Nov 262017
 


Gallica Great Paris Flood 1910

 

The World’s Twin Asset Bubbles Could Collapse Under Their Own Weight (Filia)
Atlas Stumbles – Inequality And Macroeconomics At A Crossroads (DDMB)
Europeans Still Love Paying Cash, Even if They Don’t Know It (BBG)
Echoes of Weimar Republic as Germans Lose Knack Of Coalition-Building (G.)
EU Demands In Next Round Of Talks Set To Enrage Cabinet Brexiteers (Ind.)
Catalan Leader Doubles Down on Independence Pledge (BBG)
The End of the Age of Benevolence (Marion)
Greeks Cutting Down On Food Due To Overtaxation (K.)
Libya Navy Says Over 30 Migrants Dead, 200 Rescued Off Coast (AFP)
Mexico’s Vast New Ocean Reserve To Protect ‘Galapagos of North America’ (G.)

 

 

Very interesting transcript of a MacroVoices talk with fund manager Francesco Filia. It doesn’t really fit into the Debt Rattle format, so go to Zero Hedge to read it all.

The World’s Twin Asset Bubbles Could Collapse Under Their Own Weight (Filia)

I think the equity bubble is quite uncontroversial, is quite unambiguous. There are a lot of different valuation metrics for those that care to look into them. They’ve been valid for over a hundred years of modern financial markets. And this time is no different in that respect. There are the usual metrics that the valuation guys are looking at, like financial assets to disposable income that shows that this market is way more expensive than at any point in history including the big dot com bubble and the Lehman moment in 2007-2008. But there are other metrics like the Buffett Indicator (market cap on GDP), the median debt on total assets, the corporate debt to GDP, the price on sales, the price to book, enterprise value on sales, enterprise value on EBITDA – there are a number of different metrics. They all convene that this is a market bubble that has not been seen before in history.

But we at Fasanara, we developed our own indicator just to try to add something to what was available already. And we started with one of the most famous of all the indicators in this respect, which is the Shiller adjusted PE ratio, or the CAPE ratio. This is the most famous of them. Professor Shiller got a Nobel Prize in 2013 for it. And for his studies on market inefficiencies and for the ability to infer future expected returns from valuation metrics such as the Shiller PE. And, based on the Shiller PE, what it does is simply to compare current prices to not spot earnings of foreign earnings, but a more reliable measure of the average of the last ten years and adjusted for inflation. So the average of the last ten years of real earnings. And on the basis of this index, we find out that the market is as expensive and just a little bit less expensive than it was in 1929 during the Great Depression, the peak of the market before the biggest collapse in equity prices ever seen, and the year 2000. So just slightly cheaper than the year 2000.

What we do is an evolution of the Hussman PE ratio (which is taken from the Shiller ratio) which is to compare – kind of putting all in the basket. So we put the peak earnings as opposed to average earnings, and for peak earnings we really mean the peak. We take the two top quarters over the last 40 quarters. So we cannot really be seen as being any more generous to the current markets, we take the two peak quarters of the last 40 quarters. And then what we do is we compare these peak earnings to potential growth, or trend growth. Because the point here is that what you pay in terms of stocks, should compare, not just to the past or the earnings of proposition, but also to the overall economy generally. Because if the overall economy has a lower potential growth you should be expecting to be able to pay less in terms of multiples than otherwise. The overall economy has a big correlation to earnings and to profit margins, so you should expect the potential growth rate of the economy to be quite relevant when it comes to PE multiples.

There can be a catalyst. Or there can be no catalyst. If you talk about catalysts, I could argue that can be inflation, for example. At the moment, we have seen that inflation resurfaced. We have seen some tightness in the job market. It has not translated yet into wages growth and therefore inflation. But we could just be about to see that. And, in that case, rates would rise and they would provoke as a catalyst the kind of downfall that we expect. Or the catalyst could be political. A lot of quantitative easing is being created and it is benefiting only the top 1% of the population. And it is resulting in this so-called income inequality concept.

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“Crap in, crap out? That’s how we make policy?”

Atlas Stumbles – Inequality And Macroeconomics At A Crossroads (DDMB)

Here’s a news flash: “We don’t want a boom-bust situation.” If you’ll pardon the cynicism, Janet Yellen has chosen now, the twilight of her time at the Fed to discover the words and wisdom of Ludwig Von Mises, father of the Austrian economic school of thought, detractor of the perils of malinvestment? Now?? More to the point, it’s a real trick to not want something we’ve had for over 30 years. As for being flummoxed on stubbornly low inflation, as Yellen contends, that in 2017 inflation is “more of a mystery” than ever, allow an outtake from Fed Up to shed some light. For the record, Janet Yellen was in attendance at the 2014 Federal Open Market Committee (FOMC) meeting at which the following scene took place.

“Anything but bashful at his first FOMC meeting, Governor (Stanley) Fischer asked why the Fed relied on the core personal consumption expenditure (PCE) measure of inflation. Fischer said he lived his life by the Consumer Price Index (CPI), as did his children. In his opinion, the only realistic measures of inflation were the CPI and the Dallas Fed Trimmed Mean PCE. (I bet Fisher got a kick out of that, since this relatively young metric had been nurtured under his leadership.) One brave Fed staffer explained that the models the Fed used to set interest rates wouldn’t function if they didn’t use PCE. The no-nonsense Bullard jumped in. “Let me get this straight,” Bullard said, according to a Fed official who was present. “Crap in, crap out? That’s how we make policy?” It’s the model. It’s broken and it has been for years. Stop using it. Mystery solved. Next?

On this Fed Meeting Minutes Wednesday, now that we can safely speak of the end of the Yellen (Greenspan, Bernanke) mega-era, could we please petition Jay Powell and the new regime to stop doctoring the minutes from FOMC meetings in an effort to herald honest and true ‘transparency’ in future Fed communique? After all, it was Yellen herself who brazenly called for manipulating the minutes, in recorded Fed transcripts, no less. She had this to say at the December 2008 meeting at which policymakers voted to take the fed funds rate to the zero bound: “We could also consider using the FOMC minutes to provide quantitative information on our expectations.” Could ‘we’ not instead?

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What you call a leading title. Of course they know. Cashless doesn’t work in Germany at all. Think that’s just some weird coincidence?

Europeans Still Love Paying Cash, Even if They Don’t Know It (BBG)

Digital currencies may be getting all the buzz these days, but notes and coins still reign supreme in most of Europe. Cash made up around 79% of everyday payments across the euro area last year, according to a ECB study. Almost a quarter of consumers also kept some cash at home as a precaution, and 20% said they had a high-denomination note – €200 ($237) or €500 – in their possession in the year before the survey was conducted. As the study notes, the results “challenge the perception that cash is rapidly being replaced by cashless means of payment.” The picture differs across the 19 member states though. Cash is most dominant in southern Europe, Germany, Austria and Slovenia, where it in accounts for 80% of all payment transactions at point-of-sale.

That figures drops to 45-54% in the Netherlands, Estonia and Finland. The study also found that many people don’t actually know their own payment habits. When asked how they prefer to pay, a larger share of respondents said card, not cash. That may be because nearly two-thirds of all transactions are below €15, the report said. Purchases of coffee and lottery tickets don’t stick in the mind as much as, say, a new pair of shoes. The experience of some countries shows how things can change though. While contactless cards accounted for just 1% of payments across the euro area in 2016, the figure was almost 10% for the tech-savvy Netherlands. The authors of the study say that the small size of contactless payments – 81% of transactions are below €25 – give the technology great potential.

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Power blocks fall apart all over. Germany better be careful. Merkel’s wounded, and she’s all they’ve known for 12 years.

Echoes of Weimar Republic as Germans Lose Knack Of Coalition-Building (G.)

For years, German politics were both mocked and admired for being too uneventful to the point of tedium. Only recently the lack of drama inside the reconstructed Reichstag’s circular plenary chamber led to calls for a more confrontational, Westminster-style approach. But as old geopolitical certainties have crumbled over the past 18 months, Berlin’s consensual, unexcitable style of policymaking has won new admirers. The collapse of talks to form the next coalition government have exposed Angela Merkel’s diminished authority. Many are now beginning to wonder if the division wrought on Britain and the US by Brexit and Donald Trump has also descended on Europe’s biggest economy.

With Merkel’s last coalition partners, the Social Democratic party (SPD) and the Free Democrats (FDP), more eager on parliamentary opposition than on government posts, and an already ultra-oppositional Alternative für Deutschland hoping to receive a further boost from the political standstill, commentators in Germany have started to evoke the darkest days of the Weimar Republic, when short-lived minority governments ruled by emergency decrees. “Like in Weimar, the federal republic is now a multiparty system in which extreme parties have begun to paralyse the working of the parliamentary democracy,” wrote Stephen Szabo, an expert on US-German relations.

“Germany’s obsession with stability was largely a result of reforms aimed at avoiding the mistakes of the Weimar Republic,” said Anthony Glees, a historian at the University of Buckingham. “In spite of a proportional vote system, a 5% threshold for smaller parties guaranteed that postwar Germany was for decades a two-party state, where the power would lie safely in the centre.” With polls for possible fresh elections next year predicting that both Merkel’s Christian Democratic Union and the SDP could drop below 30% while support for the FDP, the AfD, the Greens and the Left party continues to grow, Glees said, “that system is now biting Germany in the leg”.

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A bitter divorce lurks.

EU Demands In Next Round Of Talks Set To Enrage Cabinet Brexiteers (Ind.)

EU negotiators are already laying the groundwork to hit the UK with demands in the next stage of Brexit talks that are unacceptable to key figures in Theresa May’s Cabinet, The Independent can reveal. Leaked documents show chief EU negotiator Michel Barnier wants to make giving the UK a good transition deal conditional on Britain’s “automatic” acceptance of new Brussels regulations during the likely two-year period after March 2019. The plan, set out to EU leaders behind closed doors, would leave the UK with no say over rules it accepts during the transition and is likely to enrage Brexiteers in the Cabinet like Boris Johnson, Michael Gove and Liam Fox, who are determined 2019 should be the last year Britain takes new rules from Brussels.

[..] The papers consist of a presentation, drawn up by Mr Barnier for the EU27’s representatives, in which he says any UK transition out of the EU must involve the “automatic application in the UK of new EU rules post-30 March 2019”. The chief negotiator is clear Britain would have “no institutional rights, no presence in the institutions” and “no voting rights” under his plan, meaning the UK would end up following rules made in the interests of the remaining member states and even incorporating them into British law with no control of how they are formed. Any potential conflict over the transition has yet to surface because the EU has said it will not discuss future arrangements on that or trade until the three withdrawal issues have made “sufficient progress”. But the leak shows the direction the bloc is taking behind the scenes and indicates probable obstacles to agreement in future rounds of talks.

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Will Rajoy ban the independence parties altogether?

Catalan Leader Doubles Down on Independence Pledge (BBG)

Ousted Catalan President Carles Puigdemont pitched his candidacy ahead of next month’s regional election, doubling down on his pledge to make the region an independent state. Puigdemont, who maintains he’s the legitimate regional president after being sacked by the central government, will lead a new platform under the banner of Together for Catalonia. He said on Saturday a victory at the polls on Dec. 21 would serve to ratify his mandate and send a signal to the European Union, which has repeatedly sided with the government of Mariano Rajoy against unilateral attempts for independence. “The people of Catalonia have shown the world we have the capacity and the will to become an independent state,” Puigdemont told an audience in Bruges, Belgium, where he’s been staying since declaring independence last month.

“On Dec. 21, we must ratify that.” The independence movement is trying to reshape its message after the Rajoy administration invoked unprecedented constitutional powers to oust the regional government and take direct control of the wealthy region. The Madrid government acted after the ill-fated independence declaration that led thousands of local companies move their registered address. Puigdemont remains in Belgium awaiting a court decision to execute a European arrest order from a Spanish judge on charges of rebellion that could see him jailed for as long as 30 years. He blamed authorities in Madrid for limiting his ability to campaign. Rajoy’s administration has accused him of fleeing the nation to escape legal responsibilities.

Catalonia Deputy President Oriol Junqueras and half the ousted regional cabinet remain in prison, pending trial on the same charges unless a judge opts to release them. The question remains whether they’ll be able to campaign if the Supreme Court, which is handling the case, finds sufficient grounds to order their release while the investigation continues.

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“..we have reached peak denial in our civilization and whether we like it or not reality is about to make a come back.”

The End of the Age of Benevolence (Marion)

Some evenings I sit on the sofa in the family room with my teenage daughter and watch a TV program with her. I leave the choice of the show to her, it matters little to me, and when she finds something she likes she sits next to me, puts her head on my shoulder, and snuggles up for the hour it takes to watch whatever it is she’s chosen. It’s our time. Occasionally we’ll sneak in another twenty or thirty minutes to the objection of her mother but I like my time with her so I put up with the raised eyebrows and the, “She’s got school tomorrow,” scoldings. It’s important to me that she knows I love her, that I want to spend time with her and that she feels safe when she is with me. Someday, when she is a grown woman I want her to find a man that will take care of her and protect her like I do. I expect no less from a suitor and neither should she.

There will be women who read this who will object to my stance. They will say, “She doesn’t need a man to feel safe or validated or content,” but I would disagree. When she gets older she’ll need a good man, not just any man, and that’s as true today as much as it was ten years, twenty years, fifty years, one hundred years and even one thousand years ago. And it will become even more so as time goes on. Indeed, we have reached peak denial in our civilization and whether we like it or not reality is about to make a come back. The freedom that we have enjoyed in the west and the modern democracies that have sprung forth from our evolving and enlightened philosophies over the past few hundred years are not a given. Granted, they are preferable outcomes given our natural state but politically speaking they are an anomaly in the history of mankind and not the norm.

As such, democracy and the systems, social structures and institutions that have grown up around them are grossly misunderstood by the vast majority of the western world. Most of the people living in the west today have been raised to believe that democracy is a moral system of governance and that it is our gift to the rest of mankind. But democracy is not an inherently moral system nor is it a guarantor of linear, progressive political growth. At its root democracy is quite simple. It is the exercise of political power by the majority over the minority. It is the power to choose in matters of politics. This, of course, begs the question: to choose what? Since choices in general (and political ones are no exception) can be either good or bad, in this case, both for the individual and the body politic, then it follows that democracy is neither.

It is nothing more than a tool for decision making where the majority holds the power to make decisions that affect everyone, either for better or for worse. Democracy is, therefore, a reflection of the character of the people who exercise it. Additionally, democracy is also the use of soft force. That is, the minority bends to the will of the majority on political matters and the apparatus of the state is responsible for carrying out its demands. The minority consents, willingly or unwillingly not because violence is present but because, by the state’s presence, it is implied. More importantly, though, democracy is a luxury that is preceded by benevolence but does not necessarily guarantee its continuance or creation if forgotten.

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Tragedy. Entirely unnecessary.

Greeks Cutting Down On Food Due To Overtaxation (K.)

Overtaxation has forced Greeks to cut down on grocery spending, as IRI Hellas researchers have found that supermarket sales in the January-September 2017 period were 6.7% below the level recorded two years earlier and 7.4% below the 2014 level. Consumers have become bargain hunters out of necessity, not only because of the proliferation of special offers at supermarket but also due to the hikes in value-added tax and the special consumption taxes on most everyday products, on top of the direct tax obligations that households have to meet.

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Even more tragic. And just as avoidable.

Libya Navy Says Over 30 Migrants Dead, 200 Rescued Off Coast (AFP)

More than 30 migrants died and 200 were rescued on Saturday after their boats foundered off Libya’s western coast, the Libyan navy said. The coastguard conducted two rescue operations off the city of Garabulli, 60 kilometres (40 miles) east of Tripoli, spokesman Colonel Abu Ajila Abdelbarri said. He added that patrols had found 31 bodies and 60 survivors from one boat, while all 140 passengers had survived in a second boat. “When we arrived at the spot, we found an inflatable dinghy with several people clinging to part of it,” he said. Libyan navy spokesman Ayoub Qassem told AFP that 18 women and three children were among the dead recovered from the sea, while 40 people were missing.

Migrants from Somalia, Ghana, Ethiopia, Nigeria and four from Pakistan were among those rescued. Libyan patrol boat commander Nasser al-Ghammoudi said one of the vessels was three-quarters under water when the coastguard arrived. “We looked for other survivors for more than five hours,” he said. “We were able to rescue one woman after we heard her shouts.” A French NGO, SOS Mediterranee, said later Saturday that it had rescued more than 400 people from a stricken wooden boat in international waters further from the Libyan coast. Other rescue operations were ongoing on Saturday evening, the Italian coastguard told AFP. Italy’s coastguard, which coordinates the rescue effort in international waters, reported that a total of 1,500 people had been saved on Thursday and Friday.

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It’s not that vast, really.

Mexico’s Vast New Ocean Reserve To Protect ‘Galapagos of North America’ (G.)

Mexico’s government has created the largest ocean reserve in North America around a Pacific archipelago regarded as its crown jewel. The measures will help ensure the conservation of marine creatures including whales, giant rays and turtles. The protection zone spans 57,000 sq miles (150,000 sq km) around the Revillagigedo islands, which lie 242 miles (390 km) south-west of the Baja California peninsula. Mexico’s president, Enrique Peña Nieto, announced the decision in a decree that also bans mining and the construction of new hotels on the islands. He said on Saturday that the decree reaffirmed the country’s “commitment to the preservation of the heritage of Mexico and the world”. The four volcanic islands that make up the Revillagigedo archipelago, called the Galapagos of North America, are part of a submerged volcanic mountain range.

The surrounding waters, east of Hawaii, are home to hundreds of species of animals and plants, including rays, humpback whales, sea turtles, lizards and migratory birds. The local ecosystem is central to the lives of some 400 species of fish, sharks and ray that depend on the nutrients drawn up by the ocean. The area is a breeding ground for commercially fished species such as tuna and sierra. However, the various fish populations had suffered, unable to reproduce fast enough for the rate at which they were fished. The creation of a marine reserve is expected to help them to recover, as all fishing activities will now be prohibited. This will be policed by the Mexican navy.

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Nov 122017
 
 November 12, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


Fifth Avenue at 25th Street. New York City 1905

 

“Bitcoin Cash” Quadruples in 2 Days. Bitcoin Crashes by $35 Billion (WS)
Podesta Group “Will Not Exist At The End Of The Year” (ZH)
Global Banks, City of London Raise “Disorderly Brexit” Alarm (DQ)
Forty UK Conservative Lawmakers Ready To Oust PM May (R.)
Theresa May Faces Defeat By MPs Demanding Vote On Final Brexit Deal (G.)
Sack Boris Johnson For Shaming Our Nation, Jeremy Corbyn Tells PM (G.)
German War Reparations ‘Matter Of Honor’ For Poland (R.)
750,000 Protesters Flood Barcelona Demanding Release Of Catalan Leaders (R.)
EU Has Become A ‘Caricature’ Of Its Founding Values – Puidgemont (RT)
Trafficking Laws ‘Target Refugee Aid Workers In EU’ (G.)
Greece’s Middle Incomes Go Under The Knife (K.)

 

 

Safe to say that Wolf Richter is not a big fan.

“Bitcoin Cash” Quadruples in 2 Days. Bitcoin Crashes by $35 Billion (WS)

I’m writing this Saturday night, Pacific Time, and cryptos never rest. By Sunday morning, “Bitcoin Cash” might have soared another $1,000 or crashed by $1,000; and bitcoin might have soared or crashed by another $1,500. Neither would surprise me, the way these things are going. One thing for sure, you’re not watching grass grow. Bitcoin Cash, which was split from bitcoin in August, began surging from $630 on Thursday mid-day Pacific Time. Within 24 hours, it jumped 50% (or by $320) to $950. It then lost steam. But in the wee hours of Saturday morning, it fired up again and soared another $450 to $1,400 by late morning. It then fell off, but Saturday night, it returned to form and spiked to $2,448 at the moment, nearly quadrupling in two days. Here is what the move looks like in US dollars in a seven-day chart (via WorldCoinIndex):

Its market valuation jumped by $30 billion over the two days, from $10.6 billion to $41 billion. I mean why even bother with the stock market. Bitcoin went the opposite way. It plunged from a peak of $7,771 on November 8 mid-morning to $5,519 at this moment, losing $2,252 or 29% in three days. It’s now back where it first had been in late October. Its market valuation plunged by $35 billion from $127 billion to $92 billion. $35 billion is starting to add up, so to speak (via WorldCoinIndex):

Bitcoin ran into an entanglement on November 8, when developers called off a planned software upgrade, SegWit2x. The upgrade was supposed to have improved transactions speeds. This was blamed for the plunge that started on Wednesday. Then the fun focused on Bitcoin Cash. By Friday, as Bitcoin Cash had soared 50% while bitcoin was crashing, it was blamed on traders that were switching from chasing after bitcoin to chasing after Bitcoin Cash. At the time, Joshua Raymond, a director at the foreign-exchange and CFD broker XTB, told Business Insider: “The delay to Segwit2x has damaged confidence amongst bitcoin investors concerning the much-needed resolution to speed up bitcoin’s slow processing speed.

“Everyone was hoping the Segwit2x would address this but unfortunately, the delay due to a lack of consensus on the mechanics has affected confidence. Confidence on transaction speed in Bitcoin has deteriorated significantly in recent months. As Bitcoin Cash enjoys much faster transaction speeds, we have started to see a recycling of positions out of Bitcoin into Bitcoin Cash as a consequence.” Just don’t call cryptos an investment or asset or asset class or currency. While they could be used as currency, in reality, these kinds of violent moves make their use as currency way too risky and nonsensical. What’s left? The blockchain technology, which underpins these cryptos, is free and open source. Currently a lot of smart brains are trying to figure out how to put the technology to work in all kinds of industries.

Some of them will likely succeed. I’m looking forward to the moment when there is a way of transferring money around the world that is universal, convenient, cheap, fast, not subject to violent fluctuations, and 100% reliable. But that moment isn’t here yet, and neither bitcoin nor Bitcoin Cash will have anything to do with it. Instead of being usable currencies, cryptos – CoinMarketCap lists nearly 1,300 of them, with many of them already worthless – are a form of online betting based on a new technology, and they’re subject to different dynamics than classic online betting, but not regulated or forbidden by governments, unlike classic online betting.

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“..both sides of the swamp should probably control themselves in any premature celebrations as this appears to be far from over..”

Podesta Group “Will Not Exist At The End Of The Year” (ZH)

Just three weeks after we reported that special counsel Mueller was targeting lobbying firm Podesta Group. and just two weeks after Tony Podesta resigned from his position at the firm he founded, The Hill reports that Kimberley Fritts, the Podesta Group’s chief executive, told employees on Thursday that the firm would not exist at the end of the year and that they would likely not be paid through the end of November, sources told CNN. Fritts announced her resignation from the top Washington lobbying group after Podesta left the company amid ties to indictments filed in the Russia investigation. Fritts is beginning work on launching a new firm. Her last day at the company Friday created new uncertainty for the Podesta Group after the departure of Podesta on Oct. 30.

Multiple employees who spoke to The Hill said the mood at the firm was mostly optimistic, though they said many of the firm’s dozens of employees could be in limbo as Fritts sets up the new firm and brings Podesta Group talent and clients with her. As a reminder, Mueller is now investigating whether the Podesta Group properly identified to U.S. authorities its foreign work on behalf of a Ukrainian advocacy group in Europe, CNN reported. An NBC report found that the Podesta Group was one of several firms working on Paul Manafort’s public relations campaign for European Centre for a Modern Ukraine, which the Podesta Group claims it thought was a nonpartisan think tank, something which this site reported first last August. And here is one reason why we suspect more than a few on the left are now concerned…

It goes without saying, that Podesta’s brother, John, is arguably one of the top figure in Democratic politics, serving most recently as chief of staff in the Bill Clinton White House and also as the chairman of Hillary Clinton’s 2016 presidential campaign. What happens next to Tony (and perhaps his brother John) is to be determined, but one thing is clear: both sides of the swamp should probably control themselves in any premature celebrations as this appears to be far from over.

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“..the Brexit vote has presented rival European nations and the ECB with a golden opportunity to undermine the UK’s domination of Europe’s financial industry. They won’t let it go to waste.”

Global Banks, City of London Raise “Disorderly Brexit” Alarm (DQ)

For the City of London Corporation, the prospect of a messy Brexit is even more terrifying than it is for many of the global banks it hosts within its coveted Square Mile. The Bank of England has warned that up to 75,000 jobs could be lost in the financial sector following Britain’s departure from the European Union. But it’s not just jobs that are on the line; so, too, is the Square Mile’s role as the world’s most important financial center, not to mention the backbone of the UK economy. In recent months the European Commission and the European Central Bank have redoubled their efforts to compel financial institutions to move at least some of their operations onto the continent. “I have a very clear message to both smaller and larger banks: the clock is ticking,” said Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB.

“No one knows how Brexit will play out, and that’s why all affected banks should prepare themselves with a hard Brexit in mind.” Some banks are already taking action. Goldman has set aside the top eight floors of a 37-story block under construction in Frankfurt which is expected to be ready for occupation in the third quarter of 2019. Just a few months before that, construction work on the bank’s new £350m European headquarters in central London should be completed. Ten days ago, Goldman Sachs CEO Lloyd Blankfein, posted a tweet of an aerial shot of the half-finished construction in London, with the words “expecting/hoping to fill it up, but so much outside our control.” As the head of an organization with alumni at the very top of both the Bank of England and the ECB as well as tentacles that reach out to just about every corner of the old continent, Blankfein is clearly selling Goldman short, if you’ll excuse the pun.

Goldman’s not the only major bank hedging its bets. On Tuesday Germany’s struggling behemoth, Deutsche Bank, announced that it had signed an agreement to occupy at least 469,000 square feet at a site under construction in the City of London. The move comes despite a warning in April that thousands of Deutsche Bank’s UK staff may have to relocate after Brexit. To that end, Deutsche has begun work on a Frankfurt booking center that would take up some of the slack if the German lender was forced to turn its London branch into a subsidiary when Britain leaves the EU.

Most banks would prefer the status quo to continue, with the lion’s share of their operations remaining in London, which already has the physical infrastructure, legal apparatus and friendly political and regulatory culture needed to support the full gamut of global financial services. But the Brexit vote has presented rival European nations and the ECB with a golden opportunity to undermine the UK’s domination of Europe’s financial industry. They won’t let it go to waste.

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It truly is Monty Python by now.

Forty UK Conservative Lawmakers Ready To Oust PM May (R.)

Forty members of parliament from Prime Minister Theresa May’s Conservative Party have agreed to sign a letter of no-confidence in her, the Sunday Times newspaper reported. That is eight short of the number needed to trigger a party leadership contest, the mechanism through which May could be forced from office and replaced by another Conservative. May has been struggling to maintain her authority over her party since a snap election on June 8 which she called thinking she would win by a wide margin but instead resulted in her losing her parliamentary majority. Divided over how to extricate Britain from the European Union and hit by multiple scandals involving ministers, May’s government has failed to assert control over a chaotic political situation that is weakening London’s hand in Brexit talks.

An earlier attempt to unseat May in the wake of her disastrous speech at the annual party conference fizzled out, but many Conservatives remain unhappy with the prime minister’s performance and talk of a leadership contest has not gone away. May has lost two cabinet ministers in as many weeks: Michael Fallon stepped down as defense secretary after becoming implicated in a wider scandal about sexual misconduct in parliament, while Priti Patel resigned as aid minister after she was found to have had secret meetings with top Israeli officials.

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So there’s those who just want her gone, and then there’s the ones who look for a reason.

Theresa May Faces Defeat By MPs Demanding Vote On Final Brexit Deal (G.)

Theresa May faces a devastating Commons defeat over Brexit within weeks if she continues to deny parliament a meaningful vote on the final deal with the EU, Tory and Labour MPs have warned. With the withdrawal bill returning to the Commons on Tuesday, a cross-party group who oppose a hard Brexit and are co-operating on tactics say they believe they have the numbers to defeat the government if they are denied such a vote. While the critical amendments and closest votes are not expected to be taken until next month, Tories who oppose a hard Brexit insist there is no softening of their position and that they are biding their time ready to strike before Christmas. Some Tories say they are even more determined to insist on parliament’s right to veto a bad or no deal because the prime minister appears not to have responded to any of their concerns over recent weeks.

Instead, in what was seen by many as a provocative move, she announced last week that the government had tabled its own amendment that would commit the UK to formally leaving on 29 March 2019, whatever the outcome of negotiations and even if there were no deal. Meanwhile, a secret memo to May written by Boris Johnson and Michael Gove dictating terms for a hard Brexit has emerged. In blunt terms, the pair tell the prime minister to “underline her resolve” to achieve a total break with Brussels, and name 30 June 2021 as the fixed end of Britain’s transition period after leaving the EU in March 2019. The missive will undoubtedly lead critics to say the prime minister is being held hostage by the leading Brexiters. A Commons defeat for May over Brexit, at a time when her government is reeling from the loss of two cabinet ministers in six days – and may lose more – would raise further questions over her ability to survive as prime minister.

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She better be quick then, or she won’t have the job anymore.

Sack Boris Johnson For Shaming Our Nation, Jeremy Corbyn Tells PM (G.)

jeremy Corbyn has fired an extraordinary broadside against Boris Johnson, calling for him to be sacked immediately as foreign secretary for “undermining our country” and “putting our citizens at risk”. The blistering attack – and demand that Theresa May fire him – was delivered exclusively in a statement to the Observer on Saturday night, as pressure mounted on Johnson over his diplomatic blunder in the case of Nazanin Zaghari-Ratcliffe, the British mother imprisoned in Iran. The Labour leader cites a litany of undiplomatic and ill-chosen statements from Johnson since his appointment by May as foreign secretary in July last year. Corbyn accuses him of having a “colonial throwback take on the world”, and of repeatedly “letting our country down”.

It is the mishandling of the “heartbreaking” case of Zaghari-Ratcliffe that persuaded Corbyn to call for his dismissal. His statement ends: “We’ve put up with Johnson embarrassing and undermining our country with his incompetence and colonial throwback views and putting our citizens at risk for long enough. It’s time for him to go.” The intervention places both May and Johnson under renewed pressure after 10 days in which the prime minister has been forced to dismiss defence secretary Sir Michael Fallon for inappropriate behaviour towards women, and the international development secretary, Priti Patel, for conducting a freelance aid policy in the Middle East without informing No 10 or the Foreign Office.

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Get in line.

German War Reparations ‘Matter Of Honor’ For Poland (R.)

Demanding reparations from Germany for its actions in Poland during World War Two is a matter of honor for Warsaw, Jaroslaw Kaczynski, the leader of Polish ruling Law and Justice (PiS) party, said on Saturday. The issue of reparations, revived by Poland’s eurosceptic PiS after decades of improving relations with Germany, could escalate tensions between the two European Union members. In September Polish parliamentary legal experts ruled that Warsaw has the right to demand reparations from Germany, although Poland’s foreign minister indicated that no immediate claim would be made. “The French were paid, Jews were paid, many other nations were paid for the losses they suffered during World War Two. Poles were not,” Kaczynski said.

“It is not only about material funds. It is about our status, our honor … And this is not theater. This is our demand, a totally serious demand,” added Kaczynski, Poland’s de facto leader. The PiS government, deeply distrustful of Germany, has raised calls for wartime compensation in recent months but Foreign Minister Witold Waszczykowski has said further analysis was needed before any claims were lodged. Six million Poles, including three million Polish Jews, were killed during the war, and the capital Warsaw was razed to the ground in 1944 after a failed uprising in which 200,000 civilians died.

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They’ll have to do a lot more demonstrating.

750,000 Protesters Flood Barcelona Demanding Release Of Catalan Leaders (R.)

Hundreds of thousands of Catalan independence supporters clogged one of Barcelona’s main avenues on Saturday to demand the release of separatist leaders held in prison for their roles in the region’s banned drive to split from Spain. Wearing yellow ribbons on their lapels to signify support, they filled the length of the Avenue Marina that runs from the beach to Barcelona’s iconic Sagrada Familia church, while the jailed leaders’ families made speeches. Catalonia’s two main grassroots independence groups called the march, under the slogan “Freedom for the political prisoners,” after their leaders were remanded in custody on charges of sedition last month. The protest is seen as a test of how the independence movement’s support has fared since the Catalan government declared independence on Oct. 27, prompting Spanish Prime Minister Mariano Rajoy to fire its members, dissolve the regional parliament and call new elections for December.

An opinion poll this week showed that pro-independence parties would win the largest share of the vote, though a majority was not assured and question marks remain over ousted regional head Carles Puigdemont’s leadership of the separatist cause. “Look at all the people here,” said 63-year-old Pep Morales. “The independence movement is still going strong.” Barcelona police said about 750,000 people had attended, many from across Catalonia. The protesters carried photos with the faces of those in prison, waved the red-and-yellow striped Catalan independence flag and shone lights from their phones. The Spanish High Court has jailed eight former Catalan government members, along with the leaders of the Catalan National Assembly (ANC) and Omnium Cultural, while investigations continue.

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That’s true in many ways.

EU Has Become A ‘Caricature’ Of Its Founding Values – Puidgemont (RT)

Sacked Catalan leader Carles Puigdemont has lashed out against the European Union (EU) over its response to the Catalan crisis, in which Brussels sided with Madrid in suppressing the independence drive of the region. Puigdemont criticized the EU as a “caricature of what Europe is and of what we want Europe to be,” claiming, there is “no will to help solve the politics of the conflict.” Catalonia staged a regional independence referendum on October 1, amid a massive crackdown by police on voters in which nearly 900 people were injured. Following the ‘yes’ vote, Barcelona attempted to initiate dialogue with the central government, hoping the EU would step in and act as mediator to help defuse tensions.

Leaders of European nations, as well as the EU’s main institutions, sided with the Spanish Prime Minister Mariano Rajoy instead, and refused to recognize Catalonia’s self-determination call, referring to the crisis as an internal Spanish matter. The former Catalan leader sees it as a betrayal of the fundamental “values that took us to constitute Europe.” Puigdemont believes the EU leadership, which he said comprises “four or five governments,” are “probably not the most appropriate to lead the EU.” “What will the EU become in hands of this people?” the former Catalan leader asked, pointing out that he does not want the EU’s leadership to “confuse” traditional European values with “their political and economic interests.”

Just this week, European Commission President Jean-Claude Juncker called on all member nations to fight against separatist tendencies in Europe, apparently in reference to Scotland, Lombardy, Venice and other regions throughout the continent which have expressed strong self-determination ambitions. “Nationalisms are a poison that prevent Europe from working together,” Juncker said Thursday in the Spanish city of Salamanca. “We cannot stay with our arms crossed because it is time for us to do what needs to be done. I say ‘no’ to any form of separatism that weakens Europe and further widens the existing fissures.” [..] “To be treated like a criminal, like a drug-trafficker, like a paedophile, like a serial killer, I think this is abuse,” the Catalan leader lamented. “This isn’t politics, this is using the courts to do politics.”

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The shame of the EU keeps getting bigger and deeper.

Trafficking Laws ‘Target Refugee Aid Workers In EU’ (G.)

Aid workers are being targeted throughout Europe as countries including the UK use laws aimed at traffickers and smugglers to discourage humanitarian activity, a study claims. A six-month investigation by the London-based Institute of Race Relations documented the prosecutions of 45 individual “humanitarian actors” under anti-smuggling or immigration laws in 26 separate actions over the past two years. Examples include a 25-year-old British volunteer with a refugee support group, who last January sought to bring an Albanian mother and two children to the UK in the boot of her car so they could join their husband and father. She was sentenced in March to 14 months in jail, although the sentence was suspended to take into account her “misguided humanitarianism”.

UK law does not distinguish between humanitarian and commercial motives in such prosecutions, but does take such factors into account in sentencing. In Switzerland, a 43-year-old woman known to refugees as Mother Teresa for her work in providing food for those stranded on the Italian side of the border, was sentenced in September to a fine and a suspended 80-day jail term for helping unaccompanied children into the country. In France, British volunteers helping refugees in Calais have frequently been harassed by the authorities. In October 2015, former British soldier Rob Lawrie was arrested at the border for hiding a four-year-old Afghan child in his van in response to her father’s pleas to take her to relatives in Leeds. Lawrie, from West Yorkshire, avoided jail after a French court found him guilty of the lesser charge of endangerment rather than assisting illegal entry.

And in March this year three French and British volunteers with charity Roya Citoyenne were arrested for distributing food to migrants. The 68-page IRR report chronicles a culture of criminalisation in which volunteers for charities and aid groups, attempting to fill the gaps in state provision, are targeted for providing food, shelter and clean water to migrants in informal encampments or on streets. The EU’s border force, Frontex, has accused aid groups including Médecins Sans Frontières of co-operating with migrant traffickers in the Mediterranean. The report criticises senior Frontex officials for “attempts to bully and delegitimise” NGO search and rescue missions in the Mediterranean by accusing aid groups of working with smugglers and encouraging trafficking. The IRR’s vice-chair, Frances Webber, said: “Across the continent, criminal laws designed to target organised smuggling gangs and profiteers are distorted and stretched to fit an anti-refugee, anti-humanitarian agenda, and in the process criminalise decency itself.”

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Disposable income down by 50%. Taxes and social security up 96.8%. The Troika is taxing Greece to death. On purpose. It’ll be a tourist destination only. And a refugee camp.

Greece’s Middle Incomes Go Under The Knife (K.)

The disposable income of Greece’s average earners has been slashed by more than 50% due to overtaxation in recent years, according to the latest data examined by Kathimerini, which also paints a grim picture for the coming years. What’s more, the reduction of the income tax threshold is expected to further impact the disposable income of households. Brussels expects Greece’s primary surplus to beat its target of 3.5% of GDP again next year, rising to 3.9%, and then to 3.7% in 2019. However, the primary surpluses Greece has posted in the last two years are largely due to exorbitant taxes rather the result of growth. Moreover, while the European Commission’s statistics point to a disproportionate increase in taxation in Greece, at a time when the economy was shrinking, the country’s industrialists and political opposition say overtaxation has led to more tax evasion and the failure of the tax system.

Those hardest hit have been freelance professionals, who since 2009 have been subjected to unprecedented raids by the tax office, and more recently by social insurance contribution hikes, resulting in the gradual exhaustion of their income. And high taxes, including property taxes, are the reason why both freelancers and self-employed professionals submitted incomes last year that were 20% lower than their actual earnings. A telling example of overtaxation concerns freelance professionals who own a car and an apartment and earn 50,000 euros a year: In 2009 they had to pay 16,333 euros of their annual income to the tax office and their social security fund, leaving them with a net income of 33,667 euros. Five years later, their clear income dropped by a further 4,344 euros to 29,323.

The situation today is even more dire as the same self-employed professional making 50,000 euros must pay 32,151 euros in taxes and contributions, leaving them with a disposable income of 17,849. Taxes and social security contributions have rocketed by 96.8% since 2009, while compared to 2014 they have risen by 55.5%.

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Nov 092017
 
 November 9, 2017  Posted by at 9:28 am Finance Tagged with: , , , , , , , ,  6 Responses »


Henri Cartier Bresson Madrid 1933

 

How I Sold Out To The Putin-Soros-Murdoch Conspiracy (Steve Keen)
Bill Gates, Jeff Bezos and Warren Buffett Richer Than Poorest Half Of US (G.)
The Middle East Is On The Verge Of New War (SF)
With Saudi Princes Dead, Arrested, King Fahd’s Grandson Flees To… Iran (IT)
Prince Alwaleed Sold His Shares In 21st Century Fox (Abc.au)
It Begins: Pension Bailout Bill To Be Introduced This Week (ZH)
How The Netherlands Became A Tax Haven (SüdD)
FEMA Offers To Airlift Puerto Ricans To Mainland US (CBS)
Catalan Parliament Speaker, 5 MPs Appear In Court On Sedition Charge (G.)
EU Gives Greece Foreclosure Ultimatum (K.)
The Plot Against Greece (K)
UK Will Back Total Ban On Bee-Harming Pesticides (G.)

 

 

“How I sold out to the Putin-Soros-Murdoch conspiracy to destroy Western civilization”

Steve has a sense of humor alright. But the serious note here is that RT is the only place where he can get a chance to discuss the issues he sees as real. The BBC, for one, is not interested.

How I Sold Out To The Putin-Soros-Murdoch Conspiracy (Steve Keen)

I was delighted to find myself in the Top Ten (alright; top 15) of the European Values list of 2,326 “Useful Idiots” appearing regularly on RT shows, and thus legitimizing Vladimir Putin’s attempt to destroy Western civilization as we know it. Why delighted? Because it completes the set of conspiracies to which I can now be accused of belonging. They include: • The Putin Conspiracy, since I am regularly interviewed on Russia Today (and even worse, I now get paid to write for RT!); • The Soros Conspiracy, since my research, has been funded by the Institute for New Economic Thinking (INET) which he established; • The Murdoch Conspiracy, since I appear every week on Sky News Australia with Carson Scott, and I used to get paid by News Ltd to write a weekly column; and • The Alt-Right Conspiracy, since I’ve signed a book contract with Vox Day’s publishing firm Castalia House.

So not only am I a “useful idiot,” I’m a useful idiot for four contradictory conspiracies. Does that make me a double-double agent? No, it makes me someone who’s quadruple pissed off with people who attempt to understand the world from the perspective of conspiracy theories in the first place. I don’t deny the existence of conspiracies: in fact, far from it, because they’re everywhere. What I do deny is the implicit assumption that the conspirators understand the system they’re attempting to manipulate. For example, I’ve heard plenty of conspiracy theorists assert that the 2008 financial crisis was caused by the Federal Reserve/George Soros (Hi George!)/Hedge Funds/Academic-Economists-Who-Peddle-The-Efficient-Markets-Hypothesis, and “they” profited from it.

This implies “they” knew what “they” were doing. Pardon me, but I’ve met many of these protagonists—and in the case of academic economists, I’ve worked with them for 30 years. “They” don’t have a clue (except George). Even those that were actively conspiring—like many hedge funds during the subprime bubble were doing so on the basis of utterly deluded theories about how the system they were trying to game actually worked. Where apparent conspiracies did work, like Soros’s punt against the British Pound decades ago, they did so because a CSP (Clever Sinister Person) bet against the conventional wisdom of others who thought they understood the system (and did not), rather than because the CSP set up the whole thing in the first place.

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“..the “billionaire class” continues to “pull apart from the rest of us” at the fastest rate ever recorded..”

Bill Gates, Jeff Bezos and Warren Buffett Richer Than Poorest Half Of US (G.)

The three richest people in the US – Bill Gates, Jeff Bezos and Warren Buffett – own as much wealth as the bottom half of the US population, or 160 million people. Analysis of the wealth of America’s richest people found that Gates, Bezos and Buffett were sitting on a combined $248.5bn (£190bn) fortune. The Institute for Policy Studies said the growing gap between rich and poor had created a “moral crisis”. In a report, the Billionaire Bonanza, the thinktank said Donald Trump’s tax change proposals would “exacerbate existing wealth disparities” as 80% of tax benefits would end up going to the wealthiest 1% of households. “Wealth inequality is on the rise,” said Chuck Collins, an economist and co-author of the report. “Now is the time for actions that reduce inequality, not tax cuts for the very wealthy.”

The study found that the billionaires included in Forbes magazine’s list of the 400 richest people in the US were worth a combined $2.68tn – more than the GDP of the UK. “Our wealthiest 400 now have more wealth combined than the bottom 64% of the US population, an estimated 80m households or 204 million people,” the report says. “That’s more people than the population of Canada and Mexico combined.” The report says the “billionaire class” continues to “pull apart from the rest of us” at the fastest rate ever recorded. “We have not witnessed such extreme levels of concentrated wealth and power since the first gilded age a century ago.” Forbes celebrated 2017 as “another record year for the wealthiest people in America”, as “the price of admission to the country’s most exclusive club jumped nearly 18% to $2bn”.

That was a tenfold increase on the amount of money needed to enter the list when it first started in 1982. Josh Hoxie, another co-author of the thinktank report, said: “So much money concentrating in so few hands while so many people struggle is not just bad economics, it’s a moral crisis.” The report says many Americans are joining an “emerging anti-inequality movement”. “A century ago, a similar anti-inequality upsurge took on America’s vastly unequal distribution of income and wealth and, over the course of little more than a generation, fashioned a much more equal America,” it says.

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“.. the kingdom’s leadership is desperately in need of an enemy..”

The Middle East Is On The Verge Of New War (SF)

A missile gets fired on the Saudi capital. A missile, which was allegedly built in Iran and smuggled to Yemen, just to be fired at Saudi Arabia. According to initial reports, two Saudi princes died back to back in 24 hours: one in an “accidental” helicopter crash, the other during a firefight that broke out while security forces were trying to arrest him. On November 7, Saudi Arabia’s information ministry spokesman said that “Prince Abdulaziz is alive and well”. However, the prince could not be independently reached for comment by the media. Other high-ranking members of the establishment and the royal family – the two tend to be one and the same in Saudi Arabia – get arrested on charges of corruption, with their bank accounts frozen. Lebanese Prime Minister Saad Hariri unexpectedly resigns after he was summoned to Riyadh by his Saudi-backers.

Meanwhile, Saudi Arabia accused Iran of conducting acts of “direct military aggression” and accused Lebanon of “declaring war” on Riyadh by allowing Hezbollah “aggression” against the kingdom. All this happened in a span of just a few days. With ever-growing security challenges and problems at the regional level, the crisis that took hold of Saudi Arabia does not seem to be slowing down. One contributing factor to the ongoing crisis is a major split in the Saudi royal family: the power struggle that resulted in the former crown prince being deposed and replaced with a new one, a move that shook things up quite a bit inside the country. The echo of this can be seen in the current “anti-corruption” persecution, enforced by the current Crown Prince Mohammad bin Salman.

Outside the country, several key foreign policy projects failed: the effectiveness of the Yemen intervention can be judged by the fact that it resulted in a missile being fired at Riyadh. Bashar al-Assad is still in power in Syria. The attempts to scare Qatar into submission backfired, as Qatar has been getting more and more friendly with Russia, Turkey and Iran. Iran is gaining more and more influence in the region, while the Saudis seem to be losing it, hence they are trying to compensate for their losses by participating in proxy wars elsewhere. The Saudis also tried to flex their diplomatic muscle. King Salman even visited Moscow, where the two sides exchanged promises with no guarantees that these will ever be fulfilled. This also backfired, as some considered it a demonstration of weakness or an attempt to make peace by making concessions.

Add economic struggles to this series of failures, and one can see why the King’s and his Crown Prince’s position seem less and less stable by the minute. The situation apparently seemed so dire, that in order to keep everything afloat active persecution seemed the only possible way to keep the King and his successor in power. The “anti-corruption” campaign is just an excuse: the corruption has always been high in Saudi Arabia, and no one batted an eye before now. These are temporary measures. Persecution can hardly solve foreign and internal matters, and it will not lead to a solution of the problems. Right now, the kingdom’s leadership is desperately in need of an enemy to unite the population and draw their attention away from the chaotic events that unfolding in the country.

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The one that got away.

With Saudi Princes Dead, Arrested, King Fahd’s Grandson Flees To… Iran (IT)

The Saudi royal family – the House of Saud – is throwing up one intrigue after another. Hours after the reported death of Prince Abdul Aziz bin Fahd, his nephew and son of late King Fahd’s eldest surviving son, Prince Turki bin Mohamed bin Fahd has fled the country. His destination, according to speculation among those who are watching the situation closely, is, wait for it, Iran.If this is true, this may put new strain on Tehran and Riyadh, already at loggerheads for dominance in the restive Middle East region, where Saudi Arabia and Iran are fighting, what analysts term, a proxy war in Yemen. What makes Prince Turki bin Mohamed bin Fahd’s reported flight to Iran, where he is said to have sought asylum, interesting, apart from his destination, is that it comes at a time when Saudi aviation authorities are said to have been told not to let any of the oil-rich kingdom’s many royals fly out of the country.

Of course,with the outflow of information from Saudi Arabia particularly restricted right now, all reports of developments on the region must be taken with a pinch of salt. Turki bin Mohamed, is the son of Muhammad bin Fahd Al Saud, the second-oldest son of late Saudi King Fahd bin Abdulaziz Al Saud, and is also the grandnephew of the current King Salman bin Abdulaziz Al Saud This is the same King Salman whose son Crown Prince Mohammad Bin Salman (known informally as MBS) is believed to be have orchestrated what many are seeing as a coup by sideling prominent Saudi royals and taking decisions that could win over the country’s liberal quarters.

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Murdoch’s powers challenged.

Prince Alwaleed Sold His Shares In 21st Century Fox (Abc.au)

One of Rupert Murdoch’s key business allies, who was arrested in last week’s corruption crackdown in Saudi Arabia, has quietly sold off his $1.5 billion stake in 21st Century Fox. The business relationship between Mr Murdoch and Prince Alwaleed bin Talal is now under new scrutiny, with Mr Murdoch’s control over his family-controlled business empire looking more uncertain. “This is very big news,” Murdoch watcher and shareholder activist Stephen Mayne said after the company confirmed Prince Alwaleed had offloaded his shareholdings in Fox and News Corporation. “He’s been the number one backer of Murdoch family control of the public companies for the last 20 years.”

One of the world’s richest men, the Prince is one of dozens of royal family members, officials and business leaders arrested in Saudi Arabia in recent days. With his bank accounts and other assets likely to have been frozen by Saudi authorities, his detention had raised questions about who had control over his almost 40 million Fox shares. It now appears he sold those shares with little fanfare. It is unclear when the shares were sold. But a Bloomberg report on the company’s shareholders shows Prince Alwaleed’s stake fell to zero during the current financial quarter.

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Impossible to overestimate what a disaster this is going to be. We need a whole new economics to confront it.

It Begins: Pension Bailout Bill To Be Introduced This Week (ZH)

Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U.S. population: a multi-trillion pension storm, which was recently dubbed “one of the most heated battles of a lifetime” by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.

That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U.S. Treasury to remain solvent. The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is “they could not make risky investments”, which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury’s “bailout” loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.

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Amoral.

How The Netherlands Became A Tax Haven (SüdD)

Barack Obama had only been in office for a few weeks when he first tried to take on tax havens. The freshly inaugurated U.S. president wanted greater transparency, harsher penalties and more justice. Obama, who had helped draft anti-tax haven legislation – to date, still not passed – as an Illinois senator, called out many tax havens by name. There were the usual suspects: Bermuda, the Cayman Islands and Switzerland. But there was also, to the surprise of many, the Netherlands. A founding member of the European Union, quaint little Holland has for years been the most important tax haven for American corporations. This includes large multinationals such as the coffee chain Starbucks, the delivery company FedEx, the pharmaceuticals giant Pfizer and – as the Paradise Papers have revealed – the sporting apparel manufacturer Nike and the electric carmaker Tesla.

Every year, other countries lose out on billions of euros in taxes for the apparent reason that the Netherlands has bent to the will of influential lobbyists while neighboring EU member states have stood idly by and done nothing. Experts accuse the country of providing illegal state subsidies, and the European Commission is alarmed, but the Dutch tax loophole will nevertheless remain open for years to come. One of the most important days for the Netherlands as a tax haven was July 6, 2005. That was the day that Paragraph 4 of Article 24 – the so-called anti-abuse clause – was struck from the U.S. tax convention with the Netherlands, effectively legalizing the abuse of Dutch corporate law. The Netherlands’ tax loophole revolves around a business structure known in Dutch as a commanditaire vennootschap, or CV, the Dutch version of a limited partnership. In a CV, just like in a limited partnership, two or more people can join together for business purposes.

One of the partners, namely the limited partner, is only liable for a fixed amount, while the other, the general partner, is fully liable. In contrast to Germany, CVs are not regarded as taxable entities in the Netherlands, but solely as partnerships. In the eyes of the Dutch tax authorities, it’s not the CV itself that’s responsible for paying taxes, but the individual partners. This is where things get interesting, especially for American companies. By founding a CV in the Netherlands plus one or two Dutch subsidiaries, U.S. firms reach “the Holy Grail of tax avoidance.” That’s how Senator Carl Levin once put it while still in office, describing the complex networks of companies that allow their owners to completely avoid taxes.

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Time for a plan?!

FEMA Offers To Airlift Puerto Ricans To Mainland US (CBS)

The Federal Emergency Management Agency (FEMA) is offering to airlift victims of Hurricane Maria in Puerto Rico to the U.S. mainland to reach temporary housing – a complex operation that would be the first of its kind for the agency. Under FEMA’s Transitional Shelter Assistance (TSA) program, displaced residents and families who are still living in shelters on the island can opt to relocate to housing in Florida and New York. The agency is working with the governors in both states to work through logistical issues for families interested in participating. Mike Byrne, a federal coordinating officer for FEMA, said the program is the first time the agency has attempted what it calls an “air bridge,” or a relief operation requiring the transportation of individuals from a disaster area.

In most disasters, FEMA pays for displaced residents to stay in hotels under the TSA program. In Puerto Rico, the hotels are filled to capacity, so FEMA is turning to the mainland and working with states to find accommodations. “A thousand miles adds a whole level of complexity to this,” Byrne said. Byrne says agency teams are traveling to shelters on the island to ask longtime occupants about their housing options going forward, telling them about FEMA’s offer. He said the level of interest in the program has so far been low, with only about 30 out of 300 families interviewed on Tuesday expressing interest in participating. “People really don’t want to leave their homes,” Byrne said. “We want to give them every opportunity we can to be able to stay here, whether it’s providing financial assistance or repairing their homes. So we are going to work hard on those things so people don’t have to leave.”

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And still no-one has come forward with an answer. A third party will have to, the two sides can’t do it be themselves.

Catalan Parliament Speaker, 5 MPs Appear In Court On Sedition Charge (G.)

The speaker of the Catalan parliament and five of its members appeared before Spain’s supreme court in Madrid on Thursday to answer charges of rebellion and sedition over their roles in staging a banned referendum on Catalonia’s independence last month. The court will decide whether to remand Carme Forcadell and the five MPs in custody while the investigation continues or release them under certain conditions. Eight former members of the Catalan government and the leaders of the two main grassroots pro-independence groups are already in custody awaiting trial on sedition charges for their parts in the 1 October referendum, which Spanish courts ruled illegal.

The region’s deposed president, Carles Puigdemont, and four of his former cabinet ministers went into self-imposed exile in Belgium last week after Madrid responded to Catalonia’s declaration of independence by firing his administration, dissolving the parliament and calling regional elections for December. Spain’s high court issued an arrest warrant for for all five last week on sedition and rebellion charges. Forcadell and the five MPs were summoned last week to the supreme court, which handles cases of people who enjoy parliamentary immunity, but it gave them more time to prepare their defences. They are suspected of having followed a “concerted strategy to declare independence” before the official declaration of the Catalan parliament on 27 October, which Spain’s constitutional court annulled on Wednesday.

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The narrative is that rich parties organize protests. But there are certainly people simply wanting to prevent people being thrown out into the streets.

EU Gives Greece Foreclosure Ultimatum (K.)

European officials have given the government an ultimatum to proceed with electronic foreclosures on homes later in the month or else the country’s third bailout review will not be concluded. The warning came despite the recent positive messages emanating from Brussels and Washington that Greece is making progress in the review and is on course to reach an agreement with creditors on a technical level by the end of the year. But lenders appear adamant that the review’s conclusion will be jeopardized if foreclosures do not take place as scheduled and if notaries, who have borne the brunt of attacks by anti-establishment groups and protesters, are not protected. “If the Greek government has the will to protect notaries it will find the way to achieve this,” a source told Kathimerini, adding that “if they want to stop the violence they can do it.”

The sources told Kathimerini they expect to see foreclosures beginning on November 27 “at all banks and throughout the country and not just isolated cases.” Auditors have repeatedly made it clear that the resumption of foreclosures, which have dragged during the crisis years due to strikes by lawyers and notaries and more recently due to anti-austerity protesters, is a prerequisite for the successful conclusion of Greece’s current bailout review. The ultimatum, however, appears to have motivated the government to take action so that foreclosures resume and notaries are protected as sources said that all necessary measures will be taken to “ensure strategic debt defaulters do not hide behind the attacks against notaries.”

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The plot is Greeks themselves?!

The Plot Against Greece (K.)

If some power wanted to undermine all that is good in a country, to waste its natural beauty and people, to damage its past, present and future, it need look no further than Greece. Here it would see the result of a long-term conspiracy against the coue beginning of the modern Greek state, the Greeks were under foreign tutelage. In the past few decades, though, as a member of the European Union, we had begun to believe that we could function as an independent country, without patrons. And suddentry. Fortunately, the Greeks are fighters, they resist as much as they can. That is why the country is still beautiful, with talented, generous people, with bright children capable of competing with the best in the world. The “enemy,” though, holds the people hostage, keeping them from reaching their full potential, from making the country what it could be.

From thnly, bankrupt, we found ourselves under strict supervision again. It is understandable, then, that we blame foreigners for all our ills – those powers that want to suck us dry of our wealth, to keep us weak and under control. Because it is certain that we are not the ones who benefit from continued political and economic insecurity, from unpredictable and excessive taxation, disdain for investments, dysfunctional justice, a weakened education system. The only beneficiaries are the tricksters who know how to exploit the situation – and other countries. When we have almost no investments and the country’s strongest selling point as a tourist destination is its stability in an unstable region, it is clear that we are not creating added value, we are not establishing foundations for the future. Investments go elsewhere and Greece keeps falling behind the competition.

In the World Bank’s latest Doing Business survey of 190 countries, Greece was ranked 67th, from 61st last year (and 60th and 58th before that). It is incredible that after seven years of crisis and three bailout agreements it should still be so difficult to set up a business in Greece. And yet, there is stiff resistance to improving the situation: Taxes and social security contributions are way above the European Union average; there are long delays in the justice system, conflicting and confusing laws and regulations, along with a public administration determined to obstruct whatever it can, encourage corruption and send businesses elsewhere.

Other countries gain even more when thousands of Greek doctors and others with special skills move away in search of a better life, taking with them the money invested in their education. So why should we not believe that it is in our foreign partners’ interests to keep Greece at this level? In the past, they lent us money, now they loot our human resources (and later perhaps our still-to-be-discovered fossil fuels, according to a long-running conspiracy theory). Our partners did not stop lending us money, but now it comes not from their banks but from their taxpayers, and with strict conditions.

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Well well. Something good comes out of that mess of a government.

UK Will Back Total Ban On Bee-Harming Pesticides (G.)

A total ban on insect-harming pesticides in fields across Europe will be backed by the UK, environment secretary Michael Gove has revealed. The decision reverses the government’s previous position and is justified by recent new evidence showing neonicotinoids have contaminated the whole landscape and cause damage to colonies of bees. It also follows the revelation that 75% of all flying insects have disappeared in Germany and probably much further afield, a discovery Gove said had shocked him. Neonicotinoids are the world’s most widely used insecticide but in 2013 the European Union banned their use on flowering crops, although the UK was among the nations opposing the ban. The European Commission now wants a total ban on their use outside of greenhouses, with a vote expected in December, and the UK’s new position makes it very likely to pass.

“The weight of evidence now shows the risks neonicotinoids pose to our environment, particularly to the bees and other pollinators which play such a key part in our £100bn food industry, is greater than previously understood,” said Gove. “I believe this justifies further restrictions on their use. We cannot afford to put our pollinator populations at risk.” In an article for the Guardian, Gove said: “As is always the case, a deteriorating environment is ultimately bad economic news as well.” He said pollinators boost the yield and quality of UK crops by £400m-£680m every year and said, for example, gala apple growers are now having to spend £5.7m a year to do replace the work of lost natural pollinators.

Gove said the evidence of neonicotinoids’ harm to pollinators has grown stronger since 2013, including a landmark field trial published in July that showed neonicotinoids damage bee populations, not just individual insects, and a global analysis of honey revealing worldwide contamination by the insecticides. [..] Gove’s decision has delighted campaigners and scientists who have long argued that heavy pesticide use, along with the destruction of habitat and disease, are having a devastating impact on insects. “Michael Gove is to be congratulated for listening to the experts on this issue and backing tougher restrictions,” said Friends of the Earth’s chief executive Craig Bennett. “But lessons also need to be learned – we now need to move away from chemical-intensive farming and instead boost support for less damaging ways of tackling persistent weeds and pests.

Read more …

Nov 082017
 
 November 8, 2017  Posted by at 9:56 am Finance Tagged with: , , , , , , , , ,  4 Responses »


Henri Cartier Bresson Nehru Announces Gandhi’s Death, Birla House, Delhi, India Jan 30, 1948

 

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)
Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)
Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)
Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)
Lebanon – The Next Front In The Great Gas War (Golem XIV)
UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)
May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)
Those Who Broke The Economy Cannot Fix It (Ann Pettifor)
German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)
Bean Counters: Lost in Paradise (Ren.)
British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)
Brick-and-Mortar Meltdown Sinks Property Prices (WS)
Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)
1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

 

 

Long term is always better.

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)

Forget secular stagnation. One historian says the world is actually in its ninth “real rate depression” and 700 years of data show that – when it comes – the turnaround could be sudden. In research published on the Bank of England’s staff blog, Harvard University’s Paul Schmelzing says most work pointing to a period of permanently lower equilibrium real interest rates is too short term. Instead, he tracked the risk-free rate since 1311 by identifying the dominant asset of each period – starting with sovereign rates in the Italian city states in the 14th and 15th centuries and moving to long-term rates in Spain, then the Province of Holland, the U.K., Germany, and finally the U.S. Real rates, or the benchmark interest rates minus inflation, have averaged 4.78% while the 200-year real-rate average is 2.6%.

That makes the current market environment “severely depressed,” Schmelzing wrote. However, it’s simply following a five-century downward trend, in which there have been nine periods of secular decline followed by reversals. The current period – since the 1980s – is the second-longest recorded and its closest historical analogy is the global “Long Depression” of the 1880s and 1890s which saw low productivity growth, deflationary price dynamics, and the rise of global populism and protectionism. This spell seems to have ended without a push from policy makers. That could be good news for those struggling to find a fix for the current low-rate environment. “There is strong evidence suggesting that the last ‘secular stagnation cycle’ started fading relatively autonomously after just over two decades following the key financial shock, not requiring the aid of decisive fiscal or monetary stimulus.”

Read more …

There’ll be more.

Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)

Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis, one regional banker said, declining to be named because he was not authorised to speak to media.

The banker did not name the companies affected but said they included listed and unlisted firms across many sectors. He added that if the freezes stayed in place for long, they could start to hurt day-to-day business activities such as paying staff and creditors or making other transactions. A second banker said, however, that most of the frozen accounts belonged to individuals rather than companies, and that banks were being allowed by the regulator to continue to fund existing commitments. Among top business executives detained in the probe are billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Nasser bin Aqeel al-Tayyar, founder of Al Tayyar Travel; and Amr al-Dabbagh, chairman of builder Red Sea International.

The stocks of all three companies, which have issued statements saying they continue to operate as normal, plunged between 9 and 10% on Tuesday. One of the bankers speaking to Reuters said the central bank had met with some foreign banks this week to reassure them that the freezing of accounts targeted individuals, and that firms linked to those people would not be damaged.

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WSJ has gone full paywall.

Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)

The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The purge is the most extensive of the kingdom’s elite in recent history. Crown Prince Mohammed bin Salman, the son of King Salman, was named heir to the throne in June and has moved to consolidate power. He has said that tackling corruption at the highest level is necessary to overhaul what has long been an oil-dependent economy. The crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.

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Strange bedfellows.

Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)

Early this morning, Israeli Channel 10 news published a leaked diplomatic cable which had been sent to all Israeli ambassadors throughout the world concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia, which began with Lebanese Prime Minister Saad Hariri’s unexpected resignation after he was summoned to Riyadh by his Saudi-backers, and led to the Saudis announcing that Lebanon had “declared war” against the kingdom. The classified embassy cable, written in Hebrew, constitutes the first formal evidence proving that the Saudis and Israelis are deliberately coordinating to escalate the situation in the Middle East. The explosive classified Israeli cable reveals the following:

• On Sunday, just after Lebanese PM Hariri’s shocking resignation, Israel sent a cable to all of its embassies with the request that its diplomats do everything possible to ramp up diplomatic pressure against Hezbollah and Iran.
• The cable urged support for Saudi Arabia’s war against Iran-backed Houthis in Yemen.
• The cable stressed that Iran was engaged in “regional subversion”.
• Israeli diplomats were urged to appeal to the “highest officials” within their host countries to attempt to expel Hezbollah from Lebanese government and politics.

As is already well-known, the Saudi and Israeli common cause against perceived Iranian influence and expansion in places like Syria, Lebanon and Iraq of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. For Israel, Hezbollah has long been its greatest foe, which Israeli leaders see as an extension of Iran’s territorial presence right up against the Jewish state’s northern border.

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“Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government.”

Lebanon – The Next Front In The Great Gas War (Golem XIV)

The Great Gas War has already two distinct fronts: The now relatively quiet Northern Front in Ukraine and the Southern Front in Syria in which the Western empire has been losing. It looks to me that Lebanon is being targeted as the next front, where the West hopes its loses might be recouped. Yesterday, November 6th, Reuters reported, “Saudi Arabia said on Monday that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah.” This comes after Israel, Saudi’s long time though largely un-offical best friend in the region, has been very publicly preparing to renew its own war with Lebanon – or more accurately with Hezbollah. As the American news journal Newsweek put it recently, “ISRAEL PREPARES FOR ANOTHER WAR WITH HEZBOLLAH AS IDF PRACTICES LEBANON INVASION.”

Why now and why Lebanon? Well the rulers of Saudi, a Sunni dominated country, will tell us that it is because Hezbollah is a Shia terrorist organisation. “Hezbollah” literally means the “Party of Allah” or “Party of God”. Saudi Gulf affairs minister Thamer al-Sabhan yesterday pointedly referred to Hezbollah as, “the Lebanese Party of the Devil”. Saudi is not alone of course, Hezbollah has also been listed as a terrorist organisation by America, Israel, the Arab League, the UK and the EU. It is also, however, part of the popular government of Lebanon having seats in its parliament. I suggest, however, a powerful reason that a new war with Hezbollah may be in the offing is because Lebanon is the next link in any gas pipeline that could potentially bring Iranian Gas to Europe.

That was the reason the West decided to “liberate” the Syrian people and it will be why they decide to enforce the same salvation upon the people of Lebanon. Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government. I would not be surprised to hear quite soon from opposition groups vocally denouncing the government or at least Hezbollah. I expect spokes people from those groups to suddenly get a global platform along-side American and regional supporters such as Saudi.

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How to spell insanity.

UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)

The number of British-made bombs and missiles sold to Saudi Arabia since the start of its bloody campaign in Yemen has risen by almost 500%, The Independent can reveal. More than £4.6bn of arms were sold in the first two years of bombings, with the Government grant increasing numbers of export licences despite mounting evidence of war crimes and massacres at hospitals, schools and weddings. The United Nations says air strikes by the Saudi-led coalition are the main cause of almost 5,295 civilian deaths and 8,873 casualties confirmed so far, warning that the real figure is “likely to be far higher”. It has condemned the “entirely man-made catastrophe” leaving millions more on the brink of famine and sparking the world’s worst cholera epidemic, while blacklisting Saudi Arabia for killing and maiming children.

There is also fresh concern over the Kingdom’s attempt to shut all air, land and sea ports into Yemen, which it said was to stop the flow of weapons but will also halt aid imports. British-made bombs have been found at the scene of bombings deemed to violate international law but the UK has continued its political and material support for Riyadh’s campaign. Figures from the Department for International Trade (DIT) show that in the two years leading up to the Yemen war, £33m of ML4 licences covering bombs, missiles and countermeasures were approved. But in the two years since the start of Saudi bombing in March 2015, the figure increased by 457% to £1.9bn, according to calculations by Campaign Against the Arms Trade (CAAT). Licences covering aircraft including Eurofighter jets have also risen by 70% to £2.6bn in the same period.

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Secret meetings as the Middle East is imploding. And arms sales are exploding.

May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)

Prime Minister Theresa May is weighing whether to fire a member of her cabinet only seven days after her defense secretary quit in a sexual harassment scandal, as the U.K. government faces fresh turmoil in the midst of Brexit talks. May is likely to dismiss her International Development Secretary Priti Patel in a row over a succession of unauthorized meetings she held with Israeli officials behind the prime minister’s back, according to reports from the BBC and The Sun Tuesday, which the U.K. government declined to deny. The premier has not yet had the chance to speak to Patel – who is on an official trip to Africa – about the latest revelations. A conversation would be expected before a decision is made about the minister’s future. If she is forced out, Patel will be the second minister to depart May’s cabinet in one week, after Michael Fallon resigned from the defense ministry amid allegations over his past behavior toward women.

For some, May’s latest headache is yet another demonstration of her weakness, which draws repeated questions over how her government can last long enough to see Brexit to the finish line. If more dominoes drop – in the shape of senior ministers – the last one to fall could ultimately be the prime minister herself. “The destabilizing effect on an already weak administration has prompted another burst of speculation that May could soon be forced to resign,” Mujtaba Rahman of Eurasia Group said in a note to clients. He thought one likely scenario is for May to be toppled if she fails to get a grip on the latest crisis and is ousted because her MPs judge that the government cannot go on like this – and is incapable of recovering the authority a prime minister needs.

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The British economy is being bled dry….

Those Who Broke The Economy Cannot Fix It (Ann Pettifor)

Make no mistake, last week’s increase in interest rates was a big deal. Painful as it might be for a good share of the population, the real point is that the Bank is signalling the end of a particular phase of monetary policy. Since 2010 the counterpart to self-defeating austerity policies has been expansionary monetary policies. These have inflated assets – enriching the already-rich, while failing to stimulate wider economic recovery. Yesterday the Bank of England’s Monetary Policy Committee signalled an end of this dangerous game. But this technocratic realignment makes no difference to the fact that ‘the Guardians of the nation’s finances’ – Bank and Treasury economists – have failed absolutely to revive the economy.

You need look no further than the (ongoing) decline in real wages, to continuing low levels of private investment, and to the dangers of rising household debt. A small interest rate rise is hardly likely to improve these conditions. Bank and Treasury economists (aided and abetted by the OBR) are guilty of defeatism. They argue that despite their powers, THERE IS NOTHING TO BE DONE. It is assumed that somehow ‘the invisible hand’ or ‘the markets’ will, without intervention by the authorities, correct the weakness, insecurity and failures of the British economy. The prolonged and painfully weak recovery is regularly blamed on something defined as “productivity”. By shifting responsibility for economic failure on to productivity, the Bank, Treasury and OBR economists are saying that somehow economic failure is inherent to the economy – to businesses and especially to workers.

“Nothing to do with us, guv” they mutter. They add that the situation has been exacerbated by the vote to leave the EU. This is a handy way of denying that the ongoing economic failure of the British economy (and the Brexit vote) can be explained by austerity policies, and the failures of the financial system. By taking this approach, economists at the Bank have – conveniently – set the scene for endorsing further inaction by the Chancellor later this month. Yesterday the Governor of the Bank was flanked by Ben Broadbent and Dave Ramsden. Ben Broadbent, as a Goldman Sachs economist, was among the earliest to call for austerity policies. Dave Ramsden (who did not vote for the rate rise) implemented these policies as top economist at the Treasury.

But both Broadbent and Ramsden were senior figures in economic policy-making throughout the debt inflation that preceded the crisis, and (we presume) supporters of financial globalisation. It is obvious to anyone with an ounce of common sense that austerity policies have hurt the most vulnerable, and damaged Britain’s economic potential, by forcing a brutal adjustment to lower quality and lower paid work. Labour has been forced to bear the brunt of the Global Financial Crisis. The weakness in productivity is just the outcome of these policies, not the cause.

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… while Germany’s needs diverge ever more from those of southern Europe.

German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)

The German economy is at risk of overheating, according to a leaked advisory council report that follows pressure from the Bundesbank for a swifter end to the ECB’s expansive monetary policy. In their annual report, seen by Handelsblatt newspaper, the five “wise men” who advise the German government on economic policy said the economy, which they expected to expand strongly this year and next, was moving gradually into a “boom phase”. “There are clear signs that economic capacity is over-utilised,” read the report, which is due to be published on Wednesday. Germans have been among the foremost critics of the ECB’s bond-buying program, which was introduced three years ago to depress borrowing costs and reignite growth in the euro zone’s heavily indebted southern periphery.

The wise men expected Germany’s economy to expand by 2% this year and by 2.2% in 2018, Handelsblatt said. With unemployment at its lowest level since the early 1990s, Germany’s circumstances are very different from Italy’s or Spain‘s, straining the ECB’s ‘one-size-fits-all’ monetary policy. ECB President Mario Draghi last month announced a halving n the size of its 2 trillion euro bond-buying program, but this is far from the return to conventional monetary policy many Germans, including Bundesbank president Jens Weidmann, demand. Without an intervention to cool the economy, Germany’s hawks fear the buoyant economy could tip over into an inflationary cycle. Last week, a senior official from Chancellor Angela Merkel’s conservatives warned that German savers would not tolerate continued low interest rates for much longer.

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Accountants and auditors are not doing their jobs.

Bean Counters: Lost in Paradise (Ren.)

“The phrase ‘Set a thief to catch a thief’ is common parlance,” says Professor Atul K. Shah. “‘Set a global brand of professional accountants to rob society and pilfer its taxes, bleeding governments’, is not, but it should be.’ Professor Bill Black says internal controls are absolutely critical in reducing fraud by insiders in particular, but not just insiders, as the Paradise Papers have repeatedly demonstrated. Emile Woolf says there is no way to remove control fraud and dodgy accounting practices from the economy without first prosecuting the culprits. “The devils that committed this criminal negligence – with the exception of the Royal Bank of Scotland (RBS) – have never been fined or prosecuted” he said. “What you can then do is create a ring fenced fund inside those institutions, earmarked to save them from going under. But the company has to recognise it has to be paid back.

“RBS is incapable of paying back the billions of fines it still owes for misconduct,” he says. “Where does that money come from and where does it go? Without the fines RBS would have made £100 million profit this year, but because of the reserve for fines in the USA and UK, all those fines are far too great to allow for payment of a dividend.” Of course calculating a true profit figure is difficult when a significant portion of that profit is fraudulent, because it doesn’t take into account the result of the inequities of ten years ago. “The worrying thing for all of us is if it happens again,” he says. “My hope is that three years from now, banks will be forced to recognise their loans that will never be repaid. But my worry is that this is going to be after the next financial crisis, because it’s happening again. There is no redeeming features in the present. The only difference is the next crisis is going to be bigger.”

Joel Benjamin told Renegade Inc that accounting is as much about *what* you count or don’t count as it is *how* you count it. “This is evidenced through the practice of ‘base erosion and profit shifting’ – shifting profits to offshore low or no tax jurisdictions, ” he said. In the space of 50 years, Britain’s economy has transformed from an industrial power house, to that of a finance-led extractive parasite, where the cash starved productive economy receives less than 10% of bank credit. “Until the Big Four accountancy firms are accurately viewed as enablers of corporate offshore dealing, regulatory arbitrage and ardent defenders of the neoliberal order, not the ‘reputable’ objective independent arbiters of the public interest as they claim, society will continue to be taken for a ride, and public services and social cohesion will continue their long decline,” he said.

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Bill Mitchell in a long talk with his alter ego.

British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)

Mitchell tried to tell me that governments do not spend by ‘printing money’ but rather just adjust bank accounts with numbers. But I know as anyone in the street knows that they just want to print more and more. That is at the core of MMT – they want the government to go on a spending spree and just ignore the inflationary consequences. They hide that by saying that “public spending cannot be unlimited and must be commensurate to the capacity of the economy” which is just a smokescreen that I can see through. And everybody will see through it. It is code for spend like a drunken’ sailor – throw money at lazy people who cannot be bothered finding a job. Throw money at public schools that teach socialist doctrines – you know about inequality and stuff like that.

Throw money at public hospitals so that people can receive unlimited health care without having to pay for it – that is the quickest way to encourage waste and bad behaviour. People know that they can just get sick and no matter what their income is they will get some care. Where is the incentive to stay healthy in that sort of system. The article also shows how stupid Mitchell is when it says he: “… debunks the idea that governments borrow money from international markets and with it the notion that they are hostage to the market.” Well where the hell else do they get the cash from? Does he really think we are that stupid? How come China has all those US government debt bonds or whatever they are called and the US government is spending the Chinese cash? How does he explain that obvious point?

Well he tried to claim the Chinese doesn’t issue US dollars and that only the US government issues US dollars so that it cannot possibly be funded by the Chinese. I don’t buy that, not that I understood anything he said about this – all this talk about trade surpluses accumulating financial claims in the currency that the deficit country issues, and then allowing the surplus nation to use those claims (say, US dollars in the first instance) to purchase US dollar financial assets etc ad nauseum. As if that tells us anything. How come the Chinese can loan the US government money that is what I want to know? Mitchell told the journalist that Jeremy Corbyn should not worry about international capital markets because Britain could impose capital controls if it wanted to. That gets to the nub of my worries – socialist governments stealing hard-earned cash from investors who actually have some get up and go.

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Malls don’t look like good investments.

Brick-and-Mortar Meltdown Sinks Property Prices (WS)

Commercial real estate prices soared relentlessly for years after the Financial Crisis, to such a degree that the Fed has been publicly fretting about them. Why? Because US financial institutions hold nearly $4 trillion of commercial real estate loans. But the boom in most CRE sectors is over. The Green Street Property Price Index – which measures values across five major property sectors – had soared 107% from May 2009 to the plateau that began late last year, and 27% from the peak of the totally crazy prior bubble that ended with such spectacular fireworks. But it has now turned around, dragged down by a plunge in prices for retail space. The CPPI by Green Street Advisors dropped 1.1% in October from September. In terms of points, the 1.4-point decline was the largest monthly decline since March 2009. The index is now below where it had been in June 2016:

This phenomenal bubble, as depicted by the chart above, has even worried the Fed because US financial institutions hold nearly $4 trillion of CRE loans, according to Boston Fed governor Eric Rosengren earlier this year. Of them, $1.2 trillion are held by smaller banks (less than $50 billion in assets). These smaller banks tends to have a loan book that is heavily concentrated on CRE loans, and these banks are less able to withstand shocks to collateral values. Rosengren found that among the root causes of the Financial Crisis “was a significant decline in collateral values of residential and commercial real estate.” But the CRE bubble isn’t unraveling as gently as the chart suggests. Some sectors are still surging, while others are plunging. According to the report, the index, which captures the prices at which CRE transactions are currently being negotiated and contracted, “was pushed down by falling mall valuations.”

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Puidgemont predicted to get 14-15 out of 135 seats. He won’t be the leader.

Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)

Catalan secessionist parties on Tuesday failed to agree on a united ticket to contest a December snap regional election, making it more difficult to rule the region after the vote and press ahead with their collective bid to split from Spain. Catalonia’s secessionist push has plunged Spain into its worst political crisis in four decades, triggered a business exodus, forced Madrid to cut its economic forecast and reopened old wounds from Spain’s civil war in the 1930s. Pro-independence groups have called for a general strike in the restive region on Wednesday. Catalan political parties had until midnight on Tuesday to register coalitions ahead of the Dec. 21 vote, but the two main forces which formed an alliance to rule the region for the last two years did not manage to agree on a new pact in time.

While they could still find an agreement after the vote, political analysts say the lack of a deal on a joint campaign may also trigger a leadership fight at the top of the movement. This is because center-right PdeCat (Catalan Democratic Party) of sacked Catalan president Carles Puigdemont is expected to be overtaken by leftist Esquerra Republicana de Catalunya (ERC) of former regional vice president Oriol Junqueras. Puigdemont and Junqueras are the two main leaders behind the current secession bid that last month led to a unilateral declaration of independence which Spain thwarted by imposing direct rule on the region. Junqueras is currently in custody pending a potential trial on charges of sedition, rebellion and misuse of public funds. Puigdemont, who faces the same charges, is currently in self-imposed exile in Belgium and has said he would oppose extradition.

An opinion poll released on Sunday by Barcelona-based newspaper La Vanguardia showed Junqueras’ ERC could garner between 45 and 46 seats in the 135-strong regional assembly while Puigdemont’s PdeCat would win between 14 and 15 seats. In order to reach the 68-seat threshold for a majority, they would then have to form a parliamentary alliance with anti-capitalist CUP, which is expected to get seven or eight seats. Such an alliance previously existed between 2015 and 2017.

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Down the drain.

1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

More than 300,000 people in Britain – equivalent to one in every 200 – are officially recorded as homeless or living in inadequate homes, according to figures released by the charity Shelter. Using official government data and freedom of information returns from local authorities, it estimates that 307,000 people are sleeping rough, or accommodated in temporary housing, bed and breakfast rooms, or hostels – an increase of 13,000 over the past year. Shelter said the figures were an underestimate as they did not include people trapped in so-called “hidden homelessness”, who have nowhere to live but are not recorded as needing housing assistance, and end up “sofa surfing”. London, where one in every 59 people are homeless, remains Britain’s homelessness centre. Of the top 50 local authority homelessness “hotspots”, 18 were in Greater London, with Newham, where one in 27 residents are homeless, worst hit.

However, while London’s homeless rates have remained largely stable over the past year, the figures show the problem is becoming worse in leafier commuter areas bordering the capital, such as Broxbourne, Luton, and Chelmsford. Big regional cities have also seen substantial year-on-year increases in the rate of homelessness. In Manchester, one in 154 people are homeless (compared with one in 266 in 2016); in Birmingham one in 88 are homeless (119); in Bristol one in 170 are affected (199). Polly Neate, chief executive of Shelter, said: “It’s shocking to think that today, more than 300,000 people in Britain are waking up homeless. Some will have spent the night shivering on a cold pavement, others crammed into a dingy hostel room with their children. And what is worse, many are simply unaccounted for.

Read more …

Nov 062017
 
 November 6, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , ,  2 Responses »


Salvador Dalí Figure at a window 1925

 

The Next Market Cleanse Will Be Sharp, Deep, Fast (Peters)
Round-Up Of Saudi Princes, Businessmen Widens, Travel Curbs Imposed (R.)
Saudi Arabia Seals Yemen Borders, Accuses Iran Over Missile Strike (AFP)
Paradise Papers Leak Reveals Secrets Of The World Elite’s Hidden Wealth (G.)
Are We Taming Offshore Finance? (BBC)
Queen’s Private Estate Invested Millions of Pounds Offshore (G.)
UK Families Thousands Of Pounds Worse Off After Years Of Cuts (G.)
Britain ‘Would Be Booming’ If It Wasn’t For Brexit – Mark Carney (Tel.)
Most EU Firms Plan Retreat From UK Suppliers (R.)
UK Ministers ‘Could Be In Contempt Of Parliament Over Brexit Papers’ (G.)
China’s Shadow Banking Halts as Regulation Bites – Moody’s (BBG)
Catalonia’s Puigdemont Conditionally Released By Belgian Judge (G.)

 

 

Eric Peters gets points for style.

The Next Market Cleanse Will Be Sharp, Deep, Fast (Peters)

Anecdote: “The most common example is a ball sitting atop a hill,” she said, polished accent, hint of condescension. “Locally stable, but one nudge and it’s all over.” She drove terribly fast, discussing Minsky Moments; the idea that persistent stability breeds instability. “Naturally each cycle is different in key respects, and that’s because you’re far better at preventing past problems from recurring than new ones from arising.” I smiled, amused, insulted. “Despite knowing this all too well, you humans remain inexplicably fixated on the rearview mirror. And this blinds you to all manner of hazards ahead.”

She initiated a few perfect turns of the Tesla, dodging a squirrel or two, tumbling, unhurt. “The source of instability in this cycle is your dissatisfaction with ultra-low bond yields.” $8trln of sovereign debt carries a negative yield, still our central bankers buy. “You should logically respond to this historic rise in valuations across asset classes with a reduction in your expectations for future returns.” I nodded. “But instead you respond with indignation.” So I explained to her that without robust growth and a compounding stream of uninterrupted 7.5% returns, our entitlement systems will implode. They probably will anyway. And lacking the stomach for an honest accounting of this predicament, we prefer to pretend it doesn’t exist.

“Is this humor or sarcasm?” she asked. “Both,” I answered. “Fascinating, anyhow, you then demand that we algorithms produce mathematically impossible returns. So we apply leverage, which makes nearly anything possible, even at valuations that are 99th percentile in all of human history. The more leverage we apply, the more stable your system appears. The flatter your hilltop. Naturally, we ensure that today’s leverage looks different from yesterday’s disaster, recognizing your powerful aversion to repeating recent mistakes.” And I stared out the window, lost in thought, fall’s kaleidoscope whizzing by.

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Not done yet.

Round-Up Of Saudi Princes, Businessmen Widens, Travel Curbs Imposed (R.)

An anti-corruption probe that has purged Saudi Arabian royals, ministers and businessmen appeared to be widening on Monday after the founder of one of the kingdom’s biggest travel companies was reportedly detained. Shares in Al Tayyar Travel plunged 10 percent in the opening minutes of trade after the company quoted media reports as saying Nasser bin Aqeel al-Tayyar, who is still a board member, had been held by authorities. The company gave no details but online economic news service SABQ, which is close to the government, reported Tayyar had been detained in an investigation by a new anti-corruption body headed by Crown Prince Mohammed bin Salman.

Dozens of people have been detained in the crackdown, which has consolidated Prince Mohammed’s power while alarming much of the traditional business establishment. Billionaire Prince Alwaleed bin Talal, Saudi Arabia’s best-known international investor, is also being held, officials said at the weekend. The front page of Okaz, a leading Saudi newspaper, challenged businessmen on Monday to reveal the sources of their assets, asking: “Where did you get this?” in a bright red headline. Pan-Arab newspaper Al-Asharq Al-Awsat reported that a no-fly list had been drawn up and security forces in some Saudi airports were barring owners of private jets from taking off without a permit.

Among those detained are 11 princes, four ministers and tens of former ministers, according to Saudi officials. The allegations against the men include money laundering, bribery, extorting officials and taking advantage of public office for personal gain, a Saudi official told Reuters. Those accusations could not be independently verified and family members of those detained could not be reached. A royal decree on Saturday said the crackdown was in response to “exploitation by some of the weak souls who have put their own interests above the public interest, in order to, illicitly, accrue money”.

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The big fear is that it’s all a set-up to go after Iran. Which just signed a $30 billion energy deal with Russia.

Saudi Arabia Seals Yemen Borders, Accuses Iran Over Missile Strike (AFP)

The Saudi-led coalition battling Shiite Huthi rebels in Yemen closed the country’s air, sea and land borders Monday and accused Iran of being behind a weekend missile attack on Riyadh, saying it “may amount to an act of war”. Saudi Arabia intercepted and destroyed the ballistic missile, which was launched from Yemen as rebels appeared to escalate hostilities, near Riyadh’s international airport on Saturday. The missile was the first aimed by the Shiite rebels at the heart of the Saudi capital, underscoring the growing threat posed by the raging conflict. “The leadership of the coalition forces therefore considers this… a blatant military aggression by the Iranian regime which may amount to an act of war,” the official Saudi news agency SPA said in a statement.

Smouldering debris landed inside the King Khalid International Airport, just north of Riyadh, after the missile was shot down but authorities reported no major damage or loss of life. Yemen’s complex war pits the Saudi-backed government of President Abedrabbo Mansour Hadi against former president Ali Abdullah Saleh and his Iran-backed Huthi rebel allies. The Saudi statement said that the borders were being closed “to fill the gaps in the inspection procedures which enable the continued smuggling of missiles and military equipment to the Huthi militias loyal to Iran in Yemen”. Despite the temporary closure of the air, sea and land ports, Saudi would protect “the entry and exit of relief and humanitarian personnel”. “The coalition… affirms the kingdom’s right to respond to Iran at the appropriate time and in the appropriate form,” it added.

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Most of this is legal. But what are the Queen, Bono, Trudeau thinking?

Paradise Papers Leak Reveals Secrets Of The World Elite’s Hidden Wealth (G.)

The world’s biggest businesses, heads of state and global figures in politics, entertainment and sport who have sheltered their wealth in secretive tax havens are being revealed this week in a major new investigation into Britain’s offshore empires. The details come from a leak of 13.4m files that expose the global environments in which tax abuses can thrive – and the complex and seemingly artificial ways the wealthiest corporations can legally protect their wealth. The material, which has come from two offshore service providers and the company registries of 19 tax havens, was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with partners including the Guardian, the BBC and the New York Times. The project has been called the Paradise Papers. It reveals:

• Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund – and some of her money went to a retailer accused of exploiting poor families and vulnerable people. • Extensive offshore dealings by Donald Trump’s cabinet members, advisers and donors, including substantial payments from a firm co-owned by Vladimir Putin’s son-in-law to the shipping group of the US commerce secretary, Wilbur Ross. • How Twitter and Facebook received hundreds of millions of dollars in investments that can be traced back to Russian state financial institutions. • The tax-avoiding Cayman Islands trust managed by the Canadian prime minister Justin Trudeau’s chief moneyman. • A previously unknown $450m offshore trust that has sheltered the wealth of Lord Ashcroft.

• Aggressive tax avoidance by multinational corporations, including Nike and Apple.• How some of the biggest names in the film and TV industries protect their wealth with an array of offshore schemes. • The billions in tax refunds by the Isle of Man and Malta to the owners of private jets and luxury yachts.• The secret loan and alliance used by the London-listed multinational Glencore in its efforts to secure lucrative mining rights in the Democratic Republic of the Congo. •The complex offshore webs used by two Russian billionaires to buy stakes in Arsenal and Everton football clubs.

The disclosures will put pressure on world leaders, including Trump and the British prime minister, Theresa May, who have both pledged to curb aggressive tax avoidance schemes. The publication of this investigation, for which more than 380 journalists have spent a year combing through data that stretches back 70 years, comes at a time of growing global income inequality. Meanwhile, multinational companies are shifting a growing share of profits offshore – €600bn in the last year alone – the leading economist Gabriel Zucman will reveal in a study to be published later this week. “Tax havens are one of the key engines of the rise in global inequality,” he said. “As inequality rises, offshore tax evasion is becoming an elite sport.”

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No. Hell no.

Are We Taming Offshore Finance? (BBC)

The offshore finance industry puts trillions of dollars worldwide beyond the taxman’s reach. Bringing it to heel is like taming a cat; not just a normal moggy – a thankless task in itself – but a Cheshire Cat: nebulous, hard to pin down, disappearing and reappearing when it likes. No-one can actually agree on what a tax haven is. Or even on the name: one person’s tax haven is another’s “offshore financial centre”. No-one can agree on how many there are. Nor on exactly how much money is stashed offshore. No statistics are fully reliable. And this suits those who operate in offshore finance, from the owner of the wealth to the lawyer or accountant middlemen who manage the funds, to the often sun-kissed beaches of the jurisdictions where they are secluded or pass through. The industry’s key word is privacy. Or secrecy – a word it doesn’t like so much.

One adage cited by the taxation author and expert Nicholas Shaxson sums it up: “Those who know don’t talk. And those who talk don’t know.” But do we really not know how much is stashed offshore? A report this September, co-authored by the economist Gabriel Zucman, estimates about 10% of global GDP – the way we measure the size of the world’s economy – is held offshore, about $7.8tn (£6tn) . The Boston Consulting Group reported it last year at about $10tn. If you are thinking, wow, that’s bigger than Japan’s economy, you’d be right. But if you want a real wow, try $36tn – the estimate offered by James Henry, author of the book Blood Bankers. That’s twice as big as the US economy.

But no-one really knows. And here’s another wow. Remember the slogan “we are the 99%” coined by the Occupy movement to lambast the top 1% of the population for their disproportionate share of wealth? Well, the Zucman report says 80% of all offshore cash is owned by 0.1% of the richest households, with 50% held by the top 0.01%. So if you read this and are thinking, if you can’t beat them… quite frankly, it’s unlikely you will ever join them.

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This cannot be. Many Britons are miserable, and their Queen dodges taxes. As someone suggested, she should go live where her money is stashed.

Queen’s Private Estate Invested Millions of Pounds Offshore (G.)

Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund as part of an offshore portfolio that has never before been disclosed, according to documents revealed in an investigation into offshore tax havens. Files from a substantial leak show for the first time how the Queen, through the Duchy of Lancaster, has held and still holds investments via funds that have put money into an array of businesses, including the off-licence chain Threshers, and the retailer BrightHouse, which has been criticised for exploiting thousands of poor families and vulnerable people. The duchy admitted it had no idea about its 12-year investment in BrightHouse until approached by the Guardian and other partners in an international project called the Paradise Papers.

Though the duchy characterised its stake in BrightHouse as negligible, it would not disclose the size of its original 2005 investment, which coincided with a boom in the company’s value. BrightHouse has since been accused of overcharging customers, and using hard sell tactics on people with mental health problems and learning disabilities. Last month, it was ordered to pay £14.8m in compensation to 249,000 customers. Critics are likely to ask why the Queen had money in there in the first place, and the duchy may face awkward questions about whether there was enough oversight and management of the Queen’s “onward investments” to ensure they remained ethical. The duchy has also disclosed investments in “a few overseas funds”, including one in Ireland, and will be under pressure to give details of where the money is being held.

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This is Britain’s reality….

UK Families Thousands Of Pounds Worse Off After Years Of Cuts (G.)

Seven years of cuts to tax credits and universal credit have hugely eroded their role in supposedly rewarding people for working, leaving many families thousands of pounds a year worse off, a study has concluded. Ministers’ promises that the systems would benefit families for taking on more work had effectively been broken because of the cuts, according to the report by the Child Poverty Action Group (CPAG) and the Institute for Public Policy Research thinktank. The study, titled Austerity Generation, details what it says are the huge numbers of families with children pushed into poverty due to cuts and freezes to benefits, as well as measures such as the new two-child limit for payments. It calls for the chancellor, Philip Hammond, to tackle the issue in next month’s budget by restoring previous levels of universal credit work allowances, the amount of monthly income that can be earned without penalty. These were cut in April 2016.

It also seeks a pension-style triple lock of the child benefit and child credit element of universal credit, ensuring it kept pace with prices and earnings. This alone, the report argues, would keep 600,000 children out of poverty. Introduced in 2003, working tax credits are intended to top up low earnings. It is among a series of benefits replaced by universal credit, which is gradually being rolled out nationally and is intended to incentivise working. But, according to the report, cuts have eroded much of this effect for families. It calculates that a couple with two young children, one working full-time and the other part-time on the national living wage, will lose more than £1,200 a year due to universal credit cuts. Another example given is that of a single parent with two young children who starts work at 12 hours a week on the national living wage and will have an effective hourly wage of £4.18, as opposed to £5.01 before the cuts.

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… and this is what its central bank chief thinks it is instead.

Britain ‘Would Be Booming’ If It Wasn’t For Brexit – Mark Carney (Tel.)

Britain’s economy would be “booming” if not for Brexit, the Governor of the Bank of England has said. Mark Carney said businesses were waiting for the outcome of Theresa May’s negotiations with the EU before making investment decisions, which was slowing down economic growth. He said the bank’s predictions for foreign investment in Britain was now 20 per cent lower than they estimated in the month before the referendum. Speaking to Peston on Sunday, he said: “Since the referendum, what we’re seeing is that business investment has picked up, but it hasn’t picked up to any of the extent that one would have expected given how strong the world is, how easy financial conditions are, how high profitability is and how little spare capacity they have. Despite acknowledging the strength of economy, Mr Carney warned: “It should really be booming, but it’s just growing.

“I think we know why that’s the case, because they’re waiting to see the nature of the deal with the European Union. “It’s the most important investment destination and [businesses] need to know transition and end state, everybody knows this, the government knows it and is working on it, UK businesses know it and the Europeans know it.” Asked if the economy would take a hit if the UK left the EU without a Brexit deal, he said: “In the short term, without question, if we have materially less access (to the EU’s single market) than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth.” He added that in the event of a bad Brexit deal, the bank would not be able to cut future interest rates because of that inflationary pressure.

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Uncertainty.

Most EU Firms Plan Retreat From UK Suppliers (R.)

Most European businesses plan to cut back orders from British suppliers because of the slow progress of Brexit talks, a survey of company managers showed on Monday. 63% of non-British European companies expect to move some of their supply chain out of Britain, up from 44 percent in May, the Chartered Institute of Procurement and Supply (CIPS) said. With only 17 months left until Britain is due to exit the EU, the lack of clear progress in the negotiations has raised fears among executives of an abrupt departure with no transition. Monday’s survey raised the prospect of disruption for British manufacturers with EU clients. On Sunday, the Confederation of British Industry said almost two in three British firms will have implemented Brexit contingency plans by March if Britain and the rest of the EU have not struck a transitional deal by then.

Britain and the EU said last week they were ready to speed up talks, but CIPS said it was already too late for scores of businesses that look likely to be dropped by European customers. “British businesses simply cannot put their suppliers and customers on hold while the negotiators get their act together,” said Gerry Walsh, CIPS’ group CEO. “The lack of clarity coming from both sides is already shaping the British economy of the future – and it does not fill businesses with confidence.” British finance minister Philip Hammond said last month that a transition deal needed to be struck by early 2018. CIPS said a fifth of British businesses were struggling to secure contracts that extend beyond March 2019, the date Britain is due to leave the EU.

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“Offenders can also theoretically be confined to a room in the Big Ben clock tower, although this power has not been used since 1880.”

UK Ministers ‘Could Be In Contempt Of Parliament Over Brexit Papers’ (G.)

Labour is to warn ministers on Monday that they risk being held in contempt of parliament if they do not immediately release dozens of papers outlining the economic impact of Brexit. The government conceded last week that it had to publish the 58 studies covering various parts of the economy after the move was supported in a Labour opposition motion that was passed unanimously on Wednesday. While normal opposition motions are advisory, Labour presented this one as a “humble address”, a rare and antiquated procedure which the Speaker, John Bercow, advised was usually seen as binding. The leader of the Commons, Andrea Leadsom, said on Thursday that the government accepted the motion as binding, and that “the information will be forthcoming”.

However, she gave no timescale – the government has previously said it will respond to opposition motions within 12 weeks – and indicated some elements of the papers would need to be redacted to avoid “disclosing information that could harm the national interest”. The Labour motion called for the papers to be released immediately to the Brexit select committee, which has a majority of Conservative MPs, and which would then decide what elements should not be published more widely. The shadow Brexit secretary, Keir Starmer, has warned that Labour will refer the matter to Bercow over possible contempt if the studies are not passed to the committee before parliament’s one-week recess begins on Tuesday.

The parliamentary rulebook, known as Erskine May after its 19th-century author, says actions that obstruct or impede the Commons “in the performance of its functions, or are offences against its authority or dignity, such as disobedience to its legitimate commands” be can viewed as contempt. MPs held in contempt can be asked to apologise, suspended or even expelled by their fellows. Offenders can also theoretically be confined to a room in the Big Ben clock tower, although this power has not been used since 1880.

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Yeah, yeah, but: “core shadow banking activity,” including entrusted loans, trust loans, and undiscounted bankers’ acceptances, continues to expand…”

China’s Shadow Banking Halts as Regulation Bites – Moody’s (BBG)

China’s shadow banking sector, estimated by some analysts to be worth 122.8 trillion yuan ($18.5 trillion), stopped growing in the first half of the year as issuance of wealth management products declined, according to Moody’s Investors Service. For the first time since 2012, China’s gross domestic product grew faster than shadow banking assets in the six-month period, Moody’s said in a statement Monday. Following last month’s Communist Party Congress, further regulation will continue to rein in shadow banking and address some of the key systemic imbalances, Moody’s said. While Moody’s assessment offers some evidence that China’s crackdown on shadow financing is starting to bite, authorities continue to sound the alarm on high debt levels.

In an article on the People’s Bank of China’s website late Saturday, Governor Zhou Xiaochuan pointed to latent risks that are “hidden, complex, sudden, contagious and hazardous.” Government, household and corporate debt adds up to about 260 percent of the economy, according to Bloomberg Intelligence. Moody’s said that shadow banking assets accounted for 83 percent of GDP on June 30, down from a peak of 87 percent in 2016. Michael Taylor, the company’s chief credit officer for the Asia-Pacific region, said “core shadow banking activity,” including entrusted loans, trust loans, and undiscounted bankers’ acceptances, continues to expand even as regulation has had an effect.

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The pressure on the judge(s) must be deafening.

Catalonia’s Puigdemont Conditionally Released By Belgian Judge (G.)

A Belgian judge has released the ousted Catalan leader, Carles Puigdemont, and four of his ministers under certain conditions after a hearing lasting more than 10 hours. Puigdemont, who faces charges of misuse of public funds, disobedience and breach of trust relating to the secessionist campaign, turned himself in to Belgian police earlier on Sunday. The judge decided to grant them conditional release late in the evening pending a ruling by a court within the next 15 days whether to execute the European arrest warrant issued by Spain. The five have been told they must not leave the country and stay in a fixed address. “The request made by the Brussels’ Prosecutor’s Office for the provisional release of all persons sought has been granted by the investigative judge,” a statement from the federal prosecutor’s office said.

On Friday, the Spanish government had issued European arrest warrants against Puigdemont, Antoni Comín, Clara Ponsatí, Meritxell Serret and Lluís Puig for trying to “illegally change the organisation of the state through a secessionist process that ignores the constitution”. The formal charges, punishable by 30 years in prison, are rebellion, sedition, embezzlement of public funds and disobedience to authority, for their role in organising the referendum on Catalan independence on 1 October. The secessionist politicians fled to Belgium on Monday after the Spanish authorities removed Puigdemont and his cabinet from office for pushing ahead with a declaration of independence following an illegal referendum. From his self-imposed exile, Puigdemont claimed he would not receive a fair trial in Spain but promised to cooperate with the Belgian justice system.

[..] In a sign of the growing headache the crisis is causing the Belgian coalition government, the country’s deputy prime minister, Jan Jambon, from the Flemish nationalist party, questioned Spain’s handling of the crisis in Catalonia and suggested the EU should intervene. “When the police hit people, we can still ask questions,” he said. “When the Spanish state has locked two opinion leaders, I have questions. And now the Spanish government will act in the place of a democratically elected government? “Members of a government are put in prison. What have they done wrong? Simply apply the mandate they received from their constituents.”

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Nov 042017
 
 November 4, 2017  Posted by at 2:11 pm Finance Tagged with: , , , , , , , , ,  5 Responses »


Claude Monet The house at Yerres 1876

 

If there is one thing the Spain vs Catalonia conflict reminds us of, it has got to be Turkey. And that is a much bigger problem for the EU than it realizes. First of all, Brussels can no longer insist that this is an internal, domestic, Spanish issue, since Catalan president Puidgemont is in…Brussels. So are 4 members of his government.

That moves decisions to be made about his situation from the Spanish legal system to its Belgian counterpart. And the two are not identical twins. Even if both countries are EU members. This may expose a very large European problem: the lack of equality among justice systems. Citizens of EU member countries are free to move and work across the Union, but they are subject to different laws and constitutions.

The way the Spanish government tries to go after Puidgemont is exactly the same as the way Turkish president Erdogan tries to get to his perceived archenemy, Fethullah Gülen, a longtime resident of Pennsylvania. But the US doesn’t want to extradite Gülen, not even now Turkey arrests US embassy personnel. The Americans have had enough of Erdogan.

Erdogan accuses Gülen of organizing a coup. Spanish PM Rajoy accuses the Catalan government of the same. But they are not the same kind of coup. The Turkish one saw violence and death. The Spanish one did not, at least not from the side of those who allegedly perpetrated the coup.

Brussels should have intervened in the Catalonia mess a long time ago, called a meeting, instead of claiming this had nothing to do with the EU, a claim as cowardly as it is cheap. You’re either a union or you’re not. And if you are, the well-being of all your citizens is your responsibility. You don’t get to cherry pick. You got to walk your talk.

Belgian news paper De Standaard today makes an interesting distinction. It says the Belgian judicial system is not asked to “extradite” Puidgemont to Spain (uitlevering), but to “surrender” him (overlevering). Legal gibberish.

The paper also states that the case will go through three different courts, each of which has 15 days to announce a decision, so Puidgemont is safe for at least a month and a half. And then on December 21, Rajoy had called elections in Catalonia. For which, reportedly, he will seek to ban several parties. Don’t be surprised if that includes Puidgemont’s.

Moreover, even if the democratically elected president of Catalonia loses all appeals available to him, he could then ask for asylum in Belgium (apparently, Belgium is the only EU member country in which EU citizens can ask for asylum). And then you would really get into a mix-up of EU versus Belgian versus Spanish laws. In a way this is good, it would test a system that is not prepared at all for such divergences.

But what a disaster this is, once more, for the EU. It has shown zero leadership in the case, neither from the likes of European Commission head Juncker nor from Angela Merkel, its most powerful head of state. How can one not conclude that the Union is completely rudderless? This is just as bad as the refugee crisis, and the beheading of the Greek economy.

Threatening people with 30-year jail terms for organizing a peaceful vote is not what the EU should stand for. And now that is does, it threatens its own survival. Europe cannot be the land of Erdogan or Franco, it cannot look the other way and live.

That may be why the German armed forces, the Bundeswehr, have prepared a report that looks at future scenarios for Europe, including worst-case ones. The article in Der Spiegel is in German only, and my command of the language is a tad rusty, but the translation through Google is surprisingly accurate, I only had to change a few words.

The authors don’t seek the worst case option in either Spain or Greece, but perhaps they should. Then again, some of their projections are stark enough to offer plenty food for thought.

 

Military planners think EU collapse is conceivable

According to SPIEGEL information, the Bundeswehr played through social and political trends until 2040 for the first time. Strategists are also developing a worst-case scenario. The Bundeswehr believes that an end to the West in its current form over the next few decades is possible. This is according to information from Der Spiegel from the “Strategic Perspective 2040”, which was adopted at the end of February by the top of the Ministry of Defense and since then kept under wraps.

For the first time in its history, the Bundeswehr’s 102-page document shows how social trends and international conflicts could influence German security policy in the coming decades. The study sets the framework in which the Bundeswehr of the future is likely to move.

The paper does not yet provide any concrete conclusions for equipment and strength. In one of the six scenarios (“The EU in Disintegration and Germany in Reactive Mode”), the authors assume a “multiple confrontation”. The future projection describes a world in which the international order erodes after “decades of instability”, value systems worldwide diverge and globalization is stopped.

“The EU enlargement has been largely abandoned, other states have left the community, Europe has lost its global competitiveness,” write the Bundeswehr strategists: “The increasingly disorderly, sometimes chaotic and conflict-prone world has dramatically changed the security environment of Germany and Europe.” In the fifth scenario (“West against East”), some eastern EU countries are freezing the state of European integration while others have “joined the Eastern bloc”.

In the fourth scenario (“multipolar competition”), extremism is on the rise and there are EU partners who “even occasionally seem to seek a specific approach to Russia’s” state capitalist model “. The document expressly makes no prognosis, but all scenarios are “plausible with the 2040 time horizon,” write the authors. The simulations were developed by scientists of the Federal Armed Forces Planning Office.

Funny, that ‘future projection’ looks a lot like how I see the EU today, not in 2040.

There’s a longer article behind a paywall at Der Spiegel, but this should be sufficient to get a conversation going. Angela Merkel may be all EU all the time, just like all her EU peers, but her own army has serious questions about that. And given the Catalonia swamp, who could doubt that they are right about having doubts?

Yanis Varoufakis’ DiEM25 movement is all set towards democratizing the EU, but how realistic is that goal? How divergent does a Union have to get before you give up on it? Poland, Hungary, Czechia all want completely different things from what Holland and Germany want. New French president Macron is finding out as we speak that he can only do what Merkel allows him to.

And then along comes Spain and tries to inflict Franco era laws and violence on its citizens. But Brussels does nothing, and neither does Berlin. Refugees can rot away on Greek islands if eastern Europe doesn’t want them, and Catalan grandmas can get beaten to a pulp by the remnants of Franco’s troops, Brussels has zilch.

The way the EU functions today is no accident, and it’s not some new development. Present-day Brussels is the culmination of 50-60 years of institutionalization. You don’t change that with an election here or there.

Will Catalonia be the endgame of Brussels? Will it be the refugee crisis? Brexit? It’s impossible to say, but what is certain is that in its present state, the Union has no future. And at the same time, there’s no solution in sight. The powers that be are deeply invested, and they’re not going to let go just because some country, or part of a country, or political party, or group of voters wants them to.

The EU is profoundly anti-democratic, and it intends to stay that way. But imagine that Belgium ‘surrenders’ Puidgemont, a man whose movement has lifted anti-violence to a whole new and modern level, and Rajoy jails him for 30 years, and the next day sits in on some meeting in Brussels, what picture does that paint for the 500 million EU citizens?

They’re crazy if they think they can get away with this.

 

 

Nov 042017
 
 November 4, 2017  Posted by at 9:27 am Finance Tagged with: , , , , , , , , ,  3 Responses »


Henri Cartier Bresson Shanghai 1947

 

Funny Facts Friday (David Stockman)
October Payrolls, Average Hourly Earnings Miss Big (ZH)
Record 95.4 Million Americans Not in Labor Force, 968,000 Exit In 1 Month (ZH)
Manafort Money Laundering Charge In Russia Probe May Face Challenges (R.)
Swamp-O-Rama (Jim Kunstler)
How Democrats Can Beat The Republican Tax Cut (Bartlett)
European Arrest Warrant Issued For Catalan Leader Carles Puigdemont (G.)
America’s Opioid Crisis Is About To Get Worse (ZH)
‘No Deal’ Brexit To Add £930 A Year To UK Shopping Bills (G.)
Stalked By Default Fears, Venezuela Calls Creditor Meeting (AFP)
The Greek Island Camp Where Only The Sick Or Pregnant Can Leave (G.)

 

 

“there has been no gain in employed prime age male workers during the entirety of this century!”

Funny Facts Friday (David Stockman)

The funny numbers came in a veritable torrent today. For instance, the so-called U-3 unemployment rate dropped to a 17-year low of 4.1% for October. Yet the same BLS household survey which posted the lowest unemployment rate since early 2000 showed that the number of employed Americans actually sank by 484,000 last month. How’s that? Well, easy as pie according to the data mavens at the BLS. It seems that the number of persons not in the labor force soared by 969,000 in October. So, yes, with a smaller numerator and an even smaller denominator they came up with a better – nay, awesome – unemployment rate. Then again, none of the talking heads on bubblevision even mentioned the staggering loss of 484,000 jobs during the month because they ignore the household survey’s job count entirely in favor of the establishment survey number (up 261,000) – even though the former drives the unemployment rate, which they crow about endlessly.

This cherry-picking of the data is quite understandable, however, when you consider what is really buried in the household survey and is completely ignored by the stock peddlers. To wit, not so awesome at all is the fact that during October there was an all-time record of 95.4 million persons not in the labor force and another 6.5 million that were jobless – meaning 102 million Americans (16 and older) don’t have jobs. That compares to 42 million retired workers on social security. Consequently, there are 60 million adult Americans who are housewives, students, disabled, food stamp and welfare recipients, social security dependents, dwellers in mom’s basement or denizens of the illegal drug, gambling or sex trades.

To be sure, we don’t have any special opinion on the merits of these pursuits, but we do have a point of view on the societal and fiscal math. Namely, the diminishing relative ranks of workers and tax mules in American society are going to buckle under the weight of baby boom retirements and soaring welfare and public sector health care costs in the years just ahead. In that context, one of the most striking numbers in today’s report is that 53.0 million prime age men 25 to 54 years old were employed in October, 2017. As is evident in the chart below, that is down by 1.5 million jobholders since the pre-crisis peak in May 2007 and virtually identical to the number in January 2001. Stated differently, there has been no gain in employed prime age male workers during the entirety of this century!

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“..on a monthly basis, there was no wage increase at all..”

October Payrolls, Average Hourly Earnings Miss Big (ZH)

Well, with virtually everyone expecting a 300K+ payrolls number after last month’s negative hurricane-distorted print, and with whispers of a 400K print floating around, it only made sense that not only would payrolls disppoint, printing at 261K, one standard deviation below the 310K consensus estimate (and that even with a whopping 89,000 waiters and bartenders added) .. but also that the far more important average hourly earnings number, which was expected to rise at a 2.7% rate Y/Y, also missed, printing at 2.4% instead with September revised lower to 2.8%. Worse, on a monthly basis, there was no wage increase at all, printing at 0.0% (technically it was a 1 cent decline), below the 0.2% expected, and the lowest since June 2015.

Average weekly earnings also disappointed, declining by 35 cents to $912.63, the first decline since May. It is also notable that after the September surge, the number of employed Americans per the Household Survey tumbled by 484K in October, to 153.961 million. That said, the real action this time was found in previous months, where September was revised higher from -33.000 to +18,000 while August was revised up from +169,000 to +208,000, for a total two month revision of +90,000. Additionally, the unemployment rate dropped to a new cycle low, declining from 4.2% to 4.1%, below the 4.2% expected, while the underemployment rate declined to 7.9%, the lowest since the start of the century.

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“..the civilian labor force shrunk by whopping 765,000 in one month.”

Record 95.4 Million Americans Not in Labor Force, 968,000 Exit In 1 Month (ZH)

In what was otherwise a mediocre jobs report, in which the establishment survey reported that a lower than expected 261K jobs were added to the post-Hurricane economy, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new cycle low of 4.1%, for all the wrong reasons, because a quick look at the participation rate metrics showed that in October there was a sharp decline, with the labor force part. rate sliding from 63.1% to 62.7%, back to 4 decade lows…… driven by one disturbing metric: the number of people who exited the labor force soared by a near record 968,000 in October – the third highest on record – pushing the total number of people not in the labor force to a record 95.385 million, as the civilian labor force shrunk by whopping 765,000 in one month.

This took place as the number of employed Americans declined by 484,000, however since the unemployment rate denominator dropped more, it translated into an actual decline in the unemployment rate! So much for economist hopes that potential workers from the fringes are coming back to the labor force. Of course, the implication is even worse: with more slack being created in the form of workers who are leaving, not entering, the labor force, this creates a buffer for wage growth, and suggests that any hope for rapidly rising wages has once again been derailed.

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Not clear what they will be left with. FARA seems hard to prosecute.

Manafort Money Laundering Charge In Russia Probe May Face Challenges (R.)

When the lawyer for the former campaign manager of President Donald Trump attacked the money laundering charge brought against his client as flimsy, some legal experts say he may have pinpointed a potential weakness in the indictment by U.S. special counsel Robert Mueller. Paul Manafort and his associate Rick Gates both pleaded not guilty on Monday to charges that they failed to disclose they were lobbying for pro-Russia former Ukrainian President Viktor Yanukovich between 2006 and 2015 and laundered tens of millions of dollars by funneling the money through dozens of companies, partnerships and bank accounts.

In a court filing on Thursday, Manafort defense lawyer Kevin Downing said the money laundering count, the most serious facing his client with a 20-year maximum sentence, was based on a “tenuous legal theory” tying it to his failure to register as a foreign agent of the former Ukrainian leader. [..] The language of the filing and defiant statements Downing made outside the courthouse following Manafort’s arraignment on Monday suggest the lawyer is planning an aggressive defense of the charges, the first to be made public from Mueller’s probe into Russian interference in the 2016 presidential election. The Kremlin has denied meddling and Trump has said there was no collusion. Neither Trump nor his campaign was mentioned in the indictments issued on Monday.

Downing will also be seeking to suppress evidence he said was improperly obtained by search warrant, according to an additional filing on Friday. Manafort’s Virginia home was raided by FBI agents over the summer. The money laundering statute targets financial transactions involving the proceeds of “specified unlawful activity.” According to the Manafort indictment, the unlawful activity was his violation of the U.S. Foreign Agent Registration Act (FARA). Though the money laundering statute includes FARA violations, Seattle tax lawyer John Colvin said the charge against Manafort was not as straightforward as most other cases. “It doesn’t fit the normal paradigm” of money-laundering cases involving criminal activity like drug trafficking, Colvin said. “It seems like a stretch to me.”

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“Are there any like me out there who would like to see both parties tossed onto the garbage barge of history?”

Swamp-O-Rama (Jim Kunstler)

Now comes the news from Donna Brazille, on-again-off-again Democrat Party chair, that the primary elections were elaborately rigged by HRC functionaries to buy control of her nomination. Let’s not even go into the bidding for the Christopher Steele “dossier” alleging kinky sexual romps in Moscow by Donald Trump, or the activities in Ukraine of Tony Podesta’s DC lobbying company — that’s Tony, brother of John Podesta, Clinton campaign chief, whose emails remain a truffle cache for the rooting dogs of the DOJ, if they were actually on-the-task. I write this as a still-registered Democrat myself — though I consider myself their enemy now, yet hardly a Trump partisan. Are there any like me out there who would like to see both parties tossed onto the garbage barge of history?

Of course, to say that also means throwing out a cargo of terrible ideas and beliefs, not just two clown cars of personalities. Identity politics, zero interest rate policy, American Exceptionalism, endless debt, nation-building in foreign lands, FASB-157, sanctuary cities, Title IX coercion, racketeering in health care and higher ed, market interventions, ambiguous borders… is just some of the cargo that needs to be dumped overboard with both parties. Watergate begins to look as quaint and simple as a game of Chutes and Ladders compared to RussiaGate. Not only are both parties implicated one way or another in multiple nefarious schemes, plots, and intrigues, but the Department of Justice and its subsidiary, the FBI, look culpable in a range of cover-ups and mis-directions. If the DOJ becomes disabled, how does any of this get resolved?

The whole extravaganza is heading toward a constitutional crisis that might clean out the system like a Death Wish coffee enema. Sentiment may arise for Mr. Mueller to step aside, if President Trump doesn’t make the rash decision to simply fire him. The latter would certainly foment a constitutional crisis that could include an effort to run Trump over with the 25th amendment. In the event, we’ll be in a new kind of civil war.

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New deal.

How Democrats Can Beat The Republican Tax Cut (Bartlett)

To get back on offense, I think Democrats should stop trying to compete with Republicans on more distributionally fair tax cuts. When you can’t win, don’t play the game. Instead, they should say, if Republicans are willing to increase the deficit by $1.5 trillion, let’s use that money for something the country really needs that will create a vastly greater number of jobs. That is a giant infrastructure program. There is no need to detail the myriad of ways that the money could be spent without coming close to exhausting the available projects. Roads, bridges, schools, hurricane repair projects, sea walls and such to protect against future climate catastrophes, the power grid and many, many more. Civil engineers periodically publish long lists of urgent infrastructure needs.

Not only would a big infrastructure program be capital that will pay off for decades, just as Republican Dwight Eisenhower’s national highway program did, but it will create vastly more jobs than any kind of tax cut, especially the one Republicans are proposing that would largely benefit the wealthy while providing no incentives for job creation or investment. The Congressional Budget Office has long provided estimates to Congress showing that direct spending by government on infrastructure has a much more powerful effect on economic growth than any type of tax cut. A February 2015 report showed that purchases of goods and services by the federal government would raise GDP by as much as $2.50 for every $1 spent. Grants to state and local government for infrastructure could create as much as $2.20 for every $1 spent.

By contrast, according to the same report, a temporary tax cut for the wealthy, such as Republicans propose today, would create at most 60 cents of GDP for every $1 of foregone revenue. A tax cut for the middle class is much better, creating as much as $1.50 of GDP for every $1 of revenue loss. Corporate tax cuts are the worst, creating at most 40 cents of GDP for every $1 of revenue loss. Some may say that these estimates are high, given that we are close to full employment, according to many economists. But the additional stimulus would draw many discouraged workers back into the labor force, especially if it created upward pressure on wages, which workers desperately need. Higher wages will raise consumer spending that will further increase growth.

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This is going spectacularly off the rails. Brussels can no longer insist it’s a domestic Spanish issue. Because Puidgemont is in …. Brussels.

European Arrest Warrant Issued For Catalan Leader Carles Puigdemont (G.)

A Spanish judge has issued an international arrest warrant for Catalonia’s ousted president a day after she jailed eight members of the region’s separatist government pending possible charges over last week’s declaration of independence. In the latest twist in Spain’s worst political crisis in four decades, a national court judge on Friday issued a European arrest warrant for Carles Puigdemont in response to a request from state prosecutors. Puigdemont flew to Brussels earlier this week with a handful of his deposed ministers after Spanish authorities removed him and his cabinet from office for pushing ahead with the declaration despite repeated warnings that it was illegal. Puigdemont’s Belgian lawyer has already said his client will fight extradition without seeking political asylum.

Puigdemont was summoned to appear at Spain’s national court on Thursday to give evidence relating to possible charges of sedition, rebellion and misuse of public funds, but failed to appear. He has said he would only return to Spain if he were offered guarantees that the judicial process he would face were fair. Late on Friday, Puigdemont told the Belgian public TV channel RTBF that he would put his faith in the Belgian courts. He said: “I will not flee from justice. I will go towards justice, but real justice. I’ve told my lawyers to tell the Belgian justice system that I’m completely available to cooperate. “It’s obvious it’s politicised. The guarantees are not there for a fair, independent trial.”

It was Puigdemont first interview since arriving in Brussels on Monday and it he claimed there was “enormous influence of politics over the judiciary in Spain”. He said: “It’s not normal that we risk 30 years in prison, it’s extremely barbaric, we can not talk about democracy.” Puigdemont said he was ready to stand in the election, adding: “It’s possible to run a campaign from anywhere. We consider ourselves a legitimate government. “There must be a continuity to tell the world what’s going on in Spain … It’s not with a government in jail that the elections will be neutral, independent, normal.”

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Better make it a national emergency right now.

America’s Opioid Crisis Is About To Get Worse (ZH)

The simple chart below from the United Nation’s Office on Drugs and Crime beautifully illustrates the next leg up in America’s opioid crisis. If you thought today’s situation was bad – think again. Afghanistan, the world’s largest producer of opium just logged a record crop harvest this year doubling last year’s production. Some how – some way, Afghanistan’s opium will find its way into a neighborhood near you. According to VOANEWS, Last year, poppies were cultivated on 201,000 hectares, yielding 4,700 tons of opium, up 46% from 2015. Sources told VOA’s Pashto service more than 10,000 tons of opium were produced this year. Opium then can be refined into heroin. The U.N. Office on Drugs and Crime estimated that opium accounted for some 16% of the country’s GDP last year, including more than two-thirds of the entire agricultural sector. In addition to fueling insecurity, violence and insurgency, the drug production is discouraging private and public investment, a UNODC report said.

This is a bad sign for President Trump who opted to call the opioid crisis a ‘public emergency’ rather than a full-blown ‘national emergency’. Highlights from Trump’s opioid crisis speech: In 2016, more than two million Americans had an addiction to prescription or illicit opioids. Since 2000, over 300,000 Americans have died from overdoses involving opioids. Drug overdoses are now the leading cause of injury death in the United States, outnumbering both traffic crashes and gun-related deaths. In 2015, there were 52,404 drug overdose deaths — 33,091 of those deaths, almost two-thirds, involved the use of opioids. The situation has only gotten worse, with drug overdose deaths in 2016 expected to exceed 64,000. This represents a rate of 175 deaths a day.

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What happens when you transfer your food production abroad. Look, Cuba and Russia used it to their advantage.

‘No Deal’ Brexit To Add £930 A Year To UK Shopping Bills (G.)

Households face increases of up to £930 in their annual shopping bills if Britain walks away from Brexit talks without a trade deal, according to new research that reveals a disproportionate impact on poorer families and the unemployed. Meat, vegetables, dairy products, clothing and footwear would be subject to the largest consumer price rises under a “no-deal” scenario, according to a study published in the authoritative National Institute Economic Review, adding to inflationary pressures that have already forced the first interest rate rise in a decade this week. Stalled negotiations resume next week in Brussels, but the government is also about to publish a trade bill that would result in Britain being required to apply swingeing new tariffs on European imports if it falls back on World Trade Organisation rules.

Since WTO tariffs are highest for fresh food – reaching 45% for dairy products and 37% for meat – and much of this is currently imported from Europe, the team of economists predict an inflationary surge that could match that already inflicted by the falling pound. This would impact most on those least able to afford it, as poorer households typically spend a much higher proportion of their income on food and other essentials. For the 2m worst-affected households, the study predicts their weekly expenditure will rise by 2-4.7%, equivalent to £400-930 extra a year. “The overall increase in price in the affected goods is estimated to be 2.7% and this translates into an increase in the overall cost of living of 0.8-1.1% for a typical family, with the unemployed and families, those with children and pensioners hit hardest,” conclude the economists from the University of Sussex and Resolution Foundation.

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America takes revenge on Chavez.

Stalked By Default Fears, Venezuela Calls Creditor Meeting (AFP)

Venezuela on Friday called foreign creditors to a November 13 meeting in Caracas aiming to restructure its estimated $150 billion debt, as credit-rating agencies dealt the crisis-stricken country another blow with double downgrades. Standard & Poor’s cut the nation’s long-term foreign currency rating to “CC” from “CCC-” over growing concerns of the risk of a debt default in the oil-producing country, while fellow agency Fitch cut the long-term debt rating to “C” from “CC.” The increasingly dire warnings followed President Nicolas Maduro’s calls to “investors across the whole world and to holders of Venezuelan debt” to attend a Caracas meeting November 13 “to start a process to refinance and renegotiate the external debt.”

His vice president, Tareck El Aissami, who is leading a commission tasked with the restructuring, said the government is seeking “sovereign commitments” for a debt renegotiation. Flanked by the ministers in charge of the economy, finance and energy, El Aissami confirmed the country had on Friday started to pay out $1.2 billion due to service the debt of state oil company PDVSA. Maduro announced Thursday that Venezuela would begin talks to refinance the debt immediately after that payment was made. El Aissami, one of the Venezuelan officials sanctioned by the United States due to alleged ties to drug trafficking, said the talks with creditors will “establish the groundwork to renegotiate the terms of the foreign debt of the Republic and of PDVSA.”

“We will begin a sovereign renegotiation of our debt and we will continue to comply fully, transparently, as our government has done historically,” he said in a televised statement. He noted that since 2014 Venezuela, which has the largest proven crude oil reserves in the world, has paid nearly $72 billion in principal and interest payments on the debt. Maduro has repeatedly blamed the United States for the country’s woes, saying Washington is trying to strangle Venezuela with sanctions. US sanctions imposed on Venezuela in August ban US trade in any new bonds issued by the Venezuelan government or PDVSA — a needed step in any restructuring. El Aissami denounced the “continued aggression, permanent sabotage, blockade and financial persecution” he said US President Donald Trump has imposed on the people of Venezuela.

But he said the sanctions really hurt bondholders and financial institutions. Much of Venezuela’s debt is held by China and Russia, to be paid off in oil – the resource that underpins the Venezuelan economy. The country has less than $10 billion in foreign currency reserves. Analysts were pessimistic about Venezuela’s chances of successfully restructuring its debt. “Venezuela’s options to keep up with its payments are shrinking rapidly, mainly because any restructuring needs to be matched with clear and credible economic reforms capable of winning the trust and support of bond-holders,” said Diego Moya-Ocampos, an analyst at London-based IHS Markit.

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People will make themselves sick, self harm, just to get off the islands.

The Greek Island Camp Where Only The Sick Or Pregnant Can Leave (G.)

Eida was two months pregnant when she suffered a miscarriage. A month later, the 18-year-old Syrian refugee still feels angry and despondent. Not just that she lost a child. But that being pregnant was her ticket off the Greek island of Samos – and out of a squalid, barren, barb-wired camp. The young woman is one of around 3,000 refugees in Samos, one of the five Greek “hotspot” islands in the eastern Aegean Sea, designated by the EU to act as a barricade against massive irregular migrant arrivals from Turkey. Since March 2016, when Brussels concluded a controversial agreement with Ankara to curb migrant flows, only vulnerable cases are transferred from the hotspots to the Greek mainland. Eida had hoped to become one of those cases.

The rest are left with two options: languish under deplorable conditions in the camps until their asylum claims are examined, or pay local smuggling networks €1,000 or more to get ferried to the mainland. Anastasia Theodoridou, head of social services at Samos state hospital, says she routinely deals with cases like Eida’s. “Dozens of women come to the hospital desperate to find out they are pregnant. Other refugees are eager for a diagnosis of any serious condition. And if there is nothing wrong with them, they bring their spouses and children. Maybe one of them might have a chance of a diagnosis.” According to internal documents, the Samos hospital has handled 7,857 visits by refugees since the start of the year.

The grotesque paradox of refugees hoping to be ill to get favourable treatment casts a shadow on the EU’s narrative about the success of its response to the refugee crisis.The rosy outlook from Brussels is often based on statistics that show a sharp reduction in irregular daily crossings and deaths in the Aegean. This in turn has resulted in a broad desertion of the tragedy by the international community: journalists have long since gone home, NGOs are packing up, volunteers are few and far between and official funding has been reduced. But despite substantial EU support to Athens – €430m has been contracted according to the European commission – conditions at the Greek hotspots remain appalling. With the focus now shifting to refugees crossing the sea from Libya, Tunisia or Algeria, the situation here is still no less dramatic than a year ago. It is still a massive crisis, albeit a somewhat forgotten one.

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Nov 032017
 
 November 3, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , ,  8 Responses »


Edward S. Curtis Tipi in the snow 1908

 

Social Security Can Never Run Out Of Money – Just Ask Alan Greenspan (BI)
Inside Hillary Clinton’s Secret Takeover of the DNC (Donna Brazile)
Jay Powell – A Quiet Leader (DDMB)
Why Would Anyone Want The Fed Job? (Crudele)
The Borrower Is The Slave To The Lender (Lance Roberts)
US Manufacturing Worker Productivity Crashes Most In 8 Years (ZH)
Bitcoin Is the ‘Very Definition’ of a Bubble – Credit Suisse CEO (BBG)
One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week (MBV)
The Hidden Danger Bulls Are Missing (Rickards)
As Credit Booms, Citi Says Synthetic CDOs May Reach $100 Billion (BBG)
China Issues Guidelines On Overseas Investment Amid Crackdown On Deals (R.)
US Spends $250 Million Per Day For The War On Terror (TeleS)
Barcelona Council Says Catalan Government Legitimate, Independence Is Not (CN)
Kim Dotcom Wins Settlement From New Zeland Police Over 2012 Dawn Raid (NZH)
Monsanto Halts Launch Of Chemical After Farmers Complain Of Rashes (R.)

 

 

“The United States can pay any debt it has because it can always print money to do that, so there is zero probability of default.”

Social Security Can Never Run Out Of Money – Just Ask Alan Greenspan (BI)

I asked Kelton why, given her counterintuitive argument that deficits don’t really matter, Americans should take her word for it. Her reply: Don’t. Instead, listen to what Alan Greenspan, the prominent Republican former Federal Reserve chairman who is a purported deficit hawk, had to say on the matter. In March 2005, he was pressed by a young congressman named Paul Ryan about the need for privatizing Social Security because of the prospect of a looming “entitlements crisis.” Greenspan replied rather bitingly that there was no such thing or even a remote possibility. “I wouldn’t say that the pay-as-you-go benefits are insecure in the sense that there’s nothing to prevent the federal government to create as much money as it wants and pays it to somebody,” Greenspan told an incredulous Ryan. “The question is how do you set up a system that assures that the real assets are created which those benefits are employed to purchase.

So it’s not a question of security — it’s a question of the structure of the financial system.” That’s what Democrats should be saying, rather than regurgitating the old Republican rouse — which even the GOP is willing to abandon when it’s convenient — about a looming government debt crisis that never comes. “Instead of repeating talking points that reinforce the idea that Social Security is somehow financially unsustainable, Democrats should play Greenspan’s remarks on a loop. They should call attention to what Greenspan said — under oath — about the program’s long-term sustainability,” Kelton said. “Instead of accepting the premise that Social Security is in trouble, Democrats should accept Greenspan’s challenge — put forward an agenda that will do more to promote future growth than anything the Republicans are offering.”

The financial crisis was instructive on this count. Many critics of both the federal government’s fiscal stimulus and the Federal Reserve’s bond purchases worried that the country was getting so deep into debt that one of two things was bound to happen: a crisis in the Treasury market or a bout of runaway inflation. Nine years into the recovery, Treasury yields remain near historic lows and inflation is not only contained but remains worryingly low. That last point is key: It’s not that folks like Kelton and Baker believe there is no risk to government spending. They simply argue that the only risks are the misallocation of resources and inflation — not some amorphous “debt crisis” or default of the sort some politicians and market analysts have shouted about.

Unlike Greece, which actually did default on its debt because of a lack of control over its own currency, the US could default only by choice. Trump flirted with that choice once as a candidate — but quickly backed away from the threat after he realized the catastrophic market and economic consequences such a debacle would have. In August 2011, after the US’s credit rating was downgraded for the fist time following a prolonged impasse over the US debt ceiling, Greenspan was asked during a “Meet the Press” interview about the issue of “unfunded liabilities” and “entitlements.” His response again spoke volumes: “The United States can pay any debt it has because it can always print money to do that, so there is zero probability of default.”

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Quite a reversal. Brazile was fired from CNN a year ago when it was discovered she fed the Clinton campaign debate questions. Still, what a mess. Will they clean it up or try to ignore?

Inside Hillary Clinton’s Secret Takeover of the DNC (Donna Brazile)

When I got back from a vacation in Martha’s Vineyard I at last found the document that described it all: the Joint Fund-Raising Agreement between the DNC, the Hillary Victory Fund, and Hillary for America. The agreement—signed by Amy Dacey, the former CEO of the DNC, and Robby Mook with a copy to Marc Elias—specified that in exchange for raising money and investing in the DNC, Hillary would control the party’s finances, strategy, and all the money raised. Her campaign had the right of refusal of who would be the party communications director, and it would make final decisions on all the other staff. The DNC also was required to consult with the campaign about all other staffing, budgeting, data, analytics, and mailings. I had been wondering why it was that I couldn’t write a press release without passing it by Brooklyn. Well, here was the answer.

When the party chooses the nominee, the custom is that the candidate’s team starts to exercise more control over the party. If the party has an incumbent candidate, as was the case with Clinton in 1996 or Obama in 2012, this kind of arrangement is seamless because the party already is under the control of the president. When you have an open contest without an incumbent and competitive primaries, the party comes under the candidate’s control only after the nominee is certain. When I was manager of Gore’s campaign in 2000, we started inserting our people into the DNC in June. This victory fund agreement, however, had been signed in August 2015, just four months after Hillary announced her candidacy and nearly a year before she officially had the nomination.

I had tried to search out any other evidence of internal corruption that would show that the DNC was rigging the system to throw the primary to Hillary, but I could not find any in party affairs or among the staff. I had gone department by department, investigating individual conduct for evidence of skewed decisions, and I was happy to see that I had found none. Then I found this agreement. The funding arrangement with HFA and the victory fund agreement was not illegal, but it sure looked unethical. If the fight had been fair, one campaign would not have control of the party before the voters had decided which one they wanted to lead. This was not a criminal act, but as I saw it, it compromised the party’s integrity.

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We’ll go with Danielle DiMartino Booth for now. Powell’s no PhD, and not a Yellen clone. But he’s been at the Fed for 5 years already, which doesn’t make him an obvious agent for change.

Jay Powell – A Quiet Leader (DDMB)

The sheer breadth of Powell’s experience is refreshing compared to what we’ve had for the past 30 years. Powell has a deep understanding of the law and politics. He worked in the Treasury Department under Nicholas Brady and was confirmed as Undersecretary of the Treasury under George H.W. Bush. His background in politics and the experience he has had at the Fed thus far have prepared him well for his role as liaison to Congress and the White House. Powell’s experience as an investment banker was critical in his carrying out the investigation and sanctioning of Salomon Brothers. Understanding the entirely different type of politics that exists in big banks will bode well for his capacity to regulate the banks. This attribute especially will dilute the power traditionally exerted by the NY Fed in recent years, a District that has a long history of conflicts of interest vis-à-vis the banks it regulates.

A stronger regulator as Fed chair in the years leading up to the financial crisis. At the Carlyle Group, Powell founded and ran the Industrial Group within the Buyout Fund. A separate missing characteristic among Fed leaders for the past 30 years has been a woeful lack of understanding as to how Fed policy effects corporations and the decisions CEOs and CFOs make driven by Fed policy, the most obvious of which has been debt-financed share buybacks at the expense of capital expenditures. Some in the media have questioned Powell’s being the wealthiest individual at the Fed. That is an extremely strong attribute. In his work between 2010 and 2012 at a bipartisan think tank, Powell worked for a salary of $1 per year to carry out his mission to raise the debt ceiling. His wealth affords him the luxury of having no preset agenda. His history of working for his country to its best end exemplifies that he is at the Fed because he truly believes he is doing a greater good in servicing his country.

Powell’s work on Too Big to Fail banks also speaks to his ability to be independent and objective in his approach to regulating big banks with deep-pocketed lobbyists who hold huge sway over politicians. If he is willing to go up against the biggest banks, he will hopefully prove to be a leader cast in the mold of William McChesney Martin, the longest serving Fed Chairman famous for testifying to Congress that it was the Fed’s job to take away the punch bowl just as the party gets going. [..] His experience in the financial markets suggests he will be less apt to keep rates too low for too long as has been the case with his three predecessors. Powell was not in favor of the third round of QE, but voted for its nevertheless. This is his biggest black eye and why market participants perceive him to be as dovish as they do.

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Savings and pensions need higher rates, fast. But…

Why Would Anyone Want The Fed Job? (Crudele)

No matter who is appointed, the next Fed chairman has a problem. Right now, the economy is looking healthy. The stock market is booming. Consumer confidence is high. Home prices are soaring. And some economic indicators seem to say, “Happy days are here again.” Just Wednesday, for instance, the Atlanta Federal Reserve raised its forecast for economic growth in the fourth quarter to a booming 4.5% annual rate. The nation’s gross domestic product, the standard for measuring economic growth, rose at a healthy 3% annual rate in the third quarter. That 3% figure was puzzling because hurricanes should have stunted growth, which means that number might be revised downward once better-quality statistics come in.

Or it could mean that growth is darn good, despite the weather. Nevertheless, the 4.5% estimate for the fourth quarter — on top of the 3% growth in the July to September quarter — is going to force whoever ends up running the Fed to seriously consider raising interest rates faster than usual. But that’s where it gets tricky. Once rates increase, the economy could slow because borrowing costs will rise for both consumers and companies. When the cost of borrowing money increases, people and companies tend to cut back on spending. But there’s another possible twist that could complicate the job of the next Fed boss even more. The relatively impressive growth in the third-quarter GDP and the even better performance in the fourth quarter could turn out to be another fake-out.

The GDP, for instance, rose by a 4.6% annual rate in the second quarter of 2014 and by a 5.2% rate in the third quarter of that year, only to collapse back to subpar growth in the next eight quarters. Also, the New York Fed, which is more influential, doesn’t agree with the Atlanta Fed. It had current GDP at closer to 3%. With all that’s going on, why would anyone want the Fed job?

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When anyone tells you the economy has recovered, show them any of these graphs.

The Borrower Is The Slave To The Lender (Lance Roberts)

Despite the bullish economic optics, the reality for the majority of Americans is they simply have not yet recovered from the financial crisis. As the chart below shows, while savings spiked during the financial crisis, the rising cost of living for the bottom 80% has outpaced the median level of “disposable income” for that same group. As a consequence, the inability to “save” has continued.

I discussed previously the problem of rising debt. Beginning in 1990, the gap between the “standard of living” and real disposable incomes went negative with the resultant “gap” filled through the use of debt. However, since the financial crisis, this has no longer been the case. I modified the previous chart with the savings rate which tells the same story, as the cost of living began outpacing incomes the difference came from savings, and a continuous increase in debt. Again, despite the temporary uptick in the savings rate following the financial crisis, the real cost of living continues to erode the middle class.

You can see the erosion of the savings rate more clearly when you look at the rate of Personal Consumption Expenditure (PCE) growth as compared to debt growth. As spending and debt accelerated, the savings rate declined. More importantly, in 2000 the growth rate of debt sharply accelerated above PCE growth. This debt-fueled consumption, however, has not led to stronger rates of economic growth.

Debt is a negative thing for the borrower. It has been known to be such a thing even in biblical times as quoted in Proverbs 22:7: “The borrower is the slave to the lender.” Debt acts as a “cancer” on an individual’s wealth as it siphons potential savings from income as those funds are diverted to debt service. Rising levels of debt means rising levels of debt service which reduces actual disposable personal incomes that could be saved or reinvested back into the economy. The mirage of consumer wealth has been a function of surging debt levels. “Wealth” is not borrowed but “saved” and as shown in the chart below, this is a lesson that too few individuals have learned. The reality is that since “savings” are the cornerstone of economic growth longer-term, as savings provide for productive investment and lending, it should be of NO surprise that, as shown in the next chart, there is a very high correlation between the savings rate, GDP, and PCE.

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What happens when you don’t make stuff anymore.

US Manufacturing Worker Productivity Crashes Most In 8 Years (ZH)

US worker productivity rose at 3.0% QoQ in Q3 – the best since 2014.

Unit labor costs rose at 0.5% annualized rate in Q3 (est. 0.4%) following 0.3% pace in Q2. Output rose at a 3.8% rate following 3.9%. Hours worked rose at a 0.8% pace after 2.4%. The latest figure compares with a 1.2% average over the period spanning 2007 to 2016. Weak productivity helps explain why companies are reluctant to raise workers’ wages, even as profit margins have improved. However, among manufacturers, productivity crashed 5% QoQ – the biggest drop since Q1 2009, when the economy was in recession – after rising 3.4% in Q2. Let’s hope that is storm-related.

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Insert your opinion here: “From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,..”

Bitcoin Is the ‘Very Definition’ of a Bubble – Credit Suisse CEO (BBG)

The speculation around bitcoin is the “very definition of a bubble,” Credit Suisse CEO Tidjane Thiam said as the currency exceeded $7,000 for the first time. “From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” he said at a news conference in Zurich Thursday. He added that in the history of finance, such speculation has “rarely led to a happy end.” The digital currency got new impetus this week after CME, the world’s largest exchange owner, said it plans to introduce bitcoin futures by the end of the year, citing pent-up demand from clients. That pushes bitcoin closer to the mainstream by making it easier to trade without the hassles of owning bitcoin directly. Other bankers are also sounding warnings about the currency.

JPMorgan Chase CEO Jamie Dimon has called bitcoin “a fraud” that will eventually blow up. UBS Chairman Axel Weber said last month that bitcoin has no “intrinsic value” because it’s not secured by underlying assets. Bankers also are steering clear of bitcoin for fear that criminals could use its anonymity to hide their activities, Thiam said. “Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges,” he said. While bitcoin remains a no-go with the industry, banks are racing to develop blockchain, the technology underpinning the currency. Thiam said blockchain may have many applications in banking. Credit Suisse is among more than 100 banks are working within the R3, a consortium created to find ways to use blockchain as to track money transfers and other transactions.

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It’s by design, and that remains worrisome.

One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week (MBV)

Bitcoin’s incredible price run to break over $6,000 this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency. An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to “mine” more Bitcoins. That’s about as much as Nigeria, a country of 186 million people, uses in a year. This averages out to a shocking 215 kilowatt-hours (KWh) of juice used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day).

Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries’ index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes. Expressing Bitcoin’s energy use on a per-transaction basis is a useful abstraction. Bitcoin uses x energy in total, and this energy verifies/secures roughly 300k transactions per day. So this measure shows the value we get for all that electricity, since the verified transaction (and our confidence in it) is ultimately the end product. Since 2015, Bitcoin’s electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it.

As the price rises, miners add more computing power to chase new Bitcoins and transaction fees. It’s impossible to know exactly how much electricity the Bitcoin network uses. But we can run a quick calculation of the minimum energy Bitcoin could be using, assuming that all miners are running the most efficient hardware with no efficiency losses due to waste heat. To do this, we’ll use a simple methodology laid out in previous coverage on Motherboard. This would give us a constant total mining draw of just over one gigawatt. That means that, at a minimum, worldwide Bitcoin mining could power the daily needs of 821,940 average American homes. Put another way, global Bitcoin mining represents a minimum of 77KWh of energy consumed per Bitcoin transaction.

Even as an unrealistic lower boundary, this figure is high: As senior economist Teunis Brosens from Dutch bank ING wrote, it’s enough to power his own home in the Netherlands for nearly two weeks. As goes the Bitcoin price, so goes its electricity consumption, and therefore its overall carbon emissions. I asked de Vries whether it was possible for Bitcoin to scale its way out of this problem. “Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node,” he said via direct message.

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“Earnings are likely to fall short of expectations, which can lead to a correction. Once that happens, multiples can shrink as well. Soon you’re in a full-scale bear market with stock prices down 20% or more.”

The Hidden Danger Bulls Are Missing (Rickards)

Bull markets in stocks seem unstoppable right up until the moment they stop. Then comes a rapid crash-and-burn phase. Is there ever any warning that a collapse is about to happen? Of course there is. Analysts warn about it all the time and provide mountains of data and historical evidence to back up their analysis. The problem is that everyone ignores them! You can talk about the dangers represented by CAPE ratios, margin levels, computerized trading, persistent low volatility and complacency all you want, but nothing seems to slow down this bull market. Yet there is one thing that can stop a bull market in its tracks, and that’s corporate earnings. The simplest form of stock market valuation is to project earnings, apply a multiple and, voilà, you have a valuation. Multiples are already near record highs, so there’s not much room for expansion there.

The only variable left is projected earnings and that’s where Wall Street analysts are having a field day ramping up stock prices. Earnings did grow significantly in 2017 on a year-over-year basis, but that’s mainly because earnings were weak in 2016, so the year-over-year growth was relatively easy. Now comes the hard part. How do you expand earnings again in 2018 when 2017 was such a strong year? Wall Street just uses a simple extrapolation and says next year will be like this year, only better! But there is every reason to doubt that extrapolation. This is from a recent Bloomberg article:

“Ominously, Weekly Leading Index growth turned down early this year and is now at a 79-week low. Such cyclical downturns have historically telegraphed [growth-rate cycle] GRC downturns. That shows very clearly that economic growth is about as good as it gets and that a fresh growth slowdown may be on the way… ” “Over time, we find that stock price corrections — big and small — have historically clustered around GRC downturns. In other words, the risk of corrections rises around economic slowdowns… Today, there are rising rates, with quantitative tightening about to begin. This will take place during an economic slowdown, implying a likely downswing in corporate profit growth, delivering a proverbial one-two punch.”

Earnings are likely to fall short of expectations, which can lead to a correction. Once that happens, multiples can shrink as well. Soon you’re in a full-scale bear market with stock prices down 20% or more. That’s without even considering a war with North Korea and all of the dangers others have already mentioned. This may be your last clear chance to lighten up on listed equity exposure before the bubble bursts.

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Complex derivatives. What do they make you remember?

As Credit Booms, Citi Says Synthetic CDOs May Reach $100 Billion (BBG)

The comeback in complex credit derivatives blamed for exacerbating the global financial crisis is picking up pace. That’s according to new research this week from Citigroup, one of the biggest arrangers of so-called synthetic collateralized debt obligations. Sales of the products may jump to as much as $100 billion this year from about $20 billion in 2015, Citigroup analysts wrote in an Oct. 31 report. While investors suffered billions of dollars in losses on similar bets a decade ago, the leverage offered by synthetic CDOs is luring back buyers in an era of low yields and dwindling volatility. “It would seem as if the low spread-low vol environment, similar to back in 2006-2007 (when investors couldn’t get enough of levered synthetic tranches) has revived some interest in portfolio credit risk,” Citigroup analysts led by Aritra Banerjee wrote.

“Investors may not have necessarily wanted to add leverage, but, simply put, they have had to, given the lack of alternatives.” While post-crisis deals are typically tied to corporate credit as opposed to the mortgage debt that helped spur the credit crunch, the return of synthetic CDOs is likely to generate unease among investors who worry that markets are too frothy. The controversial product’s resurgence coincides with a boom in other types of credit wagers, including options on credit derivative indexes and exchange-traded funds that provide quick and easy access to a broad swath of credit. There are some key differences in today’s synthetic CDOs versus the pre-crisis vintage. Citigroup said it has created over 50 “full capital structure” deals in recent years, which vary from the single-tranche bespoke deals that dominated before and just after the crunch.

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“China’s non-financial outbound direct investment (ODI) fell 41.9% in January-September from a year earlier to $78.03 billion. For September alone, it plummeted 42.5% on-year to $9.31 billion..”

China Issues Guidelines On Overseas Investment Amid Crackdown On Deals (R.)

After years of rapid growth, China’s outbound investment has slumped so far in 2017 as authorities crack down on “irrational” overseas deals which are suspected of being used to bypass capital controls and move money offshore, pressuring the yuan currency. The draft regulations, released to the public to solicit feedback until Dec. 3, aim to improve oversight, safeguard national security and increase support, according to a post on the website of the National Development and Reform Commission (NDRC). Some administrative hurdles, such as a rule requiring that Chinese companies investing over $300 million overseas seek approval from the state planner, would be reduced or removed under the new rules, the post said.

At the same time, the new rules would also increase oversight on investments by overseas subsidiaries of Chinese companies, as well as for investments in sensitive sectors and countries, it said. Sensitive projects listed in the rules include those in countries that are at war, that do not have diplomatic ties with China or where investment is restricted by China’s commitments to international treaties, resolutions or requirements. Media organizations, weapons manufacturing, companies involved in multi-national water resources exploitation or those that China’s national macro policies restrict investment in were listed as sensitive sectors. A full list of sensitive areas would be released by the state planner in future, it said.

Punishments for companies that use dishonest measures to invest overseas, engage in unfair competition or damage national security will be increased, the rules said. The statement said that the new draft builds on previous regulations released in 2014. China’s non-financial outbound direct investment (ODI) fell 41.9% in January-September from a year earlier to $78.03 billion. For September alone, it plummeted 42.5% on-year to $9.31 billion, according to Reuters calculations.

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As Americans live paycheck to paycheck. Problem is, both parties support this lunacy.

US Spends $250 Million Per Day For The War On Terror (TeleS)

The Department of Defense’s “cost of war” report suggests that the U.S. has spent $250 million per day for the past 16 years on ‘defense.’ According to a newly published United States Department of Defense (DoD) “cost of war” report, U.S. taxpayers have shelled out $1.46 trillion for war since September 11, 2001, when the War on Terror began. This amounts to around $250 million per day. The report was published by the Federation of American Scientists Secrecy News blog and covers the period of September 11, 2001 to mid-2017. As the report notes, nearly $1.3 trillion of the total cost spent on the Iraq and Afghanistan wars alone. On top of this, continuing operations in Afghanistan and the U.S.-led air campaign in Iraq and Syria has totalled $120 billion.

U.S. President Donald Trump promised to rebuild America’s military which he sees as less extravagant than it ever has been. “Our active-duty armed forces have shrunk from 2 million in 1991 to about 1.3 million today,” he said in a speech. “The Navy has shrunk from over 500 ships to 272 ships during this same period of time. The Air Force is about one-third smaller than 1991. Pilots flying B-52s in combat missions today. These planes are older than virtually everybody in this room.” Part of Trump’s plan to ‘rebuild’ the U.S.’ military is to make sure that the military is “funded beautifully.” The Trump administration has proposed a $603 billion defense budget, which well exceeds the cap of $549 billion, and would require the U.S. Congress to make spending cuts in other areas.

In July, the House of Representatives approved $696.5 billion in defense spending, which includes a base budget of $621.5 billion and $75 billion in ‘Overseas Contingency Operations dollars’, commonly referred to as ‘war money’. Conversely, the Senate passed a $640 billion base defense budget with a $60 billion allocation for war money. Both versions of the budget well exceed the Trump administration’s proposal, making this defense budget, by far, the largest defense budget in U.S. history. While the U.S.’ current and proposed military spending is massive, the DoD’s “cost of war” report did not take into account other collateral costs of war, including veteran’s benefits and other related costs.

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Will Belgium extradite Puidgemont? 8 of his ministers are already in jail.

Barcelona Council Says Catalan Government Legitimate, Independence Is Not (CN)

Barcelona City Council has declared that the government dismissed by Spain after the application of Article 155 is “legitimate,” although it does not recognize Catalonia as an official republic. After meeting on Thursday, the council approved the proposal put forth by pro-independence party Esquerra Republicana (ERC) to “recognize the government that emerged from the polls on September 27 as the legitimate government of Catalonia,” with votes in favour from Barcelona en Comú (BeC), ERC, PDeCAt, and the anti-capitalist party CUP. Votes against came from the Socialists (PSC), the Catalan People’s Party (PP), and Ciutadans (Cs).

CUP also proposed a motion to “recognize the proclamation of the Catalan Republic approved by the Parliament of Catalonia on October 27.” Although this motion received support from ERC, PDeCAT, and the CUP, it received more votes against from BeC, Cs, PSC, and PP. Alfred Bosch, president of ERC warned that “the fact that the Catalan government has been dismissed, and its powers passed on to the Spanish government, will have an effect on Barcelona.” Barcelona’s mayor, Ada Colau, received criticism from CUP representative María José Lecha, who said the mayor cannot be “neutral or equidistant” in the face of the judicial persecution of the October 1 referendum, and that she must side either with “the oppressor or the oppressed.”

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What a story this still is.

Kim Dotcom Wins Settlement From New Zeland Police Over 2012 Dawn Raid (NZH)

Kim Dotcom and his former wife Mona have accepted a confidential settlement from the police over the raid which saw him arrested, saying he did so to protect their children and because the Government “recently changed for the better”. He said that their previous desire to see accountability had been trumped by wanting to “do what was best for our children” by bringing an end to the court case. The settlement came after a damages claim was filed with the High Court over what was considered an “unreasonable” use of force when the anti-terrorism Special Tactics Group raided his $30 million mansion in January 2012. The raid was part of a worldwide FBI operation to take down Dotcom’s Megaupload file-sharing website which was claimed to be at the centre of a massive criminal copyright operation.

Dotcom and three others were arrested and await extradition to the United States on charges which could land them in prison for decades. The NZ Herald has learned earlier settlements were reached between police and others arrested, including Bram van der Kolk and Mathias Ortmann. It was believed their settlements were six-figure sums and it is likely Dotcom would seek more as the main target in the raid. He was also the focus of risk assessments used to justify the use of the anti-terrorism squad which carried out a helicopter assault at dawn. Those assessments included photographs of Dotcom carrying shotguns – pictures taken while clay pigeon shooting – and descriptions of him as violent despite a lack of evidence to support the claim.

The court challenge also questioned “visual surveillance” which had not been authorised by the court. Evidence has emerged in court hearings of police watching the Dotcom Mansion from neighbouring properties, and scouting the mansion interior with a hidden camera carried on to the property by a local police officer on a goodwill meeting the day before the raid.

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Ban it. Ban the whole industry. We cannot afford this to continue. Let’s feed ourselves without poisoning ourselves in the process.

Monsanto Halts Launch Of Chemical After Farmers Complain Of Rashes (R.)

Monsanto put on hold the launch of a chemical designed to be applied to crop seeds on Wednesday following reports it causes rashes on people, in the latest instance of complaints about a company product that was approved by U.S. environmental regulators. Monsanto froze plans for commercial sales of the product called NemaStrike, which can protect corn, soybeans and cotton from worms that reduce yields. The company said it conducted three years of field tests across the United States in preparation for a full launch and that more than 400 people used it this year as part of a trial. The delayed launch of what Monsanto calls a blockbuster product is another setback for the company, which is already battling to keep a new version of a herbicide on the market in the face of complaints that it damaged millions of acres of crops this summer.

“There have been limited cases of skin irritation, including rashes, that appear to be associated with the handling and application of this seed treatment product,” Brian Naber, U.S. commercial operations lead for Monsanto, said in a letter to customers about NemaStrike. Some users who suffered problems may not have followed instructions to wear protective equipment, such as gloves, company spokeswoman Christi Dixon said. The company expected NemaStrike to launch across up to 8 million U.S. crop acres in fiscal year 2018, Chief Executive Hugh Grant said on a conference call last month. The product was “priced at a premium that reflects its consistent yield protection” against worms known as nematodes, he said.

The U.S. Environmental Protection Agency (EPA) did extensive evaluations of the product before approving it for use, according to Monsanto, which has described NemaStrike as “blockbuster technology.” [..] “The technology is effective and can be used safely when following label instructions,” Monsanto said. The EPA last year approved use of Monsanto’s new version of a weed killer using a chemical known as dicamba on crops during the summer growing season.Problems have also emerged with the herbicide since the agency’s approval. Farmers have complained it evaporates and drifts from where it is applied, causing damage to crops that cannot resist it.

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Nov 022017
 
 November 2, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Marc Riboud Painting the Eiffel Tower 1953

 

The US Isn’t Prepared for the Next Recession (Atlantic)
The New Fed Chair Will Watch an Economy Fraught With Risks (BBG)
The Can Kickers’ Cacophony (Stockman)
New Zealand’s Housing Boom Has Come to an End (BBG)
Australia Mortgage Stress Is Rapidly Increasing (DFA)
Scandinavia Property Markets Are Up 70% But Experts Say There’s No Bubble (BBG)
City Could Lose 10,000 Jobs On Day One Of Brexit – Bank Of England (G.)
Child Poverty In Britain Set To Soar To New Record (G.)
The Limits of Russian Sanctions (HBlatt)
Spanish Court To Question Catalonia Separatists – Except Puigdemont (AFP)
Monsanto, BASF Weed Killers Strain US States With Damage Complaints (R.)
Greece Concerned Over 200% Spike In Refugee, Migrant Arrivals (K.)
Greece Mulls Emergency Housing Measures After Migrant Spike (AP)
Refugees In Greece Demand Transfer To Germany, Start Hunger Strike (R.)

 

 

Oh well, we’ll just bail out the banks then.

The US Isn’t Prepared for the Next Recession (Atlantic)

Maybe it will start with a failed initial public offering, followed by the revelation of widespread fraud in Silicon Valley. Perhaps energy prices will spike, sapping the finances of anyone who drives a car to work. Maybe a foreign crisis will cause a credit crunch, or President Trump will spark a global trade war. A recession might seem like a distant concern, with the latest data showing that the current, extraordinarily economic long expansion just keeps humming along. But one will hit eventually, for some reason or another—that’s how economies work. And when it does, the country won’t be ready. The average middle-class household has largely recovered from the Great Recession, which began nearly 10 years ago, in December 2007.

The growing economy has started to boost earnings across the income spectrum, and higher housing prices have done the same for net worth. The amount of debt that households owe is falling, too. Yet millions of people remain in perilous financial shape, with little to buffer them in the event of a layoff. Roughly half of respondents to a Federal Reserve survey conducted in 2015 said that they could not come up with $400 in an emergency, with a third saying they could not cover three months of expenses, even if they sold assets, dipped into retirement accounts, and asked friends and family for help. Outsize wealth and income continue to accumulate at the very top of the scale, and the finances of millions of American families remain fragile. Americans are no worse off than they were when the last recession hit, in other words, but a decade of growth has not made them more secure, either.

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He really said it: “Torsten Slok, chief international economist at Deutsche Bank in New York: “The world economy has never been in better shape”

The New Fed Chair Will Watch an Economy Fraught With Risks (BBG)

Jerome Powell, said to be President Donald Trump’s pick to be the next Federal Reserve chairman, is set to take the reins of the world’s most important central bank at a time when the U.S. economy is on a roll. Growth is accelerating, inflation is tame and unemployment is the lowest in 16 years. Such a backdrop should initially enable a new Fed chairman to keep gradually raising interest rates from historic lows with the aim of stretching out what is already the third-longest U.S. upswing. Expansions don’t die of old age. Rather, they typically are brought down by the bursting of asset bubbles, shocks like natural disasters or political upheaval, or errors by central banks. Faster rate hikes could cool the stock market but risk holding inflation below the central bank’s target, possibly tipping the economy into a recession.

Tightening too slowly could stoke asset values even further. Powell, and Trump by association, will own the outcome. Powell has the added dilemma that his Fed would confront any slump in growth with little in its policy arsenal. There is barely room to cut rates deeply, and the backup plan – quantitative easing – is now the subject of Republican lawmaker ire. “Powell has been dealt some cards in this poker game that aren’t helpful for carrying out monetary policy,” said Torsten Slok, chief international economist at Deutsche Bank in New York. “The world economy has never been in better shape, but it is a very unthankful job to be a central banker these days.”

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“What lies around the corner is an immense fiscal catastrophe. That’s the inexorable result of the current cacophony of can-kicking in the Imperial City.”

The Can Kickers’ Cacophony (Stockman)

[..] if by some miracle the Donald survives the Mueller assault, the GOP retains it majority in the bi-elections and the Republican party finally gets some serious fiscal gumption, it would still not be able to impact the deficit much before 2022. Yet by then, the baseline level of red ink by CBO’s lights will be $1.02 trillion per year or nearly $1.2 trillion with the tax cut add-on permitted under this year’s budget resolution. Nor can that dire prospect be mitigated by attacking the 25% part of the budget left over for so-called discretionary or appropriated programs. That’s because upwards of $10 trillion of the $13.6 trillion baseline in this category is accounted for by national security, veterans, homeland security, border control and public infrastructure – all of which Trump and much of the Congressional GOP want to increase.

In short, the GOP is now in the midst of kicking the fiscal can right straight into a terminal crisis. Indeed, they have as much as admitted that in the implicit numbers in their phony FY 2018 budget resolution, which really wasn’t a budget plan at all, but merely a de facto amendment to the Senate rules to circumvent the normal 60-vote rule on the tax bill. Stated differently, none of the $5 trillion in deficit cuts in the GOP’s budget resolution are real because none of them are subject to reconciliation. So the true fact of the case is that the GOP majorities on Capitol Hill have just passed a budget resolution which incorporates CBO’s baseline deficit of $10.1 trillion over the next decade and adds $1.5 trillion more.

In turn, that computes out to a $32.2 trillion public debt by 2027 or 135% of GDP. And that assumes Rosy Scenario economics, too. Namely, that there will be no recession for 207 months thru 2027 – a feat that is double the longest unbroken economic expansion in recorded history. In this context, the Donald tweeted yesterday a giant tax cut is just around the corner: “The Republican House members are working hard (and late) toward the Massive Tax Cuts that they know you deserve. These will be biggest ever!” No they won’t be! What lies around the corner is an immense fiscal catastrophe. That’s the inexorable result of the current cacophony of can-kicking in the Imperial City. And as we shall address tomorrow, there is no chance that Jerome Powell or any other busload of central bankers can save the day. The monetary can has been kicked way too long, as well.

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Question is how bad will the fall be?

New Zealand’s Housing Boom Has Come to an End (BBG)

House prices in New Zealand’s largest city posted their first annual decline in six years in October, bringing an end to the nation’s property boom. Prices in the Auckland region fell 0.6% from a year earlier, helping to slow the rate of growth nationwide to 3.9%, a five-year low, property research agency Quotable Value said Thursday. Auckland’s average house price has soared 90% in the last 10 years to more than NZ$1 million ($690,000), underpinning a 56% climb in the national average to NZ$647,000. The new Labour-led government this week announced it will ban foreigners from buying existing homes as it seeks to make housing more affordable for first-time buyers, a central pledge in its election campaign.

Labour also plans to build 100,000 dwellings over the next 10 years to address a shortage, and it will change tax structures to make housing less attractive to investors, who have stoked the property boom. “There appears to be a trend of slowing in the rate of growth, with the frenzy induced by high numbers of investors in the market subsiding and a return to more normal levels of activity in housing markets around the country,” QV spokeswoman Andrea Rush said in a statement. While the surge in prices since 2012 is largely due to a supply shortage amid record immigration, investors played a key role. That prompted the central bank to last year tighten lending restrictions on them, which has helped take the heat out of the market.

Outside Auckland, which is home to a third of New Zealand’s 4.8 million people, price growth has slowed dramatically in cities that saw double-digit gains in 2016. Hamilton prices rose just 1.1% in the year to October, the QV report shows, down from a peak of 31.5% in July last year. In capital city Wellington, where supply is constrained, values rose 10% in the year. In Christchurch, which is over-supplied, prices fell 1.6%.

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People bought far more than they can afford.

Australia Mortgage Stress Is Rapidly Increasing (DFA)

Digital Finance Analytics has released the October 2017 Mortgage Stress and Default Analysis update. Across Australia, more than 910,000 households are estimated to be now in mortgage stress (last month 905,000) and more than 21,000 of these in severe stress, up by 3,000 from last month. This equates to 29.2% of households. We see continued default pressure building in Western Australia, as well as among more affluent household, beyond the traditional mortgage belts across the country. We estimate that more than 52,000 households risk 30-day default in the next 12 months, up 3,000 from last month. We expect bank portfolio losses to be around 2.8 basis points ahead, though with losses in WA rising to 4.9 basis points.

Risks in the system continue to rise, and while recent strengthening of lending standards will help protect new borrowers, there are many households currently holding loans which would not now be approved. As continued pressure from low wage growth and rising costs bites, those with larger mortgages are having more difficulty balancing the family budget. These stressed households are less likely to spend at the shops, which will act as a further drag anchor on future growth, one reason why retail spending is muted. The number of households impacted are economically significant, especially as household debt continues to climb to new record levels. Mortgage lending is still growing at three times income. This is not sustainable.

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This time is different: “healthy re-balancing”

Scandinavia Property Markets Are Up 70% But Experts Say There’s No Bubble (BBG)

Scandinavia’s red-hot property markets may be showing signs of cooling, but rumors of a bursting bubble are greatly exaggerated. That’s the consensus among local economists, who point to strong fundamentals and persistently low interest rates as evidence that the downturn is a “healthy re-balancing” rather than a harbinger of an imminent collapse. “If you ask me what is the main risk to the macro scenario, I’d say it’s probably house prices,” said Erik Bruce, senior economist at Nordea Bank in Oslo. “But I find it hard to see them dropping significantly with interest rates at this level, unemployment falling and optimism coming back.” Average house prices have shot up around 70% in both Sweden and Norway over the past decade (in Copenhagen they’ve nearly doubled since 2012, the year Danish rates first turned negative).

After years of warnings about excessive debt and overheating from financial regulators and central bankers, they’re now slowing in both Stockholm and Oslo. The adjustment in Norway’s capital city comes as the government there has tightened lending standards in order to reduce speculative buying. “These measures have worked,” said Bruce, noting that prices in Oslo are down 7-8% from their peak. In Stockholm, it’s more about supply and demand. The number of apartments up for sale in the Swedish capital hit a nine-year high in October, but real estate agents say they are having problems unloading properties as buyers and sellers drift apart on price. “New trends often start in Stockholm,” said Nordea’s Sweden-based economist Torbjorn Isaksson, so we expect “house prices at the national level to level out, going forward.”

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Should be glad to see all those bankers go.

City Could Lose 10,000 Jobs On Day One Of Brexit – Bank Of England (G.)

The Bank of England has warned that 10,000 jobs could leave the City on “day one” after the UK leaves the EU. Sam Woods, a deputy governor of the Bank, also admitted that forecasts of 75,000 job losses over the long-term were “plausible” at an appearance before peers on the Lords EU financial affairs sub-committee on Wednesday. Woods runs the regulatory arm of the Bank and based his estimate of 10,000 jobs on responses he received from 400 banks and financial firms required to provide him with their contingency plans for a hard Brexit. He has been reviewing the plans since July and said some were being put in place – with banks reserving school places and hiring office space – but that this process would get under way “in earnest” in the first quarter of 2018.

The estimate of 75,000 job losses was made by consultancy Oliver Wyman, and based on the assumption that the UK would be left to rely on World Trade Organisation rules with no transition period after March 2019, when the UK leaves the EU. Under this scenario, £10bn of tax revenue might also be lost, it said. The 75,000 estimate includes the knock-on effect of fewer City jobs to other parts of the economy. Woods said this was not a Bank of England estimate, but described it as being within a plausible range of job losses that would happen in the long term if the UK left the EU without a trade deal. He said the actual number was a “moving feast” and that the initial impact of about 10,000 roles amounted to 2% of the total employed in bank and insurance jobs, or less than 1% of financial services jobs.

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If ‘only’ a 30% child poverty rate is presented as a triumph, your society is a very dismal failure.

Child Poverty In Britain Set To Soar To New Record (G.)

The number of children living in poverty will soar to a record 5.2 million over the next five years as government welfare cuts bite deepest on households with young families, a leading UK thinktank has said. New research from the Institute for Fiscal Studies predicts an increase of more than a million in the number of children living in poverty, more than reversing all the progress made over the past 20 years. The IFS said freezing benefits, the introduction of universal credit and less generous tax credits would mean a surge in child poverty and that the steepest increases would be in the most deprived parts of the country. “Across all regions, relative child poverty is projected to increase markedly,” the IFS said. “The smallest increases are in the south, but even there relative child poverty is projected to rise by at least four percentage points.

The northern regions, the Midlands, Wales and Northern Ireland are projected to see increases of at least eight percentage points.” The report’s findings, which also predict a widening of the gap between rich and poor and four more years of weak income growth, pose a direct challenge to Theresa May, who arrived in Downing Street pledging to help those “just about managing”. May has slightly softened the impact of the £12bn of welfare cuts announced by the then chancellor George Osborne after the 2015 general election, but the IFS said the impact on poor families would still be severe. By 2021-22, the IFS expects 37% of children to be living in relative poverty – defined as a household where the income is less than 60% of the UK median – after housing costs have been taken into account.

The thinktank said this was the highest percentage since modern records began in 1961. Tackling child poverty was a priority for Labour when it took office in 1997 and over the next 13 years the rate fell from 34% to just under 30%. Since then, the relative child poverty rate has remained unchanged but, according to the IFS, is now set to increase by seven percentage points to 37% over the next five years.

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What doesn’t kill you makes you stronger.

The Limits of Russian Sanctions (HBlatt)

For Russia’s economy, the end of 2014 was something of a perfect storm, Elvira Nabiullina, the country’s central bank chief, remembers. In addition to sanctions imposed by the West, Russia had to deal with a collapse in oil prices. “The effect of the oil price was larger than that of the sanctions,” she said in an interview. “Now the economy has gotten used to both factors. The economy is growing again.” That may not be what European and American leaders would like to hear. After all, the whole point of economic sanctions is to convince political leaders like Russian President Vladimir Putin to change course. Sanctions were imposed on Russia in the aftermath of its annexation of Crimea from Ukraine.

The numbers bear out Ms. Nabiullina’s argument. Russia’s economy grew at a 2.5% annual rate in the second quarter of this year, nearly a five-year high and the third straight quarter of growth for Russia after nearly two years in a recession. Overall the IMF sees the economy growing 1.8% this year. Ms. Nabiullina’s remarks could give fodder to both sides of the Atlantic: Critics of sanctions, which include a number of German politicians and companies that have close business ties to Russia, would point out that there’s little point in continuing something that is having little effect. Supporters would say this is an argument for making sanctions even tougher – something the United States is considering imposing unilaterally by targeting energy firms, over the stiff opposition of German and European politicians who fear their own economies will be caught in the crossfire.

Ms. Nabiullina of course is no politician. Her job as central bank chief is to steer the Russian economy. But she did say that she believes sanctions are here to stay. “Our forecasts for continued economic development are built on the assumption that they will remain in place.” Even if the Russian economy has adapted, it would be wrong to say that sanctions have had no effect at all. Ms. Nabiullina said that foreign direct investment in Russia has fallen since December 2014 as the economy fell into a downward spiral, though she said some foreign investors are starting to return to the country’s bond markets. “That shows Russia’s macro-economic stability.”

Inflation also remains a mixed bag in the country. Ms. Nabiullina noted that inflation has fallen to below 3% – better even than her own medium-target of keeping price increases at 4% or below – but she said Russians have yet to be convinced that prices will remain stable. Interest rates, which were cut slightly on Friday to 8.25%, are being held high in Russia because consumer and business decisions are being driven more by inflation expectations than by actual inflation. “The population is accustomed to high inflation and doesn’t yet believe that it can stay low for a long period,” she said. “That is why our monetary policy remains strict.”

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Will Spain make the mistake of parading them as criminals in public?

Spanish Court To Question Catalonia Separatists – Except Puigdemont (AFP)

Spain is set for another day of drama in the Catalonia crisis on Thursday with a judge in Madrid to question the deposed leaders of the region’s separatist government. Notable by his likely absence, however, will be the dismissed Catalan president Carles Puigdemont, who is in Brussels and refusing to come, according to his lawyer. “He will not go to Madrid and I have suggested that he be questioned here in Belgium,” Paul Bekaert told Spain’s TV3 television on Wednesday. The hearing at the national court in Madrid, which deals with major criminal cases, is to start at 9am and to continue on Friday. The judge wants to question Puigdemont and 13 others over their efforts to spearhead Catalonia’s independence drive, which has plunged Spain into its biggest crisis in decades.

[..] On Monday, Spain’s chief prosecutor said he was seeking charges of rebellion – punishable by up to 30 years in prison – sedition and misuse of public funds against the 14. The speaker of the Catalan parliament, Carme Forcadell, and five parliamentary deputies will also be questioned over the same alleged offences, but by a judge at the supreme court. It was unclear how many of them will show up. Puigdemont, 54, has dismissed the accusations as politically motivated and on Tuesday said he would remain in Brussels until he had guarantees that any proceedings would be impartial. In a statement, he said there was a concerted effort to divide his government.

Some will go before a national audience “to denounce the drive of Spanish justice to pursue political ideas”, while others “will stay in Brussels to decry this political process to the international community”, he wrote. Puigdemont has retained the support of many in Catalonia. Maria Angels Selgas, a 60-year-old sales manager in Barcelona, said that for her, Puigdemont was still the Catalan president. “If they humiliate him then they humiliate also the more than 2 million Catalans who voted ‘yes’ in the referendum,” she said.

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Time to close them down. There’s too much toxicity involved, we can’t afford it.

Monsanto, BASF Weed Killers Strain US States With Damage Complaints (R.)

U.S. farmers have overwhelmed state governments with thousands of complaints about crop damage linked to new versions of weed killers, threatening future sales by manufacturers Monsanto and BASF. Monsanto is banking on weed killers using a chemical known as dicamba – and seeds engineered to resist it – to dominate soybean production in the United States, the world’s second-largest exporter. The United States has faced a weed-killer crisis this year caused by the new formulations of dicamba-based herbicides, which farmers and weed experts say have harmed crops because they evaporate and drift away from where they are applied. Monsanto and BASF say the herbicides are safe when properly applied. They need to convince regulators after the flood of complaints to state agriculture departments.

The U.S. Environmental Protection Agency (EPA) last year approved use of the weed killers on dicamba-resistant crops during the summer growing season. Previously, farmers used dicamba to kill weeds before they planted seeds, and not while the crops were growing. However, the EPA approved such use only until Nov. 9, 2018, because “extraordinary precautions” are needed to prevent dicamba products from tainting vulnerable crops, a spokesman told Reuters in a statement last week. The agency wanted to be able to step in if there were problems, he said. Next year, the EPA will determine whether to extend its approval by reviewing damage complaints and consulting with state and industry experts. States are separately considering new restrictions on usage for 2018.

Major soybean-growing states, including Arkansas, Missouri and Illinois, each received roughly four years’ worth of complaints about possible pesticide damage to crops this year due to dicamba use, state regulators said. Now agriculture officials face long backlogs of cases to investigate, which are driving up costs for lab tests and overtime. Several states had to reassign employees to handle the load. “We don’t have the staff to be able to handle 400 investigations in a year plus do all the other required work,” said Paul Bailey, director of the Plant Industries division of the Missouri Department of Agriculture. In Missouri, farmers filed about 310 complaints over suspected dicamba damage, on top of the roughly 80 complaints about pesticides the state receives in a typical year, he said. Nationwide, states launched 2,708 investigations into dicamba-related plant injury by Oct. 15, according to data compiled by the University of Missouri.

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Where’s Mutti Merkel?

Greece Concerned Over 200% Spike In Refugee, Migrant Arrivals (K.)

Migration Policy Minister Yiannis Mouzalas on Wednesday conceded that the migration problem is becoming more difficult to manage as the number of people arriving on the shores of Greek islands from Turkey since August is up 200% compared to the same period last year. Describing the spike as a “special phase” in the migration problem, Mouzalas added that while the average arrival rate in July was 87 people per day, it shot up to 156 per day in August, while in the months of September and October it rose even further, to 214 per day. With around 4,000 people arriving on the islands in October alone, Mouzalas described the situation at the congested camps on Lesvos as “very bad” and on Chios as “bad.” Nonetheless, he said that Greece continues to view the joint declaration of the EU and Turkey in March to stem the flow of migrants into Europe as valid.

Greece, he said, has intensified diplomatic efforts to ensure the implementation of the agreement which he described as “decisive for the future of Greece.” Referring to the scant number of returns of migrants to Turkey from Greece, Mouzalas said, “We would like to see more returns because that will restore the order of things.” He attributed the low number of returns to Turkey – 1,360 people since the deal was activated – to the way asylum applications are examined in Greece. “We are the only country that has four levels of examination of asylum applications,” he said, while admitting that some of the migrants whose applications have been rejected find illegal means to leave the islands and travel to the mainland.

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Cruise ships.

Greece Mulls Emergency Housing Measures After Migrant Spike (AP)

Greece’s government is considering emergency measures to house migrants and refugees confined to Greek islands over the winter months following a roughly four-fold increase in the number of daily arrivals from Turkey. Migration Minister Yannis Mouzalas said Wednesday that average arrivals had jumped since mid-August from about 50 per day to more than 200. He added the government could use ferries or military ships to provide additional housing space over the winter if alternatives provided by local municipalities were exhausted. Under a 2016 deal between Turkey and the EU migrants and refugees reaching Greek islands from the Turkish mainland are not allow to travel to the Greek mainland before their asylum claims are examined. Mouzalas said the agreement was not under threat but that the rise in migrant arrivals was “concerning.”

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Right in front of Parliament.

Refugees In Greece Demand Transfer To Germany, Start Hunger Strike (R.)

A group of mainly Syrian women and children who have been stranded in Greece pitched tents opposite parliament in Athens on Wednesday in a protest against delays in reuniting with relatives in Germany. Some of the refugees, who say they have been in Greece for over a year, said they had begun a hunger strike. “Our family ties our stronger than your illegal agreements,” read a banner held up by one woman, referring to deals on refugees between European Union nations. Greek media have reported that Greece and Germany informally agreed in May to slow down refugee reunification, stranding families in Greece for months after they fled Syria’s civil war. Greece denies this.

“What we’ve managed to do on family reunification is to have an increase of about 27% this year compared with last year, even though we’re accused of cutting back family reunification and doing deals to cut back family reunification,” Migration Minister Yannis Mouzalas told reporters. Mouzalas said Greece had assurances from Germany that refugees whose applications have been accepted will eventually go to Germany even if there are delays. He denied that refugees had to pay for their flights. Applications for asylum, reunification and relocation to other European countries can take months to be processed.

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Nov 012017
 
 November 1, 2017  Posted by at 9:37 am Finance Tagged with: , , , , , , , , ,  5 Responses »


Pablo Picasso Blue nude 1902

 

Americans Are Officially Freaking Out (BBG)
Mueller Mugs America: The Case Of Baby George Papadopoulos (Stockman)
Some Of The Scariest Charts In Finance To Celebrate Halloween (BV)
Most Of UK Fruit And Veg Is From Other EU Nations, Brexit To Be Dramatic (G.)
Corbyn Has a Plan to Get May’s Tories to Give Up 58 Brexit Secrets (BBG)
Australia’s Housing Boom Is ‘Officially Over’ – UBS (BBG)
Government Raids On Catalonia Police Spark Fears Of Wider Crackdown (Ind.)
Puigdemont Says Can’t Return To Catalonia, Spain Intent On ‘Vengeance’ (Ind.)
New Jersey Sues OxyContin Maker, Links Marketing To Opioid Crisis (R.)
Germany Forced To Pay Consumers To Use More Electricity
Greece Plans An Unprecedented €30 Billion Debt Swap (BBG)
Greek PM Under Fire Over Migrants, Refugees (K.)

 

 

Major point in this: the media freaks out the people.

Americans Are Officially Freaking Out (BBG)

For those lying awake at night worried about health care, the economy, and an overall feeling of divide between you and your neighbors, there’s at least one source of comfort: Your neighbors might very well be lying awake, too. Almost two-thirds of Americans, or 63%, report being stressed about the future of the nation, according to the American Psychological Association’s Eleventh Stress in America survey, conducted in August and released on Wednesday. This worry about the fate of the union tops longstanding stressors such as money (62%) and work (61%) and also cuts across political proclivities. However, a significantly larger proportion of Democrats (73%) reported feeling stress than independents (59%) and Republicans (56%).

The “current social divisiveness” in America was reported by 59% of those surveyed as a cause of their own malaise. When the APA surveyed Americans a year ago, 52% said they were stressed by the presidential campaign. Since then, anxieties have only grown. A majority of the more than 3,400 Americans polled, 59%, said “they consider this to to be the lowest point in our nation’s history that they can remember.” That sentiment spanned generations, including those that lived through World War II, the Vietnam War, and the terrorist attacks of Sept. 11. (Some 30% of people polled cited terrorism as a source of concern, a number that’s likely to rise given the alleged terrorist attack in New York City on Tuesday.)

“We have a picture that says people are concerned,” said Arthur Evans, APA’s chief executive officer. “Any one data point may not not be so important, but taken together, it starts to paint a picture.” The survey didn’t ask respondents specifically about the administration of President Donald Trump, Evans said. He points to the “acrimony in the public discourse” and “the general feeling that we are divided as a country” as being more important than any particular person or political party. [..] And keeping up with the latest developments is a source of worry all its own. Most Americans—56%—said they want to stay informed, but the news causes them stress. (Yet even more, 72%, said “the media blows things out of proportion.”)

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Who brought in Baby George? Haven’t seen anyone dig into his contacts. His story doesn’t seem to add up. Been pushing Russia on Trump far too much. A Trojan Horse?

Mueller Mugs America: The Case Of Baby George Papadopoulos (Stockman)

This is how the Deep State crushes disobedience by the unwashed American public. It indicts not only ham sandwiches but, apparently, political infants in diapers too, if that’s what it takes. Hence the sudden notoriety of Baby George Papadopoulos, who pled guilty to “lying” about an essentially immaterial date to the FBI. Oh, and by all signs and signals that plea came after this 30 year-old novice had been wearing a wire for several months. So here’s how this noxious act of bullying by Robert Mueller’s Federally-deputized thugs came down. It seems that during the early months of 2016, when Trump was winning primary after primary against all mainstream media expectations, the Donald’s establishment betters began attacking his foreign policy credentials with special malice aforethought.

That was mainly owing to his sensible suggestion that it would be better to seek rapprochement with Russia rather than pursue Hillary’s Cold War 2.0 and that 25 years after the disappearance of the Soviet Union from the pages of history that NATO was obsolete. Since this totally plausible (and correct) viewpoint was deeply offensive to the Imperial City’s group think and threatened the Warfare State’s existential need for a fearsome enemy, Trump’s ruminations about making a deal with Putin were belittled. They were, in fact, attributed not to a fresh look at the realities abroad or the possibility that homeland security does not require a global empire, but to the candidate’s lack of any pedigreed foreign policy advisors. Indeed, when it came to the Republican-oriented foreign policy establishment-nearly all of which had joined the Never Trump cause-the Donald added insult to injury.

That is, by suggesting he got his foreign policy views watching TV (like most of Washington) and that he could do a better job against terrorism than the Pentagon generals (not hard). At length, however, the “who are your foreign policy advisors” meme got so relentless that the Donald relented. On March 21, 2016 he announced a group of five advisors that exactly no one who was anyone in the Imperial City had ever heard of, and for good reason. Trump apparently rarely even met with the Five and no one running the campaign paid much attention to them. Still, Baby George’s carelessness about the exact dates and sequences of utterly irrelevant and inconsequential events is enough to get him time in one of Uncle Sam’s hospitality suites.

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“..ECB QE is currently 7 times bigger than net issuance. So is it any wonder why yields have fallen, and what happens when the ECB tries to turn off the easy money tap?”

Some Of The Scariest Charts In Finance To Celebrate Halloween (BV)

Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively calm. With that in mind, here are a few charts that shine a light on a number of threats that are lurking just below the surface of the global economy.


ECB quantitative easing has propped up government bond markets

The strength of the European economy, and signs of labour market healing across the euro area, has been the surprise story of 2017. It is undeniable that the ECB, and its quantitative easing programme, has played a huge part in the economic success seen to date. Many point to the fall in yields on peripheral area debt as a sign that the euro sovereign debt crisis is well and truly over. The question is, do falling yields signify increasing confidence in the ability of euro area nations to repay their debt, or do they simply reflect the asset purchases that the ECB has conducted since the QE programme started? The above chart, published in the most recent IMF Global Financial Stability Report, shows that official purchases of euro area debt has eclipsed net issuance since May 2015. Indeed, ECB QE is currently 7 times bigger than net issuance. So is it any wonder why yields have fallen, and what happens when the ECB tries to turn off the easy money tap?


Debt is a beast that cannot be tamed

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The EU forces food transports across the Union. Damn transport costs, including pollution. The result: “the system is very fragile”. Don’t depend for your essentials on people living 1000 miles away. It’s not that hard.

Most Of UK Fruit And Veg Is From Other EU Nations, Brexit To Be Dramatic (G.)

The UK faces serious health implications if the government fails to agree a Brexit deal, finds a report that says of 35 portions of fruit and vegetables, a figure relating to the five-a-day recommendation for individuals, just one “portion” is grown in the UK and picked by British or non-EU workers. The report, to mark the launch of a new RSA commission examining the impact of Brexit on food and farming, found that the five-a-day health target – which adds up to the 35 portions of fruit and vegetables a week – was overwhelmingly met by food grown in the EU or harvested by EU workers in the UK. Sue Pritchard, director of the RSA Food, Farming and Countryside Commission, said Brexit offered a great opportunity to reshape farming and food, but warned that no deal over the exit from the union would have a dramatic and immediate effect.

“What would be available on the shelves would change dramatically. There will be delays at ports and all along the food supply system – the impact will be felt very, very quickly,” she said. The study found that of the average 28 portions consumed by Britons of the recommended weekly intake of 35 portions of fruit and vegetables, the equivalent of 11 portions came from the EU, seven from the rest of the world and nine arose from the UK and were harvested by workers from other EU countries. The equivalent of just one portion was grown in the UK and harvested by British or non-EU workers. Pritchard added: “If there is no deal the system is very fragile and the impact in the UK food supply is likely to be dramatic.” The majority of farmers backed Brexit, but the National Farmers’ Union has since suggested that crops will “rot in the fields” and that Britain will be unable to produce the food if the government cannot secure a deal that allows tens of thousands of EU workers to continue to work on UK farms.

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Fitting. The entire country is back in Victorian times.

Corbyn Has a Plan to Get May’s Tories to Give Up 58 Brexit Secrets (BBG)

The main U.K. opposition party wants to deploy a parliamentary tool hardly used since the 19th century to get Theresa May’s Conservatives to spill Brexit secrets. The political prize? The release of 58 studies on how leaving the European Union will affect industries that make up 88 percent of the economy. Brexit Secretary David Davis said he didn’t want to publish the studies because it would compromise the U.K.’s negotiating position. On Monday, he listed the sectors in a letter but stopped short of revealing more. Jeremy Corbyn’s Labour wants to use an obscure legislative device to force the hand of Tories, who have been coy about what the economic fallout might be when the country leaves the 28-nation bloc.

On Wednesday, Labour will argue that lawmakers should have the right to see the studies, and will ask Parliament to vote to make “an humble address” to Queen Elizabeth II, asking her to order her ministers to release the assessments to the House of Commons Brexit Committee. This means-to-an-end hasn’t been used much since Victorian times. “Ministers cannot keep withholding vital information from Parliament about the impact of Brexit on jobs and the economy,” Labour Brexit spokesman Keir Starmer said in an emailed statement.

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Panic in Canberra.

Australia’s Housing Boom Is ‘Officially Over’ – UBS (BBG)

The housing boom that has seen Australian home prices more than double since the turn of the century is “officially over,” after data showed prices now flatlining, UBS said. National house prices were unchanged in October from September, while annual growth has slowed to 7% from more than 10% as recently as July, CoreLogic data released Wednesday showed. “There is now a persistent and sharp slowdown unfolding,” UBS economists led by George Tharenou said in a report. “This suggests a tightening of financial conditions is unfolding, which we expect to weigh on consumption growth via a fading household-wealth effect.”

An end to Australia’s property boom will be welcome news for first-time buyers, who have struggled to break into the market after surging prices propelled Sydney past London and New York to be the second-most expensive housing market. Less impressed may be property investors, already squeezed by regulatory lending curbs that drove up mortgage rates. The cooling housing market may encourage the Reserve Bank to keep interest rates at a record low. A rate hike would be undesirable as it would put further downward pressure on dwelling prices, said Diana Mousina, senior economist at AMP Capital Investors.

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Once they start locking up people, will Catalans still be non-violent?

Government Raids On Catalonia Police Spark Fears Of Wider Crackdown (Ind.)

The acrimony and recriminations which followed Catalonia’s declaration of independence shows little sign of defusing following the fleeing of president Carles Puigdemont to Brussels. Spain’s civil guard raided the headquarters of the regional police, Mossos d’Esquadra, today drawing accusations of starting a crackdown. Computers and documents were taken away from the building in Sabadell as well as seven other offices. “We are carrying out inspections related to the Mossos d’Esquadra’s communications on the day of the illegal referendum,” said a civil guard spokesman. “This is something we are entitled to do.” The Mossos had been ordered by Madrid to stop the vote taking place, but they had refused, pointing out that this would have led to clashes with activists who had been protecting the polling stations. The national police, who were sent in, seized ballot boxes sparking violence.

The raids were viewed by some as the beginning of a punitive drive which will continue against separatists. As the news of the raids came in the afternoon, a group of activists approached police in Plaza de Colon in Barcelona city centre, the scene of huge demonstrations in recent weeks, offering sympathy and solidarity. The officers, whose chief Josep Lluis Trapero was sacked by Madrid at the weekend, were cautious in their response. “We are waiting to hear more details,” said one. “We don’t know any more than you do.” For Adreia Carbonell, a 23-year-old student and supporter of independence, the civil guard action was an ominous pointer for the future. “It is a form of counter-revolution,” she said. “The Spanish can now do what they like. There will be more raids, more arrests soon, you will see. They are intimidating our police who protect us and of course our government has gone.”

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Double-sided. He’s gotten much weaker by leaving. But probably avoided a long jail term.

Puigdemont Says Can’t Return To Catalonia, Spain Intent On ‘Vengeance’ (Ind.)

Hot, last-minute and chaotic, ousted Catalan leader Carles Puigdemont’s first press conference since fleeing Barcelona for Brussels was a fitting tribute to the political crisis that has gripped Spain. Amid speculation that he and members of his former cabinet would seek political asylum, fuelled by the comments of a Belgian minister, the disputed Catalan president instead recommitted himself to the independence cause. It is believed that Mr Puigdemont and his colleagues drove across the border into France before flying to Brussels on Monday, after Spain took over control of the Catalan region’s government and agencies. Mr Puigdemont said he could not return to Spain unless given clear assurances that he will be protected, accusing Madrid of being intent on “vengeance”.

He and his colleagues would stay in Belgium as long as their safety was not assured in Spain and would “continue our work despite the limits imposed on us.” Insisting he remained the rightful leader of Catalonia, Mr Puigdemont said his centre-right PDeCAT party would nonetheless accept the challenge of regional elections called for 21 December “with all our strength” and vowed that Catalan separatists would come out to vote. Spain wants Catalonia “to abandon our political project, and they won’t achieve it,” he said. As the news emerged on Monday that Mr Puigdemont’s contingent had fled the country, there was a distinct sense of deflation among those of his allies who remained in Barcelona to carry out a planned campaign of civil disobedience.

And as he entered the building in Brussels, he walked past protesters holding Spanish national flags and a sign that read “Estado de Derecho” – “Rule Of Law”. Other anti-independence demonstrators waving Catalan and Spanish flags chanted “viva Espana, viva Cataluña!” amid a heavy presence from Belgian police.

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Horses and barns.

New Jersey Sues OxyContin Maker, Links Marketing To Opioid Crisis (R.)

New Jersey on Tuesday sued Purdue Pharma LP, accusing the maker of the chronic pain medication OxyContin of fueling the state’s opioid crisis through deceptive marketing to doctors and patients, including the elderly and the “opioid-naive.” The state’s attorney general, Christopher Porrino, faulted what he called Purdue’s “almost inconceivable callousness and irresponsibility” in a decade-long campaign of downplaying the risks and exaggerating the benefits of opioids in the pursuit of profit. “We vigorously deny these allegations and look forward to the opportunity to present our defense,” Purdue said in a statement. “We are deeply troubled by the opioid crisis and we are dedicated to being part of the solution.” At least 11 U.S. states have sued Purdue over opioids, including a complaint filed by Alaska on Monday.

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The grid’s a harsh mistress.

Germany Forced To Pay Consumers To Use More Electricity

A stormy weekend led to free electricity in Germany, as Bloomberg reports wind generation reached a record, forcing power producers to pay customers the most since Christmas 2012 to use electricity. Power prices turned negative as wind output reached 39,409 megawatts on Saturday, equivalent to the output of about 40 nuclear reactors. To keep the grid supply and demand in balance, negative prices encourage producers to either shut power stations or else pay consumers to take the extra electricity off the network.

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We get the intent, but what does this solve?

Greece Plans An Unprecedented €30 Billion Debt Swap (BBG)

The Greek government is planning an unprecedented debt swap worth 29.7 billion euros ($34.5 billion) aimed at boosting the liquidity of its paper and easing the sale of new bonds in the future. Under a project that could be launched in mid November, the government plans to swap 20 bonds issued after a restructuring of Greek debt held by private investors in 2012 with as many as five new fixed-coupon bonds, according to two senior bankers with knowledge of the swap plan. The bank officials requested anonymity as the plan has yet to be made public. The maturities of the new bonds may be the same as for the existing notes, which range from 2023 to 2042. “The move aims to address the current illiquidity of the Greek bond market, ” according to analysts at Pantelakis Securities SA in Athens.

It will also “establish a decent yield curve, thus facilitating the country’s return to public debt markets.” The move comes as Greece prepares for life after the end of its current bailout program in August 2018. The debt swap is a step toward the country’s full return to markets required to avoid a new bailout program. The government plans to tap the bond market in 2018 to raise at least 6 billion euros to create an adequate buffer to honor debt obligations, according to a government official. The government has yet to decide on the exact timing of the swap, the Greek official said on condition of anonymity. One of the bank officials said that transaction could start on Nov. 13 and the settlement could happen a week later. The goal is to conclude the swap before the next mission of the country’s creditors, which is scheduled for the last week of November.

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Maybe SYRIZA is the only force that can stop this.

Greek PM Under Fire Over Migrants, Refugees (K.)

Prime Minister Alexis Tsipras and his migration minister came under a hail of fire Monday from a radical faction within SYRIZA over the plight of the thousands of refugees and migrants stranded in Greece. The criticism was launched during a meeting of the party’s political secretariat at which Tsipras had hoped to showcase his government’s success in steering the country toward a post-bailout era. But instead, the government and Migration Policy Minister Yiannis Mouzalas were slammed by members of the political secretariat that represent the Group of 53 faction – seen as a custodian of party purity – within SYRIZA, over the consistent violation of migrants and refugees’ human rights. More specifically, they blamed the leftist-led coalition government and Mouzalas for delays in providing migrants and refugees with appropriate accommodation as winter approaches.

Moreover, they slammed Tsipras for failing to absorb funds from the European Union and other international organizations intended to aid migrants and refugees. The government was also chided by the Group of 53 for giving its full support to last year’s agreement between the European Union and Turkey to stem the flow of migrants into Europe, while EU countries were not doing the same. “If you think I’m doing everything wrong, then I’ll resign,” Mouzalas told his critics at the meeting. However, members of the faction shot back, calling Mouzalas a hypocrite as they said he is planning to leave the ministry anyway as his name has been put forward for a seat on the Council of Europe.

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