Aug 152017
 
 August 15, 2017  Posted by at 12:53 pm Finance Tagged with: , , , , , , ,  5 Responses »
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Salvador Dali Madrid. Drunk man 1922

 

Harvard professor and chess grandmaster Kenneth Rogoff has said some pretty out there stuff before, in his role as self-appointed crusader against cash, but apparently he’s not done yet. In fact, he might just be getting started. This time around he sounds like a crossover between George Orwell and Franz Kafka, with a serving of ‘theater of the absurd’ on top. Rogoff wants to give central banks total control over your lives. They must decide what you do with your money. First and foremost, they must make it impossible for you to save your money from their disastrous policies, so they are free to create more mayhem.

Prepare For Negative Interest Rates In The Next Recession Says Top Economist

Negative interest rates will be needed in the next major recession or financial crisis, and central banks should do more to prepare the ground for such policies, according to leading economist Kenneth Rogoff. Quantitative easing is not as effective a tonic as cutting rates to below zero, he believes. Central banks around the world turned to money creation in the credit crunch to stimulate the economy when interest rates were already at rock bottom.

Central banks create recessions and crises. Not people, and not economies. Central banks. The next recession, which is inevitable, that’s the one thing Rogoff has right, will come when the bubbles in housing, stocks, bonds, etc., created by central banks’ QE, ZIRP, NIRP, start to pop. And there’s nothing worse than giving central banks even more tools for creating crises. We should take away the tools they have now, not hand them more sledgehammers.

In a new paper published in the Journal of Economic Perspectives the professor of economics at Harvard University argues that central banks should start preparing now to find ways to cut rates to below zero so they are not caught out when the next recession strikes. Traditionally economists have assumed that cutting rates into negative territory would risk pushing savers to take their money out of banks and stuff the cash – metaphorically or possibly literally – under their mattress. As electronic transfers become the standard way of paying for purchases, Mr Rogoff believes this is a diminishing risk.

Risk? What risk? The risk of people doing with their money what they choose to do, doing what they think is best? Of people trying to save their savings from being burned by central bank policies? What kind of mind comes up with this nonsense? Who is Ken Rogoff to think that he knows better what you should do with the money you worked for than you yourself do? You’d be a fool not to protect you hard-earned earnings from negative interest rates. Rogoff therefore seems intent on creating nations full of fools.

“It makes sense not to wait until the next financial crisis to develop plans and, in any event, it is time for economists to stop pretending that implementing effective negative rates is as difficult today as it seemed in Keynes time”, he said. The growth of electronic payment systems and the increasing marginalisation of cash in legal transactions creates a much smoother path to negative rate policy today than even two decades ago. Countries can scrap larger denomination notes to reduce the likelihood of cash being held in substantial quantities, he suggests. This is also a potentially practical idea because cash tends now to be used largely for only small transactions. Law enforcement officials may also back the idea to cut down on money laundering and tax evasion.

What makes sense is to not create crises. What does not make sense is negative interest rates. Ultra low interest rates have already destroyed trillions in savings and pensions, and now Rogoff effectively says central banks should take this a step further, and target whatever it is you have left. This is insane megalomania. It’s communism in its worst possible form. Oh, and it’s outright theft. Of a form that’s far more insidious and harmful than money laundering.

The key consequence from an economic point of view is that forcing savers to keep cash in an electronic format would make it easier to levy a negative interest rate. “With today’s ultra-low policy interest rates – inching up in the United States and still slightly negative in the eurozone and Japan – it is sobering to ask what major central banks will do should another major prolonged global recession come any time soon,” he said, noting that the Fed cut rates by an average of 5.5 percentage points in the nine recessions since the mid-1950s, something which is impossible at the current low rate of interest, unless negative rates become an option. That would be substantially better than trying to use QE or forward guidance as central bankers have attempted in recent years.

Forcing savers to keep cash in an electronic format would make it easier to steal it. Central banks could dictate that you lose 5% of your money every year. Or at least, that’s what they think. They want you to spend your money, and they got just the way to force you to do that. Or so they think. Well, go ask Abe and Kuroda how that’s worked out in Japan lately. What actually happens is that when you start stealing people’s money, savings etc., they become afraid of losing the rest too, so they start looking for ways to save their savings, not spend them.

In that sense, Rogoff’s suggestions amount to terror, to terrorizing people into doing things that go against their very survival instincts. What gets people to spend money is if they don’t feel terror, when they see their money and savings grow by a few percent per year. That is the exact opposite of what Rogoff wants to do. When people ‘sit’ on their savings, they do so for good reasons. What do you think has happened to Japan?

“Alternative monetary policy instruments such as forward guidance and quantitative easing offer some theoretical promise for addressing the zero bound,” he said, in the paper which is titled ‘Dealing with Monetary Paralysis at the Zero Bound’. “But these policies have now been deployed for some years – in the case of Japan, for more than two decades – and at least so far, they have not convincingly shown an ability to decisively overcome the problems posed by the zero bound.”

No wait, Rogoff is right second time: indeed “they have not convincingly shown an ability to decisively overcome the problems”. Because they’re terribly wrong. Theoretical promise? That’s all? But that means you’re just experimenting with people’s lives and wellbeing. Who gave you that right?

It’s high time, even if it’s very late in the game, to take political power away from central banks- and thereby from the banks that own them. There is nothing worse for our societies than letting these people decide what you can and cannot do with our money. Because as long as they have that power, they will seek to expand it. To prop up their member banks at your expense. And there is only one possible end result: you’ll be left with nothing. They want it all.

Until we take that power away from them, please don’t talk to me about democracy. Talk to me about Orwell and Kafka instead.

 

 

 

Jul 192017
 
 July 19, 2017  Posted by at 8:47 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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US photographer Margaret Bourke-White on top of the Chrysler Building, NYC 1931

 

America Makes China Great Again – People’s Daily (CNBC)
Pentagon Report Declares US Empire ‘Collapsing’ (Nafeez Ahmed)
A Government Can Always Afford High-Quality Health Care Provision (BIlbo)
US Dollar Will Rebound In The Second Half Of 2017 – JPMorgan (CNBC)
Foreigners Snap Up Record Number Of US Homes (CNBC)
Big Australian Banks Told To Hold More Capital, On Notice Over Mortgages (R.)
One Million Homes Left Empty Across Australia (SMH)
In Urban China, Nobody Uses Cash Or Cards Anymore (NYT)
Survivors Of 9/11 Urge May To Release Saudi Arabia Terror Report (Ind.)
West Virginians Are Fighting To Save Their Neighbors From Opioids (NewYorker)
This Isn’t the First US Opiate-Addiction Crisis (BBG)
A Despot In Disguise: One Man’s Mission To Rip Up Democracy (Monbiot)
Italy Mulls Temporary Humanitarian Visas For Migrants, Refugees (G.)

 

 

If I were Beijing, I’d be a tad worried about the implication that Chine needs the US to be great again.

America Makes China Great Again – People’s Daily (CNBC)

A Communist Party mouthpiece is crowing that malfunctioning U.S. leadership is making China “great again” on the eve of highly anticipated bilateral trade talks between the two countries. The op-ed published in the People’s Daily said the U.S. was in political chaos and suffered from a broken system, which was why Washington couldn’t get anything done. It also claimed the U.S. mess was giving China an opportunity to shine. “U.S. foreign policy is in total disarray, and world regard for the U.S. has plummeted. Indeed, America is making China ‘great again,'” the op-ed said. “Once the world’s model, the great American meltdown has turned the U.S. into some bizarre soap opera.” This isn’t the first time China has piggybacked off an American saying — remember President Xi Jinping’s “Chinese Dream” slogan?

This time around, the tone is a bit sharper, with Chinese state media not backing down ahead of annual bilateral talks that have been rebranded this year as the U.S.-China Comprehensive Economic Dialogue. Although both Beijing and Washington have indicated they understand the need to play nice, both sides are pushing their own agenda as expected. The U.S. wants to reduce the more than $300 billion trade deficit with China and make good on a campaign promise from President Donald Trump to pressure China on a number of fronts, such as opening up its markets to more foreign participation and to bring jobs back to America. China, on the other hand, has pushed back, saying Chinese investment has helped the U.S. But it’s clear that as the U.S. continues to face political turmoil, China is enjoying its time in the spotlight. That is, Beijing is explicitly seeking to fill the void the U.S. left as it backed out of various multilateral talks and agreements…

Read more …

Got the money? Got the money? Show me the money!

Pentagon Report Declares US Empire ‘Collapsing’ (Nafeez Ahmed)

An extraordinary new Pentagon study has concluded that the US-backed international order established after World War 2 is “fraying” and may even be “collapsing”, leading the United States to lose its position of “primacy” in world affairs. The solution proposed to protect US power in this new “post-primacy” environment is, however, more of the same: more surveillance, more propaganda (“strategic manipulation of perceptions”) and more military expansionism. The document concludes that the world has entered a fundamentally new phase of transformation in which US power is in decline, international order is unravelling, and the authority of governments everywhere is crumbling. Having lost its past status of “pre-eminence”, the US now inhabits a dangerous, unpredictable “post-primacy” world, whose defining feature is “resistance to authority”.

Danger comes not just from great power rivals like Russia and China, both portrayed as rapidly growing threats to American interests, but also from the increasing risk of “Arab Spring”-style events. These will erupt not just in the Middle East, but all over the world, potentially undermining trust in incumbent governments for the foreseeable future. The report, based on a year-long intensive research process involving consultation with key agencies across the Department of Defense and US Army, calls for the US government to invest in more surveillance, better propaganda through “strategic manipulation” of public opinion, and a “wider and more flexible” US military.

[..] Observing that US officials “naturally feel an obligation to preserve the US global position within a favorable international order,” the report concludes that this “rules-based global order that the United States built and sustained for 7 decades is under enormous stress.” The report provides a detailed breakdown of how the DoD perceives this order to be rapidly unravelling, with the Pentagon being increasingly outpaced by world events. Warning that “global events will happen faster than DoD is currently equipped to handle”, the study concludes that the US “can no longer count on the unassailable position of dominance, supremacy, or pre-eminence it enjoyed for the 20-plus years after the fall of the Soviet Union.” So weakened is US power, that it can no longer even “automatically generate consistent and sustained local military superiority at range.”

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I can’t really do Bill Mitchell justice in this format, but the health care debate badly needs views such as his.

A Government Can Always Afford High-Quality Health Care Provision (BIlbo)

The US is the only advanced nation that lacks universal health care. Even though it is the world’s richest nation, millions of US citizens cannot afford to see a doctor much less acquire more complex health care (for example, surgery). It it clear that in seeking private profits, the private health care insurers drive up the cost of health care which means, in nominal terms, the proportion of GDP expenditure devoted to it will rise. It is quite obvious that when private profits are included costs will rise unless efficiency is vastly improved. The ‘free market (not!)’ lobby always appeal to arguments that competitive systems are always more effective. The Commonwealth Report shows emphatically that strong (dare we call them socialist) government-dominated universal care systems like the NHS are vastly more effective than the profit-driven US system.

There also doesn’t seem to be any reason for private insurance in health care at all. And it is here that we enounter the ‘funding’ myths. Too often health care debates get stuck in irrelevant fiscal arguments about whether the government can afford to expand and/or invest in health care. The justification for private insurance is usually predicated on these ‘governments cannot afford’ to pay for the system type arguments. They are fallacious of course. In the pursuit of profits, private health insurance providers have an incentive to move towards the US model where they seek to avoid payment and set up exclusions etc. There is no ‘funding’ reason for the existence of these private insurance providers. The NHS in the UK demonstrates that clearly.

There has clearly been a strong private health industry lobby to privatise as much of the health care system as possible in places like Australia and the UK, where there are good fully-funded public systems of universal health care operating. That lobby has been powerful in the US and continually claims there will be a fiscal blow out and Americans will live in high-taxed penury forever because some latinos or blacks are getting health care for the first time as a result of the Obama changes. From a MMT perspective, the fiscal component of the debate is irrelevant.

The fiscal beat-up is framed in terms of ‘adding heavy costs’ to the ‘budget’ such that their will be soaring deficits, which will penalise future generations etc etc. What is a heavy cost? What is a soaring deficit? These are irrelevant concepts devoid of meaning. Any sophisticated society will deem health care to be a human right. The constitution of the World Health Organisation says: “The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without the distinction of race, religion, political belief, economic or social condition.” The hallmark of a sophisticated nation is maximising the potential of its citizens. That must include placing health care under the responsibility of the currency-issuing government.

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Line of the day: “Some market observers have said that a weaker dollar can help to boost earnings of S&P 500 companies and eventually justify their high valuations.”

US Dollar Will Rebound In The Second Half Of 2017 – JPMorgan (CNBC)

The current weakness in the U.S. dollar may be short lived, as a pick-up in inflation and expected rate hikes by the Federal Reserve will support the greenback in the coming months, JPMorgan Asset Management said Wednesday. “We’re thinking that the dollar will actually rebound in the second half, and this is mainly as the markets re-price in interest rates hike. We’re of the view that inflation will actually be picking up in the U.S. and currently, markets have only priced in one rate hike now till end-2018,” Jasslyn Yeo, global market strategist at JPMorgan Asset Management, told CNBC’s “Street Signs.” “So, we think (markets) are going to do a bit of re-pricing and that will support a bit of a rebound in the dollar,” she added.

The U.S. dollar tumbled to a 10-month low on Tuesday after the Republican health-care bill aimed at replacing Obamacare failed to get enough backing to proceed to a debate. Some market observers have said that a weaker dollar can help to boost earnings of S&P 500 companies and eventually justify their high valuations. But Yeo said equity markets outside the U.S., such as Europe and Japan, have more upside potential. Yeo noted that margins in Europe are starting to improve and that could translate into stronger earnings growth, while Japan is likely to benefit from a weaker yen versus the U.S. dollar. “We still like certain spots in the U.S. market. Currently we still favor U.S. banks, which we like in terms of rate hike expectations, bond yields moving higher as well as the promise for financial deregulation in the banking system,” she said.

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Sell it all off, who cares?

Foreigners Snap Up Record Number Of US Homes (CNBC)

Foreign purchases of U.S. residential real estate surged to the highest level ever in terms of number of homes sold and dollar volume. Foreign buyers closed on $153 billion worth of U.S. residential properties between April 2016 and March 2017, a 49% jump from the period a year earlier, according to the National Association of Realtors. That surpasses the previous high, set in 2015. The jump follows a year-earlier retreat and comes as a surprise, given the current strength of the U.S. dollar against most foreign currencies, which makes U.S. housing even more expensive. Apparently, the value of a financial safe-haven is outweighing the rising costs. Foreign sales accounted for 10% of all existing home sales by dollar volume and 5% by number of properties. In total, foreign buyers purchased 284,455 homes, up 32% from the previous year.

Half of all foreign sales were in just three states: Florida, California and Texas. Chinese buyers led the pack for the fourth straight year, followed by buyers from Canada, the United Kingdom, Mexico and India. Russian buyers made up barely 1% of the purchases. But the biggest overall surge in sales in the last year came from Canadian buyers, who scooped up $19 billion worth of properties, mostly in Florida. They are also spending more, with the average price of a Canadian-bought home nearly doubling to $561,000. “There are more [baby] boomers now than ever before. It’s the demographic,” said Elli Davis, a real estate agent in Toronto who said she is seeing more older buyers downsize their primary home and purchase a second or third home in Florida. “The real estate here is worth so much more money. They all have more money. They’re selling the big city houses that are now $2 million-plus, where they went up so much in the last 10 to 15 years, so they’re cashing in.”

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Noooo, that’s not late at all…

Big Australian Banks Told To Hold More Capital, On Notice Over Mortgages (R.)

Australia on Wednesday ordered the country’s biggest banks to raise capital for the second time in two years and signalled further action to shore up their burgeoning mortgage books, potentially squeezing shareholder returns. The banking regulator said it would release a discussion paper later this year to include risk weights on mortgages among other changes, in-line with expected rules due to be finalised by global regulators. The warning on mortgages came as it raised the target for the four major banks’ common equity Tier 1 ratio – a key gauge of a lender’s strength – to at least 10.5%. That translates into an average increase of 100 basis points above the banks’ December 2016 levels. They are expected to meet the new benchmarks by January 2020.

The Australian Prudential Regulation Authority (APRA) has now ordered the big banks to boost capital twice since 2015 as it seeks to make the sector impregnable to global shocks. Australia’s major lenders – Commonwealth Bank of Australia , Westpac Banking Corp, ANZ Banking Group and National Australia Bank – hold combined market share of more than 80%, raising fears their failure could fatally weaken the broader economy. “Capital levels that are unquestionably strong will undoubtedly equip the Australian banking sector to better handle adversity in the future and reduce the need for public sector support,” APRA Chairman Wayne Byres said in a statement.

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Inevitable result of property bubbles.

One Million Homes Left Empty Across Australia (SMH)

Australia has 200,000 more homes sitting empty than it had a decade ago, new figures show, despite the country grappling with a housing supply shortage that is pushing the cost of a first home beyond many of its residents. The figures from the 2016 census have been described as “cruel and immoral” by leading UNSW urban policy expert Hal Pawson, who has warned the government must act to stem the growth in unoccupied housing. “There is gross under-occupation across Australia,” Mr Pawson said, adding that there were up to a million homes with three or more extra bedrooms than the owner required. “There is a growing realisation that our housing market is not working well. It doesn’t just create a problem for people on low incomes, it also hurts spending in the economy when housing is overvalued.”

The figures from the Australian Bureau of Statistics show up to 11.2% of properties are now unoccupied, up from 9.8% in 2006. In the space of two decades Australia has added 2.1 million homes to its property portfolio but an extra 360,000 are being left vacant. Separate analysis by the Grattan Institute, released on Monday, found the number of Australian home owners has been falling for three decades, with the spike in home ownership restricted to baby boomers. “Falling home ownership rates for younger Australians, especially 25 to 34-year-olds where home ownership rates are down 6% in the last decade alone, are just the latest evidence that the traditional Australian dream is slipping out of their reach,” said Grattan Institute fellow Brendan Coates.

[..] “The census showed empty property numbers up by 19% in Melbourne and 15% in Sydney over the past five years alone,” he said. “Considering that thousands of people sleep rough – almost 7000 on census night in 2011, more than 400 per night in Sydney in 2017 and that hundreds of thousands face overcrowded homes or unaffordable rents – these seem like cruel and immoral revelations.”

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Better not lose your phone. Or the government can’t seeyou anymore.

In Urban China, Nobody Uses Cash Or Cards Anymore (NYT)

There is an audacious economic experiment happening in China. It has nothing to do with debt, infrastructure spending or the other major economic topics du jour. It has to do with cash – specifically, how China is systematically and rapidly doing away with paper money and coins. Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay – the two smartphone payment options –before bringing up cash as a third, remote possibility. Just as startling is how quickly the transition has happened. Only three years ago there would be no question at all, because everyone was still using cash. “From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,” says Richard Lim, managing director of the venture capital firm GSR Ventures.

There are certain parts of the Chinese internet that have to be seen to be believed. Coming from outside the country, it’s hard to comprehend that Facebook or Google can be completely blocked until you are forced to do without them. It’s tough to fathom how critical the messenger app WeChat is for everyday life until the sixth person of the day asks to scan your QR (quick response) code – a square-shaped barcode – to connect the two of you. What’s happening with cash in China is similar. For the past three years, I have been outside mainland China covering Asian technology from Hong Kong, which has a very different internet culture from the mainland. I knew that smartphone payments were taking over in China, as the statistics were stark: in 2016, China’s mobile payments hit £42 trillion ($5.5tn), roughly 50 times the size of America’s £860bn market, according to consulting firm iResearch.

[..] Some Scandinavian countries have also weaned themselves from cash but still use cards frequently. In China, the change has been to phones. One friend didn’t realise how reliant she had become on mobile payments until her bank called her. She had left her ATM card in the machine three weeks earlier and had not noticed its absence. In practical terms, this means that two Chinese companies – Tencent, which runs WeChat, and Alibaba, whose financial affiliate, Ant Financial, runs Alipay – are sitting atop a goldmine of staggering proportions. Both companies can make money off the transactions, charge other companies to use their payment platforms and all the while collect the payments data to be used in everything from new credit systems to advertising.

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My wild guess: it’s not going to happen.

Survivors Of 9/11 Urge May To Release Saudi Arabia Terror Report (Ind.)

Survivors of the 9/11 attacks have written to Prime Minister Theresa May – urging her to make public a British government report into the extent of Saudi Arabia’s funding of Islamist extremism in the UK. The report into the significance of the financing of Islamic extremists in Britain by Saudi Arabia and other nations was commissioned by Ms May’s predecessor, David Cameron, as part of a deal to obtain political support for a parliamentary vote on UK airstrikes on Syria. Last week, British Home Secretary Amber Rudd said the report was not being published “because of the volume of personal information it contains and for national security reasons”. Green Party co-leader Caroline Lucas suggested the refusal to make public the report was linked to a reluctance to criticise the kingdom, with which Britain has long had close strategic and economic ties.

Now, a group representing US survivors of the 9/11 attacks and the relatives of some of the almost 3,000 people who died, has urged Ms May to seize the chance to release the report, even if it is not fully complete. “The UK now has the unique historic opportunity to stop the killing spree of Wahhabism-inspired terrorists by releasing the UK government’s report on terrorism financing in the UK which, according to media reports, places Saudi Arabia at its centre of culpability,” says the letter, signed by 15 people. “The longer Saudi Arabia’s complicity is hidden from sunlight, the longer terrorism will continue. They must be stopped; but who will stop them? We submit that you are uniquely situated to shine the cleansing light of public consciousness.” It adds: “We respectfully urge you to release the report now, finished or unfinished. We ask you to consider all the victims of state-sponsored, Saudi-financed terrorism, their families and their survivors in the UK and all over the world.”

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Completely insane. Lawless.

West Virginians Are Fighting To Save Their Neighbors From Opioids (NewYorker)

Michael Barrett and Jenna Mulligan, emergency paramedics in Berkeley County, West Virginia, recently got a call that sent them to the youth softball field in a tiny town called Hedgesville. It was the first practice of the season for the girls’ Little League team, and dusk was descending. Barrett and Mulligan drove past a clubhouse with a blue-and-yellow sign that read “Home of the Lady Eagles,” and stopped near a scrubby set of bleachers, where parents had gathered to watch their daughters bat and field. Two of the parents were lying on the ground, unconscious, several yards apart. As Barrett later recalled, the couple’s thirteen-year-old daughter was sitting behind a chain-link backstop with her teammates, who were hugging her and comforting her.

The couple’s younger children, aged ten and seven, were running back and forth between their parents, screaming, “Wake up! Wake up!” When Barrett and Mulligan knelt down to administer Narcan, a drug that reverses heroin overdoses, some of the other parents got angry. “You know, saying, ‘This is bullcrap,’ ” Barrett told me. “ ‘Why’s my kid gotta see this? Just let ’em lay there.’ After a few minutes, the couple began to groan as they revived. Adults ushered the younger kids away. From the other side of the backstop, the older kids asked Barrett if the parents had overdosed. “I was, like, ‘I’m not gonna say.’ The kids aren’t stupid. They know people don’t just pass out for no reason.” During the chaos, someone made a call to Child Protective Services.

At this stage of the American opioid epidemic, many addicts are collapsing in public—in gas stations, in restaurant bathrooms, in the aisles of big-box stores. Brian Costello, a former Army medic who is the director of the Berkeley County Emergency Medical Services, believes that more overdoses are occurring in this way because users figure that somebody will find them before they die. “To people who don’t have that addiction, that sounds crazy,” he said. “But, from a health-care provider’s standpoint, you say to yourself, ‘No, this is survival to them.’ They’re struggling with using but not wanting to die.”

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So?

This Isn’t the First US Opiate-Addiction Crisis (BBG)

The U.S. is in the throes of an “unprecedented opioid epidemic,” reports the Centers for Disease Control. The crisis has spurred calls for action to halt the rising death toll, which has devastated many rural communities. It’s true that there’s an opioid epidemic, a public health disaster. It’s not true that it’s unprecedented. A remarkably similar epidemic beset the U.S. some 150 years ago. The story of that earlier catastrophe offers some sobering lessons as to how to address the problem. Opioids are a broad class of drugs that relieve pain by acting directly on the central nervous system. They include substances such as morphine and its close cousin, heroin, both derived from the opium poppy. There are also synthetic versions, such as fentanyl, and medications that are derived from a mix of natural and synthetic sources, such as oxycodone.

Opioid addiction can take many forms, but the current crisis began with the use and abuse of legal painkillers in the 1990s, and has since metastasized into a larger epidemic, with heroin playing an especially outsized role. All of this is depressingly familiar. The first great U.S. opiate-addiction epidemic began much the same way, with medications handed out by well-meaning doctors who embraced a wondrous new class of drugs as the answer to a wide range of aches and pains. The pharmacologist Nathaniel Chapman, writing in 1817, held up opium as the most useful drug in the physician’s arsenal, arguing that there was “scarcely one morbid affection or disordered condition” that would fail to respond to its wonder-working powers. That same year, chemists devised a process for isolating a key alkaloid compound from raw opium: morphine.

Though there’s some evidence that opiate dependency had become a problem as early as the 1840s, it wasn’t until the 1860s and 1870s that addiction became a widespread phenomenon. The key, according to historian David Courtwright, was the widespread adoption of the hypodermic needle in the 1870s. Prior to this innovation, physicians administered opiates orally. During the Civil War, for example, doctors on the Union side administered 10 million opium pills and nearly three million ounces of opium powders and tinctures. Though some soldiers undoubtedly became junkies in the process, oral administration had all manner of unpleasant gastric side effects, limiting the appeal to potential addicts.

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The Koch brothers and the Fauxbel for economics.

A Despot In Disguise: One Man’s Mission To Rip Up Democracy (Monbiot)

In 2013 she stumbled across a deserted clapboard house on the campus of George Mason University in Virginia. It was stuffed with the unsorted archives of a man who had died that year whose name is probably unfamiliar to you: James McGill Buchanan. She says the first thing she picked up was a stack of confidential letters concerning millions of dollars transferred to the university by the billionaire Charles Koch. Her discoveries in that house of horrors reveal how Buchanan, in collaboration with business tycoons and the institutes they founded, developed a hidden programme for suppressing democracy on behalf of the very rich. The programme is now reshaping politics, and not just in the US.

Buchanan was strongly influenced by both the neoliberalism of Friedrich Hayek and Ludwig von Mises, and the property supremacism of John C Calhoun, who argued in the first half of the 19th century that freedom consists of the absolute right to use your property (including your slaves) however you may wish; any institution that impinges on this right is an agent of oppression, exploiting men of property on behalf of the undeserving masses. James Buchanan brought these influences together to create what he called public choice theory. He argued that a society could not be considered free unless every citizen has the right to veto its decisions. What he meant by this was that no one should be taxed against their will. But the rich were being exploited by people who use their votes to demand money that others have earned, through involuntary taxes to support public spending and welfare.

Allowing workers to form trade unions and imposing graduated income taxes were forms of “differential or discriminatory legislation” against the owners of capital. Any clash between “freedom” (allowing the rich to do as they wish) and democracy should be resolved in favour of freedom. In his book The Limits of Liberty, he noted that “despotism may be the only organisational alternative to the political structure that we observe.” Despotism in defence of freedom. His prescription was a “constitutional revolution”: creating irrevocable restraints to limit democratic choice. Sponsored throughout his working life by wealthy foundations, billionaires and corporations, he developed a theoretical account of what this constitutional revolution would look like, and a strategy for implementing it. He explained how attempts to desegregate schooling in the American south could be frustrated by setting up a network of state-sponsored private schools. It was he who first proposed privatising universities, and imposing full tuition fees on students: his original purpose was to crush student activism.

He urged privatisation of social security and many other functions of the state. He sought to break the links between people and government, and demolish trust in public institutions. He aimed, in short, to save capitalism from democracy. In 1980, he was able to put the programme into action. He was invited to Chile, where he helped the Pinochet dictatorship write a new constitution, which, partly through the clever devices Buchanan proposed, has proved impossible to reverse entirely. Amid the torture and killings, he advised the government to extend programmes of privatisation, austerity, monetary restraint, deregulation and the destruction of trade unions: a package that helped trigger economic collapse in 1982. None of this troubled the Swedish Academy, which through his devotee at Stockholm University Assar Lindbeck in 1986 awarded James Buchanan the Nobel memorial prize for economics. It is one of several decisions that have turned this prize toxic.

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Well, it would create a ton of chaos…

Italy Mulls Temporary Humanitarian Visas For Migrants, Refugees (G.)

Italy has confirmed it is considering issuing temporary humanitarian visas that would allow tens of thousands of migrants who have arrived in the country from Libya to travel around the European Union. The move would provoke an immediate Austrian response, including the closure of the border with Italy at the Brenner Pass. The chances of Italy being able legally to grant unilateral humanitarian visas in this way is slight, but the threat is intended to concentrate minds in the EU after Italy failed to win clear practical support from Germany and France to take more people that have been arriving in increasing numbers from Libya.

The refugee crisis is putting growing political domestic pressure on the Democratic party (PD)-led government, with PD mayors refusing to take extra migrants and plans for legislation on citizenship being shelved at the weekend by the Italian prime minister, Paulo Gentiloni. In an interview with Il Manifesto, Mario Giro, the deputy foreign minister, said the government was looking at all options including the granting of temporary visas. Previously he had simply described the idea as speculation, and it had been dismissed by the interior minister. Giro said: “We are in a tug of war.” He said Italy wanted to avoid unilateral gestures, but was against the strict application of EU law which required migrants to remain in their first country of arrival.

“We don’t accept being turned into a European hotspot, or feeling guilty because we rescue people, so deciding what to do with the migrants who arrive is everyone’s responsibility,” he said. On Monday, the Italian foreign minister, Angelino Alfano, said the idea of humanitarian visas was not on the agenda. The EU high commissioner for external affairs, Federica Mogherini, insisted the issue was not discussed at the EU foreign affairs council meeting on Monday in Brussels. But the Italians are examining whether they could invoke the application of directive 2001/55, a measure approved following the Balkan wars, that allows the granting of humanitarian visas. It was too early to say when or how many such permits could be issued, Giro said, adding that the Italian authorities who received asylum requests already had the power to grant them.

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Jun 092017
 
 June 9, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , , , ,  5 Responses »
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Labour Campaign Poster 1922

 

Trump Accuses Comey Of Lying About Leaked Memo (ZH)
Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)
Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)
This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)
UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)
The Myth of “Cash on The Sidelines” (Roberts)
US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)
Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)
Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)
Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)
European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)
The Shield of Law and Humanism (K.)

 

 

I know the echo chamber won’t agree, but after watching quite a bit of it, four things stood out for me in the Comey testimony, other than the somewhat too loud remarks about how the entire White House lied about him and the FBI:

1) He admitted to leaking information of his private talk with Trump in the Oval Office. Comey said he didn’t understand why Trump asked everyone to leave the room, but, well, perhaps it’s this: that if anything leaked, it would be clear whodunnit. And leaking info about a private talk with your president is not an obvious thing to do. Illegal? Borderline? Comey stated that he did it because he thought it would lead to a special counsel being appointed. But who is he to ‘promote’ such a thing?

2) He finally said in public that Trump himself had not been under investigation, something the president had asked him to do on three occasions. There was some excuse about not doing it because he might have to walk that back later, but the fact remains: no Trump investigation, and despite all other leaks, no public acknowledgement of that.

3) Comey insisted in no uncertain terms that the entire US intelligence community is convinced that Russia interfered in the 2016 elections, and Russia here means the Kremlin, re: Putin. Well, let’s finally see the proof.

4) He recounted how then-AG Loretta Lynch pushed him to relabel the criminal investigation into the Clinton server as a “matter”, a term the Clinton campaign used. But why would an AG do it too, and push the FBI to do the same? Very odd. And then Comey added that this was a reason to call the press conference in which he advised the Department of Justice not to indict Clinton.

Trump Accuses Comey Of Lying About Leaked Memo (ZH)

As we detailed earlier, during his testimony today, former FBI Director Comey testified that he only leaked the memo about his contact with the President AFTER he saw President Trump’s tweet…
COMEY: I asked — the president tweeted on Friday after I got fired that I better hope there’s not tapes. I woke up in the middle of the night on Monday night because it didn’t dawn on me originally, that there might be corroboration for our conversation. There might a tape. My judgement was, I need to get that out into the public square. I asked a friend of mine to share the content of the memo with a reporter. Didn’t do it myself for a variety of reasons. I asked him to because I thought that might prompt the appointment of a special counsel. I asked a close friend to do it. [..] A close friend who is a professor at Columbia law school.

Pretty clear – it was a response to a tweet. But, as President Trump’s personal lawyer Marc Kasowitz states: “Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President. The leaks of this privileged information began no later than March 2017 when friends of Mr. Comey have stated he disclosed to them the conversations he had with the President during their January 27, 2017 dinner and February 14, 2017 White House meeting. Today, Mr. Comey admitted that he leaked to friends his purported memos of these privileged conversations, one of which he testified was classified.

He also testified that immediately after he was terminated he authorized his friends to leak the contents of these memos to the press in order to “prompt the appointment of a special counsel.” Although Mr. Comey testified he only leaked the memos in response to a tweet, the public record reveals that the New York Times was quoting from these memos the day before the referenced tweet, which belies Mr. Comey’s excuse for this unauthorized disclosure of privileged information and appears to entirely retaliatory. We will leave it the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated”

So the question is – having called President Trump a liar, did Comey just get caught in an even bigger lie… ?

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At least on his personal involvement.

Chris Matthews: “There’s No ‘There’ There” On Trump-Russia ‘Collusion’ (ZH)

If you count yourself among the die-hard, disaffected Hillary supporters still holding out hope that President Trump will be impeached for conspiring with Russian spies to stage a coup in the United States, then you may want to sit down because earlier today one of your biggest cheerleaders just threw in the towel on that whole narrative. Yes, MSNBC’s very own Chris Matthews, the same man who confessed he “got a thrill up his leg” from simply watching Obama speak, admitted today that Comey’s testimony pretty much confirmed that “there’s no ‘there’ there” when it comes to Trump colluding with the Russians.

“The assumption of the critics of the President, of his pursuers, you might say, is that somewhere along the line in the last year is the President had something to do with colluding with the Russians … to affect the election in some way. Some conversation he had with Michael Flynn or Pual Manafort or somewhere.” “And yet what came apart this morning was that theory in two regards…the President said, according to the written testimony of Mr. Comey, go ahead and get any satellites of my operation and nail them. I’m with you on that…” “And then also, Comey said that basically Flynn wasn’t central to the Russian investigation.” “And I’ve always assumed that what Trump was afraid of was that he had said something to Flynn and Flynn could be flipped on that and Flynn would testify against the President that he’d had some conversation with Flynn in terms of dealing with the Russians affirmatively.” “And if that’s not the case, where’s the there-there?”

And when Chris Matthews throws in the towel on a liberal narrative, you know the gig is up. Oh, and by the way, this probably doesn’t help your case either… Burr: “Director Comey, did the President at any time ask you to stop the FBI investigation into Russian involvement in the 2016 U.S. elections?” Comey: “Not to my understanding, no.” Burr: “Did any individual working for this administration, including the Justice Department, ask you to stop the Russian investigation?” Comey: “No.”

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Theresa May can stay until the Tories throw her out; she’s proven to be an awful liability, not a leader. Far too risky. How much would she lose next time around? Their problem is there’s no-one else who’s obvious, there must be dirty fights in dark and rainy alleys first.

So: Tories will throw out May, while Corbyn will have to throw the Blairites out of Labour who made his position a living hell.

Most likely seems Corbyn as PM of a minority government. But that’s a big risk going into Brexit talks.

Theresa May Has ‘No Intention Of Resigning’ After Losses (BBC)

The UK faces the prospect of a hung parliament with the Conservatives as the largest party after the general election produced no overall winner. With nearly all results in, Theresa May faces having fewer seats than when she called the election. The Tories are projected to get 318 seats, Labour 261 and the SNP 35. Jeremy Corbyn has urged the PM to resign but the BBC understands she has no intention of doing so at this stage and will try to form a government. The prime minister has said the country needs stability after the inconclusive election result and the BBC’s political editor Laura Kuenssberg said Mrs May intended to try and govern on the basis that her party had won the largest number of votes and seats.

Labour is set to make 29 gains with the Tories losing 13 seats – and the SNP down by 22 seats in a bad night for Nicola Sturgeon, with her party losing seats to the Tories, Labour and Lib Dems. The Conservatives are forecast to win 42% of the vote, Labour 40%, the Lib Dems 7%, UKIP 2% and the Greens 2%. Turnout so far is 68.7% – up 2% up on 2015 – but it has been a return two party politics in many parts of the country, with Labour and the Conservatives both piling up votes in numbers not seen since the 1990s. UKIP’s vote slumped dramatically but rather than moving en masse to the Tories, as they had expected, their voters also switched to Labour.

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New elections? One positive for the former Empire: the threat of Scottish independence was wiped out.

This Is Where Theresa May’s Arrogance Will Lead Us Next (Ind.)

Despite a lot of the good news streaming out of counts everywhere right now, make no mistake: this is going to be chaos. A deep and growing sense of frustration is about to ripple through the country, because what May has essentially done in her arrogance is take a gamble that could cost us decades of stability and prosperity. It is likely that what awaits us over the next few weeks is, to put it bluntly, a mess. Hung parliament. No clear majority. No willingness to form a coalition. A possible resignation from the Prime Minister (whether she’s pushed or jumps is yet to be seen) and then yet another leadership contest. Boris Johnson is said on the Westminster grapevine to already be positioning himself as a candidate, yet his reputation has turned increasingly sour over the last few years.

Many now regard him as a cynical power-grabber without much regard for the people he claims to represent. The Tories have spent the last two years playing Russian roulette with the electorate in the hope of cementing their credibility, and causing utter shambles along the way. Having barely recovered from a referendum result which caused deep divisions and painful rifts within our society, and as Europe watches us scramble for any sort of political legitimacy, who will now head into the talks that will determine our economic and political future? Theresa May has now shoved us off a cliff into political unknowns just when what we actually needed was, ironically enough, some strong and stable leadership.

Any reassurance from Westminster that the lives of ordinary people in this country mattered more than political point-scoring would be welcome. What we’ll get instead, despite the Labour surge, is yet another election, whether that be in two months’ or two years’ time. It feels inspiring and hopeful that we have so many progressive and wonderful MPs back in the Commons. But until we have a government and a plan of how to get ourselves through this, that hope is limited to a symbolic step in the right direction. In the words of one particularly concise campaign poster: strong and stable, my arse.

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It’s going to get terrible no matter what. But for now the EU has no-one to talk to. They’re not going to sit down with May if she may last only a few more weeks.

UK’s Shock Election Result May Hamper Brexit Talks, EU Leaders Warn (G.)

The EU will force a humiliated Theresa May to explain her intentions at a face-to-face meeting in Brussels as senior diplomats and politicians warned that the hung parliament resulting from the UK election was a “disaster” that hugely increases the chance of a breakdown in the Brexit negotiations. The result is likely to delay the point at which Michel Barnier, the EU’s chief negotiator, has someone with whom to negotiate. Sources said a meeting of the European council on 22 June was the deadline by which time the EU27 would want to know the prime minister’s plans. Guenther Oettinger, the German member of the European commission, said: “We need a government that can act. With a weak negotiating partner, there’s the danger than the negotiations will turn out badly for both sides … I expect more more uncertainty now.”

It had been hoped that officials from both sides would have informal talks next week over the logistics of the negotiations, before formal talks began on the week starting 19 June. With the prime minister needing to both seek to form a minority or coalition government, as well as potentially revise her goals for the talks in the light of the election result, the original timetable seems unrealistic to officials in Brussels. The EU had, until now, believed it understood that May wanted to take the UK out of both the single market and the customs union, but in the early hours of Friday morning the Brexit secretary, David Davis, had suggested the election result could prompt a rethink.

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All on red.

The Myth of “Cash on The Sidelines” (Roberts)

[..] despite 8-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit: “Underpinning gains in both stocks and bonds is $5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness. This excess cash acts as a backstop for financial assets, both bonds and equities, because any correction is quickly reversed by investors deploying their excess cash to buy the dip,” Nikolaos Panigirtzoglou, the managing director of global market strategy at JPMorgan, wrote in a client note. This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets.

However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and ongoing global Q.E., exactly what will that catalyst be? However, Clifford Asness previously wrote: “There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.” Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs. Since this must be the case for there to be equilibrium to the markets there can be no “sidelines.”

Each month, the Investment Company Institute releases information related to the mutual fund industry. Included in this data is the total amount of assets invested in mutual funds, ETFs and money market funds. As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks. Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history.

Furthermore, with investors once again “fully invested” in equities, it is not surprising to see cash and bond allocations near historic lows. Cash on the sidelines? Not really. Everyone “all in the boat?” Absolutely. Historical outcomes from such situations? Not Great.

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The No Price Discovery Bubble.

US Household Net Worth Hits Record $95 Trillion… There Is a Catch (ZH)

In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of March 31, 2017. What it revealed is that with $110.0 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of the average US household rose to a new all time high of $94.835 trillion, up $2.4 trillion as a result of an estimated $500 billion increase in real estate values, but mostly $1.78 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, as the stock market continued to soar to all time highs . At the same time, household borrowing rose by only $36 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.8 trillion in home mortgages.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans. As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed: In 2013, families in the top 10% of the wealth distribution held 76% of all family wealth, families in the 51st to the 90thpercentiles held 23%, and those in the bottom half of the distribution held 1%. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt In other words, roughly three-quarter of the $2.4 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America’s financial net worth,

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Trump and Congress had better go out and do something.

Opioid Overdoses The Leading Killer Of American Adults Under 50 (ZH)

The opioid crisis that is ravaging urban and suburban communities across the US claimed an unprecedented 59,000 lives last year, according to preliminary data gathered by the New York Times. If accurate, that’s equivalent to a roughly 19% increase over the approximately 52,000 overdose deaths recorded in 2015, the NYT reported last year. Overdoses, made increasingly common by the introduction of fentanyl and other powerful synthetic opioids into the heroin supply, are now the leading cause of death for Americans under 50. And all evidence suggests the problem has continued to worsen in 2017. One coroner in Western Pennsylvania told a local newspaper that his office is literally running out of room to store the bodies, and that it was recently forced to buy a larger freezer. The initial data points to large increases in these types of deaths in states along the East Coast, particularly Maryland, Florida, Pennsylvania and Maine.

In Ohio, which filed a lawsuit last week accusing five drug companies of abetting the opioid epidemic, the Times estimated that overdose deaths increased by more than 25% in 2016. In some Ohio counties, deaths from heroin have virtually disappeared. Instead, the primary culprit is fentanyl or one of its many analogues. In Montgomery County, home to Dayton, of the 100 drug overdose deaths recorded in January and February, only three people tested positive for heroin; 97 tested positive for fentanyl or another analogue. In some states in the western half of the US, data suggest deaths may have leveled off for the time being – or even begun to decline. Experts believe that the heroin supply west of the Mississippi River, traditionally dominated by a variant of the drug known as black tar which is smuggled over the border from Mexico, isn’t as easily adulterated with lethal analogues as the powder that’s common on the East Coast.

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Fake News.

Trump’s $110 Billion Arms Deal With Saudis Mostly Speculative (RT)

That $110 billion arms deal President Donald Trump signed with Saudi Arabia isn’t much of a deal at all, according to reports which found the majority of the agreement was based on memos, rather than contracts. On May 20, Trump negotiated an arms deal with Riyadh. The State Department said it was worth nearly $110 billion to support “the long-term security of Saudi Arabia and the Gulf region in the face of malign Iranian influence and Iranian related threat.” White House Press Secretary Sean Spicer hailed it the “largest single arms deal in US history.” The State Department then released a general list of the weapons that were included in the deal. However, many experts have said that most of the arms sales had not been cleared by the State Department, Congress or even the industries themselves.

On Thursday, Defense News released a more detailed list of the weapons included in the deal, according to documents they obtained from the White House. The ‘deal’ lists $84.8 billion under memos of intent (MOI) “to be offered at visit,” and $12.5 billion under letters of agreement (LOA), rather than contracts. NPR also obtained a list of commercial deals from a White House spokeswoman and found that it added up to $267 billion, but said most of the deals were listed as “memoranda of understanding” (MOU). “There is no $110 billion deal,” Brookings Institution Senior Fellow Bruce Riedel wrote in blog post Monday. “Instead, there are a bunch of letters of interest or intent, but not contracts,” Riedel said. “Even then the numbers don’t add up. It’s fake news.”

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So what did they do to prove that?

Defense Minister Kammenos Says US Is Greece’s Best International Ally (K.)

Washington is Greece’s only true international ally, Defense Minister Panos Kammenos insisted on Thursday, and accused the country’s European partners of showing a lack of respect. “The Greek people are well aware that the United States has been the country’s only genuine ally,” Kammenos said. “The others are allies, but they are [allies] only in the form of creditors, without [any sense of] respect and this is because some of them will never forget that they lost World War II to this country,” Kammenos, who is also leader of junior coalition partner Independent Greeks, added during a speech marking the 70th anniversary of the US Office of Defense Cooperation in Athens yesterday. “For this reason, we welcome US support at this very difficult moment for our country,” said Kammenos, who also called for the strengthening of the Hellenic Navy with US help so “that it can operate from Crete to the Suez.”

Bolstering the navy and the country’s military aviation capabilities are necessary, he said, to intercept the flow of drugs, weapons and fuel through which terrorism is funded. He also said that Greece is positively inclined to extend the time frame of the defense agreement between the two countries, adding that Prime Minister Alexis Tsipras and his government are working in that direction. He also referred to the latest developments in the Gulf states and stressed that he supports describing the Muslim Brotherhood as a terrorist organization. Aiming his fire at Turkey, he said that each country must choose “whose side they want to be on.” It is certain, he said, that “Greece will be on the side of the US.” For his part, US Ambassador to Greece Geoffrey Pyatt praised relations between Athens and Washington, adding that as Greece’s economy stabilizes, it will become even more active in its role as a bridge between countries of the region.

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Nobody cares unless you hold their feet to the fire.

European Court Of Justice: Refugee Crisis Trumps Dublin Regulation (K.)

Any countries in the European Union receiving asylum requests from refugees have an obligation to process them irrespective of where the applicants first entered into the bloc, an advocate general at the European Court of Justice said on Thursday. Eleanor Sharpston said in a non-binding opinion that under the “exceptional circumstances” of the refugee crisis, member states should not be bound by the Dublin Regulation’s requirement that first-entry states handle all asylum applications, even after a refugee or migrant has moved on to a different country. “The words ‘irregular crossing’ in the Dublin III Regulation do not cover a situation where, as a result of the mass inflow of people into border member states, those countries allowed third-country nationals to enter and transit through their territory in order to reach other member states,” she wrote.

Sharpston referred to the case of a Syrian national who traveled to Slovenia via Croatia and that of an Afghan family that entered Europe in Greece and then made its way to Austria. Slovenia and Austria should be responsible for examining their asylum applications, she said. “If border member states… are deemed to be responsible for accepting and processing exceptionally high numbers of asylum seekers, there is a real risk that they will simply be unable to cope with the situation,” Sharpston wrote. “This in turn could place member states in a position where they are unable to comply with their obligations under EU and international law,” she added.

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The last thing Greece has left is rumored to be on the way out.

The Shield of Law and Humanism (K.)

It is difficult to believe that after Greece’s judiciary offered protection to eight members of the Turkish military, rejecting Ankara’s request for their extradition, the government would agree to the illegal, secret and inhuman expulsion of people who requested asylum here. Yet unease grows. On Wednesday the government spokesman stated, “The Greek government does not engage in pushbacks.” Let us hope that is so. The Hellenic League for Human Rights cites two instances where groups of Turkish citizens who requested asylum in Greece appear to have been handed over illegally to Turkish authorities. The Council of Europe’s commissioner for human rights, Nils Muiznieks, the UN High Commissioner for Refugees and the head of the Alliance of Liberals and Democrats in the European Parliament, Guy Verhofstadt, have expressed concern at the possibility.

There is also the strange story of three Turkish military men who where arrested in Edirne last month, accused of being part of a group that intended to kidnap President Recep Tayyip Erdogan during the failed coup last July. Turkish media said the men were arrested while on their way to Greece; some Greek lawyers, however, claim that the three had crossed into Greece when they disappeared, only to turn up in Turkish custody. The Citizens’ Protection Ministry in Greece scoffed that the claims were “fairy tales.” The case of the eight servicemen who arrived in Alexandroupoli in a helicopter the day after the coup attempt shows how difficult it is for any country to withstand Ankara’s pressure. It is understandable that no government would like to open a new front with a neighbor who can cause problems at will. But it is of paramount importance that Greece withstand such pressures.

In the past few years, among our country’s very few victories were the welcome provided to refugees and the institutional way in which it dealt with the “Eight.” Our great wound, though, is the lack of strategy, of method, of goals – of follow-up. On the refugee issue, government incompetence undermined the initial, heroic efforts of citizens. In the case of Turkish asylum seekers, the difficulties of handling the case of the Eight should not lead to cynicism, to injustice, to the violation of international conventions. Greece has a responsibility toward its own people and toward the Turkish people, to serve the principles of humanism, to abide by the law. Strenuous defense of these principles is part of the identity we aspire to but also our shield. And it is the best thing that we can offer our neighbors – the hope that there is something better than that which they are now enduring.

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Apr 172017
 
 April 17, 2017  Posted by at 9:00 am Finance Tagged with: , , , , , , , ,  1 Response »
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Rembrandt The Descent from the Cross 1634

 

Mother of All Debt : Trump Reflation Fantasy Ends on Day 100 (Stockman)
Trump Gives Generals More Freedom In ISIS Fight (WSJ)
Who Are the Debt Slaves in this Rich Nation? (WS)
Time Has Come For Banks To Prepare For Interest Rate Rises – Bundesbank (CNBC)
World’s Biggest Aluminum Producer Faces Default (ZH)
China Home Sales Surge 18% In March Ahead Of Stepped-Up Curbs (BBG)
Tesla: Is There More To Elon Musk Than Cars? (WSJ)
Uber Confirms Horrendous Loss in 2016 (WS)
India ATMs Run Out Of Cash (ToI)
Erdogan Follows Slim Referendum Win by Warning Opponents (BBG)

 

 

April 28. There won’t be one big halt, it’ll come in incremental steps.

Mother of All Debt : Trump Reflation Fantasy Ends on Day 100 (Stockman)

In honor of the Donald’s “Mother of All Bomb” (MOAB) attack on the Hindu Kush mountains Thursday, let me introduce MOAD. I’m referring to the “Mother of All Debt” crises, of course. The opening round is coming when Washington goes into shutdown mode on April 28, which happens to be Day 100 of the Donald’s reign. In theory, this should be just a routine extension of the fiscal year (FY) 2017 continuing resolution (CR) by which Congress is funding the $1.1 trillion compartment of government which is appropriated annually. The remaining $3 trillion per year of entitlements and debt service is on automatic pilot, but the truth is Washington can’t agree on what to do about either component — except to keeping on borrowing to pay the bills. There is a problem with this long-running game of fiscal kick-the-can, however.

Namely, a 100 year-old statute requires Congress to raise the ceiling for treasury borrowing periodically, but the Imperial City has now reached the point in which there is absolutely no way forward to accomplish this. Moreover, that critical fact is ill-understood by Wall Street because it does not remotely recognize that all the debt ceiling increases since the public debt exploded after the 2008-09 crisis were an accident of the Obama presidency. That is, surrounded by Keynesian economic advisers and big spending Democratic politicians, he had no fear of the national debt at all and obviously even believed the more debt the better. And Obama was also able to bamboozle the establishment GOP leadership led by former Speaker Boehner into steering enough GOP votes to the “responsible” course of action.

Needless to say, Obama is gone, Boehner is gone and the 17-month debt ceiling “holiday” that they confected in October 2015 to ride Washington through the election is gone, too. What’s arrived is vicious partisan warfare, a new President who is clueless about the urgency of the debt crisis and a bloc of 50 or so Freedom Caucus Republicans who now rule Washington. And good for them! They genuinely fear and loathe the banana republic financial profligacy that prevails in the Imperial City, and would rip the flesh from Speaker Ryan’s face were he to go the Boehner route and try to assemble a “bipartisan” consensus for a condition-free increase in the debt ceiling.

What that means is a completely new ball game in the Imperial City that will absolutely dominate the agenda as far as the eye can see. That’s because the Freedom Caucus will insist that sweeping entitlement reforms and spending cuts accompany any debt ceiling increase. Even “moderate” Senator Rob Portman (Ohio) has legislation requiring that dollar for dollar deficit cuts accompany any increase in the debt ceiling. But if you think the GOP fractures and fissures generated by Obamacare replace and repeal were difficult, you haven’t seen nothin’ yet. There is absolutely no basis for GOP consensus on meaningful deficit cuts, meaning that MOAD will bring endless starts, stops, showdowns and shutdowns, as the U.S. Treasury recurringly exhausts its cash and short-term extensions of its borrowing authority.

In the meanwhile, everything else — health care reform, tax cuts, infrastructure — will become backed-up in an endless queue of legislative impossibilities. Accordingly, there will be no big tax cut in 2017 or even next year. For all practical purposes Uncle Sam is broke and his elected managers are paralyzed. The Treasury will be out of cash and up against a hard stop debt limit of $19.8 trillion in a matter of months. But long before that there will be a taste of the Shutdown Syndrome on April 28 owing to the accumulating number of “poison pill” “riders” to the CR.

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This is not good: “A senior administration official said Mr. Trump didn’t know about the weapon’s use until it had been dropped.”

Trump Gives Generals More Freedom In ISIS Fight (WSJ)

U.S. military commanders are stepping up their fight against Islamist extremism as President Donald Trump’s administration urges them to make more battlefield decisions on their own. As the White House works on a broad strategy, America’s top military commanders are implementing the vision articulated by Defense Secretary Jim Mattis: Decimate Islamic State’s Middle East strongholds and ensure that the militants don’t establish new beachheads in places such as Afghanistan. “There’s nothing formal, but it is beginning to take shape,” a senior U.S. defense official said Friday. “There is a sense among these commanders that they are able to do a bit more—and so they are.” While military commanders complained about White House micromanagement under former President Barack Obama, they are now being told they have more freedom to make decisions without consulting Mr. Trump.

Military commanders around the world are being encouraged to stretch the limits of their existing authorities when needed, but to think seriously about the consequences of their decisions. The more muscular military approach is expanding as the Trump administration debates a comprehensive new strategy to defeat Islamic State. Mr. Mattis has sketched out such a global plan, but the administration has yet to agree on it. While the political debate continues, the military is being encouraged to take more aggressive steps against Islamic extremists around the world. The firmer military stance has fueled growing concerns among State Department officials working on Middle East policy that the Trump administration is giving short shrift to the diplomatic tools the Obama administration favored.

Removing the carrot from the traditional carrot-and-stick approach, some State Department officials warn, could hamper the pursuit of long-term strategies needed to prevent volatile conflicts from reigniting once the shooting stops. The new approach was on display this week in Afghanistan, where Gen. John Nicholson, head of the U.S.-led coalition there, decided to use one of the military’s biggest nonnuclear bombs—a Massive Ordnance Air Blast bomb, or MOAB—to hit a remote Islamic State underground network of tunnels and caves. A senior administration official said Mr. Trump didn’t know about the weapon’s use until it had been dropped. Mr. Mattis “is telling them, ‘It’s not the same as it was, you don’t have to ask us before you drop a MOAB,’” the senior defense official said. “Technically there’s no piece of paper that says you have to ask the president to drop a MOAB. But last year this time, the way [things were] meant, ‘I’m going to drop a MOAB, better let the White House know.’”

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We are all of us in the gutter (but some of us are looking at the stars).

Who Are the Debt Slaves in this Rich Nation? (WS)

We constantly hear the factoids about “American households” that paint a picture of immense wealth – and therefore a lack of risk for consumer lenders during the next downturn. We hear: “This – the thing that happened in 2008 and 2009 – won’t happen again.” For example, total net worth (assets minus debt) of US households and non-profit organization (they’re lumped together) rose to an astronomical $92.8 trillion at the end of 2016, according to the Federal Reserve. This is up by nearly 70% in early 2009 when the Fed started its QE and zero-interest-rate programs. Inflating household wealth was one of the big priorities of the Fed during the Financial Crisis. It would crank up the economy. In an editorial in 2010, Fed Chair Ben Bernanke himself called this the “wealth effect.”

So with this colossal wealth of US households, what could go wrong during the next downturn? Here’s what could go wrong: About half of Americans do not have enough savings to pay for even a minor emergency expense. The Federal Reserve found that 46% of adults could not cover an emergency expense of $400, such as a broken windshield. They would either have to borrow the money or try to sell the couch or something. So nearly half of the adults in the US live from paycheck to paycheck. About 15% of American households have either zero or negative net wealth, according to the New York Fed. Negative net worth means they have more debt than in assets. And nearly 47 million Americans, or nearly 15% of the population, live below the poverty line, according to the Census Bureau.

So who benefited from the “wealth effect”? Those who had the most assets. At the very tippy-top: Warren Buffet. At the other end of the spectrum, in 2016, only 52% of households owned stocks directly or indirectly. The phenomenal stock market boom left 48% – usually those below the poverty line, those who cannot cover emergency expenses, those with zero or negative net worth, etc. etc. – in the dust.

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Germany is one of the precious few who might benefit from higher rates. But Germany seems to forget it is not an island.

Time Has Come For Banks To Prepare For Interest Rate Rises – Bundesbank (CNBC)

The time has come for financial institutions to prepare for an environment with rising interest rates, a Bundesbank board member told CNBC on Thursday. Many risk managers have focused on credit and liquidity risks, but they need to insert interest rate risks into the equation too, Andreas Dombret, an executive board member of the German Bundesbank, said. “Let’s face it, there are quite a number of risk managers who have never seen interest rates rise and who have never seen the interest rate risk and even thought about (it) and have concentrated on credit risk and have concentrated on liquidity risk, so it’s about time to prepare for a potential change,” Dombret said.

The former vice-chairman of Bank of America’s European global investment unit explained that the German central bank is taking interest rate rises “very seriously” and is “actively” working with German banks to ensure that changes to monetary policy will not disrupt them in any way. “Should there be sharp rises in interest rates that of course would be a challenge for any bank,” Dombret said. Members of the German central bank have been critical of the low interest rate environment in the euro zone, arguing this is hurting banks’ balance sheets. Earlier this month, Bundesbank President Jens Weidmann, called on the ECB to start tightening its monetary policy.

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Simple fraud.

World’s Biggest Aluminum Producer Faces Default (ZH)

While China Hongqiao Group may be best known for being the world’s largest aluminum producer, it has in recent months featured just as prominently among short-seller reports who have accused the company of being a fraud. As the WSJ’s Scott Patterson writes, questions about China Hongqiao’s finances first emerged in November, when an anonymous short seller wrote on a website called Hongqiao Exposed that the company’s profits are “too good to be true.” China Hongqiao in the March 31 statement called the report “untrue and unfounded.” A subsequent 46-page report on Feb. 28 by Emerson Analytics, a trading firm focused on Chinese stock-market fraud, disclosed more allegations of fraud involving the Chinese commodity giant.

Emerson accused China Hongqiao of “abnormally high” profits generated by underreporting production costs and disclosing electricity expenses—one of the biggest costs for aluminum producers—as much as 40% below their true cost. Emerson said it investigated Chinese electricity costs, spoke to former China Hongqiao employees and compared the company’s costs and profits with other comparable companies.

Additionally, China Hongqiao has been more profitable than some Chinese competitors. For instance, China Hongqiao earned an average operating profit margin of 27% in the past five years, compared with minus-1.7% for state-owned Aluminum Corp. of China , known as Chalco, and 5.9% for Alcoa, according to FactSet. “People were always skeptical about how they managed to be more profitable than their peers,” said Sandra Chow, a credit analyst at CreditSights. And while China Hongqiao denied the Emerson report’s allegations and said it hired an investigative agency to look into the firm and people behind the claims, things are starting to unravel rapidly for the Chinese megacap.

As Patterson reports, China Hongqiao – the world’s biggest aluminum producer – is in trouble, locked in a feud with its accountant over fraud allegations that have forced it to suspend trading of its shares and seek help from the central government in Beijing. Just like in the case of its cow dairy peer, the problems emerged to the surface following the bearish 3rd party reports. Just days after the Emerson Analytics note, on March 4 China Hongqiao sought assistance from a trade group, the Chinese Non-Ferrous Metals Industry Association, or CNIA, saying the short sellers’ claims of inflated profits were forcing the company’s accountant, Ernst & Young, “to adopt an extremely conservative and careful attitude.” One wonders just whose books E&Y had been reviewing until that point if it took an outside party to bring attention to potential fraud at one of its biggest Chinese clients.

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It’s really not that long ago when Chinese were reluctant to go into debt. But look now.

China Home Sales Surge 18% In March Ahead Of Stepped-Up Curbs (BBG)

The value of China’s home sales remained buoyant in March, though volume figures indicated that curbs in a number of cities may be slowing the recent buying frenzy. New home sales by value rose 18% to 1 trillion yuan ($145 billion) last month from a year earlier, according to Bloomberg calculations based on data released Monday by the National Bureau of Statistics. The increase compares with a 23% surge in the first two months of the year. But the value of sales partly reflected surging home prices. By volume, home sales grew only 11% in March to 130 million square meters, according to Bloomberg calculations, below the 24% growth in the first two months of 2017. “The curbs are showing their effects,” said Liu Feifan at Guotai Junan Securities in Shenzhen, who predicted that sales growth will continue to slow.

Policy makers are seeking to clear a glut of unsold homes in smaller urban centers, while pledging to enforce strict curbs in most first- and second-tier cities to prevent a housing bubble. In a month when at least 64 cities announced new or stricter property-buying restrictions, some of the growth in home sales reflected buyers flocking into the market fearing they’d be ruled ineligible for future purchases. Investment in real estate development gained 9.4% in March from a year earlier, up from 8.9% in the first two months, according to Bloomberg calculations. Strong property investment helped China’s fixed-asset investment excluding rural areas expand 9.2% in the first quarter, accelerating from 8.1% growth last year.

Some of the growth represented a “delayed effect” from an earlier property boom, and the rate is likely to decelerate soon, Zhou Hao at Commerzbank wrote in a note after the data release. Liu at Guotai Junan said the increasingly high leverage that Chinese households have taken on for home purchase is “not sustainable.” New medium and long-term loans to households, made up mostly of mortgages, picked up again last month to 450.3 billion yuan, according to official data last Friday.

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Tesla, Uber, same bubble. Giant losses with no future profits in sight. “Uber customers knew they were in a driverless car, by the way, because it had two drivers instead of one.”

Tesla: Is There More To Elon Musk Than Cars? (WSJ)

You probably have figured it out by now, but let me state it anyway. Ten years from now, if you’re reading this paper in a driverless car, it will be on a limited-access highway or a closed-off, experimental city circuit. You will not be thumbing through your text messages in a driverless car capable of carrying you anywhere, at all hours, in all weather conditions, over all kinds of roads. And even so, you will be expected to take over driving at a moment s notice. Ditto electric cars. If you own an electric car, you will be a member of a still-small minority. Electric-car owners will be people who own multiple cars or otherwise are willing to settle for a car with limited utility, suited for a daily commute but not a family trip or a long weekend. Even so, a new phenomenon will become apparent. After unexpected tie-ups on the interstate, tow trucks will routinely have to come and remove three or four Teslas that risked a long-distance trip and ran out of juice.

All this we offer as a discordant note amid the hype for electric cars and autonomous driving. Last week the market value of Tesla surpassed that of Ford and General Motors. Tesla is now the most valuable homegrown American car company, worth almost $US52 billion.Yet in the same week a reputable consultancy, Navigant Research, showed that Ford and GM lead all others, including Tesla and Google, in the autonomous car race. Shocking? Not really. These companies are making and selling cars, while the Silicon Valleyites have been mostly engaged in brand-building exercises based on public fascination with jazzy, futuristic auto technology. Google, the pioneer of self-driving hype, recently admitted it won’t build and sell a car after all. Google, though, still finds it pays to trundle its handful of robot cars on the exquisitely mapped streets of a few locales in perfect weather as obstacles to other motorists.

Apple reaped untold millions in free publicity based mainly on rumours and job postings for automotive engineers. Uber briefly suspended its own self-driving taxi experiment in three cities after an accident last month. Uber customers knew they were in a driverless car, by the way, because it had two drivers instead of one. The Wall Street Journal reported this week that Tesla’s triumph in the market-cap sweepstakes underscores the profound change occurring in the global automotive industry as Silicon Valley pursues a vision for transportation … that could up-end century-old competitors. Except that the stock prices of traditional car makers haven’t exactly been tanking. GM’s remains within yelling distance of its postbankruptcy high. Look at BMW, whose market cap Tesla nearly equals. Even if Tesla succeeds in its high-risk plan to ramp up annual production to 500,000 from 80,000 in a scant two years, it will sell a quarter as many luxury cars as BMW does, and has yet to show it can do so profitably.

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Case in point.

Uber Confirms Horrendous Loss in 2016 (WS)

On Good Friday, when markets were closed and when the entire financial world was tuned out, and when certainly no one was supposed to pay attention, Uber, the most highly valued – at $62.5 billion – and the most scandal plagued tech startup in the world, took the until now unprecedented step of disclosing its audited revenues and losses for the fourth quarter and for the full year of 2016. Rumors of ballooning losses for 2016 had been swirling since last summer. Bloomberg reported in August that Uber had lost “at least $1.2 billion” in the first half. In December, Uber’s loss in Q3 was said to “exceed $800 million,” according to Bloomberg, and its annual loss “may hit $3 billion.”

Others chimed in as some of Uber’s dozens of investors who’re getting its financial statements share them in dribs and drabs with the media. But on Friday, Uber itself disclosed that it lost $2.8 billion before interest, tax, depreciation, and employee stock options – the latter likely being a big chunk, as the earnings of publicly traded companies that award stock-based compensation, such as Twitter, regularly show. Translated into a net loss, including the expense for stock-based compensation? Dizzying. But Uber wisely didn’t disclose it. The Financial Times, which reported this disclosure, mused that Uber is “cementing its place as the most heavily-lossmaking private company in the history of Silicon Valley.”

In Q4 alone, it lost $991 million before interest, tax, depreciation, and stock-based compensation, up 5% from the losses in Q3 and nearly double its loss in Q1. However, as Uber has expanded at break-neck speed into more than 70 countries, stirring up numerous hornets’ nests of local and national laws and regulations, revenue soared over 200% from Q1 to reach $2.9 billion in Q4. For the whole year, revenue reached $6.5 billion. This is the image of its skyrocketing 2016 quarterly revenues and ballooning losses before interest, tax, depreciation, and stock-based compensation:

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In a country of over 1 billion people, failures look big.

India ATMs Run Out Of Cash (ToI)

Five months have passed since the demonetisation drive, but the people of Srikakulam, Vizianagaram and Visakhapatnam continue to face shortage of cash in banks and ATMs. Sources said more than 90% of the ATMs in the region do not have cash while in the plains and Agency areas running dry. “The last date for paying my daughter’s tuition fees at Visakha Valley School was April 10, but I could not pay due to unavailability of cash. Moreover, the school does not have any online payment system,” said a worried P Srinivasa Rao. Speaking to TOI, State Bank of India (SBI) deputy general manager Ajoy Kumar Pandit said the customers are losing confidence in them due to the crisis.

“Nearly 70% of our 648 ATMs in the three districts are out of cash. The rest will also become dry in the next few days as we do not have cash to refill the machines. We are helpless from our side,” he said. A banking source said the RBI has diverted most of the cash to north India due to the recent elections. This has affected the southern parts of the country. “The government’s intention is to encourage smart payment systems, but the infrastructure is not up to the mark,” the source said. Many ATMs have not been upgraded with the new software required for handling the new Rs 500 and Rs 2,000 denominations, the source added.

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The referendum has revealed the opposite of what Erdogan claims it has; namely, a dramatically divided Turkey. A powder keg. Recounts first? Is the judicial system still strong enough to order them? Changing a constitution with a 50% + 1 majority is questionable enough, since a constitution is supposed to be the result of many years of deliberation; in most places it would require 67% or even 75%. On top of that, this referendum was executed with many opposition politicians and many journalists behind bars. And even then only a very slim margin?!

Erdogan Follows Slim Referendum Win by Warning Opponents (BBG)

An emboldened Recep Tayyip Erdogan followed his win in a referendum that ratified the supremacy of his rule by taking aim at political opponents at home and abroad. At his victory speech late on Sunday, supporters chanted that he should bring back the death penalty – a move that would finish off Turkey’s bid to join the EU – and Erdogan warned opponents not to bother challenging the legitimacy of his win. He told them to prepare for the biggest overhaul of Turkey’s system of governance ever, one that will result in him having even fewer checks on his already considerable power. “Today, Turkey has made a historic decision,” he said. “We will change gears and continue along our course more quickly.” The lira surged as much as 2.5% against the dollar in early trading on Monday in Istanbul before gains moderated.

The success of a package of 18 changes to the constitution was narrow, with about 51.4% of Turks approving it. It came at the end of a divisive two-month campaign during which Erdogan accused opponents of the vote of supporting “terrorists” and denounced as Nazi-like the decision of some EU countries to bar his ministers from lobbying the diaspora. “The referendum campaign was dominated by strongly anti-Western rhetoric and repeated promises to bring back the death penalty,” said Inan Demir at Nomura in London. “One hopes that this rhetoric will be tempered now that the vote is over,” but recent steps by the Turkish government do “not bode well for the hoped-for moderation in international relations.”

“It looks like the best outcome for financial markets because it gives the mandate, but not a strong mandate,” said Ozgur Altug, the chief economist at BGC Partners in Istanbul, who predicts stocks in Istanbul will rally about 7%. While markets looked favorably on the result as a sign political turmoil in the majority Muslim nation of 80 million people may settle down and help jumpstart the economy, Turkey’s biggest political party alleged fraud, demanding a recount after election officials accepted ballots without official stamps.

The EU’s rapporteur on Turkey, Kati Piri, said given the “unfair election environment,” EU accession talks will be suspended if the constitution is passed in its current form. The European Commission, in a statement, said the constitutional amendments, and their implementation “will be assessed in light of Turkey’s obligations” as an accession candidate and as a member of the Council of Europe. “You saw how the West attacked. But despite this, the nation stood tall, didn’t get divided,” Erdogan told his supporters, while calling on Turks who opposed him to “stop tiring themselves out” and accept the course the country is headed on.

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Apr 102017
 
 April 10, 2017  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , ,  9 Responses »
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Todd Webb Rue des Plantes, Paris 1950

 

Americans Are Becoming Obsessed With Putting Everything On Credit (MW)
Cash Is Dead. Long Live Cash. (WSJ)
A Change In The Change Of Change (Peters)
Great Debt Unwind: Bankruptcies Surge (WS)
Trump’s Rollback of Bank Regulations Risks a Bondholder Backlash (Street)
Syria Strike Designed To Intimidate North Korea: China State Newspaper (G.)
Is Globalisation Dead? (Pettifor)
Housing Costs Are Pushing People Further Out of Sydney (BBG)
Toronto Mayor Says He’s Open to Sale of City Real Estate Assets
Secret Recording Implicates Bank of England In Libor Manipulation (BBC)
The Fire In The Hold Of The Doomed Euro (Ward)
Tsipras: Debt Relief Prerequisite to Legislate New Measures (GR)
Great Barrier Reef at ‘Terminal Stage’ (G.)
John Clarke has Died

 

 

We need a war on plastic, not cash.

Americans Are Becoming Obsessed With Putting Everything On Credit (MW)

It’s more likely that the last time you bought a pack of gum or a can or soda, you used a credit card. People like their credit cards so much they’re using them even for the tiniest purchases, according to a new survey released Monday from the credit cards site CreditCards.com. Among people with credit cards, 17% said they use them to buy items in brick-and-mortar stores that cost less than $5, up from 11% last year. CreditCards.com surveyed about 1,000 U.S. adults in March 2017. After a lull in the wake of the Great Recession, credit cards are once again being used with increased frequency. The Federal Reserve reported last week that collective credit card debt in the U.S. had reached $1 trillion.

Credit-card debt and auto loan debt balances for people ages 60 and older have also risen since 2008, that Fed data showed, whereas credit-card debt for those 59 and younger has fallen. The Fed, when describing that phenomenon, said lending standards have tightened since the recession, and those who are older may also be more creditworthy. But when consumers can pay their balances each month, turning to credit cards for small purchases isn’t a bad thing, said Matt Schulz, a senior industry analyst for CreditCards.com. Putting more charges on a credit card may indicate consumers feel more optimistic about their financial picture for the future, he said. “People who are chasing rewards realize that those little purchases can add up to a lot of rewards over the course of a year,” he added.

Indeed, several high-profile credit cards offer cash back and perks for spending. For example, Amazon introduced a credit card this year for Prime members that gives 5% cash back on Amazon purchases (Prime itself costs $99 per year.) Some retailers, however, prohibit credit-card purchases below a certain amount to avoid paying transaction fees to the credit-card issuers for such purchases. That said, cash and debit cards still are the go-to options for making small purchases, despite the speed with which credit cards are gaining on them. Of those surveyed, 24% said they use debit cards for small purchases, and 55% said they use cash. It appears younger consumers are behind at least some of the growth in credit card use: Some 70% of baby boomers and their older cohorts, the Silent Generation, still choose cash for small purchases versus 43% of those under 53.

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A little incoherent article, but point taken. Countries that try to go cashless should be careful.

Cash Is Dead. Long Live Cash. (WSJ)

[..] the push to get rid of cash is hitting speed bumps all over. India, for example, is already partly reintroducing its 500- and 1000-rupee bills after the government’s abrupt demonetization program drew sharp criticism for hurting its cash-dependent rural population. The U.S. shows no inclination to pare back its notes. “I’m very conscious of the $100 bill being the world’s reserve currency, and every central bank around the world has stacks of $100 bills where they used to have gold,” Treasury Secretary Jacob Lew said in an interview with The Wall Street Journal shortly before he left office in January. One reason it’s a non-starter in the U.S.: About 8% of people don’t have a checking or savings account, making it all-but-impossible for them to participate in a cashless economy.

Banning cash “would bring the economy and many people to their knees if enforced,” said Hoover Institution economist John Cochrane. In the aboveground economy, card-based and digital payment systems offering ever-greater speed, safety and convenience have been steadily encroaching on paper money, even for small consumer transactions. Euromonitor International, a market-research firm, said the volume of global cash payments in 2016 for the first time fell below payments on credit and debit cards. Some of the growth in cash can be attributed to the financial crisis and the aftermath, when people lost faith in banks, and when ultralow interest rates and anemic investment returns reduced the opportunity costs of holding savings in cash. The number of $100 bills in circulation, worth $1.15 trillion in December, has surged 76% since 2009, according to Federal Reserve data.

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“Brexit was a joke. Trump was a joke..”

A Change In The Change Of Change (Peters)

“The change of change is now negative,” said the CIO. “Global growth is still rising, but the rate of improvement is slowing,” he explained. “Same holds true for global inflation, oil prices, copper, iron ore. Credit growth is slowing in the US, Europe, Japan, China.” If these things were all contracting, we’d plunge into recession, but we’re not there. We’re simply at the point in the cycle where the rate of acceleration is slowing – which is both evidence of a pause, and a precondition for every major turn. “The last time we had a major shift in the change of change was a year ago.” In Jan/Feb 2016, China was imploding. Commodity prices were tanking with equity markets, the dollar soared alongside volatility. Then China unleashed explosive credit stimulus, while the Fed blinked, guiding forward interest rates dramatically lower. Within a short time, the change of change turned positive.

Which is not to say things immediately accelerated, it’s just that they started contracting more slowly. And that marked the time to buy. “Pretty much everything that happened in 2016 can be explained by two things; China and oil prices,” he said. “Literally, that’s it.” China’s stimulus-induced rebound and the oil price recovery is all that mattered. “Brexit was a joke. Trump was a joke. In fact, the only real significance of those events was that they provided investors with opportunities to jump on board the reflation trade at back near Q1 prices.” The reflation trade quietly began in the Q1 collapse, and accelerated off the extreme post-Brexit summer lows in global interest rates. That’s what made last year remarkable. Even investors who missed the first opportunity, had two chances to make a lot of money.” You see, that reward is usually reserved for those who act on the first signs of a change in the change of change.

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Credit shrinks, the Zombies fall.

Great Debt Unwind: Bankruptcies Surge (WS)

Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012. They’re up 8% year-over-year. Over the past 24 months, they soared 37%! At 3,658, they’re at the highest level for any March since 2013. Commercial bankruptcy filings skyrocketed during the Financial Crisis and peaked in March 2010 at 9,004. Then they fell sharply until they reached their low point in October 2015. November 2015 was the turning point, when for the first time since March 2010, commercial bankruptcy filings rose year-over-year.

Bankruptcy filings are highly seasonal, reaching their annual lows in December and January. Then they rise into tax season, peak in March or April, and zigzag lower for the remainder of the year. The data is not seasonally or otherwise adjusted – one of the raw and unvarnished measures of how businesses are faring in the economy. Note that there is no “plateauing” in this chart: since the low-point in September 2015, commercial bankruptcies have soared 65%! That red spike is the mega-increase in March:

At first, they blamed the oil bust. The price of oil began to collapse in mid-2014. By 2015, worried bankers put their hands on the money spigot, and a number of companies in that sector, along with their suppliers and contractors, threw in the towel and started filing for bankruptcy protection. But now the price of oil has somewhat recovered, banks have reopened the spigot, Wall Street has once again the hots for the sector, new money is gushing into it, and oil & gas bankruptcy filings have abated. So now they blame brick-and-mortar retail which is in terminal decline, given the shift to online sales. I have reported extensively on the distress of the larger chain stores, but brick-and-mortar retailers include countless smaller operations and stores that no ratings agency follows because they’re too small and can’t issue bonds, and many of them are even more distressed.

[..] Now come the consumers – not all consumers, but those with mounting piles of debt and stagnating or declining real incomes, of which there are many. They’d been hanging on by their teeth, with bankruptcy filings consistently declining since 2010. But that ended in November 2016. In December, bankruptcy filings rose 4.5% from a year earlier. In January they rose 5.4%. It was the first time consumer bankruptcies rose back-to-back since 2010. I called it “a red flag that’ll be highlighted only afterwards as a turning point.” In March, consumer bankruptcy filings rose 4% year-over-year, to 77,900, the highest since March 2015, when 79,000 filings occurred, according to the American Bankruptcy Institute data. The turning point has now been confirmed. Total US bankruptcy filings by consumers and businesses in March spiked 40% from February and rose 4% year-over-year to 81,590, the highest since March 2015:

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Trust at risk.

Trump’s Rollback of Bank Regulations Risks a Bondholder Backlash (Street)

President Donald Trump’s pledge to roll back regulations on U.S. banks could face resistance from an influential constituency: bondholders. While stockholders of firms like JPMorgan Chase and Goldman Sachs have cheered Trump’s plans to repeal or soften rules imposed in the wake of the 2008 financial crisis, bond-rater Standard & Poor’s is warning that such a move could undermine the industry’s creditworthiness. Measures like “stress testing,” in which regulators evaluate banks annually to determine if they’re sufficiently prepared to withstand a deep economic or market downturn, have made the firms safer, according to S&P. And so-called resolution planning – the practice of planning in advance how big banks would be wound down following a Lehman Brothers-style collapse – also has contributed to the industry’s resilience, the ratings firm wrote in a March 20 report.

The timetable for any such changes isn’t yet clear, however. Trump in February signed an executive order directing U.S. Treasury Secretary Steven Mnuchin to identify any laws that might impede economic growth or vibrant markets. Those could include the 2010 Dodd-Frank Act, signed by former President Barack Obama to curb risky activities like using excessive borrowings to fuel earnings growth and allowing in-house traders to speculate on markets with proprietary capital. “An overhaul of Dodd-Frank could be detrimental for bank creditors,” S&P wrote in the report. “If changes to Dodd-Frank watered down these features, and if banks reacted to such changes by weakening their financial management, we could lower ratings.” The fresh concerns could contribute to a shift in investor sentiment that’s been mostly positive toward banks since Trump’s surprise election on Nov. 8.

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Xi responds after he’s left Mar-a-Lago.

Syria Strike Designed To Intimidate North Korea: China State Newspaper (G.)

Donald Trump’s decision to attack Syria had also been designed to intimidate North Korean leader Kim Jong-un, a Chinese newspaper has claimed, as G7 foreign ministers meet to discuss the fallout from last week’s missile incursion. The state-run Global Times said a US strike against North Korea would unleash carnage on the Korean peninsula. The US navy has deployed a strike group towards the western Pacific Ocean, to provide a presence near the Korean peninsula. South Korean officials suspect Kim may be planning to hold his country’s sixth nuclear test later this week to mark the 105th anniversary of the birth of founder Kim Il-sung on 15 April, an event a number of foreign journalists have been invited to cover.

In an editorial entitled: ‘After Syria strikes, will North Korea be next?’, the Global Times suggested the US might now be preparing to launch “similar actions” against Pyongyang and warned of catastrophic consequences if it did. “A symbolic strike against North Korea by the US would bring a disaster to the people in Seoul,” the newspaper said, claiming a “decapitation attack” on North Korea was now “highly possible”. Such a strike would “very likely evolve into large-scale bloody war on the peninsula”. The Global Times noted the decision to deploy a strike force to the Western Pacific over the weekend and cautioned Pyongyang against doing anything that might further inflame the situation.

“New nuclear tests will meet with unprecedented reactions from the international community, even to a turning point.” The warnings came after the US secretary of state, Rex Tillerson, claimed that the situation in North Korea had “reached a certain level of threat that action has to be taken”. Asked if the attack on Syria could be seen as a message to Pyongyang, Tillerson told ABC: “The message that any nation can take is: ‘If you violate international norms, if you violate international agreements, if you fail to live up to commitments, if you become a threat to others, at some point a response is likely to be undertaken.”

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“Hayek: state regulation leads to totalitarianism. But instead self-regulating markets led to today’s authoritarians.”

Is Globalisation Dead? (Pettifor)

In the BBC’s brief and pressured half-hour I wanted to get across that globalisation had not delivered on its promise – to make ‘the market’ the main driver of a more effective, more productive economy; to transform societies into nations of ‘shareholders’; to ensure a revolution in homeownership, and to avoid what Hayek called the threat of a totalitarian state. Instead financial globalisation has been an era largely fuelled by carbon (oil and coal) – as had been the case for over a century. However, unlike the Bretton Woods era, post 1970s de-regulated financial globalisation was built on mountains of private and public debt. The first – private debt – led to recurring financial crises, and the second – public debt – rose as private sector activity weakened, and tax revenues fell.

The consequences of these recurring financial crises in ‘advanced’ economies included ‘austerity’, the removal of employment protection, rising housing and education costs, the return of deflationary pressures, high unemployment, falling real wages, low productivity and rising inequality. These crises have led to increased insecurity and over-rapid social and economic change- as well as the greatest financial and economic crisis since 1929 (itself a product of excessive laissez-faire ideology). More widely, the insecurities and dislocations generated by financial globalisation have led whole populations to seek the ‘protection’ of a strong man (e.g. Presidents Trump, Duterte in the Philippines, Modi in India, Erdogan in Turkey, Putin in Russia).

Not that this worries the extreme adherents of laissez-faire – recall how Hayek supported the murderous dictator Pinochet in Chile for his brutal imposition of deregulatory ‘reform’. And so, contrary to Hayek’s expectations, financial globalisation has proved that it is market fundamentalism, and not the regulatory state that is leading the world into an era of authoritarianism and totalitarianism – in the US, Eastern Europe, India and China.

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But politicians will keep saying that it’s all because not enough is being built. Why don’t you raise rates first and see what happens?

Housing Costs Are Pushing People Further Out of Sydney (BBG)

New South Wales has taken over as Australia’s economic engine as the mining investment boom tails off, with central Sydney contributing almost a quarter of the nation’s growth last fiscal year. That success has come with a price. As workers flock to Sydney, an under-supply of housing, coupled with record-low interest rates, has made the city the world’s second-most expensive property market. Home prices jumped 19 percent in the past 12 months, stoking concern home ownership is increasingly beyond the reach of younger people. That’s a big political problem for the state’s new Premier Gladys Berejiklian, who made housing affordability one of her priorities when she took the job in late January. Housing affordability is “a barbecue stopper,” Berejiklian, 46, said in an interview in her Sydney office on Thursday.

“We are convinced if we put downwards pressure on prices through supply, that’s the best way we can solve it as a state government.” Sydney’s housing completions reached a 15-year high in 2016, though Berejiklian says the state is only now playing catch-up after “a decade of under-investment.” “There are about 100,000 dwellings we are behind on in terms of really digging into the demand,” she said. [..] There are several barriers to boosting housing supply in Sydney. The city is bordered by mountains to the west, the ocean to the east and rivers and national parks to the north and south, restricting the supply of new land, while moves to increase housing density in established suburbs have run into opposition from residents. That’s meant in the past three years, almost 70 percent of new detached houses have been built more than 30 kilometers from Sydney’s central business district…

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“..the Canadian government has been trying to find ways to “crystallize” the value in some of its property assets…”

Toronto Mayor Says He’s Open to Sale of City Real Estate Assets

Toronto’s mayor won’t rule out selling some of the city’s prime downtown real estate as he looks to make better use of assets amid an unprecedented property boom. “Would I take that off the table? No, I wouldn’t,” Mayor John Tory said in an interview last week at Bloomberg’s Toronto office. Selling buildings in the city’s costly downtown market probably wouldn’t be “quite as politically charged” as divesting other types of assets, such as the parking authority or power utility Toronto Hydro, he said. The need for North America’s fourth-largest city to fund critical transit upgrades and housing improvements coincides with skyrocketing property prices in the region. Toronto’s real estate portfolio includes 6,976 buildings with 106.3 million square feet (9.9 million square meters), almost half of which is multifamily, according to a Dec. 6 report on the city’s assets.

With all of the demands on the city to raise money for building transit lines and repairing existing housing, then “might you be looking at the business case for handling real estate in a different way? Because this is the most expensive downtown real estate you could possibly have,” said the mayor, elected in 2014. The report, commissioned by the city and conducted by Deloitte, estimates the value of municipal real estate including community housing, parks and forestry is C$27 billion ($20 billion), while the annual operating costs in “core” real estate and facilities management is C$1.1 billion. Tory said he watched with passing interest the federal government’s sale earlier this year of the Dominion Public Building. The historic downtown property beside Toronto’s Union Station sold for about C$275 million ($205 million), according to newspaper reports.

The property was “super underutilized,” BMO analyst Heather Kirk said in an interview, adding the Canadian government has been trying to find ways to “crystallize” the value in some of its property assets. “What a building is worth to the government in current form is totally different than the value to a developer,” Kirk said. “They are buying density.” When asked how any properties might be sold, Tory stressed he didn’t currently have any specific recommendations to make to the city council, although “I just know those are things that sit out there still as options that are in front of the city government to raise money to do the things we have to do,” he said.

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Ehh.. how do you lock up the Bank of England?

Secret Recording Implicates Bank of England In Libor Manipulation (BBC)

A secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama. The 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down. Libor is the rate that banks lend to each other and it sets a benchmark for mortgages and loans for ordinary customers. The Bank of England said Libor was not regulated in the UK at the time. The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. Libor, the London Interbank Offered Rate, tracks how much it costs banks to borrow money from each other.

As such it is a big influence on the cost of mortgages and other loans. Banks setting artificially low Libor rates is called lowballing. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates. He tells him: “The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.” Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. Mr Johnson says: “So I’ll push them below a realistic level of where I think I can get money?” His boss Mr Dearlove replies: “The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it.”

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The warnings have always been there. Totally ignored.

The Fire In The Hold Of The Doomed Euro (Ward)

The more basic stuff goes back at least twenty years, to the period where trouble was stored up for the future by fanatical federalists cutting every corner and pulling out all the stops to get EMU (the prototype single currency) up and running. Several eminent economists on continents ranging from Australia and the US to the UK and Europe itself made very sound predictions at the time about coming disaster, and they did so saying two related things: 1) It would offer Germany a cheap, fixed currency leading inevitably to its economic dominance, 2) It would point up the economic consequences of imposing one rigid means of exchange on 18 varietal cultures, leading generally to Southern/South Eastern Europe falling behind.

Just to add more weedkiller to the poisonous formulation, the key European leaders not only ignored the advice; they also first, ignored all the data showing that several member States were nowhere near ready to join the eurozone based on agreed criteria; and then second, were implicated in several corrupt deals on commodities – as varied as German butter, Italian wines and Greek olive oil – to cloud the existence of stark differentials in both export and industrial development. For once, the economic naysayers proved to be soothsayers. Messrs Hollande and Muscovici shrink from the limelight about their own book on the subject of cultural difference (fancy that) but it proved to be spot on….as did the musings of Lawson and Thatcher et al in relation to Germany’s dominance.

The Mark from around 1963 until the creation of EMU was the most reliable, performance-related currency on the planet. But only massive debt forgiveness by the victors after the Second World War enabled that outcome. Both the realities in that last paragraph explain why lectures from Hollande and Merkel today – when joined by hypocrisy from Draghi at the ECB – evoke so much hatred of the EU’s prime movers among the so-called ClubMed nations….and those of us Brits in the Brexit camp. I make these points not to be nihilistic, but rather to level the playing field of media coverage that has been so bombed, excavated, deliberately over-watered and then tilted for good luck by Brussels, Wall Street and Berlin obfuscation and mendacity since 2010. A very real outcome of nihilism is being encouraged (and indeed made inevitable) by the EC’s refusal to recognise that – even as the SS Eunatic set sail – there was a raging fire in the hold.

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Big words.

Tsipras: Debt Relief Prerequisite to Legislate New Measures (GR)

The mid-term debt relief measures so that Greece can enter the quantitative easing program is the prerequisite to vote for the new measures, Greek Prime Minister Alexis Tsipras said on Sunday. Addressing the SYRIZA Central Committee, the party leader spoke about the new austerity measures his administration has agreed to with creditors. He spoke of a compromise that had to be made so that measures had to be counter-balanced by social relief measures of equal fiscal value and aid that the Greek negotiating team. “There are measures that are neither necessary, nor are they the ones we would ever choose, but the compromise achieved would have counter-measures that would counterbalance the fiscal impact and generate zero fiscal balance, and both will be legislated and implemented simultaneously,” Tsipras said.

Speaking on the initial agreement reached at the Malta Eurogroup on Friday, the prime minister said that, “After Malta the way for the identification of the medium-term measures for the debt is open. This will send a clear message to the markets that the uncertainty is over.” “Now we will be the ones to decide the fiscal path the country will follow after the end of the program,” Tsipras said, explaining the strategy for the next round of negotiations. He stressed that without medium-term measures for debt relief that would allow Greece to enter the QE program, he would not implement the new measures.

The prime minister also unleashed an indirect attack against main opposition New Democracy claiming that, “Some were scheming so that the evaluation would not close, because they didn’t want us to be the ones who will pull Greece out of the crisis.” He also attacked ND leader Kyriakos Mitsotakis accusing him of “rushing to meet with the German finance minister to get his blessing and undermine the negotiations.” He also said that the conservative party espouses extreme neoliberalism.

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It was a big mistake to put the Great Barrier Reef near Australia.

Great Barrier Reef at ‘Terminal Stage’ (G.)

Back-to-back severe bleaching events have affected two-thirds of Australia’s Great Barrier Reef, new aerial surveys have found. The findings have caused alarm among scientists, who say the proximity of the 2016 and 2017 bleaching events is unprecedented for the reef, and will give damaged coral little chance to recover. Scientists with the Australian Research Council’s Centre of Excellence for Coral Reef Studies last week completed aerial surveys of the world’s largest living structure, scoring bleaching at 800 individual coral reefs across 8,000km. The results show the two consecutive mass bleaching events have affected a 1,500km stretch, leaving only the reef’s southern third unscathed. Where last year’s bleaching was concentrated in the reef’s northern third, the 2017 event spread further south, and was most intense in the middle section of the Great Barrier Reef.

This year’s mass bleaching, second in severity only to 2016, has occurred even in the absence of an El Niño event. Mass bleaching – a phenomenon caused by global warming-induced rises to sea surface temperatures – has occurred on the reef four times in recorded history. Prof Terry Hughes, who led the surveys, said the length of time coral needed to recover – about 10 years for fast-growing types – raised serious concerns about the increasing frequency of mass bleaching events. “The significance of bleaching this year is that it’s back to back, so there’s been zero time for recovery,” Hughes told the Guardian. “It’s too early yet to tell what the full death toll will be from this year’s bleaching, but clearly it will extend 500km south of last year’s bleaching.”

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A really funny man died over the weekend.

John Clarke has Died

We featured quite a few Clarke and Dawe videos through the years. Here’s a few favorites:

How does the financial system work?

European Debt Crisis

The Greek Economy

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Apr 062017
 
 April 6, 2017  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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DPC Oyster luggers along Mississippi, New Orleans 1906

 

Euro Saves Germany, Slaughters the PIGS, & Feeds the BLICS (Hamilton)
Greece Wants Eurozone Summit If Deal On Bailout Doesn’t Happen Soon (AP)
Half Of American Working Families Are Living Paycheck To Paycheck (MW)
Trump Top Economic Adviser Cohn Backs Split Of Lending, Investment Banks (BBG)
IMF Explains How To Subvert Resistance Against Elimination Of Cash (Häring)
Precursors to the ’08 Crisis are Repeating Now (Nomi Prins)
Former Fed Advisor Says Central Bank Shouldn’t Comment On Equities (CNBC)
Is the Fed’s Balance Sheet Headed for the Crapper? (DiMartino Booth)
Toronto House Price Bubble Goes Nuts (WS)
Interest-Only Loans ‘To End In Tears’ (Aus.)
China Is More Fragile than You Realize (DR)
Syria Gas Attack: Assad’s Doing…Or False Flag? (Ron Paul)
Reports In Unmasking Controversy Were Detailed (Fox)
We Are Heading For The Warmest Climate In Half A Billion Years (Conv.)

 

 

Absolutely brilliant by Chris Hamilton. Many more graphs in the article. h/t Tyler

Euro Saves Germany, Slaughters the PIGS, & Feeds the BLICS (Hamilton)

Germany was well aware of it’s post WWII collapsing birth rate and the impact of this on economic growth as this shrinking population of young made it’s way into the Core.  Consider Germany’s Core population peaked in 1995 and it’s domestic consumer base has been shrinking since, now down over 3.3 million potential consumers (about a 9% Core decline…remember a depression is a 10% decline in economic activity, which a 9% and growing decline in German consumers would have almost surely induced).

GERMANY

The chart below shows Germany’s Core population from 1950–>2040…but understand this is no guestimate through 2040.  This is simply taking the existing 0-24yr/old population (plus anticipated immigration) and sliding them into the Core through 2040.  Germany’s Core population is set to fall by over 30% or 10+ million by 2040 (far more than the 7 million Germans of all ages who died in WWII).

 

But Germany had a plan.  With the advent of the EU and Euro just as Germany’s Core began shrinking, Germany was able to avoid the pitfalls of a shrinking domestic consumer base, circumvent the strong German currency, and effectively quadruple it’s effective export market across Europe.  German exports, as a % of GDP, have essentially doubled since the advent of the Euro (22% in ’95 to almost 50% in ’16).  The chart below highlights Germany’s shrinking Core vs. rising GDP (primarily via exports) since 1995.

[..] the German motivation for the EU and Euro are fairly plain as are the resultant economic transfusion from South to North.  But for Germany to be a winner, there had to be a loser in this shrinking pie game.  Hello PIGS (Portugal, Italy, Greece, Spain), you lost.  As the old poker adage goes, when you don’t know who the sucker at the table is…it’s you.  Particularly when you “win big” at first and it all seems so easy…but then it all turns.

PIGS

The chart below shows the PIGS Core population peaking about 15 years later than in Germany but likewise clearly rolling over.  By 2040, the PIGS Core population will be back at it’s 1960 levels…down from the 2010 peak by 17 million or about a 30% decline.

But if we look at the PIGS combined GDP and Core population…we see a very different picture than in Germany.  The chart below shows the PIGS GDP turned down ahead of the Core population peak.  The rise in GDP in these nations was a credit bubble premised on cheap EU wide interest rates more appropriate for Germany.  Exports as a % of GDP (which were higher than Germany’s in ’95) have risen less than half of Germany’s increase (rising as a % primarily due to declining PIGS GDP).  Low German wage increases and high quality German goods helped displace PIGS domestic manufacturing base.

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The logical consequence of the article above. Economic warfare. Tsipras complains about the Troika “moving the goalposts”, but that’s exactly the game, Alexis.

Greece Wants Eurozone Summit If Deal On Bailout Doesn’t Happen Soon (AP)

Top Greek and European officials indicated Wednesday that it’s possible to reach a breakthrough in the country’s difficult bailout talks over the next two days. Greece’s prime minister said that if a deal on paying Athens the next bailout installment fails to materialize, the eurozone should hold a special summit. Alexis Tsipras said negotiators are “just a breath away” from an agreement at Friday’s scheduled meeting in Malta of the so-called eurogroup, the gather of finance ministers from countries that use the euro. But Tsipras blamed unnamed negotiators among Greece’s European creditors and the IMF for “moving the goalposts” each time Greece was getting close to meeting approval conditions for the bailout. “We are not playing games here … that must stop,” he said, after talks in Athens with EU Council President Donald Tusk.

Greece has to agree on budget measures to get access to its loans. But the talks have dragged on for months, freezing the latest loan payout and hurting chances of a Greek economic recovery after years of recession and turmoil. Without the bailout payment, Greece would struggle to make a debt payment in July, raising anew the prospect of default. Tsipras’ left-led government is pushing for a comprehensive deal that would cover more than just spending cuts and harsh reforms by Greece, but also alleviate the country’s debt burden and ease its access later this year to international bond markets. “If the eurogroup is not in a position to (reach an agreement) on Friday, I have asked President Tusk to convene a eurozone summit to achieve an immediate agreement,” Tsipras said. “I don’t think that will be needed, because there will be a result on Friday, but these delays cannot continue.”

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Is it just me, or do we see similar surveys once a week these days? How can anyone maintain that the US economy is doing fine?

Half Of American Working Families Are Living Paycheck To Paycheck (MW)

More than seven years after the Great Recession officially ended, there is yet more depressing research that at least half of Americans are vulnerable to financial disaster. Some 50% of people is woefully unprepared for a financial emergency, new research finds. Nearly 1 in 5 (19%) Americans have nothing set aside to cover an unexpected emergency, while nearly 1 in 3 (31%) Americans don’t have at least $500 set aside to cover an unexpected emergency expense, according to a survey released Tuesday by HomeServe USA, a home repair service. A separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being.”

One explanation: Americans are crippled under the same amount of debt as they had during the recession. The New York Federal Reserve on Monday predicted that total household debt will reach its previous peak of $12.68 trillion in 2017. The last time it reached that level was in the third quarter of 2008, during the depths of the Great Recession. Indeed, it’s already close: Total household debt in the fourth quarter of 2016 was $12.58 trillion. Fewer borrowers have housing-related debt in 2017 and, instead, have taken on auto and student loans.

One illness can push people to the brink of financial ruin. Wanda Battle, a registered nurse for four decades, was recently hit with a $100,000 medical bill. She has visited her local emergency room on more than one occasion due to severe migraines and mini-strokes. Battle, who is based near Nashville, Tenn., managed to reduce her latest hospital bill to $32,000 based on her relatively low income, but still faces $650 monthly payments for a previous $22,000 medical bill. “There were times I couldn’t work,” she told MarketWatch. “I have not held a job that is continuous.”

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Glass Steagall. Interesting.

Trump Top Economic Adviser Cohn Backs Split Of Lending, Investment Banks (BBG)

In a private meeting with lawmakers, White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter. Cohn, the ex-Goldman Sachs executive who is now advising President Donald Trump, said he generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup primarily issued loans, according to the people, who heard his comments. The remarks surprised some senators and congressional aides who attended the Wednesday meeting, as they didn’t expect a former top Wall Street executive to speak favorably of proposals that would force banks to dramatically rethink how they do business.

Yet Cohn’s comments echo what Trump and Republican lawmakers have previously said about wanting to bring back the Glass-Steagall Act, the Depression-era law that kept bricks-and-mortar lending separate from investment banking for more than six decades. In the years after the law’s 1999 repeal, banks such as Citigroup, Bank of America and JPMorgan Chase gobbled up rivals and pushed into all sorts of new businesses, becoming one-stop-shopping financial behemoths. Many banking executives believed that the inclusion of former finance executives like Cohn in Trump’s White House would temper major changes such as a Glass-Steagall return. But his Wednesday remarks suggest he could be a wildcard should Congress get serious about reinstating the law. White House officials haven’t said what an updated version of Glass-Steagall might look like.

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They actually wrote a manual.

IMF Explains How To Subvert Resistance Against Elimination Of Cash (Häring)

The IMF has published a Working Paper on “de-cashing”. It gives advice to governments who want to abolish cash against the will of their citizenry. Move slowly, start with harmless seeming measures, is part of that advice. In “The Macroeconomics of De-Cashing”, IMF-Analyst Alexei Kireyev recommends in his conclusions:

“Although some countries most likely will de-cash in a few years, going completely cashless should be phased in steps. The de-cashing process could build on the initial and largely uncontested steps, such as the phasing out of large denomination bills, the placement of ceilings on cash transactions, and the reporting of cash moves across the borders. Further steps could include creating economic incentives to reduce the use of cash in transactions, simplifying the opening and use of transferrable deposits, and further computerizing the financial system. The private sector led de-cashing seems preferable to the public sector led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation.

The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash. A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks. The de-cashing process would acquire more traction if it were based on individual consumer choice and cost-benefits considerations.”

Note, that the author is not talking about unreasonable objections and imagined disadvantages: He does count it among the advantages of de-cashing in the very next paragraph that personal savings are pushed into banks and he also does count total control of all aspects of financial life under the pros, as in the last sentence of the last quote below.

“As de-cashing gives incentives to economies’ agents to convert their currency in bank deposits, the deposit base of the banking system will increase, which can help reduce the lending rates and expand credit.”

And finally the advice to do it together:

“Coordinated efforts on de-cashing could help enhance its positive effects and reduce potential costs. At least at the level of major countries and their currencies, the authorities could coordinate their de-cashing efforts. Such coordinated efforts are, in particular, important in the decisions to phase out large denomination bills for all major currencies, to use ceilings and other restrictions on cash transactions, and to introduce the reporting requirements for cash transactions or their taxation. For currency areas, a single decashing policy would be clearly preferable to a national one. Finally, consensus between the public and the private sector and outreach on the advantages and modalities of gradual decashing should be viewed as key preconditions for its success.”

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They’re all over the place.

Precursors to the ’08 Crisis are Repeating Now (Nomi Prins)

The biggest banks are still as dangerous as they were before the last crisis, even as they push for less regulation. The big six banks U.S. banks are JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley. Despite their belly-aching about heinous Dodd-Frank Act regulations cramping their betting style, they have all done damn good recently. Since Trump was elected and started talking about deregulation, the big six bank stock values have collectively skyrocketed 33.5% (as of March 10th). Bank of America tops that rise with an eye-popping increase of 48.8% in three months. Goldman Sachs and Morgan Stanley shares shot up 36.6%. Of course, most stocks have been moving up since the election. But keep in mind that the S&P 500 rose just 10.9% during that same period.

Beyond a few extra capital requirements (mostly in the form of a set of rules called Basel III coming from Europe), the need to establish a “living will” in case of another financial emergency, and some limitations on risky trading, not much has changed for these banks. Since the 2008 financial crisis, the big six banks’ total assets have increased by 21%. The big four by 25%. Yet, of the total Global Derivatives Notional amount of $544 trillion, the big six U.S. banks carry $168 trillion of it. Comparing that figure to their total assets, we get a leverage amount of 24 times. To put that in perspective, that’s only slightly less than the leverage their derivatives positions before the 2008 crisis. The biggest banks are still the ones most at risk, and most threatening to anyone with money in the stock market. Cracks have started popping up that make it clear to us that the next financial crisis is just around the corner.

[..] The Fed’s data shows bank lending to businesses has been strong, perhaps too strong. That’s why it’s just now starting to trail off. We’ve had an epic credit expansionary cycle on the back of cheap, central bank fabricated money and ultra-loose monetary policy — what I call “artisanal” money. But defaults and distressed credit activity is rising. Last year, corporates posted their fifth-highest yearly default volume. According to Forbes, “62 companies defaulted on $59.3 billion in debt — 57% higher than the $37.7 billion of defaults in 2015.” That’s an ominous trajectory.

Bank of America just revealed that its 30-90 day consumer credit delinquencies are rising significantly again. So are delinquencies at Wells Fargo. The bank card default rate is at a 42 month high. U.S. subprime auto loan losses are at their highest level since the ’08 crisis. Banks that had been offering more commercial real estate loans now say they will tighten standards. Fears are rising that a greater%age will become delinquent just as they did in the lead up to the last financial crises. A downturn is inevitable. It’s a matter of when, not if.

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Of course it shouldn’t.

Former Fed Advisor Says Central Bank Shouldn’t Comment On Equities (CNBC)

Federal Reserve officials commented on the stock market in March, as minutes from the Federal Open Market Committee meeting revealed the central bank is working to reduce its $4.5 trillion in bonds on its balance sheet this year. Danielle DiMartino Booth, a former Dallas Fed advisor and president of Money Strong, said on CNBC’s Power Lunch on Monday, “It always makes me uncomfortable,” when the central bank comments on U.S. equities. In the summary of the March meeting, Fed members “commented that the recent increase in equity prices might in part reflect investors’ anticipation of a boost to earnings from a cut in corporate taxes or more expansionary fiscal policy, which might not materialize.

They also expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook for such policy initiatives.” “I don’t think it’s necessarily the purview of central bankers to comment on this,” DiMartino Booth said. She said the Fed’s comments on the market shows “they are also verbally concerned about financial instability,” and may consider it when the Fed makes fiscal policy decisions, in addition to labor and inflation mandates. David Nelson, chief strategist at Belpointe Asset Management, agreed, “I don’t think the Fed should be commenting on stock prices.”

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“..getting from Point A ($4.5 trillion) to Point B ($2 trillion based on balance sheet contracting just over a tenth the size of the country’s GDP) will take at least five years.”

Is the Fed’s Balance Sheet Headed for the Crapper? (DiMartino Booth)

The good news, for those fearing having to enter monetary rehab, is that it’s going to take a mighty long time to shrink the balance sheet. The fine folks over at Goldman Sachs figure that getting from Point A ($4.5 trillion) to Point B ($2 trillion based on balance sheet contracting just over a tenth the size of the country’s GDP) will take at least five years. (An aside for you insomniacs out there: Have a look back at Mind the Cap, penned back on December 16, 2015, released hours before the Fed hiked rates for the first time in order to raise the cap on the Reverse Repo Facility (RRP) to $2 trillion. (Mind The Cap via DiMartinobooth.com) Come what may, you can consider Goldman’s estimate of the terminal value of a $2 trillion balance sheet and the size of the RRP to be anything but coincidental.)

In any event, things change. As per Goldman, by 2022, “…changes in Fed leadership, regulation, Treasury issuance policy, or macroeconomic conditions could alter both the near-term path and the intended terminal size of the balance sheet.” Indeed. It is entertaining to watch market pundits shift in their skivvies trying to assure the masses that a shrinking balance sheet will be welcomed by risky assets. It was downright comical to read that the Fed’s strategically allowing only long-dated Treasuries to expire and not be replaced would prevent the yield curve from inverting, thus staving off recession. Pardon the interruption, but domestic non-financial sector debt stood at about 140% of GDP in 1980. Today, it’s crested 250% of GDP and keeps rising.

Interest rate sensitivity, especially in commercial real estate, household finance and junk bonds is particularly acute. Oh, and by the way, monetary policy is a global phenomenon. At last check, the European periphery and emerging market corporate bond market were not in the best position to weather a rising rate environment. The best performance, though, was delivered by Chair Janet Yellen herself. In the spirit of giving credit its due, Business Insider’s Pedro da Costa highlighted this delightful nugget from testimony Yellen presented to Congress in February: “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting the financial markets and pushing the economy into recession.” Isn’t the rapidly flattening yield curve communicating that ‘removing accommodation’ today is one and the same with ‘pushing the economy into recession’?

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Better do something, Justin. This is going to blow up in YOUR face.

Toronto House Price Bubble Goes Nuts (WS)

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%! That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled! The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422. Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February.

And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March. Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success. Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble. And the Bank of Canada, which has been fretting about the housing bubble for a while – always couched in its very careful terms – refuses to raise rates. Everyone is talking. No one dares to do anything real about Toronto’s house price bubble. In Toronto, according the real estate folks, it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing, really.

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We’re supposed to believe Australia never got the memo? Get real.

Interest-Only Loans ‘To End In Tears’ (Aus.)

Former National Australia Bank boss Don Argus has added to warnings about the overreliance of interest-only loans, declaring it is going to “lead to tears” as interest rates eventually move higher. After a widely expected decision by the Reserve Bank to leave its official cash rate unchanged at a record low 1.5% at its monthly board meeting yesterday, Mr Argus declared that borrowers had “forgotten” the cyclical nature of interest rates. “You can only hope that some of these dizzy values that you see people paying for houses now, you hope that they stand up on any correction, any economic correction”, Mr Argus told The Australian. Backing a tightening of so-called macroprudential controls on home lending announced by the Australian Prudential Regulation Authority last week, Mr Argus, a former BHP Billiton chairman, said the capacity of borrowers to repay loans “was always a primary concern in housing loans of yesteryear”.

“If you progressed to just an interest-only environment, that’s only going to lead to tears.” However, in a speech given in Melbourne last night, RBA governor Philip Lowe took aim at banks and other lenders for making overly generous serviceability assessments. “Despite the focus on this area over recent times, too many loans are still made where the borrower has the skinniest of income buffers after interest payments”, Dr Lowe said. “In some cases, lenders are assuming that people can live more frugally than in practice they can, leaving little buffer if things go wrong. So APRA quite rightly has said lenders can expect a strong supervisory focus on loans with a very low net income surplus.” Dr Lowe also noted that the prevalence of interest-only lending was “unusual” globally.

“A reduced reliance on interest-only loans in Australia would be a positive development and would help improve our resilience. With interest rates so low, now is a good time for us to move in this direction,” he said. Almost 40% of residential mortgage lending in Australia is interest-only, where the borrower pays off the interest rather than the principal.

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“It is about regime survival for a Chinese Communist Party that faces existential risk if they stumble.”

China Is More Fragile than You Realize (DR)

China’s economy is not just about providing jobs, goods and services. It is about regime survival for a Chinese Communist Party that faces existential risk if they stumble. Given the systemic problems inherent in trying to run an economy in the absence of the accurate price signals only free markets provide (a problem for both Chinese socialism and the West’s corrupt crony markets), their challenges are worsening every day. Malinvestments the size of ghost cities are not lost on the world’s central bankers who fear a systemic collapse of China’s economy, nor on the brilliant investors who are betting on China’s collapse like they bet against the corrupt banking products in the U.S. housing bubble. Before the 2008 financial crisis, the Chinese debt-to-GDP ratio was 147%; now, it is at about 250%.

Quietly, the Chinese leadership has begun to lower growth expectations but even those numbers should be taken with skepticism. The methodology used to calculate their GDP figures is not publicly known but uses economic data that can be manipulated for sake of appearances. Declining growth impacts China’s financial market as well. Local banks are struggling with non-performing debt rapidly increasing. Non-bank financial institutions referred to as the “shadow banking system” are spreading, with little regulation or recognition of the risks. The government’s attempts to better regulate the system is stymied by local corruption where exaggerated assets and little documentation mask a wave of malinvestments. Like the appearance of no-doc “liar” loans in the U.S. in 2004-2006, the entire shadow banking system is signalling risk of systemic collapse.

Another source of malinvestment is the real estate market. Commercial real estate bubbles are breathtaking and residential real estate values have begun to fall. This seriously threatens social unrest as many Chinese families have put their life savings into real estate believing well intended but nonsensical government assurances of support to an ever increasing housing market. As is typical with most countries, the Chinese government tries to mask the ravages of inflation by adjusting their public measurement downwards. Doing so conceals the impact it has on households. But when values collapse wiping out the entire family savings for their old age, there will be a terrifying political backlash.

Yet another concern is that the 2008 Lehman bankruptcy marked a plateau in world trade. This has been particularly difficult for China as exports accounted for more than 40% of their GDP. With reduced global trade, China began to lose competitiveness in the market place. Inflation of the money supply in the Chinese economy required higher wages to offset rising prices. In turn, China tried to move into higher value exports by manufacturing more technologically advanced and complicated products. Unfortunately, in the transition, quality suffered and foreign markets began to look for alternatives to Chinese components.

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Good to see I’m not the only one who questions the narrative (see Any of this Sound Familiar?).

Syria Gas Attack: Assad’s Doing…Or False Flag? (Ron Paul)

Just days after the US Administration changed course on Syrian President Assad, saying he could stay, an alleged chemical weapon attack that killed dozens of civilians has been blamed on the Syrian government. Did Assad sign his own death warrant with such an attack…or does some other entity benefit?

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“Sort of like in a divorce case where lawyers are hired, investigators are hired just to find out what the other person is doing from morning until night and then you try to piece it together later on.”

Reports In Unmasking Controversy Were Detailed (Fox)

The intelligence reports at the center of the Susan Rice unmasking controversy were detailed, and almost resembled a private investigator’s file, according to a Republican congressman familiar with the documents. “This is information about their everyday lives,” Rep. Peter King of New York, a member of the House Intelligence committee said. “Sort of like in a divorce case where lawyers are hired, investigators are hired just to find out what the other person is doing from morning until night and then you try to piece it together later on.” On the House Intelligence Committee, only the Republican chairman, Devin Nunes of California, and the ranking Democrat Adam Schiff, also of California, have personally reviewed the intelligence reports. Some members were given broad outlines.

Nunes has consistently stated that the files caused him deep concern because the unmasking went beyond the former national security adviser Mike Flynn, and the information was not related to Moscow. Schiff said in a statement, “I cannot comment on the content of these materials or any other classified documents, and nothing should be inferred from the fact that I am treating classified materials the way they should be treated – by refusing to comment on them. Only the Administration has the power to declassify the information and make it available to the public.” Former National Security Adviser Rice is under scrutiny after allegations she sought to unmask the identities of Trump associates caught up in surveillance – such as phone calls between foreign intelligence targets. Rice denies ever having sought such information for political purposes and has defended her requests as routine.

[..] During his March 20 testimony before the House Intelligence Committee, NSA director Admiral Mike Rogers said only 20 individuals within the agency are authorized to approve those requests. “They receive specific training, there are specific controls put in place in terms of our ability to disseminate information out of the databases associated with U.S. persons,” Rogers said at the time. What it appears to suggest is that the NSA itself agreed that the instances in which Rice requested unmasking warranted that action. FBI Director James Comey was less direct. “I don’t know for sure. As I sit here, surely more, given the nature of the FBI’s work,” he testified.

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What’s a 100 million more or less?

We Are Heading For The Warmest Climate In Half A Billion Years (Conv.)

Carbon dioxide concentrations are heading towards values not seen in the past 200m years. The sun has also been gradually getting stronger over time. Put together, these facts mean the climate may be heading towards warmth not seen in the past half a billion years. A lot has happened on Earth since 500,000,000 BC – continents, oceans and mountain ranges have come and gone, and complex life has evolved and moved from the oceans onto the land and into the air. Most of these changes occur on very long timescales of millions of years or more. However, over the past 150 years global temperatures have increased by about 1ºC, ice caps and glaciers have retreated, polar sea-ice has melted, and sea levels have risen.Some will point out that Earth’s climate has undergone similar changes before. So what’s the big deal?

Scientists can seek to understand past climates by looking at the evidence locked away in rocks, sediments and fossils. What this tells us is that yes, the climate has changed in the past, but the current speed of change is highly unusual. For instance, carbon dioxide hasn’t been added to the atmosphere as rapidly as today for at least the past 66m years. In terms of geological time, 1ºC of global warming isn’t particularly unusual. For much of its history the planet was significantly warmer than today, and in fact more often than not Earth was in what is termed a “greenhouse” climate state. During the last greenhouse state 50m years ago, global average temperatures were 10-15ºC warmer than today, the polar regions were ice-free, palm trees grew on the coast of Antarctica, and alligators and turtles wallowed in swamp-forests in what is now the frozen Canadian Arctic.

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Mar 262017
 
 March 26, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Marion Post Wolcott “Center of town. Woodstock, Vermont. Snowy night” 1940

 

Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)
Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)
What Global Central Bank Normalization Would Look Like (ZH)
Populism: The Phenomenon (Dalio et al)
The Peak Of – Dirty – Cash? (ZH)
Explaining Why White Middle Aged America Is Killing Itself (Worstall)
Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)
Drink and Women – It’s A Culture Thang (DA)
Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)
Trump Marks Greek Independence Day With Ominous Message (AP)
Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)
Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

 

 

Long analysis by Hudson. Trump as Obama’s legacy. And ousting Bernie has left America without a Democratic party, like some self-fulfilling prophecy. (Graph is from another source, but a very good fit)

Will Trump’s Victory Break Up the Democratic Party? (Michael Hudson)

Trump is sufficiently intuitive to proclaim the euro a disaster, and he recommends that Greece leave it. He supports the rising nationalist parties in Britain, France, Italy, Greece and the Netherlands, all of which urge withdrawal from the eurozone – and reconciliation with Russia instead of sanctions. In place of the ill-fated TPP and TTIP, Trump advocates country-by-country trade deals favoring the United States. Toward this end, his designated ambassador to the European Union, Ted Malloch, urges the EU’s breakup. The EU is refusing to accept him as ambassador. At the time this volume is going to press, there is no way of knowing how successful these international reversals will be. What is more clear is what Trump’s political impact will have at home. His victory – or more accurately, Hillary’s resounding loss and the way she lost – has encouraged enormous pressure for a realignment of both parties.

Regardless of what President Trump may achieve vis-à-vis Europe, his actions as celebrity chaos agent may break up U.S. politics across the political spectrum. The Democratic Party has lost its ability to pose as the party of labor and the middle class. Firmly controlled by Wall Street and California billionaires, the Democratic National Committee (DNC) strategy of identity politics encourages any identity except that of wage earners. The candidates backed by the Donor Class have been Blue Dogs pledged to promote Wall Street and neocons urging a New Cold War with Russia. They preferred to lose with Hillary than to win behind Bernie Sanders. So Trump’s electoral victory is their legacy as well as Obama’s. Instead of Trump’s victory dispelling that strategy, the Democrats are doubling down. It is as if identity politics is all they have.

Trying to ride on Barack Obama’s coattails didn’t work. Promising “hope and change,” he won by posing as a transformational president, leading the Democrats to control of the White House, Senate and Congress in 2008. Swept into office by a national reaction against the George Bush’s Oil War in Iraq and the junk-mortgage crisis that left the economy debt-ridden, they had free rein to pass whatever new laws they chose – even a Public Option in health care if they had wanted, or make Wall Street banks absorb the losses from their bad and often fraudulent loans. But it turned out that Obama’s role was to prevent the changes that voters hoped to see, and indeed that the economy needed to recover: financial reform, debt writedowns to bring junk mortgages in line with fair market prices, and throwing crooked bankers in jail.

Obama rescued the banks, not the economy, and turned over the Justice Department and regulatory agencies to his Wall Street campaign contributors. He did not even pull back from war in the Near East, but extended it to Libya and Syria, blundering into the Ukrainian coup as well. Having dashed the hopes of his followers, Obama then praised his chosen successor Hillary Clinton as his “Third Term.” Enjoying this kiss of death, Hillary promised to keep up Obama’s policies. The straw that pushed voters over the edge was when she asked voters, “Aren’t you better off today than you were eight years ago?” Who were they going to believe: their eyes, or Hillary? National income statistics showed that only the top 5% of the population were better off. All the growth in GDP during Obama’s tenure went to them – the Donor Class that had gained control of the Democratic Party leadership. Real incomes have fallen for the remaining 95%.

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Rates still no low enough?

Condo Flippers in Miami-Dade Face The End Of A Bubble (WS)

Miami-Dade’s spectacular condo flipping mania is in turmoil, with sales plunging, inventory-for-sale soaring, and new supply flooding the market. It’s not like Miami hasn’t been through this before. In February, existing home sales of all types fell 10% year-over-year, to 1,835 homes. These sales “do not include Miami’s multi-billion dollar new construction condo market,” the Miami Association of Realtors clarified in its report on March 23. And this new construction market that is not included has become distressed. Sales of single-family homes fell 10% in February, to 881 houses. The report blamed the shortage of properties “in popular price points.” Prices have been rising sharply, and at the price points where people could actually buy a house – below $250,000 – few sellers were playing ball.

Hence a stalling market. Sales of high-priced units rose, but they weren’t enough to pull out the totals. Condo sales fell 10% as well, to 954 units. This time, the report didn’t blame the lack of supply. Instead: “Existing condo sales are competing with a robust new construction market.” At the same time, inventory of existing condos for sale, not including new units, rose 10% to 15,289. At the current sales rate, supply soared 29% to 14 months. This chart by StatFunding shows the plunge in sales and the surge in condos listed for sale. I circled the last five Februaries on the sales line (red). From February 2014 to February 2017, condo sales have plunged 25%. Andrew Stearns, StatFunding’s founder and CEO, calls the resale inventory – the dark green line that has soared 90% since early 2013 – “scary”:

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When ‘normalization’ becomes the scariest idea around.

What Global Central Bank Normalization Would Look Like (ZH)

As a result of countless failures by central banks to normalize monetary policy over the past 7 years, the market – especially bonds and rates – has become openly cynical and outright skeptical regarding the possibility of a successful renormalization of policy by global central banks. After all, Japan has been trying to do that for over 30 years and has yet to succeed; the ECB hiked in 2011 resulting in near collapse of the Eurozone. Ironically, the recent Trumpflation trade – which few expected as a result of the “shocking” Trump election victory – has emerged as the most credible catalyst to prompt inflation not only in the US but around the globe, resulting in two Fed rate hikes in rapid succession.

Still, now that Obamacare repeal has failed, and questions are rising whether Trump will be able to implement his proposed Tax reform, the market has aggressively faded not only the broader Trumpflation trade, but also all of the recent dollar strength since the US election: in short, bets on a “bening” global reflation are rapidly fading, suggesting that the latest push to normalize monetary policy will once again result in failure. And yet, “what if it goes according to plan” this time? That’s the question posed by Barclays’ Christian Keller who notes that, at least for the time being, “The synchronized upswing in the global economy continues, supporting sentiment, which thus far has ignored elevated policy uncertainties. Headline inflation is increasing due to stable oil prices, while core inflation rates are mixed.”

And, assuming nothing changes, this sets the backdrop for monetary policy normalization, albeit at different speeds and modes. Taking this thought experiment one step further, what would happen if indeed this time central banks are successful to renormalize monetary policy without leading to a market crash. In that case, Barclays expects three Fed hikes in 2017 and 2018, respectively. The ECB is likely to taper further in 2018 and to start increasing depo rates in parallel (in 2018). Conveniently, Barclays has created the following chart which lays out what “coordinated global renormalization” would look like. It can serve as a benchmark to those keeping tabs on where various central banks are in the current attempt to restore monetary normalcy.

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Franklin D. Roosevelt, populist.

Populism: The Phenomenon (Dalio et al)

Populism is a political and social phenomenon that arises from the common man, typically not well- educated, being fed up with 1) wealth and opportunity gaps, 2) perceived cultural threats from those with different values in the country and from outsiders, 3) the “establishment elites” in positions of power, and 4) government not working effectively for them. These sentiments lead that constituency to put strong leaders in power. Populist leaders are typically confrontational rather than collaborative and exclusive rather than inclusive. As a result, conflicts typically occur between opposing factions (usually the economic and socially left versus the right), both within the country and between countries. These conflicts typically become progressively more forceful in self- reinforcing ways.

Within countries, conflicts often lead to disorder (e.g., strikes and protests) that prompt stronger reactions and the growing pressure to more forcefully regain order by suppressing the other side. Influencing and, in some cases, controlling the media typically becomes an important aspect of engaging in the conflicts. In some cases, these conflicts have led to civil wars. Such conflicts have led a number of democracies to become dictatorships to bring order to the disorder that results from these conflicts. Between countries, conflicts typically occur because populist leaders’ natures are more confrontational than cooperative and because conflicts with other countries help to unify support for the leadership within their countries.

In other words, populism is a rebellion of the common man against the elites and, to some extent, against the system. The rebellion and the conflict that comes with it occur in varying degrees. Sometimes the system bends with it and sometimes the system breaks. Whether it bends or breaks in response to this rebellion and conflict depends on how flexible and well established the system is. It also seems to depend on how reasonable and respectful of the system the populists who gain power are.

[..] In the period between the two great wars (i.e., the 1920s-30s), most major countries were swept away by populism, and it drove world history more than any other force. The previously mentioned sentiments by the common man put into power populist leaders in all major countries except the United States and the UK (though we’d consider Franklin D. Roosevelt to be a quasi-populist, for reasons described below). Disorder and conflict between the left and the right (e.g., strikes that shut down operations, policies meant to undermine the opposition and the press, etc.) prompted democracies in Italy, Germany, Spain, and Japan to choose dictatorships because collective/inclusive decision making was perceived as tolerance for behaviors that undermined order, so autocratic leaders were given dictatorial powers to gain control.

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The differences are huge. In lots of countries going cashless is not going to fly.

The Peak Of – Dirty – Cash? (ZH)

In several major economies it’s crunch time for the future of cash. Goldman Sachs notes that this is largely policy-driven: tangible steps are being taken to wean economies off cash (e.g. India, Europe); but adds that, at the same time consumer expectations around convenience are rising and enabling technologies have proliferated in the shape of contactless cards, mobile wallets, cryptocurrencies and more. So, they ask, does the decline in cash payments imply the demise of cash? Not necessarily. Technology has been an important catalyst for shrinking cash usage, but it is by no means a new phenomenon. As we wrote in 2012, the first technological step-change in the payments arena was the shift from cash to plastic money, i.e. credit and debit cards, which happened in the 1960s.

There are many parallels to be drawn between that period and the ongoing shift to digital money: an initial period of an increasing number of providers was followed by a consolidation stage that established a few players (Visa and MasterCard primarily) as the industry standards, eventually accelerating the adoption of plastic money. However, the availability of technology alone has not ensured the demise of cash. As the following chart shows, there are several advanced economies in which it is still the dominant mode of payment in volume terms (surprisingly quite a few European countries are in the bottom left quadrant).

Japan is a striking example of this; lots of tech and lots of cash. The US also stands out, and this could at least partly be attributed to the fact that regulators in the US have explicitly stated that the market should manage the shift to digital payments by itself. On the other hand, Scandinavian countries are on the cusp of becoming some of the first cashless societies, as a result of industry-co-ordinated steps and government initiatives. Swish, a payment app developed jointly by the major Swedish banks, has been adopted by nearly half the Swedish population, and is now used to make over nine million payments a month. About 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits and many, especially in rural areas, no longer have ATMs.

In conjunction with that, cash transactions were just c.2% of the value and 20% of the volume of all payments made last year (down from 40% five years ago). Denmark’s move to a cashless society is a deliberate result of policy, with the government removing the obligation for some retailers to accept payment in cash. Without this legislative push, we believe cash is very difficult to disrupt and substitute. After all, it is a free and convenient mode of transacting. So far, the selling point of the most broadly used alternatives to cash (cheques and cards) is greater convenience. But that hasn’t been sufficient to meaningfully reduce the market share of cash in countries outside Scandinavia and Canada.

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Plenty of theories.

Explaining Why White Middle Aged America Is Killing Itself (Worstall)

Back 18 months the team of Anne Case and Angus Deaton (who has since gained the economics Nobel) released a famous paper pointing out that white rural Americans were killing themselves. So much so that expected lifespans were in fact falling such was the rise in middle aged morbidity. That original paper found that the effect was geographically concentrated. And as I remarked at the time that’s a bit of a problem for the causality of that rise in morbidity. For we’ve got rather a lot of migration out of those rural areas. And it’s the better educated doing the leaving. Thus it is possible (no, no one has studied this in enough detail as yet for anyone to know) that the effect found is entirely down to those migration effects.

We know very well that poorer and less educated people are more likely to die in middle age than richer and better educated. So, if all the better educated and thus, in our current society, higher income people move away we will observe a rise in the death rate among the remnant population. Case and Deaton have returned to this subject with a new paper. And they agree that there is some of this compositional effect in their earlier findings: “It is important not to focus on those with less than a high school degree, a group that has grown markedly smaller over time, and is likely to be increasingly negatively selected on health.” And: “.. we note that for age-groups younger than 45, there has been a decline in the fraction of WNHs with only a high school degree, so that selection may be playing some role for the younger groups.”

Excellent, so that intuition of mine about those compositional effects was indeed correct at least in part. However, this new paper then drives a steamroller through my explanation by showing that this rise in morbidity is country-wide among that class and age group, middle aged and less educated whites. Except, well, I’m not quite sure it does. Fortunately, as I said last time, this is such an important result coming from such a well known name that it will be fully investigated. It’s not just going to be either ignored nor accepted at face value either. People will keep picking away at this until the definitive answer is understood.

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Yeah, the idea behind the EU was good. The execution has been terrible though. Celebrate while holding your breath.

Brexit Vote Is ‘Closed Nationalism’ That Belongs In Past, Says Italian PM (G.)

Britain’s decision to leave the EU has been described by the Italian prime minister as “closed nationalism” that belongs in the past during a summit in Rome to celebrate the bloc’s 60th anniversary. In an address at the Orazi and Curiazi Hall of the Capitol in the Piazza del Campidoglio, where the EU was founded six decades ago, Paolo Gentiloni expressed his discomfort with the motives behind the referendum result. He blamed the EU for not responding adequately to the economic crisis of 2008, but said: “That triggered in part of public opinion, unfortunately the majority of public opinion in the United Kingdom, it triggered a crisis of rejection. It brought forward the closed nationalism that we thought has been closed down in the archives.”

The leaders of the 27 member states that will make up the EU after the UK’s departure assembled on Saturday to mark the day on which six nations signed what was to become the Treaty of Rome. They signed a Rome declaration, which offered ringing phrases about peace and unity, and the importance of maintaining the union. “We, the leaders of 27 member states and of EU institutions, take pride in the achievements of the European Union: the construction of European unity is a bold, far-sighted endeavour,” it says. “Sixty years ago, recovering from the tragedy of two world wars, we decided to bond together and rebuild our continent from its ashes.

“We have built a unique union with common institutions and strong values, a community of peace, freedom, democracy, human rights and the rule of law, a major economic power with unparalleled levels of social protection and welfare. “European unity started as the dream of a few, it became the hope of the many. Then Europe became one again. Today, we are united and stronger: hundreds of millions of people across Europe benefit from living in an enlarged union that has overcome the old divides.” The document stipulates that the EU will make progress on a social dimension, building on its citizens’ rights, and that some member states will enhance their cooperation, particularly in the field of defence. The text concludes: “We have united for the better. Europe is our common future.”

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Grains vs grapes. Why Southern Europeans are not big drinkers.

Drink and Women – It’s A Culture Thang (DA)

When it comes to consumables, though, blowing it on drink is not such a southern European thing. On old professor of mine, an expert in the history of booze (among other substances) often observed that Europe is divided into north and south by distinct cultures of intoxication rooted in our prehistory – the grape in the south, the grain in the north, originally the function of geography and climate which in turn determined access to different sources of plant sugar.

It is the grain-fermenting northerners who have traditionally drunk themselves to oblivion, and it is them that felt the teetotal backlash of the protestant reformation, whereas the Mediterranean world used their fermented grape juice more sparingly and even made it “taboo” by ghoulishly turning it into blood in the Christian sacrament. It is said that you can still observe this divide by walking down the main street of any Mediterranean town hosting a Club 18-30 resort in high tourist season. Some might say, therefore, that Jeroen is merely projecting his own cultural inclinations. They don’t call it Dutch courage for nothing.

No, when it comes to consumables, another famous one-line aetiology of the Greek crisis comes to mind: “We ate it together” (”Mazí ta fágame”), is what PASOK grandee Theodoros Pangalos poffered in 2010 in response to the question “where did the money go?”. A succinct description of the workings of clientelism, delivered by a true master of the art. The saying survives and thrives, in large part because it had a grotesque, evocative appeal in light of the speaker’s own well-fed physique, an apparent embodiment of gluttony openly admitting to the sin and beckoning us to join him at the trough. In the popular imagination it conjured up images of the Greek political class, bloated with greed both physical and metaphorical, sharing a well-furnished table with their clients, the ordinary voters.

And although we, too, like to accuse our elites of eating Marie Antoinette’s cake and caviar (or perhaps the Greek pre-crisis equivalent, lobster spaghetti), the most appropriate fare loading down the table would be a cholesterol feast, most likely at Baïraktaris, the legendary Athens kebab house and political hangout. Not the starched white tablecloths of Washington’s Palm Grill, London’s private clubs, or the Michelin-starred chateaux of Gallic political intrigue, but oilcloth and stacks of paper napkins, the great equaliser, where we do indeed tuck in together in large, boisterous groups. You may recall Baïraktaris as the scene of another famous apophthegm, by another regular, former Prime Minister Costas Karamanlis, to the effect that “five pimps run this country”. And that is as far as I will go with the “women” element.

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Bartender, stop serving this man.

Portugal’s Cabral Says Dijsselbloem Resignation Is Best for EU (BBG)

Portugal’s Economy Minister Manuel Caldeira Cabral said Jeroen Dijsselbloem, whose Dutch party lost elections this month, should quit as chairman of the European finance ministers’ group after his comments about the duties of nations getting aid were deemed offensive. “It would be the best thing for Europe and the best thing he could do,” Cabral said in a Bloomberg Television interview from the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. “He just lost an election and I think he should not be trying to blame others for his own failures.” Dijsselbloem is under pressure to resign as leader of the euro area’s finance ministers after a German newspaper cited him saying, “I can’t spend all my money on women and drink and then at the end ask for your help.”

That remark inflamed tensions between stronger economies in the north and weaker nations including Greece, Ireland and Portugal. The Eurogroup chief has said he regrets causing offense, but doesn’t intend to resign. “I don’t think we can let the Eurogroup be divided in that way, and for that reason that person should be out,” Cabral said. “One of the worst things that some European responsibles have done in the past is not being leaders and trying to surpass their own difficulties at home by accusing other countries. This is a way of destroying Europe.”

On the U.K.’s withdrawal from the European Union, Cabral said the bloc must focus on getting good results from negotiations in the next two to five years and then moving on to other issues. He said broader trade pacts should be the goal rather than making Brexit the only thing on the agenda for Europe and the U.K. The EU should focus on trade talks that give serious results and make a priority “of opening to the world, of negotiating with Asia, of being part of this intuitive of One Belt-One Road with China and establishing links with Asia,” he said in the interview.

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Large military parade yesterday in Athens. Fighter jets flying so low car alarms were going off all the time.

Trump Marks Greek Independence Day With Ominous Message (AP)

President Donald Trump has marked Greek Independence Day with a rather ominous message. At a White House reception, Trump said that in the years to come “we don’t know what will be required to defend our freedom.” But he said it will take “great courage, and we will show it.” Greek Independence Day commemorates the start of the 1821 war that led to Greece’s independence after nearly 400 years as part of the Ottoman Empire. It’s celebrated annually on March 25. Trump told the crowd, “I love the Greeks.” He also introduced Greek-American members of the White House staff, including chief of staff Reince Priebus. Trump said Priebus is “really terrific and hard-working,” along with being “one of the top Greeks in the country.”

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“..they were often too scared to pick up their allowance for fear of being detained.”

Syrian Asylum Seekers In UK Forced Into Poverty, Fear Deportation (G.)

Hundreds of Syrian asylum seekers are struggling to survive in the UK, with some facing destitution and others forced into exploitative work because they are afraid of being detained and deported. The Observer has found Syrian asylum seekers working in warehouses, construction sites and garages for as little as £10 a day. Many had stopped signing in with the Home Office after being held in detention centres for months. Hundreds more are living in destitution, reliant on charities for food parcels and clothes. Mike Adamson, chief executive of the British Red Cross, said: “A two-tier system, where Syrian nationals who arrive in the UK as asylum seekers are left vulnerable to exploitation, seems completely at odds with the spirit behind the government’s commitment to offer a safe home to 20,000 Syrian refugees under its resettlement programme.

The Observer interviewed 10 Syrians, all living in limbo because of the Dublin regulation, which means asylum seekers can be sent back to the first EU country they reach. The men were fighting removal to countries including Bulgaria, where Human Rights Watch found asylum seekers being shot at, beaten with weapons by uniformed officials and sent back to Turkey. Several of the men we spoke to were being threatened with removal to Hungary, despite the fact that the Home Office told the Observer that it is not currently returning asylum seekers there. At least 50 Syrians have been removed under the regulation since the start of 2015, prompting some to drop off the radar. Eight of the men interviewed said that they had stopped signing in with immigration authorities because they were afraid of detention and removal. Most had family in the UK and were supporting themselves by working illegally.

[..] The Red Cross said it had seen 1,341 destitute Syrian asylum seekers in Britain last year, up from 1,159 the year before. In South Yorkshire, a quarter of all destitute asylum seekers seen, of all nationalities, said they experienced hunger every day. In nearly half of all the cases seen by the Red Cross, asylum seekers were facing destitution, despite receiving the full £36 a week afforded to them under government rules. The Syrians the Observer interviewed said they were often too scared to pick up their allowance for fear of being detained.

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Return to the desert. It’ll take centuries to refill the aquifer.

Ogallala: What Happens to the US Midwest When the Water’s Gone? (NatGeo)

For the past 60 years, the Ogallala has been pumped out faster than raindrops and snowmelt can seep back into the ground to replenish it, thanks largely to irrigation machinery like the one sleeping nearby. As a result, in parts of western Kansas, the aquifer has declined by more than 60% during that period. In some parts, it is already exhausted. The decline is steady now, dry years or wet. In 2015 rain was exceptionally heavy—50 to 100% above normal. Even so, water levels in the wells dropped again. Wilson’s field report will put the best face on it, noting it was the slowest decline in five years.

Tagging along with Wilson, I am nearing the end of a 5,000-mile journey along the back roads of Ogallala territory, from South Dakota to Texas. My drive has taken me through some of the most productive farmland anywhere, home to at least a $20-billion-a-year industry that grows nearly one-fifth of the United States’ wheat, corn, and beef cattle. It’s also a place facing hard choices: Farmers can reduce consumption of water to further extend the life of the aquifer. Or they can continue on their path toward an end that is already in sight. Some don’t like to frame the dilemma quite so starkly. But if they don’t reduce pumping and the aquifer is drained, food markets will be profoundly affected around the world. In the coming decades this slow-speed crisis will unfold just as the world needs to increase food production by 60%, according to the United Nations, to feed more than nine billion people by mid-century.

The draining of North America’s largest aquifer is playing out in similar ways across the world, as large groundwater basins in Asia, Africa, and the Middle East decline rapidly. Many of these aquifers, including the southern Ogallala, have little ability to recharge. Once their water is gone, they could take thousands of years to refill. “The consequences will be huge,” says Jay Famiglietti, senior water scientist at NASA Jet Propulsion Laboratory and lead researcher on a study using satellites to record changes in the world’s 37 largest aquifers. “We need to sustain groundwater to sustain food production, and we’re not doing it. Is draining the Ogallala the smartest thing for food production in the U.S. and globally? This is the question we need to answer.”

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Mar 062017
 
 March 6, 2017  Posted by at 10:03 am Finance Tagged with: , , , , , , , , , ,  8 Responses »
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Dorothea Lange Negro woman who has never been out of Mississippi July 1936

 

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)
In Praise Of Cash (Aeon)
Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)
Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)
China’s Credit Target Implies Adding Entire German GDP This Year (BBG)
Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)
Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)
Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)
Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)
The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)
Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)
Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)
US Asks Ankara For Steps To Ease Aegean Tension (K.)
Greece Desperate For Growth Strategy As Public Mood Darkens (G.)
Polluted Environments Kill 1.7 Million Children A Year (R.)

 

 

From Australia, but applicable worldwide. Mortgages in housing bubbles are the main engine of money (credit) creation in our economies. Boith governments and banks depend on them for profit, taxes and ultimately survival. Imagine if housing prices halved, the entire construct would collapse. They’ll do anything to keep the game going. And then they will fail.

The Government Doesn’t Actually Want Housing To Be More Affordable (SMH)

The federal government’s problem with making housing more affordable is that it becomes, by definition, cheaper. And that’s not something that the federal government wants to see happen for some very understandable reasons. Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn’t go selfishly claiming pensions later on. That’s when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. So now there are a lot of Australians who have put their retirement eggs in the basket marked “leveraging the hell out of my mortgage to buy more investment properties” for the last couple of decades and who will be therefore disadvantaged if the value of housing drops.

And then there’s pure self interest at work too, since between a third and half of all our representatives have investment properties – the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there’d be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

[..] Will housing become more affordable in Australia? Absolutely! And it could happen one of two ways. This complex web of legislation can be gently and strategically unpicked via careful bipartisan cooperation across our different spheres of government in concert with the private sector in an effort to create a sane, universally beneficial housing system at all levels. Alternatively, we can choose to leave things be until the housing bubble bursts and plunges Australia into a crippling recession. And since this is politics in 2017, we can assume that Plan A is already off the table.

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Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off. The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen.

This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending. Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

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From Thomas Paine to Henry George, the reason for UBI has long been known. Call it ‘ground rent’ or ‘land value tax’. Tax the ownership class, not the workers. ‘Birthright’ may sound strange today, but is it really?

Basic Income Isn’t Just A Nice Idea. It’s A Birthright (G.)

Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood. But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit.

[..] the success of basic income – in both the north and south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all? Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.

Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as an unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen. The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.

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Yeah, output cuts. Sure.

Oil Falls On Lower China Growth Targets, Doubts On Russian Output Curbs (R.)

Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output. But worries over escalating violence in the Middle East put a floor under prices. Brent crude futures dropped 29 cents, or 0.5%, to $55.61 a barrel as of 0638 GMT after settling 1.5% higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.6%, to $53.03 a barrel after closing the previous session up 1.4%. “The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley at Oanda brokerage in Singapore.

China aims to expand its economy by around 6.5% this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday. That is lower than the 6.7% growth achieved last year. China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China’s newly appointed banking regulator vowed on to strengthen supervision of the lending sector. Meanwhile, figures by Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia’s moves to rein in output as part of a pact with oil producers last year. That came as oil prices rose on Friday as the dollar weakened modestly after a speech by Fed Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.

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“China’s great ball of money.”

China’s Credit Target Implies Adding Entire German GDP This Year (BBG)

China’s credit engine will keep humming this year, adding the rough equivalent of Germany’s annual economic output to its already massive stock of total social financing (TSF), according to estimates derived from the nation’s 2017 targets. Adding higher equity market financing and about 5 trillion yuan ($725 billion) worth of local government bond swaps to the official credit growth target of 12%, analysts at UBS see TSF expansion of 14.8% this year. They calculate that’s equal to a whopping 23 trillion yuan, or $3.3 trillion, addition to the amount of total credit already swishing around the world’s second-largest economy. “China’s pace of leverage increase will be slowing, albeit not by that much,” economists led by Hong Kong-based Wang Tao wrote in a report.

“The government’s intention for a still strong pace of credit growth and recent notable tightening in China’s money market and bond market attest to the difficulties facing the PBC in balancing monetary policy.” China’s great ball of money creates a constant headache for policy makers as money flows from asset class to asset class, creating bubbles along the way. It’s a particular dilemma for the People’s Bank of China because it needs new credit to generate the kind of growth its leaders desire – around 6.5% or higher if possible this year. The M2 money supply target was cut to 12% this year from 13% in 2016, while still higher than the 11.3% actual expansion last year.

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So wrong so many times, and still taken serious. You’d almost admire them for it.

Record-Breaking Stocks A Bad Reason For The Fed To Raise Interest Rates (BI)

Federal Reserve officials say their decisions on interest rate policy hinge on the ebb and flow of economic data, not the whims of financial markets. They have repeatedly downplayed the effect of short-term market fluctuations in their policy moves, aimed at maintaining a strong labor market and 2% inflation over the medium term. But the thing about markets is, they don’t really matter until they suddenly do. That may be the case at the moment, with Fed officials suddenly signaling in unison, without major changes in the economic data, that an increase in interest rates is coming this month. Investors accordingly shifted from considering a March hike as rather a long shot to seeing it as a near sure possibility in just two weeks. What changed? The stock market continued to set new records without much underlying economic impetus.

When the Fed released minutes from its end of January meeting, they showed members “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook.” The Fed comments on the broad health of the financial markets all the time, but that kind of focus on stock volatility is less common. Fed Chair Janet Yellen and her Vice Chair Stanley Fischer, both speaking on March 3, appeared to seal the deal for a rate increase at the Fed’s upcoming March 14-15 meeting — with Yellen indicating that a hike is coming barring a drastic disappointment in next week’s February jobs report. Fischer was also was fairly unequivocal. “If there has been a conscious effort to move up our hike expectations I am going to join it,” he told a monetary policy conference in New York, sponsored by the University of Chicago’s Booth School of Business.

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Carswell is the only MP for Ukip. Farage hates him now. But he has some points: “Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve. “

Leaving The EU Is The Start Of A Liberal Insurgency (Carswell)

What is Nigel Farage so cross about? We won the EU referendum, for goodness sake. Since 23 June, I’ve been walking on sunshine. My mood has been a state of Zen-like bliss. Alongside Boris Johnson, David Owen, Gisela Stuart and all of those involved in the official Vote Leave campaign, I spent the referendum arguing that leaving the EU would be an opportunity to make Britain more open, outward-looking and globally competitive. It is becoming increasingly clear to me that this is where Brexit is going to take us. [..] Brexit is often bracketed alongside the election of Donald Trump and the rise of the new radical populist movements in many western countries. But to me the EU referendum result was a safety valve. Trump – or Geert Wilders in the Netherlands – is where you end up when you ignore legitimate public concerns and there isn’t a safety valve.

Throughout history oligarchy has emerged in societies in which power was previously dispersed: in the late Roman republic, and in early modern times in the Venetian and then the Dutch republics. Each time, the emergence of oligarchy was always accompanied by an anti-oligarch insurgent reaction.Many of today’s new radical movements aren’t oligarchs, but an anti-oligarchy insurgency. Trump is no American Caesar about to cross some constitutional Rubicon. Yet such insurgents often ended up unwittingly assisting the oligarchs. In Rome the Gracchi brothers, with their Trump-like concern about cheap migrant labour, caused so much civil strife that an all-powerful emperor seemed a better bet. In Venice, the anti-oligarch rebel Bajamonte launched an unsuccessful coup – and in doing so gave the elite a pretext to create a new, superpowerful executive arm of government, the Council of Ten.

Created to respond to the crisis for six weeks, it ran the republic for the next 600 years. The Dutch anti-oligarch De Witt was so inept, he paved the way for the return of a strong stadtholder, or king. So, too, today. If chaotic, angry insurgents such as France’s Marine Le Pen and the rightwing populist Alternative for Germany party are the alternative, then being governed by remote, unaccountable elites sitting in central banks and Brussels doesn’t seem so unattractive after all. But Brexit isn’t anything like that. It is the beginning of a liberal insurgency. Brexit means that we take back control from the supranational elite. Power can be dispersed outward and downwards. Those who make public policy might once more answer to the public. Cheer up – it might even mean that there is less space for anger in our politics too.

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“Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015…”

Deutsche Bank CEO Cryan Has A New Strategy: Reverse His Old Strategy (BBG)

Deutsche Bank CEO John Cryan tore up his own turnaround plan in an admission that the 17-month-old effort flopped. Germany’s largest bank late Sunday approved measures – most crucially, plans to raise about $8.5 billion in a share sale – that effectively restart what has already been the most turbulent transformation in its recent history. Among the moves: naming two deputy CEOs who may now be positioned to succeed Cryan; selling a piece of the asset-management business and abandoning the sale of the consumer-banking unit, which was the linchpin of the blueprint he scrapped. Speaking on Monday, Cryan said the deputies were installed at his request as the company will focus more on the German market with the reintegration of Postbank, which he said reflects a strong performance by the unit and a changed environment for banks.

Yet the developments underscore how, almost two years after he took over, Deutsche Bank has been unable to plot a course to a more profitable future while seeking to eliminate 9,000 jobs. “We want to move back into modest growth mode, controlled growth,” Cryan said in the interview. “The operating environment in the U.S. but also increasingly in the euro zone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Deutsche Bank fell 5.4% at 9:16 a.m. in Frankfurt trading, the biggest drop more than four weeks. Before today, the shares had rallied 44% in the past six months. Even though they’re being tapped for a capital infusion for the fourth time since 2010, some investors welcomed the developments as a way to end questions about the firm’s financial strength. S

elling a minority stake in the asset-management unit within the next two years and unloading some assets at the investment bank will help raise another 2 billion euros ($2.1 billion) of capital. Deutsche Bank’s last three capital increases raised about €21.7 billion – compared to the current market value of €26.4 billion. Even after a recent rally, the stock is 29% lower than when Cryan took the helm in 2015. “The shareholder dilution is enormous,” said Michael Huenseler, an investor at Assenagon Asset Management, which holds a stake in Deutsche Bank. “But at the same time, this package should end what has been hurting Deutsche Bank for so long: the discussion about the capital situation. Now the bank has to prove that it can be profitable.”

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A boiling cauldron that will keep festering a for a while longer. Italy has a long-standing ownership class that won’t give up easily. Corruption, the mob, the church, secret lodges.

Renzi’s Return Clouded By Probe Into Father, Government Minister (BBG)

Matteo Renzi’s comeback risks being undermined by a judicial investigation into the father of the Italian former prime minister and a government minister. Rome prosecutors on Friday were due to question Tiziano Renzi, 65, over an accusation of influence-peddling, his lawyer said. The elder Renzi is alleged to have obtained promises of monthly sums of money from Alfredo Romeo, a Naples entrepreneur, in return for mediating on his behalf for public works contracts, Italian news agency Ansa reported. The ex-premier’s father has denied any wrongdoing. [..] “If the investigation goes ahead, it will surely hurt Matteo Renzi’s prospects even if he has nothing to do with it,” said Sergio Fabbrini, director of the school of government at Luiss University in Rome. “This is the most critical moment of his political career, he has to find a new strategy.”

Tiziano Renzi’s lawyer Federico Bagattini said in a telephone interview that his client had done nothing illicit. “We deny that he ever asked for anything, that he ever promised he would intervene, and that he ever received any money or any other benefit,” Bagattini said. Tiziano Renzi said Thursday he had nothing to hide. “I have never asked for money. I never took any. Never,” he said in a statement reported by Ansa. [..] The anti-establishment Five Star Movement, which has made denunciations of political corruption one of its main platforms, has seized on the case. It submitted on Thursday a parliamentary vote of no confidence against Sports Minister Luca Lotti, a close ally of Matteo Renzi, which will test the government’s majority.

Lotti is also under investigation in the case for allegedly revealing confidential information, according to Italian news media, a charge he denied in a post on Facebook on Thursday. Five Star “talks of kick-backs, arrests, contracts – all things which I have nothing to do with,” Lotti wrote. The office of Franco Coppi, Lotti’s lawyer, did not respond to an emailed request for comment on Friday. The case is “an atomic bomb on Italian politics,” Five Star co-founder Beppe Grillo, who wants a referendum on Italy’s membership of the euro, wrote on his blog. “When it explodes, no one will be able to find shelter. Today more than ever we need honesty in institutions.”

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It didn’t start yesterday. Western media have been killing off their own credibility for propaganda reasons, for many years.

The Iraq War Stench Lingers Behind Today’s Preoccupation With Fake News (G.)

[..] with trust in the establishment at an all time low, the institutional heft of traditional media companies becomes a liability rather than an asset, enabling Trump to successfully turn the “fake news” label onto his opponents. Much of that goes back to Iraq. “The period of time between 9/11 and the invasion of Iraq represents one of the greatest collapses in the history of the American media,” says Gary Kamiya. “Every branch of the media failed, from daily newspapers, magazines and websites to television networks, cable channels and radio. “Bush administration lies and distortions went unchallenged, or were actively promoted. Fundamental and problematic assumptions about terrorism and the ‘war on terror’ were rarely debated or even discussed. Vital historical context was almost never provided. And it wasn’t just a failure of analysis. With some honourable exceptions, good old-fashioned reporting was also absent.”

Let’s look at the most famous example of how the media was used to make the Iraq war happen. On September 8 2002, the New York Times published a major story by Michael R Gordon and Judith Miller asserting that Iraq had “stepped up its quest for nuclear weapons and … embarked on a worldwide hunt for materials to make an atomic bomb”. The piece cited no named sources whatsoever. Rather, it attributed all its significant claims simply to anonymous US officials – and, by so doing, it helped launder the Bush administration’s talking points, lending a liberal imprimatur to unverified (and totally untrue) claims. When the key members of the Bush administration launched a publicity blitz to make the war happen, they were able to quote the New York Times as evidence: in effect, reacting to newspaper revelations for which they themselves were responsible.

For instance, during a CNN appearance, Condoleeza Rice urged the public to support an invasion on the basis that “we don’t want the smoking gun to be a mushroom cloud”. She’d lifted the phrase directly from Gordon and Miller – who’d taken it from the administration. Elsewhere, Gordon and Miller referred to Iraq’s supposed interest in acquiring high-strength aluminium tubes as an illustration of its nuclear ambitions. Again, the claims came from Bush officials. But when, at the UN General Assembly, Bush told the story, he sounded as if he were repeating a New York Times scoop. A similar circularity defined the propaganda campaign conducted in other countries.

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In case you were still wondering why an entire country and its people are being obliterated.

Saudi Arabia Stealing 65% of Yemen’s Oil in Collaboration with US, Total (AHT)

“63% of Yemen’s crude production is being stolen by Saudi Arabia in cooperation with Mansour Hadi, the fugitive Yemeni president, and his mercenaries,” Mohammad Abdolrahman Sharafeddin told FNA on Tuesday. “Saudi Arabia has set up an oil base in collaboration with the French Total company in the Southern parts of Kharkhir region near the Saudi border province of Najran and is exploiting oil from the wells in the region,” he added. Sharafeddin said that Riyadh is purchasing arms and weapons with the petro dollars stolen from the Yemeni people and supplies them to its mercenaries to kill the Yemenis. Late in last year, another economic expert said Washington and Riyadh had bribed the former Yemeni government to refrain from oil drilling and exploration activities, adding that Yemen has more oil reserves than the entire Persian Gulf region.

“Saudi Arabia has signed a secret agreement with the US to prevent Yemen from utilizing its oil reserves over the past 30 years,” Hassan Ali al-Sanaeri told FNA. “The scientific research and assessments conducted by international drilling companies show that Yemen’s oil reserves are more than the combined reserves of all the Persian Gulf states,” he added. Al-Sanaeri added that Yemen has abundant oil reserves in Ma’rib, al-Jawf, Shabwah and Hadhramaut regions. He noted that a series of secret documents by Wikileaks disclosed that the Riyadh government had set up a committee presided by former Saudi Defense Minister Crown Prince Sultan bin Abdel Aziz. “Former Saudi Foreign Minister Saud al-Faisal and the kingdom’s intelligence chief were also the committee’s members.”

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“If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet..”

Turkey’s Erdogan Compares German Behavior With Nazi Period (R.)

Turkish President Tayyip Erdogan accused Germany on Sunday of “fascist actions” reminiscent of Nazi times in a growing row over the cancellation of political rallies aimed at drumming up support for him among 1.5 million Turkish citizens in Germany. German politicians reacted with shock and anger. German Justice Minister Heiko Maas told broadcaster ARD that Erdogan’s comments were “absurd, disgraceful and outlandish” and designed to provoke a reaction from Berlin. But he cautioned against banning Erdogan from visiting Germany or breaking off diplomatic ties, saying that such moves would push Ankara “straight into the arms of (Russian President Vladmir) Putin, which no one wants”.

The deputy leader of Chancellor Angela Merkel’s Christian Democratic Union (CDU) party said the Turkish president was “reacting like a wilful child that cannot have his way”, while a top leader of the CDU’s Bavarian sister party described Erdogan as the “despot of the Bosphorus” and demanded an apology. German authorities withdrew permission last week for two rallies by Turkish citizens in German cities at which Turkish ministers were to urge a “Yes” vote in a referendum next month on granting Erdogan sweeping new presidential powers. Berlin says the rallies were canceled on security grounds. However, Turkish Economy Minister Nihat Zeybekci spoke at large events in Leverkusen and Cologne on Sunday while protesters stood outside.

The row has further soured relations between the two NATO members amid mounting public outrage in Germany over the arrest in Turkey of a Turkish-German journalist. It has also spurred growing demands for Merkel to produce a more forceful response to Erdogan’s words and actions. A poll conducted for the Bild am Sonntag newspaper showed that 81% of Germans believe that Merkel’s government has been too accommodating with Ankara. Germany, under an agreement signed last year, relies on Turkey to prevent a further flood of migrants from pouring into Europe. The lead article in German news magazine Der Spiegel on Sunday urged Merkel to free herself from the “handcuffs of the migrant deal”.

[..] A defiant Erdogan said he could travel to Germany himself to rally support for the constitutional changes to grant him greater power. “Germany, you have no relation whatsoever to democracy and you should know that your current actions are no different to those of the Nazi period,” Erdogan said at a rally in Istanbul. “If I want to come to Germany, I will, and if you don’t let me in through your doors, if you don’t let me speak, then I will make the world rise to its feet,” he told a separate event.

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And Erdogan will want something in return.

US Asks Ankara For Steps To Ease Aegean Tension (K.)

American officials have urged Ankara to refrain from action that would further escalate tension with fellow NATO member Greece in the Aegean Sea, Kathimerini understands, adding that the issue was raised during the Munich Security Conference last month, as well as during private contacts in Ankara. Sources told Kathimerini that US Secretary of State Rex Tillerson raised the topic with Turkish Foreign Minister Mevlut Cavusoglu on the sidelines of the Munich gathering last month. Assistant Secretary of State John Heffern reportedly asked Turkish officials for steps that will help reduce the recent spike in tensions with Greece.

A few days later, the same sources said, US Ambassador to Ankara John Bass met with Turkey’s Foreign Ministry Undersecretary Umit Yalcin to put pressure in the same direction. Yalcin is said to have attributed the standoffish behavior of the Turkish military to the army’s damaged morale by developments following July’s failed coup attempt. Analysts however say that any autonomy of the Turkish armed forces has been heavily compromised in the wake of the coup. Greek Foreign Minister Nikos Kotzias is expected to travel to Washington for a meeting with Tillerson in the coming days. Talks are to be followed by a telephone conversation between Prime Minister Alexis Tsipras and US President Donald Trump.

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Growth is not possible in Greece today. The entire austerity edifice would have to be reversed.

Greece Desperate For Growth Strategy As Public Mood Darkens (G.)

In navigating the country’s economic collapse, every one of Athens’ post-crisis governments has at some point attempted to change the narrative by diverting attention to development and growth. But the latest shift comes amid evidence that prime minister Alexis Tsipras’s two-party administration has gone a step further, approaching the World Bank for a €3bn loan to finance employment policies and programmes.

The move would highlight the desperation of a government tackling ever-growing poverty rates. Last week, the Cologne Institute for Economic Research said poverty in thrice-bailed out Greece had jumped 40% between 2008 and 2015, by far the biggest leap of any European country. Tsipras has been told he will have to enforce labour market reforms and further pension and income tax cuts if Greece is to realistically achieve a primary surplus of 3.5% – before interest payments are taken into account – once its current rescue programme expires in August 2018. The country faces debt repayments of over €7bn in July and with its coffers near empty would be unable to avert default – and inevitable euro exit – if additional loans weren’t forthcoming.

The prospect of more cuts, when pensions have already been slashed 12 times and some retirees are surviving on little more than €300 a month, has exacerbated the sense of gloom in the eurozone’s weakest member state. “We will have to compromise,” Dragasakis admitted. “Even if such demands are totally irrational,” he said, adding that Greece’s real problem was that it was primarily caught up in an ugly dispute between its lenders over what to do with a debt load close to 180% of GDP. The IMF has projected the pile will reach an “explosive” 275% of output if not relieved – a move that Germany, the biggest provider of bailout funds, refuses steadfastly to agree to. “It is why we have not completed the review,” said Dragasakis of the progress report Athens must conclude to secure further assistance.

The Greek government has been accused of deliberately delaying implementation of reforms. “This government won’t deliver reforms because it doesn’t believe in them,” said the centre-right main opposition leader Kyriakos Mitsotakis at the Delphi forum. As in antiquity, when kings, warriors and philosophers descended on Delphi at times of uncertainty to consult the Pythia, or prophetess, about their future, politicians, policy gurus, economists and academics gather annually at the place once regarded as the centre of the world to debate Greece’s plight. “What we need is a masterplan and a vision to get out of this crisis,” said Nikos Xydakis, the former European affairs minister who is now parliamentary spokesman for the ruling Syriza party. “A masterplan in financial terms but also a vision for a new identity of Greeks once this crisis ends.”

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How mankind gets rid of itself, and can’t help doing it.

Polluted Environments Kill 1.7 Million Children A Year (R.)

A quarter of all global deaths of children under five are due to unhealthy or polluted environments including dirty water and air, second-hand smoke and a lack or adequate hygiene, the World Health Organization (WHO) said on Monday. Such unsanitary and polluted environments can lead to fatal cases of diarrhea, malaria and pneumonia, the WHO said in a report, and kill 1.7 million children a year. “A polluted environment is a deadly one – particularly for young children,” WHO Director-General Margaret Chan said in a statement. “Their developing organs and immune systems, and smaller bodies and airways, make them especially vulnerable to dirty air and water.” In the report – “Inheriting a sustainable world: Atlas on children’s health and the environment” – the WHO said harmful exposure can start in the womb, and then continue if infants and toddlers are exposed to indoor and outdoor air pollution and second-hand smoke.

This increases their childhood risk of pneumonia as well as their lifelong risk of chronic respiratory diseases such as asthma. Air pollution also increases the lifelong risk of heart disease, stroke and cancer, the report said. The report also noted that in households without access to safe water and sanitation, or that are polluted with smoke from unclean fuels such as coal or dung for cooking and heating, children are at higher risk of diarrhea and pneumonia. Children are also exposed to harmful chemicals through food, water, air and products around them, it said. Maria Neira, a WHO expert on public health, said this was a heavy toll, both in terms of deaths and long-term illness and disease rates. She urged governments to do more to make all places safe for children. “Investing in the removal of environmental risks to health, such as improving water quality or using cleaner fuels, will result in massive health benefits,” she said.

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Jan 202017
 
 January 20, 2017  Posted by at 10:02 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Unknown Masterpiece 2016-7

Trump’s Tweets Are Little Different From FDR’s Fireside Chats (MW)
Fortress Washington Braces For Anti-Trump Protests, New Yorkers March (R.)
Executive Actions Ready To Go As Trump Prepares To Take Office (R.)
Mnuchin Says Long-Term Strength of US Dollar Is Important (BBG)
German Opposition Leader Calls For Security Union With Russia, End Of NATO (DW)
The ‘Ever Closer European Union’ Principle Is “Buried And Gone” (MT)
Chinese Growth Slips To 6.7% In 2016, The Slowest For 26 Years (AFP)
China GDP Beats Expectations But Debt Risks Loom (R.)
There’s an Unexplained $9 Billion Gap in India’s Cash Supply (BBG)
Amazon Is Going To Kill More American Jobs Than China Did (MW)
Stiglitz Tells Davos Elite US Should “Get Rid Of Currency” (Black)
US Government Caught Massively Fabricating Student Loan Default Data (ZH)
EU Migration Commissioner Urges NGOs To Manage Funds With Transparency (KTG)

 

 

Nice angle. Circumventing the press is nothing new.

Trump’s Tweets Are Little Different From FDR’s Fireside Chats (MW)

Donald Trump, arguably, has already changed the office of the presidency forever, with his prolific tweets, some of which, at least in the lead-up to his Friday inauguration, have endorsed specific companies, lashed out at impersonations and in some case even laid the groundwork for complex policies. Cabinet appointees have found themselves walking back his remarks with some regularity this week. Some observers embrace the transparency of the unfiltered Trump experienced on Twitter. The public wasn’t ruffled one bit when a newly elected Trump’s staff blew off the protocol for press pool reports and end-of-day signoffs. Trump’s delivery mechanism may be relatively new, but the motivation isn’t.

Circumventing the press, and even the carefully crafted press release, is a presidential tack that can be traced as far back as Franklin Delano Roosevelt’s “fireside chats,” which leveraged the radio medium to deliver Roosevelt directly into American living rooms, said Andrew Card, in an MSNBC interview. Card, White House chief of staff to the second President Bush, also served in the administrations of Ronald Reagan and George H.W. Bush. FDR delivered his first radio address on March 12, 1933, in the middle of the crisis of confidence over the U.S. banking system. The intent? Reassure the public as if the president had stopped by personally. It was only after the broadcast’s relative success that they eventually earned the “fireside chat” familiarity. Trump’s tweets are the president-elect’s way to get closer to Americans, too, said Card. And that’s not without risk. Trump’s words represent “empathy” but don’t always reflect “judgment,” said Card.

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Are they all protesting the same thing? Where were they 8 years ago?

Fortress Washington Braces For Anti-Trump Protests (R.)

Washington turned into a virtual fortress on Thursday ahead of Donald Trump’s presidential inauguration, while thousands of people took to the streets of New York and Washington to express their displeasure with his coming administration. Some 900,000 people, both Trump backers and opponents, are expected to flood Washington for Friday’s inauguration ceremony, according to organizers’ estimates. Events include the swearing-in ceremony on the steps of the U.S. Capitol and a parade to the White House along streets thronged with spectators. The number of planned protests and rallies this year is far above what has been typical at recent presidential inaugurations, with some 30 permits granted in Washington for anti-Trump rallies and sympathy protests planned in cities from Boston to Los Angeles, and outside the U.S. in cities including London and Sydney.

The night before the inauguration, thousands of people turned out in New York for a rally at the Trump International Hotel and Tower, and then marched a few blocks from the Trump Tower where the businessman lives. The rally featured a lineup of politicians, activists and celebrities including Mayor Bill de Blasio and actor Alec Baldwin, who trotted out the Trump parody he performs on “Saturday Night Live.” “Donald Trump may control Washington, but we control our destiny as Americans,” de Blasio said. “We don’t fear the future. We think the future is bright, if the people’s voices are heard.” In Washington, a group made up of hundreds of protesters clashed with police clad in riot gear who used pepper spray against some of the crowd on Thursday night, according to footage on social media. The confrontation occurred outside the National Press Club building, where inside a so-called “DeploraBall” event was being held in support of Trump, the footage showed.


JFK inaugural parade 1961

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Nice detail: “Trump plans on Saturday to visit the headquarters of the CIA in Langley, Virginia…”

Executive Actions Ready To Go As Trump Prepares To Take Office (R.)

Donald Trump is preparing to sign executive actions on his first day in the White House on Friday to take the opening steps to crack down on immigration, build a wall on the U.S.-Mexican border and roll back outgoing President Barack Obama’s policies. Trump, a Republican elected on Nov. 8 to succeed Democrat Obama, arrived in Washington on a military plane with his family a day before he will be sworn in during a ceremony at the U.S. Capitol. Aides said Trump would not wait to wield one of the most powerful tools of his office, the presidential pen, to sign several executive actions that can be implemented without the input of Congress.

“He is committed to not just Day 1, but Day 2, Day 3 of enacting an agenda of real change, and I think that you’re going to see that in the days and weeks to come,” Trump spokesman Sean Spicer said on Thursday, telling reporters to expect activity on Friday, during the weekend and early next week. Trump plans on Saturday to visit the headquarters of the CIA in Langley, Virginia. He has harshly criticized the agency and its outgoing chief, first questioning the CIA’s conclusion that Russia was involved in cyber hacking during the U.S. election campaign, before later accepting the verdict.

Trump also likened U.S. intelligence agencies to Nazi Germany. Trump’s advisers vetted more than 200 potential executive orders for him to consider signing on healthcare, climate policy, immigration, energy and numerous other issues, but it was not clear how many orders he would initially approve, according to a member of the Trump transition team who was not authorized to talk to the press. Signing off on orders puts Trump, who has presided over a sprawling business empire but has never before held public office, in a familiar place similar to the CEO role that made him famous, and will give him some early victories before he has to turn to the lumbering process of getting Congress to pass bills.

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The contradictions people seek don’t appear to exist.

Mnuchin Says Long-Term Strength of US Dollar Is Important (BBG)

Treasury Secretary nominee Steven Mnuchin told lawmakers the long-term strength of the U.S. dollar is important and said President-elect Donald Trump’s comments that the currency was too high weren’t meant as a longer-run policy. The dollar’s “long-term strength – over long periods of time – is important,” Mnuchin said in response to questions at his confirmation hearing Thursday before the Senate Finance Committee in Washington. “The U.S. currency has been the most attractive currency to be in for very, very long periods of time. I think that it’s important and I think you see that now more than ever.” At the same time, he said the greenback is currently “very, very strong, and what you see is people from all over the world wanting to invest in the U.S. currency.”

The Bloomberg Dollar Spot Index extended its gains on Thursday. The currency has appreciated more than 5% since Trump won the Nov. 8 election on expectations he will boost economic growth through tax cuts and spending increases. Trump expressed concern about the dollar’s recent appreciation in an interview with the Wall Street Journal this month, saying the currency was “too strong.” That prompted speculation that his administration might reverse longstanding tradition in the U.S. to support a strong-dollar policy. “When the president-elect made a comment on the U.S. currency, it wasn’t meant to be a long-term comment,” Mnuchin said. “It was meant to be that perhaps in the short term the strength in the currency, as a result of free markets and people wanting to invest here, may have had some negative impacts on our ability in trade.”

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You can’t keep Germany vested against Russia for too long for opaque reasons. History says so.

German Opposition Leader Calls For Security Union With Russia, End Of NATO (DW)

The parliamentary leader of Germany’s largest opposition party has urged the dissolution of the NATO alliance. Her remarks come after US president-elect Donald Trump described it as “obsolete.” German opposition leader Sahra Wagenknecht on Tuesday added her voice to calls to dissolve NATO in the wake of US President-elect Donald Trump’s controversial remarks concerning the military alliance “NATO must be dissolved and replaced by a collective security system including Russia,” Wagenknecht told Germany’s “Funke” media group. Wagenknecht, who leads the opposition Left Party in parliament, added that comments made by the future US president “mercilessly reveal the mistakes and failures of the [German] federal government.”

In an interview published by German tabloid “Bild,” Trump described NATO as an “obsolete” organization. “I said a long time ago that NATO had problems. Number one it was obsolete, because it was designed many, many years ago,” he said. “We’re supposed to protect countries. But a lot of these countries aren’t paying what they’re supposed to be paying, which I think is very unfair to the United States,” Trump added. Germany’s Left Party has previously called for warmer ties with Russia and scrapping the security alliance, measures which appear to be policy concerns for the incoming US administration. The Left Party is Germany’s largest opposition group in parliament, and holds seats in several state legislatures.

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Rutte is smart enough to feel the ghost of the times contradicting everything he ran on in the past, but he wants to use it to remain in power. Pragmatism?! It all plays into the hands of Wilders. 2 months to Dutch elections.

The ‘Ever Closer European Union’ Principle Is “Buried And Gone” (MT)

Dutch Prime Minister Mark Rutte and former European Parliament President Martin Schulz clashed over the strategy to relaunch the Union, illustrating the deep division at Europe’s helm in front of the global audience of the World Economic Forum 19 January. Hundreds of business leaders and political figures attending the Davos forum witnessed how fundamentally disunited Europeans are when they are confronted with challenges and the solutions needed to overcome them. Schulz, who stepped down as president of the European Parliament this week, praised the achievements of the past and the need to push forward EU integration. But Rutte told the Socialists and Democrats (S&D group) MEP to “leave out those romantic ideas”, adding that “that is the fastest way to dismantle Europe”.

Europe needs a “pragmatic approach and to stop lofty speeches”, Rutte said. He called for tangible results on migration, security or the internal market in the effort to create jobs. He even went as far to say that the ‘ever closer union’ principle is “buried and gone”. The ‘ever closer union’ goal is seen as the driving force behind the EU project. It was enshrined in the founding Treaty of Rome that celebrates its 60th anniversary this year. While the Dutchman said that the experiences of Helmut Kohl and François Mitterrand could not be “a model for the future”, Schulz punched back responding he was not a “romantic” but a “German”. He got an applause when he recalled how the emotional ties after World War II brought peace and prosperity to the continent.

The fight between the two started right from the get-go as Rutte insisted more efforts from France and Italy to reform their economies are needed to save Europe. He warned that if countries failed to meet their promises, it would be harder for Northern leaders like him to convince their citizens about the need to tighten their belts. “At the end, this will have a devastating impact on EU integration”, he warned. But Schulz told the Dutch leader to be “very prudent” about dictating to other countries what they should do, as this could further divide the European bloc. He said that it is the European Commission and Council, and not “several member states”, who are responsible for fiscal and macroeconomic recommendations made to national governments.

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Fake news.

Chinese Growth Slips To 6.7% In 2016, The Slowest For 26 Years (AFP)

China’s economy has grown at its slowest rate in more than a quarter-century as Beijing braces itself for an uncertain outlook that could see a trade stand-off with Donald Trump. After a tumultuous start to 2016, the country’s leaders used huge monetary stimulus to steer the world’s number two economy to hit their annual target and also record the first quarterly pick-up in two years. The Asian superpower is a crucial driver of global growth but Beijing is trying to reduce its heavy reliance on exports and state-backed investment and instead focus on domestic consumer spending to drive expansion. However, the transition has proved bumpy, with the crucial manufacturing sector struggling in the face of sagging global demand for its products and excess industrial capacity left over from an infrastructure boom.

This led to the economy growing 6.7% last year, in line with forecasts but down from 6.9% in 2015, and the worst reading since 1990. The government targeted 6.5-7.0%. The October-December increase of 6.8% also marked the first quarterly improvement since the final three months of 2014. The national statistics bureau called the figure a “good start” for the government’s goal of achieving 6.5% annual growth through to 2020. “China’s economy was within a proper range with improved quality and efficiency. However, we should also be aware that the domestic and external conditions are still complicated and severe,” the bureau said in a statement. It added that the coal and steel industries had cut overcapacity, but structural reform should be the “mainline” this year, urging policymakers to focus on “fending off risks” to stability.

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Beats expectations with a 26-year low. Wow.

China GDP Beats Expectations But Debt Risks Loom (R.)

China’s economy grew a faster-than-expected 6.8% in the fourth quarter, boosted by higher government spending and record bank lending, giving it a tailwind heading into what is expected to be a turbulent year. But Beijing’s decision to prioritize its official growth target could exact a high price, as policymakers grapple with financial risks created by an explosive growth in debt. China’s debt to GDP ratio rose to 277% at the end of 2016 from 254% the previous year, with an increasing share of new credit being used to pay debt servicing costs, UBS analysts said in a note. The fourth quarter was the first time in two years that the world’s second-largest economy has shown an uptick in economic growth, but this year it faces further pressure to cool its housing market, the impact of government efforts at structural reforms, and a potentially testy relationship with a new U.S. administration.

“We do not expect this (Q4 GDP) rebound to extend far into 2017, when a slowdown in the property market and steps to address supply shortages in the commodity sector ought to drag again on demand and output,” said Tom Rafferty, regional China manager for the Economist Intelligence Unit. The economy expanded 6.7% in 2016, the National Bureau of Statistics said on Friday, near the middle of the government’s 6.5-7% growth target but still the slowest pace in 26 years. Economists polled by Reuters had expected 6.7% growth for both the fourth quarter and the full year. Housing helped prop up growth again in the fourth quarter, with property investment rising a surprisingly strong 11.1% in December from 5.7% in November, even as house prices showed signs of cooling in some major cities.

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The mayhem is far from over.

There’s an Unexplained $9 Billion Gap in India’s Cash Supply (BBG)

India’s unprecedented ban on high-denomination currency bills has led to a mismatch in cash supply that has flummoxed some economists and data crunchers. Indians withdrew about 600 billion rupees ($9 billion) more than the 9.1 trillion rupees of currency in circulation as of Jan. 13, according to a report submitted by the Reserve Bank of India to a parliamentary panel on Wednesday. A copy of the document was seen by Bloomberg News. “This is usually not the case,” said Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai, who was a director at the RBI from 1993-2006. He added that cash with public should be lower than currency in circulation “but then you don’t have demonetization usually.”

Clarity will emerge only once the central bank reconciles and publishes final figures, he said. The central bank has refused to share the amount of invalidated bills that have been deposited and said on Jan. 5 that it is still counting the notes to eliminate errors. In a shock move late on Nov. 8, Prime Minister Narendra Modi canceled 15.4 trillion rupees of the 17.7 trillion rupees in circulation and pledged to swap the worthless notes with fresh bills. Between Nov. 9 to Jan. 13, the RBI printed about 5.53 trillion rupees of new notes and put in circulation 25,197 million bank notes aggregating 6.78 trillion rupees, taking total currency in circulation to about 9.1 trillion rupees, according to the RBI’s document on Wednesday. As on Jan. 13 the public had withdrawn close to 9.7 trillion rupees from bank counters and cash-dispensing machines, the document said.

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Apples and oranges, but still. Amazon sucks money out of communities. Support your local dealer!

Amazon Is Going To Kill More American Jobs Than China Did (MW)

Amazon.com has been crowing about its plans to create 100,000 American jobs in the next year, but as with other recent job-creation announcements, that figure is meaningless without context. What Amazon won’t tell us is that every job created at Amazon destroys one or two or three others. What Jeff Bezos doesn’t want you to know is that Amazon is going to destroy more American jobs than China ever did. Amazon has revolutionized the way Americans consume. Those who want to shop for everything from books to diapers increasingly go online instead of to the malls. And for about half of those online purchases, the transaction goes through Amazon.

For the consumer, Amazon has brought lower prices and unimaginable convenience. I can buy almost any consumer product I want just by clicking on my phone or computer — or even easier, by just saying: “Alexa: buy me one” — and it will be shipped to my door within days or even hours for free. I can buy books for my Kindle, or music for my phone instantly. I can watch movies or TV shows on demand. But for retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. Or the 4,000 at The Limited. Or the thousands of workers at Sears and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years.

Amazon and other online sellers have decimated some sectors of the retail industry in the past few years. For instance, employment at department stores has plunged by 250,000 (or 14%) since 2012. Employment at clothing and electronics stores is down sharply from the earlier peaks as more sales move online. “Consumers’ affinity for digital shopping felt like it hit a tipping point in Holiday 2014 and has rapidly accelerated this year,” Ken Perkins, the president of Retail Metrics, wrote in a research note in December. And when he says “digital shopping,” he really means Amazon, which has increased its share of online purchases from about 10% five years ago to nearly 40% in the 2016 holiday season. It’s only going to go higher, as Amazon aggressively targets other sectors such as groceries and even restaurants with delivery services for restaurant-prepared meals.

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Important points by Simon Black.

Stiglitz Tells Davos Elite US Should “Get Rid Of Currency” (Black)

half a world away at the World Economic Forum in Davos, Switzerland, Nobel Laureate economist Joseph Stiglitz made remarks earlier this week that the US should “get rid of currency.” He means paper currency, as in the US should not only get rid of $100 bills… but ALL paper currency– 50s, 20s, 10s, 5s, and even 1s. You guessed it. Stiglitz suggests that regular people don’t need paper money, and that it’s only useful for drug dealers, terrorists, tax evaders, and money launders. This thinking is so 20th century, and it’s simply wrong. ISIS is a great example. The US military has literally blown up more than a billion dollars worth of ISIS’s stockpiles of physical cash during airstrikes. But this hasn’t affected their terrorist activities one bit. That’s because the most notorious terrorist group on the planet famously uses both the world’s oldest currency (gold) and the world’s newest currency (Bitcoin).

Professor Stiglitz has likely never been anywhere near a terrorist, so he likely doesn’t have a clue how they conduct financial transactions. Stiglitz also relies on the old claim that cash facilitates illicit activity. Again, this thinking only highlights a Dark Ages mentality. In the today’s world, drug dealers and prostitutes accept credit cards. No matter what you’re selling on a street corner, whether it’s hot dogs or marijuana, there are plenty of solutions (like Stripe, Square, or PayPal) to easily allow anyone to accept credit card payments. But these intellectuals seem stuck in a Pablo Escobar fantasy that drug dealers have entire rooms filled with cash. What Stiglitz, and perhaps many law enforcement agencies, fail to realize is that one of the biggest tools in masking illegal activity is actually Amazon.com. Specifically, Amazon gift cards.

[..] These guys just don’t get it. Cash isn’t about tax evasion or illegal activity. It’s about having a choice. Any rational person who actually looks at the numbers in the banking system has to be concerned. In many parts of the world, banks are pitifully capitalized and EXTREMELY illiquid. This is especially the case in Europe right now where entire nations’ banking systems are teetering on insolvency. In the United States, liquidity is also quite low, and banks play all sorts of accounting games to hide their true financial condition. Plus, never forget that the moment you deposit funds at a bank, it’s no longer YOUR money. It’s the bank’s money. As a depositor, you’re nothing more than an unsecured creditor of the bank, and they have the power to freeze you out of your life’s savings without even giving you a courtesy call. Physical cash provides consumers another option. If you don’t want to keep 100% of your savings tied up in a system that’s rigged against you and has a long history of screwing its customers, you can instead choose to hold physical cash.

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Wonder what the new administration will make of this.

US Government Caught Massively Fabricating Student Loan Default Data (ZH)

Ever since 2012 we have warned that one of the biggest threats arising from the US student loan bubble – which is no longer disputed by anyone except perhaps members of the outgoing administration – is not that it is soaring at an unprecedented pace, that’s obvious for anyone with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government – either on purpose or due to honest miscalculation – was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality. An the WSJ reported overnight “many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed.”

The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed. A spokeswoman for the Education Department said that the problem resulted from a “technical programming error.” And so, the infamous “glitch” strikes again. How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own “fake data.”

According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

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Translation: the EU has no idea, none at all, where its hundreds of millions in taxpayer funds have gone. It’s how the aid industry is set up. And the refugees still suffer for no reason other than profit, politics and greed.

EU Migration Commissioner Urges NGOs To Manage Funds With Transparency (KTG)

EU Migration Commissioner Dimitris Avramopoulos urged non-governmental organizations involved in the care of refugees and migrants to manage funds with more transparency. “NGOs must manage available funds with transparency,” Avramopoulos said on Wednesday and called on international organizations operating in the country “to step up their efforts to provide immediate assistance to those in need in the islands.” Avramopoulos was visiting the hot spot of Moria and the refugee camp of Kara on Lesvos together with Migration Minister Yannis Mouzalas and EU’s official responsible for NGOs funding, Philippe de Broers.

On his part, Mouzalas said “We covered 70% of the needs in the camps with less money than the money received by NGOs and institutional organizations.” Mouzalas added that the European Commission needed to take tight control of the funds given to NGOs for refugees and migrants. “We have asked the European Commission and the DG Echo (i.e. DG EU Humanitarian Aid and Civil Protection)” for tighter control “and we have stated that we can not we control to this money” he said. Criticism against the NGOs and international organizations comes after a bad weather front left thousands of refugees and migrants exposed to extreme weather conditions with heavy snow fall and polar cold.

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Dec 162016
 
 December 16, 2016  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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John Vachon Big Four Cafe, Cairo, Illinois 1940

Obama’s Blunder; Trump’s Gambit (Rickards)
Trump Rally May Not Last Long – Marc Faber (CNBC)
This Stock Rally Is More Hope Than Substance (WSJ)
China, Others are Dumping US Treasurys as Never Before (WS)
The Longer China’s Record M&A Spree Lasts, The Stranger The Deals Get (BBG)
ECB Bond Buying Props Up Oil, Cars, Guns, Drones, Gambling, Handbags (DQ)
EU Agrees Dutch Demands On Ukraine Deal To Avoid ‘Present For Russia’ (R.)
Justin Trudeau: ‘Globalisation Isn’t Working For Ordinary People’ (G.)
Crackdown On Cash Is An Attack On The Poor And A Reward For Banks (Soos)
Why Are the Media Taking the CIA’s Hacking Claims at Face Value? (Nation)
Turkey Has Back-Up Plans If EU Fails To Keep Visa-Free Travel Promises (AFP)
“Without Antibiotics, Essentially You Do Not Have Modern Medicine” (R.)
The Shattering Effect Of Roads On Nature (G.)

 

 

We need more refreshing views like this. Actual thinking people.

Obama’s Blunder; Trump’s Gambit (Rickards)

[..] Russia is a more natural ally of the U.S. than China. Russia is a parliamentary system, albeit with autocratic overtones; China is a Communist dictatorship. Russia has empowered the Orthodox Church in recent decades, while China is officially atheistic. Russia is encouraging population growth while China’s one child policy and sex-selective abortions resulted in the deaths of over twenty million girls. These cultural aspects – elections, Christianity, and family formation – provide Russia with a natural affinity to western nations. Russia is also superior to China militarily despite recent Chinese advances. That makes Russia the more desirable ally in any two-against-one scenario.

The most powerful argument for embracing Russia to checkmate China is energy. The U.S. and Russia are the two largest energy producers in the world. U.S. energy production is set to expand with the support of the Trump administration. Russian production will expand also based in part on initiatives led by Rex Tillerson of Exxon, soon to be Secretary of State. China has few oil and natural gas reserves and relies heavily on dirty forms of coal and some hydropower. The remainder of China’s energy needs is met through imports. An energy alliance between the U.S. and Russia, supported by Saudi Arabia, could leave the Chinese economy and, by extension, the standing of the Communist Party of China, in jeopardy. That threat is enough to insure Chinese compliance with U.S. aims.

An emerging U.S.-Russian entente could also lead to the alleviation of western economic sanctions on Russia. This would open the door to an alliance between Germany and Russia. Those two economies have near perfect complementarity since Germany is technology rich and natural resource poor, while Russia is the opposite. Isolation of Russia is a fool’s errand. Russia is the twelfth largest economy in the world, has the largest landmass of any country in the world, is a nuclear power, has abundant natural resources, and is a fertile destination for direct foreign investment. The Russian culture is highly resistant to outside pressure, but open to outside cooperation. Just as fifty years of U.S. sanctions failed to change Cuban behavior, U.S. sanctions will not change Russian behavior except for the worse.

Engagement, not confrontation is the better course. The new Trump administration gets this. [..] Fortunately it’s not too late to reestablish a balance of power that favors the United States. China is a rising regional hegemon that should be constrained. Russia is a natural ally that should be empowered. The U.S. has blundered in its foreign policy for the past eight years. A new Trump administration has an opportunity to reverse those blunders by building bridges to Russia, and it seems to be moving in that direction.

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“..Ronald Reagan and Herbert Hoover also began their tenures with huge rallies, followed by crashes…”

Trump Rally May Not Last Long – Marc Faber (CNBC)

If President-elect Donald Trump’s rhetoric ends up fueling a trade war with China, it’s the U.S. that will take it on the chin, Marc Faber, the publisher of the Gloom, Boom & Doom report, told CNBC on Friday. “Mr. Trump is not particularly keen on China,” Faber told CNBC’s “Squawk Box” on Friday. “There may be some trade war escalation or trade restrictions with China, which in my view would rather be negative for the U.S. than for China.” Trump has certainly set his sights on China. On the campaign trail, Trump repeatedly accused China of manipulating its currency in order to give its exports an advantage over U.S.-made goods, and he threatened to slap a tariff of up to 45% on Chinese imports.

While China’s yuan has fallen against the U.S. dollar in recent months, policymakers on the mainland have been intervening to support the currency, not weaken it. But Faber, who is also known as Dr. Doom for his usually pessimistic predictions, noted that China wouldn’t be easily cowed. “China does not depend on the U.S. The U.S. is still its largest export destination as a country, but taken together, all the emerging markets are for China much more important,” Faber noted. China exported about $482 billion in goods to the U.S. last year, more than any other country exported to the United States, according to the Office of the United States Trade Representative. The U.S. exported about $116 billion in goods to China in 2015, putting its goods trade deficit $366 billion.

[..] “We have a credit bubble in China, like, by the way, everywhere else in the world. It’s just bigger in China and that, in my view, will have to be deflated,” he said. Dr. Doom also wasn’t trusting Wall Street’s rally since Trump’s election, nothing that Presidents Ronald Reagan and Herbert Hoover also began their tenures with huge rallies, followed by crashes. On Thursday, the Dow Jones rose 59.71 points, or 0.3%, to close at 19,858.24, after climbing at one point to a mere 50 points away from hitting the 20,000 mark. Faber said that the U.S. market was getting toppish. “If you want to be in equities, the U.S. market is now at the most expensive level compared to Europe, Japan and emerging economies it’s ever been,” he said.

Despite Thursday’s gains, “there were more new 12-month lows than new highs.” He wasn’t optimistic on how much further the market can run. “In March 2017, the U.S. bull market will be eight years old. By any standard, this is a very aging bull market. By June 2017, the economic recovery will be eight years old. By any standard, a recovery that is very mature,” he noted. Faber was also pessimistic about the market’s prospects under the Trump administration. “We have to be very careful when we talk about investments. We have a lot of volatility coming toward us. I think that in general people are far too optimistic about the U.S. becoming again a great country,” he said. “I doubt that one man alone can do it.”

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“When you have an adrenaline rush you don’t feel pain. It’s when the adrenaline wears off that you feel it.”

This Stock Rally Is More Hope Than Substance (WSJ)

Janet Yellen may not have an armored horse, but her effect on the bull market looks very like the ineffective stab of a picador. The stock market bull seemed to be badly hurt after the U.S. Federal Reserve chairwoman’s words on Wednesday. The Fed raised interest rates and said policy makers expected three rate increases next year, while Ms. Yellen said the economy is near full capacity and doesn’t need fiscal stimulus—suggesting rates will rise even faster if president-elect Donald Trump goes ahead with promised tax cuts. But after their stumble, stocks regained their feet on Thursday, with the S&P 500 recovering to where it was before Fed Day. A mere picador is never enough to take down a bull.

The true danger to this latest bull run—the Trump rally—comes from itself. The genius of a matador is to wear out the bull by persuading it to keep charging, entrancing the audience in the process. The stock market has been attracted by the flourishes of Mr. Trump, the appealing prospect of tax cuts and infrastructure spending. The question for the next month is whether the bull will be worn out before Mr. Trump even takes office. When markets move a long way very fast, they become vulnerable. Late investors who pile on to little more than momentum have less confidence in their positions. The more momentum builds, the more it hurts if the bull trips and those momentum investors jump off. This market has moved very fast indeed.

The post-election rotation from defensive stocks to economically sensitive cyclical shares has been the biggest of any similar period since the bounce back after the Lehman crash. The 10-year bond’s losses have almost matched the selloff of the 2013 taper tantrum. And the dollar has surged 9% against the yen, taking it to its strongest since 2002 against a basket of currencies. There are plenty of reasons to worry about whether Mr. Trump’s policies will be implemented quickly, or will be as big-league as he has said. So long as those remain worries for another day, the market can keep rising. David Bloom, head of foreign-exchange strategy at HSBC, says investors who missed out on the fast moves in stocks, bonds and the dollar after the election are now being sucked into the trade to avoid missing out. “We’re in a euphoric time,” he said. “When you have an adrenaline rush you don’t feel pain. It’s when the adrenaline wears off that you feel it.”

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We can only imagine where the dollar would be without this mass sell-off.

China, Others are Dumping US Treasurys as Never Before (WS)

All kinds of things are now happening in the world of bonds that haven’t happened before. For example, authorities in China today halted trading for the first time ever in futures contracts of government bonds, after prices had swooned, with the 10-year yield hitting 3.4%. Trading didn’t resume until after the People’s Bank of China injected $22 billion into the short-term money market. What does this turmoil have to do with US Treasurys? China has been dumping them to stave off problems in its own house…. The US Treasury Department released its Treasury International Capital data for October, and what it said about the dynamics of Treasury securities is a doozie of historic proportions. Net “acquisitions” of Treasury bonds & notes by “private” investors amounted to a negative $18.3 billion in October, according to the TIC data.

In other words, “private” foreign investors sold $18.3 billion more than they bought. And “official” foreign investors, which include central banks, dumped a net $45.3 billion in Treasury bonds and notes. Combined, they unloaded $63.5 billion in October. In September, these foreign entities had already dumped a record $76.6 billion. They have now dumped Treasury paper for seven months in a row. Over the past 12 months through October, they unloaded $318.2 billion. A 12-month selling spree in this magnitude has never occurred before. There have been a few months of timid net selling in 2012, and some in 2013, and a few in 2014, but no big deal because the Fed was buying under its QE programs. But then, with QE tapered out of the way, the selling picked up in 2015, and has sharply accelerated in 2016.

This chart (via Trading Economics), going back to the early 1980s, shows just how historic this wholesale dumping (circled in red) of US Treasury bonds and notes by foreign entities has been: The chart is particularly telling: It shows in brutal clarity that foreign buyers funded the $1 trillion-and-over annual deficits during and after the Financial Crisis, with net purchases in several months exceeding $100 billion. The other big buyer was the Fed. But since last year, the world has changed. China, once the largest holder of US Treasurys, has been busy trying to keep a lid on its own financial problems that are threatening to boil over. It’s trying to prop up the yuan. It’s trying furiously to stem rampant capital flight. It’s trying to keep its asset bubbles, particularly in the property sector, from getting bigger and from imploding – all at the same time. And in doing so, it has been selling foreign exchange reserves hand over fist.

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Beijing’s own policies come back to bite it hard. Fully predictable too.

The Longer China’s Record M&A Spree Lasts, The Stranger The Deals Get (BBG)

It’s no wonder the country’s regulators are getting concerned. This month, Chinese agencies including the National Development and Reform Commission said they’re closely watching “irrational” outbound purchases in sectors including entertainment and real estate, without naming specific deals. The heightened scrutiny coincides with a broader government effort to limit capital outflows, posing a risk to global takeover volumes after Chinese firms began rivaling their U.S. counterparts as the biggest buyers of overseas assets this year. For the Wall Street bankers helping to sell Western companies, the changing regulatory environment could make a delicate balance even trickier. Advisers need to court a widening pool of Chinese acquirers while at the same time making sure the companies are savvy enough to complete their deals.

“The M&A landscape has shifted focus to Chinese buyers,” said Brian Gu at JPMorgan Chase, the top-ranked adviser on Chinese outbound acquisitions tracked by Bloomberg this year. “How to solicit credible potential Chinese buyers now becomes an essential part of a pitch for any global sell-side mandates.” More than 360 Chinese companies announced their first cross-border acquisitions in the initial 11 months of this year, with the combined size of the transactions more than doubling from the full year 2015, according to data compiled by Bloomberg. Sifting through those new ranks of Chinese acquirers takes some work. When EQT Partners decided to sell Germany’s EEW Energy from Waste, its bankers at Morgan Stanley arranged for executives to meet potential buyers in Shanghai, Beijing and Hong Kong weeks before it began soliciting bids.

[..] While Chinese policy makers have been supportive of outbound acquisitions that help domestic companies gain foreign technology and strengthen industries seen as important drivers of economic growth, the worry is that some deals are being used as a way to move money offshore or make quick profits by re-listing acquired businesses at higher valuations in China. “Some of these companies invest outside of their core competency because they want to get money out of China, as they see the Chinese yuan will continue to depreciate,” said Christopher Balding, a professor at Peking University’s HSBC Business School in Shenzhen, without naming any specific deals.

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Nice piece of research from Don Quijones. Title is mine, couldn’t help myself.

ECB Bond Buying Props Up Oil, Cars, Guns, Drones, Gambling, Handbags (DQ)

In June 2016, the ECB activated its corporate bond buying program, ostensibly to revive the Eurozone’s stalled economy. The program has been shrouded in secrecy, as the ECB has refused to reveal the identity of most of the companies, divulging only the International Securities Identification Number (ISIN) of the bonds, but not the amounts. The ECB coordinates the overall effort, but the actual buying is done by the national central banks. Now the non-profit Corporate Europe Observatory (CEO) has cracked the code, so to speak: Finding the names via the ISIN code is a simple job. CEO has looked them all up to see what investments the ECB has found worthy of public money. Unfortunately, a lack of transparency at the ECB means the amounts held in bonds of individual corporations are not revealed.

While many pension funds do release this information, it seems that the common national bank for hundreds of millions of European citizens is unable to! Nevertheless, a lot can be learned from the lists… For instance, the fact that Europe’s oil majors have been particularly spoiled, with the ECB splurging on bonds issued by Shell no less than 11 times. The central bank bought bonds from Italian oil company Eni 16 times, Spain’s Repsol six times, Austrian OMV six times, and Total 7 times. Gas companies have also fared remarkably well. When counting the purchase of bonds in Spain, for example, 53% are from companies involved in the natural gas sector. The corresponding number in Italy is an astounding 68%. Also well favored are Europe’s biggest car companies, in particular those from Germany, with Daimler and BMW tied in top spot with 15 purchases apiece. The ECB also bought seven times bonds issued by Volkswagen, despite the reputational and financial fallout from its emissions scandal.

And it bought Renault bonds three times. Other companies on CEO’s list of coddled giants include Thales, a French producer of missiles, rifles, armored vehicles, and military drones, which has been engulfed in a spate of corruption scandals in recent years; France’s three major water corporations, Suèz, Vivendi, and Veolia; Novomatic, an Austrian-based gambling company owned by billionaire Johan Graf; and luxury goods companies like LVMH, producer of Moët & Chandon champagne, Hennessy cognac, and Louis Vuitton women’s handbags. These are just some of the corporations benefiting handsomely from a bond-buying binge that has already reached some €46 billion (as of Nov. 25, 2016). When the ECB buys these bonds, it inflates the bond prices and pushes their yields down, which is the purpose, and it thus lowers the cost of capital for this companies even further. By the end of the program, which is “scheduled” to finish in September, 2017, the ECB is expected to have lavished around €125 billion on them.

But that’s not the worst of it. As we reported in August, the ECB has admitted that it is not only buying already-issued bonds trading in secondary markets, as the public was initially led to believe; it is also buying bonds from companies via so-called “private placements.” These debt sales are not open to the broader market, so there’s no need for a prospectus. Only a small number of institutional investors participate. Private placements are not unusual. What’s new is that the ECB is using them to buy bonds. This was done discreetly, but it was leaked – and the ECB had some explaining to do. The central bank’s new role as “debt-buyer of first resort” raises a whole litany of concerns. It grants the ECB an almost god-like grip over Europe’s financial markets. And according to The Wall Street Journal, Citigroup figured “that bonds eligible for ECB purchases have already outperformed ineligible bonds by roughly 30% since the bond-buying program was announced in March.”

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A Dutch referendum in April voted down the EU association deal with Ukraine. PM Rutte now pretends that with a few minor tweaks it’s acceptable regardless. Rutte will now take it to his parliament for approval, which would overwrite the referendum result. Democracy. They’re handing the entire continent to Wilders and Le Pen on a platter. Oh, and who does Rutte blame for his behavior? You got it, Russia.

EU Agrees Dutch Demands On Ukraine Deal To Avoid ‘Present For Russia’ (R.)

EU leaders agreed on Thursday to additional Dutch demands over a landmark deal establishing closer ties with Ukraine, Maltese Prime Minister Joseph Muscat said. The EU’s so-called association agreement with Ukraine is central to the former Soviet republic’s efforts to move closer to the West. Mass street protests toppled a pro-Russian Ukrainian president in 2014 after he tried to ditch it. The Netherlands is the only EU country that has not ratified the deal, which fosters closer political ties and aims to free up trade between Ukraine and the bloc, after Dutch voters rejected it in a referendum last April. The Hague has asked the EU for additional guarantees to ensure the deal does not lead to EU membership for Ukraine.

Asked if all 28 EU leaders have arrived to a common position on the Dutch demand, Muscat said: “Yes, there is agreement.” Dutch Prime Minister Mark Rutte will now take it to his parliament for approval, which would overwrite the referendum result. Rutte told reporters before the talks that it was crucial to get a united European stance in the face of an emboldened Russia. “Russia is an increasing risk, look what happened in Crimea and eastern Ukraine and rockets being placed between Poland and Lithuania. You cannot, as the Netherlands … break this unity, that is why I’m so motivated to get this done,” he said.

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Justin is trying to make me believe that building pipelines is the way to go towards a “carbon-free economy”. Sure. He’s turning into soundbite man.

Justin Trudeau: ‘Globalisation Isn’t Working For Ordinary People’ (G.)

[..] A silver lining for Trudeau may lie in Trump’s pledge to resurrect plans for TransCanada’s Keystone XL pipeline. When the Obama administration rejected the plan last year, Trudeau said in a statement he was “disappointed” in the decision. When Trudeau called Trump to congratulate him after the election, the two briefly spoke about Keystone, said Trudeau, adding that it remains to be see how the US will move forward with plans for the pipeline. Any reluctance to move forward on climate change south of the border could be a boon for Canadian companies across various sectors, said Trudeau. “I know Canada is well positioned to pick up some of the slack and when people finally realise that it’s a tremendous business opportunity to lead on climate change, Canada will already have a head start.”

[..] Last week’s announcement of a national carbon price is a key part of Trudeau’s environmental policy – one that has been derided by environmentalists for enabling the expansion of fossil fuels, compensated by initiatives that include investments in clean tech and promises to phase out federal subsidies for oil and gas companies. The policy saw Trudeau recently approve a liquefied natural gas project in British Columbia as well as two pipelines that will offer Alberta’s oil sands nearly a million barrels a day in increased capacity. The approvals have sparked broad opposition among environmentalists, some First Nations and several of the communities affected by the planned infrastructure projects. “There is a number of people out there who’ve always [believed] if you stop pipeline, you stop the oil sands,” said Trudeau. “Well, actually as we’ve seen, it doesn’t work that way and what we end up with is much more oil by rail.”[..]

The government’s environmental policy takes a long view on the transition to a carbon-free economy, said Trudeau. “It’s not going to happen in a day, or in a week, but it will happen over years and perhaps a decade or two,” he said. “I know there are people out there extremely passionate about the environment, who don’t think I made the right decision on approving a couple of pipelines. But I think that everyone can see at least what it is we’re trying to do and that we’re consistent with what I’ve always said which is, you protect the environment and you build a strong economy at the same time.” The double-barrelled approach, said Trudeau, echoes his government’s broader effort to address the tensions currently wreaking havoc on the political status quo around the world. “People get that we need jobs, we need a protected environment,” he said. “On the other hand, if people have no jobs, if they have no opportunity, they’re not going to worry about protection of the air and water if they can’t feed their kids.”

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I don’t know that throwing in the drug legalization topic is very relevant. Just ‘hands off!’ should do it.

Crackdown On Cash Is An Attack On The Poor And A Reward For Banks (Soos)

The Coalition government recently announced a taskforce to investigate and recommend ways to deal with the so-called black economy. This primary revolves around business transactions conducted in cash to evade taxes. Other justifications concern the illicit drug trade and welfare fraud. The plan is to clamp down on this aspect of the black economy to make it more difficult for workers, businesses and households to evade tax, boosting taxation revenue. It is estimated the black economy accounts for about 1.5% of GDP or $21bn. There is also speculation that the $100-dollar bill may be removed from circulation. The Coalition government’s explanations seem sensible, with the mass media generally supportive. Yet, there are robust arguments why the Australian public should oppose this move – mostly because the government is trying to deal with problems it created itself.

The drug trade in Australia is thriving and constitutes a considerable portion of the black economy. This illegal trade, however, only exists because the government criminalises it. The primary reason offered is that it prevents the production and consumption of dangerous substances for recreational purposes. It clearly does nothing of the sort. By criminalising drugs, product is manufactured in unregulated and uncertain conditions, leading to vastly inferior quality relative to that in the legal and regulated pharmaceutical industry. Huge monopolistic profits are reaped by drug cartels and those in the supply chain, leading to a significant loss of taxable income. None of this would happen if the drug trade was legalised – and there is growing acceptance that it should be.

In short, the government cannot use the pretext of clamping down on an industry which is presently illegal by claiming the cash transactions facilitates the existence and growth of it when it is the government’s own criminalisation policy which brought it into existence. By legalising, billions of dollars of taxes could be raised through the GST, income tax and externality/sin taxes. Another area of alleged concern is welfare fraud. Recipients of welfare payments can work in the black economy, making a modest income without reporting it. If this were properly reported, welfare payments would be reduced. Again, this is a problem government has itself created. While the government and certain sections of the mass media pretend Australia has an out-of-control welfare system, the facts demonstrate Australia has some of the smallest welfare expenditures relative to GDP, easily the most well-targeted and has the highest “target-efficiency” (each dollar in spending reduces income inequality the most) in the OECD.

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I’d like to ignore this tale (who reads the WaPo anymore), but the Nation has a passable one: “..the CIA has “(1) attempted to overthrow more than 50 governments, most of which were democratically-elected, (2) attempted to suppress a populist or nationalist movement in 20 countries, (3) grossly interfered in democratic elections in at least 30 countries, (4) dropped bombs on the people of more than 30 countries, (5) attempted to assassinate more than 50 foreign leaders.”

Why Are the Media Taking the CIA’s Hacking Claims at Face Value? (Nation)

In 1977, Carl Bernstein published an exposé of a CIA program known as Operation Mockingbird, a covert program involving, according to Bernstein, “more than 400 American journalists who in the past 25 years have secretly carried out assignments for the Central Intelligence Agency.” Bernstein found that in “many instances” CIA documents revealed that “journalists were engaged to perform tasks for the CIA with the consent of the managements of America’s leading news organizations.” Fast-forward to December 2016, and one can see that there isn’t much need for a covert government program these days.

[..] The high-profile anchors and analysts on CNN, CBS, ABC, and NBC who have cited the work of The Washington Post and The New York Times seem to have come down with a bad case of historical amnesia. The CIA, in their telling, is a bulwark of American democracy, not a largely unaccountable, out-of-control behemoth that has often sought to subvert press freedom at home and undermine democratic norms abroad. The columnists, anchors, and commentators who rushed to condemn Trump for not showing due deference to the CIA seem to be unaware that, throughout its history, the agency has been the target of far more astute and credible critics than the president-elect.

In his memoir Present at the Creation, Truman’s Secretary of State Dean Acheson wrote that about the CIA, “I had the gravest forebodings.” Acheson wrote that he had “warned the President that as set up neither he, the National Security Council, nor anyone else would be in a position to know what it was doing or to control it.” Following the Bay of Pigs fiasco, President John F. Kennedy expressed his desire to “to splinter the CIA into a thousand pieces and scatter it to the winds.” The late New York Senator Daniel Patrick Moynihan twice introduced bills, in 1991 and 1995, to abolish the agency and move its functions to the State Department which, as the journalist John Judis has observed, “is what Acheson and his predecessor, George Marshall, had advocated.”

[..] To see what a corrosive effect outside powers can have on democratic processes, one need look no further than the 1996 Russian presidential election, in which Americans like the regime-change theorist Michael McFaul (later US Ambassador to Russia from 2012–14) interfered in order to keep the widely unpopular Boris Yeltsin in power against the wishes of the Russian people. For its part, the CIA has a long history of overthrowing sovereign governments the world over. According to historian William Blum, the CIA has “(1) attempted to overthrow more than 50 governments, most of which were democratically-elected, (2) attempted to suppress a populist or nationalist movement in 20 countries, (3) grossly interfered in democratic elections in at least 30 countries, (4) dropped bombs on the people of more than 30 countries, (5) attempted to assassinate more than 50 foreign leaders.”

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Yada yada

Turkey Has Back-Up Plans If EU Fails To Keep Visa-Free Travel Promises (AFP)

President Recep Tayyip Erdogan said Thursday Turkey had back-up plans if the EU failed to keep its promise over visa-free travel for Turks to the passport-free Schengen zone. Turkey and the EU signed a controversial deal in March, in which Ankara agreed to take back Syrian migrants landing on Greek islands in return for incentives including €3 billion in funds and visa-free travel. “If we do not get the expected outcome regarding the visa issue… if promises are not fulfilled, Turkey will no doubt have a plan B and it will have a plan C,” Erdogan warned during a news conference with his Slovenian counterpart in Ankara.

“We do not have to say ‘yes’ to every decision made about us. The EU has given us nothing so far,” he added, without elaborating. Ties between Brussels and Ankara have been strained since a failed July 15 coup in Turkey. The rocky relationship worsened after the European Parliament voted last month in favour of halting long-stalled membership talks with Turkey over its post-coup crackdown, a non-binding vote which Erdogan branded worthless. Turkey accuses the EU of failing to show enough solidarity after the failed putsch while Brussels has repeatedly urged Turkey to act within the rule of law as it arrests tens of thousands of people suspected of links to coup plotters.

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Horror story.

“Without Antibiotics, Essentially You Do Not Have Modern Medicine” (R.)

For nearly two years, a killer stalked the patients of Providence Alaska Medical Center. It was a bacteria called Acinetobacter baumannii, a common cause of infections in hospitals. This one was different. After a rash of mild cases in early 2011, doctors began seeing highly drug-resistant infections in patients, said Dr Megan Clancy, an infectious-disease specialist at the Anchorage, Alaska, hospital. And the bacteria was attacking more patients than just the severely ill ones who are the usual victims of drug-resistant “superbugs.” Clancy took emergency measures. Infected patients were isolated. Staff and visitors had to adhere to strict hand-washing and other infection-control protocols. Furniture and equipment were scrubbed to remove a microbe that can stubbornly persist on all sorts of surfaces.

Clancy also contacted outside researchers for help. They found that a strain of the bacteria had acquired a rare combination of traits. Bacteria typically are either highly resistant to drugs or highly virulent. This strain was both. Doctors quickly burned through the antibiotics used as the second and third lines of defense against superbugs. This strain shook them off. “When you start running out of medications, it gets pretty desperate,” Clancy said. Eventually, they turned to colistin. This powerful antibiotic was largely abandoned in the 1960s for its toxic side effects. Out of necessity, it has become in recent years a weapon of last resort against the worsening superbug scourge.

But in some of the Alaska cases, even colistin didn’t work. For public health officials, that’s the nightmare scenario. “It’s the worst of all possible worlds: You have a bacteria that is good at establishing infection, and it can’t be treated with antibiotics,” said Dr Robert Clifford, a microbiologist at the Walter Reed Army Institute of Research who studied the outbreak.

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Needs much more attention. This is how we kill the living world.

The Shattering Effect Of Roads On Nature (G.)

Rampant road building has shattered the Earth’s land into 600,000 fragments, most of which are too tiny to support significant wildlife, a new study has revealed. The researchers warn roadless areas are disappearing and that urgent action is needed to protect these last wildernesses, which help provide vital natural services to humanity such as clean water and air. The impact of roads extends far beyond the roads themselves, the scientists said, by enabling forest destruction, pollution, the splintering of animal populations and the introduction of deadly pests. New roads also pave the way to further exploitation by humans, such as poaching or mining, and new infrastructure.

An international team of researchers analysed open-access maps of 36m km of road and found that over half of the 600,000 fragments of land in between roads are very small – less than 1km2. A mere 7% are bigger than 100km2, equivalent to a square area just 10km by 10km. Furthermore, only a third of the roadless areas were truly wild, with the rest affected by farming or people. The last remaining large roadless areas are rainforests in the Amazon and Indonesia and the tundra and forests in the north of Russia and Canada. Virtually all of western Europe, the eastern US and Japan have no areas at all that are unaffected by roads. The scientists considered that land up to a kilometre on each side of a road was affected, which they believe is a conservative estimate.

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