blackstone, Commentaries on the Laws of England

“When the president does it, that means that it is not illegal.”
—Ex-President Richard Nixon, interview with David Frost

The question at bar is why the U.S. Department of Justice has failed to prosecute any too-big-to-fail banks or—more importantly—their bankers, even for admitted crimes. It’s a crucial question, because after eight straight years of unremitting prosecutorial failure, it looks very much as if a select group of top banks can, in fact, do no wrong. If that’s the case, then our constitutional republic isn’t merely in trouble. It’s dead. A person or group of people who satisfy Blackstone’s criterion for ultimate sovereign power—the power to commit crimes with impunity—can’t exist in a nation where the law reigns supreme. And yet here we are a decade after the financial crisis began in earnest, and not one TBTF bank executive has gone to jail.

Legally, the TBTF banks are indistinguishable from the King, since the power to commit crimes with impunity swallows all other sovereign powers; such a power isn’t even supposed to exist in the U.S., and yet it does. Moreover, since there can’t be two kings in a kingdom, the entire U.S. government, from the president on down, is just one of the King’s men under this formulation of power. The real job of the U.S. government, then, isn’t to represent the will of the people at all, it’s to do the King’s bidding. A nation that isn’t governed by law is governed by instead by a king—it’s one or the other—and the president’s inferiority to such an above-the-law sovereign was confirmed over 40 years ago with Nixon’s ouster. The president, unlike the King, answers to the law (despite Nixon’s opinion).

Now, you may say that while the TBTF banks might arguably have the de facto power of the King, that’s a far cry from wielding such power formally (i.e., having de jure criminal immunity). The reply to that objection is set forth in this film, “All the Plenary’s Men,” which is a sequel to “The Veneer of Justice in a Kingdom of Crime.” Another objection, raised by the DOJ itself, is that it HAS prosecuted TBTF bankers, citing cases like that of Raj Rajaratnam. These cases, however, in fact reveal the DOJ acting on behalf of the criminal global banking cartel. On that score, the DOJ’s abysmal track record is by now so extensive and so thorough that it’s possible to spot legal patterns in the DOJ’s protracted miscarriage of justice, and, as you’re about to see, those patterns are very deeply disturbing indeed.

What’s been going on cuts right past a garden variety constitutional crisis like Watergate straight to a crisis of sovereignty. The backdrop for all of this is HSBC’s exoneration in December of 2012 for laundering money for drug dealers and terrorists, about which the House Financial Services Committee issued a report in July of 2016. Whether it was due to the political circus in town at the time, or to the Republican authorship of that report (albeit without dissent), it didn’t get nearly the scrutiny it deserved. You see, prosecutors working on the HSBC case were actually going to indict the bank, but they got overruled, and HSBC and its team of criminals skated. The story of how exactly that reversal came about reveals, if not the King himself, then certainly many of the King’s top men.

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“It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.”

The National Blues (Jim Kunstler)

You can read it in the bodies of the people in the new town square, i.e. the supermarket: people prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sunk in despair, a deadly consolation for lives otherwise filled by empty hours, trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort. These are people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter. They have no prospects for a better life — and, anyway, the sheer notion of that has been reduced to absurd fantasies of Kardashian luxury, i.e. maximum comfort with no purpose other than to enable self-dramatization. And nothing dramatizes a desperate life like a drug habit. It concentrates the mind, as Samuel Johnson once remarked, like waiting to be hanged.

[..] The eerie thing about reading the landscape of despair is that you can see the ghosts of purpose and meaning in it. Before 1970, there were at least five factories in my little town, all designed originally to run on the water power (or hydro-electric) of the Battenkill River, a tributary of the nearby Hudson. The ruins of these enterprises are still there, the red brick walls with the roofs caved in, the twisted chain-link fence that no longer has anything to protect, the broken masonry mill-races. The ghosts of commerce are also plainly visible in the bones of Main Street. These were businesses owned by people who lived in town, who employed other people who lived in town, who often bought and sold things grown or made in and around town.

Every level of this activity occupied people and gave purpose and meaning to their lives, even if the work associated with it was sometimes hard. Altogether, it formed a rich network of interdependence, of networked human lives and family histories. What galls me is how casually the country accepts the forces that it has enabled to wreck these relationships. None of the news reports or “studies” done about opioid addiction will challenge or even mention the deadly logic of Wal Mart and operations like it that systematically destroyed local retail economies (and the lives entailed in them.) The news media would have you believe that we still value “bargain shopping” above all other social dynamics. In the end, we don’t know what we’re talking about.

I’ve maintained for many years that it will probably require the collapse of the current arrangements for the nation to reacquire a reality-based sense of purpose and meaning. I’m kind of glad to see national chain retail failing, one less major bad thing in American life. Trump was just a crude symptom of the sore-beset public’s longing for a new disposition of things. He’ll be swept away in the collapse of the rackets, including the real estate racket that he built his career on. Once the collapse gets underway in earnest, starting with the most toxic racket of all, contemporary finance, there will be a lot to do. The day may dawn in America when people are too busy to resort to opioids, and actually derive some satisfaction from the busy-ness that occupies them.

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Funny but true.

‘Taxation Is Theft’ Meme Goes Mainstream (TAM)

The month of April is a nightmare for anyone with a conscience, as we only have until “tax day” — which usually falls on April 15 — to give the taxman what he says he deserves. So if you pay taxes to Uncle Sam and you’re also aware you’re paying for mass murder in the Middle East and in U.S. streets due to the drug war, you should also feel sick to your stomach as you write that check. To a restaurant customer, this may have served as enough incentive to remind his server that taxation is always immoral — but he didn’t stop there. Last week, a customer at a Missouri restaurant gave the waitress a “personal gift” instead of a tip, writing the now popular line “Taxation is theft” in the tip section of the receipt. In a second note, the fiscally conscious customer added: “This is not a tip. This is a personal gift and not subject to federal or state income taxes.”

With major progressive news outlets like ATTN: reporting on this story, left-leaning reporters started to debate wages in the food and service industries, discussing the fact that tips end up being factored as wages, meaning they are always taxable. But as that discussion developed, reporters were quick to realize that when personal gifts are in the mix, the taxman can’t take part of those earnings away. After all, a gift would have to exceed $13,000 to be subject to taxation, meaning that even if the customer had spent hundreds, the “personal gift” would not amount to anything close to the requirements stipulated by the IRS.

With that, ladies and gentlemen, it becomes easier to not only tip with class, but also with substance, giving your waiter a lesson on what’s moral and how to legally go around the rules to make sure they enjoy their full tip — not just the percentage deemed to be fit by the federal government. As this story becomes part of the popular movement ignited by libertarians, expect to see more progressive news outlets becoming familiarized with the actual concept of taxation. What’s left for us to find out is if they are going to change their tune and start attacking people like this customer when the two-party pendulum swings once again and a fully Democratic slate takes over Washington. Are they going to remain consistent in discussing taxation from the point of view of the worker, or are they going to side with the leech? Only time will tell.

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From separate map picked up on Twitter: “When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.”

Erdogan: Turkey and US Can Wipe Out ISIL in Raqqa (AlJ)

Turkish President Recep Tayyip Erdogan said on Saturday if Ankara and Washington were to join forces they could turn the Syrian city of Raqqa into a “graveyard” for Islamic State of Iraq and the Levant (ISIL). Erdogan also suggested he could launch cross-border operations against Kurdish rebels at any time, just days after the military carried out air strikes in Syria and Iraq, drawing concern from the United States. “America, the coalition, and Turkey can join hands and turn Raqqa into a graveyard for [ISIL],” Erdogan told a business summit in Istanbul. “They [ISIL] will look for a place to hide.” Erdogan’s comments come ahead of a meeting with US President Donald Trump on May 16 – their first face-to-face summit since the real estate mogul and reality TV star took office in January.

Ankara is hopeful about a relationship with Washington under Trump after ties frayed in the final years of Barack Obama’s administration, which limited cooperation between the NATO allies. The two countries have bitterly disagreed over the role of the Kurdish People’s Protection Units (YPG) in Syria. Turkey views the YPG as the Syrian extension of the Kurdish PKK group, which has waged a deadly insurgency against the Turkish state since 1984. But the US is concerned that Turkey’s military operations in Syria are more focused on preventing Syrian Kurds from forming an autonomous region in northern Syria, along Turkey’s border, that could embolden Turkey’s own Kurdish minority.


@Furiouskurd: When ISIS was winning Turkey was just watching. Now when ISIS is getting defeated by Kurds, Turkey starts attacking Kurds. Turkey = ISIS.

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As the only party involved, the Kurds fight for their own land. And they have liberated lots of prisoners, women, children.

ISIS Suffers Heavy Casualties In Kurdish Fighters’ Advances In Raqqa (FNA)

The Kurdish-led Syrian Democratic Forces (SDF) continued the anti-ISIL Euphrates Rage Operation in Western Raqqa and managed to drive the terrorists out of more neighborhoods in al-Tabaqa city, killing over 40 of them. The SDF engaged in heavy fighting with ISIL in al-Tabaqa city and managed to take control of the neighborhoods of al-Nababeleh, al-Zahra and al-Wahab, killing 23 militants. In the meantime, the Kurdish fighters managed to push ISIL back from al-Wahabah and Radio Station in al-Tabaqa, killing 20 militants and capturing 10 others. In relevant developments in the province on Tuesday, the SDF stormed ISIL’s defense lines and took full control over the villages and settlements of Kabash al-Sharqi, Um al-Tonok, Rayan, Tishrin farm, Mosheirehe al-Shamaliyeh, Mosheirefeh al-Janoubiyeh, al-Rahiyat, Beir Jarbou, Jarwa, al-Hattash, Hazimeh, Khalwa Abideh, Holo Abd, Abareh, al-Kaleteh, Sukriyeh and Zohra, inflicting major losses on ISIL.

The Kurdish forces also won back a key neighborhood in the Southern sector of Tabaqa city following a large advance on its Western urban. In the meantime, the SDF managed to seize control over the Alexandria suburb, and now the Kurds have swept through the adjacent Wahab neighborhood. Kurdish forces also secured the island of Jazirat al-Ayd, a few kilometers North of Lake Assad. According to latest reports, around 40% of Tabaqa city has been brought under Kurdish control with just a few hundred ISIL militants left in its Northern sector and around the city center.

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‘..double suspension..’

Russia Backs China Call To Stop N. Korea Nuke Tests, US-S. Korea Drills (RT)

Russia has supported a Chinese initiative in the UNSC intended to stabilize the situation on the Korean peninsula. It calls on the North to refrain from missile and nuclear testing, while the US and South Korea should halt military drills in the area.
“Members of the [UN] Security Council have unanimously called upon DPRK [Democratic People’s Republic of Korea] to stop missile and nuclear tests and to fulfil UNSC resolutions,” the Russian Foreign Ministry said in a statement on Saturday following a United Nations Security Council (UNSC) session held in New York earlier on Friday. The UNSC called for a political and diplomatic solution to the nuclear crisis on the Korean Peninsula, the ministry added.

“In this context, the Russian Federation supported a Chinese proposal for a ‘double suspension’ (Pyongyang is to stop missile and nuclear tests and the US and South Korean militaries are to halt drills near North Korea) as a starting point for political negotiations.” However, the council was not able to agree on a common solution, the ministry added. The UNSC session was joined by Russian Deputy Foreign Minister Gennady Gatilov, who urged Washington and Seoul to reconsider their decision to station a THAAD anti-missile system on the Korean Peninsula, warning that it will serve as a “destabilizing factor” in the region.

Gatilov said the Terminal High Altitude Area Defense (THAAD) had been deployed “in line with the vicious logic of creating a global missile shield,” while warning that it is also undermining the security and deterrent capacities of adjacent states, such as China, thus threatening “the existing military balance in the region.” “It is not only we who perceived this step very negatively. We are once again urging both the United States and the Republic of Korea to reconsider its expediency, and other regional states not to yield to the temptation of joining such destabilizing efforts,” the deputy foreign minister said. Ahead of the UNSC session, Chinese Foreign Minister Wang Yi told reporters that a peaceful solution to the Korean crisis is the “only right choice.” “Peaceful settlement of the nuclear issue on the Korean Peninsula through dialogue and negotiations represents the only right choice that is practical and viable,” Wang said.

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Very few Brazil politicians are not involved in one scam or another.

Brazil Paralyzed by Nationwide Strike, Driven by Corruption and Impunity (GG)

Just over one year ago, Brazil’s elected President, Dilma Rousseff, was impeached – ostensibly due to budgetary lawbreaking – and replaced with her centrist Vice President, Michel Temer. Since then, virtually every aspect of the nation’s political and economic crisis – especially corruption – has worsened. Temer’s approval ratings have collapsed to single digits. His closest political allies – the same officials who engineered Dilma’s impeachment and installed him in the presidency – recently became the official targets of a sprawling criminal investigation. The President himself has been implicated by new revelations, saved only by the legal immunity he enjoys. It’s almost impossible to imagine a presidency imploding more completely and rapidly than the unelected one imposed by elites on the Brazilian population in the wake of Dilma’s impeachment.

The disgust validly generated by all of these failures finally exploded this week. A nationwide strike, and tumultuous protests in numerous cities, today has paralyzed much of the country, shutting roads, airports and schools. It is the largest strike to hit Brazil in at least two decades. The protests were largely peaceful, but some random violence emerged. The proximate cause of the anger is a set of “reforms” that the Temer government is ushering in that will limit the rights of workers, raise their retirement age by several years, and cut various pension and social security benefits. These austerity measures are being imposed at a time of great suffering, with the unemployment rate rising dramatically and social improvements of the last decade, which raised millions of people out of poverty, unravelling.

[..] During the past three years, Brazilians have been subjected to one revelation after the next of extreme corruption pervading the country’s political and economic class. Scores of corporate executives and long-time party leaders are imprisoned. They include the head of the Brazilian construction giant Odebrecht, the House Speaker who presided over Dilma’s impeachment, and the former governor of the state of Rio de Janeiro. The current House Speaker, and Senate President, and nine of Temer’s ministers are now targets of criminal investigations for bribery and money laundering, as are numerous governors.

In sum, the vast bulk of the top-shelf political and economic elite have proven to be radically corrupt. Billions upon billions of dollars have been stolen from the Brazilian public. Recently released recordings from the judicial confessions of Marcelo Odebrecht, scion of one of Brazil’s richest families, depict a country ruled almost entirely through bribes and criminality, regardless of the ideology or party of political leaders. And yet, even in the wake of this oozing and incomparable elite corruption, the price that is being paid falls overwhelmingly on the victims – ordinary Brazilians – while the culprits prosper.

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Melenchon seeks to hold on to his voters for the June parliamentary elections.

Mélenchon: France To Choose Between Extreme Right And Extreme Finance (IC)

The leader of a far-left movement who won nearly 20% of the vote in the first round of France’s presidential election, Jean-Luc Mélenchon, told his seven million voters in a YouTube address on Friday that he would not tell them how to vote in the final-round run-off next weekend. As for himself, Mélenchon said that he would cast a ballot, and that it would not be for Marine Le Pen, the candidate of the far-right National Front, who courted his voters in a video of her own on Friday. But Mélenchon also refused to say, like the leaders of other parties across the political spectrum – and celebrities including the French soccer legend Zinedine Zidane – that he would vote for Le Pen’s centrist rival, the former banker Emmanuel Macron, to stop the far-right from gaining power.

Instead, Mélenchon predicted that forcing France to choose between a candidate of “the extreme right” and one of “extreme finance” would led to a political crisis, and left open the possibility that he would submit a blank ballot, a form of protest vote permitted under French electoral law. (Mélenchon’s platform included provisions for voting to be made mandatory, and for blank ballots to be recognized under law.) The appeal for unity, to construct a barrage, or dam, against the rising tide of the far-right, Mélenchon said, was, in fact, a disguised attempt to force voters like him, who profoundly disagree with Macron’s economic policies, to endorse his project. Amid fears that widespread abstention and protest votes for neither candidate could lower the threshold for Le Pen to win with 50% of the valid votes cast, Mélenchon’s refusal to join the sort of united front against Le Pen that led to her father’s defeat in 2002 caused anxiety to spike.

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Chameleons and parrots are us.

Matteo Renzi Tries The Macron Approach (Pol.)

Matteo Renzi toned down the EU-critical rhetoric of his final months as Italian prime minister during his visit to Brussels on Friday to drum up support for his bid to be restored as head of the Democratic Party (PD) in its primaries this weekend. With aides suggesting on social media that French presidential hopeful Emmanuel Macron’s pro-EU stance, which helped him beat Euroskeptic Marine Le Pen in the election’s first round, could be a boost for Renzi, he talked about “Angela, François and I” when referring to German Chancellor Angela Merkel and French President François Hollande. Renzi even stood in front of a display showing the EU flag, and felt the need to explain why, in the run-up to his failed constitutional referendum that cost him the prime ministership last December, he had removed the EU flag from behind his desk.

“It wasn’t anger, it was calculated gesture,” Renzi told PD followers at a hotel near the European Parliament, adding that it was in response to the European Commission demanding Italian action on its budget deficit when it had been hit by an earthquake. The Italian and international media have speculated about the similarities between Renzi and Macron, with Renzi’s slogan for the PD primary this Sunday — In Cammino (“on the way”) — almost a direct translation of the name of Macron’s centrist political movement, En Marche. One close Renzi aide, Giuliano Da Empoli, wrote on Facebook the day after Macron’s first-round victory on April 23 that the French result “shows that one can be at the same time a convinced pro-European and a harsh critic of the status quo.”

That was the tone Renzi tried to strike in Brussels on Friday, repeating his line that the EU “needs radical change” and taking a dig at Germany for its trade surplus, while warning about the dangers of populism. “With the radicals you win the primary elections but then you lose the elections,” he told the audience. In the French campaign, which comes to a head with the second-round vote on May 7, the candidate closest to Renzi’s Democratic Party was Benoît Hamon, who won the ruling Socialist Party’s primaries but took only 6% of the vote on election night. That must resonate for Renzi, who wants to regain control of the PD to prepare a bid for a new term as prime minister in elections due early next year.

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“Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters..” She’s right, all everyone’s done is side WITH Germany. Without a word.

EU Throws Down Brexit Gauntlet to Britain as Talks Edge Closer (BBG)

European Union governments threw down the gauntlet to the U.K. ahead of Brexit talks, listing demands Prime Minister Theresa May must satisfy before they will discuss the trade deal she wants and urging her to be more realistic in her expectations. Any doubts about the scale of the task facing Britain in withdrawing from the EU after four decades were laid to rest at a Brussels summit of the region’s leaders on Saturday. A tough negotiating stance was endorsed unanimously, within minutes and to applause. The U.K. responded by saying it’s bracing for a confrontation. The complexity comes down to the fact that a departure from the world’s biggest trading bloc has never been done and was never supposed to happen. The EU is striving to ensure the U.K. is worse off outside it than inside, not least to avoid setting a precedent.

After agreeing to the terms of separation, then it’s a matter of getting down to the business of what a future relationship might look like. “Nobody has united here against the U.K.,” German Chancellor Angela Merkel told reporters as she left the meeting. “The British people have made a decision, which we will have to respect. But we remaining 27 now get together in order to speak with one voice.” The Brexit discussions will begin soon after the U.K.’s June election, which May called in part to strengthen her mandate going into talks. The first orders of business will be guaranteeing the rights of 3 million EU citizens living in the Britain and calculating a financial settlement one leader said would be at least €40 billion euros ($44 billion). Only once “sufficient progress’’ is made on those thorny topics and reinforcing the border between the two Irelands will the EU’s attention turn to trade. That looks unlikely to happen before December.

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Merkel tries to deflect the blame for what’s gone wrong, blames local officials for sweeping things under the carpet. Yeah, she would never have had any reason to do just that herself. Plus, she blames ‘Europe’s haphazard policing of its outer borders’, something for which no-one carries more responsibility than … Merkel, the de facto boss of the EU. Mutti Merkel’s just another politician going wherever the wind blows.

Merkel Talks Tough on Migrants in Election Campaign Warm-Up (BBG)

German Chancellor Angela Merkel is talking tough on migrants and crime as she hits the campaign trail for two state elections next month, giving a foretaste of her bid for a fourth term in September. Merkel’s hardened rhetoric was on display in North Rhine-Westphalia, Germany’s most populous state, where her Christian Democratic Union is seeking to end seven years of Social Democratic rule on May 14. On Friday, she’s campaigning east of Hamburg in Schleswig-Holstein, where two polls this week suggest her party has a slim lead over the SPD ahead of a regional vote on May 7. At a CDU rally in the rural Westphalian town of Beverungen, Merkel reaffirmed her push to return migrants who don’t qualify for asylum and attacked the state’s Social Democrat-led government as soft on crime.

She said local officials “tried to sweep under the carpet” lapses in policing around mass sexual assaults on women in Cologne on New Year’s Eve in 2015, an incident that stoked an anti-immigration backlash. “The opportunity for improvement was there,” Merkel told the crowd on Thursday. “Things didn’t get better, so it’s time for a change.” As polls suggest that both Germany’s anti-immigration AfD party and her Social Democratic challenger Martin Schulz are in retreat for now, Merkel is using the opening to rally her CDU behind traditional themes of public safety. At a security conference this week, she said Europe’s haphazard policing of its outer borders compares unfavorably to U.S. immigration checks and must be strengthened.

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PricewaterhouseCoopers gets the first half right: as I’ve said numerous times, Greece cannot recover under present conditions imposed by the Troika. But then PwC loses the thread. Pity but predictable.

PwC: Greece Must Reform Or Forget Recovery (K.)

The extent of the destruction the Greek economy has suffered in the last few years, also undermining the effort to restructure it, becomes clear when comparing specific data, not on a quarterly or annual basis, but over the longer term. The country remains in a vicious cycle of recession, the economy will not grow by more than 1% this year, and any positive signs have proved temporary or insufficient to alter the overall picture. According to “Economic Outlook for Greece 2017-2018,” a study by PricewaterhouseCoopers (PwC), investment in the country’s economy dropped from €60 billion in 2010 to €20 billion last year. Investments are showing no signs of sustainable recovery as savings remain in the red and banks continue to deleverage their financial reports.

Consumption has been in constant decline, with a small recovery last year followed by a fresh drop in recent months. The average disposable income has gone down primarily due to the increased taxation and hikes in social security contributions, while the capital controls remain and banks are dependent on emergency liquidity assistance (ELA) for their financing. PwC notes that disposable incomes are unlikely to grow significantly anytime soon. There are just a few domestic investments that could fuel a recovery and no significant funding for investments is expected from abroad. At the same time it will be hard for fiscal performance to post a significant improvement without any deep structural reforms, including in the social security system.

The banks’ lack of liquidity, the delayed repayment of the state’s dues to its suppliers and the capital controls are likely to persist. PwC further argues that despite the delays in the second bailout review, Greece could avoid any unforeseeable tension and political events and achieve some growth, but not any greater than 1%, and the same challenges will remain next year too. An exit from the vicious cycle, says PwC, will require not only a change in the Greek debt’s sustainability terms, but also a drastic acceleration of structural reforms and the boosting of competitiveness and growth.

Read more …

Apr 272017
 
 April 27, 2017  Posted by at 8:41 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait with palette 1906

 


The Destruction Of Greece – “Only A Down Payment” According To The IMF (Bilbo)
Greek Supermarkets Report Dramatic Recession (K.)
US Student Loan Implosion (PolCal)
If Mortgage Rates Rise, What Happens to Canada’s House Price Bubble? (WS)
Canada’s Housing Bubble Explodes As Biggest Lender Crashes (ZH)
Canada’s Housing Watchdog Warns of ‘Problematic Conditions’ (BI)
It’s Tough Being Canada These Days (BBG)
Trump Tells Canada, Mexico, He Won’t Terminate NAFTA Treaty Yet (R.)
Trump Tax Plan Would Raise US Debt by $5.5 Trillion, 20% of 2027 GDP (CRFB)
What Happened Last Time US Companies Got A Break On Overseas Profits (CNBC)
New Zealand Plans Spending Splurge to Keep ‘Growing Like Sydney’ (BBG)
Russian Spokeswoman On ‘Ridiculous’ Airstrikes In Syria, Fake News (Y!)
German Court Upholds Greek Teacher’s Case Against Pay Cut (AP)

 

 

Excellent lenghty takedown by Bill Mitchell.

The Destruction Of Greece – “Only A Down Payment” According To The IMF (Bilbo)

With Greece still wallowing in the depths of recession, it is clear that the IMF hasn’t finished with the destruction of that formerly independent nation. The destruction to date (27% contraction and increased poverty) are considered by the IMF to be “only a down payment” on what Greece has to do so satisfy the Troika. At what point do people start to realise that the on-going costs of this austerity dwarf the significant costs that would accompany exit? And the Troika is not done with Greece yet. They intend to screw it down even further. And the costs of remaining in the dysfunctional monetary union escalate by the day. At some point, the Greeks will realise they have been dudded. What is left is anyone’s guess – but it won’t be pretty. The destruction of Greece is “only a down payment” according to the IMF – keep that mentality in mind when you are working out whether Greece should remain obedient or tell them all to f*ck off and regain their currency independence and restore prosperity.

[..] The ‘event’ that brought Greece to heal in June 2015 was the ECB decision to starve the Greek banks of liquidity – in total violation of its charter to maintain financial stability within its jurisdiction. How many Greek people lost income over that blackmail? How many took their own lives? How many plunged into mental illness? Did the IMF come up with a measure of their sordid part in all that? And now Thomsen is back – threatening and haranguing a subservient polity in Greece who call themselves Socialists but have done more damage to their own nation by taking the obedience option that the conservatives could have ever dreamed of doing. The Troika are now claiming (largely at the behest of the IMF) that if Greece cuts further it will receive debt relief.

Why the Greeks are worried about their external debt is beyond me. Why not just refuse to pay it and let the debtors (largely the ECB these days as a result of the deals done with the previous bailouts (which insulated the private German and French banks from exposure) sort out the implications of that? Why not threaten Brussels with default (redenomination) and exit if they don’t allow the Greek government to expand its fiscal deficit to stimulate growth – along the lines of Spain, which only is growing because its fiscal position is in violation with the fiscal rules – conveniently ignored by Brussels as it wanted the PP government returned? Why not demand that the ECB include Greek government debt in its QE program – thereby ‘funding’ the deficit. If not, we leave!

Then the bullies would be on call and the compromises would come thick and fast. But the spinelessness of the Greek polity combined with the sociopathological joy of the Troika in bringing this rogue nation to heel will ensure no such confrontation occurs and Greece will continue to wallow at the bottom of the Eurozone. It is forecast that Greece currently needs an injection of around “€100 billion in emergency bailout cash” to stay afloat for a while. This would further add to its “already massive debt burden, that could also deepen the budget cuts and economic overhauls required to get Athens’ balance sheets back into the black and prolong what has already been a near decadelong ordeal for the country.” And the costs of staying in – huge and getting bigger.

Read more …

A “dramatic drop in consumption of basic commodities such as milk and bread..”

Greek Supermarkets Report Dramatic Recession (K.)

The supermarket sector in Greece is experiencing a deep recession ranging from 8 to 15% year-on-year across its categories, according to the marketing and strategic planning director of AB Vassilopoulos, Zeta Cheimonidou. Her statements at a corporate event confirmed the general mood in the industry and data compiled by researchers surveying the sector. Cheimonidou went on to estimate that 2017 will see a 4 to 5% decline in supermarket turnover compared with 2016. “The market is experiencing a much steeper decline than last year. There is a very deep recession,” Cheimonidou stated, although she added that it would be safer to wait and see how demand evolves up until the end of May before drawing any conclusions for the entire year.

If proven correct, her estimate for a 4% drop in turnover will come on the back of a major decline in 2016 compared to 2015, which, depending on the surveying company, ranges from 4.5 to 6.5%. In its recent annual general meeting, the Hellenic Food Industry Federation (SEVT) noted the dramatic drop in consumption of basic commodities such as milk and bread, while a senior market research company official told Kathimerini that “our clients, suppliers and retailers, were crying in the first quarter.”

Read more …

Congress wil have to address this soon.

US Student Loan Implosion (PolCal)

The Consumer Federation of America recently put out a press release that reports that they’ve found that 1.1 million student loan borrowers in the United States have gone 270 or more days without making payments on their Federal Direct Student Loans, with more than $137 billion worth of the loans issued by the U.S. government now qualifying as being in default by that standard. Data from the CFA’s press release has made the rounds among multiple news outlets, but we have a pretty basic question: Are those big numbers? They certainly seem like big numbers, what with all the millions and billions being thrown about, but how do these numbers fit into the bigger U.S. government-issued student loan story? Let’s start with the biggest numbers, where we discover that $137 billion worth of Federal Direct Student Loans are in default, against the larger total of $1.3 trillion worth of Federal Direct Student Loans that have been issued through the end of December 2016.

Here, we calculate that the percentage of student loans that have gone 270 or more days without having had a payment made upon them represents about 11% of the total amount borrowed. That means that some 1.1 million people whose student loans require that they make some sort of scheduled payment went more than 9 months without making any. To tell if that’s a big number or not requires that we put that number into some kind of context. Here, we’ll draw on the U.S. Federal Reserve’s data for the delinquency rates on loans and leases issued by all commercial banks in the U.S., where for the fourth quarter of 2016, we find that the total delinquency rate is 2.04%. That value had previously peaked at 7.4% back in the first quarter of 2010, following the bottoming of the Great Recession.

But another important thing to consider is that delinquency rate would include all private-sector issued loans and leases that have payments that are past due, including those that have gone without payment for much less than 270 days. That figure tells us that the default rate of 11% for Federal Direct Student Loans is, to put it in Trumpian terms, “Yuge!” [..] The average student loan balance in the U.S. is $30,650. For Americans who haven’t defaulted on their student loans, that average figure drops to $28,150. But for Americans who have defaulted on their payments to their U.S. government creditor, the average balance on their Federal Direct Student Loan is $124,545.

Read more …

If you were not scared yet…

If Mortgage Rates Rise, What Happens to Canada’s House Price Bubble? (WS)

Housing affordability is a function of down payment, monthly payment, and household income. With home prices skyrocketing while household incomes were lagging far behind, low mortgage rates were the grease that kept it going. But what happens when mortgage rates begin to tick up? A “payment shock.” “An increase in interest rates of 100 bps [1 percentage point] on a 5 year term would represent a rise of C$388 for the monthly mortgage payment in the Vancouver market (+9% to C$4,669) and C$239 in Toronto (+7% to C$3,692). With housing affordability problem in these markets being already acute, we doubt current home prices could resist such an interest rate hike.”

This chart via NBF Economics and Strategy shows by how much monthly mortgage payments would rise if mortgage rates ticked up just 1 percentage point. Note the impact on monthly payments for homes in Toronto (Ontario) and Victoria and Vancouver (British Columbia):

So just how big is the Canadian housing bubble? The chart below by NBF Economics and Strategy compares US home prices (Case-Shiller 20-City index) to Canadian home prices (Teranet-National Bank 26-city index). Both indices are based on similar methodologies of comparing pairs of sales of the same home over time. The shaded areas denote recessions in Canada. The brief dip during the last recession in Canada pales against the multi-year housing bust in the US:

Like so many other assets classes in central-bank nirvana, this one too has reached ludicrous levels. But there’s a difference. People don’t live in stocks, bonds, classic cars, or art, and these asset bubbles have less impact on the real economy. But people do have to live in homes. Now that the results are clearer than daylight, central banks and governments worry about the consequences: Bubbles don’t just plateau. Now they wonder, belatedly, how to get out of it without bringing the whole construct down. The fact that a 1-percentage point increase in mortgage rates poses existential questions for some of the hottest markets shows how far policy makers have painted themselves into a corner.

Read more …

“Home Capital shares dropped by 61% in Toronto..”

Canada’s Housing Bubble Explodes As Biggest Lender Crashes (ZH)

Call it Canada’s “New Century” moment. We first introduced readers to the company we said was the “tip of the iceberg in Canada’s magnificent housing bubble” nearly two years ago, in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada’s largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices – most prominently noted short-seller Marc Cohodes – would constantly remind traders and investors about the threat posed by HCG.

Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice. As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely liquidation, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday.

Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable fell 17%, Street Capital fell 13%, while First National declined 7.6%. In short, the Canadian mortgage bubble has finally burst. refundable commitment fee of C$100 million, while standby fee on undrawn funds is 2.5%. The initial draw must be C$1 billion. The loan has an effective – and very much distressed – interest rate of 22.5% on the first C$1 billion, declining to 15% if fully utilized, according to a note from Jaeme Gloyn, an analyst at National Bank of Canada. Home Capital said the credit line is intended to “mitigate” a sharp drop in Home Trust’s high-interest savings account balances, which sank by $591 million from March 28 to April 24, at which point the total balance was $1.4 billion. Home Capital warned on Wednesday that further outflows are anticipated. Translated: what until last night was a depositor bank jog just became a sprint.

Read more …

Dangerous shoptalk: “..overvaluation has been downgraded to moderate from a previously strong assessment..”

Canada’s Housing Watchdog Warns of ‘Problematic Conditions’ (BI)

Canada’s housing watchdog maintained its view that there is “strong evidence of problematic conditions” in the market that some economists have classified as being in a bubble. The market is characterized by imbalances, defined as when demand and prices are far from their historical averages, Canada Mortgage and Housing Corporation said in second-quarter report. “While the overall assessment of problematic conditions remains strong for Canada, overvaluation has been downgraded to moderate from a previously strong assessment,” CMHC said.

“Careful analysis by geography shows that local differences continue to divide the Canadian housing market into several markets: centers in the East are showing weak evidence of overvaluation, while centres in Southern Ontario and the West are showing moderate to strong evidence of overvaluation,” it added. In Victoria, for example, the CMHC determined that overvaluation had accelerated from “moderate” to “strong.” The Teranet and National Bank of Canada house-price index showed a 24.8% gain year-on-year in March. It jumped 12.2% for Vancouver. Separately on Wednesday, shares of Canada’s home lenders fell after Home Capital Group said it obtained a $1.5 billion credit line to cope with falling deposits. Home Capital shares plunged by more than 60%.

Read more …

“George Washington used to complain about British lumber coming in from Canada..”

It’s Tough Being Canada These Days (BBG)

It’s tough being Canada these days. There’s no other way, really, to explain why the Trump administration announced on Tuesday that it was imposing tariffs on exports of Canadian softwood lumber – tariffs that will cost the Canadian lumber industry $1 billion annually. The Canadian dairy industry is also in Trump’s crosshairs, as he made plain in a threatening tweet Tuesday morning. Trump spent much of his campaign railing about China’s “unfair” trade practices, and all the “American jobs” that have migrated to Mexico. But now that he’s president, he’s apparently been made to understand that slapping tariffs on Chinese goods could lead to a catastrophic trade war. And any moves that might destabilize Mexico would have negative consequences for the U.S.

Ah, but hit Canada with a tariff, and you get all of the political upside of looking tough with no downside. This is not just because Canadians are nice. It’s because the Canadian economy is more U.S.-dependent than any other. “20% of Canada’s GDP relies on the U.S.,” said Laura Dawson, the director of the Canada Institute at the Wilson Center. “And 70% of Canada’s exports go to the U.S.” Even if Canada wanted to retaliate, what exactly could it do? Stop the Ford plants in Canada from shipping cars to Ford in Detroit? A rational administration would never let these minor disputes get in the way of a smooth-functioning economic relationship with Canada. To start with, there’s the fact that Canada is the staunchest U.S. ally, which you would think would count for something.

And the U.S. benefits enormously from trade with Canada, which buys 18% of all American exports, more than any other country. Last year, Canada’s trade surplus with the U.S. was a minuscule $11.2 billion. The integration of the two economies has been beneficial to both. Nor are the two disputes anything new. The American lumber industry has been complaining about Canadian softwood lumber since pretty much forever. “George Washington used to complain about British lumber coming in from Canada,” Dawson said with a chuckle. The basic allegation is that most timberland in Canada is owned by its provinces, which sell logging rights at below-market prices. The U.S. views this as a government subsidy, a notion Canada rejects. Although Americans and the Canadians have never been able to put this dispute to rest, they have been able to negotiate a truce on three separate occasions since the early 1980s.

Read more …

Advisers can’t agree.

Trump Tells Canada, Mexico, He Won’t Terminate NAFTA Treaty Yet (R.)

U.S. President Donald Trump told the leaders of Canada and Mexico on Wednesday that he will not terminate the NAFTA treaty at this stage, but will move quickly to begin renegotiating it with them, a White House said. The announcement came after White House officials disclosed that Trump and his advisers had been considering issuing an executive order to withdraw the United States from the trade pact with Canada and Mexico, one of the world’s biggest trading blocs. The White House said Trump spoke by telephone with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau and that he would hold back from a speedy termination of NAFTA, in what was described as a “pleasant and productive” conversation.

“President Trump agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries,” a White House statement said. “It is my privilege to bring NAFTA up to date through renegotiation. It is an honor to deal with both President Peña Nieto and Prime Minister Trudeau, and I believe that the end result will make all three countries stronger and better,” Trump was quoted as saying in the statement. The Mexican and Canadian currencies rebounded in Asian trading after Trump said the U.S. would stay in NAFTA for now. The U.S. dollar dropped 0.6% on its Canadian counterpart and 1% on the peso.

Read more …

This is not going to be easy to pass.

Trump Tax Plan Would Raise US Debt by $5.5 Trillion, 20% of 2027 GDP (CRFB)

The White House released principles and a framework for tax reform today. We applaud the President’s focus on tax reform, but the plan includes far more detail on how the Administration would cut taxes than on how they would pay for those cuts. Based on what we know so far, the plan could cost $3 to $7 trillion over a decade– our base-case estimate is $5.5 trillion in revenue loss over a decade. Without adequate offsets, tax reform could drive up the federal debt, harming economic growth instead of boosting it. The framework proposes a number of specific changes including: consolidating and reducing individual income tax rates to 10, 25, and 35%; doubling the standard deduction; cutting the business tax rate to 15% on both corporations and pass-through businesses; repealing the Alternative Minimum Tax (AMT) and estate tax; repealing the 3.8% investment surtax from the Affordable Care Act (“Obamacare”); moving to a territorial tax system; and imposing a one-time tax on money held overseas.

The plan also includes some vaguer proposals, including “providing tax relief for families with child and dependent care expenses” and eliminating “targeted tax breaks that mainly benefit the wealthiest taxpayers.” Although the framework itself is vague on the latter, at their press conference Secretary of the Treasury Steven Mnuchin and National Economic Director Gary Cohn seemed to imply it meant repealing all individual deductions unrelated to savings, charitable giving, or mortgage interest (revenue would come mostly from repealing the state and local tax deduction). Even with the detailed portions of the plan, there are not enough parameters specified to provide a certain revenue estimate of the tax plan. But making some assumptions based on prior proposals, our best rough estimate suggests the specified parts of the plan would cost $5.5 trillion. Assuming tax break limits only apply only to higher earners, that cost could be as high as $7 trillion; assuming credits and exclusions are eliminated as well as deductions, it would cost $3 trillion.

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“..as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was an expressly prohibited use by Congress.”

What Happened Last Time US Companies Got A Break On Overseas Profits (CNBC)

The Trump administration wants to give companies a break on profits earned overseas and brought back to the United States — a program that’s been tried before to little effect. Current estimates put the total stockpile that U.S firms are holding abroad so as to avoid U.S. taxes at somewhere in the $2.5 trillion range. Back in 2004, Congress approved a plan to “repatriate” such overseas funds that companies could bring back home at a reduced rate. The program was part of the American Jobs Creation Act. The hope then, as now, was that companies would shovel that money back into the economy in the form of investment and job creation. It didn’t quite work out that way. Contrary to the intent, the benefits skewed toward a select few companies in a select few industries.

Rather than use the money for hiring and capital purchases, companies plowed the cash into share buybacks and dividends, and many of the biggest beneficiaries actually cut American jobs in the years after the repatriation. “While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment,” the Congressional Research Service, Congress’ nonpartisan think tank, said in a report. The CRS cited a series of reports into the benefits of repatriation, with a common theme that the 2004 program was “an ineffective means of increasing economic growth.” In the 2004 case, 9,700 companies were eligible to take part in a tax holiday that would bring the overseas cash back at a rate of 5.25%, well below the 35% rate for profits earned abroad.

Of that group, 843 firms participated. They brought home $312 billion in qualified earnings, or about one-third of the total cash held overseas, according to the CRS. That translated into total deductions of $265 billion. [..] In the 2005-06 time frame, Pfizer, which repatriated $37 billion, slashed 10,000 jobs. Merck, which brought back $15.9 billion, cut 7,000 jobs, and HP pared its employment rolls by 14,500 after repatriating $14.5 billion. Most of the money went to repairing balance sheets and rewarding shareholders, according to the CRS. According to one study cited, as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was an expressly prohibited use by Congress.

Read more …

Once was a nice country.

New Zealand Plans Spending Splurge to Keep ‘Growing Like Sydney’ (BBG)

New Zealand’s government announced plans to substantially increase infrastructure spending to help sustain economic growth and cope with a swelling population. In its May 25 budget, the government will allocate NZ$11 billion ($7.6 billion) in additional spending on infrastructure like schools, roads, hospitals and housing between 2017 and 2020, Finance Minister Steven Joyce said in a speech in Wellington Thursday. When added to already-planned investments, a total of around NZ$23 billion would be spent over the four-year period, representing “the biggest addition to the government’s capital stock in decades,” he said. New Zealand’s economy is among the fastest-growing in the developed world, expanding at around 3% a year, and the government predicts rising budget surpluses.

Growth is being driven in part by record immigration and fewer New Zealanders seeking work abroad, which is straining infrastructure. “As a country we are now growing a bit like South-East Queensland or Sydney, when in the past we were used to growing in fits and starts,” Joyce said. “That’s great because we used to send our kids to South-East Queensland and Sydney to work, and now they come back here.” Details of the first tranche of spending would be unveiled in the budget, and Joyce said the government wants to make greater use of public-private partnerships and joint ventures to boost infrastructure further.

[..] The government will aim to cut net debt to 10-15% of GDP by 2025, from an estimated 24.3% at June 30 this year. Its current target is to reduce net debt to 20% of GDP by 2020. Joyce said the government borrowed heavily to help the country through the global financial crisis and a devastating earthquake in Christchurch in 2011. “Shocks can come along at any time, and sometimes they come in pairs,” he said. “We are a geologically young country, and we are also a small country in an often turbulent world – so there are plenty of shocks ahead of us.”

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“I just want any example of Russia spreading fake news, just show me one example.. I can present you tons, dozens, billions of examples of Western media spreading false news about Russia..”

Russian Spokeswoman On ‘Ridiculous’ Airstrikes In Syria, Fake News (Y!)

Recent U.S. airstrikes against Syria were “ridiculous,” according to Russian Foreign Ministry spokesperson Maria Zakharova. In a blunt, at times contentious, interview with Yahoo Global News Anchor Katie Couric, Zakharova called the strikes “unacceptable” and said they violated international law and made no military or political sense. “They brought the situation nowhere,” she said. She went on to say that the goal of the West to oust Syrian President Bashar Assad is “not a way out, it is a dead end.” When pressed on whether Assad was responsible for the chemical attacks that led to the U.S. military action, she said, “Our decisions should be based on real evidence,” detailing Russia’s desire to have independent investigators determine blame.

She pointed to U.S. claims in 2003 that Iraq had weapons of mass destruction, which later turned out to be false. “That was the worst thing that happened to the Security Council, to the United States, to the Middle East region,” Zakharova said. The wide-ranging, exclusive conversation began with Zakharova objecting to Couric’s characterization of the Russian government as a “regime.” “I think if a president is elected by the people of his country, it’s not about being a regime, it’s about being a democracy,” she said. Zakharova said that relations between the U.S. and Russia began to deteriorate during the Obama administration, in part because of what she called “fake news” reports about her country that were disseminated during those years.

“What I’m facing today is, the main role of the media is to separate people (in order) to divide the world into separate parts. I think it’s dangerous.” She dismissed claims from American and European intelligence officials that, in actuality, Russia is disseminating fake news to achieve its geopolitical goals. “I just want any example of Russia spreading fake news, just show me one example,” she said. “I can present you tons, dozens, billions of examples of Western media spreading false news about Russia,” she told Couric.

Read more …

Germany forces Greece to take measures that are illegal under German law. Both are -equal- members of an economic union.

German Court Upholds Greek Teacher’s Case Against Pay Cut (AP)

A German federal court has upheld a complaint by a teacher at a Greek school in Germany against a pay cut that the Greek government imposed at the height of the country’s financial crisis. The teacher, a Greek citizen, works at a Greek government-run school in Nuremberg but his contract is subject to German law. He sued after his pay was cut in 2010. A lower court granted his demand for some €20,000 ($21,780) in extra pay for Oct. 2010-Dec. 2012 — the amount by which his salary was lowered. The Federal Labor Court said Wednesday it has rejected a Greek appeal against that ruling. It ruled that Greek austerity legislation isn’t directly applicable on German territory and that Greece doesn’t have legal immunity over the labor contract.

Read more …

Apr 252017
 
 April 25, 2017  Posted by at 7:59 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait 1972

 


Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)
Trump Summons Entire Senate To White House Briefing On North Korea (G.)
Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)
The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)
Canadians’ Confidence In Housing Hits Record High (HPoC)
Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)
Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)
Rising Defaults In China Reveal Hidden Debt (BBG)
China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)
Naked Selfies Used As Collateral For Chinese Loans (AFP)
Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)
Ontario To Pay Guaranteed Incomes To The Poor (AFP)
Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)
At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

 

 

They’ve been doing this forever: “..the fight is the “longest-running battle since the Trojan War.”

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)

U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed. Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3% to 24.1% on Canadian lumber producers including West Fraser Timber. “We’re going to be putting a 20% tax on softwood lumber coming in – tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering at Breitbart News. A White House official confirmed the comment.

The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. U.S. Commerce Secretary Wilbur Ross amplified Trump’s remarks in a statement afterward that also referenced a fight over a new Canadian milk policy that U.S. producers say violates Nafta. “It has been a bad week for U.S.-Canada trade relations,” Ross said, adding “it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.” He said the Commerce Department “determined a need” because of unfair Canadian subsidies to the lumber industry to impose “countervailing duties of roughly one billion dollars.” In a dig at NAFTA, which Trump has said he wants to renegotiate, Ross added, “This is not our idea of a properly functioning Free Trade Agreement.”

[..] The so-called countervailing duties, which counter what the U.S. considers Canadian subsidies, came in below some analyst expectations. CIBC analyst Hamir Patel forecast the initial combined countervailing and anti-dumping duties could reach 45 to 55%, he said in an April 23 note. The U.S. may also apply anti-dumping duties if it determines Canadian firms are selling for below costs. That decision is expected in June. “It definitely could’ve been a heck of a lot worse,” Kevin Mason at ERA Forest Products Research said by phone. “I think a lot of people were bracing for a higher duty.”

[..] Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that. Robert Lighthizer, Trump’s nominee to be the next U.S. Trade Representative, said at his confirmation hearing last month that he views the lumber dispute as the top trade issue between the U.S. and Canada. Oregon Democratic Senator Ron Wyden told Lighthizer the fight is the “longest-running battle since the Trojan War.”

Read more …

Huffin’-and-a-puffin’.

Trump Summons Entire Senate To White House Briefing On North Korea (G.)

The entire US Senate will go to the White House on Wednesday to be briefed by senior administration officials about the brewing confrontation with North Korea. The unusual briefing underlines the urgency with which the Trump administration is treating the threat posed by Pyongyang’s continuing development of nuclear weapons and missile technology. It follows a lunch meeting Trump held with ambassadors from UN member states on the security council on Monday where he emphasised US resolve to stop North Korea’s progress. “The status quo in North Korea is unacceptable and the council must be prepared to impose additional and stronger sanctions on North Korean nuclear and ballistic missile programs,” Trump said at the meeting. “North Korea is a big world problem, and it’s a problem we have to finally solve.”

On Friday the US secretary of state, Rex Tillerson, is due to chair a security council foreign ministers’ meeting on the issue in New York, at which the state department said he would call once more for the full implementation of existing UN sanctions or new measures in the event of further nuclear or missile tests. “This meeting will give the security council the opportunity to discuss ways to maximise the impact of existing security council measures and to show their resolve to response further provocations with appropriate new measures,” said Mark Toner, state department spokesman. Senators are to be briefed by the defence secretary, James Mattis, and Tillerson on Wednesday. Such briefings for the entire senate are not unprecedented but it is very rare for them to take place in the White House, which does not have large secure facilities for such classified sessions as Congress.

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Not going to be easy. Trump’s too desperate to get a deal done.

Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)

President Donald Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfill a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury. Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin will brief House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the leaders of congressional tax-writing committees – House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch.

While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15%; Ryan wants 20%, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent. “I’m not sure he’s going to be able to get away with that,” Hatch told reporters Monday. “You can’t very well balance the budget that way.”

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Demand goes down because people have less money to spend. All the rest is humbug.

The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)

Lackluster gasoline demand is once again raising concerns that the oil market won’t be able to escape the doldrums. Demand for U.S. gasoline has recovered since January, but remained below 2016 levels throughout much of this year. Now, analysts are worried weak consumption will cause gasoline stockpiles to keep building and eventually result in weaker crude oil demand and pricing. U.S. gasoline futures were down more than 1% on Monday, reflecting demand concerns as refiners emerge from the winter maintenance season and prepare to turn out more fuel. Meanwhile, U.S. crude settled 39 cents lower at $49.23, extending last week’s deep losses. “As gas prices drop, that creates an undertow for the entire crude oil market,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Part of the problem is a tough comparison with extraordinarily low gasoline prices last year. The national average gasoline price on Monday was nearly 28 cents above last year’s level, according to GasBuddy.com. “I’m in the camp that says last year was a little bit of the anomaly,” Kloza said. “Gas was so cheap that we drove a little bit more almost capriciously. This year, I just don’t think it’s going to happen.” In a troubling sign, the nation’s gasoline station operators have reported at industry conferences that their sales are down 1.5 to 2% this year, according to Andy Lipow, president of Lipow Oil Associates. “When you hear retailers telling you that their demand is down you’ve got to be a believer,” he told CNBC. Lipow said he fears that trend will carry through for the balance of 2017. Demand is certain to rise as the summer driving season ramps up, but Lipow sees stockpiles remaining relatively high.

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Stark raving madness. A housing market that is rising at ‘only’ 9.5% per year is labeled ‘rational’.

Canadians’ Confidence In Housing Hits Record High (HPoC)

The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried. In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances. The survey found 48.5% of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11% expect to see house prices decrease. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” pollster Nik Nanos said in a statement. “Household expectations have improved by roughly 10% since the start of the year as the effects of the oil price shock have stabilized and the focus has moved toward rising property values,” Bloomberg economist Robert Lawrie said.

“In recent weeks, however, consumer sentiment regarding personal finances began drifting lower, with extended household balance sheets perhaps the next focus of concern for policymakers.” High debt levels are precisely why many market observers are growing concerned about Canada’s priciest housing markets, namely the Toronto and Vancouver regions. House prices in Toronto jumped 33% in March from a year earlier, to an average of $916,567. While Vancouver’s house prices have moderated over the past six months, they remain elevated, with the benchmark price at $919,300 in March.

National Bank of Canada, which co-publishes the Teranet house price index, warned recently that “irrational exuberance” may be setting into some Canadian housing markets, noting that more than half of Canada’s regional markets are seeing price growth above 10% annually. With mortgages ballooning, Canadian household debt has repeatedly hit record highs in recent years, and now stands at $1.67 of debt for every dollar of disposable income. Those elevated debt levels are the main reason one why the Bank for International Settlements (BIS), a Geneva-based “central bank of central banks,” warned recently that Canada has the second-highest risk of a financial crisis, behind only China.

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Essential and repeated here a 1000 times: “Bubbles have a habit of overshooting on the downside when they finally burst.”

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains. Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities. When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008. The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector. China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing. About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%. Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

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“..we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops.”

Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)

Between autumn 1977 and Christmas 1979, interest rates rose from 5% to 17%. If you were a young boomer whose biggest cost was a variable rate mortgage, that would have hurt. In 2009, by contrast, interest rates were cut to a record low of 0.5%, and stayed there for the better part of a decade. When eventually they did move again, it was down. You don’t know you’re born. Except, of course, you do – because, if you’re reading this and you’re under 40, there’s a pretty good chance you’re still stuck paying rent. Yes, interest rates are low; no, this is not particularly helpful. Even if you do have a mortgage, it’s probably a fixed rate one because, let’s be honest, those rates are going up again one day. But not, it seems, today. The Yorkshire Building Society has just launched a new mortgage that charges an interest rate of just 0.89%. “We are very pleased to offer borrowers the lowest mortgage rate ever available,” said a spokesman.

“The cost of funding has fallen in recent weeks and, as a financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.” (“We used to dream of mortgages at under 1%,” say the boomers.) So does that means that owning a home is now cheaper than it’s ever been? Well, no, of course not. For one thing, this isn’t a fixed rate deal. It’s actually a (bear with me on this) two-year-long discount of 3.85% to the standard variable rate (SVR) of 4.74%. That means it’s very, very unfixed indeed: a normal tracker mortgage moves in response to Bank of England rates; an SVR one moves in response to the lender’s whims. Accepting this mortgage means placing a bet that the Yorkshire Building Society will be nice to you. It also comes with an unusually high arrangement fee of £1,495, but this shouldn’t bother you, because you probably can’t get that rate anyway. To even be considered, you need a deposit worth 35% of the value of your home.

[..] But there’s another, more sinister, reading of the recent rash of ultra-low mortgage rates: it suggests we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops. But bubbles tend to burst. Prices can’t rise forever: one day, interest rates must surely rise. When the inevitable happens, there is a danger that those who took advantage of this deal may find their equity wiped out – and the rate they’re paying will shoot through the roof.

That would obviously be very sad for those who are affected; for those shut out of home ownership, though, it may be no bad thing. That’s because nine years of record-low interest rates have probably contributed to the fact that house prices have soared out of reach; and higher prices have meant increasingly unattainable deposits. A rise in interest rates could, paradoxically, make housing more affordable.

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Companies guaranteeing each other’s crappy debt. What could go wrong? Problem is, Beijing had let them do it for years.

Rising Defaults In China Reveal Hidden Debt (BBG)

Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday. Scrutiny is mounting after a corn oil producer in the eastern province of Shandong said last month it had guaranteed debt of a neighboring aluminum product manufacturer which is now stuck in a cash crunch.

Just days before that, a local government financing vehicle in China’s southwest had to repay an auto parts maker’s loans it had guaranteed after the latter defaulted. “Disclosure of such guarantees isn’t timely,” said Qiu Xinhong at Shenzhen-based First State Cinda. “Sometimes, it’s like a buried mine and you don’t know when the risks will explode.” This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11% of their equity, and at LGFVs is 18%, according to Citic Securities. The load is even heavier at weaker borrowers. About 44% of issuers rated lower than AA- have a ratio of more than 30%, according to Everbright Securities. The phenomenon is less common in the U.S. because banks don’t require such guarantees to offer loans, according to Fitch Ratings.

“If companies in the same region offer a huge amount of guarantees for each other’s debt, it would form a guarantee web and deepen interconnections among the companies,” said Gang Meng, director of rating at Golden Credit Rating International Co. in Beijing. “If one company has to repay debt for its guaranteed company, risks would quickly ripple to other companies in the web, which will result in a butterfly effect.” [..] Guarantors don’t mark the pledges on their balance sheets and often disclose them only on an annual basis. Such shadow debts pose rising risks after central bank tightening pushed up onshore corporate bond yields to two-year highs and defaults on local notes surged to a record.

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The distinction between state banks and shadows has become very murky.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)

A $1.7 trillion source of inflows into Chinese markets has suddenly switched into reverse, roiling the nation’s money management industry and sending local bonds and stocks to their biggest losses of the year. The turbulence has centered on so-called entrusted investments – funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China’s financial system and reducing transparency.

The banks’ withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking predict the selloff will deepen this year. “We are seeing an exodus of funds,” said He Qian at HFT Investment Management, which oversaw about 189 billion yuan ($27.5 billion) as of last year. He was one of about half-a-dozen asset managers and analysts who said banks have started scaling back their entrusted investments.

The arrangements have become an important part of China’s shadow finance system. When banks sell wealth-management products – the ubiquitous savings vehicles that offer higher yields than deposits – the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients – plus some extra for themselves.

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You better look good than feel good.

Naked Selfies Used As Collateral For Chinese Loans (AFP)

Hundreds of photos and videos of naked women used as collateral for loans on a Chinese online lending service have leaked onto the web, highlighting regulatory problems in the fast-growing peer-to-peer marketplace. A 10-gigabyte file posted on the internet exposed the personal details of more than 160 young women who were asked to provide the explicit material to secure money through online lending platform Jiedaibao. Launched by JD Capital in 2015, Jiedaibao allows lenders to operate anonymously but requires borrowers to reveal their real names when making transactions. Loan amounts and interest rates can be customised to meet the needs of users – often people who have a hard time accessing loans through more traditional financial institutions, like banks.

Interest on the “nude loans” reached an astonishing 30% a week, according to the Global Times newspaper. Lenders told female borrowers that if they failed to repay the loans, their nude photos would be sent to their families and friends, whose information was also required for some transactions, the article said. Material in the file put on the web last Wednesday showed some borrowers also promised to repay loans with sexual favours, according to screen captures posted on social media websites. In a statement on its official Twitter-like Weibo account, Jiedaibao said it had tracked down the accounts of several borrowers through photos and ID information circulated online and had frozen the suspected lenders’ accounts. “The ‘nude loans’ deals were mainly initiated and completed offline, and Jiedaibao only played the role of a money transfer platform in the deals,” the statement said.

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Derivatives used this way are instruments of massive wealth destruction. Why use different rates for each side of the deal? “..the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate..”

Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)

Derivatives burdened Italy’s public debt again last year for a record amount of €8.3 billion ($9 billion), making the country the biggest swaps loser in the euro region. Losses related to swaps held by the nation added €4.25 billion to the country’s debt while net liabilities’ burden totaled €4.07 billion, based on data released Monday by EU statistics office Eurostat. In the 2012-2016 period, the burden totaled €29.6 billion, also a euro-area record. Italy’s derivative-related losses and net liabilities were higher than those for the whole euro region combined both in 2016 and in the five-year period as some countries actually saw the swaps helping to alleviate their debts. Governments across the euro region have used derivatives to manage their debt-financing costs and to hedge against sudden changes in rates and excessive exchange-rate volatility.

Those deals have sometimes backfired with the effect of pushing nations’ debts even higher. In the existing interest-rate swaps the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate,” the government said earlier this month in an annex to its annual Economic and Financial Document. Since starting from November 2015, the Euribor stayed negative and the impact on the flow indexed to that rate was that the Treasury had to pay money to its counterparts, instead of being paid by them, the document also said. Italy’s public debt rose last year to €2.2 trillion, or 132.6% of the country’s GDP, Eurostat said in a separate report on Monday.

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it’s important to get it right.

Ontario To Pay Guaranteed Incomes To The Poor (AFP)

Ontario has launched a pilot program to provide a guaranteed basic income to a few thousand people to test its effects on recipients and public finances, the Canadian province announced on Monday. Provincial premier Kathleen Wynne said the program would provide a “basic income” for three years to 4,000 people living under the poverty line. “We want to find out whether a basic income makes a positive impact in people’s lives,” Ms Wynne said, adding that “everyone should benefit from Ontario’s economic growth.” Income support payments will be as high as Can$16,989 (£9,800) a year for an individual, or Can$24,027 for a couple, plus an additional Can$6,000 for the disabled.

The figures will be reduced for those holding part-time jobs – they will receive 50 cents less for each dollar earned. As a concrete example, a single person with a yearly salary of Can$10,000 will receive an additional payment of Can$11,989. The 4,000 participants, aged 18 to 65, have been chosen at random in three cities: Hamilton and Lindsay in the Toronto suburbs and Thunder Bay in the province’s west. The province estimates the cost of the program at Can$50 million a year. Ontario is the most heavily populated Canadian province, with 38% of the country’s 36.5 million inhabitants. 13% of Ontario residents live below the poverty line, according to Statistics Canada.

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What the FBI did has already been declared illegal in New Zealand courts.

Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)

FBI Director James Comey is currently in New Zealand and if Kim Dotcom has his way, Comey could find himself being questioned by the New Zealand police. The internet entrepreneur, who is wanted by the United States on multiple charges including fraud and copyright infringement, filed a complaint with the police Tuesday against the FBI director for what Dotcom called theft of his data by the agency. The alleged theft happened when the police raided Dotcom’s home Jan. 20, 2012, as part of investigations instigated by the U.S. The charges against him are based on the now-defunct website Megaupload that he operated, where users could share content with each other.

Some of that content was illegal to share, but according to New Zealand laws, internet service providers are not held responsible for the actions of their users. In his complaint Tuesday, Dotcom’s lawyer urged the police to urgently question Comey, who is in New Zealand for a conference. The grounds for the complaint are that the FBI received copies of data that was taken from Dotcom’s home during the 2012 raid, an act which courts in the country have held to be illegal, according to the complaint.

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The value you put on someone else’s life inevitably becomes the value of your own life.

At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

At least 16 people, including two children, drowned after an inflatable boat carrying refugees and migrants sank off Greece’s Lesbos island, authorities said on Monday. They are believed to be the first confirmed deaths in Greek waters this year of migrants or refugees making the short but dangerous crossing from Turkey on overcrowded rubber dinghies. Nine bodies were recovered in Greek territory and another seven in Turkish waters, Greek and Turkish coastguard officials said. Two survivors have been rescued. The two women, one of whom is pregnant, told the United Nations refugee agency UNHCR that 20 to 25 people were on board when the dinghy capsized around 1900 GMT on Sunday. The women are from Cameroon and the Democratic Republic of Congo.

Though fewer than 10 nautical miles separate Lesbos from Turkish shores, hundreds of people have drowned trying to make the crossing since Europe’s refugee crisis began in 2015. In that year, Lesbos was the main gateway into the European Union for nearly a million Syrians, Iraqis and Afghans. But a deal in March 2016 between the EU and Ankara has largely closed that route. Just over 4,800 people have crossed to Greece from Turkey this year, according to UNHCR data. An average of 20 arrive on Greek islands each day. “The number of people crossing the Aegean to Greece has dropped drastically over the past year, but this tragic incident shows that the dangers and the risk of losing one’s life remains very real,” said Philippe Leclerc, UNHCR Greece representative.

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Apr 162017
 
 April 16, 2017  Posted by at 8:54 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Fred Stein Snow White 1946

 


Who Will Buy Baby Boomers’ Homes? (CityLab)
Canada Completely Lost Its Mind Over Real Estate (McL)
The Bank of Canada Should ‘Cease and Desist’ (Mises)
Will Trump Accept Responsibility When This Shitshow Implodes? (Quinn)
Can We Avoid Another Financial Crisis? (ET)
China Finally Halts Outflows. Now What? (Balding)
Russia Could Soon Take Over A Chunk Of US Oil Infrastructure (Vice)
Britain Set To Lose EU ‘Crown Jewels’ Of Banking And Medicine Agencies (G.)
The Dream Is Officially Over For Iron Ore (SMH)
Brazil’s Odebrecht Paid $3.3 Billion In Bribes Over A Decade (R.)
Zimbabwe Cash Crisis: ‘Coins May Also Disappear’ (AllA)
Marine Le Pen Faces Wipe Out In French Election After Computer Blunder (E.)
The Refugee King of Greece (NYT)
EU ‘Leaving Migrants To Drown’ Say Rescuers (Ind.)

 

 

These people are so stuck in their narrow field and views. Build more! is not an answer to any of this. Homes are grossly overpriced, and they will be ‘re-priced’.

Who Will Buy Baby Boomers’ Homes? (CityLab)

Frequent sales put pressure on the market to produce homes catering to changing tastes among buyers. Nelson notes that the home building industry is now producing less than half the number of new houses it did in the mid-2000s. Though demand now outpaces supply, homeowners are hanging on to properties significantly longer—nine to ten years—because they owe more on their houses than they can get for them, their houses are worth less than before the recession, or they can’t find a home that meets their needs due to insufficient supply. “It’s not that Boomers are going to ‘age in place,’” says Nelson. “They’re going to be stuck in place, and they’re going to make the best of it.” Those who can afford it will remodel. Regardless of when it occurs, the great senior sell-off won’t affect every Boomer equally.

A large chunk of Millennials—Nelson posits around two-thirds—will want to buy suburban homes because they like the lifestyle, or because they will be priced out of cities like Washington, D.C. or Los Angeles, where housing costs are exorbitant. Most of the other third, he says, will want to live in central cities and the oldest, closest suburbs—though not necessarily downtown. The small percentage who prefer downtown living but cannot afford certain cities may move to more affordable ones, such as Philadelphia or Minneapolis. Nelson predicts that the fringe areas surrounding cities will bring the biggest headaches for Boomers looking to unload their houses. Because Millennials will be looking for small homes when they finally start to buy in larger numbers, the sprawling McMansions of the exurbs won’t be desirable to many of them.

“The Boomers in the exurbs are going to be in a real pickle,” says Nelson. “Even in a dynamic market like Washington, D.C. or other booming cities, the market for those homes is going to be soft.” Though Jennifer Molinsky, a senior research associate at Harvard’s Joint Center for Housing Studies, agrees that exurbs and rural areas will likely be vulnerable to the Boomer/Millennial housing mismatch, she’s not as pessimistic about the sell-off as a whole. “The Baby Boomers are a large generation,” she says. “Nothing they do is going to happen en masse.” She also believes that the Boomers who don’t age in place will demand an increasing array of housing options that will help spread out sales over time, decreasing the likelihood of a sudden glut of housing.

But many analysts do agree on one thing: More housing will need to be built for Millennials—and it needs to be scaled to their desires, not their parents’s. “Millennials are likely to prioritize different features in their homes, such as greener materials or in-law suites,” says Molinsky. And according to the Harvard Joint Center’s projections, nearly 90% of those looking for homes in 2035 will be under 35 or 70 and over—and both groups tend to buy less square footage. The challenge for local governments and developers, says Nelson, “is to anticipate these future needs and build different and smaller homes now—before getting trapped with too many larger homes later.”

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“In British Columbia, real estate and related fields such as construction and finance make up an astounding 40% of GDP..”

Canada Completely Lost Its Mind Over Real Estate (McL)

The average selling price for all homes in the Greater Toronto Area, including houses and condos, surged to $916,567 in March, a 33% rise from the year before, according to the Toronto Real Estate Board. Since January alone, prices are up 19%. A lowly semi-detached house in the city is now worth more than $1 million. Prices are growing even faster in the surrounding suburbs. More first-time homebuyers and investors are looking to Barrie, Ont., a city about 100 km north of Toronto, where the average selling price jumped 33% compared to the year before.

[..] Canada is a country deeply reliant on real estate. The industry accounts for roughly 12% of its GDP. In British Columbia, real estate and related fields such as construction and finance make up an astounding 40% of GDP. Vancouver is seeing prices rise again after numerous efforts to cool the market. And in Alberta, not even a recession and a 9% unemployment rate did much damage to house prices in Calgary and Edmonton. “It’s surprising how well it has held up, given the severity of two years of contraction,” says Todd Hirsch, chief economist at ATB Financial.

[..] “Tight supply starts to become a justification for all outcomes,” says Beata Caranci, chief economist at TD Bank Group. If buyers are convinced supply is low, then the big price increases will seem logical, exacerbating their fear of missing out and pushing them to act irrationally. Toronto’s price surge did indeed coincide with a significant drop in listings, but that could be a result of psychology on the seller’s part. Some homeowners could be holding on to their properties in anticipation of prices rising even further. Families that would otherwise sell their homes to upsize could also be staying put simply because prices are so high, and competition is so fierce, that the hassle isn’t worth it. An influx of deep-pocketed foreign investors could also be taking properties off the market, especially since Vancouver implemented a 15% tax last year for foreign nationals. “I do believe that at least some investors went directly from Vancouver to Toronto,” Porter says. “That has played a role in launching Toronto, and some surrounding cities, into the stratosphere.”

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Way too late: “…the Bank of Canada needs to pay more attention to the housing issue because it is a huge threat to the entire economy.”

The Bank of Canada Should ‘Cease and Desist’ (Mises)


“Beneath the symbol
We’ll all assemble
Oh how we’ll fly
Oh how we’ll tremble”

– Captain Beefheart, “Ice Cream for Crow”

If interest rates are the symbol beneath which we all assemble, then there are some bad times ahead. But Canada’s “leading economists,” say interest rates are “too blunt a tool” to cool the housing market.This week, Governor Stephen Poloz as expected did not raise rates, but continues to face tough questions about the connection between low rates and the “hot” housing market. Of course, he deserves every hard question thrown at him. And it’s nice that journalists are actually starting to question the obvious connection between low-interest rates and the housing bubble. With Canadians across the country locked out of their local housing markets, and with foreign buyers using Canadian property to protect their wealth from destructive communist dictatorships, frustration needs an outlet and it looks as if Poloz and the BoC are, finally, in the crosshairs.

But that doesn’t mean Poloz will listen. After all, the central bank is supposed to remain “independent” from democratic government and popular opinion. Poloz is making his decisions based on his misunderstanding of the economy, not the will of the mob. As Avery Shenfeld, CIBC Capital Markets’ chief economist, told BNN in an email, “The Bank of Canada will likely stick to its view that house prices are best dealt with through macro-prudential policies particular to that market, with the interest rate setting used to steer the economy overall.” Meaning, let the banks and federal government deal with the issue. The BoC will do what it can, but it will not include raising rates. Raising interest rates will certainly “cool” the housing market, but it will also lead to some unintended consequences that would “hurt” the overall economy.

Remember, the BoC is stacked with Keynesians, who regard the “hangover theory” as implausible as the irrefutable Say’s Law. So if the Bank can’t or won’t raise rates, and leaving the price of interest to the free market isn’t even on the table, then what about a rate cut? Doug Porter, chief economist at BMO Capital Markets, also told BNN, “The BoC should cease and desist with talk of possible further rate cuts, which simply fuel the sense that rates are never going higher, and instead start warning that rates will someday rise.” That would be smart, we’ll have to see what tomorrow brings. So far, Bank of Canada governor Stephen Poloz has left real estate to the experts, meaning, not him. Capital Economics Senior Canada Economist David Madani told BNN that the “Bank of Canada needs to pay more attention to the housing issue because it is a huge threat to the entire economy.” But Poloz, like his predecessor before him, prefers “moral suasion.” Madani thinks the Bank should be using “much stronger language.”

Oh, how we’ll fly, oh how we’ll tremble.

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“67% of the US economy is dependent upon Americans spending money they don’t have on shit they don’t need.”

Will Trump Accept Responsibility When This Shitshow Implodes? (Quinn)

Donald J. Trump has taken credit for making America’s economy great again. He’s been crowing about all the jobs being created, the soaring consumer confidence and record highs in the stock market. It’s all because the Donald has inspired Americans about our glorious future. But, a funny thing has been happening in the real world. The economy has gone into the shitter and GDP will be lucky to reach 1% in the first quarter of his presidency.

The bullshit consumer confidence surveys mean absolutely nothing. Feelings don’t mean shit.

What consumers do is what matters.

 

67% of the US economy is dependent upon Americans spending money they don’t have on shit they don’t need.

And they’ve dramatically reduced that spending. If consumers are so confident, why are a record number of major retailers going bankrupt and closing 3,500 stores in 2017? Mom and pop retailers have been shuttering for years.

If the narrative about a dramatically improving housing market was true, why would furniture store sales and building material store sales be falling?

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That’s a NO. Steve’s new book is out and available on Amazon. Valentin Schmid feels the need to insert his own opinion and veers way out of his depth by questioning Minsky’s instability theory.

Can We Avoid Another Financial Crisis? (ET)

Keen answers the $1 trillion dollar question with a resounding “no.” This is because too many countries rode a wave of private debt explosion during the last boom, and are now in the equivalent of economic purgatory. Keen identifies China as the biggest threat. “They face the junkie’s dilemma, a choice between going ‘Cold Turkey’ now, or continue to shoot up (on credit) and experience a bigger bust later. China is undoubtedly the biggest country facing the debt junkie’s dilemma now. But it doesn’t lack for company,” he writes. Other countries with a high level of private debt and a reliance on debt to fuel economic demand -Keen calls them “debt zombies”- are Australia, Belgium, Canada, South Korea, Norway, and Sweden.

In total, the influence of China and these smaller economies is simply too great for the world to avoid a financial crisis. According to Keen, the solution within this layer of economic theory is more government regulation of the banking system and government deficits to counter a fall in private demand – which is essentially the policy response to the 2008 financial crisis. More aggressive options are quantitative easing in the form of ‘helicopter money’, where the central bank monetizes government debt, and the government then writes a check to households to either pay down debt or spend it in case there isn’t any debt to pay down. There could also be a more official debt jubilee where debt is simply forgiven.

“On its own, a Modern Debt Jubilee would not be enough: all it would do is reset the clock to allow another speculative debt bubble to take off. Currently, private money creation is a by product of the activities of a casino (Keynes, 1936, p. 159), rather than what it primarily should be: the consequence of the funding of corporate investment and entrepreneurial activity,” writes Keen. The ultimate objective would be for the government to counter excessive private debt bonanzas. Being an agnostic thinker, Keen also entertains concepts of government issued money and cryptocurrencies, although he doesn’t think they can eventually replace the banking system, partly because of scale, partly because of political resistance. “As long as that model holds sway over politicians and the general public, sensible reforms will face an uphill battle—even without the resistance of the finance sector to the proposals, which of course will be enormous.”

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China strangles itself to save its economy.

China Finally Halts Outflows. Now What? (Balding)

Is China finally making headway in its battle against currency outflows? On the surface, yes: People’s Bank of China foreign exchange reserves are effectively unchanged since December at $3 trillion, and data for February released by the State Administration of Foreign Exchange showed a significant narrowing of net outflows of capital based on international bank settlements and sales. That’s a major accomplishment, given that yuan had been leaving the country at an average rate of almost $60 billion per month in the middle of last year. But how this turnaround was achieved raises some serious long-term questions for China. For one thing, it wasn’t driven by economic strength. Officially recorded payments and receipts are both down significantly across all categories.

Total foreign bank inflows are flat, while payments abroad were down by 15% through the first two months of the year. With total outflow payments from banks of $3.1 trillion in 2016, a 15% drop represents a large decline in absolute terms. In other words, balance wasn’t achieved by increasing exports or investment into China, but rather by preventing Chinese from buying from and investing in the rest of the world. Some of the government’s restrictions on currency-exchange transactions – such as cracking down on fake trade data and overpayments for imports – were justified and sensible. But others were more dubious and have led to significant distortions. Most banks, for instance, now can only pay for international transactions if they’ve balanced their books with a corresponding level of inflows.

Beijing-based banks are under particular pressure, required to bring in 100 yuan for every 80 they use to pay for overseas transactions. Unsurprisingly, given these regulations, official bank payments and receipts are now almost perfectly balanced. But accomplishing this has required major declines in foreign investment as well as triple-checking what used to be routine transactions of virtually any size. Foreign firms don’t have it much easier. Although China still officially permits foreign companies to move capital for standard operating transactions, such as dividend payments, more than a few firms have complained about not getting permission to do even that.

The risk is that foreign investment in China, which has declined, will fall even further if investors worry about not being able to bring profits back home. Similarly, stepped-up capital controls on Chinese looking to move cash abroad has increased the attractiveness of gray-market money changers in Hong Kong, who have little difficulty finding firms in China hoping to move large sums. Although their volumes have dropped somewhat, the money changers still do a thriving business selling U.S. dollars at a typical discount of 2% to 5% from the official rate.

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Where’s John McCain when you need him?

Russia Could Soon Take Over A Chunk Of US Oil Infrastructure (Vice)

Russia may soon take control of American oil and gasoline infrastructure in a deal U.S. lawmakers warn represents a threat to energy security. Rosneft, Russia’s state-controlled oil company, could end up with a majority stake in Texas-based Citgo after the entity that owns Citgo, Venezuela’s state-owned oil and natural gas company PDVSA, used almost half of Citgo’s shares as collateral for a loan from Rosneft. In the midst of Venezuela’s ongoing economic crisis, PDVSA is reportedly in danger of defaulting on that loan. That means Rosneft, a company specifically named in U.S. sanctions levied against Russia after its 2014 annexation of Crimea, is poised to become one of the biggest foreign owners of American oil refining capacity. Rosneft is headed by Igor Sechin, a powerful crony of Russian President Vladimir Putin, and is often seen as a proxy for the Kremlin’s energy policies.

PDVSA put up as collateral about 49.9% of Citgo shares in exchange for a $1.5 billion loan from Rosneft in December. It had used the other half of Citgo as collateral for a bond deal two months before that. Should PDVSA default on its Russian loan, the Russians could relatively easily end up with a majority stake in Citgo by acquiring more PDVSA bonds on the open market. While the exact details and time-frame of the Rosneft loan remain murky, PDVSA successfully made $2.2 billion in payments on notes that matured April 12, sending ripples of relief through financial markets. Still, the possibility of default has set off alarm bells in Congress, where Republican and Democratic members of the House and Senate told Treasury Secretary Steven Mnuchin they see Russia’s potential acquisition of Citgo as a threat to the country.

“We are extremely concerned that Rosneft’s control of a major U.S. energy supplier could pose a grave threat to American energy security, impact the flow and price of gasoline for American consumers, and expose critical U.S. infrastructure to security threats,” six senators wrote in a letter to Mnuchin dated April 10. Those senators include Democrat Robert Menendez of New Jersey and Republicans Marco Rubio of Florida and Ted Cruz of Texas. [..] Citgo owns three large U.S. oil refineries in Louisiana, Illinois, and Texas with a combined capacity of almost 749,000 barrels a day, or a bit more than 4% of the total U.S. refining capacity of 18.6 million barrels a day. Citgo-branded fuel is available at more than 5,000 locally owned retail gas stations in 29 states. The company also controls pipeline networks and 48 oil product terminals.

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What Britain need is an election.

Britain Set To Lose EU ‘Crown Jewels’ Of Banking And Medicine Agencies (G.)

The EU is set to inflict a double humiliation on Theresa May, stripping Britain of its European agencies within weeks, while formally rejecting the prime minister’s calls for early trade talks. The Observer has learned that EU diplomats agreed their uncompromising position at a crunch meeting on Tuesday, held to set out the union’s strategy in the talks due to start next month. A beauty contest between member states who want the European banking and medicine agencies, currently located in London, will begin within two weeks, with selection criteria to be unveiled by the president of the European council, Donald Tusk. The European Banking Authority and the European Medicines Agency employ about 1,000 people, many of them British, and provide a hub for businesses in the UK.

It is understood that the EU’s chief negotiator hopes the agencies will know their new locations by June, although the process may take longer. Cities such as Frankfurt, Milan, Amsterdam and Paris are competing to take the agencies, which are regarded as among the EU’s crown jewels. Meanwhile, it has emerged that Britain failed to secure the backing of any of the 27 countries for its case that trade talks should start early in the two years of negotiations allowed by article 50 of the Lisbon treaty. The position will be announced at a Brussels summit on 29 April. Despite a recent whistlestop tour of EU capitals by the Brexit secretary, David Davis, diplomats concluded unanimously that the European commission was right to block any talks about a future comprehensive trade deal until the UK agrees to settle its divorce bill – which some estimate could be as high as €60bn – and comes to a settlement on the rights of EU citizens.

[..] The European commission said earlier this month that talks about a potential trade deal would occur only once “sufficient progress” had been made on Britain’s €60bn divorce bill and the position of EU citizens in the UK and British citizens on the continent. It is understood diplomats representing the EU27 did discuss a definition of “sufficient progress”, but ultimately left it to the leaders to decide. An EU source said it was hoped that “scoping” talks on a deal, and a transitional arrangement on access to the single market, could start in the autumn. The EU’s negotiating position detailed in the European council’s so-called draft guidelines will also be redrafted to include mention of the European parliament’s role, in a sign that MEPs are angling to play a greater part in shaping the talks. Tusk’s team will “fine-tune” the guidelines ahead of a final meeting of diplomats on 24 April, an EU source said. A one-day summit of leaders will take place on 29 April in Brussels to sign off on the document.

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Not to worry though. Australia already has a new bubble going to replace it.

The Dream Is Officially Over For Iron Ore (SMH)

Nev Power, the man who runs Andrew Forrest’s third force in iron ore, Fortescue, is something of an optimist. As the company’s share price was in freefall on Thursday he fronted up to media and investors putting a relatively positive spin on the outlook for prices of the commodity most pivotal to the health of the Australian economy. In previous periods Power has underestimated price falls and price gains and he now thinks it will settle at about $US60 ($79) to $US65 per tonne. Having ridden price rises in iron ore for more than a year, the big producers like Fortescue now need to reassure investors they are match fit to cope with the wild downward gyration in price. For the sake of the broader economy – and Fortescue shareholders – let’s hope he is right and we don’t reach the $US45 that the previous federal treasurer, Joe Hockey, predicted less than two years ago.

The trouble is that the myriad professional analysts and forecasters that follow this market have a significantly less rosy view of where the price will bottom out – more like $US50 a tonne. As prices have spiralled down over the past few weeks and the decline momentum has moved into full swing this week, the I-told-you-so cries have been louder than ever. As the price of iron ore irrationally moved up to more than US$94 in February – it was these bearish experts that were red faced. Today their predictions have been, at least in part, vindicated. It is now below $US70 and falling – a whopping 28% drop in a matter of weeks. To be fair the big producers including BHP Billiton and Rio Tinto have not been in denial about the iron ore price bubble – warning investors for more than a month that the recent prices have been something of a mirage.

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Is there anyone left in government who is not on the take?

Brazil’s Odebrecht Paid $3.3 Billion In Bribes Over A Decade (R.)

Odebrecht, the Brazilian engineering company at the center of a historic corruption scandal, paid out a total of about $3.3 billion in bribes in the nine years through 2014, according to testimony cited by local media on Saturday. Through a department specifically established to pay politicians and other recipients for public works contracts, Odebrecht paid as much as $730 million annually in both 2012 and 2013, the years when bribe payments peaked, according to a spreadsheet that a former executive reportedly gave investigators as part of a plea deal. The $3.3 billion figure, and related annual tallies as laid out in the spreadsheet, were reported on Saturday by the G1 news site of the Globo media group and the Estado de S. Paulo, a leading newspaper.

A trove of plea deal testimony unsealed this week by a Supreme Court justice is shedding light on the extent and manner in which Odebrecht, once Latin America’s most successful engineering firm, routinely paid officials in Brazil and other countries in exchange for winning contracts. The testimony was unsealed as the justice, Edson Fachin, authorized investigations of eight government ministers, 12 governors and dozens of federal lawmakers implicated in the scandal, uncovered three years ago because of a kickback investigation at the state-run oil company Petrobras. Odebrecht, whose former chief executive has been jailed since 2015 because of the probe, negotiated a far-reaching plea agreement with Brazilian investigators last year, leading to testimony by about 80 company executives and employees.

Along with an affiliate, Odebrecht also agreed last year to pay at least $3.5 billion to U.S. and Swiss investigators for international charges related to the scandal. Earlier on Saturday, Estado de S. Paulo also reported that Brazilian authorities were investigating if any of the foreign kickbacks the company has already admitted to violated Brazilian law. The company made those payments in countries including Mexico, Ecuador, Peru and Angola.

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A whole new form of cashless society…

Zimbabwe Cash Crisis: ‘Coins May Also Disappear’ (AllA)

Coins used to be for the piggy banks used by kids to save money given by their parents for break-time snacks at school. The adults normally kept a few of them when they got them from the grocery store as change. One normally didn’t have to keep lots of these because they broke pockets in the case of men, or made the handbag heavy for women. When the piggy bank became full, a way was always sought to turn the coins into “real cash” – crispy bank notes the parents would use to buy items of choice for the saving kids. Banks did not normally accept large amounts of coins, and these coins were often changed for notes in grocery shops or other retailers who had use for them for change.

In crisis-torn Zimbabwe, things have changed; coins are no longer for children’s piggy banks, they are now treasure items for adults who are failing to get cash from banks due to a worsening liquidity crunch in the economy. Banks are now dispensing large amounts of coins to depositors because they have run out of notes to honour their obligations to the banking public. At a bank in the capital last week, depositors waited in long queues to withdraw US$50 apiece in coins. “I’m at least relieved,” one depositor said, holding a plastic full of coins after a long wait in a bank queue. Bank notes have become a scarce commodity and coins have taken their place as a medium of exchange in the country. The $0,25 and $0,50 bond coins, which were introduced to ease a change problem that had been brought by use of hard currencies in 2009, have become choice monetary instruments in a liquidity-challenged economy.

[..] Economist, Christopher Mugaga, who is also the chief executive officer of the Zimbabwe National Chamber of Commerce, said the situation in the country was increasingly getting desperate. He warned that even the coins could soon become scarce on the market. He blamed the crisis on an erosion of confidence in the banking sector, which has resulted in people avoiding depositing their money with banks because of failure to withdraw it on demand. “When the bond notes were introduced, pressure was on the notes. People are also not banking hence for a every dollar, only $0,05 goes back into the banking system. So when you go back to the bank, you will not find the notes,” Mugaga said. “If the problem persists, coins may also disappear,” he warned.

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A very convenient blunder.

Marine Le Pen Faces Wipe Out In French Election After Computer Blunder (E.)

A monumental computer blunder could cost Marine Le Pen the French general election as 500,000 citizens living outside of France have the chance to vote twice. Half a million people received duplicate polling cards in the post, which would allow them to cast two votes at the first round of the election, held on April 23. French authorities confirmed they would not be investigating the potential electoral fraud until AFTER the election, when retrospective prosecution may take place. This could crush Ms Le Pen’s dreams of surging to power, as most French nationals living outside of their country are not right wing – demonstrated by the fact many feel they depend on the EU to guarantee their stay in foreign countries.

Voting twice is a crime, but police will only find out if they run a check on the individual through their computer systems. The punishment can be up to two years in prison and a fine of about £13,500. France’s Interior Ministry has said it will not be invalidating the election because of the duplicate voting glitch, but with Bloomberg’s latest poll currently showing Mr Macron and Ms Le Pen polling at 22.8%, and far left Mr Melenchon at 18.3%, it is possible an extra 500,000 votes either way could swing the balance of power.

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The New York Times is way late and doesn’t even care to ask where all the money went.

The Refugee King of Greece (NYT)

According to aid experts, more has been spent on the humanitarian response in Greece than on any refugee crisis in history. “Every year, Greece hosts 25 million tourists,” a frustrated aid worker told me, “and to date we have been given 800 million euros in funding for this crisis — but we can’t find proper accommodation for 50,000 people?” The crisis is, instead, the result of deliberate political choices. According to Louise Roland-Gosselin, the advocacy manager of Doctors Without Borders, “Europe has said: ‘We have had enough of this. It’s no longer our problem.’ There are too many elections in too many countries. Politicians are pandering to the right and saving their skins at the price of the refugees.”

As part of the deal with Turkey, the European Union agreed to relocate the refugees who were already stuck in Greece. But only 10% have been settled elsewhere, and member states are trying to weasel out of taking more. A family reunification program is supposed to be more effective, but the number of people being resettled under that program is shrinking, too. [..] The family, like thousands of others, arrived traumatized by war. Now they are being traumatized again, this time by European politics. Europe is doing this on purpose. It wants to dissuade other refugees from making the journey. But desperate people will keep coming, and will simply take greater risks than ever before. [..] By refusing to resettle refugees, Europe is whittling away at its commitment to human rights.

But Europe promised to protect those rights in the 1948 Universal Declaration of Human Rights, as well as in other treaties, charters and national laws. “These states are undermining their obligations — and these are the same states that created the human rights laws and ratified conventions,” says Sari Nissi, who heads up the International Committee of the Red Cross mission in Greece.

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The EU has lost its legitimacy. “Efforts by the European Union and its border agency FRONTEX to prevent loss of life at sea [..] have only resulted in more people drowning..”

EU ‘Leaving Migrants To Drown’ Say Rescuers (Ind.)

More than 2,000 migrants trying to reach Europe were rescued from the Mediterranean on Friday, while at least one person was found dead, the Italian coastguard confirmed. A spokesperson for the service said 19 rescue operations by coastguards or non-governmental organisations had saved a total of 2,074 migrants on 16 rubber dinghies and three small wooden boats. The coastguard also confirmed that one person had died when the boats sank, but gave no details. The rescues come just days after a boat sank off the coast of Libya on Thursday. Ninety-seven refugees are missing, presumed drowned. According to the International Organisation for Migration (IOM), nearly 32,000 migrants have arrived in Europe by sea so far this year. More than 650 have died or are missing.

The number of migrants increased to a high of 5,079 for 2016, according the the IOM – despite a huge decline in numbers of migrant arrivals since 2014. Médecins Sans Frontières (MSF), a medical charity which has carried out hundreds of rescue operations in the Mediterranean since the beginning of the migrant crisis, has criticised Frontex, the European Border and Coast Guard agency, who operate official EU patrols on migration routes. MSF said in a series of tweets that NGOs were being forced to fill gaps in service provision left by the EU coastguard. “Frontex Director says it’s a paradox that a third of rescues are done by NGOs. We agree. Where are Frontex boats in a day like this?” MSF tweeted. “Many more people could have died in a day like this if we arrived a few hours later. We are where we’re needed, what’s the EU doing meanwhile?”

Friday’s rescue operations were performed entirely by NGOs. Mary Jo Frawley, a nurse who was involved in MSF’s patrols this week, said: “Efforts by the European Union and its border agency FRONTEX to prevent loss of life at sea through strengthened border control, increasing militarisation and a focus on disrupting smuggling networks has only resulted in more people drowning not fewer and has had little impact on the flows of arrivals. “This, combined with the lack of adequate EU search and rescue operations has meant that MSF and other humanitarian organisations have – in an unprecedented move – been forced to step in to avoid further loss of life.

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Apr 112017
 
 April 11, 2017  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  6 Responses »
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Carole Lombard 1934

 


54% Of Canadians Think Home Prices Will Never Fall (BNN)
Wild Housing Speculation Drives Entire Canadian Economy (WS)
Third of US Car Owners Can’t Afford Surprise Repairs (UT)
The Retail Apocalypse’s Terrifying Impact On One Corner Of Wall Street (BI)
China Is Playing a $9 Trillion Game of Chicken With Savers (BBG)
Currency-Issuing Governments Never Have To Worry About Bond Markets (Bilbo)
Recessions Are Never Desirable Events And Are Always Avoidable (Bilbo)
So Many Triggers (Thomas)
American Carnage – The New Landscape of Opioid Addiction (Caldwell)
How Erdogan’s Referendum Gamble Might Backfire (Spiegel)
Share of Member States in EU GDP (EC)
Austria FinMin Calls For €1 Billion EU Investment In Greece (R.)
JP Morgan Report Sees ‘Light At The End Of The Tunnel’ For Greece (Amna)
Refugee Community Center Set To Open On Lesvos (K.)

 

 

Stupefying. “Of those in the younger generation who are already in the housing market, more than four of every five plan to sell..”

54% Of Canadians Think Home Prices Will Never Fall (BNN)

More than half of the country believes home prices will never fall, according to a new poll from CIBC. Despite lofty valuations in the Toronto and Vancouver housing markets, 54% of respondents to the CIBC poll say housing prices will rise indefinitely, while only 40% think prices will decline over the course of the next five years. David Madani, senior Canadian economist at Capital Economics, thinks the unbridled optimism is just one more sign the Toronto housing market is in bubble territory. “The fact that the majority of Canadians still think home prices can continue to shoot up is sort of testament to the fact we’re in a full-blown housing bubble,” he said in an interview with BNN. According to the poll, those high prices are keeping homeowners on the sidelines, with 62% of respondents saying they’re reluctant to sell their home, lest they become buyers again.

Home prices in Toronto are up more than 30% over the course of the last year, and prices in Vancouver have risen more than 14%. Those who are looking to sell are largely of the baby boomer cohort, with more than two-thirds of respondents older than 55 saying they plan to downsize to a smaller home or condo. CIBC says boomers are motivated to sell not just due to the ease of maintaining a smaller home, but also as a boost to their retirement savings. What’s less clear is who they’re going to sell their home to: 52% of the millennial generation either don’t believe they’ll ever own a home, or are unsure if home ownership is in their future, according to the CIBC poll. Of those in the younger generation who are already in the housing market, more than four of every five plan to sell, with 63% complaining the mortgage and housing costs are making them cash-poor.

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It drives it and will make it crumble. But Justin isn’t listening.

Wild Housing Speculation Drives Entire Canadian Economy (WS)

Here’s another data point on the Canadian housing bubble, how immense it really is, and how utterly crucial wild housing speculation has become to the Canadian economy. Housing starts surged to 253,720 units in March seasonally adjusted, the highest since September 2007, according to Canada Mortgage & Housing Corp. Of them, 161,000 were multi-family starts of condos and rental units in urban areas. In Toronto, one of the hot beds of Canada’s house price bubble, housing starts jumped by 16,600 units, all of them condos and apartments, defying any expectation of a slowdown. Housing starts are an indication of construction activity, a powerful additive to the local economy with large secondary effects. Housing construction gets fired up by the promise of ever skyrocketing housing prices, and thus big payoffs for developers, lenders, real estate agents, and the entire industry.

National home price data covers up the real drama in certain cities, particularly Vancouver (British Columbia) and Toronto (Ontario), but it does show by how much Canadian housing prices have overshot the already lofty US housing prices. The chart below by Stéfane Marion, Chief Economist at Economics and Strategy, National Bank of Canada, compares US home prices per the Case-Shiller 20-City index to Canadian home prices per the Teranet-National Bank 26-market index. Both indices are based on similar methodologies of comparing pairs of sales of the same home over time. The shaded areas denote recessions in Canada. Note that during the housing crisis in the US, there was only a blip in Canada’s housing market:

How important is real estate and housing construction to the Canadian economy? Hugely important! It accounts for an ever larger proportion of the Canadian economy. For all of Canada, according to data by Statistics Canada, housing construction and real estate activities combined account for 15.5% of GDP, up from 14.7% in 2011. This chart shows housing construction and real estate activities in the largest four provinces as percent of the province’s GDP in 2015, and for Canada overall. StatCan data for 2016 are not yet available. Note British Columbia: 22% of its economy is based on residential construction and real estate activities – due to Canada’s number one housing hot-bed Vancouver:

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As I said last week: it seems there’s an article on this theme every week now.

Third of US Car Owners Can’t Afford Surprise Repairs (UT)

Nearly one-in-three American motorists cannot pay for vehicle repairs without taking on debt, according to a new study from AAA. The study estimates 64 million drivers could not pay out-of-pocket for an average repair bill of $500 to $600. There are about 210 million licensed motorists in the country, according to the U.S. Department of Transportation. About 76% of men said they could afford the expense, while only 62% of women could do the same. “We were a little shocked at the results,” said Michael Calkins, AAA manager of technical services. “That one-third of American drivers couldn’t afford the cost of a $500 auto repair is a little concerning.”

AAA suggests motorists adhere to a scrupulous vehicle maintenance schedule and set aside $50 a month to build a fund for maintenance and unexpected repairs. But some motorists don’t – or can’t. About one-third of U.S. drivers delay or skip recommended car maintenance, Calkins said, a possible lingering repercussion of the 2008 recession. Motorists pay later for putting off vehicle maintenance now, as worn-down parts increase the likelihood of costly roadside breakdowns, Calkins said. A car-care fund can help motorists stick to their maintenance schedules, but for many low-income families, $50 a month is a big ask, said Asley Orr, executive director of Good News Mountaineer Garage, a nonprofit that donates used cars to West Virginians who need transportation to work.

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Who owns the stores and malls? Who owns the debt that keeps them going until it doesn’t?

The Retail Apocalypse’s Terrifying Impact On One Corner Of Wall Street (BI)

One of the biggest waves of retail closures in decades is killing off malls across the US and taking some Wall Street investments with it. Struggling with online competition, huge retailers like Sears, JCPenney, and Macy’s are closing hundreds of stores that typically anchor malls, meaning they occupy the largest spaces at mall entrances and drive most shopper traffic. When a big store shuts down, it triggers a chain reaction that can end with the shopping mall being unable to collect enough rent to cover its debts, forcing it to default. By one measure, as many as a third of the malls in the US are at risk of facing this situation. This has become a nightmare for investors who are expecting to collect on those debts. They own bonds – called commercial mortgage-backed securities, or CMBSs – that are backed by the mall properties’ rents.

If this sounds familiar, that’s because it’s similar to one element of the financial crisis. Back then, mortgage-backed securities, which pooled homeowners’ mortgages into a multitrillion-dollar financial market, were part of the problem. They encouraged risky lending, and together with derivatives on the bonds that were ginned up by Wall Street, they left banks and investors with massive losses that threatened the financial system. Nobody is predicting anything that dire today, but CMBSs, which Morgan Stanley says account for nearly 10% of the $3.6 trillion commercial real-estate mortgage market, work similarly. They pool debt payments from several malls or other commercial properties and then splice them so that investors can buy the segment and take on the kind of risk they want.

What’s happening in the retail market, though, is worse than anyone who invested in the bonds could’ve imagined a few years ago. “Malls are hard to turn around once they go downhill,” said Steve Jellinek, vice president of CMBS analytical services for Morningstar Credit Ratings. As a result, many CMBS investments are getting wiped out, and “retail lending has really taken a beating,” he said. About $48 billion in loans backed by mall properties are at risk of default, according to Morningstar.

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This is how the Chinese see Beijing, first as full of hot air (true), and second as capable of making good on any and all losses (not true): “Cracking down on implicit guarantees is just like curbing home prices,” she says. “It’s something that the government needs to say, but it’s not something they will eventually do.”

China Is Playing a $9 Trillion Game of Chicken With Savers (BBG)

Like many individual investors in China, Yang Mo has no idea what’s in the wealth management products that make up a big chunk of her net worth. She says there’s really no point in finding out. Sure, WMPs invest in all kinds of risky assets, but the government would never let a big one fail, she explains. “It’s not how the Chinese government does things, and it’s not even Chinese culture,” says Yang, a 29-year-old public relations professional in Beijing. Hers is a common refrain in Asia’s largest economy, where savers have poured $9 trillion into WMPs and similar products on the assumption that they’ll get bailed out if the investments sour. Even after news in February that policy makers are drafting rules to make it clear that state guarantees don’t exist, Yang is undaunted.

She says she’ll only withdraw money from WMPs in the unlikely event that they start to suffer losses. “Cracking down on implicit guarantees is just like curbing home prices,” she says. “It’s something that the government needs to say, but it’s not something they will eventually do.” Yang’s steadfast faith in bailouts illustrates the dilemma for authorities as they try to reduce moral hazard and improve the pricing of risk in China’s financial system: It may require a major WMP blowup to shake investors out of their complacency, an event that could wreak havoc on banks that increasingly rely on the products for funding. [..] WMPs – a key part of China’s shadow banking system – are getting squeezed as the nation’s central bank increases interest rates to discourage excessive leverage.

That’s not only putting pressure on products that use borrowed funds to meet their fixed return targets, it’s also weighing on the Chinese bond market, where WMPs allocate the biggest portion of their funds. For as long as they can, banks will make investors whole when WMPs run into trouble because they fear the reputational damage of a failed product, according to Hong. At some point, though, WMP shortfalls may be too large for the banks to cover, forcing policy makers to decide whether they’re willing to allow losses. Intervention is becoming less likely, if the new draft rules are anything to go by. Regulators are working on language that would make clear there are no state guarantees on asset-management products – which include WMPs, trusts, mutual funds and other products – people familiar with the matter said in February.

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Snippets from a great and long article by Australian economist Bill Mitchell. Everything they tell you about austerity is a lie.

Currency-Issuing Governments Never Have To Worry About Bond Markets (Bilbo)

How many times have you heard a politician claim they had to cut government spending and move the fiscal balance to surplus because they had to engender the confidence of the bond markets. Apparently, this narrative alleges that if bond markets are not ‘confident’ (whatever that means) then they will stop begging treasury departments for more debt issues and the government, in question, will run out of money and then pensions will stop being paid and the public service will be sacked and public trains and buses will stop running and before we know it the skies will blacken and collapse on us. The narrative ignores the usual statistics that bid-to-cover ratios are typically high (hence my ‘begging’ terminology) which are supplemented by well documented cases where the bond dealers (including banks etc) do actually beg central banks to stop driving yields down in maturity segments where these characters have pitched their “business model” (read: where they make the most profits).

The facts are exactly the opposite to the neo-liberal pitch. Currency-issuing governments never need to worry about how bond markets ‘feel’. Essentially, the bond markets are irrelevant to the ability of such a government to design and implement its fiscal plans. And, the central bank always can counteract any tendencies that the bond markets might seek to impose where governments do actually issue debt. [..] Nothing a student learns in a mainstream macroeconomics course at university (at any level – and the deception becomes worse the in later years as the student enters graduate school) about the relative powers of governments and bond markets is true. [..] So next time you hear an economist or a politician talk about how bond markets have to be satisfied and they use that as a justification for hacking into public spending (and driving up unemployment and poverty rates) you know they are lying and are frauds.

The bond traders never have to be satisfied. They can be forced to live on crumbs by the central bank if it so chooses. [..] The narrative that asserts that governments have to assuage the sentiments of the bond markets – which is an oft-repeated claim to justify job-destroying and poverty-inducing austerity – is just fake. It is a lie. It is just one of many lies that the elites use to pursue their biased austerity. Biased because they never advocate cutting spending or government support that helps them. They just support cuts that help the most disadvantaged who have little political voice and so can be disregarded. The point is that currency-issuing governments never have to worry about bond markets. And it would be better if the government eliminated the public debt market altogether – then the bond traders would have to do something productive for a living and get off the corporate welfare teat!

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More Bill Mitchell.

Recessions Are Never Desirable Events And Are Always Avoidable (Bilbo)

Bloomberg published an article last week (April 7, 2017) that it should not have published given that the article offers only fake knowledge to its readership. The article in question – Australia’s Delayed Recession Fallout Is Showing Up in Its Jobs Data – carried the sub-title “There may be trouble ahead” and purported to argue that because the Australian government’s fiscal stimulus allowed our nation to avoid a recession in 2009 we now have to ‘pay the piper’ and take our medicine and suffer a recession anyway. The proposition is ridiculous to say the least. The article uses as authority some nonsensical statements from a “business management consultant”, who doesn’t appear to have a very sound grasp of either history or what is actually going on. This is another case of misinformation.

The fact is that the Australian government’s fiscal stimulus in 2008 and 2009 saved the economy from recession. The current slowdown and parlous labour market is not some delayed effect from that. Rather, it is because the Australian government caught the ‘fiscal surplus bug’ obsession, and began a misguided pursuits of surpluses, irrespective of what the external and private domestic sectors were doing. It caused an immediate slowdown and all the virtuous dynamics that were accompanying the stimulus-led growth (for example, fall in household debt and the rise in the household saving ratio) were reversed, as we would expect. Far from being delayed effects, the poor jobs data is because current fiscal policy is too restrictive. Simple solution: expand the discretionary fiscal deficit (preferably with a large-scale public sector job creation strategy).

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“..Deutsche is ten times larger than Lehman Brothers..”, ” (90% of Deutsche’s revenue has been from derivative trading, which is what brought down Lehman.)”

So Many Triggers (Thomas)

Deutsche Bank has announced that it will create more shares, selling them at a 35% discount. Existing shareholders have not been pleased and, in the first four days since the offer was announced, the value of existing shares dropped by 13% as shareholders began dumping them. So why on earth would Germany’s foremost bank do something so rash? Well, in recent years, the bank has been involved in many arbitrations, litigations, and regulatory proceedings as a result of fraudulent activities, including the manipulation of markets. Having been found guilty, they presently owe $7.2 billion to the US Department of Justice and are now facing an additional $10 billion litigation bill. Unfortunately, the bank is already broke and, should Deutsche actually be able to sell the new shares, the $8.6 billion they hope to receive will still not save them from bankruptcy.

Business has also not been so good. They’ve lost nearly $2 billion in the last two years, instituted a hiring freeze, cut bonuses by 80%, and are facing a $2.5 million civil penalty to pay to the Commodity Futures Trading Commission for failure to report transactions and, not surprisingly, have been downgraded. The German government has stated that they will not bail out Deutsche and, indeed, under the EU agreement, they cannot do so. It’s safe to say that Germany’s largest bank will soon go the way of the dodo. For those who don’t live in Europe, this may not seem all that significant. However, Deutsche is the bank that funds the euro system, which they can now no longer do. Further, Deutsche is ten times larger than Lehman Brothers, an American bank that famously went down in 2008, heralding in that year’s economic crash. (90% of Deutsche’s revenue has been from derivative trading, which is what brought down Lehman.)

Upon the collapse of Deutsche Bank, four major US banks would be expected to become insolvent in a matter of days. The ripples would then continue to spread outward into the economic system as a whole. For many years, I’ve made repeated reference to the fact that the Western powers have been headed south economically, repeatedly relying on strategies that would provide short-term gain but would ultimately create long-term pain. They’ve been remarkably consistent and steadfast in this trend and, at this point, Deutsche is merely the latest trigger that may bring down the system.

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Chilling.

American Carnage – The New Landscape of Opioid Addiction (Caldwell)

There have always been drug addicts in need of help, but the scale of the present wave of heroin and opioid abuse is unprecedented. Fifty-two thousand Americans died of overdoses in 2015—about four times as many as died from gun homicides and half again as many as died in car accidents. Pawtucket is a small place, and yet 5,400 addicts are members at Anchor. Six hundred visit every day. Rhode Island is a small place, too. It has just over a million people. One Brown University epidemiologist estimates that 20,000 of them are opioid addicts—2% of the population. Salisbury, Massachusetts (pop. 8,000), was founded in 1638, and the opium crisis is the worst thing that has ever happened to it. The town lost one young person in the decade-long Vietnam War. It has lost fifteen to heroin in the last two years.

Last summer, Huntington, West Virginia (pop. 49,000), saw twenty-eight overdoses in four hours. Episodes like these played a role in the decline in U.S. life expectancy in 2015. The death toll far eclipses those of all previous drug crises. And yet, after five decades of alarm over threats that were small by comparison, politicians and the media have offered only a muted response. A willingness at least to talk about opioid deaths (among other taboo subjects) surely helped Donald Trump win last November’s election. In his inaugural address, President Trump referred to the drug epidemic (among other problems) as “carnage.” Those who call the word an irresponsible exaggeration are wrong.

Jazz musicians knew what heroin was in the 1950s. Other Americans needed to have it explained to them. Even in the 1960s and 1970s, with bourgeois norms and drug enforcement weakening, heroin lost none of its terrifying underworld associations. People weren’t shooting it at Woodstock. Today, with much of the discourse on drug addiction controlled by medical bureaucrats, it is common to speak of addiction as an “equal-opportunity disease” that can “strike anyone.” While this may be true on the pharmacological level, it was until quite recently a sociological falsehood. In fact, most of the country had powerful moral, social, cultural, and legal immunities against heroin and opiate addiction. For 99 percent of the population, it was an adventure that had to be sought out. That has now changed.

America had built up these immunities through hard experience. At the turn of the nineteenth century, scientists isolated morphine, the active ingredient in opium, and in the 1850s the hypodermic needle was invented. They seemed a godsend in Civil War field hospitals, but many soldiers came home addicted. Zealous doctors prescribed opiates to upper-middle-class women for everything from menstrual cramps to “hysteria.” The “acetylization” of morphine led to the development of heroin. Bayer began marketing it as a cough suppressant in 1898, which made matters worse. The tally of wrecked middle-class families and lives was already high by the time Congress passed the Harrison Narcotics Tax Act in 1914, threatening jail for doctors who prescribed opiates to addicts. Americans had had it with heroin. It took almost a century before drug companies could talk them back into using drugs like it.

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Referendum on April 16: “..some pollsters see the “no” camp ahead by as much as 10%.”

How Erdogan’s Referendum Gamble Might Backfire (Spiegel)

Support for the presidential system is crumbling. Erdogan may be giving the impression that the entire country is behind him, with his speeches resembling religious masses. On Sunday a week ago, tens of thousands cheered him on in Ankara. But some pollsters see the “no” camp ahead by as much as 10%. Even previously loyal Erdogan supporters, including party functionaries, don’t understand why the president so desperately wants this referendum. According to polls, one third of AKP voters are fluctuating between yes and no. The new system would concede powers to the president that even the nation’s founder, Mustafa Kemal Atatürk, didn’t have.

The president would be able to appoint ministers and 12 of 15 constitutional judges, and he would have the power to dissolve parliament any time he wanted to. The position of prime minister would also be eliminated. Erdogan claims the reform is necessary to secure stability and prevent further coup attempts. But he already has more power than any other politician in recent Turkish history. Campaign posters plasterd with Erdogan’s visage hang everywhere in Bursa. The balconies are decorated with Turkish flags and vehicles drive through the streets blaring AKP election songs. The AKP is trying to create excitement, and that shouldn’t be too difficult here in Bursa. The city is Turkey’s fourth-largest and a higher-than-average share of residents voted for the AKP in the November 2015 parliamentary election.

For a long time, the residents of Bursa were the way Erdogan wanted them to be: hard-working and pious. The city has developed into an industrial center and the government built brand new residential neighborhoods, with shopping malls and mosques. But since the attempted coup, the economy has collapsed and many storefronts now stand empty. Mumcu’s cousin, who runs a textile company, says that his revenue has dropped from €50 million to €2 million in the past year.

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Germany and France are half of EU GDP. The rest are mere pawns.

Share of Member States in EU GDP (EC)

In 2016, the GDp of the European Union (EU) amounted to €14 800 billion (bn) at current prices. Over half of it was generated by three Member States: Germany, the United Kingdom and France. With a GDP worth €3 100bn in 2016, Germany was the leading EU economy, accounting for over a fifth (21.1%) of EU GDP. It was followed by the United Kingdom (16.0%), France (15.0%), Italy (11.3%), Spain (7.5%) and the Netherlands (4.7%). At the opposite end of the scale, eleven Member States had a GDP of less than 1% of the EU total. They were: Malta, Cyprus, Estonia, Latvia, Lithuania, Slovenia, Croatia, Bulgaria, Luxembourg, Slovakia and Hungary. As regards the 19 Member States which form the euro area, their cumulated GDP stood at €10 700 bn in 2016, meaning that they accounted all together for 72.5% of the EU GDP. Germany (29.2%) and France (20.7%) made up half of the euro area GDP.

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Schäuble is shaking his head.

Austria FinMin Calls For €1 Billion EU Investment In Greece (R.)

The European Union should consider a one-billion-euro special investment programme to spur growth in debt-ridden Greece, Austria’s finance minister told daily Der Standard in an interview published on Monday. Hans Joerg Schelling said Greece would only be able to get back on track and regain access to capital markets if it was able to generate sustainable growth in the mid- and long-term. It was important to help the country participate in a pick-up in growth in the euro zone, he added. There was no immediate comment from Athens which has called for more help and debt relief as it struggles to cope with its financial crisis and attain a budget surplus of 3.5% of economic output, excluding debt servicing outlays next year.

“You must assess whether to start a big investment programme through the European Investment Bank or maybe with the (European bailout fund) ESM… to get an additional boost (for the Greek economy),” the paper quoted Schelling as saying. “I would define a scale of one billion euros.” Schelling, seen as a possible successor to Eurogroup President Jeroen Dijsselbloem, said one project could be an investment in renewable energy to make Greece less dependent on energy imports. The European Investment Bank (EIB) launched a one billion euro credit line to Greek banks in December, mainly to be used for on-lending to small and medium sized companies and firms promoting youth employment.

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JP Morgan doesn’t understand the state the Greek economy is in.

JP Morgan Report Sees ‘Light At The End Of The Tunnel’ For Greece (Amna)

The decision reached by Eurozone finance ministers in Malta concerning Greece increases the chances of a solution for completing the second review of the Greek programme before May 22, according to a report by J. P. Morgan released on Monday. The U.S. banking and financial services giant said the decisions appears to have clarified most of the obstacles that were delaying talks for concluding the review and point to a higher possibility of a good outcome for Greece. J.P. Morgan’s central scenario, to which it gives an 85 pct probability, predicts that the next step will be the return of the institutions’ missions to Greece to finalise the technical details that will support a staff-level agreement (SLA).

If its predictions are correct, the report said, there will be great progress over the next few weeks, while the sequence of events will be the signature of the SLA, passing of the measures agreed by the Greek Parliament and the completion of the review ensuring future disbursements and further details on debt relief measures. As a part of this positive scenario, J.P. Morgan said, it was also expected that Greece will become eligible for inclusion in the ECB’s quantitative easing programme in the summer. “We give an 85 pct probability to this development. This is the most positive result for the Greek bond market and we expect that 10-year Greek bonds will have price/yield rations of about 85 euros/5.5-6 pct with this scenario,” the report says. Even if the worst of the three scenarios it has drawn up should be proved right, J.P. Morgan said that an accident leading to Grexit was extremely unlikely after last Friday’s decisions and that in its medium-term outlook on Greek bonds “the reward for the risk remains attractive.”

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Fantastic. The Automatic Earth and its very generous readers play a substantial role in this. Thank you so much for making it possible.

Refugee Community Center Set To Open On Lesvos (K.)

Just a 10-minute walk from the municipal-run camp of Kara Tepe and a bit over a half-hour from the Moria migrant camp north of Mytilene, the capital of Lesvos, a community center currently under construction on a 1.5-acre site aspires to become a magnet for individuals stranded on the eastern Aegean island by offering a wide range of activities. Run by the Swiss Cross charity, the center, which is set to open in the coming days, was built by migrants with the help of volunteers who arrived here from different parts of Europe. The project is called “One Happy Family.” The facility will provide a coffee shop (complete with nargile), a home cinema, a library and a garden.

The O Allos Anthropos (Fellow Man) group has agreed to provide about 1,000 servings of food [daily]. The entire project will cost 200,000 euros, which includes rent for the first 12 months. “The Swiss are very good at organizing, while the Greeks are good at hospitality, so great things can come out of that mix,” Achilleas Peklaris, a writer and journalist now working for Swiss Cross, told Kathimerini. After doing charity work in Thessaloniki, northern Greece, Swiss Cross moved to Lesvos, prompted by the tragic deaths of Moria camp residents living outdoors in tents in freezing conditions this past winter.

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Mar 212017
 
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Fred Stein Streetcrossing, Paris 1935

 


To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)
The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)
S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)
US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)
Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)
Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)
Toronto Home Prices May Jump 25% This Year – TD (BBG)
Canada Real Estate: This Is Going To Blow Sky High (Bergin)
British Banks Handled Vast Sums Of Laundered Russian Money (G.)
What Central Banks Get Wrong About Economic Equilibrium (BBG)
Full Speed Ahead for Murphy’s Law (Jim Kunstler)
Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)
Three-Quarters Of Older People In The UK Are Lonely (G.)
Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)
Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

 

 

Currency manipulation?

To Make America Great Again, Trump Will Have To Make the Dollar Weak Again (MW)

If Donald Trump really wants to Make America Great Again, he’s going to have to Make the Dollar Weak Again first. So argued hedge fund manager Mathew Klody of MCN Capital Management at this week’s Grant’s investment conference in New York. He made an intriguing case. If Klody’s right, Trump may just be blowing smoke when he talks about tariffs and border-adjustment taxes. And, most importantly, if Klody is right, we should also buy foreign currencies, especially those issued by emerging markets. Sooner or later, the president will need to drive down the dollar, and for those based in the U.S. that will drive up foreign currencies. Mexican pesos, anyone? This is not far-fetched. Research Affiliates, the smart investment advisers in Newport Beach, Calif., argue that emerging market currencies are among the most attractive asset classes available to investors.

They’re expecting those currencies to produce returns in U.S. dollars of inflation plus about 3.5% a year over the next decade, with far less volatility than stocks. Incidentally, if Klody’s analysis is right, Trump should also, logically, be good for gold. The collapse of American manufacturing towns, and the old industrial middle class, has gone hand in hand with a staggering 40-year rise in the dollar, Klody observed. It is standard economics that as your currency rises, your exports become more expensive and less competitive in foreign markets. Meanwhile, the reverse happens at home: Imports from overseas get cheaper and cheaper compared with domestic production. Klody noted that since the mid-1970s, the U.S. dollar has quadrupled in price — yes, really — when measured against the Federal Reserve’s broad basket of foreign currencies.

It may be mere coincidence that during that same period, imports have surged, and the U.S. has lost its global dominance in many areas of manufacturing. MCN Capital’s Klody notes that during the period that the dollar soared, workers’ share of domestic income has plummeted.From the 1940s through the early 1970s, the working man and woman got a pretty consistent 50% of national domestic income.Since the mid-1970s, it’s collapsed to around 43%. And, yes, that’s happened under most political regimes (the Clinton-Gingrich-dot-com years in the 1990s being an exception).That, of course, is a big reason why Trump won. Klody himself came from a small town in Pennsylvania that used to be a classic American industrial boomtown. And now, according to the town’s mayor, it looks like a deserted bomb site.

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Tyler: “The above, simply summarized: the Fed has given Trump just enough rope to hang himself with; and since all that matters now is how effective the President will be in passing his political agenda – which is not looking good- should Trump fails, the one of two possible outcomes that is most likely is the one where the “curve bear flattens or inverts”, prompting the next, long overdue, recession. “

The Fed Gave Trump Just Enough Rope To Hang Himself With – Deutsche (ZH)

Aleksandar Kocic: “The subtext of the last week’s Fed “package” is a compromise motivated by a desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus (or its absence) by hiking too aggressively…. Depending on the interplay between degree of political resolve and the Fed actions we could see two distinct paths of resolution of the existing tensions in the mid- or long-run. Last week, the Fed delivered what appears as a dovish hike, in all likelihood to be followed with two hikes more in 2017 and three in 2018. Such a choice of the Fed action was a compromise driven by the developments in the labor market and the key events in Europe, on one side, combined with the risk associated with the approval of the fiscal stimulus, on the other.

The subtext of this compromise can be interpreted as being motivated by the Fed’s desire to extend the comfort zone and to hedge their position against possible fiscal irresponsibility, while, at the same time, not stand in the way to any possible fiscal stimulus by hiking too aggressively. Despite all the efforts not to create more uncertainty, this is likely to create at least mild ambiguity regarding the long-run. A Fed which is not in a standby position waiting for the fiscal package to arrive and kick in is going to be supportive for USD and higher real rates. The March FOMC “package” (in terms of rate hike, dots, rhetoric and Q&E) implies effectively a real rate rise and is most likely bearish for breakevens, which could diminish the effect of the border tax on the trade deficit and, as such, reduce the impact on growth potential.

In addition, having higher real rates increases the costs of borrowing and possibly creates political resistance against deficit expansions and structural steepening of the curve. On top of that, given what we saw in the last weeks, this suggests that the political process around the budget plan and the Legislative package already expected by the market is going to be anything but smooth, which is adding further doubts about its success and timing. Depending on the interplay of politics and policy – degree of political resolve and the Fed actions – we could see two distinct paths of resolution of the existing tensions in the mid- or long-run.

On one hand, it appears that the Fed is removing uncertainty around the terminal rate, while on the other, politics is creating a binary outcomes which could have a dramatically different effect on long rates. In that context, we are facing a future with bifurcating back end of the curve. Either political bottlenecks clear and the stimulus gets approved and goes full force leading to higher growth potential with subsequent rise in price levels and structural steepening of the curve, or political tensions effectively sabotage either its arrival or content (or both), and the curve initially bear flattens or even twists with rate shorts capitulation accelerating the rally of the back end.”

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Find a -nearly- deserted island to live on.

S&P 500 Companies Blow $1.7 Trillion On Making Earnings Look Less Bad (WS)

The S&P 500 index, closing today at 2,373, hovers near its all-time high. Total market capitalization of the 500 companies in the index exceeds $20 trillion, or 106% of US GDP. In the three-plus years since the end of January 2014, the index has soared 33%. And yet, over these three-plus years, even with financial engineering driven to the utmost state of perfection, including $1.7 trillion in share buybacks and despite “ex-bad-items” accounting schemes that are giving even the SEC goosebumps – despite all these efforts, the crucial and beautifully doctored “adjusted” earnings-per-share, perhaps the single most manipulated metric out there, has gone nowhere. “Adjusted” earnings per share are back where they’d been at the end of January 2014. It’s a sad sign when not even financial engineering can conjure up the appearance of earnings growth.

Companies report earnings in two ways: 1) All companies report as required under GAAP (our slightly inconvenient Generally Accepted Accounting Principles). These earnings are often a loss or way too small and shrinking, instead of growing, and hence not very palatable. 2) So most companies also report pro-forma, ex-bad-items, “adjusted” earnings, based on the companies’ own notions of what matters. Analysts and the media hype that metric. This is just a method of reporting the same results in a more glamorous manner. Then there’s financial engineering. Companies borrowed heavily over the past few years and used those funds to purchase their own shares. This hollowed out equity and left companies with piles of debt.

Over the past three years, companies blew $1.7 trillion on share buybacks. This money was not invested in productive activities that would have expanded the company and the economy, and generated cash flow to service this debt. All it did was reduce the number of shares outstanding. This has the effect of increasing earnings per share (EPS) though the company didn’t actually make more money. Add this system of share buybacks to the system of “adjusting” earnings per share via reporting schemes, and the result should be a miracle of soaring “adjusted” EPS. But no.

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“..surged 30% since Donald Trump was elected president..”

US “Too Big To Fail” Banks Top $1 Trillion – What Happens Next? (ZH)

For the first time ever, the market cap of America’s “Big Four” banks topped $1 trillion having surged 30% since Donald Trump was elected president. While to some this is cause for celebration, we note that the last time a nation’s “big four” banks topped $1 trillion in market cap did not end well… As Bloomberg notes, the four biggest U.S. banks were worth the most on record versus China’s “Big Four” this month, as JPMorgan, Wells Fargo, Bank of America, and Citigroup were worth over $250 billion more than Industrial & Commercial Bank, China Construction Bank, Bank of China, and Agricultural Bank of China combined. The four Chinese banks, the world’s most profitable, were worth about the same as the U.S. foursome as recently as June. However, as the chart shows, while the American quartet’s combined market value closed above $1 trillion for the first time last month, China achieved that goals in June 2015… and it did not end well.

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Too late now.

Australia’s Central Bank Warns Of Growing Risks In Housing, Debt (CNBC)

Australia’s central bank saw growing risks in the nation’s hot housing market when it left rates steady earlier this month, underlining the case against further easing in policy. Minutes of its March meeting showed the Reserve Bank of Australia (RBA) was generally optimistic about the economy as it transitioned away from a decade long boom in mining investment. However, board members felt there had been a “build-up of risks” in the housing market as borrowing for investment fueled brisk price rises in Sydney and Melbourne. Home prices accelerated at an annual pace of 11.7% in February, with Sydney running red-hot at 18.4%, data from property consultant CoreLogic showed. Governor Philip Lowe has repeatedly argued that cutting rates further could encourage a renewed borrowing binge by households who are already heavily indebted, outweighing any economic benefits.

With wages growing at record lows, debt was outpacing incomes and threatening to weigh on consumer spending. Data out recently showed retail sales grew at a tepid pace for a third straight month while the outlook for capital expenditure remained uninspiring. The RBA noted tighter supervision had contributed to “some” strengthening in lending standard by the banks, which has also been raising rates on some mortgage products recently. Analysts suspect even stricter standards are likely to be imposed by regulators in coming weeks. Housing affordability, or the lack of it, has become a hot-button issue for the conservative government of Malcolm Turnbull which has promised measures to ease the problem in its May budget. The RBA’s angst over housing has convinced financial markets there will be no more cuts in interest rates, already at all time lows of 1.5%.

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They’re too scared too crack down on anything. Housing can bring down the entire Oz economy by now.

“I don’t use the B-word. I refuse to use the B-word..”

Australia Bank Regulators To Unleash New Crackdown On Lenders (AFR)

Regulators are preparing to impose a fresh wave of constraints on the banks to slow investor lending growth, crack down on interest-only loans, and force buyers to stump up more equity on purchases as they scramble to manage a rampant property boom. Warning that financial and economic risks have grown in recent months, particularly across east coast property markets, the nation’s top financial regulators and Treasurer Scott Morrison unleashed co-ordinated calls for fresh restraint from banks. “Watch this space,” declared Australian Prudential Regulation Authority chairman Wayne Byres on Monday, speaking just hours after Mr Morrison urged APRA and the Australian Securities and Investments commission to use “the levers that they have”. Leaping house price growth over recent months in Sydney and Melbourne, as well as a tsunami of new apartment stock due to hit the market in coming months are creating a wall of uncertainty over the financial stability of the housing market.

That’s being exacerbated by concerns over heavily indebted households’ ability to withstand a rising global interest rate environment at a time of record-low wages growth. In a sign of growing tensions between members of the Council of Financial Regulators – which includes APRA, ASIC, Treasury and chaired by the Reserve Bank – Mr Byres pointedly refused to describe the property market as being in a “bubble”, saying use of the term was “superficial” and “binary”. “I don’t use the B-word. I refuse to use the B-word,” Mr Byres said. “We are in it – we are not in it. If we are in it we’re all going to be ruined – if we are not in it we’re going to be right. It’s too simplistic.” By contrast, Greg Medcraft, ASIC’s chairman, bluntly repeated his view that the market was in a bubble. “I have been saying for a while that I thought it was a bubble and other people are catching up now. “Clearly the issue is if you raise interest rates that’s a big tool but then you affect the whole economy.”

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Hike rates into this.

Toronto Home Prices May Jump 25% This Year – TD (BBG)

Toronto’s housing market is likely to stay strong for the rest of the year, with home prices jumping as much as 25%, amid hints that speculators are fueling demand and posing a potential risk to the economy, TD Economics Chief Economist Beata Caranci said. A “strong Toronto home-price forecast is not a vote of confidence in market fundamentals,” Caranci wrote Monday in a note to clients. “It’s getting harder to ignore warning signs that market demand pressures are increasingly reflecting speculative forces.” Residential prices in Canada’s largest metropolitan region are forecast to grow 20 to 25% this year, up from a previous estimate of 10 to 15%, according to the report by TD Economics, part of Toronto-Dominion Bank.

Toronto-area prices have climbed 19% in the past 12 months, the fastest clip since the 1980s, when a frenzied housing market resulted in year-over-year increases of 55%, Caranci said. “Evidence is building that speculative forces are growing deeper roots, which raises the risk that prices will move closer to the top end of that forecast in the absence of policy measures,” Caranci wrote. As for next year, higher mortgage rates and fewer affordable properties will likely cut the growth rate to 3 to 5%, though a lack of clarity on housing speculation makes predictions difficult, Caranci said. A housing market driven by speculators seeking a quick profit boosts the risk of rapidly unwinding price gains at the same time homebuyers are contending with larger debt burdens, she said.

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Seen this movie so many times before.

Canada Real Estate: This Is Going To Blow Sky High (Bergin)

Originally, I thought this would be a bit of a joke. There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire. I thought this was so ridiculous, it may be fun. What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches. Prices were originally $150 per ticket, but I was able to buy for $50. While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market. I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there! I was blown away. Bubbles are largely psychological. This crowd was tangible proof of that.

15k people in one spot listening to Americans explain why real estate in Toronto is an exceptional investment. The whole experience was horrifying. The crowd was very well-dressed, middle- to upper-middle class (from appearances), and super excited to hear how much money could be made if you just buy real estate (most of them clearly already owned). The first real segment of the expo was a panel of Canadian developers and real estate agents giving their views on the market. It actually started off a touch bearish, which surprised me. Two of the panelists were saying that prices are exceptionally high and no market goes up forever. With that slight bit of caution thrown out there, it became a real estate FOMO-building talk.

There are, apparently, two very important things to know when dealing with real estate. First, you have to face your fear; this fear is to be ignored and then you should ‘just do it’ and ‘buy now’. The next step is find what you can afford and then buy it. Ignore all ‘non-doers’, don’t overanalyze or focus on the numbers, just fucking buy. To allay fears the speakers are actually quite clever as they shift between a long to short term focus when it suits. For example, now is a great time to buy because short-term the market is on fire. If, however, markets cool then you just hold because it always goes up long-term – and you are a savvy long-term buyer, aren’t you? By showing no scenario where you can lose I can see how this pitch works on the susceptible.

The second important factor in real estate is financing. Not everyone has money, so what can they do? The answers were shocking. Be ‘creative’ was the first response. Pool your money, borrow from friends and family, own just 5% of a house, get the money however you can and just do it – remember, it only goes up. Other financing suggestions were get cozy with a lender and they will ‘bend the rules’ for you! The fact that the biggest condo developer in Canada (Brad Lamb) said lenders will bend (but not break, apparently) rules to get you financing in front of 15k people with most people smiling and nodding was shocking. So there you go – when it comes to Toronto real estate, just do it (using borrowed money any way you can get it).

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Well, actually, it’s HSBC again. And a few minor conspirators.

British Banks Handled Vast Sums Of Laundered Russian Money (G.)

Britain’s high street banks processed nearly $740m from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB, the Guardian can reveal. HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts are among 17 banks based in the UK, or with branches here, that are facing questions over what they knew about the international scheme and why they did not turn away suspicious money transfers. Documents seen by the Guardian show that at least $20bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80bn, detectives believe. One senior figure involved in the inquiry said the money from Russia was “obviously either stolen or with criminal origin”.

Investigators are still trying to identify some of the wealthy and politically influential Russians behind the operation, known as “the Global Laundromat”. They estimate a group of about 500 people were involved. These include oligarchs, Moscow bankers, and figures working for or connected to the FSB, the successor spy agency to the KGB. Igor Putin, the cousin of Russia’s president, Vladimir, sat on the board of a Moscow bank which held accounts involved in the fraud. British-registered companies played a prominent role in this extensive money-laundering network. The real owners of most of the firms used in the scheme remain secret, however, because of the anonymity provided by controversial offshore laws.

The Global Laundromat banking records were obtained by the Organized Crime and Corruption Reporting Project (OCCRP) and Novaya Gazeta from sources who wish to remain anonymous. OCCRP shared the data with the Guardian and media partners in 32 countries. The documents include details of about 70,000 banking transactions, including 1,920 that went through UK banks and 373 via US banks.

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More of this interview with Steve in a few days, hopefully.

What Central Banks Get Wrong About Economic Equilibrium (BBG)

In today’s “Morning Must Read,” Bloomberg’s Tom Keene highlights comments on economic equilibrium models. He speaks with Kingston University Economics Professor Steve Keen on “Bloomberg Surveillance.”

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“What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe.”

Full Speed Ahead for Murphy’s Law (Jim Kunstler)

In the 1950s, finance made up about 5% of the economy. It’s mission then was pretty simple and straightforward: to manage the accumulated wealth of the nation (capital) and then allocate it to those who proposed to generate greater wealth via new productive activities, mostly industrial, ad infinitum. It turned out that ad infinitum doesn’t work in a world of finite resources — but the ride had been so intoxicating that we couldn’t bring ourselves to believe it, and still can’t. With industry expiring, or moving elsewhere (also temporarily), we inflated finance to nearly 40% of the economy. The new financialization was, in effect, setting a matrix of rackets in motion.

What had worked as capital management before was allowed to mutate into various forms of swindling and fraud — such as the bundling of dishonestly acquired mortgages into giant bonds and then selling them to pension funds desperate for “yield,” or the orgy of merger and acquisition in health care that turned hospitals into cash registers, or the revenue streams on derivative “plays” that amounted to bets with no possibility of ever being paid off, or the three-card-monte games of interest rate arbitrage played by central banks and their “primary dealer” concubines. Some of what I’ve listed above may be incomprehensible to the blog reader, and that is because these rackets were crafted to be opaque and recondite.

The rackets continue without regulation or prosecution because there is an unstated appreciation in government, and in the corporate board rooms, that it’s all we’ve got left. What remains of the accustomed standard of living in America is supported by wishing and fakery and all that is now coming to a climax as we steam full speed ahead into Murphy’s law: if something can go wrong, it will. When all of America comes to realize that President Trump doesn’t know what he’s doing, it will make last November’s national nervous breakdown look like a momentary case of the vapors. What can go wrong awaits in markets, banks, currencies, and the immense dark pools of counterparty obligations that amount to black holes where notions of value are sucked out of the universe. There is so much that can go wrong. And then it will. And then maybe that will prompt us back to consider being a nation again.

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Sometimes I think we’re going to live to see Noah’s next ark.

Earth Is A Planet In Upheaval Breaking Into ‘Uncharted Territory’ (G.)

The record-breaking heat that made 2016 the hottest year ever recorded has continued into 2017, pushing the world into “truly uncharted territory”, according to the World Meteorological Organisation. The WMO’s assessment of the climate in 2016, published on Tuesday, reports unprecedented heat across the globe, exceptionally low ice at both poles and surging sea-level rise. Global warming is largely being driven by emissions from human activities, but a strong El Niño – a natural climate cycle – added to the heat in 2016. The El Niño is now waning, but the extremes continue to be seen, with temperature records tumbling in the US in February and polar heatwaves pushing ice cover to new lows.

“Even without a strong El Niño in 2017, we are seeing other remarkable changes across the planet that are challenging the limits of our understanding of the climate system. We are now in truly uncharted territory,” said David Carlson, director of the WMO’s world climate research programme. “Earth is a planet in upheaval due to human-caused changes in the atmosphere,” said Jeffrey Kargel, a glaciologist at the University of Arizona in the US. “In general, drastically changing conditions do not help civilisation, which thrives on stability.” The WMO report was “startling”, said Prof David Reay, an emissions expert at the University of Edinburgh: “The need for concerted action on climate change has never been so stark nor the stakes so high.”

[..] 2016 saw the hottest global average among thermometer measurements stretching back to 1880. But scientific research indicates the world was last this warm about 115,000 years ago and that the planet has not experienced such high levels of carbon dioxide in the atmosphere for 4m years. 2017 has seen temperature records continue to tumble, in the US where February was exceptionally warm, and in Australia, where prolonged and extreme heat struck many states. The consequences have been particularly stark at the poles. “Arctic ice conditions have been tracking at record low conditions since October, persisting for six consecutive months, something not seen before in the [four-decade] satellite data record,” said Prof Julienne Stroeve, at University College London in the UK. “Over in the southern hemisphere, the sea ice also broke new record lows in the seasonal maximum and minimum extents, leading to the least amount of global sea ice ever recorded.”

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Ah, look at all the lonely people
Where do they all come from?
All the lonely people
Where do they all belong?

Three-Quarters Of Older People In The UK Are Lonely (G.)

Almost three-quarters of older people in the UK are lonely and more than half of those have never spoken to anyone about how they feel, according to a survey carried out for the Jo Cox commision on loneliness. The poll by Gransnet, the over-50s social networking site, also found that about seven in 10 (71%) respondents – average age 63 – said their close friends and family would be surprised or astonished to hear that they felt lonely. Gransnet is one of nine organisations – including Age UK, the Alzheimer’s Society and the Silver Line helpline for older people – working to address the issue of loneliness in older people, which is the current focus of the commission, set up by Cox before her murder last June. They are urging individuals and businesses to look for signs of loneliness and refer people to organisations that can help.

But they also want people to take time to speak to neighbours, family, old friends or those they encounter randomly. The chairs of the cross-party commission, the Labour MP Rachel Reeves and Conservative MP Seema Kennedy, said there was a stigma around loneliness that must be tackled. “We all need to act and encourage older people to freely talk about their loneliness,” they said. “Everyone can play a part in ending loneliness among older people in their communities by simply starting a conversation with those around you. “How we care and act for those around us could mean the difference between an older person just coping, to them loving and enjoying later life.” Almost half (49%) of the 73% who described themselves as lonely in the online poll said they had been so for years, 11% said they had always felt lonely and 56% said they had never spoken about their loneliness to anyone.

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Pure Greek tragedy. But you can’t leave 2.5 million people untreated.

Greek Public Hospitals Stretched Further As Access Granted To Uninsured (K.)

A change in legislation last April has given access to the public health system to some 2.5 million Greeks who did not have social insurance but has also put a financial strain on hospitals, whose funding has not increased. Treating uninsured patients cost public hospitals in Athens €57.2 million last year. Across Greece, €23.5 million was spent on providing free lab tests to about 204,000 people. “Our experience shows that the number of uninsured people coming to the hospitals is increasing,” the vice president of the Athens-Piraeus Hospital Doctors’ Association, Ilias Sioras, told Kathimerini. “But the hospitals do not have adequate funds.” State funding is at €1.1 billion this year, the same as in 2016.

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If Erdogan gets desperate enough he’ll pull the plug and turn this into a Europe supports terrorism narrative. Woe Greece.

Sharp Increase In Refugees Reaching Aegean Islands From Turkey (K.)

New arrivals to the eastern Aegean islands of Lesvos, Chios and Samos have raised the number of migrants landing in Greece from neighboring Turkey since last Thursday to 566, government figures showed on Monday. The figure represents a significant increase compared to arrivals in the rest of March and for the whole of February. In the past four days, 195 migrants landed on Lesvos, 341 on Chios and 30 on Samos. More than 14,000 migrants remain stuck on the islands of the eastern Aegean awaiting the outcome of their applications for asylum or deportation. The majority are living in overcrowded reception facilities where conditions have been described as “unacceptable” and “inhumane” by human rights groups.

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Mar 052017
 
 March 5, 2017  Posted by at 10:40 am Finance Tagged with: , , , , , , , , ,  8 Responses »
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Near The Hermitage, SaintPetersburg, Russia 1930

 


The Rich Already Have a UBI (Jacobin)
The Next Market To Break *Should* Be Stocks (MA)
America’s Miserable 21st Century (CM)
China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)
China Signals Slower Increase In Defense Spending (BBG)
The Priced-In Risk of Marine Le Pen’s Victory (BBG)
Self-Fulfilling Pessimism (Vox)
Only The Rich Are Poisoned (Taleb)
Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)
Greece, Getting Smaller (Maria Katsounaki)
Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)
America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)
Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)
Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

 

 

Time to overhaul taxation. Away from income tax. Inevitable.

The Rich Already Have a UBI (Jacobin)

The universal basic income -a cash payment made to every individual in the country- has been critiqued recently by some commentators. Among other things, these writers dislike the fact that a UBI would deliver individuals income in a way that is divorced from working. Such an income arrangement would, it is argued, lead to meaninglessness, social dysfunction, and resentment. One obvious problem with this analysis is that passive income -income divorced from work- already exists. It is called capital income. It flows out to various individuals in society in the form of interest, rents, and dividends. According to Piketty, Saez, and Zucman (PSZ), around 30% of all the income produced in the nation is paid out as capital income. If passive income is so destructive, then you would think that centuries of dedicating one-third of national income to it would have burned society to the ground by now.

In 2015, according to PSZ, the richest 1% of people in America received 20.2% of all the income in the nation. Ten points of that 20.2% came from equity income, net interest, housing rents, and the capital component of mixed income. Which is to say, 10% of all national income is paid out to the 1% as capital income. Let me reiterate: one in ten dollars of income produced in this country is paid out to the richest 1% without them having to work for it. Even if you exclude the capital component of mixed income (since it is connected to work even if the income is not from labor) and housing rents (since these are imputed to homeowners rather than paid to them as cash), that still means that, from equity income and interest alone, the top 1% receives 7.5% of the national income without having to work for it. Put another way: the average person in the top 1% receives a UBI equal to 7.5 times the average income in the country.

If passive income is so destructive, then the income situation of the 1% surely is a national emergency! Where does the 1% get its meaning with all of that free cash flowing in? The fact is that capitalist societies already dedicate a large portion of their economic outputs to paying out money to people who have not worked for it. The UBI does not invent passive income. It merely doles it out evenly to everyone in society, rather than in very concentrated amounts to the richest people in society. The idea of capturing the 30% of national income that flows passively to capital every year and handing it out to everyone in society in equal chunks has been around since at least Oskar Lange wrote about it in the early parts of the last century. This is, to me, the best way to do a UBI, both practically and ideologically. Don’t tax labor to give money out to UBI “loafers.” Instead, snag society’s capital income, which is already paid out to people without regard to whether they work, and pay it out to everyone.

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Looks scary.

The Next Market To Break *Should* Be Stocks (MA)

From an intermarket perspective – and in the wake of the major breakdown in Treasuries that manifested last summer akin to 87′, we would argue that the move in equities is likely much more mature than the echo of the record January 1987 sounding that some have recently pointed to for more bullish intermediate bearings. Their reasonings being, that although the markets may be near-term extended, like in January 1987, they still gained another 30% over the following 8 months. The old market adage applied – overbought can still become more overbought. That said, what the data mining ignores here is similar to the benevolent rotation out of bonds and into equities that supported the reflationary blowoff that began after Treasuries broke down in the Spring of 1987, stocks have been under this same strong reflationary momentum since last summer.

What’s happened this week of note, and which has helped firm our own near-term expectations, is that several Fed presidents have more than candidly implied that the March meeting is very much in play for another rate hike. And although we had recently suspected that more hawkish posturing would adversely impact precious metals over the short-term, long-term Treasuries now again look vulnerable as well, which would closer resemble the final leg lower in Treasuries in 1987 and the curtain call for equities that fall.

In 1987, the initial breakdown leg in the 30-year Treasury bond registered a decline of ~14%. After remaining in a trading range for another 3 months, bond prices fell roughly another 10%, before finding a low as the equity markets broke down. Through the end of last year, the 30-year Treasury bond had fallen ~16% from its highs last summer. Although we still believe long-term Treasuries offer good relative value to investors as the limits of the US’s mature economic expansion become increasingly visible this year, the more than 2 month trading range now appears susceptible to further near-term weakness, akin to the final leg lower in 1987.

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Nice find from Tyler.

America’s Miserable 21st Century (CM)

Yes, things are very different indeed these days in the “real America” outside the bubble. In fact, things have been going badly wrong in America since the beginning of the 21st century. It turns out that the year 2000 marks a grim historical milestone of sorts for our nation. For whatever reasons, the Great American Escalator, which had lifted successive generations of Americans to ever higher standards of living and levels of social well-being, broke down around then—and broke down very badly. The warning lights have been flashing, and the klaxons sounding, for more than a decade and a half. But our pundits and prognosticators and professors and policymakers, ensconced as they generally are deep within the bubble, were for the most part too distant from the distress of the general population to see or hear it.

[..] In some circles people still widely believe, as one recent New York Times business-section article cluelessly insisted before the inauguration, that “Mr. Trump will inherit an economy that is fundamentally solid.” But this is patent nonsense. By now it should be painfully obvious that the U.S. economy has been in the grip of deep dysfunction since the dawn of the new century. And in retrospect, it should also be apparent that America’s strange new economic maladies were almost perfectly designed to set the stage for a populist storm. Ever since 2000, basic indicators have offered oddly inconsistent readings on America’s economic performance and prospects. It is curious and highly uncharacteristic to find such measures so very far out of alignment with one another.

We are witnessing an ominous and growing divergence between three trends that should ordinarily move in tandem: wealth, output, and employment. Depending upon which of these three indicators you choose, America looks to be heading up, down, or more or less nowhere. From the standpoint of wealth creation, the 21st century is off to a roaring start. By this yardstick, it looks as if Americans have never had it so good and as if the future is full of promise. Between early 2000 and late 2016, the estimated net worth of American households and nonprofit institutions more than doubled, from $44 trillion to $90 trillion. (SEE FIGURE 1.)

Although that wealth is not evenly distributed, it is still a fantastic sum of money—an average of over a million dollars for every notional family of four. This upsurge of wealth took place despite the crash of 2008—indeed, private wealth holdings are over $20 trillion higher now than they were at their pre-crash apogee. The value of American real-estate assets is near or at all-time highs, and America’s businesses appear to be thriving. Even before the “Trump rally” of late 2016 and early 2017, U.S. equities markets were hitting new highs—and since stock prices are strongly shaped by expectations of future profits, investors evidently are counting on the continuation of the current happy days for U.S. asset holders for some time to come.

A rather less cheering picture, though, emerges if we look instead at real trends for the macro-economy. Here, performance since the start of the century might charitably be described as mediocre, and prospects today are no better than guarded. The recovery from the crash of 2008—which unleashed the worst recession since the Great Depression—has been singularly slow and weak. According to the Bureau of Economic Analysis (BEA), it took nearly four years for America’s GDP to re-attain its late 2007 level. As of late 2016, total value added to the U.S. economy was just 12% higher than in 2007. (SEE FIGURE 2.) The situation is even more sobering if we consider per capita growth. It took America six and a half years—until mid-2014—to get back to its late 2007 per capita production levels. And in late 2016, per capita output was just 4% higher than in late 2007—nine years earlier. By this reckoning, the American economy looks to have suffered something close to a lost decade.

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It all means very little without new debt data. Are they still trying to borrow growth? You bet.

China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)

China is aiming to expand its economy by around 6.5% in 2017 as it continues to implement a proactive fiscal policy and maintain a prudent monetary policy, Premier Li Keqiang said on Sunday. Top leaders at the National People’s Congress are tolerating slightly slower economic growth this year to give them more room to push through reforms to deal with a build-up in debt. A lending binge and increased government spending last year have fueled worries about high debt levels and an overheating housing market. GDP officially grew 6.7% in 2016, the slowest in 26 years, but within the government’s target range of 6.5 to 7%. That 6.5% growth target is “needed to achieve the employment objective,” Li said in his prepared remarks.

The government announced ambitious jobs plans, including to ensure that every family has at least one breadwinner, which is key as jobs are cut in major state-owned enterprises. As the government moves away from manufacturing-led growth, Beijing is tasked with quickly finding new employment for millions of workers, or risk the possibility of social unrest as unemployment looms China says it expects 11 million new urban jobs will be created this year, but that still wont keep pace with the 15 million new workers the government estimates will enter the market, according to prepared remarks. The government will continue to focus on the coal and steel sectors, with plans in place to cut steel production capacity. But experts were skeptical of the idea that certain economic growth levels would be “needed” for employment reasons.

“There is not now nor has there ever been any magical connection between GDP and jobs. You can have capital-intensive 6.5% GDP growth and not create enough jobs and you can have 3.5% labor-intensive GDP growth and create more than enough jobs,” said Derek Scissors, a resident scholar at the American Enterprise Institute and chief economist of the China Beige Book. “The Chinese government’s position for the past 20 years has been that the nutrition content of food doesn’t matter at all, only the number of calories.” This doesn’t make any sense economically, but it’s perfectly clearly politically,” he said, noting that China had said it needed greater GDP growth when its labor force was actually expanding, as opposed to its current contraction.

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Becoming unaffordable?

China Signals Slower Increase In Defense Spending (BBG)

China indicated a continued slowdown in defense spending growth this year, as President Xi Jinping presses ahead with a sweeping military overhaul. The defense budget will rise “about 7%,” National People’s Congress spokeswoman Fu Ying told a briefing ahead of China’s annual legislative session in Beijing. An actual spending target wasn’t expected until Sunday, when the Ministry of Finance releases its 2017 budget at the start of the 11-day legislative gathering. Last year, the country budgeted a 7.6% uptick in military spending to 954.4 billion yuan (equal to $147 billion at the time), the slowest increase since a 7.3% rise in 2010. Seven% would be the slowest expansion in more than a decade, tracking the broader trend in the country’s economy.

The increase consolidates China’s lead as the world’s second-largest military spender, accounting for more than 10% of the global arms total, said Siemon Wezeman, a senior researcher with the Stockholm International Peace Research Institute. More than two decades of expansion have helped China build a modern military capable of projecting force further from its coasts, while spurring anxious neighbors to upgrade their own defenses. Fu said China was committed to peace and described tensions in the South China Sea, where the country’s land reclamation campaign has been criticized by the U.S. and rival claimants, as “easing.” “We advocate dialogue and peaceful solutions to disputes of sovereignty and maritime rights,” said Fu, a former vice foreign minister and ex-ambassador to the U.K. “Meanwhile, we should possess the capacity to protect our sovereignty and interests.”

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Don’t count her out.

The Priced-In Risk of Marine Le Pen’s Victory (BBG)

Markets trade in the probability of certain events happening. In case an event has high risk, a “tail” is priced in. Those tail risks typically show up in certain corners of the markets. Today, tail risks are priced in for a potential unexpected outcome in the French elections. That tail risk is on the rise now that polls of the second round of voting indicate a tight race between center candidate Emmanuel Macron and the far-right candidate Marine Le Pen. Tail risks can be viewed in a linear way. For example, the German 2-year bond (“Schatze”) reached an all-time negative yield of -92 basis points when Le Pen recently gained in the polls.

As a result, the German 2-year yield became negatively correlated with the price of French bonds and stocks. A generic view is that German bonds are a reflection of the “tail risk” that Le Pen is victorious. However, there are technical reasons to explain the fall of German 2-year bonds. Those technicalities are a scarcity of German bond collateral in the repurchase market and the ECB’s purchase of German bonds yielding less than the deposit rate. This is what makes the 2-year German bond “overvalued” and therefore not as accurate a reflection of the true tail risk in France. There are other areas in markets that provide a better idea of how much of a Le Pen win is priced in.

Tail risks can be seen in currency options. The options market use a measure called “skew.” This is the difference between the implied volatility of puts and calls. A negative skew means currency markets price euro puts with higher implied volatility than the currency’s calls. In the case of negative skew, the currency market thinks the risk for depreciation of a currency is large. The skew of the euro currency has been on a steady decline since President Donald Trump was elected in November, as seen in Fig. 1. On the other hand, the French bond market has seen a surge in yields discounted to the second round of the presidential election, on May 7. Rising yields are a sign of uncertainty about the outcome of the election. Fig. 1 shows how markets are pricing a “tail risk” of an adverse election outcome. And this tail risk seems to be increasing by the day.

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I like Blanchard’s notion that “the reason unemployment is decreasing is productivity growth is so low.” But I don’t get that he overlooks, when saying “why is demand growth not stronger?”, that so many people have simply lost the means to spend. That seems to be a curious blind spot for an IMF economist. it’s not about pessimism, it’s about not having any money.

Self-Fulfilling Pessimism (Vox)

Why is it that demand growth is not stronger? In this video, Olivier Blanchard discusses his research on long-run forecasts and unexpected decreases in consumption. This video was recorded at the American Economic Association in Chicago in January 2017.

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“..one is more likely to be drinking poison in a golden cup than an ordinary one.”

Only The Rich Are Poisoned (Taleb)

When people get rich, they shed their skin-in-the game driven experiential mechanism. They lose control of their preferences, substituting constructed preferences to their own, complicating their lives unnecessarily, triggering their own misery. And these are of course the preferences of those who want to sell them something. This is a skin-in-the-game problem as the choices of the rich are dictated by others who have something to gain, and no side effects, from the sale. And given that they are rich, and their exploiters not often so, nobody would shout victim. I once had dinner in a Michelin-starred restaurant with a fellow who insisted on eating there instead of my selection of a casual Greek taverna with a friendly owner operator, his second cousin as a manager and his third cousin once removed as a receptionist.

The other customers seemed, as we say in Mediterranean languages, to have a cork plugged in their behind obstructing proper ventilation, causing the vapors to build on the inside of the gastrointestinal walls, leading to the irritable type of decorum you only notice in the educated upper classes. I note that, in addition to the plugged corks, all men wore ties. Dinner consisted in a succession of complicated small things, with microscopic ingredients and contrasting tastes that forced you to concentrate as if you were taking some type of exam. You were not eating, rather visiting some type of museum with an affected English major lecturing you on some artistic dimension you would have never considered on your own. There was so little that was familiar and so little that fit my taste buds: once something on the occasion tasted like something real, there was no chance to have more as we moved on to the next dish.

Trudging through the dishes and listening to some b***t by the sommelier about the paired wine, I was afraid of losing concentration. I costs a lot of energy to fake that I was not bored. In fact I discovered an optimization in the wrong place: the only thing I cared about, bread, was not warm. It appears that this is not a Michelin requirement. I left the place starving. Now if I had a choice I would have had some time-tested recipe (say a pizza with very fresh ingredients, or a juicy hamburger) in a lively place –for a twentieth of the price. But because the fellow dinner partner could afford the expensive restaurant, we ended up the victims of some complicated experiments by a chef judged by some Michelin bureaucrat. It would fail the Lindy effect: food does better through minute variations from Sicilian grandmother to Sicilian grandmother. It hit me that the rich people were natural targets; as the eponymous Thyestes shouts in Seneca’s tragedy, thieves do not enter impecunious homes, and one is more likely to be drinking poison in a golden cup than an ordinary one.

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The Turkish foreign minister claims the right to campaign among Turkish residents in Germany and Holland. Nobody wants that. Imagine if Mexico would take its political campaigns to US streets.

Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)

Austrian Chancellor Christian Kern on Sunday called for a European Union-wide ban on campaign appearances by Turkish politicians to avoid having individual member countries like Germany come under pressure from Ankara. Turkey said on Saturday it would defy opposition from authorities in Germany and the Netherlands and continue holding rallies in both countries to urge Turks living there to back an April 16 referendum to boost President Tayyip Erdogan’s powers. Turkish Foreign Minister Mevlut Cavusoglu criticized German and Dutch restrictions on such gatherings as undemocratic, and said Turkey would press on with them in the run-up to the vote. Kern, in an interview published in the Welt am Sonntag newspaper, said the measure would weaken the rule of law in Turkey, limit the separation of powers, and violate the values of the EU.

He also called for the EU to end discussions with Turkey about membership in the bloc and scrap or restrict €4.5 billion in aid planned for Turkey through 2020. “We should reorient relations with Turkey without the illusion of EU membership,” Kern told the newspaper. “Turkey has moved further and further away from Europe in the past few years. Human rights and democratic values are being trampled. Press freedom is a foreign word,” he said. Kern criticized Ankara’s arrest of German-Turkish journalist Deniz Yucel, a correspondent for Die Welt newspaper, and many other journalists, academics and civil servants, and called for Yucel’s immediate release. At the same time, he said, Turkey remained an important partner in issues of security, migration and economic cooperation, and said Ankara had lived up to its obligations under the migrant deal struck with the EU.

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The demise of a nation.

Greece, Getting Smaller (Maria Katsounaki)

“Instead of ‘Little Greece’ we need a serious Greece,” former Prime Minister Costas Simitis told the Delphi Economic Forum on Friday. As he spoke, Athens was suffocating again because of a mass transit strike, “unknown persons” were destroying ticket validating machines on buses, Eurostat’s figures showed that Greece is the consistent champion in unemployment, at 23% (with the next country, Spain, at 18.2% and the eurozone average at 9.6%), while a report from the Cologne Institute for Economic Research (IW) named Greece the leader in the percentage rise of poverty. The talks between the Greek government and its creditors show more differences than convergence, while Politico reported that the government has asked the World Bank for technical and financial assistance…

Each of the issues we mentioned has a past, present and future. They are not the same – some are tied to the economic crisis, other are not. One could argue that putting them together is aimed at making an impression. But let’s ask ourselves how the destruction of ticket validating machines was allowed to become a hobby. How have illegality and criminality become normal? How will unemployment and poverty be reduced when every investment crashes against denial, suspicion and compulsive behavior? When the only thing that grows is the amount of taxes and social security fees that we must pay? Let us ask ourselves this: When did the discussion that for a strike to be held “50% plus 1” of employees must agree, so as to put an end to the impunity of minorities?

Why has union leadership that is allied to political parties become “the right to strike” whereas any effort at reform serves the interests of the “economic oligarchy”? How can anyone trust a government that, while “negotiating hard” at the same time declares “the crisis is over,” while behaving as if this were a Third World country? Every day we are further gone in our illness and further from recovery. Little Greece is neither honest nor serious. It is not size that makes her lack credibility, but the ever-deeper national autism, the constant repetition of the performance “we are fighting for solutions” while caring nothing for solutions.

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Got to keep that border open.

Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)

Canada will not tighten its border to deter migrants crossing illegally from the United States in the wake of a U.S. immigration crackdown because the numbers are not big enough to cause alarm, a government minister said on Saturday. Public Safety Minister Ralph Goodale said the issue had not risen to a scale that required hindering the flow of goods and people moving across the world’s longest undefended border. Hundreds of people, mainly from Africa and the Middle East, have defied winter conditions and walked across the border, seeking asylum. They are fleeing President Donald Trump’s immigration crackdown, migrants and refugee agencies say.

It is not common to have so many asylum seekers in the United States looking for refuge in Canada over such a short period. The influx poses a political risk for Prime Minister Justin Trudeau, who faces pressure from the left, which wants more let in, and from the right, which fears an increased security risk. “We are concerned and we will deal properly with the extra hundreds (crossing illegally),” Goodale told reporters at a televised news conference in Emerson, Manitoba. “But the full border deals with 400,000 people moving in both directions every day. It also handles C$2.5 billion in trade every day. “It is critically important for us to make sure that it is strong and secure. At the same time, it needs to be efficient and expeditious.”

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Since it’s impossible to deport millions of people, clearer heads are called for.

America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)

The queue starts outside the consulate gate soon after dawn and stretches up Park View street. The visitors speak in low murmurs, exchanging the latest rumours. A dragnet in Glendale. Checkpoints in Highland Park. People deported for jaywalking. For speaking Spanish. Some visitors say they have sold their furniture to create an emergency fund. Others wonder if they should stop going to work and pull their kids from school. Overreactions? Wise precautions? No one knows. They’ve come here for answers. Inside the gate hulks a nondescript, cream-coloured office block. Lights flicker into life on a pale winter day and by 7am all is aglow: the consulate general of Mexico in Los Angeles is open for business. It is a lighthouse, of sorts, for undocumented Mexicans caught in the political maelstrom that is Hurricane Trump.

“I’m here to make a plan,” said Juana Sanchez, 53, a seamstress who has stitched and sewed in LA’s fashion district for 29 years. A plan for what? She managed a tight smile. “Deportation.” The immigration policies gusting out of the White House have chilled the US’s estimated 11 million undocumented people, half of whom are Mexican. The new president has vastly widened the numbers deemed priorities for expulsion. “As we speak tonight we are removing gang members, drug dealers that threaten our communities and prey on our very innocent citizens,” he told a joint session of Congress last week. “Bad ones are going out as I speak and as I promised throughout the campaign.”

The Mexicans who flock to the LA consulate say that in reality Immigration and Customs Enforcement (ICE) is sweeping up caretakers, students, mothers – anyone who entered the US illegally, and is thus a law-breaker. “Trump is the world’s worst terrorist. He has the Latino community terrorised,” said Rosa Palacios, a careworker with a nine-year-old granddaughter who weeps in fear at losing relatives. The hostility outdid previous anti-immigrant crackdowns, she said. “It is worse than when they thought we were infected.”

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Mexico may well come out of this a stronger country.

Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)

Mexico opened legal aid centers at its 50 consulates across the United States on Saturday to defend its citizens, the Mexican government said, amid worries of a crackdown on illegal immigration under U.S. President Donald Trump. Foreign Minister Luis Videgaray exhorted the U.S. government to respect the rights of Mexicans and called for the United States to allow a path to legality for undocumented migrants. “We are not promoting illegality,” Videgaray said, according to a video of an event at the Mexican consulate in New York provided by the foreign ministry, saying that Mexico supported following the law, but that means respecting human rights. Trump has issued orders to initiate tougher deportation procedures during his first month in office, following up on campaign vows to fight illegal immigration and to build a wall on the U.S.-Mexico border.

“Today we are facing a situation that can paradoxically represent an opportunity, when suddenly a government wants to apply the law more severely,” Videgaray said. “It is becoming more than evident that to apply the law, which is the obligation of any state, would also imply a real economic damage to this country which highlights the need for immigration reform, an immigration reform that resolves once and for all the legal status of the people,” Videgaray said. The Pew Research Center estimates there are nearly 6 million undocumented Mexicans living in the United States. Late last month, Videgaray expressed “worry and irritation” about Trump’s new policies to U.S. Secretary of State Rex Tillerson and Homeland Security chief John Kelly when they visited Mexico for talks on immigration and security.

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There is so much international law concerning the rights of refugees, written especially after wars, but none of it seems to matter much.

Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

Almost half of the refused asylum seekers who are unable to leave the UK have considered committing suicide, according to new research that criticises government rules for forcing individuals into destitution and a life in limbo. Interviews with asylum seekers refused permission to remain, in the UK but who cannot go home because they lack a passport, their nationality is disputed or there is no viable route back to their country, also found that half have considered or are applying for statelessness. The British Red Cross charity said such individuals should be allowed temporary leave to remain and work if they meet Home Office requirements, sparing people from years living in penury.

The charity said it knew of cases where women trapped in this situation had resorted to paying for a place to sleep with sex. It cited one Algerian who has been in the UK for 17 years who wassleeping on the streets and warned that those stuck in such limbo frequently suffer periods of homelessness alongside debilitating mental health issues, and that survival depended on the goodwill of friends and charities. Analysis by the Guardian last week revealed that Britain is one of the worst destinations in western Europe for people seeking asylum. Based on in-depth interviews with 15 people, the British Red Cross report found chronic stress, insomnia, anxiety and depression, with one refused asylum seeker from Sudan, a victim of torture, describing that he self-harms by banging his head against the wall.

No conclusive figures exist on the numbers of people who cannot leave the UK, although a freedom of information response from the Home Office reveals that 1,096 people lodged an application for statelessness in the UK after being refused asylum, following the introduction of new guidance in April 2013.

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Feb 222017
 
 February 22, 2017  Posted by at 9:45 am Finance Tagged with: , , , , , , , ,  4 Responses »
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DPC Launch of battleship Georgia, Bath, Maine, Oct 1904

 


Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)
Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)
France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)
EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)
Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)
Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)
The Cognitive Bias President Trump Understands Better Than You (Wired)
US Car Loans, Delinquencies Hit Record Levels (Q.)
‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma
China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)
Tech CEOs Back Call For Basic Income (CNBC)
Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)
Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)
Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)
Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)
Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

 

 

Michael Hudson speaking. “..when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites.”

Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back (CP)

I take issue with one thing that you said. You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now. What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015. It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

Sharmini, for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink. So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay.

When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade. Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see. Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

[..] when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece. So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

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Suggestion: lock them up until they have an agreement. Then let Greeks vote on that.

Will EU and IMF Finally Offer Light At The End Of The Greek Debt Tunnel? (G.)

Simon Tilford, deputy director of the Centre for European Reform, a thinktank, said he believed the IMF and eurozone would find a compromise, whereby the fund signed up to the 3.5% target for a limited period of time, as the price of stabilising the eurozone in an election year. “My feeling is they will largely settle for a fig leaf. It will be made to look as if the pace of austerity has been eased, ie that the eurozone will agree that the size of the primary budget surplus will be reassessed at some specified point in the future.” “All we are going to see us another round of extend and pretend.” He added that this would not do anything “significant to alleviate the pressure we see on Greece”. He pointed out that even a primary budget surplus of 1.5% (favoured by the IMF) “would still mean ongoing austerity in Greece”. The IMF’s reforms may also prove politically difficult to sell to a population reeling from nearly eight years in the EU’s bailout regime.

One of the IMF’s key demands is an overhaul of the Greek tax system to ensure more middle-class professionals pay their dues. More than 50% of Greek wage earners do not pay income tax, compared with 8% in the rest of the eurozone. But the low tax take partly reflects the economic collapse that has pushed down wages and squeezed people out of regular work. Reforming pensions, another IMF priority, may also run into trouble. The fund wants to rein in “extremely generous” Greek pensions that absorb 11% of national income. But Greek pensions have already been slashed since 2010, with 43% of pensioners living on €660 a month, compared with an average annual income of €20,000 for over-65s in other eurozone countries, according to government figures. Many Greek pensioners are also supporting unemployed children and grandchildren, as other benefits have been cut. With these politically tough reforms ahead, the light at the end of tunnel looks dim and distant. “Greeks are facing ongoing austerity into the foreseeable future,” Tilford says.

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Sorry, but fearmongering no longer works.

France Exiting The Euro Would Be Largest Sovereign Default In History (CNBC)

A few days ago, David Rachline of the far-right National Front party in France said that “the debt of France is about €2 trillion, about €1.7 trillion are issued under French law, which means that it can be re-denominated.” The economic program of the National Front specifically calls for the exit of the euro and the creation of a new currency, the French franc, which would be “closely” linked to the euro while allowing the government to undertake “competitive devaluations” making the transition in an “orderly way”. There is only one problem. It does not work. There is no “orderly exit” from the euro. It is an oxymoron. This would be the largest credit event in history and would create a massive contagion effect throughout the euro zone. The euro, obviously, would suffer from the break-up risk, so the fallacy of the “closely linked” second currency is simply a joke.

Both would collapse in tandem. The risk is already evident. The French-German yield spread has reached the highest level since 2012 despite the ECB’s massive quantitative easing. The ECB has bought more than €255 billion of French bonds. This mirage of an “orderly exit” ignores that the French financial system, which carries assets more than three times the size of France´s GDP, would be severely damaged from the impact of the credit event. A financial system that already suffers from weak net income margins and more than 160 billion euros in non-performing loans, would collapse as these bad loans escalate and the losses in the banks’ bond portfolios eat away their core capital. This would inevitably lead to Greek-style capital controls and bank runs as the entities would lose liquidity support from the ECB.

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“I think the rise of Le Pen is a result of the disappointment in other candidates..” Eh, no, it’s disappointment in the EU.

EU Tax Chief Admits Le Pen Win Would Be The End Of The European Project (CNBC)

A win for far-right presidential candidate Marine Le Pen would spell the end of the EU – but the French are not crazy enough to let that happen, insists European Commissioner Pierre Moscovici. “I’m confident. I know my citizens and my compatriots well and know they are not going to elect a candidate who is proposing France exiting (Europe). That would be the end of the European project,” Moscovici, who is European Commissioner for Economic and Financial Affairs, told CNBC Monday. In a clear nod to the rising populist movements in Europe, the election of U.S. President Donald Trump and the U.K.’s EU referendum, Moscovici, said he believes common sense will prevail as France goes to the polls in the two-round election this year. “I cannot imagine 50% of the French are crazy enough to vote for her,” he said.

“I’m quite convinced that she cannot win … she never even ever won a regional election in France – never ever.” Moscovici appealed, however, to the other presidential candidates, who include Independent Emmanuel Macron and Republican Francois Fillon, to prove themselves to the electorate and, ultimately, make a stronger case for remaining in the EU. “The other candidates need to have a stronger campaign and show that they are credible to propose a future that is likeable for the French. “I think the rise of Le Pen is a result of the disappointment in other candidates, so I urge them to make a strong proposal for France, and as well for Europe, and for France in Europe.”

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It’s amazing that they haven’t tried more of these tactics to make her look bad (they will, though). “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing..”

Marine Le Pen’s Party’s Headquarters Raided Over ‘Fake Jobs’ Scandal (AFP)

French investigators probing an alleged fake jobs scam by the far-right National Front (FN) raided the group’s headquarters outside Paris on Monday, the party said. The raid is the second in a year by investigators trying to determine whether the FN used European Parliament funds to pay for 20 assistants presented as parliamentary aides while continuing to work for the party elsewhere. “For the second time, a raid took place at the same offices, over the same allegations, which confirms that the first raid amounted to nothing,” the party said in a statement. The group accused investigators acting for the Paris prosecutor’s office of a “media operation” designed to disrupt the presidential campaign of FN leader Marine Le Pen. Le Pen, who has led the anti-EU party since 2011, is a member of the European Parliament which accuses her of defrauding it of nearly €340,000.

She is riding high in polls ahead of the two-stage presidential election on April 23 and May 7 election, and has denied the claims, describing the investigation as a vendetta against her. According to a report by the EU’s anti-fraud office OLAF, leaked last week, the parliament paid out 41,554 euros towards a contract for Le Pen’s bodyguard Thierry Legier who was falsely presented as a parliamentary assistant. The allegations against Le Pen have been drowned out by a fake jobs scandal engulfing her conservative rival Francois Fillon. Fillon’s campaign has been adrift since it emerged that his wife netted at least 680,000 euros for a suspected fake job as a parliamentary assistant over a period spanning 15 years. He has denied the allegations. Polls currently show Le Pen winning the first round of the election, but failing to garner the more than 50% of voters needed for victory in the second round.

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I still think it’s a good thing the US is having this conversation. But the upcoming ugliness is terrible. You need to always take care of individual people first.

Revised Trump Travel Ban Will Face Legal Hurdles, Too (BBG)

President Donald Trump is poised to announce a redrafted executive order on immigration from seven majority-Muslim countries. Will it pass legal muster? Or will the courts once again thwart the president’s will? Early reports suggest that the new order will be drafted to avoid many of the legal problems that were posed by the earlier version, and to make judicial review harder to obtain. But the crucial question is whether the courts will consider the political context in which the order was drafted to conclude that it is still a Muslim ban under another name. Whether the court should do so turns out to be a close legal question. But Supreme Court precedent suggests that it should – in which case the new order could well be blocked like the original. The expected fixes in the new order would improve the administration’s legal position.

For one thing, the new order is expected to exclude legal permanent residents with green cards, who were included in the original order according to the administration’s early guidance, then excluded by a later interpretation. In its decision upholding a temporary restraining order by a federal judge in Seattle against enforcement of the first travel ban, the U.S. Court of Appeals for the Ninth Circuit treated the executive order as covering green card holders. That mattered because, as the court said, green card holders have a stronger constitutional claim to be covered by the due-process clause of the Constitution than do other visa holders. By excluding green card holders, the new order would force plaintiffs to identify different people who are harmed by the order.

Another smart revision would be to omit the provision that said religious minorities in the seven countries – which is to say, almost certainly Christians – would be given preferential treatment when refugees are once again let into the U.S. That provision was the only part of the text that could be used to suggest that the order unconstitutionally favored one religion, Christianity, over another, Islam. The Trump administration would also be smart to phase in the new order to avoid trapping visa holders who are in transit, which creates sympathetic plaintiffs detained at the airports. But that’s not the end of the game, constitutionally speaking. Even if due process is omitted from the case entirely, plaintiffs could still allege once more that the order discriminates on the basis of religion in violation of the free-exercise and establishment clauses of the First Amendment.

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Paint a strong picture of something that’s not the norm.

The Cognitive Bias President Trump Understands Better Than You (Wired)

Americans born in the United States are more murderous than undocumented immigrants. Fighting words, I know. But why? After all, that’s just what the numbers say. Still, be honest: you wouldn’t linger over a story with that headline. It’s “dog bites man.” It’s the norm. And norms aren’t news. Instead, you’ll see two dozen reporters flock to a single burning trash can during an Inauguration protest. The aberrant occurrence is the story you’ll read and the picture you’ll see. It’s news because it’s new. The problem here is not just that this singling out creates a distorted, fish-eye lens version of what’s really happening. It’s that the human psyche is predisposed to take an aberration—what linguist George Lakoff has called the “salient exemplar”—and conflate it with the norm.

This cognitive bias itself isn’t new. But in a media environment driven by clicks, where politicians can bypass journalistic filters entirely to deliver themselves straight to citizens, it’s newly exploitable. You know who else isn’t as likely to commit murders in the US as native-born citizens? Refugees. Or immigrants from the seven countries singled out in President Trump’s shot-down travel ban. Or for that matter, immigrants at all. According to numerous studies, increased immigration correlates with lower violent crime rates in a community. Yet next week, Trump is promising a revised travel ban in the name of safety. In the past, the president has also promised to publish a weekly list of crimes committed by undocumented immigrants. What he hasn’t promised to publish is a list of crimes committed by Americans. That’s not news.

But his list is likely to create the false impression that undocumented immigrants are especially prone to commit violent crimes—an impression in which the human brain is complicit. Lakoff, a University of California, Berkeley linguist and well-known Democratic activist, cites Ronald Reagan’s “welfare queen” as the signature “salient exemplar.” Reagan’s straw woman—a minority mother who uses her government money on fancy bling rather than on food for her family—became an effective rhetorical bludgeon to curb public assistance programs even though the vast majority of recipients didn’t abuse the system in that way. The image became iconic, even though it was the exception rather than the rule. Psychologists call this bias the “availability heuristic,” an effect Trump has sought to exploit since the launch of his presidential campaign, when he referred to undocumented Mexican immigrants as rapists.

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Slaves.

US Car Loans, Delinquencies Hit Record Levels (Q.)

Last year, Americans bought more new cars than ever before. Given that auto sales make up around a fifth of all retail spending, 2016’s banner year is being hailed as a sign of burgeoning consumer confidence across the country. But something else is revving up, too: auto loans. The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt, a rise of 9% from the previous year and 13% above the pre-crisis peak in 2005, in inflation-adjusted terms. The number of cars and trucks on the road, meanwhile, rose by only 1.5% last year, and 9% since 2005, according to US transportation department data.

Total household debt levels are now a hair under their 2008 peak, with some of the fastest growth in recent years down to auto loans. If America’s car-buying bonanza is being fueled by cheap credit, is consumer sentiment really as robust as it might seem? And is it sustainable? There are reasons to wonder. While car purchases and financing have leapt since 2009, wages have picked up only slightly over the same period. Meanwhile, the average loan taken out to buy a new car has risen steadily.

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TO learned nothing from Vancouver.

‘Trapped Wealth’ Drives Toronto’s Speculative Real Estate Dilemma

Toronto’s housing boom is unrelenting. Prices in Canada’s largest city surged more than 20% over the past year, the fastest pace in three decades, data released last week show. Some of the city’s neighboring towns are posting even bigger gains. It’s become a matter of considerable alarm. Stability is one concern: if the market tumbles, so will Canada’s economy. Pricier real estate also drives away less-affluent, younger people and boosts the cost of doing business, eroding competitiveness. “I don’t think anybody is cheering,” said Doug Porter, the Toronto-based chief economist of Bank of Montreal, who used the dreaded “bubble” word last week to describe the market. “I don’t see who benefits other than real estate agents. It’s trapped wealth.”

So, what’s driving the boom? The housing industry – builders and brokers – claim lack of supply is the main culprit. Others, Porter included, see demand as the problem. Lately, evidence is mounting that speculation is behind the jump. Builders say they are being held back by everything from regulations to prohibitive taxes and land restrictions. Ontario’s greenbelt region around Toronto is one example. This is no doubt true for one segment of the market: single-detached homes. Just over one-quarter of the 176,000 homes built in Toronto over the past five years were single-detached. That’s well down from the 1990s, when they accounted for almost half of all construction. Supply constraints don’t explain the price gains for condominiums, which have seen a flood of new completions. The average sale price of a condo is up 15% year-over-year. That’s after builders completed more than 54,000 apartment units over the past two years, easily a record supply for Toronto.

Canada’s recent census results, released this month, also provide some evidence against the shortage argument. Occupied private dwellings have risen by 7.2% in Toronto over the past five years, faster than population growth. The census, however, doesn’t say what type of homes are being built. Plus, there is also the recent puzzle of disappearing listings. New listings in Toronto fell 17% in January from a month earlier, the biggest one-month decline since 2002. Sales as a share of new listings rose above 90%, smashing the record. Is this a sign of a bubble? Are sellers holding off putting their homes on the market to see where prices settle? Has supply become so tight that potential sellers are pulling out of the market altogether since they have nowhere to move to? “The market is thinning out basically, you know what that means,” said David Madani, an economist at Capital Economics in Toronto, said in a telephone interview.

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They keep on announcing this. And the shadow system keeps growing, rapidly.

China’s Central Bank To Shine Regulatory Light On Shadow Banking (SCMP)

China’s financial watchdogs are considering casting a huge new regulatory net over the country’s vast shadow banking sector. The central bank has spearheaded the drafting of new regulations to tame China’s 60 trillion yuan “asset management” industry. According to people who have seen the draft regulations, the rules would bring the various kinds of asset management products and investment schemes offered by all kinds of financial institutions under the one regulatory umbrella. Oversight for the flourishing sector is now split between the securities, banking and insurance regulators. China Minsheng Banking chief analyst Wen Bin said regulatory standards differed between watchdogs and a unified system would help regulators cut systemic risks and financial leverage.

“China’s financial innovation has grown quickly in the past few years and the blending of financial operations through asset management products has challenged the fragmented regulatory system,” Wen said. Mainland financial institutions, including banks, mutual fund firms, brokerages and insurance companies, have rushed to set up asset management schemes, raising funds from clients and then investing in a range of markets and projects. These schemes are usually beyond the watch of regulators and harbour growing risks for the country’s financial stability, something the leadership is determined to eliminate ahead of a big power reshuffle due late this year. If rolled out, the rules would ban financial institutions from promising clients a minimum or fixed return from their products. Institutions would have to contribute 10% of their management fees to a risk reserve fund, and funds in one “asset management product” could not be used in another, except in authorised cases.

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These people really think they will rule the world. But what happens when the economy collapses? When the S&P falls 50%+? Are robots going to grow your food?

Tech CEOs Back Call For Basic Income (CNBC)

It’s 2067 and robots have wiped out millions of jobs, AI is rampant, and unemployment is on the rise. Technology companies and CEOs have become public enemy number one. This portrayal of the future is one tech executives are keen to avoid and has driven a growing chorus to support the idea of a universal basic income (UBI). “There is going to be backlash when it comes to jobs,” Sayantan Ghosal, an economics professor at the University of Glasgow who has written about UBI, told CNBC by phone. U.S. technology firms have been investing heavily in research and development of AI. Tesla with driverless cars, Amazon with workerless shops, and the likes of Google developing smarter-than-human software. Even Sergey Brin, the co-founder of Google, recently stated that he was “surprised” by the pace of AI developments.

Over the past few months, major technology executives have come out in support of a UBI. In an interview with CNBC in November, Tesla Chief Executive Elon Musk backed the idea. “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” Musk said. He reiterated his thoughts last week at the World Government Summit in Dubai, in which he said a UBI would be “necessary”. Marc Benioff, chief executive of Salesforce, warned of AI creating “digital refugees”. At the World Economic Forum (WEF) in Davos in January, Benioff said there was “no clear path forward” on how to deal with the job displacement that will occur. Other tech executives talked up the industry’s responsibility. “We should do our very best to train people for the jobs of the future,” Microsoft CEO Satya Nadella said at Davos.

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The dark side of the man.

Monsanto and Bayer’s Chemical Romance: Heroin, Nerve Gas and Agent Orange (AN)

Fifty years ago, the Monsanto and Bayer corporations were forced to separate in order to avoid violating basic antitrust regulations. U.S. courts declared that the two chemical giants, when operating together under the name Mobay, stymied market competition and comprised a monopoly that could not stand. But that was then. Today, under a much different regulatory climate that all but rubberstamps such corporate monopolies, the Germany-based Bayer’s $66 billion offer to purchase Monsanto is being fast-tracked by U.S. regulators. The proposed mega-merger, or re-marriage, will result in nearly 30% of all worldwide pesticide and seed sales being controlled by the new partnership. The merger faces federal antitrust scrutiny before it can be finalized, a process currently underway.

It already passed its first test in January when it got the blessings of President-elect Donald Trump, who held an exclusive meeting with the CEOs of both corporations and emerged—not surprisingly—with his thumbs up. Trump’s exclusive meeting with these corporate titans came well before he had even bothered to name his selection to lead the U.S. Department of Agriculture, a not-so-subtle acknowledgement of where the true power lies when it comes to the politics of food. In addition to market control, Bayer’s proposed purchase is aimed at steadying a reeling Monsanto, which is mired in turmoil from a long list of objectionable activities involving toxic pesticides and its increasingly unpopular genetically-modified organisms.

Ironically, given its own sullied past that includes Nazi sympathizing and marketing heroin-laced cough syrup for children, Bayer is being portrayed as the one riding to the rescue of Monsanto’s poor public image. If anything, it’s a sign of just how low the Monsanto brand and reputation has plummeted, forcing it to try and improve its image by sidling up to Bayer, a participant in some of the cruelest crimes in human history. While these types of mergers are nothing new to the agribusiness sector, where consolidation has been king for decades, last year’s proposed mega-mergers shattered the record for such deals. There were $125 billion worth of proposed agri-chemical mergers in 2016, nearly doubling the previous record of $65 billion in 2010. In addition to the proposed Bayer/Monsanto deal, there are also pending mergers between Dow and DuPont as well as Syngenta and the Chinese National Chemical Corporation.

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Canada continues to set the standard. But protests begin.

Canada Will Not Halt Illegal Border Crossing Despite Opposition – Trudeau (R.)

Canada will continue to accept asylum seekers crossing illegally from the United States but will ensure security measures are taken to keep Canadians safe, Canadian Prime Minister Justin Trudeau said on Tuesday. The number of would-be refugees crossing into Canada at isolated and unguarded border crossings has increased in recent weeks amid fears that U.S. President Donald Trump will crack down on illegal immigrants, and photos of smiling Canadian police greeting the migrants have gone viral. Opposition Conservatives want Trudeau’s center-left Liberal government to stem the flow of asylum seekers from the United States because of security fears and a lack of resources to deal with them.

“One of the reasons why Canada remains an open country is Canadians trust our immigration system and the integrity of our borders and the help we provide people who are looking for safety,” Trudeau told parliament. “We will continue to strike that balance between a rigorous system and accepting people who need help.” Immigration Minister Ahmed Hussen also said Canada would continue to honor the Canada-U.S. Safe Third Country Agreement, which requires it to turn back refugees if they make asylum claims at Canadian border crossings with the United States. Refugee advocates have argued this drives asylum seekers to cross illegally at isolated locations, risking their lives in frigid weather. Amnesty International and other groups are pressuring the Canadian government to abandon the agreement, arguing the United States is not safe for refugees.

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Very smart move. They will contribute a lot to the country. Stong, hardened, intelligent and grateful.

Canada To Welcome 1,200 Yezidi Refugees From Iraq (AFP)

Canada will resettle 1,200 Yezidi refugees who faced persecution by the Islamic State group, the immigration minister said Tuesday. Some 400 have already been airlifted to this country. “Our operation is under way and individual survivors of Daesh have been arriving in Canada for resettlement in the last number of months and this began on October 25, 2016,” Immigration Minister Ahmed Hussen, using an Arabic name for the Islamic State. “Our government will resettle approximately 1,200 highly vulnerable survivors of Daesh and their family members in Canada,” he added. The initiative follows Parliament’s resolution last fall to take in Yezidis facing “genocide” in Iraq at the hands of the Islamic extremist IS group.

The original aim was to bring over women and girls at risk, but Hussen told a news conference that Ottawa had learned that “Daesh has also deliberately targeted boys and as such we are helping to resettle all child survivors of Daesh.” Hussen said the migrants are arriving on commercial flights at a “controlled pace” to avoid overwhelming Canada’s refugee system. The operation is expected to cost Can$28 million (US$21 million). Since coming to power in late 2015, Prime Minister Justin Trudeau’s government has resettled 40,000 Syrian refugees. The Yezidis taken in have been subjected to comprehensive security checks and medical examinations, Hussen said. Yezidis are a Kurdish-speaking minority with a pre-Islamic religion thought partly to have its origin in the Zoroastrianism of ancient Persia. They are neither Arab nor Muslim and IS considers them polytheistic heretics.

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And don’t you forget it.

Europe Wrote The Book On Demonising Refugees, Long Before Trump Read It (G.)

It has become an article of faith among liberals that Donald Trump is the world’s biggest enemy to refugees and Muslims, while the EU somehow offers them a safe harbour. After all, with the words “We can do it” Angela Merkel invited a million Syrian refugees into Germany, while Trump’s travel ban has slammed shut America’s door to some of the world’s most vulnerable displaced people. In today’s liberal mindset, it is Brexit that has stirred up hostility against migrants, while the EU is a bulwark of civilised values, protecting refugees from the threat of a resurgent far right. If you were a migrant in a leaking boat approaching Lesbos, however, the treatment you would receive from Frontex, the EU’s border patrol, would be no less hostile than anything Trump could inflict.

In Tunis last week a video showed Tunisian border police whipping cowering migrants from elsewhere in north Africa. This brutality was EU-sponsored. Like Libya, Morocco, Turkey and Egypt, Tunisia receives funding and training from Brussels through the European neighbourhood policy (ENP). Under a broader framework of “development” and “reforms”, these ENP countries serve as a buffer zone, making sure that refugees are intercepted and turned back – or, in Libya, locked up and tortured in refugees’ prisons – before these desperate people can reach the EU’s shores. The idea that the Europe of Merkel and Theresa May is more welcoming to refugees than Trump’s America simply isn’t borne out by the facts. The EU’s deal with Turkey, condemned by humanitarian agencies, ensures that refugees arriving in Greece – regardless of their point of departure – will be sent to Turkey.

Turkey now has the largest refugee population in the world, at about 3 million people. This month Britain reneged on its promise to admit 3,000 unaccompanied child refugees. Concerned that the Balkan route is a weak link into Europe, Austria has mobilised aspiring EU members including Macedonia, Serbia and Kosovo into a Balkan frontier defence project to fortify the refugee entry points of the “Balkan corridor”. Last year Macedonian police used tear gas, grenades and stun guns against Iraqis and Syrians attempting to get through a razor-wire fence and into the country.

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“..traffickers came and removed the engine from the boat and left the craft adrift..”

Bodies Of At Least 74 Migrants Wash Ashore In Western Libya (G.)

The bodies of at least 74 people, believed to be migrants, have washed ashore on the Libyan coast in the latest tragedy at sea for people fleeing to Europe to escape war and poverty. The Libyan Red Crescent said on Tuesday the bodies had been found the previous morning on the coast of the city of Zawiya, and aid workers had spent six hours recovering them, with more dead believed to be in the vicinity. A spokesman for the organisation, Mohammed al-Misrati, told the Associated Press that a torn rubber boat was found nearby and it was likely that more migrants had drowned in the incident, as such vessels usually carry about 120 people.

The Zawiya coastguard later posted a video that showed the migrants’ boat with no engine. Joel Millman, a spokesman for the International Organization for Migration (IOM), told Reuters a local staff member had reported that “traffickers came and removed the engine from the boat and left the craft adrift”. “This is not a only horrible number of deaths in one incident but it strikes us as something that we haven’t really seen much of, which is either deliberate punishment or murder of migrants,” Millman said.

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Jan 292017
 
 January 29, 2017  Posted by at 11:10 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Michael Andrews A Shadow 1974


Donald Trump’s Cruel Ban On Refugees Sets A Chilling Precedent (Robert Fisk)
Judges Block Parts of Trump’s Order on Muslim Nation Immigration (BBG)
Malevolence Tempered by Incompetence (Wittes)
Trump’s Muslim Ban Triggers Chaos, Heartbreak, And Resistance (IC)
Science Can Decode the Laws of History and Predict US Political Violence (PT)
UK Agrees £100m Fighter Jet Deal With Turkey Despite Human Rights Abuse (Ind.)
Canada’s Justin Trudeau Takes A Stand On US Refugee Ban (BBC)
Centralization and the Decline of Europe (IL)
Muslims Make A Pitch For Populist Vote As Dutch Politics Turns Sharp Right (G.)
How Great the Fall Can Be (Greer)
This Could Be Greece’s Last Chance To Save Itself (CNBC)
Greece’s Best-Selling Daily To Cease Publication Due To Debts (AFP)
Second Man Dies At Lesbos Refugee Camp Within Days (Kath.)

 

 

Strong from Fisk: “It’s OK to use pilotless planes to assault men and women in other countries. It’s OK if your allies steal land from others for their own people, if you support Arab dictatorships that emasculate and execute and rape their prisoners, as long as they are “allies” of the USA.”

But do note: none of these things have occurred under Trump. So where were you when Obama became the Drone King? When Hillary said We Came We Saw He Died? Do you feel those things are less important or less cruel than what happened yesterday in US airports? Now is the time to speak.

Donald Trump’s Cruel Ban On Refugees Sets A Chilling Precedent (Robert Fisk)

So Donald Trump is going to f**k them all. No excuses for such filthy words today. I’m only quoting the man whose Pentagon offices he just used to disgrace himself – and America. For it was Secretary of Defence James ‘Mad Dog’ Mattis who told Iraqis in 2003 that he came “in peace’ – he even urged his Marines to be compassionate – but said of those who might dare to resist America’s illegal invasion of their country: “If you f**k with me, I’ll kill you all.” There’s no getting round it. Call it Nazi, Fascist, racist, vicious, illiberal, immoral, cruel. More dangerously, what Trump has done is a wicked precedent. If you can stop them coming, you can chuck them out. If you can demand “extreme vetting” of Muslims from seven countries, you can also demand a “values test” for those Muslims who have already made it to the USA.

Those on visas. Those with residency only. Those – if they are American citizens – with dual citizenship. Or full US citizens of Muslim origin. Or just Americans who are Muslims. Or Hispanics. Or Jews? Refugees one day. Citizens the next. Then refugees again. No, of course, Trump would never visit such obscene tests on Jewish immigrants – for they would be obscene, would they not? – and nor will he stop Christians from Muslim countries. America has always condemned sectarian states, but now Trump declares that he approves of sectarianism. Minorities will be welcome – the Alawites of Syria, to whom Bashar al-Assad belongs, will presumably not count, and I guess we can expect all US embassies to have three queues for visa applicants. One for Muslims, one for Christians, and a third marked ‘Other’. That’s where most of us will be standing in line. And by doing so, we will automatically give approval to this iniquitous system – and to Trump.

There’s no point in wasting time over the obvious: that America has bombed, directly or indirectly, five of the seven nations on Trump’s banned list. Sudan just escapes, but the US blew a packed Iranian passenger airliner out of the sky in 1988 and has raised no objections to Israel’s bombing of Iranian personnel in Syria. So that makes six. There’s nothing to be gained by reiterating that the four countries whose citizens participated in the international crimes against humanity of 9/11 – Saudi Arabia, Egypt, the Emirates and Lebanon – do not feature on the list. For the Saudis must be loved, cosseted, fawned over, approved, even when they chop off heads and when their citizens funnel cash to the murderers of Isis. Egypt is ruled by Trump’s “fantastic guy” anti-‘terrorist’ president al-Sisi. The glisteningly wealthy Emirates won’t be touched. Nor will Lebanon, although its tens of thousands of dual-national Syrians may have a tough time in the future.

But no, this vile piece of legislation is not aimed at nations. It’s targeting refugees, the poor, the huddled masses yearning to breathe free. The Muslim ones, that is, not the Christians. How can they ever withstand a “values test”? And what are America’s “values” anyway? It’s OK to attack sovereign states. It’s OK to use pilotless planes to assault men and women in other countries. It’s OK if your allies steal land from others for their own people, if you support Arab dictatorships that emasculate and execute and rape their prisoners, as long as they are “allies” of the USA. It’s OK to fast-track Saudi visas – as the Brits have been doing for years – even if they are members of the most inspirational Wahhabi cult in the world: membership includes the Taliban, al-Qaeda, Isis, you name it.

There’s even no value in touting our own participation in this charade. Having just patted the killer governments of the Gulf on the head – and heading off to do the same to Turkey’s autocrat-in-chief – our poodlet prime minister, fresh out of Washington, hasn’t uttered a word about Trump’s wickedness. Wasn’t it Britain – and America, for heaven’s sake – that was weeping copious tears, buckets of the stuff, for the 250,000 (or 90,000) Muslim refugees of eastern Aleppo a couple of months ago? And now, so much do we care for them, that they are being well and truly f****d.

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More of this please.

Judges Block Parts of Trump’s Order on Muslim Nation Immigration (BBG)

Two judges temporarily blocked President Donald Trump’s administration from enforcing parts of his order to halt immigration from seven Middle Eastern countries, after a day in which students, refugees and dual citizens were stuck overseas or detained and some businesses warned employees from those countries not to risk leaving the U.S. A nationwide ruling in Brooklyn, New York, barring refugees and visa holders already legally in the U.S. from being turned back came hours after the American Civil Liberties Union and other groups sued to halt the Jan 27 order. A separate order in Alexandria, Virginia, forbid the government from removing about 60 legal permanent residents of the U.S. who were being detained at Dulles International Airport.

Neither ruling strikes down the executive order, which will now be subject to court hearings. White House officials didn’t immediately respond to a request for comment late Saturday night. There were wrenching scenes – and angry protests – at major airports across the country before the court orders were issued. At Los Angeles International Airport, a lawyer reported that an 80-year-old insulin-dependent visitor was being held by officials and had no contact with her worried family. Shane Moss, a 38-year-old from Missouri, was returning from Thailand with his girlfriend, a dietician and joint Canadian-Iranian citizen with a valid work visa, when they were forced to separate. Hours later, he had not heard from her. “They won’t tell me anything,” Moss said. “I’m worn out. I’ve been up for 20-something hours and we’ve still got to get home to Kansas City.”

[..] The executive order, issued on Friday, bars citizens of Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, from entering the U.S. for the next three months in an effort to stop terrorists and gain hold of the immigration system. White House officials told reporters, before the court orders were issued, that green card holders from those countries who found themselves abroad and trying to come back would be evaluated case by case. Last year there were nearly 32,000 immigrant visas issued in the U.S. to the seven affected countries. The order also halts refugee resettlement to the U.S. for 120 days, and orders that refugee admissions for 2017 be cut to 50,000 from the planned limit of 110,000.

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This is from what I would call a decidedly right wing lawyer (though he also says he’s ‘pro-refugees’). “I believe in strong counterterrorism powers. I defend non-criminal detention. I’ve got no problem with drone strikes. I’m positively enthusiastic about American surveillance policies. I was much less offended than others were by the CIA’s interrogations in the years after September 11.” But who says: “It will cause hardship and misery for tens or hundreds of thousands of people because that is precisely what it is intended to do.”

Malevolence Tempered by Incompetence (Wittes)

Put simply, I don’t believe that the stated purpose is the real purpose. This is the first policy the United States has adopted in the post-9/11 era about which I have ever said this. It’s a grave charge, I know, and I’m not making it lightly. But in the rational pursuit of security objectives, you don’t marginalize your expert security agencies and fail to vet your ideas through a normal interagency process. You don’t target the wrong people in nutty ways when you’re rationally pursuing real security objectives. When do you do these things? You do these things when you’re elevating the symbolic politics of bashing Islam over any actual security interest. You do them when you’ve made a deliberate decision to burden human lives to make a public point. In other words, this is not a document that will cause hardship and misery because of regrettable incidental impacts on people injured in the pursuit of a public good. It will cause hardship and misery for tens or hundreds of thousands of people because that is precisely what it is intended to do.

[..] I think we can, without drawing any kind of equivalence between this order and Jim Crow, make a similar point here: Is this document a reasonable security measure? There are many areas in which security policy affects innocent lives but within which we do not presumptively say that the fact that some group of people faces disproportionate burdens renders that policy illegitimate. But if an entire religious grouping finds itself irrationally excluded from the country for no discernible security benefit following a lengthy campaign that overtly promised precisely such discrimination and exactly this sort of exclusion, if the relevant security agencies are excluded from the policy process, and if the question is then solemnly propounded whether the reasonable pursuit of security is the purpose, I think we ought to exercise one of the sovereign prerogatives of philosophers—that of laughter.

So yes, the order is malevolent. But here’s the thing: Many of these malevolent objectives were certainly achievable within the president’s lawful authority. The president’s power over refugee admissions is vast. His power to restrict visa issuances and entry of aliens to the United States is almost as wide. If the National Security Council had run a process of minimal competence, it could certainly have done a lot of stuff that folks like me, who care about refugees, would have gnashed our teeth over but which would have been solidly within the President’s authority. It could have all been implemented in a fashion that didn’t create endless litigation opportunities and didn’t cause enormous diplomatic friction. How incompetent is this order? An immigration lawyer who works for the federal government wrote me today describing the quality of the work as “look[ing] like what an intern came up with over a lunch hour. . . . My take is that it is so poorly written that it’s hard to tell the impact.”

I would wax triumphant about the mitigating effect of incompetence on this document, but alas, I can’t do it. The president’s powers in this area are vast, as I say, and while the incompetence is likely to buy the administration a world of hurt in court and in diplomacy in the short term, this order is still going take more than a few pounds of flesh out of a lot of innocent people. Moreover, it’s a very dangerous thing to have a White House that can’t with the remotest pretense of competence and governance put together a major policy document on a crucial set of national security issues without inducing an avalanche of litigation and wide diplomatic fallout. If the incompetence mitigates the malevolence in this case, that’ll be a blessing. But given the nature of the federal immigration powers, the mitigation may be small and the blessing short-lived; the implications of having an executive this inept are not small and won’t be short-lived.

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It started at least a week ago.

Trump’s Muslim Ban Triggers Chaos, Heartbreak, And Resistance (IC)

Following an executive order signed late Friday, President Donald Trump on Saturday launched a sweeping attack on the travel rights of individuals from more than a half dozen Muslim majority countries, turning away travelers at multiple U.S. airports and leaving others stranded without answers — and without hope — across the world. Trump’s order triggered waves of outrage and condemnation at home and abroad, prompting thousands of protesters to flood several American airports and ultimately culminating in a stay issued by a federal district judge in New York City on the deportation of people who were being detained by immigration officials. Similar stays were issued by judges in Washington, Massachusetts, and Virginia.

The administration’s assault on civil liberties explicitly targeted the world’s most vulnerable populations – refugees and asylum seekers fleeing devastating wars – as well as young people with student visas pursuing an education in the United States, green card holders with deep roots in the country, and a number of citizens of countries not included in the ban. It also impacted American children traveling with, or waiting to meet, their non-citizen parents. With an estimated 500,000 people in the crosshairs, Trump’s order was carried out swiftly and sowed confusion among the nation’s immigration and homeland security agencies – which were excluded from the drafting process and were scrambling to understand how to implement it, according to media reports and two government officials who spoke to The Intercept.

Days before the executive order was signed, reports began to emerge that valid visa holders were suddenly being prevented from reentering the country after taking trips abroad. A senior U.S. immigration official, who asked not to be identified for fear of retaliation, confirmed to The Intercept that the rash of unusual student visa revocations began roughly a week before the official order was signed. Many of the stories the official heard about were anecdotal. Others, however, the official was able to review via internal Department of Homeland Security monitoring systems. While visas are revoked every day with little explanation afforded to those affected, the backgrounds of the individuals in these cases raised no red flags, the official said.

On the contrary, the impacted individuals whose files the official reviewed included a young mother of a U.S. citizen child, and students at some of the nation’s top universities publicly recognized for their outstanding achievement. These students had already undergone rigorous U.S. government vetting before being admitted to the country, and had only traveled abroad briefly over their winter break. The Intercept has independently verified two of these stories by speaking to those denied entry, who asked that their names not be used because they are attempting to appeal the decisions.

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Interesting notion: “elite overproduction”.

Science Can Decode the Laws of History and Predict US Political Violence (PT)

Consider the “structural-demographic theory” that was first proposed by the sociologist Jack Goldstone and subsequently developed and tested with data by others, including myself. The theory explains major outbreaks of political violence, such as the French Revolution or American Civil War, by focusing on several interrelated processes. One is the falling or stagnating living standards of the general population. But contrary to the widely held view, popular discontent by itself is not a sufficient cause of a civil war or a revolution. A more important factor is what has been called “elite overproduction” – that is, the appearance of too many elite candidates vying for a limited supply of power positions within the government and the economy. As written about in my book War and Peace and War, elite overproduction results in intense intra-elite competition, polarisation, and conflict that ultimately takes violent forms.

[..] The structural-demographic theory has been tested by several investigators on many historical societies. The theory predicts very long-term cycles in which periods when societies are internally at peace are succeeded by waves of unrest. Both of these “integrative” and “disintegrative” phases are about a century long. The theory focuses entirely on the dynamics of political instability within states as external wars have a logic of their own (in fact, it is typically societies which are in their integrative phases that prosecute successful wars of external conquest). Our empirical investigations of a variety of historical societies confirm that they go through structural-demographic cycles. But on top of the long cycles are often superimposed shorter oscillations with periods of roughly 50 years.

It appears that people eventually tire of incessant fighting, so during the disintegrative phases human generations experiencing a lot of fighting tend to alternate with relatively peaceful ones. Recently the Journal of Peace Research published my article in which I tested the predictions of the theory on American data. Constructing and analysing a database on US political violence (between 1780 and 2010), I found that the dynamics of violent incidences were just as predicted by the theory: a long structural-demographic cycle with a 50-year cycle superimposed on it:

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This is really the worst news of all. Money, and the military-industrial complex, still rule supreme. Nothing at all will improve until we root it out.

UK Agrees £100m Fighter Jet Deal With Turkey Despite Human Rights Abuse (Ind.)

The UK has signed a £100m deal to design new fighter jets for Turkey, despite the country’s President undertaking a severe crackdown on his regime’s opponents. Theresa May said it could open the way to billions of pounds worth of business, as she became the first foreign leader to visit Turkey since Recep Tayyip Erdogan ordered a wave of arrests and sackings in the wake of last summer’s coup. Questioned over human rights concerns, Downing Street officials said the deal to design the TF-X jets was sealed in light of Turkey’s status as a Nato ally and claimed Ms May could approach human rights as a “separate” issue. The PM did warn the President it was “important” for him to uphold human rights, as the stony faced Turkish leader looked on.

The UK is already mired in controversy regarding some £3bn worth of licences granted to export arms to Saudi Arabia as the Kingdom embarked on a deadly bombing campaign in Yemen. The announcement in Ankara yesterday means BAE Systems and Turkish Aerospace Industries have signed a “heads of agreement”, establishing a partnership for the development of the Turkish Fighter Programme or TF-X. Downing Street sources said the £100m contract has the potential to facilitate multibillion pound contracts between the UK and Turkish firms over the project’s 20-year lifetime. Ms May added: “It marks the start of a new and deeper trading relationship with Turkey and will potentially secure British and Turkish jobs and prosperity for decades to come.”

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How will Justin avoid a major battle with Washington? Build a wall?

Canada’s Justin Trudeau Takes A Stand On US Refugee Ban (BBC)

Canadian Prime Minister Justin Trudeau has taken a stand on social media against the temporary US ban on refugees and immigration from seven Muslim-majority countries Mr Trudeau underscored his government’s commitment to bringing in “those fleeing persecution, terror & war”. The US Department of Homeland Security said the entry ban would also apply to dual nationals of the seven countries. However, Mr Trudeau’s office says Canadian dual nationals are exempt. “We have been assured that Canadian citizens travelling on Canadian passports will be dealt with in the usual process,” a spokeswoman for Mr Trudeau said in an emailed statement.

US President Donald Trump’s National Security Adviser Mike Flynn “confirmed that holders of Canadian passports, including dual citizens, will not be affected by the ban,” the statement said. Canada’s Immigration Minister Ahmed Hussen is a dual national who arrived as a Somali refugee. Within hours, Mr Trudeau’s tweets had been shared more than 150,000 times. “Welcome to Canada” also became a trending term in the country. Mr Trudeau, who gained global attention for granting entry to nearly 40,000 Syrian refugees to Canada over the past 13 months, also sent a pointed tweet that showed him greeting a young refugee at a Canadian airport in 2015.

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Growth, centralization and decline. I’ve made the connection many times.

Centralization and the Decline of Europe (IL)

The famous French diplomat Charles Maurice de Talleyrand supposedly said that a weakness of the Bourbon monarchs was that they learned nothing and forgot nothing. If so, the genetic descendants of the Bourbons are now in charge of Europe. But before explaining why, let’s first establish that Europe is in trouble [..] because of statism and demographic change. What’s far more noteworthy, though, is that even the Europeans are waking up to the fact that the continent faces a very grim future. For instance, the bureaucrats in Brussels are pessimistic, as reported by the EU Observer. “…the report warns of a longer term risk for the EU economy. “As expectations of low growth ahead affect investment today, there is potential for a vicious circle,” the commission’s director general for economic and financial affairs writes in the report’s foreword. “In short, the projected pace of GDP growth may not be sufficient to prevent the cyclical impact of the crisis from becoming permanent (hysteresis), ” Marco Buti writes.”

The people of Europe share that grim assessment. Pew has some very sobering data on angst across the continent. Support for European economic integration – the 1957 raison d’etre for creating the European Economic Community, the EU’s predecessor – is down over last year in five of the eight EU countries surveyed by the Pew Research Center in 2013. Positive views of the European Union are at or near their low point in most EU nations, even among the young, the hope for the EU’s future. The favorability of the EU has fallen from a median of 60% in 2012 to 45% in 2013.

Establishment-oriented voices in the United States also agree that the outlook is rather dismal. Writing in the Washington Post, Sebastian Mallaby offers a grim assessment of Europe’s future. “…since 2008…, the 28 countries in the European Union managed combined growth of just 4%. And in the subset consisting of the eurozone minus Germany, output actually fell. …most of the Mediterranean periphery has suffered a lost decade. …The unemployment rate in the euro area stands at 9.8%, more than double the U.S. rate. Unemployment among Europe’s youth is even more appalling: In Greece, Spain, France, Croatia, Italy, Cyprus and Portugal, more than 1 in 4 workers under 25 are jobless.” The bottom line is that there’s widespread consensus that Europe is a mess and that things will probably get worse unless there are big changes.

But the key question, as always, is whether the changes are positive or negative. And this is why I started with a reference to the Bourbon kings. European leaders today also are infamous for learning nothing and forgetting nothing. [..] As Nassim Nicholas Taleb has sagely observed, it is centralization and harmonization that creates systemic risk. And all this talk about “common resources” and “public risk sharing” is simply the governmental version of co-signing a loan for the deadbeat family alcoholic. Yet Europe’s ideologues can’t resist their lemming-like march in the wrong direction. What makes this especially odd is that there is so much evidence that Europe originally became rich for the opposite reason.

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Elections in (7?) weeks and everyone turns right. Pragmatism, politicians call it.

Muslims Make A Pitch For Populist Vote As Dutch Politics Turns Sharp Right (G.)

Nourdin el Ouali has grown used to far-right attacks on Dutch Muslims, and to dog-whistle politics. But when the country’s prime minister wrote an open letter last week, in effect demanding that minorities integrate or “go away”, he was still shocked. Mark Rutte’s letter comes less than two months before a national election, and after months of watching populist Geert Wilders rising into the top position in national polls. If the election were held tomorrow his far-right party would probably be the largest in parliament. The letter did not directly mention Muslims, and began instead by attacking people who drop litter or spit on buses. However, in his warning of “something wrong” in Dutch society, the message was clear.

Rutte’s naked bid to woo far-right voters for the 15 March election prompted scathing criticism across mainstream society, and worry among Dutch Muslims, who have already endured a sharp rise in hate crime and say they face regular discrimination in daily life. “It concerns me a lot, because it’s the prime minister who wrote the letter,” says Ouali, a Rotterdam native, founder and city councillor for the progressive Nida party. “You would expect a different role from someone in this position, to rise above it all, bring people together – not writing this kind of letter where he really in a sneaky way talks about Dutch identity, implying there are groups [of Dutch citizens] that are a threat to the Dutch way of life.”

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“..those of my readers who have worked themselves up to the screaming point about the comparatively mild events we’ve seen so far may want to save some of their breath for the times ahead when it’s going to get much, much worse.

How Great the Fall Can Be (Greer)

What kinds of meltdowns are we going to get when internet service or modern health care get priced out of reach, or become unavailable at any price? How are they going to cope if the accelerating crisis of legitimacy in this country causes the federal government to implode, the way the government of the Soviet Union did, and suddenly they’re living under cobbled-together regional governments that don’t have the money to pay for basic services? What sort of reaction are we going to see if the US blunders into a sustained domestic insurgency—suicide bombs going off in public places, firefights between insurgent forces and government troops, death squads from both sides rounding up potential opponents and leaving them in unmarked mass graves—or, heaven help us, all-out civil war?

This is what the decline and fall of a civilization looks like. It’s not about sitting in a cozy earth-sheltered home under a roof loaded with solar panels, living some close approximation of a modern industrial lifestyle, while the rest of the world slides meekly down the chute toward history’s compost bin, leaving you and yours untouched. It’s about political chaos—meaning that you won’t get the leaders you want, and you may not be able to count on the rule of law or even the most basic civil liberties. It’s about economic implosion—meaning that your salary will probably go away, your savings almost certainly won’t keep its value, and if you have gold bars hidden in your home, you’d better hope to Hannah that nobody ever finds out, or it’ll be a race between the local government and the local bandits to see which one gets to tie your family up and torture them to death, starting with the children, until somebody breaks and tells them where your stash is located.

It’s about environmental chaos—meaning that you and the people you care about may have many hungry days ahead as crazy weather messes with the harvests, and it’s by no means certain you won’t die early from some tropical microbe that’s been jarred loose from its native habitat to find a new and tasty home in you. It’s about rapid demographic contraction—meaning that you get to have the experience a lot of people in the Rust Belt have already, of walking past one abandoned house after another and remembering the people who used to live there, until they didn’t any more. More than anything else, it’s about loss. Things that you value—things you think of as important, meaningful, even necessary—are going to go away forever in the years immediately ahead of us, and there will be nothing you can do about it.

It really is as simple as that. People who live in an age of decline and fall can’t afford to cultivate a sense of entitlement. Unfortunately, [..] the notion that the universe is somehow obliged to give people what they think they deserve is very deeply engrained in American popular culture these days. That’s a very unwise notion to believe right now, and as we slide further down the slope, it could very readily become fatal—and no, by the way, I don’t mean that last adjective in a metaphorical sense. History recalls how great the fall can be, Roger Hodgson sang. In our case, it’s shaping up to be one for the record books—and those of my readers who have worked themselves up to the screaming point about the comparatively mild events we’ve seen so far may want to save some of their breath for the times ahead when it’s going to get much, much worse.

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Greece can not save itself by agreeing to more cuts; it can only doom itself.

This Could Be Greece’s Last Chance To Save Itself (CNBC)

Despite decisive action proposed by the IMF to ease Greece’s financial burden, more turbulence lies ahead for the debt-ridden European nation, reveals the latest IMF report, which was delivered to the Fund’s board members for consultation. CNBC has received the report through a close source to the IMF. According to IMF deputy spokesman William Murray, the report will be discussed at the IMF’s board meeting on Feb.6. Among the reforms they are pressing are further cuts to pension programs and an increase in income taxes. Without a substantial pace of reforms, Greece will be unable to narrow the gap in its real per-capita income relative to the euro zone and remain prosperous and competitive. This has prompted the euro zone’s finance ministers to demand that Greece proceed with these necessary reforms until Feb. 20 or risk the IMF dissolving support of the Greek financial program.

In the latest report, the IMF claims the Greek banks have a weak capital structure and are exposed to the risk of nonperforming loans. The Greek banks’ current strategies require a reduction in the aggregate nonperforming loans ratio to 48, 42 and 34% by 2017, 2018 and 2019, respectively, but these backloaded NPL reductions “do not appear consistent with the Greek authorities’ ambitious investment and growth assumptions.” Among the measures included in the IMF report is the push to rebalance the policy mix toward growth-friendly and equitable policies and to lower the threshold of tax-free income. “Greece’s revenue yields lag behind peers as high marginal tax rates applied on narrow bases encourage tax evasion, discourage labour participation in the formal economy and provide incentives for firms to relocate to low tax neighbouring countries,” the IMF report said.

In addition, the IMF supports a further reduction to Greece’s pensions, which in recent years have fallen by 40%. The report stresses that “while recent pension reforms have helped address expected long-run pressures from population aging, pensions for current retirees remain unaffordably high.” At this point, the IMF is very critical, claiming that “the Greek authorities did not see a need to reduce pension spending or the income tax credit.” The IMF is hardening its stance not only against Greece but also across the euro zone countries seeking greater debt relief for Greece. Yet even with with full implementation of policies agreed to under the ESM program, a debt sustainability analysis included in the report reveals that Greece’s public debt is “highly unsustainable.” It further emphasizes that Greece’s public debt and financing needs will become “explosive” in the long run if Greece is unable to replace highly subsided official sector financing with market financing at rates consistent with sustainability.

The IMF projects Greek debt will reach 170% of GDP by 2020 and 164% of GDP by 2022 but will rise thereafter, reaching around 275% of GDP by 2060. (This is based on the cost of debt rising over time as market financing replaces highly subsidized official sector financing. It should more than offset the debt-reducing effects of growth and the primary balance surplus. ) The country’s gross financing needs (defined as the sum of budget deficits and funds required to roll over debt that matures in the course of the year) will be higher: a 15% of GDP threshold by 2024 and a 20% of GDP threshold by 2031, reaching around 33% by 2040 and about 62% of GDP by 2060.

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It all falls apart.

Greece’s Best-Selling Daily To Cease Publication Due To Debts (AFP)

Two historic Greek newspapers, including the country’s best-selling daily, will cease publication, the debt-ridden Lambrakis Press Group announced on Saturday. “‘To Vima’ weekly and ‘Ta Nea’ daily are forced to cease their publication within days due to financial reasons,” the company said in a statement. Lambrakis Press Group (DOL) “is lacking any available resources and as a result it can’t support the printing of its newspapers and, of course, can’t ensure the unhampered operation of the other media outlets it owns,” it added. Besides the two newspapers DOL owns numerous magazines, news sites and the Vima FM radio. DOL failed to pay its €99 million ($106-million) debt obligations in December, Antonis Karakoussis, director of the Vima newspaper and Vima FM radio said on January 11.

He added that this situation was the result of the economic crisis Greece has faced since 2010 which has already led to the closure of many media outlets. In Saturday’s statement DOL accused the creditor banks of putting the press group in a special management regime without providing for the continuation of its publications. DOL says the creditor banks are withholding all its earnings “whether these come from newspaper sales or from advertisements”. Lambrakis Press Group, one of the shareholders of the Mega Channel TV station that is also heavily indebted, has also faced legal turmoil over the past months, with its president, Stavros Psycharis, being prosecuted for tax evasion and money laundering. With its particularly critical stance against Greece’s leftist Prime Minister, Alexis Tsipras since his election in 2015, DOL has been, along with other Greek media moguls, the target of the government’s effort to “reestablish transparency” in what it calls a sector “of oligarchs”.

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Yes, it’s come to this. Lesbos resident Eric Kempson has more in the video.

Second Man Dies At Lesbos Refugee Camp Within Days (Kath.)

A 46-year-old Syrian man was found dead in his tent in the Moria refugee camp on Lesvos on Saturday morning. He was the second person to die at the facility last week, after the death of a 22-year-old Egyptian man a few days earlier. The deaths have highlighted the poor conditions that refugees face at camps on the Greek islands, especially during the current cold weather. The government is making efforts to create new facilities and move some migrants to the mainland but the United Nations High Commissioner for Refugees accused Athens last week of failing to respond to its proposals about improving conditions at the existing camps.

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Dec 152016
 
 December 15, 2016  Posted by at 8:50 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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William Henry Jackson Hand cart carry, Adirondacks, New York 1902


Dollar at 14-Year Peak as Fed Rejuvenates Trump Rally (R.)
Dollar Jumps as Fed Pulls the Trigger While Stocks, Debt Decline (BBG)
Fed Fallout Escalates: China Bond Market Crashes Most On Record (ZH)
Higher US Interest Rates Next Year Could Make Big Problems For China (CNBC)
Shadow Banking in China Appears to Have Made a Roaring Comeback (BBG)
Trump Meets With Tech Titans: “No Formal Chain Of Command Around Here” (CNBC)
Canada’s Gravity-Defying Household Debt Swells to C$2 Trillion (BBG)
EU Politicians Believe UK Post-Brexit Trade Deal Could Take Decade (G.)
Ex-UK Ambassador: Clinton Emails Leaked By “Disgusted” Dem. Whistleblower (DM)
US Accuses Vladimir Putin Of “Personal Involvement” In Election Hack (ZH)
Eurozone Suspends Short-Term Debt Relief for Greece (WSJ)
Greek Opposition Leader To Seek Backing In Brussels For Snap Polls (Kath.)

 

 

Moving fast. A lot of global debt gets much more expensive to pay off.

Dollar at 14-Year Peak as Fed Rejuvenates Trump Rally (R.)

The dollar rose to a 14-year peak against a basket of major currencies on Thursday after the Federal Reserve boosted the number of projected interest rate hikes for 2017, rejuvenating the month-long Trump rally and knocking emerging market currencies. The Fed’s 25 basis-point interest rate increase on Wednesday was widely anticipated by financial markets though they appeared to have been caught out by the central bank signal of three hikes in 2017, up from around two flagged at its September policy meeting. The relatively hawkish Fed stance came as U.S. president-elect Donald Trump takes over with promises to boost growth through tax cuts, spending and deregulation. “The rate hike projections for 2017 being increased to three shows that Fed’s board is having to factor in the impact of Trump’s policies,” said Junichi Ishikawa at IG Securities in Tokyo.

The dollar index extended its overnight rally and was up 0.5% at 102.270. It touched 102.620, its highest since January 2003. The euro was down 0.2% at $1.0512 after sliding to $1.0468, a trough not seen in 21 months. The greenback set a 10-month high of 117.860 yen early on Thursday and was last up 0.3% at 117.390. The allure of higher U.S. yields took a predictable toll on emerging Asian currencies. The Chinese yuan fell to its lowest levels in more than eight years, after the central bank set the daily mid-point at the lowest since mid 2008. Low-yielding currencies such as the Singapore dollar and Korean won came under pressure, as investors grew anxious over the risk of capital being sucked out of regional economies toward dollar-based assets.

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Yellen hiked rates and dotplot.

Dollar Jumps as Fed Pulls the Trigger While Stocks, Debt Decline (BBG)

The dollar rallied, while Treasury yields spiked as the Federal Reserve signaled a steeper path for in interest rates going forward after their first hike to borrowing costs in 2016. U.S. equities slumped the most since October. The greenback climbed to its strongest level in 10 months versus the yen, advancing against most of its major peers as as traders speculated that U.S. rates may be elevated faster than previously thought. Utilities and energy shares drove the S&P 500 Index down 0.8% as two-year Treasury yields soared to their highest level in seven years. The dollar’s gains sent oil tumbling as gold also retreated. Emerging-market currencies were among the biggest decliners, while Asian index futures diverged amid the yen’s drop.

“The bottom line is that this is more hawkish than the markets expected,” said Dennis Debusschere at Evercore ISI in New York. “I don’t think the shift higher in the dots was priced in. The consensus going in was that they’d wait until they had details of the fiscal program before they actually raised the rate forecast, and they did that before they saw the details.” What was only the second U.S. rate increase in a decade tied off a volatile year for markets, with investors whipsawed by ructions in Chinese trading, then the shock wins for Brexit and Donald Trump. The Fed moving further into tightening territory puts it at the vanguard of a shift globally from easing monetary policy toward an increased focus on fiscal stimulus.

After hiking by 25 basis points, the central bank said it expects three rate increases in 2017, up from two in its September forecasts. Speaking to reporters after the decision, Fed Chair Janet Yellen sought to downplay the significance of that change in the projections. “This is a very modest adjustment in the path of the federal funds rate,” Yellen said during the press conference. The decision to raise rates is “a vote of confidence in the economy,” she said, noting that some fed officials, but not all, incorporated the assumption of a change in fiscal policies when making their forecasts.

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“.. it appears the final bastion of safety has cracked”.

Fed Fallout Escalates: China Bond Market Crashes Most On Record (ZH)

After a bubblicious surge higher over the last few months (as China’s hot money swishes from one trending-higher market to another), China’s bond market is collapsing. As Chinese money-markets tighten into new year, yuan weakens, and capital outflows accelerate, so it appears the final bastion of safety has cracked. Chinese bond futures crashed overnight by the most on record, erasing in a week the gains of the last 18 months. The rally began in 2014, buoyed by slowing economic growth and a monetary-easing cycle that kicked off in November that year. Now that is over…

As Chinese liquidity pressures ripple up from the short-term repo markets…

Offshore Yuan has tumbled 5 handles since The Fed raised rates…

And Japanese stocks cannot hold a bid despite the weaker yen. It appears Janet’s message about Trump’s fiscal plan is starting to sink in.

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“They’re playing whack-a-mole constantly. They try to bring down one bubble, and something pops up somewhere else. They do that, and something comes up somewhere else..”

Higher US Interest Rates Next Year Could Make Big Problems For China (CNBC)

Rising interest rates in the United States have an obvious effect on the world’s biggest economy — but less obvious is the impact those rates could have on the second biggest. Higher interest rates in the United States could make it harder for China to manage its exploding debt, as the Asian giant increasingly depends on borrowing in order to keep growing — while simultaneously trying to block capital from fleeing for more fruitful shores in America. “If the Federal Reserve [keeps increasing] interest rates in the United States, the single biggest casualty of that this time is going to be China, because there’s so much money just waiting to leave” the country, said Ruchir Sharma at Morgan Stanley. Sharma spoke Tuesday evening as part of a panel at the Asia Society in New York.

Sharma pointed out that over the last year, China has moved from one bubble to another: commodities, stocks and, currently, real estate. That is not a sustainable way for China to grow, he said, especially considering that China’s “debt increase over the last five years has been 60 percentage points as a share of its economy.” “They’re playing whack-a-mole constantly. They try to bring down one bubble, and something pops up somewhere else. They do that, and something comes up somewhere else,” said Sharma, who noted that housing prices in China’s largest cities have increased between 30 and 50% over the last 18 months alone. Fed officials on Wednesday approved the first U.S. interest rate increase in a year. The 0.25 percentage point hike was widely expected, but the more aggressive pace for future increases outlined by the Fed — three next year instead of the two that were previously expected — was not.

Rising U.S. rates typically mean better yields for U.S. Treasurys and a stronger U.S. dollar. And indeed, both bond yields and the greenback immediately moved higher after Wednesday’s announcement. “I certainly think we could hit a 3 (percent on the 10-year Treasury yield) by the first quarter” of next year, Rick Rieder, CIO, global fixed income at BlackRock, told CNBC on Wednesday. The 10-year was last at 3% in January 2014. [..] the ability to keep financing its “massive debt binge” is impaired, Sharma said, if too much money bleeds out of the system. And China needs a lot of money — and more and more of it — to keep hitting the largely arbitrary 6% GDP growth rate that Beijing has mandated for the country. “Today in China, it’s taking $4 in debt to create a dollar of GDP growth,” said Sharma

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Oh no, it was never gone. It’s only been growing the whole time.

Shadow Banking in China Appears to Have Made a Roaring Comeback (BBG)

Time to don the tin hats? Chinese shadow-banking activity registered a surprise jump in November, throwing into sharp relief how policy makers are struggling to make good on their vow to rein in the runaway loan growth that threatens the stability of the financial sector. Often cast as one of the weakest links in the global financial system given the potential threat it poses to Asia’s largest economy, shadow credit – which consists of trust loans, entrusted loans and bank-acceptance bills –rose sharply to 479 billion yuan ($69 billion), after having dropped to 55 billion yuan in October. The surprise rebound may be a reaction to expectations for continuing yuan weakness as companies look to increase their local-currency liabilities at the expense of dollar-denominated obligations.

“Today’s surprising data will likely trigger some regulatory concerns,” David Qu, China economist at Australia & New Zealand Banking, wrote in a note to clients on Wednesday, citing the size and opacity of off-balance sheet lending from trust companies, brokerages, micro-lenders, pawn-shops and even real-estate companies. The rise could reflect “short-term speculation due to expectations of renminbi depreciation and producer-price inflation,” analysts at Nomura Holdings Inc, led by Zhao Yang, wrote in a report on Wednesday. Efforts to curtail shadow lending may exacerbate this month’s liquidity squeeze, as the yield on 10-year government bonds shoots up to 3.24% from 2.74% at the end of October – their highest level in more than a year.

“If Chinese regulators start to restrict shadow banking activities, there may be spillover effects to the bond market due to liquidity tightening,” Qu adds, referring to the prospect that redemptions from wealth-management funds would force asset managers to trim their bond positions. Last month’s credit binge wasn’t confined to the shadow financial system. Total social finance, the broadest measure of new lending, expanded the most since March at 1.74 trillion yuan, up from 896.3 billion yuan in October. [..] The 11.8% increase on a year-on-year basis was driven by household lending growth, reflecting how property curbs have yet to kick in, as well as expansion in the shadow-banking sector.

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Tens of billions eating crow at that table. Trump knows exactly what Bezos, Cook etc. said about him not long ago. Eric Schmidt just about ran Hillary’s campaign.

Trump Meets With Tech Titans: “No Formal Chain Of Command Around Here” (CNBC)

A confab of tech titans had a “productive” meeting with President-elect Donald Trump at Trump Tower on Wednesday, Amazon CEO Jeff Bezos told CNBC, as Trump moved to mend fences with Silicon Valley before taking office in January. Apple, Alphabet, Microsoft, Amazon, Facebook, Intel, Oracle, IBM, Cisco and Tesla were among the C-suite executives in attendance, with Apple CEO Tim Cook and Tesla CEO Elon Musk expected to get private briefings, according to transition staff. During the campaign, Trump issued a number of barbs directed at Bezos and his businesses, but at the meeting both men appeared nothing but complimentary. “I found today’s meeting with the president-elect, his transition team, and tech leaders to be very productive,” Bezos said.

“I shared the view that the administration should make innovation one of its key pillars, which would create a huge number of jobs across the whole country, in all sectors, not just tech—agriculture, infrastructure, manufacturing—everywhere.” Though many tech leaders actively opposed his election, Trump said at the meeting he was interested in helping tech do well — and that the executives can call any time, since there’s no formal chain of command. “We want you to keep going with the incredible innovation,” Trump said. “There’s no one like you in the world….anything we can do to help this go along, we’re going to be there for you. You can call my people, call me — it makes no difference — we have no formal chain of command around here.”

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As someone commented on Twitter: “Carney’s baby is all grown up”.

Canada’s Gravity-Defying Household Debt Swells to C$2 Trillion (BBG)

The appetite for bank borrowing remained unabated in the third quarter, setting fresh records for total credit and mortgage borrowing, Statistics Canada reported Wednesday. The widely-followed ratio of household debt to after-tax income rose to another record high of almost 167%. The numbers will intensify concern among policy makers the economy has become over-reliant on bank borrowing, and is vulnerable to a housing downturn and rising interest rates. The latest report covers the three months before Finance Minister Bill Morneau tightened mortgage lending rules again in October, a move designed to discourage Vancouver and Toronto home buyers from signing larger mortgages than they could handle.

“Household indebtedness continues to defy gravity and remains the Achilles heel of the Canadian economy,” said Charles St-Arnaud at Nomura Securities, who has worked in Canada’s finance department and central bank. “Continued increase in yields and job losses remain the biggest risks.” Credit-market debt climbed to C$2.005 trillion ($1.53 trillion) from C$1.980 trillion in the prior quarter. Those obligations jumped by 1.3% in the third quarter, faster than the 0.9% gain in household income. Total consumer debt exceeded the size of Canada’s economy for a second straight quarter, accounting for 101.2% of gross domestic product in the July-to-September period. Debts have climbed alongside the Vancouver and Toronto housing boom, fueled by job growth and rock-bottom borrowing costs.

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Elections, anyone?

EU Politicians Believe UK Post-Brexit Trade Deal Could Take Decade (G.)

Europe’s politicians believe a trade deal with the UK could take up to a decade or more and could still fail in the final stages, Downing Street has been warned by the UK’s ambassador to the EU. Sir Ivan Rogers, who conducted David Cameron’s renegotiation with the EU prior to the referendum, is reported to have told the prime minister that European politicians expected that a deal would not be finalised until the early to mid-2020s, according to the BBC. That deal could still be rejected by any of the 27 national parliaments during the ratification process. It is understood Rogers was reporting back conversations he had had with European politicians, rather than giving his own advice to the British government. “It is wrong to suggest this is advice from our ambassador to the EU,” a Number 10 spokesman said. “Like all ambassadors, part of his role is to report the views of others.”

Former Tory minister Dominic Raab, a leave campaigner, said it was “reasonable to set out a worst-case scenario of five to 10 years to iron out all the detail of a trade deal.” He told BBC Radio 4’s Today programme: “The crucial question is whether we maintain barrier-free trade in the meantime, in which case there’s no real problem. I have to say it’s very unlikely in the interim that the EU would want to erect trade barriers.” The reports come after Brexit secretary, David Davis, told a select committee hearing that “everything is negotiable” within a year and a half of the formal article 50 notification in March. The deal would then take about six months to be agreed by European leaders, the European parliament and the British parliament, he said.

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Try these on for size: “Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct.” Misconduct? Well: “Murray was a vocal critic of human rights abuses in Uzbekistan while serving as ambassador between 2002 and 2004, a stance that pitted him against the UK Foreign Office.”

Ex-UK Ambassador: Clinton Emails Leaked By “Disgusted” Dem. Whistleblower (DM)

A Wikileaks envoy today claims he personally received Clinton campaign emails in Washington D.C. after they were leaked by ‘disgusted’ whisteblowers – and not hacked by Russia. Craig Murray, former British ambassador to Uzbekistan and a close associate of Wikileaks founder Julian Assange, told Dailymail.com that he flew to Washington, D.C. for a clandestine hand-off with one of the email sources in September. ‘Neither of [the leaks] came from the Russians,’ said Murray in an interview with Dailymail.com on Tuesday. ‘The source had legal access to the information. The documents came from inside leaks, not hacks.’ His account contradicts directly the version of how thousands of Democratic emails were published before the election being advanced by U.S. intelligence.

Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct. He was cleared of those but left the diplomatic service in acrimony. His links to Wikileaks are well known and while his account is likely to be seen as both unprovable and possibly biased, it is also the first intervention by Wikileaks since reports surfaced last week that the CIA believed Russia hacked the Clinton emails to help hand the election to Donald Trump. Murray’s claims about the origins of the Clinton campaign emails comes as U.S. intelligence officials are increasingly confident that Russian hackers infiltrated both the Democratic National Committee and the email account of top Clinton aide John Podesta. In Podesta’s case, his account appeared to have been compromised through a basic ‘phishing’ scheme, the New York Times reported on Wednesday.

U.S. intelligence officials have reportedly told members of Congress during classified briefings that they believe Russians passed the documents on to Wikileaks as part of an influence operation to swing the election in favor of Donald Trump. But Murray insisted that the DNC and Podesta emails published by Wikileaks did not come from the Russians, and were given to the whistleblowing group by Americans who had authorized access to the information. ‘Neither of [the leaks] came from the Russians,’ Murray said. ‘The source had legal access to the information. The documents came from inside leaks, not hacks.’ He said the leakers were motivated by ‘disgust at the corruption of the Clinton Foundation and the tilting of the primary election playing field against Bernie Sanders.’

‘I don’t understand why the CIA would say the information came from Russian hackers when they must know that isn’t true,’ he said. ‘Regardless of whether the Russians hacked into the DNC, the documents Wikileaks published did not come from that.’ Murray was a vocal critic of human rights abuses in Uzbekistan while serving as ambassador between 2002 and 2004, a stance that pitted him against the UK Foreign Office.

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“The former CIA official said the Obama administration may feel compelled to respond before it leaves office. “This whole thing has heated up so much,” he said. “I can very easily see them saying, `We can’t just say wow, this was terrible and there’s nothing we can do.'”

Well, if Obama is truly getting involved, he has 4 days in which to turn 37 Republican electors against Trump. As for the potential fallout, which may include various forms of social conflict should the Trump victory be overturned in the 11th hour at the Electoral College, then Putin will truly win as a result of what may then follow.

US Accuses Vladimir Putin Of “Personal Involvement” In Election Hack (ZH)

And just like that the narrative of Russia hacking the presidential election has escalated to the highest possible level, and has officially jumped the shark. Moments ago, following a month-long barrage of unsubstantiated stories in the press accusing the Russian government of indirectly hacking the US presidential election, which culminated with last night’s 8,000 word NYT expose, and which followed a schism between the FBI and CIA, in which the former disputed the latter’s “fuzzy and ambiguous” claims that Russia sought to influence the presidential elections, moments ago the NBC News reported that U.S. intelligence officials believe with “a high level of confidence” that Russian President Vladimir Putin became personally involved in the covert Russian campaign to interfere in the U.S. presidential election.

Perhaps because the official narrative has so far been unable to gather traction with the previous “shotgun approach” in which just “Russia” was accused of handing the election to Trump, four short days before the Electoral College vote, the narrative has changed and it now involves the very pinnacle of Russia’s government: the president himself. Citing two senior officials with direct access to the information, NBC reports that “new intelligence shows that Putin personally directed how hacked material from Democrats was leaked and otherwise used. The intelligence came from diplomatic sources and spies working for U.S. allies, the officials said.” So why did Putin hack a few million rust belt Americans into believing that their lives under Obama, and by extension Hillary, were bad enough that they demanded a change? NBC provides the following spoonfed logic:

Putin’s objectives were multifaceted, a high-level intelligence source told NBC News. What began as a “vendetta” against Hillary Clinton morphed into an effort to show corruption in American politics and to “split off key American allies by creating the image that [other countries] couldn’t depend on the U.S. to be a credible global leader anymore,” the official said.

Ultimately, the CIA has assessed, “the Russian government wanted to elect Donald Trump.” And this is where the latest turn in the story falls apart, because even NBC – which will blast this report on prime time TV to all America – admits “the FBI and other agencies don’t fully endorse that view”, but it adds “few officials would dispute that the Russian operation was intended to harm Clinton’s candidacy by leaking embarrassing emails about Democrats.”

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As I said, looks like Tsipras has had enough.

Eurozone Suspends Short-Term Debt Relief for Greece (WSJ)

Greece’s European creditors suspended proposed debt-relief measures for the country after the Greek government surprised them by announcing it would boost welfare benefits for low-income pensioners, a sign of escalating tensions over the country’s bailout. The moves come as Athens and its international creditors—which include the eurozone and the IMF—are struggling to conclude their latest review of the country’s rescue plan of as much as €86 billion ($92 billion) in loans. “The institutions have concluded that the actions of the Greek government appear to not be in line with our agreements,” a spokesman for Jeroen Dijsselbloem, the Dutch finance minister who presides over the group of his eurozone counterparts, said in a statement on Twitter.

“No unanimity now for implementing short-term debt measures,” he added. The step puts further pressure on Greece’s government, which is considering calling snap elections in 2017 as it grapples with slumping popularity and is losing hope of winning concessions on deeper debt relief or austerity from the eurozone and the IMF. Greece’s embattled Prime Minister Alexis Tsipras surprised Greeks and the country’s creditors last week with handouts that his government hadn’t previously discussed with bailout supervisors, which represent eurozone governments and the IMF. Mr. Tsipras promised 1.6 million pensioners a Christmas bonus of between €300 and €800. He also suspended a planned increase in sales tax for Aegean islands that have received large numbers of refugees from the Middle East and elsewhere.

Eurozone officials expressed frustration that the country’s creditors were not told in advance by Greece of its plans—widely seen as a lure to voters ahead of elections—and said the new measures would have to be assessed to determine whether they were in line with the country’s bailout commitments. “We will adhere to the [bailout] program to the letter, but whatever outperformance in revenue arises by following to the program, we will not ask anyone in order to give this money to those most in need,” Mr. Tsipras said Tuesday from the small island of Nisyros.

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Can you imagine the opposition in your country doing this? They would risk being persecuted for treason. In Europe, it’s the new normal. But he might as well ask Putin.

Greek Opposition Leader To Seek Backing In Brussels For Snap Polls (Kath.)

In talks with officials on the sidelines of a summit of the European People’s Party in Brussels that started Wednesday, conservative New Democracy leader Kyriakos Mitsotakis is to press his argument that Greece needs snap elections to sweep away the current leftist-led government and bring in a more reform-friendly administration. Mitsotakis is to meet Thursday with European Commission President Jean-Claude Juncker and European Economic and Monetary Affairs Commissioner Pierre Moscovici, among others.

ND sources are hoping that EU officials will welcome Mitsotakis’s call for political change, coming as it does just a few days after Prime Minister Alexis Tsipras unsettled the country’s creditors by announcing Christmas bonuses for thousands of pensioners and vowing to keep in place a value-added tax discount for remote islands that the government had promised its lenders to revoke. The meetings come as ND leads leftist SYRIZA by a wide margin in opinion polls. Mitsotakis’s argument is that snap polls would not be destabilizing, as they had been in January 2015, as ND is a reformist power compared to the SYRIZA coalition with Independent Greeks which the conservative party describes as “unreliable and opportunistic” in its policy-making.

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