Oct 162018
 
 October 16, 2018  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , , ,  


M. C. Escher Doric columns 1945

 

Yemen On Brink Of ‘World’s Worst Famine In 100 Years’ (G.)
Humanity Is ‘Cutting Down The Tree Of Life’ (G.)
‘Hyperalarming’ Study Shows Massive Insect Loss (WaPo)
America’s Budget Deficit Jumps By 17% As Spending Surges (CNBC)
More Free Money: A Carry Trade in Liquidity (Mish)
Powell Has Lost His North Star, And The Fed Is Flying Blind (MW)
Facebook Paid £15.8 Million In UK Tax On £1.2 Billion In 2017 Revenues (BBC)
Ecuador To Assange: No Talking Politics, Pay Own Bills, Look After Cat (RT)
Brexit Deal Slipping To December Amid Deadlocked Talks (Ind.)
No-Deal Brexit Is ‘More Likely Than Ever Before’ – Tusk (Ind.)
Syria’s Chessboard (Hallinan)

 

 

As Stormy Daniels and Elizabeth Warren see their ‘cases’ blow up in their faces 3 weeks before the midterms, the best PR and legal teams that money can buy are framing a Khashoggi narrative nobody will be able to credibly deny. Or at least Erdogan is not showing his hand. But now that Pompeo’s in the region anyway, let’s put this on his agenda. 12 to 13 million at risk of starvation.

Yemen On Brink Of ‘World’s Worst Famine In 100 Years’ (G.)

Yemen could be facing the worst famine in 100 years if airstrikes by the Saudi-led coalition are not halted, the UN has warned. If war continues, famine could engulf the country in the next three months, with 12 to 13 million civilians at risk of starvation, according to Lise Grande, the agency’s humanitarian coordinator for Yemen. She told the BBC: “I think many of us felt as we went into the 21st century that it was unthinkable that we could see a famine like we saw in Ethiopia, that we saw in Bengal, that we saw in parts of the Soviet Union – that was just unacceptable. “Many of us had the confidence that would never happen again and yet the reality is that in Yemen that is precisely what we are looking at.”

Yemen has been in the grip of a bloody civil war for three years after Houthi rebels, backed by Iran, seized much of the country, including the capital, Sana’a. The Saudi-led coalition has been fighting the rebels since 2015 in support of the internationally recognised government. Thousands of civilians have been caught in the middle, trapped by minefields and barrages of mortars and airstrikes. The resulting humanitarian catastrophe has seen at least 10,000 people killed and millions displaced. Speaking on Sunday evening, Grande said: “There’s no question we should be ashamed, and we should, every day that we wake up, renew our commitment to do everything possible to help the people that are suffering and end the conflict.”

Read more …

And it’s not just people that we’re killing:

Humanity Is ‘Cutting Down The Tree Of Life’ (G.)

Humanity’s ongoing annihilation of wildlife is cutting down the tree of life, including the branch we are sitting on, according to a stark new analysis. More than 300 different mammal species have been eradicated by human activities. The new research calculates the total unique evolutionary history that has been lost as a result at a startling 2.5bn years. Furthermore, even if the destruction of wild areas, poaching and pollution were ended within 50 years and extinction rates fell back to natural levels, it would still take 5-7 million years for the natural world to recover. Many scientists think a sixth mass extinction of life on Earth has begun, propelled by human destruction of wildlife, and 83% of wild mammals have already gone.

The new work puts this in the context of the evolution and extinction of species that occurred for billions of years before modern humans arrived. “We are doing something that will last millions of years beyond us,” said Matt Davis at Aarhus University in Denmark, who led the new research. “It shows the severity of what we are in right now. We’re entering what could be an extinction on the scale of what killed the dinosaurs. “That is pretty scary. We are starting to cut down the whole tree [of life], including the branch we are sitting on right now.” Ecosystems around the world have already been significantly affected by the extermination of big animals such as mammoths, he said.

[..] Davis said each lost species had its own intrinsic value, but the loss of the most distinct creatures was most damaging: “Typically, if you have something that is off by itself, it does some job that no other species is doing.” The losses are already affecting ecosystems, he said, particularly the vanishing of “megafauna”. These huge creatures roamed much of Earth until humans arrived and included giant cats, deer, beavers and armadillos. “We are now living in a world without giants,” said Davis. “So the seeds of big fruit are not dispersed any more because we don’t have mammoths or gomphotheres or giant ground sloths eating those fruits.” Another example, he said, is the widespread loss of wolves. This means smaller predators like coyotes thrive and more birds are killed, radically changing food chains.

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“Between January 1977 and January 2013, the catch rate in the sticky ground traps fell 60-fold..”

“..our study indicates that climate warming is the driving force behind the collapse of the forest’s food web. ”

‘Hyperalarming’ Study Shows Massive Insect Loss (WaPo)

Insects around the world are in a crisis, according to a small but growing number of long-term studies showing dramatic declines in invertebrate populations. A new report suggests that the problem is more widespread than scientists realized. Huge numbers of bugs have been lost in a pristine national forest in Puerto Rico, the study found, and the forest’s insect-eating animals have gone missing, too. In 2014, an international team of biologists estimated that, in the past 35 years, the abundance of invertebrates such as beetles and bees had decreased by 45 percent. In places where long-term insect data are available, mainly in Europe, insect numbers are plummeting. A study last year showed a 76 percent decrease in flying insects in the past few decades in German nature preserves.

The latest report, published Monday in the Proceedings of the National Academy of Sciences, shows that this startling loss of insect abundance extends to the Americas. The study’s authors implicate climate change in the loss of tropical invertebrates. “This study in PNAS is a real wake-up call — a clarion call — that the phenomenon could be much, much bigger, and across many more ecosystems,” said David Wagner, an expert in invertebrate conservation at the University of Connecticut who was not involved with this research. He added: “This is one of the most disturbing articles I have ever read.”

[..] “We went down in ’76, ’77 expressly to measure the resources: the insects and the insectivores in the rain forest, the birds, the frogs, the lizards,” Lister said. He came back nearly 40 years later, with his colleague Andrés García, an ecologist at the National Autonomous University of Mexico. What the scientists did not see on their return troubled them. “Boy, it was immediately obvious when we went into that forest,” Lister said. Fewer birds flitted overhead. The butterflies, once abundant, had all but vanished. García and Lister once again measured the forest’s insects and other invertebrates, a group called arthropods that includes spiders and centipedes. The researchers trapped arthropods on the ground in plates covered in a sticky glue, and raised several more plates about three feet into the canopy.

The researchers also swept nets over the brush hundreds of times, collecting the critters that crawled through the vegetation. Each technique revealed the biomass (the dry weight of all the captured invertebrates) had significantly decreased from 1976 to the present day. The sweep sample biomass decreased to a fourth or an eighth of what it had been. Between January 1977 and January 2013, the catch rate in the sticky ground traps fell 60-fold. “Everything is dropping,” Lister said. The most common invertebrates in the rain forest — the moths, the butterflies, the grasshoppers, the spiders and others — are all far less abundant. “Holy crap,” Wagner said of the 60-fold loss.


Comparison of the average dry-weight biomass of arthropods caught per 12-h day in 10 ground (A) and canopy (B) traps within the same sampling area in the Luquillo rainforest.

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If there are no insects left, who cares about deficits? What’s the use?

America’s Budget Deficit Jumps By 17% As Spending Surges (CNBC)

The U.S. federal budget deficit rose in fiscal 2018 to the highest level in six years as spending climbed, the Trump administration said Monday. The deficit jumped to $779 billion, $113 billion or 17 percent higher than the previous fiscal period, according to a statement from Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney. It was larger than any year since 2012, when it topped $1 trillion. The budget shortfall rose to 3.9 percent of U.S. GDP. The deficit increased by $70 billion less than anticipated in a report published in July, according to the two officials.

Federal revenue rose only slightly, by $14 billion after Republicans chopped tax rates for corporations and most individuals. Outlays climbed by $127 billion, or 3.2 percent. A spike in defense spending, as well as increases for Medicaid, Social Security and disaster relief, contributed to the increase.

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“If the goal was to bail out the banks at public expense (and it was) it’s clear Bernanke had a far better plan than the ECB.”

More Free Money: A Carry Trade in Liquidity (Mish)

Not only do banks earn free money on excess reserves, they can borrow money and make guaranteed free money on that.

The Federal Reserve Bank of St. Louis discusses the Carry Trade in Liquidity: “The IOER [interest on excess reserves] has been the effective ceiling of other short-term interest rates. The figure above compares the IOER with overnight rates on deposits and repos. As we can see, the IOER has mostly remained above these two rates, implying that (at least some) banks have been able to borrow funds overnight, deposit them at the Fed and earn a spread, in essence engaging in carry trade in liquidity markets.”

How Much Free Money?

While the Fed has been busy giving banks free money by paying interest on excess reserves, banks in the EU have suffered with negative interest rates, essentially taking money from banks and making them more insolvent. If the goal was to bail out the banks at public expense (and it was), it’s clear Bernanke had a far better plan than the ECB.

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The Fed’s been flying blind at least since Bernanke talked about ‘entering uncharted territory’. That’s what that means.

Powell Has Lost His North Star, And The Fed Is Flying Blind (MW)

Federal Reserve Chairman Jerome Powell is in an unenviable position. Folks expect him to fine-tune interest rates to keep the economy going and inflation tame but he can’t make things much better — only worse. Growth is nearly 3% and unemployment is at its lowest level since 1969. What inflation we have above the Fed target of 2% is driven largely by oil prices and those by forces beyond the influence of U.S. economic conditions — OPEC politics, U.S. sanctions on Iran, and dystopian political forces in Venezuela and a few other garden spots. When the current turbulence in oil markets recedes, we are likely in for a period of headline inflation below 2%, just as those forces are now driving prices higher now.

Overall, long-term inflation has settled in at the Fed target of about 2%. The Fed should not obsess about it but keep a watchful eye. Amid all this, Powell’s inflation compass has gone missing. The Phillips curve, as he puts it, may not be dead but just resting. To my thinking, it’s in a coma if it was ever alive at all. That contraption is a shorthand equation sitting atop a pyramid of more fundamental behavioral relationships. Those include the supply and demand for domestic workers and in turn, an historically large contingent labor force of healthy prime-age adults sitting on the sidelines, the shifting skill requirements of a workplace transformed by artificial intelligence and robotics, import prices influenced by weak growth in Europe and China, and immigration.

Of course, Mariner Powell has his North Star — what economists affectionately call R* (R-Star), but it is no longer at a fixed position in Powell’s sky. R* is the federal funds rate that neither encourages the economy to speed up or slow down. However, with businesses needing much less capital to get started or grow these days and for decades China and Germany—the second and fourth largest economies globally—racking up current account surpluses and savings to invest abroad, it is no wonder the forces of supply and demand have been driving R* down to historically low levels.

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They use what they don’t pay in taxes, to spy on you.

Facebook Paid £15.8 Million In UK Tax On £1.2 Billion In 2017 Revenues (BBC)

Facebook’s UK tax bill has tripled to £15.8m – but the social media giant will see an immediate cut because of a tax credit. The final bill comes to £7.4m, since Facebook will see tax relief of £8.4m after awarding shares to employees. In 2016, Facebook’s tax bill rose to £5.1m, following a major overhaul of the social media firm’s tax structure. However, the company’s profits only climbed by £4m year-on-year from £58.4m to £62.7m in 2017. The company’s UK office provides marketing services and sales and engineering support to the company. Facebook’s revenue rose by a third year-on-year to £1.2bn in 2017, because of increased revenues from inter-company and advertising reseller services in 2017.

“We have changed the way we report tax so that revenue from customers supported by our UK teams is recorded in the UK and any taxable profit is subject to UK corporation tax,” said Facebook’s Northern Europe vice-president, Steve Hatch. [..] The publication of Facebook’s 2017 tax accounts follows extensive criticism from policymakers and the media over the last 12 months of how much tax tech giants typically pay in Europe. Large technology companies have been condemned for moving sales through other countries and paying modest amounts of tax in the UK.

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Hard to gauge what exactly this means, time must tell. Seems good that they talk of medical help. but will he be able to get it?

Ecuador To Assange: No Talking Politics, Pay Own Bills, Look After Cat (RT)

WikiLeaks supporters were thrilled to hear that Ecuador would restore Julian Assange’s internet connection. But his hosts – who have in some ways become his jailers – reportedly imposed a long list of restrictions on his behavior. While stating that he is allowed to exercise his “right of communication and freedom of expression,” a nine-page document already leaked online forbids the journalist from engaging in political activity or doing anything to interfere in the affairs of other states. The document expressly states that Ecuador cannot be held liable for the content of Assange’s communications, but nevertheless prohibits him from engaging in activities that might damage the relationship between Ecuador and other states.

Assange’s communications were cut seven months ago, after he criticized Spanish authorities’ treatment of voters during the Catalan independence referendum. Assange must pay for his own WiFi. He must use only his own devices, absent written government permission, and provide the embassy with serial number, model number, and brand name for those devices. He must also pay for his own medical evaluations, with the option of transferring to a hospital in case of an emergency – an option repeatedly denied him by UK authorities, who refused to guarantee safe passage without arrest in the event of such a transfer. Assange’s health has been the subject of much concern during his six-year confinement in the Embassy.

Visitors are also slapped with new restrictions. They must submit visit requests in writing to the embassy chief, giving their name, nationality, profession and place of work, reason for visiting, email and social media accounts, and even the serial numbers for phones and other devices they wish to bring inside. The new rules even mandate the collection of IMEIs, unique identification numbers specific to a phone handset. While repeat visitors receive a less restrictive screening process, they can have their access revoked at any time without an explanation. All visitor data will be turned over to the Ecuadorian Ministry of Foreign Affairs and other unspecified parties.

The restrictions include a threat to use UK police to arrest visitors or seize communications equipment should the journalist violate the lengthy list of rules. Adding insult to injury, the embassy threatened to remove Assange’s cat to a shelter should they decide he is not cleaning up after the animal properly.

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They lost two years doing nothing but fight amongst themselves. That time was always badly needed.

Brexit Deal Slipping To December Amid Deadlocked Talks (Ind.)

A Brexit deal now looks unlikely until just before Christmas after Theresa May admitted “weeks” may be needed to break the deadlock in talks with Brussels. The delay was also signalled by Ireland’s prime minister who warned of log-jammed negotiations dragging into December, increasing concern that stalled talks could simply collapse into a “disaster” no-deal situation. In a veiled swipe at Brexiteers, European Council President Donald Tusk said solving the vexed issue of the Irish border had proved “more complicated than some may have expected” and said no deal is now “more likely than ever”.

A further sign of slippage came when the EU confirmed it would take a decision this week on whether a special summit once proposed for November to publicly seal a Brexit deal, will be needed given the state of talks. But despite the deadlock, Ms May again came under intense pressure from Conservative Eurosceptics to refuse anything resembling the EU’s proposals, amid signs she is diluting her stance to secure a deal. The October summit was once supposed to be the moment a withdrawal deal was locked in, with expectations already having slipped to a potential specially arranged meeting in November – even under those circumstances the outline would have had to have been agreed at this week’s meeting.

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More likely by the day.

No-Deal Brexit Is ‘More Likely Than Ever Before’ – Tusk (Ind.)

A no-deal Brexit is “more likely than ever before”, the president of the European Council has warned, ahead of a make-or-break summit of EU leaders in Brussels. Donald Tusk, who has described this week’s top-level meeting as “the moment of truth”, said Brexit had “proven to be more complicated than some may have expected”. But he said that “that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible”.

Mr Tusk’s warning, made in a letter to EU leaders formally inviting them to the summit, comes a day after negotiations between the European Commission and UK Government hit a a wall over the question of how to prevent a hard border in Northern Ireland. Over dinner on Wednesday night the heads of state or government of the 27 remaining EU member states will decide whether there is any pointing holding a special Brexit summit in November – or whether the horse has already bolted. It is now confirmed that Theresa May will address the 27 leaders before the dinner in a last-ditch bid to win them over; though she will not be allowed into the main discussion itself.

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Russia and Assad delayed their final offensive to offer the jihadists a way out. But now these are refusing to leave.

Syria’s Chessboard (Hallinan)

The Syrian civil war has always been devilishly complex, with multiple actors following different scripts, but in the past few months it appeared to be winding down. The Damascus government now controls 60 percent of the country and the major population centers, the Islamic State has been routed, and the rebels opposed to Syrian President Bashar al-Assad are largely cornered in Idilb Province in the country’s northwest. But suddenly the Americans moved the goal posts—maybe—the Russians have fallen out with the Israelis, the Iranians are digging in their heels, and the Turks are trying to multi-task with a home front in disarray. So the devil is still very much at work in a war that has lasted more than seven years, claimed up to 500,000 lives, displaced millions of people, destabilized an already fragile Middle East, and is far from over.

There are at least three theaters in the Syrian war, each with its own complexities: Idilb in the north, the territory east of the Euphrates River, and the region that abuts the southern section of the Golan Heights. Just sorting out the antagonists is daunting. Turks, Iranians, Americans and Kurds are the key actors in the east. Russians, Turks, Kurds and Assad are in a temporary standoff in the north. And Iran, Assad and Israel are in a faceoff near Golan, a conflict that has suddenly drawn in Moscow. Assad’s goals are straightforward: reunite the country under the rule of Damascus and begin re-building Syria’s shattered cities. The major roadblock to this is Idilb, the last large concentration of anti-Assad groups, Jihadists linked with al-Qaeda, and a modest Turkish occupation force representing Operation Olive Branch. The province, which borders Turkey in the north, is mountainous and re-taking it promises to be difficult.

For the time being there is a stand down. The Russians cut a deal with Turkey to demilitarize the area around Idilb city, neutralize the jihadist groups, and re-open major roads. The agreement holds off a joint Assad-Russian assault on Idilb, which would have driven hundreds of thousands of refugees into Turkey and likely have resulted in large numbers of civilian casualties. But the agreement is temporary—about a month—because Russia is impatient to end the fighting and begin the reconstruction. However, it is hard to see how the Turks are going to get a handle on the bewildering number of groups packed into the province, some of which they have actively aided for years. Ankara could bring in more soldiers, but Turkey already has troops east of the Euphrates and is teetering on the edge of a major economic crisis.

Read more …

Feb 122016
 
 February 12, 2016  Posted by at 10:01 am Finance Tagged with: , , , , , , , , ,  


NPC Ezra Meeker’s Wild West show rolls into town, Washington DC 1925

Japanese Stock Market Plunges 5% As Global Rout Gathers Pace (Guardian)
Asian Shares Slip As Bank Fears Add To Global Gloom (Reuters)
Global Assault on Banks Intensifies as Investors Punish Weakness (BBG)
Emerging Stocks Rout Deepens on Risk Aversion as Currencies Drop (BBG)
Yuan Declines Most in Two Weeks as Global Selloff Saps Sentiment (BBG)
Asia’s Rich Advised to Buy Yen as BOJ’s Negative Rates Backfire (BBG)
Who Stole The Yen Carry Trade? (CNBC)
If Credit Is Right, The S&P Is Facing A 40% Crash (ZH)
How Much Further Could Stocks Fall? (BI)
S&P Cuts Deutsche Bank’s Tier 1 Securities Rating To B+ from BB- (Reuters)
The Week When Central Bank Planning Died? (MW)
China Buys The World With State-Backed Debt (FT)
China Turns a Glut of Oil Into a Flood of Diesel (BBG)
11.5% Of Syrian Population Killed Or Injured (Guardian)
Greeks At Frontline Of Refugee Crisis Angry At Europe’s Criticism (Reuters)
The Grandmothers Of Lesvos (Kath.)

I’ve asked the question before: how much longer for Abe? He demanded the GPIF moved its pension money into stocks.

Japanese Stock Market Plunges 5% As Global Rout Gathers Pace (Guardian)

The global stock market rout has continued in Asia Pacific with Japanese stocks plunging nearly 5% as investors continued to dump risky assets amid uncertainty about the stability of the financial system. Tokyo was heading for its biggest weekly fall for more than seven years, after fears over a slowdown in the global economy and an overnight selloff in banking shares sent the Nikkei share average down by 4.84%. After 24 hours’ respite offered by a public holiday on Thursday, the Nikkei share index sank below 15,000 points for the first time in 16 months. The Nikkei has fallen 12% over the week, putting it on course for its biggest weekly drop since October 2008.

Markets across the region were caught up in the selling despite the promise of a better day when oil prices jumped 5% on comments by an Opec energy minister sparked hopes of a coordinated production cut. South Korea’s main Kospi index ended the day 1.4% while the Kosdaq index of smaller stocks was suspended after plummeting more than 8%. The Hang Seng index was off 1% in Hong Kong. In Australia, where shares entered bear territory earlier in the week, stocks closed down more than 1% led lower by the country’s huge banking sector. The sell-off came despite comments from the Reserve Bank governor Glenn Stevens that fears of global slump were “overdone” and that investors were panicking.

The sell-off on Friday prompted the value of the yen, gold and government bonds to soar as investors rushed to traditional safe-haven assets. The yen was 110.985 to the US dollar on Thursday – its lowest level since October 2014 – punishing Japanese exporters, whose overseas earnings will suffer further if the yen continues on its current trajectory. “The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States,” said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

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Hmmm. We haven’t talked about Japanese banks much yet, have we?

Asian Shares Slip As Bank Fears Add To Global Gloom (Reuters)

Asian shares slipped on Friday as mounting concerns about the health of European banks further threatened a global economic outlook already under strain from falling oil prices and slowdown in China and other emerging markets. The prices of yen, gold and liquid government bonds of favoured countries soared as investors rushed to traditional safe-haven assets. “The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States,” said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management. “I do not expect a collapse or major financial crisis like the Lehman crisis but it will take some before market sentiment will improve,” he added.

MSCI’s index of Asia-Pacific shares outside Japan fell 0.5%. Japan’s Nikkei fell 5.3% to a 15-month low as sudden spike in the yen took most investors by surprise. “It is hard to find a bottom for stocks when the yen is strengthening this much. It is hard to become bullish on the market in the near future,” said Masaki Uchida, executive director of equity investment at JPMorgan Asset Management. “But the valuation of some (Japanese) bank shares is extremely cheap. So for long-term investors, it could be a good level to buy,” he added. Financial shares led losses in Australia and Hong Kong though their declines are still modest compared to peers in Europe and the US.

The strengthening yen touched 110.985 to the dollar on Thursday, rising almost 10% from its six-week low touched on Jan 29, when the Bank of Japan introduced negative interest rates. The currency last stood at 112.22 yen, hardly showing any reaction after Japanese Finance Minister Taro Aso stepped up his verbal intervention on Friday, saying he would take appropriate action as needed. MSCI’s broadest gauge of stock markets fell 0.6% in Asia on Friday, flirting with its lowest level since June 2013. It has fallen fell more than 20% below its record high last May, confirming global stocks are in a bear market.

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Banks are bubbles.

Global Assault on Banks Intensifies as Investors Punish Weakness (BBG)

Credit Suisse Group AG shares plunged to the lowest in a generation and a one-year contract to insure Deutsche Bank debt against default surged to a record as a global rout in financial companies intensified. Theories abound as to what lies behind the selloff, with some traders fretting over falling oil prices, China’s slowing economy and negative interest rates. A pullback by some sovereign-wealth funds has also been blamed for lower asset prices. Whatever the cause, the hammering has been the worst in Europe, where concerns persist about the health of some of the biggest banks eight years after the financial crisis. “The market is aggressively penalizing banks,” said Nikhil Srinivasan at Assicurazioni Generali in Milan. “It’s going to be a challenging 2016, and I don’t see a short tunnel – this could go on for a while.”

Investors are fleeing lenders that show signs of weakness, as Societe Generale did yesterday when the Paris-based bank said it might miss its profitability goal this year. The stock plunged 13%, the most since 2011. Both Credit Suisse and Deutsche Bank published dismal fourth-quarter results in recent weeks that have sent shareholders and bondholders to the exits. U.S. lenders haven’t been spared. JPMorgan dropped to the lowest in more than two years after Federal Reserve Chair Janet Yellen said Thursday that the central bank was taking another look at negative interest rates as a potential policy tool if the U.S. economy faltered, a scenario some investors view as a possibility amid a darkening outlook for world growth.

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South Korea even halted its small cap trading for a while.

Emerging Stocks Rout Deepens on Risk Aversion as Currencies Drop (BBG)

Emerging-market equities headed for the worst weekly drop in a month and currencies retreated as anxiety over the worsening outlook for global growth sapped demand for riskier assets. South Korea’s Kospi led declines on Friday, poised for its worst week since August, as benchmark indexes in the Philippines and Indonesia fell. Chinese shares traded in Hong Kong slumped while markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays. Malaysia’s ringgit and South Africa’s rand weakened the most and a gauge of 20 developing-nation currencies was set for its first five-day drop since mid-January.

World equities descended into a bear market on Thursday amid growing skepticism that central banks can arrest the slide in the world economy, and as crude oil in new York closed at the lowest level in more than 12 years. Signals from central banks in Europe and Japan that additional stimulus is likely did little to ease concerns about growth. Investors ignored a second day of testimony from Federal Reserve Chair Janet Yellen, whose indication that the U.S. won’t rush to raise interest rates failed to stem a global selloff.

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Beijing is going to have a real exciting weekend.

Yuan Declines Most in Two Weeks as Global Selloff Saps Sentiment (BBG)

The offshore yuan fell the most in two weeks, tracking Asian currencies and stocks lower as a global selloff eroded the appeal of riskier assets. Equity markets sank into bear territory amid skepticism central banks can arrest a slide in the world economy. The Bloomberg-JPMorgan Asia Dollar Index fell for a second day while stocks in Hong Kong headed for their lowest close in more than three years. Federal Reserve Chair Janet Yellen said this year’s global tumult was in response to a drop in the yuan and in oil prices, and not the U.S. central bank’s rate increase in December. A gauge of the dollar’s strength rose 0.1% on Monday, paring its decline from Feb. 5 to 0.8%.

The yuan traded in Hong Kong fell 0.16% to 6.5399 a dollar as of 11:50 a.m. local time, ending three days of gains, according to China Foreign Exchange Trade System prices. The currency is headed for a 0.4% advance for the week. China’s onshore financial markets will reopen on Monday, after a week-long holiday, with investors watching out for what the People’s Bank of China will do with the yuan’s reference rate. “There’s a tug of war right now as people are debating whether the dollar’s weakness and its effect on emerging-market currencies will be sustainable,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. China’s central bank is likely to keep the yuan’s fixing stable on Monday, he added.

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The hilarious reaction to Kuroda’s, and Abenomics’, failure.

Asia’s Rich Advised to Buy Yen as BOJ’s Negative Rates Backfire (BBG)

Money managers for Asia’s wealthy families are favoring the yen as it benefits from the turmoil in global financial markets. Credit Suisse is advising its private-banking clients to buy the yen against the euro or South Korean won because the Japanese currency remains undervaluedversus the dollar. Stamford Management Pte, which oversees $250 million for Asia’s rich, told clients the yen is set to strengthen to 110 against the dollar as soon as the end of this month. Singapore-based Stephen Diggle, who runs Vulpes Investment Management, plans to add to assets in Japan where the family office already owns hotels and part of a nightclub in a ski resort. The yen has outperformed all 31 other major currencies this year as Japan’s current-account surplus makes it attractive for investors seeking a haven.

Bank of Japan Governor Haruhiko Kuroda’s Jan. 29 decision to adopt negative interest rates has failed to rein in the currency’s advance. “All existing drivers still point to more yen strength,” said Koon How Heng, senior foreign-exchange strategist at Credit Suisse’s private banking and wealth management unit in Singapore. “The BOJ will need to do more to convince the markets about the effectiveness of its negative interest-rate policy.” The yen has appreciated 7% against the dollar this year to 112.32 as of 12:10 p.m. in Tokyo Friday. It touched 110.99 Thursday, the strongest level since Oct. 31, 2014, the day the BOJ unexpectedly increased monetary stimulus for the second time during Kuroda’s tenure.

That’s a drawback for the central bank governor. He needs a weaker yen to help meet his target of boosting Japan’s inflation rate to 2% and keep exports competitive. Stamford Management has briefed some of the families whose wealth it helps to manage about the firm’s “bullish stance” on the yen, said its chief executive officer, Jason Wang. “The adoption of negative interest rates reeks of desperation to me,” Wang said. “It’s akin to an admission by the BOJ that conventional monetary policy is ineffective in hitting their 2% inflation target.”

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Abe.

Who Stole The Yen Carry Trade? (CNBC)

Japan’s descent into a negative interest rate policy should have weakened the yen, but instead it’s spurring a rally as appetite for using the currency to fund other bets wanes. The yen strengthened on Thursday to highs not seen since October of 2014, with the dollar fetching as few as 110.98 yen. That’s despite the Bank of Japan (BOJ) blindsiding global financial markets on January 29 by adopting negative interest rates for the first time ever – a move that should spur outflows of the local currency, not inflows. Instead, a confluence of factors – worries about banks’ profits, a commodities price slump and uncertainty over the Federal Reserve’s hiking path – is causing an old favorite, the yen carry trade, to fall out of fashion, which means the currency is moving in the opposite direction to that expected in the wake of the BOJ’s surprise rates move.

“The advent of negative rates is compounding concerns about underlying strains in the financial sector and bank profitability,” Ray Attrill, co-head of foreign-exchange strategy at National Australia Bank, told CNBC’s “Street Signs” on Wednesday. Japanese investors are repatriating funds in part because the BOJ’s move sparked concerns that other central banks could wage a campaign of competitive rate cuts in response. This in turn caused worries about global banks’ earnings because negative interest rates in Japan – as well as low interest rates globally – dents the banks’ net interest margins. That’s a driver of why bank shares have sold off particularly viciously in recent weeks amid a wider global market rout.

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“…and credit is always right in the end!”

If Credit Is Right, The S&P Is Facing A 40% Crash (ZH)

…and credit is always right in the end! 1,100 is the target…

High Yield bond yields and Leveraged Loan prices are at their worst since 2009 as it seems the hosepipe of QE3 liquidity (its the flow not the stock, stupid) is slowly unwound from a buybacks-are-over equity market.

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The Doug Short graph comes with a ton of caveats, but stock valuations sure look high.

How Much Further Could Stocks Fall? (BI)

A few months ago, I noted that stocks were so frighteningly expensive that they could fall more than 50%. I also noted that that would not be the worst-case scenario. Well, since then, stocks have fallen sharply, and they’re now down about 15% off their highs. So how much further could they fall? On a valuation basis, I’m sorry to say, they could fall much further. It would take at least another 30% drop from here – call it 1,200 on the S&P 500 – before stock prices reached even historically average levels. And that would by no means be the worst-case scenario. Why do I say this? Because, by many historically predictive valuation measures, even after the recent 15% haircut, stocks are still overvalued to the tune of ~60%. That’s better than the ~80% over-valuation of a few months ago.

But it’s still expensive. In the past, when stocks have been this overvalued, they have often corrected by crashing — in 1929, 1987, 2000, and 2007, for example . They have also sometimes corrected by moving sideways and down for a long, long time — in 1901-1920 and 1966-1982, for example. After long eras of over-valuation, like the period we have been in since the late 1990s (with the notable exceptions of the lows after the 2000 and 2007 crashes), stocks have also often transitioned into an era of undervaluation, often one that lasts for a decade or more. In short, stocks are still so expensive on historically predictive measures that they are priced to deliver annual returns of only about 2%-3% per year for the next decade. So a stock-market crash of ~50% from the peak would not be a surprise. It would also not be the “worst-case scenario.” The “worst-case scenario,” which has actually been a common scenario over history, is that stocks would drop by, say 75% peak to trough.

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Coco no more.

S&P Cuts Deutsche Bank’s Tier 1 Securities Rating To B+ from BB- (Reuters)

Rating agency Standard and Poors on Thursday said it cut Deutsche Bank AG’s Tier 1 securities rating to B+ from BB- and also lowered Deutsche Bank Capital Finance Trust I perpetual Tier 2 instrument rating to BB- from BB. S&P said the bank’s €4.3 billion pro forma payment capacity for 2017 should be sufficient to enable continued Tier 1 interest payments, but its German GAAP earnings prospects are difficult to foresee amidst restructuring and volatile market conditions. The rating change with a stable outlook reflects the expectation that the Frankfurt-based bank will make steady progress during the next two years towards its financial and operational targets for 2020, S&P added.

Shares of Deutsche Bank have fallen about 40% since the start of this year as shareholders expressed doubts over the management’s execution of its two-year turnaround plan, announced last October. The bank, seeking to reassure investors, said on Monday it had “sufficient” reserves to make payments due this year on AT1 securities. Deutsche Bank is also looking at buying back several billion euros worth of its debt in an effort to reverse the falling value of its securities, the Financial Times said on Tuesday. However, S&P expects the German bank’s profitability to remain relatively poor in 2016-2017, due to restructuring charges and likely further litigation provisions.

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Close, yes.

The Week When Central Bank Planning Died? (MW)

Has the “Yellen put” finally expired? Financial markets are in the grips of a global rush to safety. Central banks, whose flood of liquidity have been given much of the credit for the sharp postcrisis rise in stocks and other asset prices, seem unable to stem the tide. “This week may go down in financial history as the week when central bank planning died—the 2016 version of the fall of the Berlin Wall. It sounds worse than it is, as this was always coming,” said Steen Jakobsen, chief economist at Saxo Bank, in a Thursday note. Markets took little comfort in two days of testimony by Federal Reserve Chairwoman Janet Yellen. The S&P 500 and Dow Jones Industrial Average posted their fifth straight decline Thursday. The yen, meanwhile, has soared despite the Bank of Japan’s easing efforts.

It was the Bank of Japan’s surprise decision in late January to impose a negative rate on some deposits that appeared to rock investor faith. As MarketWatch noted at the time, the move was viewed by many economists as desperate. Moreover, with central banks continually undershooting inflation targets despite extraordinarily loose policy, there are growing fears that the ability of monetary policy to affect the real economy has been impaired. The ability of central banks to steer the market—or vice versa—was first dubbed the “Greenspan put,” then renamed the “Bernanke put,” and, finally, the “Yellen put.” A put option gives an investor the right to sell the underlying security at a preset strike price. In other words, bullish stock investors could count on central bankers to keep a floor under the market. That’s what some think is finally coming to an end.

“We have relied on central bankers to fix the world’s economic woes, when all they could really do was to get the global financial system back on an even keel,” said Kit Juckes, global macro strategist at Société Générale, in a note. “Keeping policy too easy, for too long and boosting asset markets in the vain hope that this would deliver a sustainable pickup in demand has meant that even a timid attempt at normalizing Fed policy has caused two months of mayhem.” Now, amid a growing realization that central banks’ powers are on the wane, investors are rushing for havens, he said. The Bank of Japan wasn’t the first major central bank to go negative. It joined the European Central Bank and the Swiss National Bank, as well as the Swedish and Danish central banks. But there are fears that negative rates will prove counterproductive.

Central banks have implemented negative rates in an effort to halt the hoarding of cash in a bid to fuel spending and push up inflation. But skeptics fear the strategy could backfire. “The increasing number of central banks adopting [negative interest rate policies] is weighing on the profit outlook for financial companies that now must pay to hold some of their reserves at the central bank and hurting the performance of the global financial sector.,” wrote Jeffrey Kleintop, global chief investment strategist at Charles Schwab, in a blog post. A main worry is that banks might have to push up lending rates to cover the cost of holding some reserves at the central bank. As a result, it’s the financial sector, not falling oil, that has been the leading driver of the fall in global stocks in 2016, Kleintop said (see chart).

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Now combine this with Kyle Bass’ assertion that FX reserves are already depleted. What exactly are they buying foreign companies with then?

China Buys The World With State-Backed Debt (FT)

The warnings are clear for ChemChina. The company behind China Inc’s biggest outward investment bid will be hoping to avoid the unhappy experiences suffered by some of the country’s earlier trailblazers. The state-owned oil company Cnooc , for example, ran into problems after it paid a record $15bn in 2013 for Nexen, one of Canada’s largest oil firms. Cnooc began with good intentions, paying a 60% premium to Nexen’s share price, only to suffer from the prolonged slump in global oil prices. A huge pipeline spill and a retreat from promises to safeguard Canadian jobs — it fired senior Nexen executives and laid off hundreds of staff — have further dented goodwill around the deal. Investments by other Chinese stalwarts have also hit turbulence, falling at regulatory hurdles or unravelling for commercial reasons.

“Chinese investment overseas is a double-edged sword,” says Derek Scissors, of the American Enterprise Institute. The outward embrace of China Inc raises a series of challenges for target companies and countries, he adds. Common problems arise from a mismatch of regulatory systems, a clash of corporate cultures and commercial miscalculations. China is not alone in having deals that hit problems — it happens to US and European companies also. But increasingly the issue for Chinese deals is debt. Analysts say that a surge in the indebtedness of corporate China since 2009 has meant that many of its largest companies are looking for acquisitions abroad while dragging behind them mountains of unpaid loans and bonds. ChemChina, which is offering $44bn for Syngenta, the Swiss agrichemical giant, is a case in point.

Its total debt is 9.5 times its annual earnings before interest, tax, depreciation and amortisation (ebitda), putting it into the “highly-leveraged” category as defined by Standard & Poor’s, the rating agency. This, say analysts, highlights the nature of ChemChina’s planned acquisition before even a cent has been paid. The proposed deal is not between two commercial businesses but between the Chinese state and a Swiss company. “Bids like that by ChemChina are backed by the state,” Mr Scissors says. “There is no chance a company as heavily leveraged as this would be able to secure this level of financing on a commercial basis. “If your financials are out of whack with every commercial company on the planet then you can call yourself commercial but you are not,” he adds. The issue with debt is by no means confined to ChemChina.

The median debt multiple of the 54 Chinese companies that publish financial figures and did deals overseas last year was 5.4, according to data from S&P Global Market Intelligence. Many would be regarded as “highly leveraged”. Some companies are almost off the chart. Zoomlion, a lossmaking and partially state-owned Chinese machinery company that is bidding for US rival Terex, has a debt multiple of 83; by comparison Terex’s is 3.6. China Cosco, a state-owned shipping company, is seven times more indebted than Piraeus Port Authority in Greece, which it bought for €368.5m last month . The state-owned Cofco Corporation, which recently reached an agreement with Noble Group, the commodities trader, under which its subsidiary Cofco International would acquire a stake in Noble Agri for $750m, has debts equivalent to 52 times its ebitda.

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Wiping out the entire region’s oil processing industry.

China Turns a Glut of Oil Into a Flood of Diesel (BBG)

Fuel producers from India to South Korea are finding that rising refined products from China are cutting the profit margins they’ve enjoyed from cheap oil to the lowest in more than a year. Worse may be coming. China’s total net exports of oil products – a measure that strips out imports – will rise 31% this year to 25 million metric tons, China National Petroleum Corp., the country’s biggest energy company, said in its annual research report last month. That comes after diesel exports jumped almost 75% last year.

“If China dumps more fuel into the market, international prices will crash,” said B.K. Namdeo, director of refineries at India’s state-run Hindustan Petroleum. “It will be similar to what happened to crude prices due to the oversupply. If international prices of oil products come down, then it will hurt margins of all refiners.” A common measure of refining profitability in Asia – the margin from turning Middle East benchmark Dubai grade into fuels including diesel and gasoline in the regional trading hub of Singapore – slid this week to the lowest level since October 2014, adding to mounting evidence that China’s exports are weighing on Asian processors.

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Let’s blame Russia.

11.5% Of Syrian Population Killed Or Injured (Guardian)

Syria’s national wealth, infrastructure and institutions have been “almost obliterated” by the “catastrophic impact” of nearly five years of conflict, a new report has found. Fatalities caused by war, directly and indirectly, amount to 470,000, according to the Syrian Centre for Policy Research (SCPR) – a far higher total than the figure of 250,000 used by the United Nations until it stopped collecting statistics 18 months ago. In all, 11.5% of the country’s population have been killed or injured since the crisis erupted in March 2011, the report estimates. The number of wounded is put at 1.9 million. Life expectancy has dropped from 70 in 2010 to 55.4 in 2015. Overall economic losses are estimated at $255bn (£175bn).

The stark account of the war’s toll came as warnings multiplied about Aleppo, Syria’s largest city, which is in danger of being cut off by a government advance aided by Russian airstrikes and Iranian militiamen. The Syrian opposition is demanding urgent action to relieve the suffering of tens of thousands of civilians. The International Red Cross said on Wednesday that 50,000 people had fled the upsurge in fighting in the north, requiring urgent deliveries of food and water. Talks in Munich on Thursday between the US secretary of state, John Kerry, and his Russian counterpart, Sergei Lavrov, will be closely watched for any sign of an end to the deadly impasse. UN-brokered peace talks in Geneva are scheduled to resume in two weeks but are unlikely to do so without a significant shift of policy.

Of the 470,000 war dead counted by the SCPR, about 400,000 were directly due to violence, while the remaining 70,000 fell victim to lack of adequate health services, medicine, especially for chronic diseases, lack of food, clean water, sanitation and proper housing, especially for those displaced within conflict zones. “We use very rigorous research methods and we are sure of this figure,” Rabie Nasser, the report’s author, told the Guardian. “Indirect deaths will be greater in the future, though most NGOs [non-governmental organisations] and the UN ignore them. “We think that the UN documentation and informal estimation underestimated the casualties due to lack of access to information during the crisis,” he said. In statistical terms, Syria’s mortality rate increased from 4.4 per thousand in 2010 to 10.9 per thousand in 2015.

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“Beyond commands, we’re human. We’ll lose heart, we’ll cry, we’ll feel sad if something doesn’t go well. There isn’t a person who won’t be moved by this..”

Greeks At Frontline Of Refugee Crisis Angry At Europe’s Criticism (Reuters)

Some EU members have suggested Greece should be suspended from Schengen if it does not improve. But the criticism and threats have been met with anger in Greece. Prime Minister Alexis Tsipras on Wednesday said the EU was “confused and bewildered” by the migrant crisis and said the bloc should take responsibility like Greece has done, despite being crash-strapped. Most Greeks, including the coast guard, the army, the police were “setting an example of humanity to the world,” Tsipras said. For those at the frontline, foreign criticism is even more painful. “We’re giving 150%,” said Lieutenant Commander Antonis Sofiadelis, head of coast guard operations on Lesvos. Once a dinghy enters Greek territorial waters, the coast guard is obliged to rescue it and transport its passengers to the port.

”The sea is not like land. You’re dealing with a boat with 60 people in constant danger. It could sink, they could go overboard,” he said. More than a million people, many fleeing war-ravaged countries and poverty in the Middle East and Africa, reached Europe in the past year, most of them arriving in Greece. For the crews plying a 250-km-long coastline between Lesvvos and Turkey, the numbers attempting the crossing are simply too big to handle. It is but a fraction of a coastline thousands of kilometers long between Greece and Turkish shores. ”The flow is unreal,” Sofiadelis said. Lesvos has long been a stopover for refugees. Locals recall when people fleeing the Iraqi-Kurdish civil war in the mid-1990s swam across from Turkey. Yet those numbers do not compare to what has become Europe’s biggest migration crisis since WWII and which has continued unabated despite the winter making the Aegean Sea even more treacherous.

After days of gale force winds and freezing temperatures, more than 2,400 people arrived on Greece’s outlying islands on Monday, nearly double the daily average for February, according to United Nations data. Sofiadelis, the Lesvos commander, said controls should be stepped up on the Turkish side, while Europe should provide assistance with more boats, more staff and better monitoring systems such as radars and night-vision cameras. Greek boats, assisted by EU border control agency Frontex, already scan the waters night and day. By late morning on Monday, Captain Frangoulis and his crew – including a seafaring dog picked up at a port years ago – have been at sea for more than 24 hours. Each time his crew spot a boat that could be carrying migrants “our stomach is tied up in knots,” Frangoulis said.

”There’s this fear that everything must go well, everyone boards safely, no child falls in the sea, no one’s injured.” Though fewer than 10 nautical miles separate Lesvos from Turkish shores, hundreds of people have drowned trying to make it across. Patrol boats, as well as local fishermen, have often fished out corpses from the many shipwrecks of the past months, the bodies blackened and bruised from days at sea. After every rescue operation, a sense of relief fills the crews. Once the Agios Efstratios docked at the Lesvos harbour on Monday, Frangoulis’ beaming crew helped passengers disembark, holding up crying babies in their arms. ”There’s no room for sentimentalism. We execute commands,” Frangoulis said of the rescue operations. “Beyond commands, we’re human. We’ll lose heart, we’ll cry, we’ll feel sad if something doesn’t go well. There isn’t a person who won’t be moved by this,” he said.

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Real people.

The Grandmothers Of Lesvos (Kath.)

Even as the high winds whip up the sea they still come. I spot two black dots far away on the horizon: rubber dinghies that have set off from the Turkish coast, overladen with men, women and children. If she could, 85-year-old Maritsa Mavrapidi would walk down the road from her front gate to the beach of Skala Sykamias and wait – as she has done so many times in the past – for the boats to land. After all, she knows exactly what it means to be refugee. “Our mothers came here as refugees from Turkey, just across the way, and they were just girls at the time. They came without clothes, with nothing,” she says. “That’s why we feel sorry for the migrants.” Maritsa prefers not to go out on cold days. Her cousins would also have liked to be at the beach to help the newcomers but they also avoid bad weather.

Efstratia Mavrapidi is 89 and Militsa (Emilia) Kamvisi 83. The latter was recently nominated for a Nobel Peace Prize along with a Lesvos fisherman as representatives of the islanders who have taken the refugees into their hearts and their homes. “Dear Lord, we never expected this: people coming through the storm,” says Maritsa. “As soon as they step off the boat they say prayers and kiss the ground; it’s unbelievable. They’re to be pitied. And there are so many babies, tiny little things. It breaks your heart to see the babies in such a sorry state, trembling with cold.” I sit with the three women in Militsa’s home. The village’s olive grove starts at the back of the house and from the front there’s a view to the sea. “I’ve moved downstairs because I have volunteers who help the refugees staying upstairs,” she says.

[..] They share roots and a hard life. Their mothers arrived on Lesvos on fishing boats from Asia Minor in 1922. They are reminded every time they see refugees landing on the island’s shores of the scenes of exodus their mothers had described. “My mother had three babies when she came from Turkey,” remembers Efstratia. “She had no clothes for the youngest and had to tear her underskirt to wrap it in.” Back in Turkey Militsas’s father had been engaged to a different woman. “He packed up his sewing machine and a trunk of clothes as they prepared to leave, but his fiancee and her mother were killed. He came to Lesvos alone and later met my mother.” They know from the stories they were told that the islanders were not particularly welcoming to the new arrivals from Asia Minor.

“The locals were scared that the refugees would settle here,” says Maritsa. “Eventually they did. They bought land and got married.” One of the places where many of the refugees put down roots was Skala Sykamias. Here, in this spot that was the birthplace of celebrated novelist Stratis Myrivilis, the refugees experienced poverty and suffering. “They led very sad lives and had many children, like the migrants that coming today,” says Militsa. “They made their homes in olive storage sheds. Four families could live in one room, separated by hanging carpets,” adds Efstratia.

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Oct 152015
 
 October 15, 2015  Posted by at 9:04 am Finance Tagged with: , , , , , , , , ,  


DPC League Island Navy Yard, Philadelphia. USS Brooklyn spar deck 1898

The Biggest American Debt Selloff In 15 Years (CNN)
Inequality To Drive ‘Massive Policy Shift’: Bank of America (CNBC)
At US Ports, Exports Are Coming Up Empty (WSJ)
Consumers Shutting Down As US Economy Deflates (CNBC)
The US Is Closer To Deflation Than You Think (CNBC)
Walmart Share Plunge Wipes Out $21 Billion In Market Cap In One Day (USA Today)
Wal-Mart Just Made Things Worse For Everybody Else (CNBC)
The Chilling Thing Walmart Said About Financial Engineering (WolfStreet)
Glencore Collapse Could Be Even Worse Than Feared (MM)
Unwinding Of Carry Trade May Unmask China’s True Metal Demand (Bloomberg)
VW: Secret Emissions Tool In 2016 Cars Is Separate From ‘Defeat’ Cheat (AP)
VW Customers Demand Answers And Compensation Over Emissions Scandal (Guardian)
Lavrov: Unclear What Exactly US Is Doing In Syria (RT)
Two-Thirds Of British Hospitals Offer Substandard Care (Guardian)
Assange ‘In Constant Pain’ As UK Denies Safe Passage To Hospital For MRI (RT)
Will Trudeaumania Sweep Canada’s Liberals Into Power – Again? (Guardian)
EU Need for Turkey to Halt Refugee Flow Collides With History (Bloomberg)
Refugee Rhetoric Echoes 1938 Summit Before Holocaust: UN Official (Guardian)
‘Lesbos Is Carrying The Sins Of The Great Powers’ (ES)

This is not reversible.

The Biggest American Debt Selloff In 15 Years (CNN)

China has been selling U.S. debt but it’s not alone. Lots of emerging markets like Brazil, India and Mexico are also selling U.S. Treasuries. Not that long ago all these countries were all huge buyers of U.S. debt, which is viewed as one of the safest places to park money. “Five or six years ago, the big concern was that China was going to own the United States,” says Gus Faucher, senior economist at PNC Bank. “Now the concern is that China is selling them.” Foreign governments have sold more U.S. Treasury bonds than they’ve bought in the 10 consecutive months through July 2015, the most recent month of available data from the Treasury Department. Just in the first seven months of the year, foreign governments sold off $103 billion of U.S. debt, according to CNNMoney’s analysis of Treasury Department data.

Last year there was an overall increase of nearly $45 billion. It’s a reality of the global economic slowdown. When commodity prices boomed a decade ago, emerging market countries took their profits and invested them in U.S. Treasury bonds and other types of assets that are similar to cash. Now that commodity prices are falling, countries that rely on commodities – Brazil, Mexico, Indonesia – just don’t have the cash they once did to invest in safe assets like U.S. Treasury bonds. “Slow growth means that they just don’t have the same appetite for dollars because they don’t have cash to put to work,” says Lori Heinel, chief portfolio strategist at State Street Global Advisors. “The bigger issue is ‘do they have the dollars flowing into the economies to keep investing in Treasuries?'”

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Interesting thought on PQE. Too little too late though.

Inequality To Drive ‘Massive Policy Shift’: Bank of America (CNBC)

Rising income inequality and a deflationary global economic picture are going to lead to big changes in 2016, according to one Wall Street forecast. Quantitative easing and zero interest rates are on their way out in the U.S., and Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, believes they will be replaced with massive infrastructure spending. The result would benefit Main Street more than Wall Street, which has had a banner seven-year run helped by historically easy Federal Reserve monetary policy. “If the secular reality of deflation and inequality is intensified by recession and rising unemployment, investors should expect a massive policy shift in 2016,” Hartnett said in a note to clients. “Seven years after the West went ‘all-in’ on QE and ZIRP, the U.S./Japan/Europe would shift toward fiscal stimulus via government spending on infrastructure or more aggressive income redistribution.”

A reversal in trend would have a substantial impact on investing. Investors should move to assets that benefit in reflationary times, like Treasury Inflation Protected Securities, gold (which Hartnett thinks will bottom in 2016), commodities and small-cap Chinese stocks, Hartnett said. TIPs have been around flat for the year, while gold has dropped nearly 2% and commodities overall are off nearly 13%. Easy-money measures have helped boost Wall Street, with the S&P 500 up about 200% since the March 2009 lows as companies have spent some $2 trillion on stock repurchases. Dividend payments also have soared during the period, with the second quarter’s $105 billion increase the biggest in 10 years, according to FactSet.

Asset returns have jumped while global economic growth has been anemic in what Hartnett called “the most deflationary expansion of all time.” GDP gains in the U.S. have averaged barely 2% during the post-Great Recession recovery, while some economists believe a global recession could hit in 2016. The clamor for some of that asset wealth to find its way into the larger economy is growing and giving rise, according to Hartnett, to populist presidential candidates like Donald Trump and Bernie Sanders in the U.S. and similar movements around the world. “Deflation exacerbates ‘inequality’ of income, wealth, profits, asset valuations,” Hartnett wrote. “The gap between winners and losers is being driven wider and wider by excess liquidity and technological disruption (trends synonymous with the 1920s, another period infamous for ‘inequality’).”

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China exports fell 20%. US exports are pluning. See the trend.

At US Ports, Exports Are Coming Up Empty (WSJ)

One of the fastest-growing U.S. exports right now is air. Shipments of empty containers out of the U.S. are surging this year, highlighting the impact the economic slowdown in China is having on U.S. exporters. The U.S. imports more from China than it sends back, but certain American industries—including those that supply scrap metal and wastepaper—feed China’s industrial production. Those exporters have suffered this year as China’s economy has cooled. In September, the Port of Long Beach, Calif., part of the country’s busiest ocean-shipping gateway, handled 197,076 outbound empty boxes. They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports.

The empties are shipping out at a faster rate at many U.S. ports, particularly those closely tied to trade with China, while shipments of containers loaded with goods are declining as exporters find it tougher to make foreign sales. That’s at least partly because the strong dollar makes American goods more expensive. Normally, after containers filled with consumer goods are delivered to the U.S. and unloaded, they return to export hubs. There, they typically are stuffed with American agricultural products, certain high-end consumer goods and large volumes of the heavy, bulk refuse that is recycled through China’s factories into products or packaging. Last month, however, Long Beach and the Port of Oakland both reported double-digit gains in exports of empty containers.

So far this year, empties at the two ports are up more than 20% from a year earlier. Long Beach’s containerized exports were down 8.2% this year through September, while Oakland’s volume of outbound loaded containers fell 12.7% from a year earlier in the January-September period. “This is a thermometer,” said Jock O’Connell at Beacon Economics. “The thing to worry about is if the trade imbalance starts to widen.” Trade figures released Tuesday in Beijing underscored China’s faltering demand. China’s imports fell 20.4% year-over-year in September following a 13.8% decline in August. As of June, U.S. exports of scrap materials were down 36% from their peak of $32.6 billion in 2011.

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This is what deflation truly is: “The math is pretty simple: A lack of purchasing power for consumers has led to a lack of pricing power for companies.”

Consumers Shutting Down As US Economy Deflates (CNBC)

The math is pretty simple: A lack of purchasing power for consumers has led to a lack of pricing power for companies. When it comes to the U.S. economy big-picture outlook, the ramifications are more complicated, and not particularly pleasant. Wednesday’s producer price index reading, showing a monthly decline of 0.5%, demonstrates a larger problem: At a time when policymakers are hoping to generate the kind of inflation that would indicate strong growth, the reality is that deflation is looming as the larger threat. Declining prices often would be treated as a net positive by consumers, but income weakness is offsetting the effects. Even Wall Street is feeling the heat. Prices for brokerage-related services and financial advice dropped 4.3% in September, accounting for about a quarter of the entire slide for final demand services.

The prospects heading into year’s end are daunting. In addition to the punk PPI number, retail sales gained by just 0.1% in September. Excluding autos, gasoline and building materials, sales actually declined 0.1%. On top of that, the August retail numbers were revised lower, with the headline rate now flat from the originally reported 0.2% gain. On the same day as the two disappointing data releases, Wal-Mart warned that the weakness is likely to extend through its fiscal year, with sales expected to be flat. The warning sent its shares tumbling 9% in morning trade, the worst performance in 15 years. All in all, then, not a great environment in which to raise rates, which the Federal Reserve hopes to do before the end of the year.

“Consumers are growing increasingly uncertain regarding their future income streams and are less willing to finance today’s spending with the prospect of tomorrow’s improved, future earnings,” Lindsey Piegza, chief economist at Stifel Fixed Income, said in a note to clients. “With gasoline prices at multiyear lows, consumers should be spending gangbusters but they aren’t.” Wage growth remains elusive for most workers, with the average hourly earnings rising just 2.2% annually. Job growth has slowed as well, with average monthly nonfarm payroll additions in the third quarter down nearly 28% from the previous quarter. The data on the ground shoot holes in a number of theories that were expected to drive the economy, market behavior and Fed policymaking.

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Prices rise only in the West.

The US Is Closer To Deflation Than You Think (CNBC)

Deflation talk these days is mostly centered on the euro zone and parts of emerging markets, but the U.S. is dancing on the brink itself. In fact, if not for a comparatively high inflation rate in the Western quadrant, the U.S. itself actually would have had a negative consumer price index rating in August, driving its economy into the same deflationary malaise found in other slow-growth regions. Of the four Census regions, only the West had a positive CPI for August, according to the most recent figures from the Bureau of Labor Statistics. And it hasn’t just been a recent occurrence. “All price growth in the U.S. in the past eight months came from the West,” the St. Louis Federal Reserve said in a report on geographic inflation influences. Inflation in the West has been a full percentage point above the other three regions, all of which experienced deflation.

Excluding the West, the national rate of inflation as measured by the CPI would have been -0.19% in August, as compared to the already anemic national rate of 0.2%, according to the St. Louis Fed. (The September reading will be released Thursday morning.) Annualized inflation in the West was 1.3% in August. In the Northeast it was -0.1%, -0.2% in the South and -0.3% in the Midwest. Much of the deflationary pressure came through falling energy prices – down 9.5% annualized in the West, 14.5% in the Midwest, 18.3% in the East and 17.1% in the South. Low inflation, and the possibility of deflation, presents a daunting conundrum for Fed officials, who have dismissed falling energy prices as transitory despite the fundamental factor of slowing global demand.

Wall Street has been waiting all year for signs the U.S. central bank would start down the path to normalizing monetary policy by raising rates for the first time in more than nine years. However, liftoff has been delayed as the FOMC has fussed over when conditions will be ideal for the move. More hawkish members want to raise because they worry the Fed will be too late once inflation accelerates, while also citing the need simply to have wiggle room for policy accommodation that the Fed does not have as long as it keeps its key rate near zero. Futures traders do not believe the Fed will hike until March 2016.

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The direct result of falling consumer spending.

Walmart Share Plunge Wipes Out $21 Billion In Market Cap In One Day (USA Today)

The Waltons had a bad – and expensive – day. Retailing giant Walmart stunned investors Wednesday when it gave disappointing guidance for growth and profit, sending its stock down 10% to $60.03. The stock drop, which was the biggest in decades, instantly wiped out more than $21 billion in shareholder wealth. That drop was bad for anyone who owns shares of Walmart. But it was especially painful for the company’s top 10 shareholders, who collectively own two-thirds of Walmart’s outstanding stock and saw $14.7 billion in wealth vanish Wednesday. The dive in Walmart shares hurt some of the wealthiest people in America including Walton family members Alice, Jim, John and S. Robson. Famed investor Warren Buffett’s Berkshire Hathaway also is a huge owner of Walmart stock.

Each was on the front line for one of the biggest implosions of a blue-chip stock in recent years. Walton Enterprises, an investment vehicle controlled by several members of the Walmart family, suffered the biggest hit. This investment vehicle owns 1.4 billion shares of Walmart, or 44% of the total shares outstanding, S&P Capital IQ says. Its holdings took a $9.5 billion hit. When you Include the holdings of other Walton family-controlled entities, such as the 197 million shares owned by S. Robson Walton and another 194 million held in the Walton Family name, the day’s loss jumps to more than $12 billion. Buffett’s Berkshire Hathaway owns 60.4 million shares of Walmart and lost nearly $405 million.

Don’t think it’s just a “rich person’s problem,” either. Walmart’s drop hit many individual investors closer to home. Index fund behemoth Vanguard is the fourth largest owner of Walmart stock because Walmart’s huge market value makes it a key holding in many index funds, which are widely held by individual investors. Vanguard’s 98.6 million shares brought home a $660 million daily loss directly to Vanguard investors. The pain of owning a big chunk of a single stock became painfully clear again Wednesday – especially if your last name is Walton.

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As the no. 1 drops, so must the smaller fish.

Wal-Mart Just Made Things Worse For Everybody Else (CNBC)

Wal-Mart shares had their worst day in 15 years Wednesday, after the world’s largest retailer said sales will be flat in fiscal 2016, while its earnings will slide to between $4.40 and $4.70 a share — down from $4.84 last year. Shares of competitors including Target, Macy’s, Kohl’s and J.C. Penney fell in sympathy, as Wal-Mart said it would invest billions into price over the next two years. With Wal-Mart already undercutting much of its peers, the move will put added pressure on its competitive set, which is already struggling to grow sales against a backdrop of steep price cuts and rock-bottom starting prices. Deflation in the retail sector was one reason why the National Retail Federation said that holiday sales will increase 3.7% this year, representing a deceleration from 2014.

Analysts and brands alike have said the holiday shopping season is already shaping up to be cutthroat, as retailers will do almost anything to get consumers to spend in their stores. “It’s a never-ending battle to capture their share of the overall spend,” Steve Barr, U.S. retail and consumer leader at PricewaterhouseCoopers, said Tuesday. It’s easy to understand why Wal-Mart, once the undisputed leader in pricing, is putting such an emphasis on delivering the best value to shoppers. According to PwC’s holiday forecast, 87% of shoppers said price is the primary driver behind their holiday spending choices. This is even more pronounced among what the consulting firm has dubbed “survivalists,” those who earn an annual income of less than $50,000.

According to PwC, 90% of survivalists said price is the No. 1 factor behind their holiday purchase decisions. Separately, a study released by coupon website RetailMeNot found consumers said a discount has to offer more than 34% off to be deemed a good deal. “I think we’ll see individuals taking advantage of the fact that prices haven’t moved against them this year,” the NRF’s chief economist, Jack Kleinhenz, said on a call after the trade group’s sales forecast.

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“The most chilling words in the news release? “These are exciting times in retail given the pace and magnitude of change.”

The Chilling Thing Wal-Mart Said About Financial Engineering (WolfStreet)

Wal-Mart had a bad-hair day. Its shares plunged $6.71, the largest single-day cliff-dive in its illustrious history. They ended the day down 10%, at $60.02, a number first kissed in 2001. Shares are 34% off their peak in January. So it wasn’t just today. But Wal-Mart didn’t do anything that special at its annual investor meeting today. It announced big “capital investments,” (we’ll get to the quotation marks in a moment), a crummy outlook, and a huge share buyback program. All of which it has done many times before. Only this time, the outlook is even worse, but the promised share buybacks are even larger. Wal-Mart proffered its strategies on how it would try to boost revenue growth in an environment where its primary customers – the 80% that got trampled by the Fed’s policies – are struggling to make ends meet.

A problem Wal-Mart has had for years. The news release hints at these new initiatives, spells out costs, and forecasts the resulting earnings debacle. Wal-Mart will goose “capital investments” by $11 billion in Fiscal 2017, on top of the $16.4 billion it’s spending on “capital investments” in fiscal 2016. This will maul earnings per share. In 2017, they’re expected to drop 6% to 12%, when the analyst community had forecast an increase of 4%. But 2019 is back in the rosy scenario of earnings growth. These capital investments aren’t computers, buildings, or new shelves. They’re largely “investments in wages and training,” which isn’t a capital investment at all, but an ordinary expense. “75% of next year’s investment will be related to people,” CEO Doug McMillon clarified.

That’s why they’ll hit earnings right away. A true capital investment would be an asset that is depreciated over time, with little earnings impact upfront. So sales in fiscal 2016 would be flat, which Wal-Mart blamed on “currency exchange fluctuations.” Would that be the strong dollar? But sales were also flat for the prior three fiscal years when the dollar was weak. Don’t lose hope, however. In the future, starting in fiscal 2017, sales would edge up 3% to 4%. To accomplish this, management is now desperately praying for inflation. The most chilling words in the news release? “These are exciting times in retail given the pace and magnitude of change.”

Then there was the announcement of a $20-billion share buyback program. $8.6 billion remaining from the $15 billion buyback program authorized in 2013 would be retired. That $15-billion program was on top of $36 billion in buyback programs over the preceding four years. Buybacks is what Wal-Mart does best.

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Derivatives.

Glencore Collapse Could Be Even Worse Than Feared (MM)

“Editor’s Note: We’re sharing this update on Glencore’s collapse with you because it’s shaping up to be even worse than Michael originally thought. Glencore still poses a “Lehman Brothers”-level risk to the global economy – but it’s now clear the world’s biggest commodities trader is on the hook for hundreds of billions in “shadow debt” that it simply refuses to address. This crisis is one small step away from upending our financial system, so here’s what you need to know…”

A lot of powerful voices have joined me in warning about the potential threat that Glencore poses to global financial markets. Bank of America, for instance, has published a report on the true size of the fallout. As you’ll see in a moment, it’s staggering. But since we talked about Glencore late last month, something insane has happened: The stock has gone up. But not for any good reason. The company has not righted the ship. The surge is only due to short-sellers covering their positions. The ugly truth is, the company is still a “shining” example of exactly what’s wrong with these markets. And I fear individual investors will get caught in the mess and wiped out on a stock like this or some of the others around it. That’s why I want to call out the misapprehensions and lies that are causing this “fauxcovery” and show you what’s next.

Because it could end up even worse than I thought…Since hitting a low of £0.69 ($1.05) per share on Sept. 28, Glencore stock has doubled to £1.29 ($1.97) per share. Even its credit default swap spreads have recovered to 650 basis points from a panic peak of 900 basis points. To place the last point in context, however, markets are pricing the company like a weak single B credit instead of a CCC credit. So while the major credit rating agencies still consider Glencore an investment-grade company, the actual credit markets have a much dimmer view of its prospects. Naturally, the company is doing everything possible to calm markets. First, last week it took the unusual step of publishing a six-page “funding factsheet” designed to dispel market concerns about its liquidity and solvency.

This factsheet shed very little light on what is really going on at the company, however. It said virtually nothing about Glencore’s derivatives contracts, other than stating that its derivatives contracts were undertaken within “industry standard frameworks.” Here’s the thing – “industry standard frameworks” normally require companies to post additional cash collateral upon the loss of an investment-grade rating, so the company’s statement should not have made anybody feel better. That suggests to me that the rise in the company’s stock price was largely a matter of short covering, not investors suddenly deciding that everything is hunky-dory in the House of Glencore.

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Remember the metals bought with stored and unpaid metals as collateral?

Unwinding Of Carry Trade May Unmask China’s True Metal Demand (Bloomberg)

The great mystery of metals is the amount used to finance the Chinese carry trade, or collateral used to borrow cheap dollars to buy yuan-backed high-interest-carrying notes. The Bank for International Settlements says this trade may be $1 trillion to $2 trillion, tying up tens of millions of metric tons of iron ore, aluminum and other metals. About a year of global copper consumption (22 million mt) equals just 5% to 10% of the estimate. The true figure will determine real China metal demand and future inventory. The impact of the Chinese metal carry trade is in the distortion of the true underlying copper demand, and a buildup in the metal’s inventory, strictly for collateral in financing. China accounts for 46% of global copper demand, according to the Word Bureau of Metals Statistics.

One question analysts must ask: What if it’s just 35%? The potential stopping of this trade, and normalization of the distorted demand, will provide understanding of China’s true copper needs and their potential growth. Nickel prices have fallen by half since year-end 2013, when they surged after No. 1 global exporter Indonesia banned exports of nonprocessed ore. Inventories are near record levels. The likely culprits for the higher inventory and price crash are the large amounts of the metal held off exchanges because they were used as collateral in a carry trade that took advantage of China’s high interest rates. A warehouse scandal at the Qingdao complex prompted banks to call in these trades, pummeling nickel prices.

The lucrative practice of using commodities as collateral to make money from interest-rate differentials inside and outside of China, a practice known as the carry trade, could cause significant pressure on commodity markets, were the trade to unravel. The Bank for International Settlements says this trade exceeds $1.2 trillion worth of commodities and could reach $2 trillion. Any major change in the direction of this trade could flood the market with more supply.

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Actually, it’s a second defeat device. And that means it’s company policy, not a freak incident involving only technicians.

VW: Secret Emissions Tool In 2016 Cars Is Separate From ‘Defeat’ Cheat (AP)

US regulators say they have a lot more questions for Volkswagen, triggered by the company’s recent disclosure of additional suspect engineering of 2016 diesel models that potentially would help exhaust systems run cleaner during government tests. That’s more bad news for VW dealers looking for new cars to replace the ones they can no longer sell because of the worldwide cheating scandal already engulfing the world’s largest automaker. Depending on what the Environmental Protection Agency eventually finds, it raises the possibility of even more severe punishment. Volkswagen confirmed to AP on Tuesday that the “auxiliary emissions control device” at issue operates differently from the “defeat” software included in the company’s 2009 to 2015 models and revealed last month.

The new software was first revealed to EPA and California regulators on 29 September, prompting the company last week to withdraw applications for approval to sell the 2016 model cars in the US. “We have a long list of questions for VW about this,” said Janet McCabe at EPA. “We’re getting some answers from them, but we do not have all the answers yet.” The delay means that thousands of 2016 Beetles, Golfs and Jettas will remain quarantined in US ports until a fix can be developed, approved and implemented. Diesel versions of the Passat sedan manufactured at the company’s plant in Chattanooga, Tennessee, also are on hold. Volkswagen already faces a criminal investigation and billions of dollars in fines for violating the Clean Air Act for its earlier emissions cheat, as well as a raft of state investigations and class-action lawsuits filed on behalf of customers.

If EPA rules the new software is a second defeat device specifically aimed at gaming government emissions tests, it would call into question repeated assertions by top VW executives that responsibility for the cheating scheme lay with a handful of rogue software developers who wrote the illegal code installed in prior generations of its four-cylinder diesel engines. That a separate device was included in the redesigned 2016 cars could suggest a multi-year effort by the company to influence US emissions tests that continued even after regulators began pressing the company last year about irregularities with the emissions produced by the older cars.

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VW has provided precious little info for its clients. That’ll backfire.

VW Customers Demand Answers And Compensation Over Emissions Scandal (Guardian)

Nine out of 10 Volkswagen drivers in Britain affected by the diesel emissions scandal believe they should receive compensation, increasing the pressure on the carmaker as it attempts to recover from the crisis. Almost 1.2m diesel vehicles in Britain are involved in the scandal, out of 11m worldwide, and VW faces a hefty bill if it is forced to make payouts to motorists. The company has put aside €6.5bn (£4.8bn) to deal with the cost of recalling and repairing the affected vehicles, but it also faces the threat of fines and legal action from customers and shareholders. There is a growing frustration among VW drivers in the UK over the lack of information about how their vehicle will be repaired, according to the consumer watchdog Which?. VW has sent letters to affected customers, arriving this week.

However, the letters state that the company is still working on its plans and another letter will be sent when these are confirmed. Paul Willis, the managing director of VW UK, told MPs on Monday that the recall of vehicles may not be completed by the end of 2016 and that it was premature to discuss compensation. However a survey by Which? has found that nine out of 10 affected motorists want compensation. Richard Lloyd, the executive director of Which?, said: “Many VW owners tell us they decided to buy their car based on its efficiency and low environmental impact, so it’s outrageous that VW aren’t being clear with their customers about how and when they will be compensated.

“Volkswagen UK must set out an urgent timetable for redress to the owners of the affected vehicles. We also need assurances from the government that it is putting in place changes to prevent anything like this happening again.” In the wake of the scandal, 86% of VW drivers are concerned about the environmental impact of their car, while 83% questioned the impact on its resale value and 73% feared the performance of their vehicle would be affected. More than half of the VW customers said they had been put off from buying a VW diesel car in the future. A total of 96% stated that fuel efficiency was an important factor in buying the diesel vehicle, while 90% said it was the seemingly limited environmental impact. Both these issues are affected by the scandal.

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“..it’s unclear “why the results of so many combat sorties are so insignificant.”

Lavrov: Unclear What Exactly US Is Doing In Syria (RT)

The Russian Foreign Ministry has questioned the effectiveness of the US-led year-long air campaign in Syria, saying it’s unclear “why the results of so many combat sorties are so insignificant.” Failing to curb ISIS, the US has now “adjusted” its program. “We have very few specifics which could explain what the US is exactly doing in Syria and why the results of so many combat sorties are so insignificant,” Russian Foreign Minister Sergey Lavrov told Russian channel NTV. “With, as far as I know, 25,000 sorties they [US-led air campaign] could have smashed the entire [country of] Syria into smithereens,” the minister noted.

Lavrov questioned the Western coalition’s objectives in their air campaign, stressing that Washington must decide whether its aim is to eliminate the jihadists or to use extremist forces to pursue its own political agenda. “Maybe their stated goal is not entirely sincere? Maybe it is regime change?” Lavrov said, as he expressed doubts that weapons and munitions supplied by the US to the so-called “moderate Syrian opposition” will end up in terrorists’ hands. “I want to be honest, we barely have any doubt that at least a considerable part of these weapons will fall into the terrorists’ hands,” Lavrov said. American airlifters have reportedly dropped 50 tons of small arms ammunition and grenades to Arab groups fighting Islamic State (IS, formerly ISIS/ISIL) in northern Syria.

US officials assure concerned parties that the fighters have been screened and are really confronting IS. “We do not want the events, when [some countries] not only cooperated with terrorists but plainly relied on them, to happen again,” Lavrov said, recalling that the French, for instance supplied weapons to anti-government forces in Libya in violation of a UN Security Council resolution. Lavrov has called on the US to “transcend themselves” and decide what is more important, either “misguided self-esteem realization” or getting rid of the “greatest threat” that is challenging humanity.

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Scary.

Two-Thirds Of British Hospitals Offer Substandard Care (Guardian)

Two-thirds of hospitals are offering substandard care, according to the NHS regulator, which also warns that pressure to cut costs could lead to a further worsening of the health service in the coming years. The Care Quality Commission also said that levels of safety are not good enough in almost three-quarters of hospitals, with one in eight being rated as inadequate. In its annual report, the watchdog detailed examples including one hospital where A&E patients were kept on trolleys overnight in a portable unit and not properly assessed by a nurse; while in another, medicine was given despite the patient’s identity not being properly confirmed. In some care homes, residents either received their medication too late or were given too much of it, leading to overdoses.

Understaffing and money problems are already contributing to a situation where 65% of hospitals, mental health and ambulance services either require improvement or are providing inadequate care.Too many patients are already receiving care that is unacceptably poor, unsafe or highly variable in its quality, from staff who range from the exceptional to those who lack basic compassion, it adds. In the report, England’s health and social care regulator raises concerns that patients could suffer as the service seeks to make the £22bn of efficiency savings by 2020 that NHS England has offered and health secretary Jeremy Hunt is pressing it hard to start delivering. “The environment for health and social care will become even more challenging over the next few years,” it states. “Tensions will arise for providers about how to balance the pressures to increase efficiency with their need to improve or maintain the quality of their care”.

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As much humanity as refugees receive. “They can guard the car with 10,000 police officers if they wish..”

Assange ‘In Constant Pain’ As UK Denies Safe Passage To Hospital For MRI (RT)

The UK has refused to grant Julian Assange safe passage to a hospital for an MRI scan and diagnosis, WikiLeaks has said, adding that he has been in “severe pain” since June. Assange’s lawyer has accused the UK of violating his client’s basic rights. WikiLeaks said that the UK government refused to satisfy Assange’s request to visit a hospital unhindered after the Ecuadorian Embassy filed one on his behalf on September 30. An MRI was recommended by a doctor, Laura Wood, back in August, according to the statement read aloud at a press conference given by Ecuadorian Foreign Minister Ricardo Patino on Wednesday.

“He [Julian Assange] has been suffering with a constant pain to the right shoulder region…[since June 2015]. There is no history of acute injury to the area. I examined him and all movements of his shoulder (abduction, internal rotation and external rotation) are limited due to pain. I am unable to elicit the exact cause of his symptoms without the benefit of further diagnostic tests, [including] MRI,” Patino read, citing a letter from the doctor. The UK’s Foreign and Commonwealth Office (FCO) issued a reply stating that Assange could not be guaranteed unhindered passage for a more thorough medical diagnosis on October 12.

Patino has criticized the decision saying that “even in times of war, safe passage are given for humanitarian reasons.” The Ecuadorian Embassy asked the UK authorities to offer a safe passage for a few hours for Assange into a London Hospital “under conditions agreed upon by UK and Ecuador,” Patino said, according to the WikiLeaks press release. “They can guard the car with 10,000 police officers if they wish,” the FM stressed, according to the press-release.

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If Canada elects Harper again, forget about the country.

Will Trudeaumania Sweep Canada’s Liberals Into Power – Again? (Guardian)

In the longest official federal election period in the nation’s history, it now appears Liberal leader Justin Trudeau may well be the nation’s next prime minister, with polls showing him establishing a commanding lead over his rivals, and the trend continuing to grow. It’s a stunning development in an election that could be described as an epic cliffhanger. Many, if not most, Canadians are eager for a change from prime minister Stephen Harper and his Conservative government, but with two worthy and eager rivals – the New Democratic party’s Thomas Mulcair and the Liberal party’s Justin Trudeau – where those change-hungry voters will place their bet has been difficult to decipher. When Harper announced the campaign in early August, it was met with immediate cynicism.

The extended campaign time (79 days as opposed to what had been the standard 37 days) gave the Conservatives an immediate advantage, given that their financial war chest is considerably larger than that of the Liberals or NDP. The Conservative strategy seemed a sound one: let the two opposition parties battle it out while the ruling party would float as much advertising as possible, handily winning over another majority. But the ruling party has faced considerable obstacles, including an astonishingly embarrassing ongoing scandal involving appointees to the unelected Senate (the Canadian version of the House of Lords) and a flagging economy. Polls have indicated many Canadians want change.

Ironically enough, one of the main reasons Canadians may have shifted their allegiances to the Liberal party leader is precisely because of the most famous negative ad campaign of the election, paid for and put into heavy rotation by the Conservatives. The ad, first rolled out in May by the Conservatives, has a group of people looking over an application by Justin Trudeau for the PM’s job. Perhaps most striking for its laughably bad acting, the ad has people concluding Trudeau is a lightweight who is “just not ready” for the job, with one concluding “nice hair, though”.

The ad attempts to suggest that not only is Trudeau simply not ready but voting for him is tantamount to a risky foray into untested waters, given the turbulent global economy and nagging threats of terror (the Cons have been playing both up at every turn). But a funny thing happened on the way through this fear-mongering: by just about any standards, Trudeau has run an excellent campaign. In late August he unveiled a campaign promise to invest billions of dollars in Canada’s roads, bridges, public transit and other public facilities. He suggested these were all necessary investments, which would help to stimulate the moribund economy, and went one step further, suggesting if he formed government, he would be open to deficit spending – moderate deficits, he cautioned, which would be over by 2019.

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Europe has it coming.

EU Need for Turkey to Halt Refugee Flow Collides With History (Bloomberg)

The EU needs Turkey more than ever to halt the flow of refugees from the Middle East – and has little to offer in return. With its decade-old bid to join the 28-nation union stalled, Turkey will be the topic without being at the table at a summit of EU leaders Thursday in Brussels. On the same mission, Angela Merkel plans to travel to Istanbul on Sunday to meet Turkish leaders. Relations have been all downhill since EU membership talks with Turkey began in 2005, years before civil war in neighboring Syria sent refugees streaming toward Europe. Turkey is stymied in part by Cyprus, its Mediterranean rival, and an anti-expansion mood in northern Europe. Meantime, a blossoming Turkish economy fed the sense that the country of 77 million could get along fine on its own.

“Many people in the EU are regretting the unproductive approach they had to the accession negotiations with Turkey, blocking the process and creating a deep sense of resentment in Ankara,” said Amanda Paul, an analyst at the European Policy Centre in Brussels. “If it were going along normally, it would be easier to reach this sort of agreement with Turkey.” Contacts are so strained that after President Recep Tayyip Erdogan went to Brussels on Oct. 5 to consider an “action plan” on migration, Turkish officials said the plan wasn’t discussed. EU Commission President Jean-Claude Juncker’s spokesman downgraded it to “an accord in principle to undertake a process.”

After Syria descended into war in 2011, European governments were content to let neighboring states such as Turkey, Lebanon and Jordan cope with the refugee influx. Only once Turkey amassed 2.2 million and they started heading northwest did European leaders wake up, finding themselves in the biggest refugee crisis since World War II. Germany, with a population of 81 million, is being roiled by this year’s expected arrival of at least 800,000 refugees, which is causing strains in Merkel’s governing coalition. “Turkey fears that even more refugees will come because the fighting in Syria isn’t letting up,” Merkel said Wednesday in a speech in eastern Germany. “I will fly to Turkey on Sunday to see how we can help on the ground so Turkey’s burden is shouldered more widely.”

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“It’s just a political issue that is being ramped up by those who can use the excuse of even the smallest community as a threat to the sort of national purity of the state..”

Refugee Rhetoric Echoes 1938 Summit Before Holocaust: UN Official (Guardian)

The dehumanising language used by UK and other European politicians to debate the refugee crisis has echoes of the pre-second world war rhetoric with which the world effectively turned its back on German and Austrian Jews and helped pave the way for the Holocaust, the UN’s most senior human rights official has warned. Zeid Ra’ad Al Hussein, the UN high commissioner for human rights, described Europe’s response to the crisis as amnesiac and “bewildering”. Although he did not mention any British politicians by name, he said the use of terms such as “swarms of refugees” were deeply regrettable. In July, the UK prime minister, David Cameron, referred to migrants in Calais as a “swarm of people”.

At this month’s Conservative party conference, the home secretary, Theresa May, was widely criticised for suggesting that mass migration made it “impossible to build a cohesive society”. In an interview, the high commissioner said the language surrounding the issue reminded him of the 1938 Evian conference, when countries including the US, the UK and Australia refused to take in substantial numbers of Jewish refugees fleeing Hitler’s annexation of Austria on the grounds that they would destabilise their societies and strain their economies. Their reluctance, Zeid added, helped Hitler to conclude that extermination could be an alternative to deportation.

Three-quarters of a century later, he said, the same rhetoric was being deployed by those seeking to make political capital out of the refugee crisis. “It’s just a political issue that is being ramped up by those who can use the excuse of even the smallest community as a threat to the sort of national purity of the state,” he said. “If you just look back to the Evian conference and read through the intergovernmental discussion, you will see that there were things that were said that were very similar.”

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“..there are cases of Afghan children drowning off Greece that would touch the public deeply if publicised..”

‘Lesbos Is Carrying The Sins Of The Great Powers’ (ES)

Four rubber boats arrive in an hour, 40 to 50 people in each. One man nudges his two-year-old daughter towards me while he fetches his son. I try to soothe her tears. While two French doctors attend the injured, most of the new arrivals seem in good health and high spirits. Many of them, with their fashionable sportswear and smart backpacks, could be day-trippers. But it feels very different as night falls and the coach bearing me and my fellow Startup Boat activists — young volunteers trying to find tech and strategic solutions to the problems posed by the refugee crisis — takes us past a crowd of 150. None of the promised buses have arrived to take them to refugee camps at Moria and Karatape, 20 miles away.

Welcome to Lesbos, where in recent weeks 1,500-3,000 people — predominantly Syrians, then Iraqis and Afghans — have arrived daily, paying traffickers €1,200 for the short passage from Turkey. The former military camp at Moria has an official capacity of 410 but at times has housed 1,000, with hundreds camped outside. Karatape, set up specifically for Syrians, can take 1,000. While we were on Lesbos, a 24-hour period when police were off duty left Karatape at twice capacity, and food stores exhausted. The situation, says Lesbos mayor Spyros Galinos, is like “a bomb in my hands”. “I believe Lesbos is carrying the sins of great powers,” he says. “If this dot on the map could manage to accommodate such high numbers, all member states can help us.”

The problems extend beyond Syrian refugees. In Athens, young Afghan Mohammad Mirzay tells me why EU nations have made a “big mistake”, allowing Syrians the right to remain, however many countries they have travelled through, but not extending this to others. The Taliban are persecuting the Hazaras, he says, while there are cases of Afghan children drowning off Greece that would touch the public deeply if publicised. He takes me to Galatsi Olympic Hall, a venue at the 2004 Games, now designated a safe house. Families are camped in the fetid space. “Why should we be divided?” says Mirzay. “We should push in altogether. We should support ‘human’.”

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Jun 152015
 
 June 15, 2015  Posted by at 9:14 am Finance Tagged with: , , , , , , , , , ,  


DPC City Hall and Market Street and west from 11th, Philadelphia 1912

Tsipras Hardens Greek Stance After Collapse of Talks (Bloomberg)
Greece Has Nothing To Lose By Saying No To Creditors (Münchau)
Varoufakis: Debt Restructuring Is The Only Way Forward (Reuters)
Syriza Left Demands ‘Icelandic’ Default As Greek Defiance Stiffens (AEP)
IMF ‘Blocked EU Compromise Proposal’ To Let Greece Cut Military Spending (AFP)
Doctors At Greek State-Run Hospitals At Risk Of Burnout (Kathimerini)
Finland’s Problem Is The Same As Greece’s (Forbes)
The Futility of Our Global Monetary Experiment (David Stockman)
The Sunday Times’ Snowden Story Is Journalism At Its Worst (Glenn Greenwald)
Five Reasons the MI6 Story is a Lie (Craig Murray)
Let Me Be Clear – Edward Snowden Is A Hero (Shami Chakrabarti)
US And Poland In Talks Over Weapons Deployment In Eastern Europe (Guardian)
The Oil Cash-and-Carry Trade Does The Shipping Tanker Contango (Dizard)
China To Inject Billions Into European Infrastructure Fund (Reuters)
China’s Stock Market Value Tops $10 Trillion for First Time (Bloomberg)
China’s MSCI Reality Check Is Too Big To Ignore (MarketWatch)
Stand Back: China’s Bubble Will Burst (Clive Crook)
How Obama’s “Trade” Deals Are Designed To End Democracy (Eric Zuesse)
Inside The Crazy World Of Canada’s Peak Real Estate (MacLean’s)
Australian Banks And Real Estate: A Ponzi Scheme That Could Ruin Us? (ABC.au)
Just 16% Of Hurricane Sandy Funds Given Out By 2014 (NY Post)
‘Stop Over-The-Counter Sales of Monsanto’s Round-Up’ – French Minister (RT)
An Immigrant Is Worth More Than Drugs (Beppe Grillo’s blog)

“One can only read political motives in the creditors’ insistence on new cuts to pensions..”

Tsipras Hardens Greek Stance After Collapse of Talks (Bloomberg)

Greece and its creditors swapped recriminations over who was to blame for the breakdown of bailout talks, as each side hardened its position after the latest attempt to bridge differences collapsed in acrimony. With markets plunging in Asia and in Europe, Prime Minister Alexis Tsipras portrayed Greece as the torchbearer of democracy faced with unrealistic demands, while the caucus leader of Chancellor Angela Merkel’s parliamentary bloc said Greeks had to “finally reconcile themselves with reality.” “One can only read political motives in the creditors’ insistence on new cuts to pensions after five years of plundering them under the memorandum,” Tsipras was cited as saying in a statement in Efimerida Ton Syntakton newspaper on Monday. “We will wait patiently for the institutions to move toward realism.”

The euro dropped in early trading after the European Commission said negotiations in Brussels had broken up on Sunday after just 45 minutes with the divide between what creditors asked of Greece and what its government was prepared to do unbridged. The focus now shifts to a June 18 meeting in Luxembourg of euro-area finance ministers that may become a make-or-break session deciding Greece’s ability to avert default and its continued membership in the 19-nation euro area. “In the end, this is not the kind of situation where you can have a mechanical agreement for some kind of numbers, where you meet in the middle or something similar,” Valdis Dombrovskis, EC vice president for euro policy, said on Latvian television Monday. “To reach an agreement Greece has to do the work that is necessary.”

The latest failed attempt to find a formula to unlock as much as €7.2 billion in aid for the anti-austerity Syriza-led government brings Greece closer to the abyss. With two weeks until its euro-area bailout expires and no future financing arrangement in place, creditors had set June 14 as a deadline to allow enough time for national parliaments to approve an accord. “If some interpret the government’s honest willingness to reach compromise and the steps it has taken to bridge the differences as weakness, they should consider this: we don’t just carry a heavy history of struggles,” said Tsipras. “We’re carrying on our backs the dignity of a people, but also the hopes of the people of Europe. It’s too heavy a burden to ignore. It’s not a question of ideological stubbornness. It’s a question of democracy.”

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“Greece would default on all official creditors, and on the bilateral loans from its European creditors. But it would service all private loans with the strategic objective to regain market access a few years later.”

Greece Has Nothing To Lose By Saying No To Creditors (Münchau)

So here we are. Alexis Tsipras has been told to take it or leave it. What should he do The Greek prime minister does not face elections until January 2019. Any course of action he decides on now would have to bear fruit in three years or less. First, contrast the two extreme scenarios: accept the creditors’ final offer or leave the eurozone. By accepting the offer, he would have to agree to a fiscal adjustment of 1.7% of GDP within six months. My colleague Martin Sandbu calculated how an adjustment of such scale would affect the Greek growth rate. I have now extended that calculation to incorporate the entire four-year fiscal adjustment programme, as demanded by the creditors.

Based on the same assumptions he makes about how fiscal policy and GDP interact, a two-way process, I come to a figure of a cumulative hit on the level of GDP of 12.6% over four years. The Greek debt-to-GDP ratio would start approaching 200%. My conclusion is that the acceptance of the troika’s programme would constitute a dual suicide – for the Greek economy, and for the political career of the Greek prime minister. Would the opposite extreme, Grexit, achieve a better outcome? You bet it would, for three reasons. The most important effect is for Greece to be able to get rid of lunatic fiscal adjustments. Greece would still need to run a small primary surplus, which may require a one-off adjustment, but this is it.

Greece would default on all official creditors, and on the bilateral loans from its European creditors. But it would service all private loans with the strategic objective to regain market access a few years later. The second reason is a reduction of risk. After Grexit, nobody would need to fear a currency redenomination risk. And the chance of an outright default would be much reduced, as Greece would already have defaulted on its official creditors and would be very keen to regain trust among private investors.

The third reason is the impact on the economy’s external position. Unlike the small economies of northern Europe, Greece is a relatively closed economy. About three quarters of its GDP is domestic. Of the quarter that is not, most comes from tourism, which would benefit from devaluation. The total effect of devaluation would not be nearly as strong as it would be for an open economy such as Ireland, but it would be beneficial nonetheless. Of the three effects, the first is the most important in the short term, while the second and third will dominate in the long run.

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Always was.

Varoufakis: Debt Restructuring Is The Only Way Forward (Reuters)

Greece Finance Minister Yanis Varoufakis said he could rule out a ‘Grexit’ because it would not be a sensible solution to the Greek debt crisis and in a German newspaper interview on Monday also said a debt restructuring was the only way forward. “I rule out a ‘Grexit’ as a sensible solution,” Varoufakis told mass circulation Bild newspaper, referring to a possible Greek exit from the euro zone. “But no one can rule out everything. I can’t even rule out a comet hitting earth.” Talks on ending the deadlock between Greece and its international creditors broke up in failure, with European leaders venting frustration as Athens stumbled towards a debt default that threatens its future in the euro.

Varoufakis said he believed it could be possible for Greece to reach an agreement with creditors quickly. He said the only way Greece would be able to repay its debts was if there was a restructuring and a deal could be possible if Chancellor Angela Merkel took part in the talks. “We don’t want any more money,” he told the German daily that has been especially critical of the rescue efforts, adding Germany and the rest of the eurozone had already given Greece “far too much” money. “An agreement could be reached in one night. But the chancellor would have to take part.”

He said the austerity program had failed. “There’s no way around it: We have to start all over again. We have to make a clean sweep,” Varoufakis said. He added that his government wanted to prevent a ‘Grexit’ but needed “a restructuring. That’s the only way possible that we can guarantee and also afford to repay so much debt.”

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No, they’re not kidding.

Syriza Left Demands ‘Icelandic’ Default As Greek Defiance Stiffens (AEP)

The radical wing of Greece’s Syriza party is to table plans over coming days for an Icelandic-style default and a nationalisation of the Greek banking system, deeming it pointless to continue talks with Europe’s creditor powers. Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma. The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or ‘Left Platform’, as well as other hard-line groupings in Syriza’s spectrum.

It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be. “This goes well beyond the Left Platform. We are talking serious numbers,” said one Syriza MP involved in the draft. “We are all horrified by the idea of surrender, and we will not allow ourselves to be throttled to death by European monetary union,” he told the Telegraph. The militant views on the Left show how difficult it could be for premier Alexis Tsipras to rally his party’s support for any deal that crosses Syriza’s electoral ‘red-lines’ on pensions, labour rights, austerity, and debt-relief. Yet they also strengthen his hand as talks with EMU creditors turn increasingly dangerous. Talks between Greece and its EU creditors fell apart once again on Sunday, leaving a final decision on a default to eurozone finance ministers.

Mr Tsipras warned over the weekend in the clearest terms to date that Greece’s creditors should not push him too far. “Our only criterion is an end to the ‘memoranda of servitude’ and an exit from the crisis,” he said. “If Europe wants the division and the perpetuation of servitude, we will take the plunge and issue a ‘big no’. We will fight for the dignity of the people and our sovereignty,” he said. It may soon be too late to push any accord through the German Bundestag and other EMU parliaments before June 30, when Greece faces a €1.6bn payment to the IMF. The interior ministry has already ordered governors and mayors to transfer their cash reserves to the central bank as a precaution, but even this is not enough to avert default without a deal. Yet an official document released this evening in Athens appeared to throw down the gauntlet.

“The government reiterates, in no uncertain terms, that no reduction in pensions and wages or increases, through VAT, in essential goods – such as electricity – will be accepted. No recessionary measure that undermines growth – the experiment has lasted long enough,” it said. European officials examined ‘war game’ scenarios of a Greek default in Bratislava on Thursday, admitting for the first time that they may need a Plan B after all. “It was a preparation for the worst case. Countries wanted to know what was going on,” said one participant to AFP. The creditors argue that ‘Grexit’ would be suicidal for Greece. They have been negotiating on the assumption that Syriza must be bluffing, and will ultimately capitulate. Little thought has gone into possibility that key figures in Athens may be thinking along entirely different lines.

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Cutting military spending is a thorny topic. The IMF knows who the paymasters are. Hilarious that they claim to be opposed to “any such “bartering”; it’s all they been doing since January.

IMF ‘Blocked EU Compromise Proposal’ To Let Greece Cut Military Spending (AFP)

The IMF “torpedoed” a recent attempt by European Commission chief Jean-Claude Juncker to offer Athens a compromise proposal in tortuous debt talks, a German daily reported. Citing a “negotiator” as its source, the Frankfurter Allgemeine Zeitung said there had been “tensions” between the EU Commission and the IMF in recent days as Greece and its creditors race against the clock to come up with a debt deal to avert a catastrophic default by Athens. The compromise that Juncker wanted to present to Greek Prime Minister Alexis Tsipras would have allowed Athens to postpone some €400 million in pension cuts in return for making similar savings on military spending, the newspaper said in its Sunday edition.

But the IMF was opposed to any such “bartering”, the source was quoted as saying in the report. Tsipras meanwhile warned Greece on Saturday to prepare for a “difficult compromise” with its EU-IMF creditors, who are demanding tough reforms in return for unlocking the last tranche of desperately-needed bailout funds ahead of key deadlines at the end of the month. Top Eurozone officials upped the pressure on Friday, saying they were preparing the ground for an Athens default, which could see Greece crashing out of the Eurozone.

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Tragedy.

Doctors At Greek State-Run Hospitals At Risk Of Burnout (Kathimerini)

There are a number of specializations that are especially demanding. For the past four months, the recently opened thoracic surgery clinic at the Attikon Hospital in Athens has been operating with a staff of two. “I have applied for an assistant, someone who is specialized in what we do here, to be temporarily reassigned from another hospital, but what can they do when every hospital is understaffed?” noted the clinic’s director, Pericles Tomos. He has one intern when the work calls for four. Over three months, the two of them conducted 37 surgeries, and they work more than 12 hours a day. The shortage of thoracic surgeons has also hit other hospitals in the country. Over 70% of the positions for this specialization remain open as young doctors with expertise prefer to work abroad.

Similar shortages in other specializations put a greater burden on doctors working at public hospitals. At the capital’s Evangelismos Hospital, heart surgeon Panagiotis Dedeilias works more than 80 hours a week. “I have often felt completely exhausted after working for 36 hours straight,” he told Kathimerini. “I have had interns faint in the operating room because of exhaustion, while I have also seen others growing indifferent toward the job. They may not have lost their ability to diagnose a patient and do what they need to do, but they are cold toward patients’ relatives and seem to be losing their ambition.” Dedeilias has never taken a day off after being on emergency duty for 24 hours. “You can’t leave a patient behind when you know there’s no one to replace you,” said Giorgos Marinos, a doctor who is in charge of running the emergency room at the Laiko Hospital, also in Athens.

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It shouldn’t be in the eurozone.

Finland’s Problem Is The Same As Greece’s (Forbes)

Finland’s central bank governor, Erkki Liikanen, tells us that Finland is going to have to work hard to get through this current difficult economic situation. The country’s GDP is still significantly below pre-crisis levels and it’s likely to be a number of years before there’s a full recovery. But the real point behind this story is that it just doesn’t have to be this way. As Paul Krugman has been pointing out recently and as many others of us have been shouting for years. Finland simply should never have joined the euro, as Greece should not have. As, in fact, pretty much most of the current members should not have joined the single currency.

Further, none of this is a surprise. It’s inherent in the very design of said currency, indeed it was pointed to by Robert Mundell, the man who worked out the economics of single currencies. That it would all go wrong is exactly what the warning about the euro was. It is going wrong, has gone wrong, and for exactly the reason predicted:

Finland is in trouble, and in the words of the central bank this week, the situation is “grave”. While France has often been branded Europe’s “sick man” and Greece’s problems are well known, Finland’s economy is still 5pc smaller than before the financial crisis. The country will barely crawl out of a three-year recession this year, while unemployment is forecast by the OECD to grow in 2015.

Faced with a bloated state, below-par growth, and prices and costs that have risen at a much faster pace than the rest of the eurozone, the medicine is a familiar one. What Finland has to do is have an internal devaluation. That is, it’s got to force down labour prices. That’s something that is difficult and something that can only be done with considerable economic pain. It’s also what Spain, Portugal and the extreme case of Greece have all also had to do. And the reason is that they’re in the euro. As Paul Krugman points out:

What’s going on? Well, in the case of Finland we’re seeing the classic problems of asymmetric shocks in a currency area that isn’t optimal. Finland’s two main export sectors, forest products and Nokia, have tanked; this creates the need for a sharp fall in relative wages to make up for the lost markets, but because Finland doesn’t have its own currency anymore this adjustment must take the form of a slow, grinding internal devaluation (which is, by the way, why the garbled discussion of wages turns the story into nonsense).

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“It was digital money conjured out of thin air and they certainly haven’t destroyed or repealed the law of supply and demand.”

The Futility of Our Global Monetary Experiment (David Stockman)

If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling. When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market.

This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system. Second, I think even though they stopped actually adding to their balance sheet in October — when QE supposedly ended in a technical sense — the Fed has put $3.5 trillion worth of basic financial fraud into the world financial system and economy.

After all, when they bought all of that treasury debt and all of those GSE securities, what did they use to pay for it with? It was digital money conjured out of thin air and they certainly haven’t destroyed or repealed the law of supply and demand. So, if you put $3.5 trillion of demand into the fixed income market at points along the yield curve all the way from two years to thirty years, that is an enormous fat sum on the scale. That is an enormous distortion of pricing because you can’t have that much demand without affecting the price. Now, with the ECB at full throttle, and with Japan being almost a lunatic in its mimicking of QE, you are creating the greatest distortion of fixed income pricing or bond market pricing in the history of the world, and the bond market is the monster of the midway.

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Essential reading.

The Sunday Times’ Snowden Story Is Journalism At Its Worst (Glenn Greenwald)

Western journalists claim that the big lesson they learned from their key role in selling the Iraq War to the public is that it’s hideous, corrupt and often dangerous journalism to give anonymity to government officials to let them propagandize the public, then uncritically accept those anonymously voiced claims as Truth. But they’ve learned no such lesson. That tactic continues to be the staple of how major US and British media outlets “report,” especially in the national security area. And journalists who read such reports continue to treat self-serving decrees by unnamed, unseen officials – laundered through their media – as gospel, no matter how dubious are the claims or factually false is the reporting.

We now have one of the purest examples of this dynamic. Last night, the Murdoch-owned Sunday Times published their lead front-page Sunday article, headlined “British Spies Betrayed to Russians and Chinese.” Just as the conventional media narrative was shifting to pro-Snowden sentiment in the wake of a key court ruling and a new surveillance law, the article claims in the first paragraph that these two adversaries “have cracked the top-secret cache of files stolen by the fugitive US whistleblower Edward Snowden, forcing MI6 to pull agents out of live operations in hostile countries, according to senior officials in Downing Street, the Home Office and the security services.” It continues:

Western intelligence agencies say they have been forced into the rescue operations after Moscow gained access to more than 1m classified files held by the former American security contractor, who fled to seek protection from Vladimir Putin, the Russian president, after mounting one of the largest leaks in US history. Senior government sources confirmed that China had also cracked the encrypted documents, which contain details of secret intelligence techniques and information that could allow British and American spies to be identified. One senior Home Office official accused Snowden of having “blood on his hands”, although Downing Street said there was “no evidence of anyone being harmed”.

Aside from the serious retraction-worthy fabrications on which this article depends – more on those in a minute – the entire report is a self-negating joke. It reads like a parody I might quickly whip up in order to illustrate the core sickness of western journalism. Unless he cooked an extra-juicy steak, how does Snowden “have blood on his hands” if there is “no evidence of anyone being harmed?” As one observer put it last night in describing the government instructions these Sunday Times journalists appear to have obeyed: “There’s no evidence anyone’s been harmed but we’d like the phrase ‘blood on his hands’ somewhere in the piece.”

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The Sunday Times may yet regret having run it. Already, a vital accusation was silently removed from the digital version.

Five Reasons the MI6 Story is a Lie (Craig Murray)

The Sunday Times has a story claiming that Snowden’s revelations have caused danger to MI6 and disrupted their operations. Here are five reasons it is a lie.

1) The alleged Downing Street source is quoted directly in italics. Yet the schoolboy mistake is made of confusing officers and agents. MI6 is staffed by officers. Their informants are agents. In real life, James Bond would not be a secret agent. He would be an MI6 officer. Those whose knowledge comes from fiction frequently confuse the two. Nobody really working with the intelligence services would do so, as the Sunday Times source does. The story is a lie.

2) The argument that MI6 officers are at danger of being killed by the Russians or Chinese is a nonsense. No MI6 officer has been killed by the Russians or Chinese for 50 years. The worst that could happen is they would be sent home. Agents’ – generally local people, as opposed to MI6 officers – identities would not be revealed in the Snowden documents. Rule No.1 in both the CIA and MI6 is that agents’ identities are never, ever written down, neither their names nor a description that would allow them to be identified. I once got very, very severely carpeted for adding an agents’ name to my copy of an intelligence report in handwriting, suggesting he was a useless gossip and MI6 should not be wasting their money on bribing him. And that was in post communist Poland, not a high risk situation.

3) MI6 officers work under diplomatic cover 99% of the time. Their alias is as members of the British Embassy, or other diplomatic status mission. A portion are declared to the host country. The truth is that Embassies of different powers very quickly identify who are the spies in other missions. MI6 have huge dossiers on the members of the Russian security services – I have seen and handled them. The Russians have the same. In past mass expulsions, the British government has expelled 20 or 30 spies from the Russian Embassy in London. The Russians retaliated by expelling the same number of British diplomats from Moscow, all of whom were not spies! As a third of our “diplomats” in Russia are spies, this was not coincidence. This was deliberate to send the message that they knew precisely who the spies were, and they did not fear them.

4) This anti Snowden non-story – even the Sunday Times admits there is no evidence anybody has been harmed – is timed precisely to coincide with the government’s new Snooper’s Charter act, enabling the security services to access all our internet activity. Remember that GCHQ already has an archive of 800,000 perfectly innocent British people engaged in sex chats online.

5) The paper publishing the story is owned by Rupert Murdoch. It is sourced to the people who brought you the dossier on Iraqi Weapons of Mass Destruction, every single “fact” in which proved to be a fabrication. Why would you believe the liars now?

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Second that.

Let Me Be Clear – Edward Snowden Is A Hero (Shami Chakrabarti)

Who needs the movies when life is full of such spectacular coincidences? On Thursday, David Anderson, the government’s reviewer of terrorism legislation, condemned snooping laws as “undemocratic, unnecessary and – in the long run – intolerable”, and called for a comprehensive new law incorporating judicial warrants – something for which my organisation, Liberty, has campaigned for many years. This thoughtful intervention brought new hope to us and others, for the rebuilding of public trust in surveillance conducted with respect for privacy, democracy and the law. And it was only possible thanks to Edward Snowden. Rumblings from No 10 immediately betrayed they were less than happy with many of Anderson’s recommendations – particularly his call for judicial oversight.

And three days later, the empire strikes back! An exclusive story in the Sunday Times saying that MI6 “is believed” to have pulled out spies because Russia and China decoded Snowden’s files. The NSA whistleblower is now a man with “blood on his hands” according to one anonymous “senior Home Office official”. Low on facts, high on assertions, this flimsy but impeccably timed story gives us a clear idea of where government spin will go in the coming weeks. It uses scare tactics to steer the debate away from Anderson’s considered recommendations – and starts setting the stage for the home secretary’s new investigatory powers bill. In his report, Anderson clearly states no operational case had yet been made for the snooper’s charter. So it is easy to see why the government isn’t keen on people paying too close attention to it.[..]

So let me be completely clear: Edward Snowden is a hero. Saying so does not make me an apologist for terror – it makes me a firm believer in democracy and the rule of law. Whether you are with or against Liberty in the debate about proportionate surveillance, Anderson must be right to say that the people and our representatives should know about capabilities and practices built and conducted in our name. For years, UK and US governments broke the law. For years, they hid the sheer scale of their spying practices not just from the British public, but from parliament. Without Snowden – and the legal challenges by Liberty and other campaigners that followed – we wouldn’t have a clue what they were up to.

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The narrative machine.

US And Poland In Talks Over Weapons Deployment In Eastern Europe (Guardian)

The US and Poland are discussing the deployment of American heavy weapons in eastern Europe in response to Russian expansionism and sabre-rattling in the region in what represents a radical break with post-cold war military planning. The Polish defence ministry said on Sunday that Washington and Warsaw were in negotiations about the permanent stationing of US battle tanks and other heavy weaponry in Poland and other countries in the region as part of Nato’s plans to develop rapid deployment “Spearhead” forces aimed at deterring Kremlin attempts to destabilise former Soviet bloc countries now entrenched inside Nato and the EU. Tomasz Siemoniak, the Polish defence minister, had talks on the issue at the Pentagon last month.

Warsaw said on Sunday that a decision whether to station heavy US equipment at warehouses in Poland would be taken soon. Nato’s former supreme commander in Europe, the American admiral James Stavridis, said the decision marked “a very meaningful policy shift”, amid eastern European complaints that western Europe and the US were lukewarm about security guarantees for countries on the frontline with Russia following Vladimir Putin’s seizure of parts of Ukraine. “It provides a reasonable level of reassurance to jittery allies, although nothing is as good as troops stationed full time on the ground, of course,” the retired admiral told the New York Times.

Nato has been accused of complacency in recent years. The Russian president’s surprise attacks on Ukraine have shocked western military planners into action. An alliance summit in Wales last year agreed quick deployments of Nato forces in Poland and the Baltic states. German mechanised infantry crossed into Poland at the weekend after thousands of Nato forces inaugurated exercises as part of the new buildup in the east. Wary of antagonising Moscow’s fears of western “encirclement” and feeding its well-oiled propaganda effort, which regularly asserts that Nato agreed at the end of the cold war not to station forces in the former Warsaw Pact countries, Nato has declined to establish permanent bases in the east.

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“..one of those phenomena you hear about in airport lounges just around the time it is nearly over.”

The Oil Cash-and-Carry Trade Does The Shipping Tanker Contango (Dizard)

The oil cash-and-carry trade is one of those phenomena you hear about in airport lounges just around the time it is nearly over. At the risk of repeating what your taxi driver told you this morning, oil cash-and-carries are about buying 2m barrels of oil with money borrowed from a “too big to fail” bank, storing it in a very large crude carrier, leaving it at anchor for, say, a year and then selling the oil at a higher price. Easy to understand, if you are the billionaire industrialists the Koch brothers. The cycles of this trade tell us a lot about macro-trade hype, the prospects for interest rates and ship owners’ financing. They can also mislead people about the prospects of the oil price.

I am not worried that the Koch brothers themselves will be tempted by the lure of fast money to overcommit their credit lines to the oil carry trade. I would be more concerned that the investing public, or the “smart money” of private equity funds, will continue to buy bits of crude or tankers, or shares in the companies that own them, in the hope of profiting from a growing market for oil storage. Even as the shares of companies owning bulk carriers have sunk to the bottom of the Mariana trench, tanker equities have steamed ahead. For example, Scorpio Bulkers is down 76% over the past year, while Nordic American Tankers is up over 56%.

No doubt some analyst could point to perceived differences in management quality, but for most investors these are commodity plays: bulkers = China raw material imports; tankers = oil contango. A contango, or a series of prices for future delivery of a commodity that increases over time, can tell a counterintuitive story, particularly for oil. For many, it appears to predict that the price is going up. Most of the time, though, crude oil prices are in backwardation, meaning near-term prices are higher than prices for future delivery. This makes sense when you consider it; if refiners only need oil a couple of months in advance, why not leave it in the ground rather than pay storage and financing costs on that position?

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Europe can’t afford to pay for its own infrastructure anymore.

China To Inject Billions Into European Infrastructure Fund (Reuters)

China will pledge a multi-billion dollar investment in Europe’s new infrastructure fund at a summit on June 29 in Brussels, according to a draft communique seen by Reuters – Beijing’s latest round of chequebook diplomacy to win greater influence. While the exact amount is still to be decided, the pledge will mark the latest step in China’s efforts to shape global economic governance at the expense of the United States, and follows major EU governments’ decision to join the Chinese-led Asian Infrastructure Investment Bank (AIIB) in defiance of Washington. It is expected to come with a request for return investment in China’s westward infrastructure drive – the “One Belt, One Road” initiative – constructing major energy and communications links across Central, West and South Asia to as far as Greece.

“China announced that it would make (X amount) available for co-financing strategic investment of common interest across the EU,” the draft final statement says, adding that agreements will be finalised at another meeting in September. An EU diplomat said the Chinese contribution was likely to be “in the billions”. EU and Chinese officials have told Reuters that Chinese banks are looking mainly at telecoms and technology projects. Chinese Premier Li Keqiang, who will attend the summit in Brussels, will agree with EU leaders that the €315 billion fund will “create opportunities for China to invest in the EU, in particular in infrastructure and innovation sectors”. If sealed, the deal will be a success for EC President Jean-Claude Juncker, who faced scepticism last year when he proposed the European Fund for Strategic Investment (EFSI), because EU governments are putting in little seed money.

France, Germany, Italy and Poland have each announced they will contribute 8 billion euros, while Spain and Luxembourg have pledged smaller contributions. The bloc is relying mainly on private investors and development banks to fund projects selected from an initial list of almost 2,000 submitted by the 28 member states, from airports to flood defenses, that are together worth 1.3 trillion euros. A big Chinese investment might raise questions about governance of the fund, which is so far strictly a European institution. An EU diplomat said it was not known whether China would seek representation commensurate with its stake. The decision to invite China into an EU fund could cause some friction with Washington, which is wary of Beijing’s rising influence and upset that Europe rebuffed its calls to stay out of the AIIB.

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What can you say to this other than ‘don’t look down’?

China’s Stock Market Value Tops $10 Trillion for First Time (Bloomberg)

The value of Chinese stocks rose above $10 trillion for the first time, the latest milestone for the nation’s world-beating rally. Companies with a primary listing in China are valued at $10.05 trillion, an increase of $6.7 trillion in 12 months, according to data compiled by Bloomberg. The gain alone is more than the $5 trillion size of Japan’s entire stock market. The U.S. is the biggest globally, at almost $25 trillion. No other stock market has grown as much in dollar terms over a 12-month period, as Chinese individuals piled into the nation’s equities using borrowed funds to bet gains will continue. Valuations are now the highest in five years and margin debt has climbed to a record, all while the economy is mired in its weakest expansion since 1990.

“This a reflection of the risk-taking attitude of the public,” Hao Hong at Bocom International in Hong Kong, said. “People are taking on an unreasonable amount of risk for deteriorating economic growth.” Outside of China, investors aren’t showing the same enthusiasm toward the nation’s equities. Funds pulled a net $6.8 billion out of Chinese stock funds in the seven days through Wednesday, Barclays Plc. said in a research note, citing EPFR Global data. Dual-listed Chinese shares cost more than twice as much on average on mainland exchanges than they do in Hong Kong. MSCI’s June 9 decision against including mainland equities in its benchmark gauge had little impact on the Shanghai Composite Index, which climbed 2.9% last week to its highest level since January 2008.

Foreigners are limited by quotas when buying shares in Shanghai via an exchange link with Hong Kong, while similar access to Shenzhen-traded stocks will likely start this year, according to the Hong Kong bourse. The Shanghai gauge has rallied 152% in the past 12 months, the most among global benchmark indexes tracked by Bloomberg, and trades at about 26 times reported earnings. Less than a year ago, the gauge was valued at about 9.6 times, the lowest since at least 1998. The Shenzhen Composite Index, tracking stocks on the smaller of China’s two exchanges, trades at 77 times profits after surging 194%.

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No confidence.

China’s MSCI Reality Check Is Too Big To Ignore (MarketWatch)

In recent weeks, much of the debate on China has centered on the idea that it is “too big to be ignored,” meaning the rest of the world would inevitably need to own its equities and currency. But now it’s set for a reality check. In the same week that Chinese A-shares failed to be included in MSCI’s emerging-market benchmark, it was also revealed that global investors pulled $7.9 billion out of Asia. This was the biggest weekly withdrawal in almost 15 years, according to data provider EPFR Global, and the majority reportedly related to China. Take this as a cue to look past China’s size and, instead, consider again its questionable fundamentals.

So far this year, concerns over a potential debt crisis have been drowned out by the roar of China’s domestic equity bull market – the best performing in the world this year by a long margin. But last week’s decision by MSCI tells us it’s too early to consider China a mainstream asset class. Despite much talk of reform, Beijing’s efforts to open its capital markets or make its financial system more transparent have been limited. Yuan internationalization might be accelerating, but a capital-account opening still looks like a distant promise. The decision against effectively forcing global fund managers to benchmark against an index they can still not freely buy and sell, in a currency that is not freely traded, is hard to take issue with.

As well as A-shares, Beijing has been angling to have the yuan recognized as one of the IMF’s benchmark currencies. This again follows the “too big to be ignored” line of thinking for the world’s second-largest economy. But this could be similarly premature when the yuan’s value is still determined by Beijing and not the market. The fact that the PBoC doesn’t issue currency notes larger than 100 yuan ($16) suggests it’s still preoccupied with the risk of capital flight. Rather than IMF technical tests, a simple one would be whether the Communist Party is willing to test its own people’s confidence in the yuan by letting it be freely exchanged? After that, it might be time to consider its merits as a global reserve currency, or whether Chinese shares should become cornerstone holdings in global equities.

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“..two-thirds of the country’s newcomers to investing left school before the age of 15..”

Stand Back: China’s Bubble Will Burst (Clive Crook)

Singapore, which I’m visiting at the moment, opens your mind to the highly improbable. Rich, ethnically diverse, cheerfully efficient, globalized in the extreme, it’s a man-made economic miracle — astonishing proof of what market forces combined with superb top-down direction can achieve. Even in Singapore, though, there are limits to what you can believe. I struggle to imagine, for instance, that China’s stock market isn’t a bubble. China’s leadership has long been impressed with the Singapore model. Since Deng Xiaoping, its government has been much more interested in capitalism in the style of Lee Kuan Yew than class struggle in the style of Karl Marx. In China, the mix of markets and smart management has indisputably worked another miracle, and on a vastly larger scale than Lee’s.

It’s a record that can make investors credulous. Lately, the government has defied predictions of an economic hard landing: The economy has slowed, but hasn’t crashed. Beijing wanted a gentle slowdown – part of its effort to rebalance the economy toward consumption and away from exports and investment – so it pulled some fiscal and monetary levers and that’s what happened. Targeted growth of 7% in GDP this year, fast by any other country’s standards, looks achievable. Many investors seem to think officials can direct the stock market just as precisely. It’s only a matter of time before they’re proved wrong. You could argue, in fact, that they already have been. The government wants a strong stock market for several reasons, including to support demand as property prices sag and growth in credit and investment slow.

It has been talking up share prices. Official news outlets extoll the virtues of stock ownership. But the government surely can’t have wanted the frenzy that in recent months has pushed the valuations of many companies to preposterous levels. Manic episodes rarely end well – and in many respects, this is mania. The Shenzhen market is up almost 200% over the past year. Its price-earnings ratio stands at a little less than 80. (Standard & Poor’s 500 Index is up 9% and has a ratio of 19.) Much of the demand for Chinese shares is credit-fuelled and comes from small investors new to the game. In one week in April Chinese investors opened 4 million new brokerage accounts – and two-thirds of the country’s newcomers to investing left school before the age of 15.

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“..an international conquest of democracy, by international corporations.”

How Obama’s “Trade” Deals Are Designed To End Democracy (Eric Zuesse)

U.S. President Barack Obama has for years been negotiating with European and Asian nations — but excluding Russia and China, since he is aiming to defeat them in his war to extend the American empire (i.e, to extend the global control by America’s aristocracy) — three international ‘trade’ deals (TTP, TTIP, & TISA), each one of which contains a section (called ISDS) that would end important aspects of the sovereignty of each signatory nation, by setting up an international panel composed solely of corporate lawyers to serve as ‘arbitrators’ deciding cases brought before this panel to hear lawsuits by international corporations accusing a given signatory nation of violating that corporation’s ‘rights’ by its trying to legislate regulations that are prohibited under the ’trade’ agreement,

such as by increasing the given nation’s penalties for fraud, or by lowering the amount of a given toxic substance that the nation allows in its foods, or by increasing the percentage of the nation’s energy that comes from renewable sources, or by penalizing corporations for hiring people to kill labor union organizers — i.e., by any regulatory change that benefits the public at the expense of the given corporations’ profits. (No similar and countervailing power for nations to sue international corporations is included in this: the ‘rights’ of ‘investors’ — but really of only the top stockholders in international corporations — are placed higher than the rights of any signatory nation.)

This provision, whose full name is “Investor State Dispute Resolution” grants a one-sided benefit to the controlling stockholders in international corporations, by enabling them to bring these lawsuits to this panel of lawyers, whose careers will consist of their serving international corporations, sometimes as ‘arbitrators’ in these panels, and sometimes as lawyers who more-overtly represent one or more of those corporations, but also serving these corporations in other capacities, such as via being appointed by them to head a tax-exempt foundation to which international corporations ‘donate’ and so to turn what would otherwise be PR expenses into corporate tax-deductions. In other words: to be an ‘arbitrator’ on these panels can produce an extremely lucrative career.

These are in no way democratic legal proceedings; they’re the exact opposite, an international conquest of democracy, by international corporations.

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The harder they come.

Inside The Crazy World Of Canada’s Peak Real Estate (MacLean’s)

A huge chunk of Canadians’ assets are tied up in real estate (roughly 35% in principal residences and another 10% in second properties), and their value has exploded. Some $1.7 trillion in net new wealth has been created from Canadian real estate since 2000. In fact, a growing number of Canadians expect their home to pay for their retirement. Is it any wonder, then, that with so much at stake, emotions run high and disputes turn ugly? “Real estate is seen as a commodity in scarce supply—while there’s actually a lot of it out there, it’s scarce if we can’t afford it,” says John Andrew, an adjunct assistant professor who studies real estate at Queen’s University. “It’s inevitable that you start to see these conflicts. It tends to bring out the worst in people.”

It’s not just battles over monster homes. While bidding wars have become an unwelcome rite of passage in the quest for home ownership in Canada over the past decade, the battles have grown even more irrational and vicious of late as buyers compete for the privilege of owning dilapidated, inner-city homes that often need to be gutted to be saved. As for those priced out of the housing market altogether, there are growing calls for politicians to do something—anything—to bring down the cost of owning a home in Canada. That’s led to a NIMBYish dispute in Calgary over legal basement suites and quasi-xenophobic discussions in Vancouver about the need to clamp down on foreign property buyers—read: mainland Chinese.

One local urban planner has even dubbed Vancouver a “hedge city,” suggesting its single-family homes are little more than a place for wealthy foreigners to park their cash. With all the rage, greed and animosity, the country’s already overheated housing market has hit yet another level—one where desperate, would-be buyers clamour, wild-eyed, for a slice of the action, while existing homeowners go to extreme lengths to protect their property nest eggs. Meanwhile, the rest of the world looks on and wonders: Has Canada gone crazy?

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You betcha.

Australian Banks And Real Estate: A Ponzi Scheme That Could Ruin Us? (ABC.au)

Madness has gripped Sydney’s and parts of Melbourne’s property market; a malaise that, if allowed to continue, could have dire consequences for the nation. So far, much of the debate around the rampant real estate market has revolved around affordability and the worrying concern that we are in the process of creating a class system based upon land ownership as wealth is transferred from a generation entering the workforce to those about to exit it. But a far greater and more immediate danger lurks in the shadows. The prospect of a reversal – of a sudden decline in property values in the two major capitals – would be enough to tip the nation into a severe economic crisis.

It’s not as though it hasn’t happened elsewhere. The collapse in American property markets in 2007 sparked the worst global recession in generations. The UK endured its own crisis borne from overly exuberant real estate speculation. The same thing happened across Europe. The east coast capital city property bubble is being driven by investors who borrowed $11.5 billion in April, a 23.5% rise from a year earlier. They sidelined owner occupiers, who borrowed $9.8 billion. None of this is being fuelled by wages growth. Beneath this month’s GDP figures – which superficially showed an encouraging 0.9% lift for the March quarter – lay the real story. Nominal GDP – a much better proxy for earnings and wages – grew just 0.4% for the quarter and an anaemic 1.2% for the year.

In the past fortnight, the Prime Minister and the Treasurer have been assailed by the nation’s three most powerful economic mandarins, each of whom has directly contradicted the Government mantra on rising property prices. Treasury head John Fraser, Reserve Bank chief Glenn Stevens and financial system inquiry author David Murray have all expressed alarm at recent developments in the eastern states capital city housing markets. They have yet to detail the mechanism by which their unfolding fears could play out if the Sydney and Melbourne housing bubble is not deflated. But here is a likely scenario over how an unfettered boom could wreck the economy.

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Katrina, Sandy, big words but..

Just 16% Of Hurricane Sandy Funds Given Out By 2014 (NY Post)

Just 16% of the money given to the city for Hurricane Sandy projects was doled out in contracts by the end of 2014 even though the storm ravaged the area more than two years before, according to a new analysis. Some Sandy projects were added late in the planning process and the feds had not appropriated all the funding by that time, the Independent Budget Office found. The funding was worth a total $9.7 billion. The MTA said much of the rebuilding and strengthening of the transit system still has to be done such as work on the Cranberry Tube, used by the A and C lines, and the L train s Canarsie Tube.

Those Sandy projects which have been funded are progressing rapidly, rep Kevin Ortiz said. The IBO also said that when the MTA s last capital plan wrapped up it had spent less than half of its funds. The plan ran between 2010 and 2014, and cost $31.9 billion. Many of the projects and contracts expand beyond the four years of the last plan, according to the report. The MTA is facing a $14 billion deficit for its next plan, which funds big-ticket items like new subway cars.

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How can France sign up to the TTIP if it does this?

‘Stop Over-The-Counter Sales of Monsanto’s Round-Up’ – French Minister (RT)

French environment and energy minister Segolene Royal has asked garden centers to stop self-service sales of Monsanto’s Roundup weed killer to fight the harmful effects of pesticide. “France must be offensive on stopping pesticides,” Segolene Royal told France 3 television on Sunday. “I have asked garden shops to stop over-the-counter sales of Monsanto’s Roundup.” The US agribusiness giant’s weed killer came back under scrutiny in March, after its main active ingredient, glyphosate, was branded “probably carcinogenic to humans” by the International Agency for Research on Cancer (IARC), part of the World Health Organization (WHO).

Earlier this month, the French consumer association CLCV asked authorities to ban glyphosate herbicides, which are used domestically by amateur gardeners in France. On Thursday Royal and the Minister of Agriculture made a joint statement announcing that phytosanitary products used to control plant diseases would only be available to amateur gardeners “through an intermediary or a certified seller” from January 2018. France plans to introduce a full ban on the use of pesticides by home gardeners from 2022, according to the statement made by the environment and energy ministry in April.

In response to the minister’s statement, Monsanto said on Sunday it had no information about a change in authorization for selling Roundup. “Under the conditions recommended on the label, the product does not present any particular risk for the user,” the company said in an email sent to Reuters. Glyphosate is the most-produced weed killer in the world, with applications in agriculture, forestry, industrial weed control, as well as lawn, garden, and aquatic environments, according to the IARC. Monsanto has strongly contested IARC’s classification, saying that “relevant, scientific data was excluded from review.” In the US, the herbicide has been considered safe since 2013, when Monsanto received approval for increased tolerance levels for glyphosate from the US Environmental Protection Agency (EPA).

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Immigrants get more money than many residents.

An Immigrant Is Worth More Than Drugs (Beppe Grillo’s blog)

Giovanni Falcone said “Follow the money and you’ll find the mafia”. Every immigrant arriving in Italy has the right to €1,050 a month to live on. Of this, a percentage goes to the mafia. Judging from the wiretapped conversations that amount ranges from one to two euros a day. For the mafia, immigrants are a source of income. They’re worth more than drugs. A boatload of Africans is worth more than a boatload of cocaine. And so it’s in their interests to get as many as possible to come. The boat handlers are paid by the immigrants – about a thousand euro per person. But who’s really paying the boat handlers?

Is it really the immigrants that, back home, would get by on that amount for years? Or someone else? Is the immigrant getting into a lifetime of debt to get a place on board a boat? And to whom is he indebted? It’s not realistic to think that people who “have lost everything“, who are destitute, who don’t even have the money for a change of clothes, can easily get hold of a thousand euro or even more. Where’s this money coming from? The most obvious response is that the ones paying out are the ones that are making money – htus the mafias.

And that’s how they close the circle – with the boat handlers, the mafias and the immigrants. To be sure, there are also the political parties that create “the moments of crisis” so that they can open up “welcome centres” that can be used to cream off money for themselves and for the mafias. Mafiacapitale is just the tip of the iceberg. Where there are immigrants, there’s the smell of money. It’s a resource to be added to the GDP together with drugs and prostitution. After Rome, there’ll be other cities, other kickbacks, and other politicians. It’s just a matter of time. To resolve the imigration issue, the associated flow of money needs drying up.

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 March 21, 2015  Posted by at 6:53 am Finance Tagged with: , , , , , , , , ,  


Jack Delano Freight operations on the Indiana Harbor Belt railroad 1943

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)
American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)
Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)
Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)
Debt Is Oil Patch’s Four-Letter Word (Bloomberg)
Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)
Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)
Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)
It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)
EU Offers Funds In Return For Urgent Greek Reforms (Guardian)
EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)
EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)
Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)
The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)
US Sets First Fracking Standards in More Than 30 Years (Bloomberg)
Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)
US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)
Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)
Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)
The Lion Hugger (BBC)

Why? Because people refuse to go deeper into debt: “In an environment where credit is not being used in a material way, the fate of wages matters..” But that still sounds far too much like it’s a voluntary thing. It’s not.

Wages Haven’t Been This Crucial to US Economy in 50 Years (Bloomberg)

When it comes to U.S. economic growth, wages may never have been this important. The link between earnings and consumer spending has been tighter in this expansion than in any other since records began in the 1960s, according to calculations by Tom Porcelli at RBC Capital Markets. Wages have become even more critical as households, still shaken after being caught with too much debt when the recession hit, remain unwilling or unable to tap home equity or let credit-card balances balloon to buy that new television or dishwasher. By not overextending themselves again, Americans are only spending as much as their incomes will allow, meaning that 70% of the economy is riding on how fast pay rises.

“In an environment where credit is not being used in a material way, the fate of wages matters,” Porcelli said. “They’re doing all of the driving from a consumption perspective.” The correlation between growth in wages and consumer spending adjusted for inflation stands at 0.93 since June 2009, when the recovery began, according to Porcelli. A reading of 1 means they move in the same direction all the time, zero means there is little relationship and minus 1 means they continually diverge. Porcelli tracked wages through the index of aggregate weekly payrolls for private production workers, which takes into account hourly earnings, the length of the workweek and changes in employment for about 80% of the labor force. Records go back to 1964, longer than the measure for all employees that includes supervisors, which dates back only to 2006.

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“The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us..”

American Underwater Homeowners “Here To Stay” Zillow Says (Zero Hedge)

A few weeks back we commented on the rather disturbing news that repeat foreclosures jumped in January: “According to Black Knight Financial, both new and repeat foreclosures hit a 12-month high during the first month of the year with repeats (i.e. the borrower was rescued but has since entered the foreclosure process again) jumping 11% M/M. More troubling is the trend in repeat foreclosures which accounted for only 15% of total foreclosures during the crisis but now make up a startling 51%.” Here’s what the trend looks like:

Now, a new report from Zillow seems to offer further evidence that the US housing market may not be the picture of health after all (as if we needed more proof after housing starts cratered 17% in February). The%age of homeowners underwater in the US was flat from Q3 to Q4 which doesn’t sound all that terrible until you consider that this figure had fallen for 10 consecutive quarters. Things look particularly bad in Florida and the midwest where Zillow notes more than 25% of borrowers are sitting in a negative equity position. Here’s more:

In the fourth quarter of 2014, the U.S. negative equity rate – the%age of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9%, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year… More than a quarter of mortgaged homes are underwater in some markets in Florida and the Midwest…

Zillow goes on to note that we have entered a new era in the US housing market: the era of the underwater homeowner. Even better, the report goes on to note that in a number of cases, borrowers will likely be “in negative equity forever”:

…this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come.

In fact, some homeowners trapped very deeply underwater may essentially be in negative equity forever. And those homeowners are much more likely to own America’s least expensive homes. Making matters worse, many homeowners in the bottom home value tiers are not only underwater, but very far underwater. Consider, for example, homeowners of the least expensive homes in the Detroit metro area. These homeowners are 29 times more likely to owe twice as much than their house is worth compared to a homeowner at the high end of the market.

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Darn! Trumped by teapots again!

Here’s the Next Biggest Threat to Global Crude Oil Prices (Bloomberg)

The next big threat to oil prices isn’t from OPEC or Bakken shale. It’s Russian samovars, or teapots. Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners – known as teapots to those in the industry – get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who’s followed the country’s energy industry for more than 20 years. That would equate to 5% growth in shipments, the most in at least a decade.

“The pain Russia is feeling from low oil prices has made more crude available for export,” Henderson said by phone March 18. “Quite a few of Russia’s simple refineries could reduce their runs.” Rising shipments from Russia, which ranks with Saudi Arabia and the U.S. as the world’s biggest oil producers, would put more pressure on crude, already down more than 50% from last year. Falling energy prices and U.S. and European Union sanctions imposed last year in response to the Ukraine crisis have pushed Russia to the brink of recession, damping demand for refined fuel products in the country. Crude loadings from Russian ports are 9.5% higher in the first quarter year over year, according to shipment schedules obtained by Bloomberg.

Teapot refineries processed as much as 800,000 barrels of crude a day last year, Igor Dyomin, a spokesman for Russia’s state-run pipeline operator, Transneft, said by phone March 19. A teapot refinery is one that produces mostly fuel oil rather than more premium fuels, according to Dyomin. Seven simple plants with a combined capacity of 1.2 million barrels a day are most at risk in the current price environment, according to Henderson.

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As seen from a mile away.

Global Oil Glut Set To Grow As China Slows Crude Imports (Reuters)

A global oversupply of oil is set to rise as China pauses in the build-up of its strategic reserves and Asian refineries slow crude imports ahead of the spring maintenance season, putting more downward pressure on prices. China’s purchases to fill its strategic petroleum reserves (SPR) had been one of the main drivers of Asian demand since August of last year, with the No.2 oil consumer taking up cheap crude to fill its tanks despite slowing economic growth. Yet China could pause its reserve purchases soon as tank sites reach their limits and new space only becomes available later this year. Little is known about China’s SPR levels.

The government seldom issues data, but its plan is to reach around 600 million barrels, about 90 days’ worth of imports. Most estimates put the SPR stocks currently to be 30-40 days’ worth. “I don’t think there is much (SPR) space left to fill,” a Chinese storage executive said under the condition of anonymity. In the Zhoushan area of Zhejiang province – site of two SPR bases and major commercial storage facilities – tanks are brimming, the executive said. “They are so full that one VLCC tanker owned by a state refiner has had to wait for almost 15 days to discharge,” he said. Adding to downward pressure is the expectation that Chinese refiners could process less crude oil in the second quarter as demand is dented by tax hikes and an economy growing at its slowest in 25 years.

Thomson Reuters data also shows that Asian imports overall have fallen 5% since peaking in December, when China’s purchases hit an all-time high at 7.2 million barrels per day. In India and Japan, crude imports for the most recent month are down 20% and 11% from a year ago, respectively, mainly due to the approach of the spring refinery maintenance season.

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“Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices..”

Debt Is Oil Patch’s Four-Letter Word (Bloomberg)

The 60 percent plunge in crude oil prices since mid-2014 isn’t just about increased production and slower global growth. Debt may be the four-letter word when it comes to explaining the extent of the energy sector’s collapse, a paper in the Bank for International Settlement’s Quarterly Review shows. While production has certainly increased and consumption cooled, current estimates of both are little changed from previous forecasts. This stands in contrast to the last two periods of similar oil-price declines in 1996 and 2008, which were attributed to big reductions in demand and/or a surge in production, according to the paper.nThis time, low borrowing costs, a product of easy Federal Reserve monetary policy, are a new wrinkle.

Cheap financing has made it easier for exploration and production (E&P) companies to finance operations and expand rapidly as the era of hydraulic fracturing kicked into high gear. Debt in the global oil and gas industry reached $2.5 trillion in 2014, 2 1/2 times what it was eight years earlier, according to the BIS paper. Just as fracking helped production soar in America’s oil fields, the debt boom is now magnifying the slump in prices as E&Ps boost current and future sales of crude to make sure they can fulfill their debt obligations. The direct effect on the economy is a sharp cutback in capital spending plans, already evidenced by plummeting rig counts.

At the same time, production continues to march higher. Deteriorating balance sheets encourage companies to keep pumping from existing wells even as the value of the assets (the oil) backing those securities declines. That explains the blowout in spreads between high-yield energy bonds and risk-free counterparts. “A sell-off of oil company debt could spill over to corporate bond markets more broadly if investors try to reduce the riskiness of their portfolios,” the BIS authors write. “The fact that debt of oil and gas firms represents a substantial portion of future redemptions underlines the potential system-wide relevance of developments in the sector.”

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Just to show you what Samaras and the Troika did to the country. And what the EU etc. want to continue doing.

Shocking Austerity: Greece’s Poor Lost 86% Of Income, Rich Only 17-20% (KTG)

Greece’s unbalanced austerity and drastic increase of poverty. The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%. The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9% !!! This is the result of a study that has analyzed 260.000 tax and income data from the years 2008 – 2012.

According to the study commissioned by the German Institute for Macroeconomic Research (IMK) affiliated with the Hans Böckler Foundation:
– The nominal gross income of Greek households decreased by almost a quarter in only four years.
– The wages cuts caused nearly half of the decline.
– The net income fell further by almost 9%, because the tax burden was significantly increased
– While all social classes suffered income losses due to cuts, tax increases and the economic crisis, particularly strongly affected were households of low- and middle-income. This was due to sharp increase in unemployment and tax increases, that were partially regressive.
– The total number of employees in the private sector suffered significantly greater loss of income, and they were more likely to be unemployed than those employed in the public sector.
-From 2009 to 2013 wages and salaries in the private sector declined in several stages at around 19%. Among other things, because the minimum wage was lowered and collective bargaining structures were weakened. Employees in the public sector lost around a quarter of their income.

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“In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors.”

Of Greeks and Germans: Re-Imagining Our Shared Future (Yanis Varoufakis)

Any sensible person can see how a certain video[1] has become part of something beyond a gesture. It has sparked off a kerfuffle reflecting the manner in which the 2008 banking crisis began to undermine Europe’s badly designed monetary union, turning proud nations against each other. When, in early 2010, the Greek state lost its capacity to service its debts to French, German and Greek banks, I campaigned against the Greek government’s quest for an enormous new loan from Europe’s taxpayers. Why?

I opposed the 2010 and 2012 ‘bailout’ loans from German and other European taxpayers because:
• the new loans represented not a bailout for Greece but a cynical transfer of losses from the books of the private banks to the weak shoulders of the weakest of Greek citizens. (How many of Europe’s taxpayers, who footed these loans, know that more than 90% of the €240 billion borrowed by Greece went to financial institutions, not to the Greek state or its citizens?)
• it was obvious that, at a time Greece could not repay its existing loans, the austerity conditions for giving Greece the new loans would crush Greek nominal incomes, making our debt even less sustainable
• the ‘bailout’ burden would, sooner or later, weigh down German and other European taxpayers once the weaker Greeks buckled under their mountainous debts (as moneyed Greeks had already shifted their deposits to Frankfurt, London etc.)
• misleading peoples and Parliaments by presenting a bank bailout as an act of ‘solidarity to Greece’ would turn Germans against Greeks, Greeks against Germans and, eventually, Europe against itself.
In 2010 Greece owed not one euro to German taxpayers. We had no right to borrow from them, or from other European taxpayers, while our public debt was unsustainable. Period!

That was my ‘controversial’ point in 2010: In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors. Well before the May 2010 ‘bailout’, I urged European citizens to tell their governments not to even think of transferring private losses to them. To no avail, of course. That transfer was effected soon after[2] with the largest taxpayer-backed loan in economic history given to the Greek state on austerity conditions that have caused Greeks to lose a quarter of their income, making it impossible to repay private and public debts, and causing a hideous humanitarian crisis. That was then, in 2010. What should we do now, in 2015, that Greece remains in crisis and our people, the Greeks and the Germans, have, regrettably but also predictably, descended into a mutual ‘blame game’?

First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe. Secondly, we need to focus on our joint interest: On how to grow and to reform Greece rapidly, so that the Greek state can best repay debts it should never have taken on while looking after its citizens as a modern European state ought to do. In practical terms, the 20th February Eurogroup agreement offers an excellent opportunity to move forward. Let us implement it immediately, as our leaders have urged in yesterday’s informal Brussels meeting. Looking ahead, and beyond current tensions, our joint task is to re-design Europe so that Germans and Greeks, along with all Europeans, can re-imagine our monetary union as a realm of shared prosperity.

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“Greece was not asked, so the claims have not gone away.” “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece..”

Legal Experts: Greece Has Grounds for WWII Reparations (Greek Reporter)

A growing number of legal experts are supporting Greece’s demands over the German war reparations from the country’s brutal Nazi occupation during World War II. Despite the official German refusal to address the issue, legal experts say now Athens has ground for the case. The hot issue is expected to be brought up by Greece’s newly elected Prime Minister Alexis Tsipras during his official visit to Berlin on Monday, where he is scheduled to hold a meeting with the German Chancellor Angela Merkel. The tension between the two countries have recently rose to unexpected levels and a series of events with the Finance Ministers of Greece and Germany, Yanis Varoufakis and Wolfgang Schaeuble respectively, and the war reparations issue — mainly by the Greek side — has significantly affected the already negative climate.

The Greek leftist-led coalition government has repeatedly raised the issue causing Germany’s firm reaction as expressed by German Finance Minister Wolfgang Schaeuble, who recently warned Athens to forget the war reparations, underlining that the issue has been settled decades ago. Central to Germany’s argument is that 115 million deutschemarks have been paid to Greece in the 1960s, while similar deals were made with other European countries that suffered a Nazi occupation. At the same time, though, lawyers from Germany and other countries have said the issue is not wrapped up, as Germany never agreed a universal deal to clear up reparations after its unconditional surrender.

The German answer on that is that in 1990, before its reunification, the “Two plus Four Treaty” agreement was signed with the United Kingdom, the United States, the former Soviet Union and France, which renounced all future claims. According to Berlin, this agreement settles the issue for other states too. “The German government’s argument is thin and contestable. It is not permissible to agree to a treaty at the expense of a third party, in this case Greece,” international law specialist Andreas Fischer-Lescano said, as cited by the Reuters. Mr. Lescano’s opinion finds several other experts in agreement. One of them, the Greek lawyer Anestis Nessou, who works in Germany highlighted that “there is a lot of room for interpretation. Greece was not asked, so the claims have not gone away.”

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Obviously. But still, that money did not leave the country.

It Really Looks Like Greeks Are Hiding Cash Under the Mattress (Bloomberg)

It is no secret that banks in Greece have been losing deposits in recent months. The question that is somewhat open, though, is where Greeks have been moving their deposits to. Have they been transferring the cash to other banks, or have they been squirreling it away under the mattress—and under bathroom tiles? At first glance, data from the Bank of Greece seem to point to the deposit transfer option rather than the cash-under-mattress option as the “banknotes in circulation” line item on its balance sheet hasn’t shown any big spike in recent months. This, however, does not tell the full story. The banknotes in circulation item on the Bank of Greece balance sheet only shows the amount of cash Greece has been allocated under its share of overall euro-area banknote circulation.

Any extra cash needs of the Greek economy are accounted for elsewhere on the Bank of Greece balance sheet under the rather drab headline of “net liabilities related to the allocation of euro banknotes within the Eurosystem.” This extra cash was zero before the start of the Greek crisis in 2009, climbed above €22 billion in the months leading to the 2012 Greek political crisis, and had been falling steadily since. Until December of last year, that is, when the Greek political crisis reemerged following the collapse of the Samaras administration. We can now clearly see there has been a €10 billion increase in cash in Greece in the three months to the end of February 2015. That is a lot of mattresses.

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Impossible conditions: “only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity..” That directly contradicts its mandate.

EU Offers Funds In Return For Urgent Greek Reforms (Guardian)

Greece’s eurozone creditors are considering bringing forward a financial lifeline for Athens by a few weeks after Alexis Tsipras, the Greek prime minister, told EU leaders the country would be insolvent by the end of April without assistance. In a key three-hour meeting in Brussels that ended in the early hours of Friday, Tsipras informed his creditors if they wait until the end of April before releasing funds, it will be too late for Greece. According to an account of that meeting policymakers are now discussing whether they can supply emergency funding earlier than previously agreed. Tsipras was also advised to treat the Eurocrats working in Athens with more respect and ensure their safety. Under the terms of an agreement on Greece’s bailout last month, some €7.2bn in rescue funds were not to be disbursed until the end of April and only on condition that Tsipras’s left-wing government had persuasively shown it was committed to enforcing austerity in the country.

Chancellor Angela Merkel of Germany concluded a two-day EU summit in Brussels on Friday by stressing Tsipras had to present a “comprehensive” reform package urgently and this would need to be endorsed by the Eurogroup of finance ministers before Greece could access any of the funds. Merkel’s remarks came after the crucial meeting, that ran until 2am on Friday, when Tsipras came face-to-face for the first time with the leaders of his key creditors – Merkel and Mario Draghi, the president of the European Central Bank. The other five present at the crisis talks were the French president, François Hollande; the presidents of the European Commission and Council, Jean-Claude Juncker and Donald Tusk; Jeroen Dijsselbloem, head of the committee of eurozone finance ministers; and Uwe Corsepius, a senior eurocrat who has just been appointed Merkel’s EU adviser.

Tsipras had requested the meeting and had been confrontational in the days preceding it. According to an authoritative account of what took place, he started the negotiations by making it clear he expected urgently needed bailout funds released without giving very much in return. According to the account, he was disabused of that notion within 10 minutes and the meeting then ran smoothly, except for an episode where the new Greek leader was upbraided by Draghi, who is furious at the way senior EU officials monitoring the terms of the Greek bailout are being treated in Athens. According to senior officials in Brussels, the Tsipras government has been orchestrating a campaign of intimidation against the eurocrats in Athens, frustrating their work and refusing all access.

Visiting Athens this week, they were confined to a luxury hotel and denied access to government ministries. Their whereabouts were leaked to the media and “aggressive” demonstrations were staged outside the hotel. One of the top officials needed two bodyguards. Draghi was said to have read Tsipras the riot act, while the others demanded cooperation with the creditors. Merkel was said to have soothed things by telling Tsipras that, when International Monetary Fund officials go to Berlin, they are granted access to everything they need, even when it is a little humiliating.

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Narrative: it’s for the poor.

EC Head Juncker Offers $2 Billion In Unused Funds To Greece (RT)

The European Commission has made $2 billion of unused funds available to Greece to help the country avert a cash crunch, EC head Jean-Claude Juncker says. The offer was made a day after crisis talks between Greece’s new Prime Minister Alexis Tsipras and European leaders on Greece’s EU-IMF bailout. Greek authorities said on Friday they were gradually moving towards meeting the requirements of international creditors on a more detailed reform plan, after Prime Minister Tsipras said his coalition would intensify work to avert the country’s bankruptcy. Austerity policies have been the focus of a standoff between Greece and its troika of creditors.

Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy. Austerity policies have been the focus of a standoff between Greece and its Troika of creditors. Promises to end the era of drastic cuts helped Tsipras win power two months ago, but since then his stance has weakened. Greece’s western creditors have been insisting the country needs to reform its economy and start cutting its own expenses, if it wants to get new money for its ailing economy.

The Troika of creditors said in February they were ready to extend the current bailout program until June 2015, but a general agreement hasn’t been reached yet. Tsipras has sharply criticized the Troika methods calling them arm-twisting. He blames them for his country’s unprecedented recession. Greece received two bailouts from the EU in 2010 and 2014 totaling €240 billion. Having taken on austerity measures, Greece saw its economy losing a quarter of its value, with a third of Greeks living below the poverty line and unemployment exceeding 30%. Experts say the money Greece has now will only last till the end of March.

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Bizarre story.

EU Bank’s Lack Of Transparency ‘Like A John Le Carré Novel’ (Guardian)

The EU watchdog has accused the union’s bank of flouting its own transparency rules and hiding what it knows about allegations of tax avoidance by a Zambian mining firm largely owned by the Swiss commodity trader Glencore. On Tuesday, Emily O’Reilly, the European ombudsman, said she was not satisfied with the European Investment Bank’s claims that, despite an internal investigation, it had been unable to establish whether Mopani Copper Mines had avoided paying local tax running into tens of millions. Ten years ago, the EIB – which is owned by EU member states – loaned Mopani $50m (£30m) for the renovation of a smelter to reduce sulphur dioxide emissions.

Six years later, after a leaked audit report suggested that Mopani had avoided paying tens of millions of dollars in local tax, the bank announced an investigation into the company. It also halted loans to Glencore because of “serious concerns” about its corporate governance. Glencore has always denied the allegations, which it maintains are based on “fundamental factual errors”. Mopani repaid the EIB loan in full in 2012.

After the EIB refused to release the findings of its investigation, the charity Christian Aid referred the bank to the European ombudsman, who was granted access to the internal report. In her ruling, O’Reilly disputed the bank’s assertion that “it was not possible to comprehensively prove or disprove the allegations” made in the leaked audit report. She said: “The ombudsman considers that this statement does not adequately reflect the information contained in the [EIB] investigation report on this issue.”

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Someone should stop Abe and Kuroda. This will be a huge disaster.

Japan Pensions Sell Record $46 Billion Bonds to Buy Stocks (Bloomberg)

Japan’s public pension funds, which include the world’s biggest, accelerated their push to dump local bonds and invest the money abroad to a record pace. The $1.1 trillion Government Pension Investment Fund and its smaller peers almost doubled net sales of Japanese government bonds to 5.56 trillion yen ($46 billion) in the fourth quarter, the most in Bank of Japan figures dating back to 1998. They bought an unprecedented 2.39 trillion yen of foreign stocks and bonds. Selling of JGBs and buying of overseas securities has continued for six straight quarters.

GPIF posted its largest investment gain in almost two years last quarter after shifting more money into stocks from Japanese bonds, as it came under government pressure to boost returns to cover payouts for the world’s fastest-aging population. The Federation of National Public Service Personnel Mutual Aid Associations, last month said it will boost its investments in foreign stocks and bonds and cut exposure to domestic debt, matching the plan by GPIF. “It seems like three other civil service funds have yet to move,” Takafumi Yamawaki, the chief rates strategist in Tokyo at JPMorgan, said referring to data from the BOJ and and GPIF. “That means there is still some room left for the shift to take place.”

Japan’s public pension funds raised domestic stock holdings for a fifth quarter, adding a net 1.73 trillion yen, the most since 2009. They held 5.6% of a record 1.023 quadrillion yen of outstanding JGBs at the end of December. The biggest holder, the BOJ, owned 25% of the total as of then, it said Wednesday in Tokyo. GPIF hired four external managers of domestic and overseas stocks as it moves to boost equities to half its assets. It made a 5.2% return in the fourth quarter, the most since the period ended March 2013, according to a statement last month. Domestic shares returned 6.2% in the quarter, while local debt returned 1.9%. Foreign bonds returned 9.4%, and overseas stocks gained 10%.

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” The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED..”

The Central Banks Will Not Be Able to Control the Dollar Carry Trade (Phoenix)

The biggest issue facing the finacial system today is the US Dollar rally. The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013. And it’s imploding as we write this. Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally bigger than the economies of Germany and Japan COMBINED. When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.

And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown. Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up. You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed’s FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up. Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system. Take a look at the impact it’s having on emerging market currencies.

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It’s all about timing.

US Sets First Fracking Standards in More Than 30 Years (Bloomberg)

The Obama administration issued the first federal regulations for fracking since the drilling technique fueled a domestic energy boom, requiring extensive disclosures of the chemicals used on public land. After years of debate and delay, the Bureau of Land Management on Friday said drillers on federal lands must reveal the chemicals they use, meet well construction standards and safely dispose of contaminated water used in fracking. The rule had been highly anticipated by drillers, who oppose added regulation, and by environmentalists who have raised alarms about water contamination. Both sides had complaints with the outcome: groups representing the oil and gas industry sued to block its implementation and an environmental group said the regulation favored industry over public health.

“This rule will move our nation forward as we ensure responsible development while protecting public land resources,” Interior Secretary Sally Jewell said on a call with reporters. “As we continue to offer millions of acres of America’s public lands – your lands – for oil and gas development, it is critical that the public has confidence that robust safety and environmental protections are in place.” Domestic production from more than 100,000 wells on public lands accounts for about 11% of U.S. natural-gas production and 5% of oil production. Fracking, or hydraulic fracturing, is a technique in which water, chemicals and sand are shot underground to free oil or gas from rock. It is used for about 90% of the wells on federal lands.

The rule, which is set to take effect in three months, triggered criticism from environmental groups, which said the regulations put industry interests ahead of public health, and from congressional Republicans the oil and gas industry. The Independent Petroleum Association of America and the Western Energy Alliance filed a lawsuit against the Interior Department, saying the regulations are the product of “unsubstantiated concerns,” and lack evidence necessary to sustain them. The group asked in a lawsuit filed Friday in a U.S. court in Wyoming to have the new rules declared invalid.

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Can it get any crazier?

Ukraine Sends Request For Proposals For US Taxpayer-Guaranteed Bond (Reuters)

The Republic of Ukraine has sent out a request for proposals (RFP) to banks for a new US government-guaranteed bond, according to three sources. This is the second time the US government has thrown its financial backing behind a Ukrainian international bond issue. In May 2014, the US guaranteed a US$1bn Ukrainian bond maturing in 2019 through the US Agency for International Development. That bond was given a credit rating in line with the US sovereign at Aaa by Moody’s, AA+ by Standard & Poor’s and AAA by Fitch. This is a far cry from Ukraine’s credit rating, which stands at Caa3, CCC and CC with the same three agencies.

The RFP comes just over a week after Ukraine agreed a new four-year US$17.5bn bailout facility with the IMF. As part of the IMF agreement several institutions – including the EU, World Bank and US – have agreed to provide around US$7.5bn between them, according to analyst estimates, to the war torn country. It is not clear whether the US-backed bond forms part of the US contribution. Meanwhile, Ukraine is obligated under the IMF agreement to restructure at least US$15.3bn of outstanding debt. Ukraine’s finance minister Natalia Yaresko confirmed during an investor call last week that bondholders will see haircuts to principal, as well as maturity extensions and changes to interest payment.

Russia, which holds US$3bn of Ukrainian debt that comes due in December this year, will not be exempt from the cuts, Yaresko said. A clause in the debt owed to Russia allows it to accelerate bond payments if Ukraine’s debt-to-GDP ratio breaches 60% – a number that has been passed largely because Ukraine’s industrial power centre Donbass has ground to a halt under sustained conflict. Russia has repeatedly said that it would not accelerate the debt.

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Not surprised.

US ‘Aggressively’ Threatened Germany Over Snowden Aylum (Glenn Greenwald)

German Vice Chancellor Sigmar Gabriel (above) said this week in Homburg that the U.S. government threatened to cease sharing intelligence with Germany if Berlin offered asylum to NSA whistleblower Edward Snowden or otherwise arranged for him to travel to that country. “They told us they would stop notifying us of plots and other intelligence matters,” Gabriel said. The vice chancellor delivered a speech in which he praised the journalists who worked on the Snowden archive, and then lamented the fact that Snowden was forced to seek refuge in “Vladimir Putin’s autocratic Russia” because no other nation was willing and able to protect him from threats of imprisonment by the U.S. government (I was present at the event to receive an award).

That prompted an audience member to interrupt his speech and yell out: “Why don’t you bring him to Germany, then?” There has been a sustained debate in Germany over whether to grant asylum to Snowden, and a major controversy arose last year when a Parliamentary Committee investigating NSA spying divided as to whether to bring Snowden to testify in person, and then narrowly refused at the behest of the Merkel government. In response to the audience interruption, Gabriel claimed that Germany would be legally obligated to extradite Snowden to the U.S. if he were on German soil.

Afterward, however, when I pressed the vice chancellor (who is also head of the Social Democratic Party, as well as the country’s economy and energy minister) as to why the German government could not and would not offer Snowden asylum — which, under international law, negates the asylee’s status as a fugitive — he told me that the U.S. government had aggressively threatened the Germans that if they did so, they would be “cut off” from all intelligence sharing. That would mean, if the threat were carried out, that the Americans would literally allow the German population to remain vulnerable to a brewing attack discovered by the Americans by withholding that information from their government.

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“..if it’s really God’s plan, does He also pay the bill?”

Inhofe’s Snowball Fight With NASA, US Navy, CEOs And The Pope (Paul B. Farrell)

The Tulsa World newspaper recently reran a heated Washington Post editorial headlined: “Sen. Jim Inhofe embarrasses GOP and U.S.” The Senate’s top climate-science denier’s snowball throwing stunt in the Senate chambers was more offensive to his Senate colleagues and the liberal media than his official denier’s bible he wrote calling it “The Greatest Hoax: How the Global Warming Conspiracy Threatens Your Future.” But what if Oklahoma Sen. Inhofe is right? What if “God really is in charge” of the global warming mess? And what if “humans cannot change climate,” as he warns America? Get it? Humans cannot reverse the climate damage. The biggest “hoax is that there are some people who are so arrogant to think that they are so powerful.”

But humans can’t change climate. Humans are powerless to change it, not RiskyBusiness.org nor 350.org, not Big Oil nor the GOP. And if God is in solely responsible, humans are just bit players in a grand drama, but can’t affect the outcome one way or another, either accelerating it or halting it. And no matter what capitalists or environmentalists do, or plan, or legislate, or oppose, or spend, God’s plan is “The Plan,” and we may just make matters worse, and waste a lot of money … $60 trillion. Economic shocker. A ScientificAmerican team did a research study on the cost of fixing the global warming and climate-change problem. Bottom line: $60 trillion. That’s one helluva price tag. A whopping $60 trillion on our planet – where the total global GDP is only $75 trillion.

And if it’s really God’s plan, does He also pay the bill? Now add this to the economic equation: Is Inhofe speaking for God? He’s hardly neutral, a huge chunk of Oklahoma’s state revenue is generated by Big Oil. And he’s received well over a million bucks in campaign donations from fossil-fuel interests. Worse, no states, nations nor businesses, nobody has a master plan for dealing with climate change … yes, lots of conflicting, piecemeal technologies … but no tested, reliable grand solution … no guarantees anything will work.

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Monsanto has more clout than the WHO.

Monsanto Weedkiller Roundup Is Probably Carcinogenic, WHO Says (Bloomberg)

Monsanto’s best-selling weedkiller Roundup probably causes cancer, the World Health Organization said in a report that’s at odds with prior findings. Roundup is the market name for the chemical glyphosate. A report published by the WHO in the journal Lancet Oncology said Friday there is limited evidence that the weedkiller can cause non-Hodgkin’s lymphoma and lung cancer and convincing evidence it can cause cancer in lab animals. The report was posted on the website of the International Agency for Research on Cancer, or IARC, the Lyon, France-based arm of the WHO. Monsanto, which invented glyphosate in 1974, made its herbicide the world s most popular with the mid-1990s introduction of crops such as corn and soybeans that are genetically engineered to survive it.

The WHO didn t examine any new data and its findings are inconsistent with assessments from the U.S., EU and elsewhere, Monsanto said. We don t know how IARC could reach a conclusion that is such a dramatic departure from the conclusion reached by all regulatory agencies around the globe, Philip Miller, Monsanto vice president for global regulatory affairs, said in a statement. The evidence in humans is from studies of exposures, mostly agricultural, in the USA, Canada, and Sweden published since 2001, the WHO said in the report. In addition, there is convincing evidence that glyphosate also can cause cancer in laboratory animals. The WHO said exposure by the general population is generally low.

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Feel good story.

The Lion Hugger (BBC)

In 2012 Valentin Gruener rescued a young lion cub and raised it himself at a wildlife park in Botswana. It was the start of an extraordinary relationship. Now an astonishing scene is repeated each time they meet – the young lion leaps on Gruener and holds him in an affectionate embrace. “Since the lion arrived, which is three years now, I haven’t really left the camp,” says Gruener. “Sometimes for one night I go into the town here to organise something for the business, but other than that I’ve been here with the lion.” The lion he has devoted himself to is Sirga – a female cub he rescued from a holding pen established by a farmer who was fed up of shooting animals that preyed on his cattle. “The lions had killed the other two or three cubs inside the cage, and the mother abandoned the remaining cub. She was very tiny, maybe 10 days old,” Gruener says.

The farmer, Willy de Graaf, asked Gruener to try to save her and so he took her to a wildlife park financed by de Graaf and became her adoptive mother, “feeding her and taking care of her”. “You have this tiny cute animal sitting there and it’s already quite feisty,” he says. “It will become about 10 times that size and you will have to deal with it.” She’s much bigger now, but when Gruener opens her cage she still rushes to greet him – ecstatically throwing her paws around his neck. “That happens every time I open the door. It is an amazing thing every time it happens, and it’s such a passionate thing to do for this animal to jump and give me a hug,” says Gruener. “But I guess it makes sense. At the moment she has no other lions with her in the cage and I guess for her I’m like her species. So I’m the only friend she’s got. Lions are social cats so she’s always happy to see me.”

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