Jan 172019
 


Pablo Picasso Nude female standing 1922

 

Theresa May Survives Confidence Vote, Britain Remains In Brexit Deadlock (G.)
Corbyn: No Talks With May Until No-Deal Brexit Is Off The Table (G.)
Markets Expect Brexit To Be Delayed, Bank Of England Governor Says (G.)
More Than 170 UK Business Leaders Join Call For 2nd Brexit Referendum (G.)
German Carmakers Warn Hard Brexit Would Be ‘Fatal’ (R.)
Trump ‘Inclined’ To Impose New US Auto Tariffs (R.)
Chinese Unemployment Worries Grow As Beijing Beefs Up Stimulus (CNBC)
China Injects Gargantuan 1.1 Trillion In Liquidity This Week (ZH)
Greek PM Tsipras Wins Confidence Vote After FYROM Name Crisis (R.)
DOJ Official Warned Steele Dossier Biased, Connected To Clinton (Solomon)
The New York Times Smears the President (Stockman)
Fake Washington Post Copies Announcing Trump Resignation Handed Out In DC (RT)
Plastic Pollution Of The Oceans Is Set To Treble In The Next Decade (G.)

 

 

Brexit will be delayed, quite possibly indefinitely. May’s looking for a way to achieve this while putting the blame on anyone but herself. She survived this votes only becasue of the DUP, whose votes she bought. Welcome to democracy.

Theresa May Survives Confidence Vote, Britain Remains In Brexit Deadlock (G.)

Theresa May has survived as prime minister after weathering a dramatic no-confidence vote in her government, but was left scrambling to strike a Brexit compromise that could secure the backing of parliament. In a statement in Downing Street on Wednesday night, the prime minister exhorted politicians from all parties to “put aside self-interest”, and promised to consult with MPs with “the widest possible range of views” in the coming days. It followed her announcement that she would invite Jeremy Corbyn and other party leaders for immediate talks on how to secure a Brexit deal, something she had declined to do earlier in the day, although Labour later said Corbyn would decline the invitation unless no-deal was taken off the table.

A day after overwhelmingly rejecting her Brexit deal, rebel Conservatives and Democratic Unionist party (DUP) MPs swung behind the prime minister to defeat Labour’s motion of no confidence by 325 votes to 306 – a majority of 19. In her late-night statement, the prime minister said: “I am disappointed that the leader of the Labour party has not so far chosen to take part – but our door remains open … It will not be an easy task, but MPs know they have a duty to act in the national interest, reach a consensus and get this done.”

The Scottish National party’s leader in Westminster, Ian Blackford, met May on Wednesday night, and the Liberal Democrat leader, Vince Cable, also accepted her invitation. Blackford later wrote to May, urging her to make a “gesture of faith” to show that she was serious. He said the SNP would take part in cross-party talks if she was able to confirm “that the extension of article 50, a ruling out of a no-deal Brexit and the option of a second EU referendum would form the basis of those discussions”.

Read more …

Corbyn is gambling on new elections. That, too, delays any solution.

Corbyn: No Talks With May Until No-Deal Brexit Is Off The Table (G.)

Jeremy Corbyn has said he will not hold talks with Theresa May until the prime minister agrees to remove the threat of a no-deal Brexit, ruling out any meeting with the prime minister in the immediate aftermath of the no-confidence vote. Responding to May’s offer of swift talks to break the Brexit impasse, the Labour leader told MPs that before he would entertain “positive discussions about the way forward” she had to agree to his precondition. “The government must remove clearly once and for all the catastrophe of a no-deal exit from the European Union and all the chaos that would result from that,” Corbyn said minutes after the opposition party was defeated in the confidence vote.

Minutes after the exchanges in the Commons, with Downing Street refusing to take no deal off the table, Corbyn’s spokesman said that as things stood, the Labour leader would not take up May’s offer of an evening Brexit meeting. The two sides were still in discussions, but in light of such a fundamental difference, appeared unlikely to come to an agreement to speak in the immediate future – even though only 10 weeks remain until the UK’s planned departure date. When asked directly if Corbyn was going to No10, the spokesman added: “As I understand it that is not going to take place.”

Labour is willing to support a Brexit deal if May will accept a customs union, a close relationship with the single market and enhanced protections for workers and consumers rights. However, this would represent a massive shift for the prime minister and risk splits in her own party, making it hard to see how a deal could be agreed. Corbyn’s spokesman acknowledged this, saying, “Any change in the government red lines will cause them internal splits.”

Read more …

Times headline said 2020.

Markets Expect Brexit To Be Delayed, Bank Of England Governor Says (G.)

Investors expect a delay to Britain’s exit from the EU following the crushing defeat of the prime minister’s Brexit deal, the Bank of England governor has said. Mark Carney said the reaction of financial markets in the wake of the vote showed a degree of confidence that a no-deal Brexit was unlikely on 29 March. The pound bounced back against the dollar on Tuesday night amid optimism that article 50 would be prolonged and that the prospect of a disorderly severance from Brussels had receded. “Public market commentary, consistent with our market intelligence, is that a rebound appears to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished,” said Carney.

Speaking to MPs on the Treasury select committee on Wednesday, the governor said investors were following developments in parliament closely to detect shifts in the direction of Brexit. The reaction of EU officials and governments across the continent was also being watched closely. Carney said a “sharp rebound in sterling following the vote” was the main indicator that some investors believed Brexit could be delayed beyond the end of March.

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2nd referendum is poison. General elections not so much. But the Tories will cling to power no matter what.

More Than 170 UK Business Leaders Join Call For 2nd Brexit Referendum (G.)

More than 170 business leaders, including Terence Conran and Norman Foster, have thrown their weight behind the campaign for a second referendum on Brexit. In a step designed to indicate growing support for a “people’s vote” after Theresa May suffered the heaviest parliamentary defeat in the modern era over her Brexit plan, the letter due to be published in the Times on Thursday asks both main party leaders in Westminster to support a second referendum. Conran, the renowned designer, who was knighted in 1983, and Lord Foster, the architect behind the Gherkin skyscraper in the City of London, were among 172 signatories from the world of business urging a second referendum on the final Brexit deal.

The architect Sir David Chipperfield and the noble laureate and research scientist Paul Nurse were also among new names on the list of supporters. Several other captains of industry, including Mike Rake, the former chairman of BT, had previously backed the campaign and were also included as signatories. The figures from business, together representing more than £100bn in annual contributions to the UK economy, warned that a bad Brexit deal or Britain leaving without any deal at all could damage the economy. While admitting that many business leaders had initially backed May’s deal, even though they believed it was far from perfect, the group stated that the priority after the prime minister’s defeat in parliament was to stop a “chaotic crash-out from the EU”.

The letter said: “The only viable way to do this is by asking the people whether they still want to leave the EU. With the clock now ticking rapidly before we are due to quit, politicians must not waste any more time on fantasies. We urge the leadership of both the main parties to support a people’s vote.” Both May and the Labour frontbench under Jeremy Corbyn have so far dismissed the idea of a second referendum. The prime minister has said she will speak to senior MPs to find a compromise deal, while Corbyn is pushing for a general election.

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German economy is under severe pressure. Still, I don’t see what’s so wrong about fewer cars.

German Carmakers Warn Hard Brexit Would Be ‘Fatal’ (R.)

German carmakers on Wednesday warned of fatal consequences if Britain left the European Union without a divorce deal, predicting job losses in Britain and Europe and urging lawmakers to redouble efforts to ensure tariff-free trade can continue. Prime Minister Theresa May’s deal to leave the EU suffered an overwhelming defeat in parliament on Tuesday, leaving the country’s future in limbo and manufacturers bracing for their “worst-case scenario”, a no-deal Brexit. Britain would suffer most if it lost free trade with European markets since 80 percent of vehicles assembled in the country are exported, mostly to the European Union. But for Germany the stakes are also high.

In 2016, Britain was the largest single export market for German manufacturers, who sold 800,000 new cars there, or 20 percent of their overall global exports. Fewer cars are exported to China and U.S. because German carmakers have factories there. “The consequences of a ‘no deal’ would be fatal,” German auto industry association VDA said after the vote. “Without an orderly and practical solution for business, jobs in the car industry, particularly on the British side, are on the line.”

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Cars is not the big one, agriculture is. But Europe won’t budge on chlorinated chickens.

Trump ‘Inclined’ To Impose New US Auto Tariffs (R.)

U.S. President Donald Trump is likely to move ahead with tariffs on imported vehicles, a move that could prompt the European Union to agree a new trade deal, said Senate Finance Committee Chairman Charles Grassley on Wednesday. “I think the president’s inclined to do it,” the Republican senator told reporters. “I think Europe (is) very very concerned about those tariffs … It may be the instrument that gets Europe to negotiate.” U.S. Commerce Department recommendations into whether Trump should impose tariffs of up to 25% on imported cars and parts on national security grounds are due by mid-February. Grassley, who has had regular talks with Trump and U.S. Trade Representative Robert Lighthizer on trade issues, said he did not like new tariffs but “they are a fact of life when Trump is in the White House.”

He said they may have been an “effective tool” in getting China, Canada, Mexico and others to negotiate on trade. Iowa senator Grassley also wants the EU to agree to include agricultural issues in trade talks, although EU trade commissioner Cecilia Malmström said last week the 28-country bloc could not negotiate on agriculture. The White House has pledged not to move forward with imposing tariffs on the EU or Japan as long as it is making constructive progress in bilateral trade talks. Trump has urged the EU to drop its 10% tariff on imported vehicles. The U.S. passenger car tariff is 2.5%, while it imposes 25% tariffs on pickup trucks. Trump has repeatedly threatened to impose new auto tariffs. “Cars is the big one,” Trump said last year.

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The economy grows 6% amid widespread job losses?!

Chinese Unemployment Worries Grow As Beijing Beefs Up Stimulus (CNBC)

Beijing is working hard to stop a slowing Chinese economy from hitting its workforce. In the last several weeks authorities have made a flurry of announcements, including tax cuts, monetary policy loosening and plans to support public spending. The push comes as economic data points to sagging domestic growth and the U.S. looks set to keep up the pressure on trade. Amid that environment, worries of widespread job losses won’t help the already gloomy sentiment that’s giving consumers a second thought on spending. The overarching worry for China’s leaders is that unemployment could lead to social unrest, and deeper questioning of the Communist Party’s claim to having a handle on the best interests of the country.

Already, the economy is widely expected to slow from around 6.5% growth to just above 6%. “We think the biggest risk in the near term is rising unemployment around the Lunar New Year,” Haibin Zhu, chief China economist and head of China equity strategy, J.P. Morgan, said in a Monday report. [..] Gavekal Dragonomics’ China Consumer Analyst Ernan Cui pointed out in a Jan. 9 report that an official survey covering 374,000 large industrial firms shows total employment declined by about 2.8 million people in the 12 months through November. [..] [A UBS] survey in November found that 23% of 125 Chinese respondents in manufacturing have already laid off employees due to the negative effect of U.S.-China trade tensions. Some 34% planned to lay off employees in the next six months, and 18% had cut wages, the report said.


Job losses in Chinese manufacturing accelerated in mid-2018 after the U.S. imposed tariffs Note: Employment in large industrial enterprises, three-month moving average. December excluded for data anomalies.

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“..a panicked “spasm”..”

China Injects Gargantuan 1.1 Trillion In Liquidity This Week (ZH)

Following what Bloomberg calculated was a record net reverse repo liquidity injection on Wednesday, when the PBOC injected a whopping 560 billion yuan of liquidity into the financial system via open market operations, the Chinese central bank has done it again and in Thursday’s open market operation, it sold 250BN yuan in 7 Day repos (slightly below yesterday’s record 350BN), and 150BN in 28 Day repos, which net of maturities resulted in a whopping net 380BN yuan ($56.2BN) liquidity injection. This brings the net liquidity injection this week to a near record 1.14 Trillion yuan (Monday 20BN, Tuesday 180BN, Wednesday 560BN and Thursday 380BN) and the week is not even over yet – should tomorrow’s reverse repo be of similar magnitude, then this week will go down in history as China’s biggest liquidity injection on record.

As yesterday, today’s massive liquidity injection was aimed at “keeping reasonable and sufficient liquidity in banking system as liquidity falls relatively fast during peak season for tax payments,” according to a statement from the PBOC, although why this year should be such a significant outlier, even when factoring in the liquidity needs ahead of the Lunar new year, to prior periods was not exactly clear. There is, of course, a much simpler explanation: with Chinese economic and trade data turning from bad to worse with every passing day, Beijing’s response is increasingly one of a panicked “spasm”, as Nomura’s Charlie McElligott wrote today when he noted that with regard to the response of Chinese authorities in addressing their economic slowdown and credit crunch, “it had to get worse before it got better”—recently collapsing Chinese data has now clearly forced an escalation of easing-/stimulus-/liquidity- policies.

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He ‘won’ by one vote. And now has to win another vote on the name deal itself. Funny to see western media all say Macedonia is set to change its name. Who likes homework, after all? There is no country named Macedonia, that’s the whole point.

Greek PM Tsipras Wins Confidence Vote After FYROM Name Crisis (R.)

The Greek prime minister, Alexis Tsipras, has won a confidence vote in parliament, clearing a major hurdle for Greece’s approval of an accord to end a dispute over Macedonia’s name and averting the prospect of a snap election. Tsipras called the confidence motion after his rightwing coalition partner Panos Kammenos quit the government on Sunday in protest at the name deal signed between Athens and Skopje last year. Parliament gave Tsipras 151 votes, meeting the threshold he required in the 300-member assembly. His leftist party, Syriza, has 145 seats in parliament. Additional support was given by defectors of Kammenos’s Independent Greeks party (ANEL) and independents.

Tsipras told parliament: “I call upon you with hand on heart to give a vote of confidence to the government which gave battle, which bled, but managed to haul the country out of memorandums and surveillance,” referring to Greece’s international lenders, who kept the country on a tight leash for years. [..] Greek opponents of the agreement say Macedonia’s new name – the Republic of North Macedonia, reached after decades of dispute between Athens and Skopje – represents an attempt to appropriate Greek identity.

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There are far too many questions for this to go away. Bill Barr to the rescue.

DOJ Official Warned Steele Dossier Biased, Connected To Clinton (Solomon)

When the annals of mistakes and abuses in the FBI’s Russia investigation are finally written, Bruce Ohr almost certainly will be the No. 1 witness, according to my sources. The then-No. 4 Department of Justice (DOJ) official briefed both senior FBI and DOJ officials in summer 2016 about Christopher Steele’s Russia dossier, explicitly cautioning that the British intelligence operative’s work was opposition research connected to Hillary Clinton’s campaign and might be biased. Ohr’s briefings, in July and August 2016, included the deputy director of the FBI, a top lawyer for then-Attorney General Loretta Lynch and a Justice official who later would become the top deputy to special counsel Robert Mueller.

At the time, Ohr was the associate attorney general. Yet his warnings about political bias were pointedly omitted weeks later from the Foreign Intelligence Surveillance Act (FISA) warrant that the FBI obtained from a federal court, granting it permission to spy on whether the Trump campaign was colluding with Russia to hijack the 2016 presidential election. Ohr’s activities, chronicled in handwritten notes and congressional testimony I gleaned from sources, provide the most damning evidence to date that FBI and DOJ officials may have misled federal judges in October 2016 in their zeal to obtain the warrant targeting Trump adviser Carter Page just weeks before Election Day.

They also contradict a key argument that House Democrats have made in their formal intelligence conclusions about the Russia case. Since it was disclosed last year that Steele’s dossier formed a central piece of evidence supporting the FISA warrant, Justice and FBI officials have been vague about exactly when they learned that Steele’s work was paid for by the law firm representing the Clinton campaign and the Democratic National Committee (DNC). A redacted version of the FISA application released last year shows the FBI did not mention any connection to the DNC or Clinton.

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David guts the entire narrative. Well done.

The New York Times Smears the President (Stockman)

The Donald has been on a red hot twitter rampage, and he’s completely justified. Actually, we didn’t think the Russian Collusion Hoax could get any stupider until we saw the New York Times’ Friday evening bushwhack. The trio of authors, apparently self-tortured victims of the Trump Derangement Syndrome, actually had the gall to print a story in the once and former Gray Lady of journalistic rectitude which was nothing more than an ugly smear on the sitting President of the United States—one that would have done Joe McCarthy proud. [..] the trio —one of whom graduated from Harvard in 2015 and the other two not much older—don’t seem to even know that foreign policy is a debatable issue.

Or that the American people actually voted into office a candidate who took the other side of Imperial Washington’s unwarranted demonization of Putin and made no bones about his desire for a rapprochement with Russia. Actually, as to pursuing rapprochement, so did: • JFK, after the near catastrophe of the Cuban Missile Crisis; • Lyndon Johnson, after the Seven Days War during his meeting with Kosygin at Glassboro NJ; • Richard Nixon, with the ABM Treaty, detente and his visit with Brezhnev in Moscow; • Jimmy Carter, when he signed the SALT-II agreement; • Ronald Reagan, when he went to Moscow to virtually end the Cold War; and • Bill Clinton, when he sent a multi-billion IMF aid package to Yeltsin to help him get re-elected in 1996.

The fact is, all of the above presidential policy initiatives were heatedly debated in Washington during a period when the US and Soviet Union each had roughly 9,000 nuclear warheads pointed at the other. But that did not lead to FBI counter-intelligence investigations of politicians—to say nothing of sitting Presidents—who took the “wrong” side of these thoroughly democratic debates.

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Wonder who they’re mocking. Is it Bezos?

Fake Washington Post Copies Announcing Trump Resignation Handed Out In DC (RT)

Taking the art of fake news to new heights, a non-profit has circulated mock Washington Post issues near the White House, telling readers that President Donald Trump fled to Crimea on the back of women-led protests. Activists giving out fake copies of the Washington Post commuters were spotted near the White House on Wednesday morning. Vigilant readers immediately alerted the newspaper, which said that the copies, dated May 1, 2019, were “not Post products” and that it was “looking into this.” The fake copies include an eye-catching headline for the lead story: “UNPRESIDENTED. Ending Crisis, Trump Hastily Departs White House,” complete with a picture of a glum Trump on his way to “slip in a private car in the wee hours of the morning.”

The paper “reports” that Trump abruptly left his office at 3:15am on May 1, leaving a message on a napkin in the Oval Office that blamed “crooked Hillary,” the mysterious “Hfior,” and “the Fake News Media” for his flight. The report, meticulously mimicking the Washington Post’s source-based reporting style, cites “four White House aides” speaking on condition of anonymity, that they found the napkin two days before events took a dramatic turn. Trump’s fictional resignation and the subsequent swearing-in of Vice President Mike Pence, who instantly promises to keep as low a profile as possible, comes amidst “massive protests” staged by a grassroots movement with #MeToo as its backbone.

[..] The news of Trump’s resignation sparks a wave of celebrations across the globe, with European countries refusing to shelter him. The creators of the fake diligently stick to the Washington Post’s style, fanning the Russia collusion narrative just like their prototype by sending Trump to seek safe haven in Russia – namely, Crimea. While there has been speculation that radical liberal political activist group MoveOn or CODEPINK, a women-led grassroots NGO, might be behind the stunt since they promoted the action, later in the day, The Yes Men, a progressive non-profit group, claimed responsibility in a press release.

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UK MPs want action. I say don’t depend on politicians if you want to get things done. Britain has a target date of 2042 for phasing out avoidable plastic waste. As its volume is set to treble by 2030. That is so insane, forget about the rest too. Politics won’t solve this.

Plastic Pollution Of The Oceans Is Set To Treble In The Next Decade (G.)

A new global agreement to protect the seas should be a priority for the government to stop our seas becoming a “sewer”, according to a cross-party group of MPs. Plastic pollution is set to treble in the next decade, the environmental audit committee warned, while overfishing is denuding vital marine habitats of fish, and climate change is causing harmful warming of the oceans as well as deoxygenation and acidification. The effects of plastic pollution are particularly poorly understood, the committee found in its report, published on Thursday. It found “a lack of data on the serious long-term harm and health implications of plastic particles entering the food chain” and accused the government of treating the oceans as “out of sight, out of mind”.

One way of tackling the problem would be through a “Paris agreement for the sea”, the MPs recommended. Governments are still working on a possible new ocean protection treaty, under the UN. The MPs also called for the government to bring forward the target date of phasing out avoidable plastic waste from 2042, and urged greater action to reduce greenhouse gas emissions. Labour MP Mary Creagh, chair of the committee, said: “We have to stop treating our seas as a sewer. Plastic, chemicals and sewage are choking our oceans, polluting our water and harming every ocean species from plankton to polar bears. Supporting Indonesia and Malaysia to reduce plastic while simultaneously exporting our contaminated plastics to them shows the lack of a joined-up approach at the heart of the government’s strategy.”

[..] A UK government spokesperson said: “The UK is already a global leader in protecting our seas and oceans. We have recently proposed 41 new marine conservation zones, led calls to protect 30% of the world’s oceans by 2030, and we are going further and faster to tackle the plastic that harms marine life with our ambitious resources and waste strategy. “We know there is more to do, and we will soon publish an international ocean strategy to drive global action to conserve the world’s oceans.”

Read more …

Jul 252018
 
 July 25, 2018  Posted by at 12:59 pm Finance Tagged with: , , , , , , , , , , ,  6 Responses »


René Magritte Empire of light 1950

 

There’s not a shade of a doubt that I’m not an expert on tariffs, trade barriers and subsidies, and I’d be the last to suggest any such thing. But I can read. Still, do correct me if I’m wrong anywhere. The whole field is so complicated -no doubt often on purpose- that there’s always the possibility that there are side issues involved for which one would need to actually be an expert.

But still. Now that EU chief Jean-Claude -‘When it becomes serious, you have to lie’- Juncker is due to arrive at the White House soon, I looked at some of the items involved. Last night Trump said that all tariffs, barriers and subsidies should be dropped between the EU and US. Why the TTiP doesn’t come anywhere close to that is anyone’s guess. Too complicated for the boys and girls?

In at least some major fields, Trump does seem to have a point or two. The US has a 2.5% tariff on European cars, while the EU slaps a 10% tariff on American cars. That’s 4x as much, or a 300% difference. Whoever said yes to that? Sure, the US has a 25% tariff on EU pickups, but nobody in Europe drives pickups, hence they don’t produce them, so that’s not consequential.

So what had Trump done? He’s threatened a 20% tariff on Beemers and Mercs, and added -for entertainment value only- that he doesn’t want to see any of them in on Fifth Avenue anymore. Cue EU carmakers warning about the cost to American customers.

That’s all fine and well, but those tariffs on personal cars are still 300% higher. So push your European government to make them equal. Easy as -American- pie. How about zero? I can see where Trump’s coming from. Issuing warnings to the American public about BMW’s getting more expensive doesn’t look entirely on the up and up.

 

Also, I was looking at agriculture. Now, I grew up in Europe, and I do have an idea about EU farm subsidies (they’re notorious even inside the EU, going all the way back to the 1950s-60s). There was a point where they were over 70% of the total EU budget. They’re 30% or even somewhat below that now, but that’s not because subsidies have gone down, it’s because the EU budget has grown exponentially.

US farm subsidies were some $23 billion last year, and a year ago the Trump administration proposed a $4.8 billion cut to that. Now that Trump has initiated a one-time $12 billion for farmers to make up for the effects of his tariff proposals, one half of America -Conservatives- cry foul because: “that’s Soviet-style politics”, and no doubt the EU will cry right with them.

But look: under the EU’s Common Agriculture Policy (CAP), EU farm subsidies for the 2021-2027 period will fall a whole 5% to ‘only’ $420 billion. And that’s just a proposal, and already France, the main beneficiary of the subsidies, has declared that such a cut is unacceptable. Soviet style?

The meeting of tee-totaller Trump and wine-totaller Juncker is interesting enough in and of itself, and you bet the Donald knows what and who Juncker is, but unless Jean-Claude comes with something very substantial, the numbers I cited above would seem to be very clear. And that’s without steel, aluminum etc etc.

If your side gives its farmers almost 20 times as much as the other side, what are you going to say? You may ask for some time to adapt, but that would seem to be it. However, Juncker could never sell egalization of subsidies ‘at home’. France and others would shave his head and ass and apply tar and feathers. And Macron would fear the same fate if he gives in. As Merkel would on the car issue.

Juncker has no room to wiggle on the whole shebang. All he can do is damage control and a good glass of wine (wonder if Trump instructed his staff not to give him any, or merely cut him off after the first bottle). It’s just that Trump has noticed the policy damage, and doesn‘t like it. And you have to wonder, who ever accepted those terms, and signed treaties like that TTiP that they are engraved in?

 

If you ask me, communities and countries should always make sure they remain in control of all their basic necessities. And food is certainly one of them. Also. if any politician near you ever proposes selling the rights to your drinking water to some foreign party, tar and feathers is your reply. Let Americans make their own cars, And German and French theirs. It’s not of the same importance as food, water, shelter and clothing, but you get the drift.

Schlepping food halfway across the planet is a dangerous thing once you become dependent on it to feed your children and your community (schlepping it halfway through Europe is as well). Selling your local water rights is even worse. That’s downright insane.

But if you’re going to trade, and once you’ve excluded basic necessities, zero tariffs or at least equal tariffs seems the way to go. Just wait till Trump starts that discussion with China for real. That conversation is largely about barriers, it’s different from Europe, though -hidden- subsidies feature ‘bigly’ as well.

 

Still, summarized, though I’m far from a Trumponado, I can see his point(s). I find it much harder to see what earlier US administrations were thinking when they agreed to all this stuff. And sure, his approach is brusque and perhaps brutal, but the country he’s, for better or for worse, president of, does seem to have gotten the short end of an very extensive array of sticks.

But by all means, don’t listen to me, listen to the experts. Then again, also look at the numbers.

 

 

Feb 192018
 
 February 19, 2018  Posted by at 10:56 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


Frank Larson Broadway Billboard Seven Year Itch 1955

 

Global Dividends Hit Record Of $1.25 Trillion In 2017, More To Come (R.)
Jittery US Bond Market Braces For Supply Wave (R.)
How Did America Go Bankrupt? Slowly At First, Then All At Once (CH)
London’s Housing Boom Is Over, Rightmove Says (BBG)
Average Price Of Newly Marketed UK Home Rises Above £300,000 Again (G.)
Ex-CIA Director Thinks US Hypocrisy About Election Meddling Is Hilarious (CJ)
German Carmakers In A Spin Ahead Of Diesel Ban Ruling (R.)
Sweden Is Getting Worried About Its Cashless Society (BBG)
Europe Is A Collection Of Filter Bubbles (BBG)

 

 

As is the case with buybacks, this is all money that execs decide NOT to invest in a company (productivity, modernization, maintenance), but in its stock value.

Global Dividends Hit Record Of $1.25 Trillion In 2017, More To Come (R.)

Global dividends rose 7.7% to an all-time high of $1.25 trillion (1 trillion euros) last year boosted by a buoyant world economy and rising corporate confidence, Janus Henderson said on Monday, predicting another record year ahead. The surge – the strongest since 2014 – was driven by increases in every region and almost every industry with record showings in 11 countries including the United States, Japan, Switzerland, Hong Kong, Taiwan and the Netherlands, the investment manager added. For 2018 Janus Henderson expects dividends to keep the same 7.7% growth rate to reach around $1.35 trillion, as corporate and economic growth remains strong even in more volatile financial markets. “Companies are seeing rising profits and healthy cash flows, and that’s enabling them to fund generous dividends.

The record payout last year was almost three-quarters higher than in 2009, and there is more to come,” Ben Lofthouse, Director of Global Equity Income at Janus Henderson, said. “The next few months are set fair, and we expect global dividends to break new records in 2018.” Adjusting for movements in exchange rates, special one-off dividends and other factors, global dividends rose 6.8% last year and are expected to rise another 6.1% in 2018. Janus said 2017’s dividend growth showed less regional divergence than in previous years, reflecting the broadly based global economic recovery, though Europe lagged behind. European dividends rose just 1.9% to $227 billion, weighed down by cuts from a handful of large companies in France and Spain, lower special dividends and a weak euro during the second quarter, when most dividends are paid, it said.

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How can more debt not be good?

Jittery US Bond Market Braces For Supply Wave (R.)

Bond investors, who have been on edge over signs of growing inflation and a possibly more aggressive Federal Reserve, will have their work cut out for them as the U.S. government seeks to sell $258 billion worth of debt this coming week. The Treasury Department began ramping up its debt issuance earlier this month to fund the expected growth in borrowing tied to the biggest tax overhaul in 30 years and a two-year federal spending package. Last year’s tax reform is expected to add as much as $1.5 trillion to the federal debt load, while the budget agreement would increase government spending by almost $300 billion over the next two years. Analysts worry the combination of a rising budget deficit, faster inflation and more Fed rate increases have ratcheted up the risk of owning Treasuries. Those concerns pushed benchmark 10-year Treasury yields up to 2.944%, a four-year peak last week.

Treasury bill and two-year yields have reached their highest level in more than nine years. The five-year Treasury yield is hovering at its highest levels in nearly eight years, while seven-year yield climbed to levels not seen since April 2011. The increase in U.S. yields may entice investors seeking steady income in the wake of the rollercoaster sessions on Wall Street and other stock markets this month, analysts said. [..] The heavy Treasury supply will kick off on Tuesday with $151 billion worth of bills including record amounts of three-month and six-month T-bills. The rest of the debt sales will spread over a holiday-shortened week with $28 billion of two-year fixed rate notes on Tuesday; $35 billion in five-year debt on Wednesday and $29 billion in seven-year notes on Thursday. The Treasury Department also plans to add $15 billion to an older two-year floating-rate issue.

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Everything is debt. Imagine what would happen if it wasn’t there. Or soon won’t be.

How Did America Go Bankrupt? Slowly At First, Then All At Once (CH)

Clearly, debt has surged since 2000 and particularly since 2008 versus decelerating net full time jobs growth. The number of full time employees is economically critical as, generally speaking, only these jobs offer the means to be a home buyer or build savings and wealth in a consumer driven economy. Part time employment generally offers only subsistence level earnings. But if we look at the change over those periods highlighted, we get a clear picture. Full time jobs are being added at a rapidly declining rate while federal debt is surging in the absence of the growth of full time employees.

And if we look at the federal debt added per full time job added (chart below)…broken arrow…broken arrow!!! That is $1.92 million dollars in new federal debt per net new full time employee since 2008. Compare that to the $30 thousand per net new full time employee from ’70 to ’80…or $140 thousand from ’80 to ’90…and nearly quadruples the $460 thousand per from ’00 to ’08. Despite a far larger total population and after ten years of “recovery” since ’08, this is likely as good as it gets. We are likely at or very near the top of this economic cycle. This pattern is likely to carry forward over the next decade and economic cycle…likely with disastrous results.

[..] US population growth has been decelerating since 1790 and debt to GDP rising (chart below). Originally, the combination of a relatively small population, high immigration, and high birth rates meant annual population growth in excess of 3% and relatively low debt to GDP. Over time, as the population grew, immigration slowed, and birth rates collapsed; US population growth tumbled. Since 1950 total annual population growth (black line in chart below) has decelerated almost 75% (from 2% to 0.6%) but more critically the annual population growth among the under 65 year old population has essentially ceased (as the yellow line in the chart shows) and more debt has been the resounding “solution”. Massive interest rate cuts to incent debt creation have been substituted for the decelerating organic growth.

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About time.

London’s Housing Boom Is Over, Rightmove Says (BBG)

London’s property market has moved out of its boom phase and home sellers need to be more realistic about their price demands, according to Rightmove. The February report from the home-listing website shows that asking prices were down 1% from a year earlier, a sixth consecutive fall. They rose 4.4% on the month, reflecting the usual jump at the start of the spring season. While multiple reports point to a cooling in London housing, the damage is being limited by cautious sellers, who aren’t flooding the market in a panic to dump property. That means the long-running supply-demand imbalance in the city is providing some support to prices. “End-of-the-boom prices normally readjust more quickly if there is an over supply,” Miles Shipside, Rightmove director, said in the report. However, “some would-be sellers are holding back, preventing a glut of competition from forcing prices downward,” he said.

The capital’s housing market was the worst performing in the U.K. in 2017 and there’s little to suggest any upturn is in store. Brexit uncertainty has damped demand, while years of rampant inflation has pushed ownership out of reach for many. The mean asking price in London this month was almost 630,000 pounds ($885,000), more than 20 times average U.K. earnings. For those who need a fast sale, Shipside’s advice is to “sacrifice some of the substantial price gains of the last few years.” The average time to sell a property in London is now 83 days, up from 73 days a year ago. Nationally, asking prices increased 0.8% in February from January, though that was below the 10-year average for the time of year. The average price of 300,000 pounds is up 1.5% year-on-year. That compares with gains of about 6% seen less than two years ago.

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But wait, this quotes Rightmove as well…

Average Price Of Newly Marketed UK Home Rises Above £300,000 Again (G.)

The average price of a UK property coming on to the market has risen by more than £2,400 in a month to just over £300,000 amid evidence of “record” levels of house-hunting activity, according to Rightmove. The website, which tracks 90% of the UK property market, said the national average asking price for a home had increased by 0.8% during the past month, following the 0.7% rise it reported in mid-January. However, some sellers may be over-pricing their properties: the average time to sell has risen once again and is now 72 days, compared with 67 days a month ago and 55 during the summer of 2017. In London, the average has climbed to 83 days. Rightmove said that while it was the norm for new sellers’ asking prices to be buoyant at the start of a new year, “this first complete month in 2018 is seeing more pricing optimism than the comparable period in 2017”.

In general, however, sellers were not being over-ambitious or setting too high a price, it added. The website, which claims to display a stock of more than one million properties to buy or rent, said the average asking price now stood at £300,001, compared with £297,587 a month ago. It described January as its “busiest month ever”, with a record 141m website visits. In all the UK regions it tracks, the typical price of a newly-marketed property rose during the past month, with the exception of south-west England, where the figure slipped back slightly. Scotland saw the biggest monthly increase, at 5.1%, while the north-east and Wales managed 3.6% and 3.5%. However, on a national basis, the annual rate of price growth “remains subdued” at 1.5%, said the website.

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Isn’t it?

Ex-CIA Director Thinks US Hypocrisy About Election Meddling Is Hilarious (CJ)

Take off the terrorist’s mask, and it’s the CIA. Take off the revolutionary’s mask, and it’s the CIA. Take off the Hollywood producer’s mask, and it’s the CIA. Take off the billionaire tech plutocrat’s mask, and it’s the CIA. Take off the news man’s mask, and guess what? It’s the motherfucking CIA. CIA influence is everywhere. Anywhere anything is happening which could potentially interfere with the interests of America’s unelected power establishment, whether inside the US or outside, the depraved, lying, torturing, propagandizing, drug trafficking, coup-staging, warmongering CIA has its fingers in it. Which is why its former director made a cutesy wisecrack and burst out laughing when asked if the US is currently interfering in other democracies.

Fox’s Laura Ingraham unsurprisingly introduced former CIA Director James Woolsey as “an old friend” in a recent interview about Special Prosecutor Robert Mueller’s indictment of 13 alleged members of a Russian troll farm, in which Woolsey unsurprisingly talked about how dangerous Russian “disinformation” is and Ingraham unsurprisingly said that everyone should really be afraid of China. What was surprising, though, was what happened at the end of the interview. “Have we ever tried to meddle in other countries’ elections?” Ingraham asked in response to Woolsey’s Russia remarks. “Oh, probably,” Woolsey said with a grin. “But it was for the good of the system in order to avoid the communists from taking over. For example, in Europe, in ’47, ’48, ’49, the Greeks and the Italians we CIA-”

“We don’t do that anymore though?” Ingraham interrupted. “We don’t mess around in other people’s elections, Jim?” Woolsey smiled and said said “Well…”, followed by a joking incoherent mumble, adding, “Only for a very good cause.” And then they both laughed. They laughed about this. They thought it was funny and cute. They thought it was funny and cute that the very allegation being used to manufacture support for world-threatening new cold war escalations against a nuclear superpower was something they both knew the United States does constantly, usually through Woolsey’s own CIA. The US government’s own data shows that it has deliberately meddled in the elections of 81 foreign governments between 1946 and 2000, including Russia in the nineties. That isn’t even counting the coups and regime changes it facilitated, including right here in my home Australia in the seventies.

The US meddles constantly in other democracies, not “for a good cause” as Woolsey claims, but to advance the agendas of the loosely allied plutocrats, intelligence and defense agencies which comprise America’s permanent government. It does this not to improve or protect the lives of ordinary Americans, but to make the rich richer and the powerful more powerful, usually at the expense of the money, resources, homes, governments, livelihoods and lives of people in other countries. It does this with impunity and without hesitation.

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Carmakers rule the country.

German Carmakers In A Spin Ahead Of Diesel Ban Ruling (R.)

A court will decide on Thursday whether German cities can ban heavily polluting cars, potentially wiping hundreds of millions of euros off the value of diesel cars on the country’s roads. Environmental group DUH has sued Stuttgart in Germany’s carmaking heartland, and Duesseldorf over levels of particulate matter exceeding EU limits after Volkswagen’s 2015 admission to cheating diesel exhaust tests. The scandal led politicians across the world to scrutinize diesel emissions, which contain the matter and nitrogen oxide (NOx) and are known to cause respiratory disease. There are around 15 million diesel vehicles on German streets and environmental groups say levels of particulates exceed the EU threshold in at least 90 German towns and cities.

Local courts ordered them to bar diesel cars which did not conform to the latest standards on days when pollution is heavy, startling German carmakers because an outright ban could trigger a fall in vehicle resale prices, and a rise in the cost of leasing contracts, which are priced on assumed residual values. The German states concerned, where the carmakers and their suppliers have a strong influence, appealed against the decisions, leaving Germany’s federal administrative court – the court of last resort for such matters – to rule on whether such bans can legally be imposed at local level.

“The key question is whether bans can already be considered to be legal instruments,” said Remo Klinger, a lawyer for DUH. “It’s a completely open question of law.” Paris, Madrid, Mexico City and Athens have said they plan to ban diesel vehicles from city centers by 2025, while the mayor of Copenhagen wants to ban new diesel cars from entering the city as soon as next year. France and Britain will ban new petrol and diesel cars by 2040 in a shift to electric vehicles.

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Big Brother is not worried.

Sweden Is Getting Worried About Its Cashless Society (BBG)

‘“No cash accepted” signs are becoming an increasingly common sight in shops and eateries across Sweden as payments go digital and mobile. But the pace at which cash is vanishing has authorities worried. A broad review of central bank legislation that’s underway is now taking a special look at the situation, with an interim report due as early as the summer. “If this development with cash disappearing happens too fast, it can be difficult to maintain the infrastructure” for handling cash, said Mats Dillen, the head of the parliamentary review. He declined to get into more details on what types of proposals could be included in the report. Sweden is widely regarded as the most cashless society on the planet. Most of the country’s bank branches have stopped handling cash; many shops, museums and restaurants now only accept plastic or mobile payments.

But there’s a downside, since many people, in particular the elderly, don’t have access to the digital society. “One may get into a negative spiral which can threaten the cash infrastructure,” Dillen said. “It’s those types of issues we are looking more closely at.” Last year, the amount of cash in circulation dropped to the lowest level since 1990 and is more than 40 percent below its 2007 peak. The declines in 2016 and 2017 were the biggest on record. An annual survey by Insight Intelligence released last month found only 25 percent of Swedes last year paid in cash at least once a week, down from 63 percent just four years ago. A full 36 percent never use cash, or just pay with it once or twice a year.

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There is no such thing as one Europe. And the more the EU promotes the narrative, the more that will become obvious.

Europe Is A Collection Of Filter Bubbles (BBG)

The EU can act in unison at times – for example, on Russia sanctions or, at least so far, on Brexit. But as French President Emmanuel Macron and German Chancellor Angela Merkel try for a closer union in the next few years, they will need to be mindful of the fact that there is no single narrative among the publics in different European countries on matters of economic importance. A recent paper for Bruegel, a Brussels-based think tank, vividly shows this by analyzing coverage of Europe’s recent financial crisis by four important centrist newspapers: Germany’s Sueddeutsche Zeitung, France’s Le Monde, Italy’s La Stampa and Spain’s El Pais. The total data set encompassed 51,714 news stories. The researchers fed them to a content analysis algorithm and then analyzed the results to construct generalized narratives. Their focus was on how blame for the crisis was attributed.

They found that only El Pais consistently attributed blame to Spain itself for its financial troubles during the euro crisis. “In Spain, the connection between the global financial crisis, the local housing bubble and the mismanagement of a previous period of impressive growth was more visible,” Porcaro explained to me. As one might expect, Sueddeutsche Zeitung blames the crisis on a departure from the traditional German social market economic model. Everyone except Germany seems to have contributed, according to the Munich paper — from greedy financial market players to financially imprudent Greeks to the ECB with its loose monetary policy. Le Monde, too, blamed the banks and speculators, but also German intransigence in handling the indebted southern Europeans.

And La Stampa focused on Italy’s role as a victim of circumstance, namely globalization and German-imposed austerity. Banks and financiers didn’t get much attention as culprits from the Italian newspaper, but the Italian political system and government did get some blame, as in Spain. Le Monde and La Stampa, according to the Bruegel paper, both “embrace a sense of desperation that goes far beyond purely economic considerations but calls into question the entire political system and social fabric.” It’s as if the euro area’s four biggest economies didn’t share a reality. The four quality dailies resemble the blind men in the Indian parable, feeling different parts of an elephant’s body, declaring the whole animal should look like a tree or a snake, then coming to blows when they can’t agree.

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Jul 292017
 
 July 29, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , ,  2 Responses »


Dorothea Lange Grocery store in Widtsoe, Utah 1936

 

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)
Congress Checkmates Trump (And The American People) (LR)
Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)
EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)
The Great Transatlantic Bond Divergence Unwind (WSJ)
Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)
Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)
Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)
What Explains amazon.com’s Share Price? (PCR)
Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)
Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

 

 

More incentives for the Fed to trigger a crisis.

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)

Let’s start at the beginning. Bubbles and Busts are both created by The Federal Reserve. Presidents are merely along for the ride. They like to credit themselves for the bubbles, and then look for scapegoats, usually the (non-existent) free market during the busts. But it is The Fed that creates them both. President Trump has made a big (yet understandable) mistake. He’s tried to portray himself as the cause of the current bubble in the stock market. He wants credit where credit is due. In this case, credit is not due. As we already mentioned, the Fed created the current bubble, and did so a long time ago. One look at a chart of the S&P 500 says it all:

Chances are, Trump realizes that most people won’t look at a chart of the stock market and he just wants some good PR. The president wants people to think that he is the reason for the stock market bubble. This is a big mistake. The Fed is the premier member of the so-called “Deep State”. In fact, without The Fed, there would hardly be a “Deep State” to speak of. The Fed sits at the top of the Deep State. They have the ultimate power (that no human beings should ever have) to create new money out-of-thin-air. In case Trump hasn’t figured it out yet, the Deep State does not like him. Should a major decline in the stock market occur during Trump’s Administration, guess who will take the blame? President Trump. After all, he took ownership of the bubble!

Should the market tumble, the mainstream media (that also despises Trump) will have plenty of his quotes, YouTubes, and Tweets to use against him. The economic woes will be pinned on Trump. Will Trump deserve the blame? No, but it’ll be too late. This is not to say that a major decline will occur during Trump’s tenure. Bubbles can take on a life of their own, and this one may last during Trump’s full term. But that’s a risky gamble to make. This bubble is going on almost 10 years now without a serious decline. Should we see a major selloff, Trump has very few friends in the major power centers that will come to his aid. As Peter Schiff points out in this fantastic clip below: The Fed now has their fall guy:

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A curious move. An ultimate power game.

Congress Checkmates Trump (And The American People) (LR)

Yesterday, the US Senate passed HR 3364, the Countering America’s Adversaries Through Sanctions Act by a massive 98 yeas to two nays. Opposing the bill were Sens. Bernie Sanders (I-VT) and Rand Paul (R-KY). The bill passed in the House by 419-3 on Tuesday, with Reps Massie (R-KY), Amash (R-MI), and Duncan (R-TN) opposing. The new sanctions bill ties President Trump’s hands on foreign policy, as he will be forced to ask Congress for permission to ease the measures. Speaking in favor of the legislation, Sen. Bob Menendez (R-NJ) cited the need to send Russia a message that it cannot meddle in US elections, that it cannot annex Crimea, that it cannot invade Ukraine, and that it cannot indiscriminately kill women and children in Syria.

Those of us living in the actual real world recognize that the first count remains unproven and the remaining counts are simply fatuous, fact-free bluster by Washington’s uninformed, group-thinking, foreign policy elites. Fueled by the millions coming in to the military-industrial complex. The House and Senate passed “Countering America’s Adversaries Through Sanctions Act” now goes to President Trump’s desk, where he faces a damned if he does and damned if he doesn’t scenario. A veto would certainly be over-ridden, handing the president a bitter bi-partisan blow that would likely end whatever aspirations he may retain to keep his campaign promises to get along better with Russia.

Similarly, signing the bill signs a death warrant for any foreign policy different than the one served up by the neocons for decades: create enemies; push war propaganda; collect massive checks from military industrial complex; demonize any American refusing to go along; repeat, adding bombs as necessary. Checkmate, President Trump.

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Over 600 would have to leave. Question: why does the US have over 6000 more staff in Russia than vice versa?

Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)

Russia told the United States on Friday that some of its diplomats had to leave the country in just over a month and said it was seizing some U.S. diplomatic property as retaliation for what it said were proposed illegal U.S. sanctions. Russia’s response, announced by the Foreign Ministry, came a day after the U.S. Senate voted to slap new sanctions on Russia, putting President Donald Trump in a tough position by forcing him to take a hard line on Moscow or veto the legislation and anger his own Republican Party. President Vladimir Putin had warned on Thursday that Russia had so far exercised restraint, but would have to retaliate against what he described as boorish and unreasonable U.S. behaviour. Relations between the two countries, already at a post-Cold War low, have deteriorated even further after U.S. intelligence agencies accused Russia of trying to meddle in last year’s U.S. presidential election, something Moscow flatly denies.

The Russian Foreign Ministry said on Friday that the United States had until Sept. 1 to reduce its diplomatic staff in Russia to 455 people, the same number of Russian diplomats it said were left in the United States after Washington expelled 35 Russians in December. It said in a statement that the decision by Congress to impose new sanctions confirmed “the extreme aggression of the United States in international affairs.” “Hiding behind its ‘exceptionalism’ the United States arrogantly ignores the positions and interests of other countries,” said the ministry. “Under the absolutely invented pretext of Russian interference in their “Under the absolutely invented pretext of Russian interference in their domestic affairs the United States is aggressively pushing forward, one after another, crude anti-Russian actions. This all runs counter to the principles of international law.”

[..] An official at the U.S. embassy in Moscow, who declined to be named because they were not allowed to speak to the media, said there were around 1,100 U.S. diplomatic staff in Russia. That included Russian citizens and U.S. citizens. Most staff, including around 300 U.S. citizens, work in the main embassy in Moscow with others based in outlying consulates. The Russian Foreign Ministry said it was also seizing a Moscow dacha compound used by U.S. diplomats to relax from Aug. 1 as well as a U.S. diplomatic warehouse in Moscow.

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Confidence spelled backwards. How to cause a bank run in 3 easy lessons.

EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)

European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed. The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble. The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender. It also come amid a bitter wrangle among European countries over how to deal with troubled banks, roughly a decade after a financial crash that required the ECB to print billions of euros to prevent a prolonged economic slump.

Giving supervisors the power to temporarily block bank accounts at ailing lenders is “a feasible option,” a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue. EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said. “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a person familiar with German government’s thinking said. To cover for savers’ immediate financial needs, the Estonian paper, dated July 10, recommended the introduction of a mechanism that could allow depositors to withdraw “at least a limited amount of funds.”

Banks, though, say it would discourage saving. “We strongly believe that this would incentivize depositors to run from a bank at an early stage,” Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group, said. The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors’ powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000).

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Price discovery.

The Great Transatlantic Bond Divergence Unwind (WSJ)

Many of the trades embraced by markets after President Donald Trump’s election have been slowly unwinding in 2017. Here’s an important one that could have further to go: the gap between U.S. and German government bond yields. The spread between 10-year Treasurys and bunds ballooned after Mr. Trump’s November victory to a level not seen since before the fall of the Berlin Wall, around 2.3 percentage points by the end of 2016. U.S. yields rose sharply on the idea of reflation and stimulus, while Europe appeared stuck in a rut. At 1.75%age points, the gap is close to its pre-election level. But even that is unusual by historical standards. Between 1990 and 2014, the spread was only rarely wider than one percentage point, and over that period averaged just 0.2 point, according to data from FactSet.

Such a tight relationship between German and U.S. bonds reflected the long global bull market for bonds in the glory years of globalization. Relatively synchronized monetary policy meant yields fell on both sides of the Atlantic together. The Fed’s 2013 taper, followed by signals of coming European Central Bank bond buying helped set the bond markets apart. That both helped weaken the euro and encouraged a rush of bond issuance by U.S. companies in European markets as borrowing costs fell. Where policy goes now is key. Markets doubt how far the Fed might get with its tightening, and seem unflustered by the prospect of the central bank shrinking its balance sheet. Investors may be too relaxed, but in the absence of fiscal stimulus and inflation, much higher yields for Treasurys might be hard to achieve in the near term.

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But they rule Germany. So yeah, some fines etc., but the culture just goes on.

Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)

German’s major automakers were accused in a U.S. lawsuit of acting as a cartel, colluding for nearly two decades to limit the pace of technological advances in their vehicles and stifle competition – allegations that widen the scope of the latest scandal to hit the nation’s auto industry. BMW AG, Daimler AG, Volkswagen AG and its Audi and Porsche brands shared competitive information about vehicle technologies with one another from 1996 through at least 2015 in violation of antitrust laws, according to a complaint filed Friday in San Francisco federal court. “These coordinated actions enabled the manufacturer defendants — the self-named ‘Fünfer-Kreise,’ or Circle of Five — to impose a German automobile premium on consumers premised on superior German engineering, while secretly stunting incentives to innovate,” the suit alleges.

The suit, which seeks class-action status on behalf of U.S. drivers, says the companies agreed to limit the development of vehicle systems, including emissions control. The arrangement allegedly led to the development of so-called “defeat devices” used by Volkswagen to cheat on pollution tests. Plaintiffs claim the operation of convertible roofs, body design, brakes and electronic systems were also part of the “technological innovations inhibited” by the pacts. The supplier of VW’s cheat software, Robert Bosch Gmbh, was also named as a defendant in the lawsuit.

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“The added cost of insurance pushed 274,000 customers into delinquency..”

Elizabeth Warren has called on the Fed to remove Wells Fargo board members. I think if your legal system does not allow you to put these people behind bars, maybe you should look there first. Many of these people should be put before a judge and Wells Fargo should be forced to close. Institutions like that are diseases in a society.

Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)

New revelations that Wells Fargo spent years enrolling unknowing borrowers in costly auto insurance has put the bank under new pressure to answer for a months-long scandal over sales practices that have harmed millions of Americans. The latest news that 800,000 Wells Fargo auto borrowers were improperly charged for insurance rattled investors yet again, and sent its stock down 2.6% on Friday. Shareholders, analysts, lawmakers and consumer advocates demanded answers about how the situation manifested, and why Wells Fargo did not disclose the problems sooner, given existing turmoil over phony deposit and credit card accounts opened in customers’ names without their permission.

“This is a full-blown scandal — again,” said New York City Comptroller Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares. “It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm.” Stringer called on the bank to install a new independent chair and “immediately” disclose more information. Wells Fargo first became aware of potential problems a year ago, when the auto lending business began receiving an unusually high number of complaints, Franklin Codel, head of consumer lending, said in an interview. The auto insurance program was quickly suspended, and the problem escalated to senior management, the board and regulators, he said.

Wells Fargo planned to delay public disclosure until it could notify affected customers and reimburse them. “The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said. “It’s not a great customer experience to say, ‘Yeah, we’ll get back to you.'” [..] Wall Street analysts expect the financial damage to go beyond the $80 million in reimbursements. In a note on Friday, Piper Jaffray’s Kevin Barker predicted the true cost would be “multiples” of that figure, with lawsuits and further customer remediation. The added cost of insurance pushed 274,000 customers into delinquency, and led to at least 20,000 wrongful repossessions, according to the Times.

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“Community bank” and Wells Fargo in one sentence. Take out the ones that are most guilty and go on as you were.

Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)

Wells Fargo, the lender struggling to overcome a fake-accounts scandal in its community bank, said the division’s new leader is cutting about 70 senior executive jobs. The lender will reduce the number of regional and area presidents to 91, Mary Mack, head of the retail bank, said Friday in a memo to staff, a copy of which was obtained by Bloomberg. Bank spokeswoman Bridget Braxton confirmed the contents of the memo and said employees whose positions are eliminated will remain staff members for 60 days until further steps are decided. Most of the remaining managers will be re-titled as region bank presidents with direct responsibility for more employees than before, in a move aimed at reducing management levels across the branch network, Mack wrote.

Across its 10 geographical divisions, Wells Fargo previously employed 160 regional and area presidents. “Change is hard, yet change is necessary to make sure we are well positioned for the future,” Mack wrote. “In order to truly be better, we must put the right structure in place,” she added. The community-banking division, which houses the retail bank, has generated weaker profit since September when Wells Fargo was fined $185 million because employees had been opening accounts for more than a half decade without customers’ permission. This week, the firm’s consumer operations revealed another scandal, announcing that the bank had charged as many as 500,000 customers for auto insurance they didn’t need.

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“..Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.”

What Explains amazon.com’s Share Price? (PCR)

“Here are today’s top stories on Bloomberg” “Jeff Bezos briefly overtook Bill Gates as the world’s richest person. A surge in Amazon shares Thursday morning in advance of its earnings report gave Bezos a net worth of $92.3 billion, surpassing the Microsoft founder’s $90.8 billion fortune. In afternoon trading, Bezos remains ranked second on the Bloomberg Billionaires Index. Gates has held the top spot since May 2013.” Amazon’s stock closed yesterday at $1,046 per share. Amazon’s profits do not support this extraordinary price. Apple, a very profitable company, has a share price of $150.56, an overprice itself. What or who is making Bezos so rich from an online sales company? Note, amazon.com is just sales. It is not some new manufacturing technology that produces valuable output at low cost.

amazon.com is what Walmart, Sears, and Macy’s do, the difference being that amazon.com is online and Walmart, Sears, and Macy’s are in physical locations where real merchandise can be experienced hands on and tried on for fit. In other words, online purchases are convenient, but you don’t know what you are getting. Does it fit? What is the quality? And so forth. How many times do you send it back before you get what you want? There are two answers to the question about who is making Bezos rich. One is that Wall Street is betting that the collapse of US anti-trust law and regulatory authority—it is still on the books but not enforced, just look at the Big Banks—and the ability of Bezos to use his ownership of the Washington Post, the newspaper of the country’s capital, to support those who support him, ensure that amazon.com will be an online monopoly.

Once this is put in place, amazon’s prices and profits will rise, and the extraordinary amazon.com P/E ratio will come into line with reality. Another is that Bezos’ cooperation with Washington’s spy network over all Americans is paid for by the CIA’s many front companies driving up the price of amazon.com’s stock. As the price of amazon.com rises, so does Bezos’ wealth. I don’t know that either of these answers is correct. What I notice is that Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.

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Just in case you’re thinking things are a mess where you are. His brother is rumored to succeed him.

Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)

On July 28, 2017, the Supreme Court of Pakistan (SCP) rendered a unanimous verdict by a five-member bench that disqualified Prime Minister Nawaz Sharif from holding public office. This outcome was the result of the Panama Leaks, which revealed that the premier and his family owned assets disproportionate to their known sources of income. The opposition Pakistan Tehreek-i-Insaf (PTI), led by Imran Khan, seized on this issue and managed to compel Pakistan’s normally apathetic state institutions to take notice. For over a year, the premier and his family failed to explain how they acquired upscale properties in London. The ruling family dug themselves even deeper into the hole in their effort to establish some kind of cover for their acquisitions by being deliberately inaccurate before the SCP and even forging documents.

Surrounded by sycophants, the premier was evidently badly advised at each step and he and his family have paid a very high political price and could well face jail time. Pakistan has a long tradition of dragging its civilian chief executives over the coals. No prime minister has completed a regular term in office, their tenures cut short by assassination, civilian or military coups, judicial intervention, and intra-party machinations. Many premiers have been overthrown or dismissed for alleged abuse of power, mal-administration, and corruption. Nawaz Sharif and his family, in being unable to account for their wealth, and in their crude attempts at a cover up, have demonstrated that they are evidently crooks.

This said, the Pakistan Muslim League-Nawaz (PML-N) has done a better job of delivering on its campaign promises than any political party in Pakistan’s democratic experience. Pakistan’s energy crisis has eased, the economy is headed towards 6% annual growth, FDI is the highest in a decade, per capita income has risen perceptively, major cities have seen considerable investment in their infrastructure, and the gross level of terrorist violence has declined. Given that the ruling party won in 2013 with as many votes as the next two largest parties combined, its victory in 2018 seemed all but assured.

[..] Since 1947, Pakistan state elites have presided over a massive privatization of public wealth. Entitlements in the form of plots, perks, benefits, are part of an elaborate system of bureaucratically induced shortages that breed systemic corruption and undermines governance. Pakistani private and public sector corporations and entrepreneurs guzzle subsidies and thrive only in a cartelized environment. Any attempt by a government to rationalize the economy or improve productivity is met with howls of protest and demands for more subsidies. Pakistani professionals, be they lawyers, doctors, engineers, educators, behave like mafias, seeking to avoid ethical checks while relentlessly pursuing self-aggrandizement.

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We’ll eat our own crap yet. Garbage in, garbage out.

Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

Plastic microparticles are getting into the flesh of fish eaten by humans, according to a new study. A team of scientists from Malaysia and France discovered a total of 36 tiny pieces of plastic in the bodies of 120 mackerel, anchovies, mullets and croakers. They warned that as plastic attracts toxins in the environment, these poisons could be released into people’s bodies after they ate the fish. The plastics found included nylon, polystyrene and polyethylene. Writing in the journal Scientific Reports, the researchers said: “The widespread distribution of microplastics in aquatic bodies has subsequently contaminated a diverse range of aquatic biota, including those sold for human consumption such as shellfish and mussels.

“Therefore, seafood products could be a major route of human exposure to microplastics. “Microplastics were suggested to exert their harmful effects by providing a medium to facilitate the transport of other toxic compounds such as heavy metals and persistent organic pollutants to the body of organisms. Upon ingestion, these chemicals may be released and cause toxicity.” They suggested people eating the fish examined in this study, which are often dried and sold across Malaysia and neighbouring countries, could consume up to 246 pieces of microplastic a year. However, they added: “The majority of the tested fish in this study did not contain microplastics. Therefore, it is less likely that an individual would ingest the suggested maximum number of microplastics per annum.”

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Sep 242015
 
 September 24, 2015  Posted by at 8:02 am Finance Tagged with: , , , , , , , , ,  9 Responses »


David Myers Theatre on 9th Street. Washington, DC July 1939

EU Refugee Summit In Disarray, Greatest Refugee Tide ‘Yet To Come’ (Guardian)
China Consumers Tighten Belts, A Red Flag For The Global Economy (Reuters)
China Prosecutor To Intensify Financial Markets Crackdown (Reuters)
China Is Sitting on an Ocean of Diesel Fuel (Bloomberg)
Bill Gross: “Mainstream America Is Being Slowly Cooked Alive” (Zero Hedge)
Deflation Supercycle Is Over As World Runs Out Of Workers (AEP)
Volkswagen Could Pose Bigger Threat To German Economy Than Greek Crisis (Reuters)
UK, France And Germany Lobbied For Flawed Car Emissions Tests (Guardian)
Volkswagen Emissions: Automakers’ Tobacco Moment? (CNBC)
Volkswagen Test Rigging Follows a Long Auto Industry Pattern (NY Times)
VW Chief Winterkorn Steps Down After Emissions Scandal (Bloomberg)
Volkswagen CEO Likely to Get $32 Million Pension After Leaving (Bloomberg)
What Volkswagen’s Crisis Could Mean for Auto Asset-Backed Securities (Alloway)
VW Recall Letters In April Warned Of An Emissions Glitch (Reuters)
How Smog Cops Busted Volkswagen and Brought Down Its CEO (Bloomberg)
West Virginia Engineer Proves To Be A David To VW’s Goliath (Reuters)
Forget ‘Developing’ Poor Countries, It’s Time To ‘De-Develop’ Rich Countries (Guardian)
‘Downsizing Could Free Up 2.5 Million British Homes’ (Guardian)
Prepare For A Catastrophic NHS Winter Meltdown (Guardian)

Absolutely nothing was achieved. €1 billion goes to UN to feed refugees outside Europe. Hollow vapor.

EU Refugee Summit In Disarray, Greatest Refugee Tide ‘Yet To Come’ (Guardian)

European heads of government met in Brussels on Wednesday night in an attempt to bury months of mutual mudslinging over the EU’s biggest ever refugee crisis, but failed to come up with common policies amid signs they were unable to contain and manage the migration emergency. The emergency Brussels summit decided little but to throw money at aid agencies and transit countries hosting millions of Syrian refugees and to step up the identification and finger-printing of refugees in Italy and Greece by November. Calls for European forces to take control of Greece’s borders – the main entry point to the EU from the Middle East – fell on deaf ears. The summit’s chairman delivered coded criticism of the German chancellor, Angela Merkel, and of the European Commission while warning that the refugee crisis would get much worse before it might get better.

Turkey, which is the main source of Syrians trying to move to Germany, was recognised as the lynchpin of any strategy for containing the crisis and it emerged that Ankara was demanding a high price for its cooperation. Donald Tusk, the president of the European Council who chaired the summit, warned: “The greatest tide of refugees and migrants is yet to come.” In a barb directed at Merkel and Jean-Claude Juncker, the president of the European Commission, Tusk added: “We need to correct our policy of open doors and windows.” The summit pitted the governments of central Europe against Germany and France after Berlin and Paris on Tuesday forced a new system of imposed refugee quotas on a recalcitrant east.

There was talk of boycotts and threats to take the issue to court from the Czechs and Slovaks. The EU’s most robust anti-immigration hardliner, Viktor Orbán, the prime minister of Hungary, warned Merkel, against any “moral imperialism”. He argued that Greece was incapable of securing its borders with Turkey and that the job should be given to a pan-European force. He admitted he got no support, adding that he was left with two options – retaining the razorwire fences he has built on the borders with Serbia and Croatia or sending any refugees who enter Hungary straight through to Austria. The Austrian chancellor, Werner Faymann, replied that he should send the refugees through and take down the fence. Merkel said: “Setting up fences between members states is not the solution.” “The conditions for a comprehensive solution are not yet in place.”

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Chinese have lost trust in their government.

China Consumers Tighten Belts, A Red Flag For The Global Economy (Reuters)

Terry Xu considers himself one of the lucky ones. The 32-year-old father-of-one invested 10% of his savings earlier this year in Chinese stocks. Now, with markets down around 40% since mid-June, he’s selling off his portfolio at a loss. Painful, but not a catastrophe – he says his colleagues lost more, and he earns well above the average wage. But the equity market turmoil, coupled with signs the economy is slowing means Xu, and millions of other middle class Chinese consumers like him, is scaling back his spending in an ominous sign for China’s policymakers and the global economy. “This year’s economy has been uncertain,” he said. “It’s not like before, where we just used to buy everything for our child. Now, we only buy and spend what we need”.

Xu earns 20,000 yuan ($3,140) a month as a product development manager for a Western headphone maker in Shenzhen. A flat he bought in 2012 for 900,000 yuan, which he shares with his 4-year-old daughter, wife and parents-in-law, is now worth 2.5 million. Still, he plans to keep his Apple iPhone 4 rather than upgrade to the latest iPhone 6S, and his next pair of trainers will be from the Chinese brand Anta Sports rather than his preferred Nike. Xu’s worries are typical of middle class families – relatively minor compared with the millions of his compatriots who get by on lower incomes. But his belt-tightening jars with the Chinese government’s hopes that consumers will pick up the slack as exports fall and it tries to rebalance the economy away from a long-running reliance on trade and government spending.

Domestic consumption contributed 60% of China’s economic growth in the first half of 2015, up from 51.2% in the whole of 2014, suggesting Beijing’s desired rebalancing is on track. But forward looking indicators and companies’ experiences in China are more worrying. A China consumer confidence index produced by ANZ Bank and polling company Roy Morgan fell to a record low in August. Car sales in China could drop this year for the first time in two decades, while smartphone sales recorded their first fall in China during the second quarter, consumer research firm Gartner said. If that translates into a slowdown in overall consumer spending, the impact will be felt beyond China.

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Chasing shadows.

China Prosecutor To Intensify Financial Markets Crackdown (Reuters)

China’s state prosecutor will intensify its crackdown on criminal activities in its stock and futures markets, following a series of high-profile cases involving one of the country’s market regulators and securities firms. The prosecutor told a news conference in Beijing it would strengthen coordination with market regulators as part of efforts to halt activities such as insider trading and spreading of false information, state radio said on its website on Wednesday. The authorities have stepped up investigations on market participants since June, when wild gyrations sent the equity market down as much as 40%. Amid the crackdown, investors, fund managers and watchdog officials have all been the subject of investigations. The China Securities Regulatory Commission said on Sept. 18 it has recently started investigating 19 cases of suspected illegal share sales and speculative activities.

Meanwhile, executives at the country’s largest broker CITIC Securities, including its general manager, are being investigated by authorities for alleged offences including insider trading and leaking information. The country’s securities watchdog has also been swept up in the crackdown. China’s Communist Party sacked CSRC Assistant Chairman Zhang Yujun, state media reported on Sept. 22, days after it was announced he was the subject of a graft probe. The campaign to identify and punish those deemed responsible for the market sell-off started shortly after June’s turmoil. However, most analysts attribute the summer crash to the bursting of a typical stock market bubble which was earlier spurred by official media and fueled in large part by borrowed money.

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Perfect timing.

China Is Sitting on an Ocean of Diesel Fuel (Bloomberg)

Add diesel to the commodities flooding global markets from China. The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminum overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of expansion. “A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,” said Ivan Szpakowski at Citigroup in Hong Kong. “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.”

Exports of Chinese raw materials are exacerbating a global glut that drove prices to the lowest since the 2008 financial crisis and prompted steel and aluminum producers around the world to protest against the deluge. While diesel exports are principally a risk to Asian refiners, the additional shipments threaten to worsen a glut that already extends from Singapore to Europe and the U.S. Refining profits, or cracks, from making diesel in the Asian oil trading hub of Singapore have shrunk about 30% from a year ago as exports from China, India and the Middle East create an oversupply, according to Ehsan Ul-Haq, an analyst at KBC Advanced Technologies in London.

“The world is becoming an ocean of diesel,” said Ul-Haq. “Demand in China is not as high as it was previously expected. Chinese refiners are becoming more export oriented.” China’s August shipments of the fuel, also known as gasoil, surged 77% from a year earlier to a record 722,516 metric tons, or about 175,000 barrels a day, according to data released this week by the General Administration of Customs. They may rise to about 250,000 barrels a day later this year, according to ICIS China and JBC Energy GmbH, industry consultants. “Inevitably, this should prevent gasoil cracks in Asia from going higher than they already are,” said David Wech, managing director of Vienna-based JBC.

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Talking his book.

Bill Gross: “Mainstream America Is Being Slowly Cooked Alive” (Zero Hedge)

While hardly as dramatic as Bill Gross’ last letter in which he urged readers to “go to cash” as a result of the “Frankenstein creation” that ZIRP has created, his latest letter “Saved by Zero” takes a calmer stance and urges central banks to “get off zero” as the “developed world is beginning to run on empty because investments discounted at near zero over the intermediate future cannot provide cash flow or necessary capital gains to pay for past promises in an aging society. And don’t think that those poor insurance companies and gargantuan pension funds in the hundreds of billions are the only losers.” His punchline:

“Mainstream America with their 401Ks are in a similar pickle. Expecting 8-10% to pay for education, healthcare, retirement or simply taking an accustomed vacation, they won’t be doing much of it as long as short term yields are at zero. They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor models and fight non-existent inflation.”

We are not so sure about that non-existant inflation: sure, if one ignores healthcare, food, tuition and expecially rental costs, then sure. But let that slide for the time being. Gross’ conclusion: “get off zero and get off quick. Will 2% Fed Funds harm corporate America that has already termed out its debt? A little. Will stock and bond prices go down? Most certainly. But like Volcker recognized in 1979, the time has come for a new thesis that restores the savings function to developed economies that permit liability based business models to survive – if only on a shoestring – and that ultimately leads to rejuvenated private investment, which is the essence of a healthy economy. Near term pain? Yes. Long term gain? Almost certainly. Get off zero now!” Sure, it makes all the sense in the world… and that’s why the Fed won’t do it precisely because of the “stock prices going down” part.

The Fed clearly confirmed that the stock market mandate is the only one it cares about, and as such it will let Wall Street trample over Main Street any day. Confirming this is the latest Fed Funds projection which has a December rate hike now at just 42% odds, meaning the majority of the market no longer believes the rate hike will come before 2016 (just as Goldman demanded), and is acting accoridngly. The real question, one not addressed by Gross in this letter, is the dramatic shift in the market’s posture, one where a continuation of easy conditions no longer leads to a surge in stocks. It is this that is the biggest threat to the Fed, as the market is now confirming a major easing episode such as QE4 or NIRP may not be what the Econ PhD doctor ordered to get new all time highs. This is why the Fed is not only trapped, but pushing on a string. And the longer it keeps rates at zero the greater the pain in the long-run.

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“..scarce labour will set off a bidding war for workers, all spiced by a state of latent social warfare between the generations.” “The last time Europe’s serfs suddenly found themselves in huge demand was after the Black Death in the mid-14th century. They say it ended feudalism.”

Deflation Supercycle Is Over As World Runs Out Of Workers (AEP)

Workers of the world are about to get their revenge. Owners of capital will have to make do with a shrinking slice of the cake. The powerful social forces that have flooded the global economy with abundant labour for the past four decades years are reversing suddenly, spelling the end of the deflationary super-cycle and the era of zero interest rates. “We are at a sharp inflexion point,” says Charles Goodhart, a professor at the London School of Economics and a former top official at the Bank of England. As cheap labour dries up and savings fall, real interest rates will climb from sub-zero levels back to their historic norm of 2.75pc to 3pc, or even higher. The implications are ominous for long-term US Treasuries, Gilts or Bunds. The whole structure of the global bond market is a based on false anthropology.

Prof Goodhart says the coming era of labour scarcity will shift the balance of power from employers to workers, pushing up wages. It will roll back the corrosive inequality that has built up within countries across the globe. If he is right, events will soon discredit the sweeping neo-Marxist claims of Thomas Piketty, the best-selling French economist who vaulted to stardom last year. Mr Piketty’s unlikely bestseller – Capital in the 21st Century – alleged that the return on capital outpaces the growth of the economy over time, leading ineluctably to greater concentrations of wealth in an unfettered market system. “Piketty was wrong,” said Prof Goodhart. What in reality happened is that the twin effects of plummeting birth rates and longer life spans from 1970 onwards led to a demographic “sweet spot”, a one-off episode that temporarily distorted labour economics.

Prof Goodhart and Manoj Pradhan argue in a paper for Morgan Stanley that this was made even sweeter by the collapse of the Soviet Union and China’s spectacular entry into the global trading system. The working age cohort was 685m in the developed world in 1990. China and eastern Europe added a further 820m, more than doubling the work pool of the globalised market in the blink of an eye. “It was the biggest ‘positive labour shock’ the world has ever seen. It is what led to 25 years of wage stagnation,” said Prof Goodhart, speaking at a forum held by Lombard Street Research. We all know what happened. Multinationals seized on the world’s reserve army of cheap leader. Those American companies that did not relocate plant to China itself were able play off Chinese wages against US workers at home, exploiting “labour arbitrage”.

US corporate profits after tax are now 10pc of GDP, twice their historic average and a post-war high. It was much the same story in Europe. Volkswagen openly threatened to shift production to Poland in 2004 unless German workers swallowed a wage freeze and longer hours, tantamount to a pay cut. IG Metall bowed bitterly to the inevitable. Cheap labour held down global costs and prices. China compounded the effect with a factory blitz – on subsidised credit – that pushed investment to a world record 48pc of GDP and flooded markets with cheap goods – first clothes, shoes and furniture, and then steel, ships, chemicals, mobiles and solar panels. Lulled by low consumer price inflation, central banks let rip with loose money – long before the Lehman crisis – leading to even lower real interest rates and asset bubbles. The rich got richer.

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One in 7 German jobs is related to car industry.

Volkswagen Could Pose Bigger Threat To German Economy Than Greek Crisis (Reuters)

The Volkswagen emissions scandal has rocked Germany’s business and political establishment and analysts warn the crisis at the car maker could develop into the biggest threat to Europe’s largest economy. Volkswagen is the biggest of Germany’s car makers and one of the country’s largest employers, with more than 270,000 jobs in its home country and even more working for suppliers. Volkswagen Chief Executive Martin Winterkorn paid the price for the scandal over rigged emissions tests when he resigned on Wednesday and economists are now assessing its impact on a previously healthy economy. “All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis,” ING chief economist Carsten Brzeski told Reuters.

“If Volkswagen’s sales were to plunge in North America in the coming months, this would not only have an impact on the company, but on the German economy as a whole,” he added. Volkswagen sold nearly 600,000 cars in the United States last year, around 6% of its 9.5 million global sales. The U.S. Environmental Protection Agency said the company could face penalties of up to $18 billion, more than its entire operating profit for last year. Although such a fine would be more than covered by the €21 billion the company now holds in cash, the scandal has raised fears of major job cuts. The broader concern for the German government is that other car makers such as Daimler and BMW could suffer fallout from the Volkswagen disaster. There is no indication of wrongdoing on the part of either company and some analysts said the wider impact would be limited.

The German government said on Wednesday that the auto industry would remain an “important pillar” for the economy despite the deepening crisis surrounding Volkswagen. “It is a highly innovative and very successful industry for Germany, with lots of jobs,” a spokeswoman for the economy ministry said. But analysts warn that it is exactly this dependency on the automobile sector that could become a threat to an economy forecast to grow at 1.8% this year. Germany is already having to face up to the slowdown in the Chinese economy. “Should automobile sales go down, this could also hit suppliers and with them the whole economy,” industry expert Martin Gornig from the Berlin-based DIW think tank told Reuters.

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“Just four months before the VW emissions scandal broke, the EU’s three biggest nations mounted a push to carry over loopholes from a test devised in 1970..”

UK, France And Germany Lobbied For Flawed Car Emissions Tests (Guardian)

The UK, France and Germany have been accused of hypocrisy for lobbying behind the scenes to keep outmoded car tests for carbon emissions, but later publicly calling for a European investigation into Volkswagen’s rigging of car air pollution tests. Leaked documents seen by the Guardian show the three countries lobbied the European commission to keep loopholes in car tests that would increase real world carbon dioxide emissions by 14% above those claimed. Just four months before the VW emissions scandal broke, the EU’s three biggest nations mounted a push to carry over loopholes from a test devised in 1970 – known as the NEDC – to the World Light Vehicles Test Procedure (WLTP), which is due to replace it in 2017.

“It is unacceptable that governments which rightly demand an EU inquiry into the VW’s rigging of air pollution tests are simultaneously lobbying behind the scenes to continue the rigging of CO2 emissions tests,” said Greg Archer, clean vehicles manager at the respected green thinktank, Transport and Environment (T&E). “CO2 regulations should not be weakened by the backdoor through test manipulations.” Vehicle emissions are responsible for 12% of Europe’s carbon emissions and by 2021, all new cars must meet an EU emissions limit of 95 grams of CO2 per km, putting accurate measurements of real emissions at a premium. The loopholes would not only raise real world CO2 emissions from new cars to 110g CO2 per km – well above the EU limit – but increase fuel bills for drivers by €140 per year according to T&E.

Huw Irranca-Davies, Labour MP and chair of an influential select committee of MPs, the environmental audit committee, said: “Given that the UK is struggling to bring down carbon emissions and other harmful pollutants from road vehicles it is extremely worrying that the UK government appears to be trying to water down the EU’s proposed new road testing regime. “As well as cutting CO2 emissions, improving the efficiency of vehicles can save lives by reducing the illegal levels of air pollution in UK cities, so the Department for Transport should be making these tests more rigorous not less.” The WLTP test was supposed to remove loopholes that had allowed a gap between real world CO2 emissions and test cycle ones to develop, which EU consultants have estimated at up to 20%.

But the UK lobbied for car makers to be allowed to exploit flexibilities such as externally charging their batteries to full before testing. The Department for Transport also argued that the best available technologies should be shunned in favour of outdated ‘inertia classes’, which involve manually adding 100 kilo weights to the car to see what effect greater weight on the amount of CO2 the car pumps out. Research by the International Council on Clean Transportation has found that car manufacturers often game these tests by optimising test car performances at one pound below the desired inertia class. Germany went further than the UK, calling for the tests to be conducted on sloping downhill tracks, and for allowing manufacturers to declare a final CO2 value 4% lower than the one measured. France supported all the proposed loopholes, bar the 4% lower CO2 value.

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Can governments keep protecting their carmakers from the law?

Volkswagen Emissions: Automakers’ Tobacco Moment? (CNBC)

The decimation of share prices across the autos industry this week highlights growing concerns that Volkswagen’s problem could quickly turn into one for the entire carmaking industry. The U.S. Environmental Protection Agency has accused Volkswagen of installing a device in its diesel vehicles to run maximum anti-pollution controls only when emissions tests were taking place. VW has admitted the mistake and apologised, with its U.S. boss, Michael Horn, saying the company had “totally screwed up.” No other car manufacturers have been accused of this kind of behavior. However, the light shone on what Volkswagen was trying to sell as emission-reducing cars, which were in fact pumping more nitrogen dioxide (NOx) into the air than thought, could be uncomfortable for others.

The scandal should be “a massive wake up call to governments and regulators around the world,” Friends of the Earth air pollution campaigner Jenny Bates told CNBC. “More than fifty thousand people die early every year in the UK due to our illegally filthy air. Vehicle pollution is the main problem, with diesel vehicles the biggest culprit. Tough pollution standards are crucial for cleaning up our sub-standard air quality – which is why an urgent investigation is needed to ensure that the motor industry is complying with EU regulations.” Even given the drastic share price falls, investors are likely to stay away from the automobile sector for a while as they wonder which company will be next.

Analysts have been producing gloomy forecasts for both Volkswagen and the sector as a result, with one typical example from Societe Generale, which downgraded the sector from Overweight to Neutral, deeming it “dead money”. Yet the fallout could be even worse than feared, if it emerges that the problem of promoting cars as more environmentally friendly than they are goes beyond Volkswagen. This kind of industry-wide problem is sometimes called a “tobacco moment” after the cigarette industry’s early denials of the links between smoking and lung cancer, which eventually proved futile.

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Industry + governments.

Volkswagen Test Rigging Follows a Long Auto Industry Pattern (NY Times)

Long before Volkswagen admitted to cheating on emissions tests for millions of cars worldwide, the automobile industry, Volkswagen included, had a well-known record of sidestepping regulation and even duping regulators. For decades, car companies found ways to rig mileage and emissions testing data. In Europe, some automakers have taped up test cars’ doors and grilles to bolster their aerodynamics. Others have used “superlubricants” to reduce friction in the car’s engine to a degree that would be impossible in real-world driving conditions. Automakers have even been known to make test vehicles lighter by removing the back seats. Cheating in the United States started as soon as governments began regulating automotive emissions in the early 1970s.

In 1972, certification of Ford Motor’s new cars was held up after the EPA found that the company had violated rules by performing constant maintenance of its test cars, which reduced emissions but did not reflect driving conditions in the real world. Ford walked away with a $7 million fine. The next year, the agency fined Volkswagen $120,000 after finding that the company had installed devices intended specifically to shut down a vehicle’s pollution control systems. In 1974, Chrysler had to recall more than 800,000 cars because similar devices were found in the radiators of its cars. Such gadgets became known as “defeat devices,” and they have long been banned by the EPA. But their use continued to proliferate, and they became more sophisticated, as illustrated by Volkswagen’s admission this week that 11 million diesel cars worldwide were equipped with software used to cheat on emissions tests. [..]

In the United States, automakers’ lobbying has ensured that the statute giving powers to the National Highway Traffic Safety Administration “has no specific criminal penalty for selling defective or noncompliant vehicles,” says Joan Claybrook, a former administrator of the agency and a longtime advocate of auto safety. There are no criminal penalties under laws applying to the E.P.A. for violations of motor vehicle clean air rules, though there is a division of the Justice Department devoted to violations of environmental law. “I don’t see them changing this behavior unless criminal penalties are enacted into law that allow the prosecutor to put the executives in jail,” Ms. Claybrook said.

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Criminal investigation MUST follow.

VW Chief Winterkorn Steps Down After Emissions Scandal (Bloomberg)

Volkswagen CEO Martin Winterkorn resigned after U.S. officials caught the company cheating on emissions tests, leaving the world’s top-selling automaker to appoint a fresh leader to repair its reputation among customers, dealers and regulators around the globe. Stepping down after almost a decade in charge, Winterkorn said he was accepting the consequences of the mushrooming scandal that has wiped €20 billion off the company’s market value. Possible replacements include Matthias Mueller, head of the Porsche brand who has the support of the family that controls a majority stake of Volswagen, and Herbert Diess, who recently joined from rival BMW, a person familiar with the matter said.

Meantime, the company expects more executives to be targeted in the coming days in its investigation, the executive committee of the supervisory board said in a statement, exonerating Winterkorn of being involved in the manipulations. Volkswagen also asked local German prosecutors to assist and open a criminal probe. “The incident must be cleared up mercilessly, and it must be assured that such things cannot ever happen again,” said Stephan Weil, a member of the board committee and the prime minister of Lower Saxony, a key Volkswagen shareholder. “We are very much aware of the scope of this issue, the economic damage and the implications for VW’s reputation.”

Winterkorn, who was supposed to receive a contract extension on Friday, had a dramatic fall from grace that began last week with the revelation that the Wolfsburg, Germany-based company fitted diesel-powered vehicles with software that circumvented air pollution controls, then lied about it to the U.S. Environmental Protection Agency for nearly a year. The 68-year-old CEO, who had repeatedly apologized for the manipulations, was unable to hang on as the stock price plummeted 35% over two days and pressure grew from the German government for quick action. “He had little choice,” said Erik Gordon at the University of Michigan. “The company’s reputation is in tatters.” Volkswagen shares rose 5.2% to close at €111.50 on Wednesday, clawing back some of the losses earlier this week. “Volkswagen needs a fresh start,” Winterkorn said in a statement. “I am clearing the way for this fresh start with my resignation.”

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Insanity squared.

Volkswagen CEO Likely to Get $32 Million Pension After Leaving (Bloomberg)

Martin Winterkorn, engulfed by a diesel-emissions scandal at Volkswagen AG, amassed a $32 million pension before stepping down Wednesday, and may reap millions more in severance depending on how the supervisory board classifies his exit. After Winterkorn disclosed Wednesday that he had asked the board to terminate his role, company spokesman Claus-Peter Tiemann declined to comment on how much money the departing CEO stands to get. Volkswagen’s most recent annual report outlines how Winterkorn, its leader since 2007, could theoretically collect two significant payouts. Winterkorn’s pension had a value of 28.6 million euros ($32 million) at the end of last year, according to the report, which doesn’t describe any conditions that would lead the company to withhold it.

And under certain circumstances, he also can collect severance equal to two years of “remuneration.” He was Germany’s second-highest paid CEO last year, receiving a total of 16.6 million euros in compensation from the company and majority shareholder Porsche SE.
While the severance package kicks in if the supervisory board terminates his contract early, there’s a caveat. If the board ends his employment for a reason for which he is responsible, then severance is forfeited, according to company filings. The supervisory board’s executive committee said in a statement Wednesday that Winterkorn “had no knowledge of the manipulation of emissions data,” and that it respected his offer to resign and request to be terminated. It also thanked him for his “towering contributions” to the company.

Winterkorn, 68, said in his statement Wednesday that he was stunned to learn of the scope of alleged misconduct occurring at the company. U.S. officials said Sept. 18 the carmaker had cheated during tests of diesel-powered vehicles sold since 2009. “As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the supervisory board to agree on terminating my function as CEO,” he said. “I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part.” The annual report also mentions another piece of his pension: He can use a company car in the years that benefit is being paid out.

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Being a VW dealership is a nightmare right now.

What Volkswagen’s Crisis Could Mean for Auto Asset-Backed Securities (Alloway)

From the Environmental Protection Agency to … securitized bonds? The emissions scandal currently rocking Volkswagen is having ripple effects across markets, potentially moving all the way to sliced-and-diced bonds tied to car loans and leases. Sales of auto asset-backed securities, or ABS, have been booming in recent years as investors seek out higher-yielding products. According to Deutsche Bank estimates, about $5.6 billion worth of VW auto ABS is outstanding, with some $4.39 billion of that figure coming from bonds backed by loans and leases. Volkswagen, now facing potential fines and litigation, could find its ability to attract new business temporarily crimped, forcing down the values of the cars backing such loans. But that will probably have little impact on ABS investors, according to Elen Callahan, Deutsche Bank analyst.

“Given that the vehicles are still ‘safe and legal to drive’ and that the repairs will come at no cost to the owner, we do not expect borrowers to become disincentivized from making their contractual monthly payment on their VW vehicle,” she wrote in a note published on Wednesday. Still the $1.25 billion worth of bonds that Deutsche bank estimates are backed by car dealer inventories of VW cars—known as dealer floorplan ABS—could be a more complicated story. “As is typical for dealer floorplan ABS, the ABS trust benefits from VW financing assistance including but not limited to VW’s pledge to repurchase unsold new vehicles and inventory,” Callahan said. “We believe that despite the financial burdens associated with the recalls, VW will continue to honor this commitment given the importance of its dealer network to its primary business.”

The revelations made public last week by the EPA have reminded some auto bond analysts of recalls that hit Toyota Motor in 2009 and 2010, which affected some 9 million vehicles. Car dealers, told to immediately halt sales of popular 2015 and 2016 models, including Volkswagen’s Jetta and Beetle convertible, “are now saddled with unsalable product, at least for the time being,” Barclays analyst Brian Ford told clients in a Tuesday report. “Dealers now have a number of cars that they cannot sell; so inventory will not turn over as rapidly,” he said in a follow-up interview. “The ABS most affected by VW’s sales stoppage of certain 2015 and 2016 diesel models is the dealer floorplan securitizaiton.”

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This is not new.

VW Recall Letters In April Warned Of An Emissions Glitch (Reuters)

In April of 2015, Volkswagen of America, Inc. sent letters to California owners of diesel-powered Audis and Volkswagens informing them of an “emissions service action” affecting the vehicles. Owners were told they would need to take their cars to a dealer for new software to ensure tailpipe emissions were “optimized and operating efficiently.” The company didn’t explain that it was taking the action in hopes of satisfying government regulators, who were growing increasingly skeptical about the reason for discrepancies between laboratory emissions test results and real world pollution from Volkswagen’s diesel cars. Officials at the California Air Resources Board and the EPA agreed in December of 2014 to allow a voluntary recall of the company’s diesel cars to fix what Volkswagen insisted was a technical – and easily solved – glitch.

The recall was rolled out nationally over a period of months. On Wednesday, California Air Resources Board spokesman Dave Clegern confirmed that the letters were part of that recall. “This is one of the fixes they presented to us as a potential solution. It didn’t work,” he said. Volkswagen, which had no obligation at the time it initiated the recall to disclose the discussions that had led to it, declined to comment on the letter. The controversy came to public attention last week after Volkswagen acknowledged it had deliberately deceived officials about how much its diesel cars polluted. The recall letter instructed owners of certain 2010-2014 Volkswagen vehicles with 2-liter diesel engines to contact dealers for a software update in order to fix an issue with the malfunction indicator light illuminating.

“If the [light] illuminates for any reason, your vehicle will not pass an IM emissions inspection in some regions,” the letter warned, noting that California required the update before it would renew vehicle registrations. “The vehicle’s engine management software has been improved to assure your vehicle’s tailpipe emissions are optimized and operating efficiently,” read the letter, which said an earlier software update increased the likelihood of the light illuminating.

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“We had 10 meetings with VW..” “Time and again they refused to tell us what was going on.”

How Smog Cops Busted Volkswagen and Brought Down Its CEO (Bloomberg)

The revelation that ended Martin Winterkorn’s career at Volkswagen AG came on Sept. 3 in a meeting at an office park east of Los Angeles. After months of obfuscation, company engineers finally divulged a secret to engineers at the California Environmental Protection Agency’s Air Resources Board: Volkswagen had installed a “defeat device” to cheat on vehicle emissions tests — and then lied about it to the board and the U.S. EPA for more than a year. On Sept. 23, Europe’s largest automaker announced that Winterkorn, its 68-year-old chief executive officer, had resigned. While the company exonerated him of involvement in the manipulations, it said it will conduct an internal investigation and has asked local German prosecutors to assist and open a criminal probe.

The unraveling began in 2013. European regulators, concerned about diesel pollution there, wanted to test emissions on vehicles sold in the U.S. under actual driving conditions. The results were expected to show real-world emissions were closer to lab performance in America than in Europe. But they weren’t. That prompted investigations in California that ultimately involved 25 technicians working almost full time. They discovered the software Volkswagen used to circumvent air-pollution regulations in at least 11 million cars. “This is going to become a very, very serious problem for Volkswagen and any other companies that may have had such practices,” said Donald W. Lyons, who founded the Center for Alternative Fuels, Engines and Emissions at West Virginia University.

The nonprofit International Council on Clean Transportation, with offices in Washington, Berlin and San Francisco, got the emissions-testing contract from European regulators. It then hired researchers at the Morgantown, West Virginia, center in early 2013. The center, which has studied engine emissions and use of alternative fuels since 1989, was going to evaluate three diesel passenger cars, including a Volkswagen Passat and Jetta. m“We never went into it saying,‘we’re going to catch a manufacturer,”’ said Arvind Thiruvengadam, a research assistant professor at the center. “We were totally looking and hoping to see something different.”[..]

Using portable measuring equipment with hoses attached to vehicle exhaust pipes, researchers drove the Jetta and BMW through Los Angeles and took the Passat to Seattle and back. They also worked with the California Air Resources Board’s laboratory in El Monte, which tested the cars on a dynamometer, a device that measures engine performance. When the Volkswagen cars were in the lab, they met the Clean Air Act standards. In the real world, they were belching out oxides of nitrogen at much higher levels than allowed. “There was a lot of texting and e-mailing back and forth,” among the two groups: “‘Whoa, things aren’t looking good here,”’ Carder said. In May 2014, the West Virginia center published the results of its study, prompting the California board to start an investigation.

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“..his team’s findings were made public nearly a year and a half ago..”

West Virginia Engineer Proves To Be A David To VW’s Goliath (Reuters)

Daniel Carder, an unassuming 45-year-old engineer with gray hair and blue jeans, appears an unlikely type to take down one of the world’s most powerful companies. But he and his small research team at West Virginia University may have done exactly that, with a $50,000 study which produced early evidence that Volkswagen AG was cheating on U.S. vehicle emissions tests, setting off a scandal that threatens the German automaker’s leadership, reputation and finances. “The testing we did kind of opened the can of worms,” Carder says of his five-member engineering team and the research project that found much higher on-road diesel emission levels for VW vehicles than what U.S. regulators were seeing in tests.

The results of that study, which was paid for by the nonprofit International Council on Clean Transportation (ICCT) in late 2012 and completed in May 2013, were later corroborated by the U.S. Environmental Protection Agency and California Air Resources Board (CARB). Carder’s team – a research professor, two graduate students, a faculty member and himself – performed road tests around Los Angeles and up the West Coast to Seattle that generated results so pronounced that they initially suspected a problem with their own research. “The first thing you do is beat yourself up and say, ‘Did we not do something right?’ You always blame yourself,” he told Reuters in an interview. “(We) saw huge discrepancies. There was one vehicle with 15 to 35 times the emissions levels and another vehicle with 10 to 20 times the emissions levels.”

Despite the discrepancies, a fix shouldn’t involve major changes. “It could be something very small,” said Carder, who’s the interim director of West Virginia University’s Center for Alternative Fuels, Engines and Emissions in Morgantown, about 200 miles (320 km) west of Washington in the Appalachian foothills. “It can simply be a change in the fuel injection strategy. What might be realized is a penalty in fuel economy in order to get these systems more active, to lower the emissions levels.” Carder said he’s surprised to see such a hullabaloo now, because his team’s findings were made public nearly a year and a half ago. “We actually presented this data in a public forum and were actually questioned by Volkswagen,” said Carder.

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Perpetual growth.

Forget ‘Developing’ Poor Countries, It’s Time To ‘De-Develop’ Rich Countries (Guardian)

This week, heads of state are gathering in New York to sign the UN’s new sustainable development goals (SDGs). The main objective is to eradicate poverty by 2030. Beyoncé, One Direction and Malala are on board. It’s set to be a monumental international celebration. Given all the fanfare, one might think the SDGs are about to offer a fresh plan for how to save the world, but beneath all the hype, it’s business as usual. The main strategy for eradicating poverty is the same: growth. Growth has been the main object of development for the past 70 years, despite the fact that it’s not working. Since 1980, the global economy has grown by 380%, but the number of people living in poverty on less than $5 (£3.20) a day has increased by more than 1.1 billion. That’s 17 times the population of Britain. So much for the trickle-down effect.

Orthodox economists insist that all we need is yet more growth. More progressive types tell us that we need to shift some of the yields of growth from the richer segments of the population to the poorer ones, evening things out a bit. Neither approach is adequate. Why? Because even at current levels of average global consumption, we’re overshooting our planet’s bio-capacity by more than 50% each year. In other words, growth isn’t an option any more – we’ve already grown too much. Scientists are now telling us that we’re blowing past planetary boundaries at breakneck speed. And the hard truth is that this global crisis is due almost entirely to overconsumption in rich countries.

Scientists tell us our planet only has enough resources for each of us to consume 1.8 “global hectares” annually – a standardised unit that measures resource use and waste. This figure is roughly what the average person in Ghana or Guatemala consumes. By contrast, people in the US and Canada consume about 8 hectares per person, while Europeans consume 4.7 hectares – many times their fair share. What does this mean for our theory of development? Economist Peter Edward argues that instead of pushing poorer countries to “catch up” with rich ones, we should be thinking of ways to get rich countries to “catch down” to more appropriate levels of development.

We should look at societies where people live long and happy lives at relatively low levels of income and consumption not as basket cases that need to be developed towards western models, but as exemplars of efficient living. How much do we really need to live long and happy lives? In the US, life expectancy is 79 years and GDP per capita is $53,000. But many countries have achieved similar life expectancy with a mere fraction of this income. Cuba has a comparable life expectancy to the US and one of the highest literacy rates in the world with GDP per capita of only $6,000 and consumption of only 1.9 hectares – right at the threshold of ecological sustainability. Similar claims can be made of Peru, Ecuador, Honduras, Nicaragua and Tunisia.

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Move over, darling.

‘Downsizing Could Free Up 2.5 Million British Homes’ (Guardian)

More than 2.5m homes could be released on to the property market if older owners were given better incentives and information on downsizing, the Royal Institution of Chartered Surveyors (Rics) has claimed. It said tackling the housing crisis needed to address barriers to supply, rather than simply addressing demand, and that 2.6m homes worth a combined £802bn could be released if homeowners received greater support to move into specialist retirement or smaller properties. The group’s Residential Policy Review also recommended that second homeowners should be charged full council tax to encourage them to sell or let the property, and that new developments should have a statutory percentage of affordable rented accommodation.

The report comes just days after the City regulator was forced to deny its policy was to encourage older homeowners to move, after comments made by a member of staff on its mortgage team sparked controversy. Increased life expectancy means that there around 11.4 million over-65s in the UK, and the figure is projected to rise to around 17.2 million by 2033. Currently, homeownership is concentrated in older age groups, with many owning their properties outright. Rics said communication about alternatives to staying in the family home were poor, meaning that options like retirement rental, housing co-operatives and shared housing were not being fully exploited. It acknowledged “there is a very strong emotional dimension to people’s homes, with considerable effort, both physical and emotional, to moving”.

Jeremy Blackburn, head of policy at Rics said: “Britain’s older homeowners are understandably reluctant to move out of much-loved, but often under-occupied family homes. “Clearly, it’s an emotive issue and one that needs to be treated with sensitivity, but we would like to see central and local government provide older people with the information, practical and financial support they need to downsize if that is their choice.” Blackburn cited the example of Bristol City council, which said it was offering a fund to support moving costs. “Almost a third of over 55s have considered downsizing in the last five years; yet we know that only 7% actually did,” he said.

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Not the first NHS warning in recent days.

Prepare For A Catastrophic NHS Winter Meltdown (Guardian)

The NHS is on the brink of a major, messy failure. If nothing is done to address the underlying issues now, the failure will be deep with grave consequences and a long recovery. This winter things are set to go catastrophically wrong. Pressure on health services normally reduces in summer, often producing undue optimism about how they will cope come winter and delaying necessary preparations. Last summer there was virtually no reduction in pressure. Oddly, this failed to dent the optimism. The revised story was that unrelenting pressure had become a year-round phenomenon, so increased numbers and longer waits were now normal and the coming winter wouldn’t be any worse. Unfortunately it was, the worst in 20 years.

Demand for healthcare had simply reached a new (summer) plateau, with new peaks of winter demand inevitable and predictable – but not predicted and not prepared for. Waits and delays soared, even though demand increased modestly, following a well-established trend. The crisis happened because the NHS starved itself of the capacity it needed, in the futile belief that lack of supply would constrain demand and so save money. This led not only to running out of spare capacity, but to shortages and the loss of the elasticity to cope with new peaks in demand. The result was waits and delays multiplied rather than increased, and it contributed to the worst NHS deficit in a decade.

Despite this, the lesson has not been learned that the NHS’s struggles this summer foreshadow a meltdown this winter. Some 90% of trusts are predicting a deficit this year. The deficits add up to £2bn, double last year’s figure. Performance continues to wallow, with little or no recovery from the long delays and extended waiting times of last winter. Crucially, performance this summer was worse than last summer, which prefigured last winter’s crisis. The obvious conclusion is that it prefigures something worse.

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