Jan 242018
 


Horacio Coppola Florida, Buenos Aires 1936

 

Rising Rates and Decelerating Deficits Spell Doom For US Housing -Again (CH)
Global Pension Ponzi – Carillion Collapse One Of Many To Come (GCore)
South Korea Bans Anonymous Cryptocurrency Trading (BI)
South Korea Is Banning All Foreigners From Trading Cryptocurrency (F.)
Mueller Wants To Question Trump On Comey, Flynn Firings (ZH)
Sessions, Comey Questioned By Mueller In Russia Probe (ZH)
Evidence Suggests A Massive Scandal Is Brewing At The FBI (NYPost)
Behind the Money Curtain: Taxes, Spending and Modern Monetary Theory (CP)
Turkey Lodges Third Extradition Request For Eight Servicemen in Greece (K.)
German Politicians Decry Arms Sales To Turkey Amid Attack On Syrian Kurds (RT)
Nearly Half Of Children In London, Birmingham Live In Poverty (Ind.)
UK Opposes Strong EU Recycling Targets Despite Plastics Pledge (G.)
Monsanto Faces A Fight For Soy Market (R.)
Number Of New Antibiotics Has Fallen Sharply Since 2000 (G.)

 

 

Chris Hamilton tends to get stuck in a multitude of data and graphs. Bit of a shame. Sometimes it’s about what you leave out.

But point taken: Demographics, Housing and Debt.

Rising Rates and Decelerating Deficits Spell Doom For US Housing -Again (CH)

I recently wrote an article explaining why a 30% to 50% decline in household net worth is imminent (HERE). No shocker that the primary asset for most in figuring household net worth is real estate, particularly primary residences. This article details why US housing starts and job creation are set to decelerate and a recession will almost surely follow… sending home prices tumbling (and likely equity and bond prices, to boot) severely negatively impacting US households net worth’s. First, the year over year change in housing starts (one unit variety) is highly indicative of the subsequent change (in 12 to 18 months) of full time employees (chart below…year over year change in full time employees blue shaded area) vs. YoY change in housing starts (red line)). As goes housing, so goes subsequent jobs creation.

[..] If you think interest rate changes and housing creation look interdependent…you’re right (chart below).

Again, total annual total population growth, 0-65yr/old population growth, housing starts (1-unit)…but this time including annual change in full time employees.

I believe the interest rate hikes and decelerating deficits will slow housing and jobs creation…but even if I’m wrong, there is still trouble dead ahead as the US is simply running out of employable persons as the percentage of employed 15-64yr/olds is nearing all time highs (also known as potential homebuyers).

Read more …

Pensions problems are literally everywhere. But they come to light only when companies themselves collapse first.

Global Pension Ponzi – Carillion Collapse One Of Many To Come (GCore)

The looming pension crisis has been signalled in the collapse of Carillion. The deficit of latest private sector dead-on-arrival Carillion is officially £580 million. However, private reports suggest it could be as high as £2.6 BILLION. According to a Sky News investigation: ‘the £2.6 billion figure relates to the cost to Carillion of paying an insurance company to guarantee all of its pension liabilities, and is significant because it is likely to be the sum claimed on behalf of the pension schemes as part of the liquidation process.’ Nearly 30,000 UK workers’ pensions are at risk thanks to Carillion management’s total mismanagement of a company that has seen its share price collapse 94% in the last 12 months. Carillion’s 27,500-member pension scheme was placed on an ‘at risk list’ in autumn 2017. Arguably, it like many other pension funds should have been there many months ago.

Sadly, Carillion is just the latest in a very long string of serious company collapses that have highlighted the major pension crisis in the UK and around the Western world. It also likely signals that we may be on the verge of many, many more very large corporate bankruptcies in the UK due to massive debt levels and unfunded liabilities. This is not a situation unique to the private sector. It will be repeated in the years ahead – both in the public and the private sector. In November 2017, the OECD warned that the UK’s defined benefit workplace pension plans (final salary schemes) as ‘persistently underfunded’ and the state pension as seriously lacking. Everyone is exposed by this and it emphasises the importance of saving for retirement and ensuring your pension is both funded and properly diversified. These ongoing disasters in the UK’s pension pots are also a threat to the efforts of prudent individuals who have worked hard to set aside enough for their hard-earned retirements.

Read more …

This will be copied across the world.

South Korea Bans Anonymous Cryptocurrency Trading (BI)

South Korea has made moves to ban anonymous cryptocurrency accounts from being used for financial transactions. Financial authorities have already banned banks from offering virtual accounts that are needed to buy or sell cryptocurrency. New regulations set for next week will further the ban already in place by introducing a system to verify a person’s identity before they can make a transaction. Planned regulation also prevents foreigners and underage investors from opening cryptocurrency accounts in South Korea, Yonhap reported, citing financial officials. South Korea’s senior financial regulator Kim Yong-beom told reporters that six South Korean banks will begin issuing new trading accounts next week after the system is implemented. Those banks include Shinhan Bank, NH Bank and the Industrial Bank of Korea.

Existing crypto bank accounts not linked to verified users will be banned on the same day, Kim said. Officials also announced on Sunday that cryptocurrency traders would be required to share user data with the banks, according to Yonhap. Newly proposed regulations would require banks to check whether cryptocurrency exchanges comply with the new transparency measures. The government will also be able to access users’ transaction data through compliant banks, according to officials, which may point to the government looking to enforce taxes on cryptocurrency transactions. Stricter trading regulations are part of a government system to curb speculative investment into virtual money, as many fear that the cryptocurrency bubble may soon burst. The government also hopes to prevent the use of cryptocurrency in illegal activity.

Read more …

“Kang noted a loophole. In the new system, foreigners and minors can’t possibly make investments as it operates on a bank’s real-name account, but they could potentially use corporate accounts to make additional investments. “There’s no limit to that for now. We haven’t come up with measures to ban that as there is no actual way to do so,” he said.”

South Korea Is Banning All Foreigners From Trading Cryptocurrency (F.)

The system aims to tackle money laundering and related crimes, along with speculation-driven overheating in the market, Kang Young-soo, head of the FSC’s cryptocurrency response team, said by phone on Tuesday after the announcement. “The government is concerned about manipulation of market conditions and injection of illegal funds while market funds are leaked into speculative investments,” he added. “We view that foreigners’ and minors’ investments contribute to our areas of concern.” All foreigners, including residents, nonresidents and “kyopo” ethnic Koreans with foreign citizenship, will be banned from trading cryptocurrencies in Korea, the FSC’s foreign media department said by email. Minors are banned after Prime Minister Lee Nak-yeon earlier claim the cryptocurrency craze could lead the youth toward crime.

The government first suggested last month to ban minors and nonresident foreigners. But the final decision nets all foreigners regardless of resident status. “If they’re not Korean citizens, then they can invest in exchanges provided in their countries. Why do they have to invest in ours?” Kang quipped. [..] “The government is creating boundaries for instances of foreigners injecting in coins into the country and a phenomenon of more Bitcoins and other cryptocurrency circulating within the Korean market,” says Kim Jin-hwa, corepresentative of the Korea Blockchain Association, which has about 30 member companies including several exchanges. “With the current conditions of our market, higher supply would equate to higher speculation.”

The targets of the latest regulation, says blockchain startup BlockchainOS Choi Yong-kwan, are Chinese investors who have flooded the cryptocurrency market since their country banned cryptocurrency trade last year. Digital coins from China enter Korean exchanges, then are illegally changed into foreign currencies, which are sent back to China, he explained. “These cases are surprisingly high, and difficult to track or identify. This measure can be viewed as a response to ban these illegal activities,” he said by phone, but suggested the ban would have little effect on existing investors. “The biggest problem lies on Chinese cryptocurrency investors, so this matter is an important focus.”

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Trump can simply say NO. But he probably won’t.

Mueller Wants To Question Trump On Comey, Flynn Firings (ZH)

Following the news earlier this month that special counsel Mueller is seeking to question President Trump – and following today’s NYT report that Mueller had interviewed AG Jeff Sessions – moments ago the Washington Post reported that Mueller wants to question Trump over his decision to fire former FBI Director James Comey and the departure of former national security adviser Michael Flynn from the White House. According to two WaPo sources, Trump’s legal team could present conditions for Trump to interview with Mueller’s investigators as soon as next week. The Post also adds that Trump’s lawyers hope to have Trump answer some of Mueller’s questions in an in-person interview and some in writing.

Within the past two weeks, the special counsel’s office has indicated to the White House that the two central subjects that investigators wish to discuss with the president are the departures of Flynn and Comey and the events surrounding their firings. Mueller has also reportedly expressed interest in Trump’s efforts to remove Jeff Sessions as attorney general or pressure him into quitting, “according to a person familiar with the probe who said the special counsel was seeking to determine whether there was a “pattern” of behavior by the president.” Earlier this month, Trump declined to say whether he would grant an interview to Mueller and his team, deflecting questions on the topic by saying there had been “no collusion” between his campaign and Russia during the 2016 presidential election.

“We’ll see what happens,” Trump said when asked directly about meeting with the special counsel. While Trump has told has allegedly told his lawyers that he is not worried about a face to face meeting with the special counsel, some of Trump’s close advisers and friends fear a face-to-face interview with Mueller could put the president in legal jeopardy. A central worry, they say, is Trump’s lack of precision in his speech and his penchant for hyperbole. Roger Stone, a longtime informal adviser to Trump, said he should try to avoid an interview at all costs, saying agreeing to such a session would be a “suicide mission.” “I find it to be a death wish. Why would you walk into a perjury trap?” Stone said. “The president would be very poorly advised to give Mueller an interview”, Stone said.

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I googled Sessions. All articles on this are from WaPo, NYT, CNN etc. Where is the balance?

Sessions, Comey Questioned By Mueller In Russia Probe (ZH)

The leaks from the special counsel’s office just keep coming. After reporting earlier today that AG Jeff Sessions sat for an interview with Mueller last week, the paper is now reporting that Mueller interviewed former FBI Director James Comey last year. The interview with Comey focused on the infamous memo he wrote where he alleged that Trump had asked him to take it easy on Michael Flynn. Many of the special counsel’s critics have warned that Mueller should recuse himself from all dealings with Comey, who is believed to be a key witness in the probe. Comey and Mueller have a long history of working together, and also share a personal friendship, having vacationed together. A spokeswoman for Sessions confirmed that he had appeared before the committee. Circling back to Sessions, the NYT pointed out that Sessions is perhaps one of the most important witnesses to be interviewed by Mueller.

For Mr. Mueller, Mr. Sessions is a key witness to two of the major issues he is investigating: the campaign’s possible ties to the Russians and whether the president tried to obstruct the Russia investigation. Mr. Mueller can question Mr. Sessions about his role as the head of the campaign’s foreign policy team. Mr. Sessions was involved in developing Mr. Trump’s position toward Russia and met with Russian officials, including the ambassador. Along with Mr. Trump, Mr. Sessions led a March 2016 meeting at the Trump International Hotel in Washington, where one of the campaign’s foreign policy advisers, George Papadopoulos, pitched the idea of a personal meeting between Mr. Trump and Mr. Putin. Mr. Papadopoulos plead guilty in October to lying to federal authorities about the nature of his contacts with the Russians and agreed to cooperate with the special counsel’s office.

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The FBI is confident it won’t be investigated. There’s no-one to do it.

Evidence Suggests A Massive Scandal Is Brewing At The FBI (NYPost)

During the financial crisis, the federal government bailed out banks it declared “too big to fail.” Fearing their bankruptcy might trigger economic Armageddon, the feds propped them up with taxpayer cash. Something similar is happening now at the FBI, with the Washington wagons circling the agency to protect it from charges of corruption. This time, the appropriate tag line is “too big to believe.” Yet each day brings credible reports suggesting there is a massive scandal involving the top ranks of America’s premier law enforcement agency. The reports, which feature talk among agents of a “secret society” and suddenly missing text messages, point to the existence both of a cabal dedicated to defeating Donald Trump in 2016 and of a plan to let Hillary Clinton skate free in the classified email probe.

If either one is true -and I believe both probably are- it would mean FBI leaders betrayed the nation by abusing their powers in a bid to pick the president. More support for this view involves the FBI’s use of the Russian dossier on Trump that was paid for by the Clinton campaign and the Democratic National Committee. It is almost certain that the FBI used the dossier to get FISA court warrants to spy on Trump associates, meaning it used the opposition research of the party in power to convince a court to let it spy on the candidate of the other party – likely without telling the court of the dossier’s political link. Even worse, there is growing reason to believe someone in President Barack Obama’s administration turned over classified information about Trump to the Clinton campaign. As one former federal prosecutor put it, “It doesn’t get worse than that.” Joseph diGenova, believes Trump was correct when he claimed Obama aides wiretapped his phones at Trump Tower.

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Quite literally nobody seems to understand that governments are not households.

Behind the Money Curtain: Taxes, Spending and Modern Monetary Theory (CP)

Taxes do not fund government spending. That’s a core insight of Modern Monetary Theory (MMT) whose radical implications have not been understood very well by the left. Indeed, it’s not well understood at all, and most people who have heard or read it somewhere breeze right past it, and fall back to the taxes-for-spending paradigm that is the sticky common wisdom of the left and right. This, despite the fact that the truth of the proposition is obvious if you think through just a few steps about the process of money-creation. What makes it hard to see is the dense knot of conventional theory and discourse in which we are entangled, and which seems impossible to cut as cleanly as MMT suggests.

But the discussion around the newly-enacted Republican tax bill has brought the issue of tax policy to the forefront again, and it’s time for the left to realize how fundamentally wrong that common wisdom is, and how continuing to argue within the phony terms of the taxes-for-revenue paradigm occludes and reproduces a persistent reactionary fiction regarding what taxes are for. The argument of the common-wisdom economic paradigm is that the government must collect taxes (or borrow money—we’ll get to that) to spend on whatever programs it wants to fund. In this paradigm, the government extracts money from an external, economically prior source, and uses it to pay for government programs. For both the left and the right in this paradigm, taxes are for funding government spending: money first flows into the government through taxes collected, and is then spent into economy in various programs and purchases.

The arguments that ensue are over how much money to collect in taxes, from which sources, and which government programs to fund with the money collected. Most leftists take their stance within this paradigm. Bernie Sanders, for instance, says his Medicare-for-all plan would “raise revenue” from various taxes such as income and capital gains, and from limiting “deductions for the rich.” Dean Baker suggests a 4% increase in payroll taxes to “fully fund” Social Security and Medicare. These kinds of analyses, typical of the left, make points that are helpful in immediate political fights, and they’re also grounded in the conventional paradigm about, money, taxes, and government spending. That paradigm not only informs most thinking—whether conservative, liberal, or left-radical—about money in our society, it also informs the legal and institutional policy framework. It’s the paradigm of the household.

We’re comfortable with the household paradigm because it reflects everyday reality. The household has to get money from somewhere to spend it. It’s obvious. But, also obvious, the household (or business or state) does not create money. That teensy little huge fact makes the household-government finance analogy wrong and wildly misleading. Unless we take that fact as of no significance—And how could we?—we need another paradigm. Analyses and critiques—no matter how radical—of government financing as if it worked like household financing are based on false premises, and false premises lead down meandering dead-end paths to wrong conclusions. We have to reject the household analogy whenever it comes up from any source, including our own minds, where it will sneak in. Most leftists, I’m afraid, do end up assuming it, and ignoring the huge little fact that it cannot be right.

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Governments rejecting Supreme Court decisions. Well, perhaps in Turkey that’s the rule.

Turkey Lodges Third Extradition Request For Eight Servicemen in Greece (K.)

Ankara on Tuesday lodged a third request for the extradition of the eight Turkish servicemen who fled to Greece in July 2016 following a failed coup in the neighboring country, sources said. The request by Ankara was lodged just a few hours after Greek Justice Minister Stavros Kontonis received in Athens a delegation from the Turkish Justice Ministry where, according to sources, the Turkish officials underlined Turkey’s insistence on the return of the eight men who are accused of treason. The same sources indicate that Ankara has included new claims about the servicemen in its third request for their extradition.

Speaking after a meeting with Turkey’s Deputy Justice Minister Bilal Ucar in Athens, Kontonis said that the eight could not be send back given that the country’s Supreme Court has rejected the original extradition request. Kontonis said the ruling was “fully respected by everyone and the Greek government.” However, he said, a proposal to try them in Athens was still on the table, adding that it would be up to Ankara “to take the appropriate legal steps.”

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German weapons fight US allies.

German Politicians Decry Arms Sales To Turkey Amid Attack On Syrian Kurds (RT)

German politicians have widely opposed plans to provide Turkey with tank modernization upgrades after Leopard 2 combat vehicles were spotted taking part in the military operation against the Kurds in Syria’s Afrin. Amid rumors of potential resumption of arms sales to Turkey, German opposition parties, the Greens and the Left, urged the government to reconsider such deals with Ankara, pointing out that German weapons are now killing innocent people in Syria. “An immediate halt to all arms exports to Turkey is long overdue,” Agnieszka Brugger, a Greens lawmaker told the Heilbronner Stimme newspaper. “This intense situation should be a wake-up call for the German government.”

Since the 1980s Germany has sold Turkey some 751 Leopard tanks, including 354 modern Leopard 2 type, which has been previously used by Turkey an a cross border operation against Islamic State (IS, formerly ISIS/ISIL) terrorists and US-supported Kurdish militias in Syria. Throughout its military campaign in the neighboring country, Turkey lost a number of 60-ton Leopard 2 tanks, built by Bavaria’s Krauss-Maffei, due to mine explosions. Ankara has recently pressed Berlin and German arms companies to retrofit the hardware to offer better protection against enemy mines. The tanks used by Turkey come from decommissioned stocks of the Bundeswehr. The frontal armor on the hull and turret on the Leopard 2 is much thicker than on the sides and rear of the tracked vehicle.

[..] The massive outcry from the German politicians was caused by the publication of pictures which allegedly showed German tanks used against the Kurds in Syria. An expert from the Bundeswehr confirmed to the German Press Agency in Berlin on Monday that pictures, distributed by the state-owned Anadolu Turkish news agency, showed Leopard 2 A4 tanks of German production. [..] “Angela Merkel must explain her Turkey policy,” said Jan Korte, an MP from the Left. He noted that German soldiers are directly involved in the war of aggression against the Kurds by flying Boeing E-3A Airborne Warning & Control System (AWACS) aircraft missions and not doing anything to stop the bloodshed on the ground.

Free Democratic Party (FDP) MP Graf Alexander Lambsdorff also expressed sharp criticism of the Turkish action against the Kurds in Syria. “This invasion is not legitimized by international law. There is no mandate from the United Nations and it is not self-defense. All states should call on Turkey to end the campaign and ask them to work on a political solution instead.”

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When seeing stats like this, one must fear for what is yet to come in Britain.

Nearly Half Of Children In London, Birmingham Live In Poverty (Ind.)

Almost half of all children in some UK cities are estimated to be living in poverty, new figures reveal, amid warnings that welfare reforms are leading to an “emerging child poverty crisis”. An analysis of data indicates the most deprived areas in the country have experienced the biggest increases in child poverty over the past two years, with parts of London and Birmingham seeing levels rise by 10 percentage points to above half of all children. The “shocking” figures have been attributed to the benefit freeze – which has been in place since 2015 and leaves children’s benefits frozen until the end of the decade – as well as the high cost of credit for low income families, leaving many “spiralling into debt”.

A report by the independent Joseph Rowntree Foundation (JRF) last month found that Britain’s record on tackling poverty had reached a turning point and was at risk of unravelling, with nearly 400,000 more children and 300,000 more pensioners living in poverty than five years ago. The JRF stated that while poverty levels fell in the years to 2011-12, changes to welfare policy – especially since the 2015 Budget – saw the numbers creep up again. Their report showed a total of 14 million people in the UK currently live in poverty – more than one in five of the population.

Now the latest figures, collated by the End Child Poverty coalition through analysis of tax credit data and national trends in worklessness, estimate that child poverty in Manchester and Birmingham stands at 44% and 43% respectively. In the London borough of Tower Hamlets this reaches 53%. [..] A child is said to live in poverty if they are in a family living on less than 60 per cent of median household income. According to the latest official statistics, 60 per cent of median income, after housing costs, was around £248 per week.

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EU targets are for 2035. Ergo, they are not ‘strong’. They’re just as bad and weak as the UK 2042 targets. Don’t be fooled.

UK Opposes Strong EU Recycling Targets Despite Plastics Pledge (G.)

The UK government is opposing strong new recycling targets across the EU despite its recent pledge to develop “ambitious new future targets and milestones”, confidential documents have revealed. A 25-year environment plan was launched earlier in January by the prime minister, Theresa May, who particularly focused on cutting plastic pollution. The plan, aimed partly at wooing younger voters, says “recycling plastics is critical”. A target to recycle 65% of urban waste by 2035 was agreed by the European council and parliament in December and now awaits a vote of approval by member states. But the UK’s opposition is revealed in a record of a subsequent briefing for EU ambassadors, obtained by Greenpeace’s Unearthed team and seen by the Guardian. “The UK cannot support a binding target of 65% for 2035,” said the record, compiled by officials from one member state and confirmed by others. Furthermore, the UK said its opposition meant it would not support the overall waste agreement.

The recycling target had already been watered down from the 70% by 2030 initially sought by the European parliament. The UK’s own environment officials estimated that meeting ambitious recycling targets would bring benefits totalling billions of pounds, according to a July 2017 internal presentation, also obtained by Greenpeace. It suggested a 65% target by 2030 would save almost £10bn over a decade in waste sector, greenhouse gas and social costs. “This Conservative government must be judged on what they do, not on what they say,” said Sue Hayman, shadow environment secretary. “It comes as no surprise that the government are trying to scupper progress on recycling behind the scenes. “Recycling rates have stagnated on this government’s watch and we are way behind meeting our national targets. [Environment secretary] Michael Gove needs to clarify the government’s position on this matter without delay.”

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Fighting GMO resistance with more GMO. A road to nowhere but mass starvation.

Monsanto Faces A Fight For Soy Market (R.)

Monsanto is facing major threats to its historic dominance of seed and herbicide technology for the $40 billion U.S. soybean market. Rivals BASF and DowDuPont are preparing to push their own varieties of genetically modified soybeans. At stake is control over seed supply for the next generation of farmers producing the most valuable U.S. agricultural export. The market has opened up as Monsanto’s Roundup Ready line of seeds – engineered to tolerate the weed killer glyphosate – has lost effectiveness as weeds develop their own tolerance to the chemical. Compounding the firm’s troubles is a national scandal over crop damage linked to its new soybean and herbicide pairing – Roundup Ready 2 Xtend seeds, engineered to resist the chemical dicamba.

The newly competitive sector has sown confusion across the U.S. farm belt, particularly among smaller firms that produce and sell seeds with technology licensed from the agrichemical giants. Many of these sellers told Reuters they are amassing a surplus of seeds with engineered traits from multiple developers – at substantial extra cost – because they can only guess which product farmers will buy. “Our job is to meet our customers’ needs, and we don’t know what those are going to be,” said Carl Peterson at Peterson Farms Seed. “I don’t think I’ve ever seen anything quite like this.” Monsanto has much to lose. Soybeans are the key ingredient in feed used to fatten the world’s cattle, pigs, chickens and fish. Net sales of Monsanto’s soybean seeds and traits totaled almost $2.7 billion in fiscal 2017, or about a fifth of its total net sales. Gross profits from soybean products climbed 35% over 2016, beating 15% growth of its bigger corn seed franchise.

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No, the solution is not more and new antibiotics. The solution is to stop using the present ones the way we do. It can be legislated by tomorrow morning.

Number Of New Antibiotics Has Fallen Sharply Since 2000 (G.)

The number of new antibiotics being developed has fallen sharply since 2000 and drugmakers need to do much more to tackle the rise of superbugs, according to a report. Britain’s biggest pharmaceutical company, GlaxoSmithKline, and its US rival Johnson & Johnson are leading efforts to combat antibiotic resistance, according to the report, which was presented at the World Economic Forum in Davos. The Netherlands-based Access to Medicine Foundation assessed 30 of the world’s biggest drugmakers, including pharma companies, biotech firms and generic drugmakers, and produced the first independent report on the industry’s efforts to address drug-resistant infections.

Overprescription of antibiotics, along with their overuse in animals, has caused growing drug resistance in humans with serious health implications – leading to the rise of superbugs such as MRSA that cannot be treated with existing antibiotics. England’s chief medical officer has repeatedly warned that antibiotic resistance could spell the “end of modern medicine”. Caesarean sections and cancer treatments would become very risky without the drugs used to fight infection. In Europe, an estimated 25,000 people a year die from antibiotic-resistant bacteria. In the US, at least 2m illnesses and 23,000 deaths a year can be attributed to antibiotic resistance, according to the foundation’s report.

New antibiotics are urgently needed but there is little incentive for drugmakers to develop them as they will be tightly controlled once they reach the market to limit the risk of resistance emerging. The number of new antibacterial drugs approved in the US dropped from 33 between 1985 and 1999 to 13 between 2000 and 2014. Jayasree Iyer, the head of the foundation, said: “If we don’t use antibiotics in the right doses or for the right bugs, we risk giving bacteria a chance to adapt and strengthen their defences, which will make it harder to kill them the next time. The threat that once-deadly infections could again become life-threatening is intensifying. “Pharmaceutical companies have a critical contribution to make to the effort to tackle superbugs.”

Read more …

Nov 212017
 
 November 21, 2017  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , ,  6 Responses »


Notting Hill Gate Station, London 1860s

 

China’s $15 Trillion Problem: Investors Don’t Believe in Losses (BBG)
Household Debt, Size Of Home Loans A Worry – Australia Regulator (ND)
Fiscal Sundown In America, Part 1 (Stockman)
The Approaching Silicon Valley Meltdown (St. Cyr)
Merkel Prefers Fresh Elections To Minority Government As Talks Fail (G.)
Italy To Go Beyond GDP, Measure La Dolce Vita (BBG)
Your Retirement Cash May Be In The Caymans. Can You Get It Back? (IBT)
Room Rates At Trump’s Hotels Have Fallen By Up To 63% (Tel.)
Why Are We Helping Saudi Arabia Destroy Yemen? (Ron Paul)
Spain ‘Ready To Discuss’ Greater Fiscal Autonomy For Catalonia (G.)
37.5% of Greece’s Children Are At Risk Of Poverty (KTG)
Greek Online Foreclosures To Start With Big Debtors’ Assets (K.)
EU Orders Greece To Recover Up To €55 Million In State Aid (R.)
As Oceans Warm, the World’s Kelp Forests Begin to Disappear (Yale)

 

 

They wouldn’t let that happen…

China’s $15 Trillion Problem: Investors Don’t Believe in Losses (BBG)

When China unveiled plans on Friday to end the implicit guarantees underpinning asset-management products worth trillions of dollars, it should have been a bombshell for the nation’s savers. But for Yolanda Yuan and other individual investors who’ve piled into AMPs issued by banks, insurers and securities firms, the government’s announcement was largely a non-event. The reason: they didn’t believe it. “I don’t think any big banks will dare to take the risk of allowing defaults on AMPs, as that will lead to a flood of fund redemptions,” said Yuan, a 29-year-old sales manager at a state-run financial company in Shanghai. She has about 100,000 yuan ($15,069) of personal savings in products covered by the new regulations.

Over the past 13 years, assets in Chinese AMPs have swelled from almost nothing to $15 trillion in large part due to one key assumption: that investors would be made whole no matter what happened to the products’ underlying assets. Authorities are now moving to quash that belief amid concern that rampant moral hazard is distorting market prices and making the financial system vulnerable to crises. Yuan’s enduring faith in implicit guarantees suggests the government’s task won’t be easy. It may ultimately require an AMP blowup for Chinese regulators to convince investors that they’re serious about the new rules, which are set to take effect in mid-2019. But a major product failure is risky: In a worst-case scenario, it could spark a destabilizing stampede out of AMPs, which have become a key source of funding for banks and other financial institutions.

It’s not clear that’s a chance Beijing is willing to take, despite last week’s rhetoric. “It’s very hard,” said David Loevinger, a former China specialist at the U.S. Treasury Department who now works at TCW Group in Los Angeles. “You have to show people that there are no longer guarantees. The only way to show it is to force investors to take losses. They have to see it to believe it.”

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Not at all late.

Household Debt, Size Of Home Loans A Worry – Australia Regulator (ND)

The banking regulator is concerned about the size of mortgages being taken on by homeowners, issuing a warning to both lenders and borrowers. Australian Prudential Regulation Authority chairman Wayne Byres on Tuesday said Australia’s household debt was high and would continue to rise, and that too many loans were still being approved above people’s ability to pay. “Household indebtedness is high. Perhaps more importantly, the trajectory is clearly for it to rise further,” Mr Byres told the Australian Securitisation Forum in Sydney. “Lenders need to be vigilant to ensure their policies and practices are both prudent and responsible. “In short, heightened risk requires heightened prudence by APRA but also – and preferably – by lenders and borrowers themselves.”

Mr Byres said APRA’s moves to limit investor and interest-only mortgages had worked, bringing growth in lending to property investors back into line with owner-occupier lending. APRA decreed in March that big banks should limit interest-only loans to 30% of new residential mortgages, on top of a 10% cap on investor lending growth. But Mr Byres said the size of loans being issued by the big banks was still an issue, with consumers vulnerable if historically low interest rates are lifted by the Reserve Bank of Australia. Mr Byres said there had been only a slight drop in the proportion of borrowers being granted loans six times the amount of their income – a level at which they would spend about half their net income on repayments if interest rates returned to their long-term average of about 7%.

Such leverage was far higher in Australia than in comparable markets such as the UK and Ireland, he said. That left considerable potential for banks to further tighten lending practices, Mr Byres said. “Aided by file reviews conducted by external auditors, we have confirmed there is more to do in this area to improve serviceability measures, particularly in relation to the assessment of living expenses and the identification of a borrower’s existing debts.” APRA’s move to limit investor lending has borne fruit, with interest-only lending accounting for about 23% of new lending in the three months to September 30, well below its 30% limit.

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Dave’s still an angry young man.

Fiscal Sundown In America, Part 1 (Stockman)

[..] at least the Democrats did attempt to finance the trillions in new tax credits and Medicaid costs generated by ObamaCare with some revenue raisers such as the medical device and insurance company taxes and the added levies on upper income earners and investment returns. Back in the day, in fact, this kind of “tax and spend” welfare statism is exactly what the Democrats stood for. And it was also the party’s political Achilles Heel because it enabled the GOP to periodically arouse the electorate on the dangers of “big government” and thereby obtain a resurgence in Washington’s corridors of political power. But after the break from the old-time fiscal religion of balanced budgets during the so-called Reagan Revolution in 1981, the GOP has slowly morphed into the “borrow and spend” party.

Indeed, as the historically ordained party of fiscal rectitude, the GOP’s apostasy has enabled two-party complicity in a mindless regime of fiscal kick-the-can since the turn of the century. That lapse, in turn, acutely aggravated an already perilous fiscal equation owing to the baby boom retirement wave and the Fed induced slowdown in the trend rate of economic growth (see below). In this context, it should be noted that the Senate bill is a farce insofar as it claims to be a middle class tax cut and growth stimulant – since it actually accomplishes neither. On a honestly reckoned basis (counting debt service and eliminating budget gimmicks), however, it would add $2.2 trillion of new debt over the next decade on top of the $12 trillion already built-in under current policy.

Accordingly, the Senate version of Trumpite “tax reform” would accelerate the public debt toward $35 trillion by 2027 or 140% of GDP. Yet all of this added red ink would be “wasted” on cuts for 150 million individual taxpayers that are written in disappearing ink (i.e. they lapse after 2025) and on misbegotten corporate rate cuts that will do virtually nothing for economic growth. Indeed, contrary to the old Washington saw about “wasting a good crisis” the Senate bill involves something more like creating a good crisis and wasting it, too.

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“The Valley” (and its entire ancillary complex aka “the disruptor class”) is on the verge of receiving a wake up call..”

The Approaching Silicon Valley Meltdown (St. Cyr)

[..] there has been one outlier, for the most part, which seemed to skirt around all the current chaos, relatively unscathed. That would be Silicon Valley and all its ancillary provinces aka “Disruptive Tech.” So far the coveted group known collectively as “FAANG” (e.g., Facebook™, Apple™, Amazon™, Netflix™, Google™) seems to have held the “barbarians at the gates” known as investors relatively at bay, or “stable” in their positions, if you will. What has been, anything but, is their cohort of IPO brethren that were supposed to have joined them. “The Valley” seems to fit nicely as a moniker for a now self-recognized nation-state, after-all, if you include the market cap of these and a few others (e.g., Tesla™ and more) their combined valuations rival those of sovereign nations.

For all intents and purposes one could say they’re already developing and embracing their own newly formed currency, aka “Bitcoin™.” All that’s needed would seem is proposing a charter, and recognition. And that’s why it’s all about to burst, in my opinion. All of it. Why? Just as there are always clues, it’s in the consistency of further developments, along with weighing any prior, coupling them with the current, then trying to extrapolate whether or not they still stand, or are valid. This is the work most people (especially those paraded across the sycophantic mainstream business/financial media) won’t do. And not doing so for many – as of today – will have ramifications, maybe for a lifetime. So what’s the “Why?” Of course, it’s only my opinion, but I stand behind it more fervently than ever before. And it is this…

“The Valley” (and its entire ancillary complex aka “the disruptor class”) is on the verge of receiving a wake up call, the likes, that may make the dot-com era look relatively “stable” in hindsight. To use the political as an analogy, let’s just say, I believe the newly formed “nation-state” of FAANG will have much more in common with the turmoil in Brazil, Spain, Venezuela, and a few others in the coming months as it continues to desperately cling to the mythical Utopia of magical creatures known as unicorns, and cash out riches known as IPO’s. That “Utopia” has already been found to be a Potemkin Village made of spreadsheet papier-mâché analysis and valuation metrics, not worth the digital paper they’re written on.

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All of a sudden, both Merkel’s career and Germany’s role in Europe are under fire.

Merkel Prefers Fresh Elections To Minority Government As Talks Fail (G.)

Angela Merkel has indicated that she would rather have fresh elections than try to rule in a minority government as the collapse of German coalition talks posed the most serious threat to her power since she became chancellor more than a decade ago. Merkel, who has headed three coalitions since 2005, said she was “very sceptical” about ruling in a minority government and suggested she would stand again as a candidate if elections were called in the new year, telling public broadcaster ARD she was “a woman who has responsibility and is prepared to take responsibility in the future”. Exploratory talks to form the next German government collapsed on Sunday night after the pro-business Free Democratic Party (FDP) walked out of marathon negotiations with Merkel’s Christian Democrats, its Bavarian sister party, the Christian Social Union (CSU), and the Green party.

Germany’s president had earlier urged political parties to resume efforts to a build a governing coalition following a meeting with Merkel. “I expect the parties to make the formation of a new government possible in the foreseeable future,” Frank-Walter Steinmeier said, adding that the parties had a responsibility that “cannot be simply given back to the voters.” Elections in September saw Merkel’s bloc poll first place but with a reduced share of the vote and with the FDP and Greens as its only plausible coalition partners. The collapse in the talks and possibility of fresh elections brings further uncertainty for the British government over Brexit, which had hoped that a strong German coalition, including the FDP, might help smooth the next phase of negotiations.

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“There may be cases when a government is willing to press ahead with a policy even if it reduces short-term growth because it produces benefits in terms of broader welfare.”

Italy To Go Beyond GDP, Measure La Dolce Vita (BBG)

Italy has long prided itself for its quality of life – and with good reason. Italy may be only just recovering from a long economic crisis, but its citizens are healthier and live longer than those of most other countries in the world. It is perhaps no coincidence then that the Italian government is pioneering the use of welfare indicators in its budget process. As of this year, the finance ministry will produce official forecasts for 12 indicators, ranging from income inequality to CO2 emissions to obesity – the first country to do so in the EU and the G7. Measuring “la dolce vita” is a complex task, but one other countries should consider too. Growth will remain the main indicator to judge a country’s economic success because of its conciseness.

But, to the extent they can, it is hard to see why governments should not monitor the broader impact their policies have on the well-being of citizens. The push to go beyond GDP as a measure of welfare dates back at least to former U.S. presidential candidate Robert Kennedy. “The gross national product does not allow for the health of our children, the quality of their education or the joy of their play,” said Kennedy in a speech in 1968. Since then, economists have produced a long list of reports on well-being – the most famous of which was probably one by the Stiglitz-Sen-Fitoussi Commission set up by the French Government in 2008. Yet, so far this paperwork has produced little action: Governments still base their economic policy-making primarily on the basis of GDP.

There are very good reasons for continuing to do so. The choice of other welfare indicators is arbitrary and may be imprecise. In Italy, one of the biggest drivers of inequality is the gap between the young, whose incomes have fallen the most during the crisis, and the elderly and yet this is not included in the range of selected measures. There is also an issue of weighting: How will the Italian government decide which of the 12 indicators it has chosen is the most important? Finally, forecasting some variables such as “predatory crime” is bound to pose some serious headaches. Yet, this does not mean the principle is wrong. There may be cases when a government is willing to press ahead with a policy even if it reduces short-term growth because it produces benefits in terms of broader welfare.

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Chasing yield. What ultra low rates do.

Your Retirement Cash May Be In The Caymans. Can You Get It Back? (IBT)

The release of the so-called “Paradise Papers” touched off new scrutiny of how moguls, celebrities and politicians stash their cash in offshore tax havens. The practice, though, is hardly limited to the global elite. In fact, government documents show that local government officials have sent hundreds of billions of dollars of public sector workers’ retirement savings to a tiny archipelago most famous for white-sand beaches — and laws that shield investors from taxes. Operating outside the U.S. legal system, the offshore accounts in the Cayman Islands give Wall Street firms leeway to make complex international investments and to earn big fees off investors’ capital. But with offshore accounts featuring prominently in high-profile Ponzi schemes, some critics warn that the use of tax havens can endanger the retirement savings of millions of teachers, firefighters, cops and other public workers — a situation that could put taxpayers on the hook for losses if the investments go bust, or the money goes missing.

The tidal wave of cash has flowed from public pension systems into so-called “alternative investments”: private equity, hedge funds, venture capital firms and real estate. While many alternative investment firms operate in Lower Manhattan, more than a third of all the cash in those private funds flows through vehicles domiciled in the Caymans, according to Securities and Exchange Commission records reviewed by International Business Times. Those same records show that public pension plans, university endowments and other nonprofits have funneled a massive $1.8 trillion into alternative investments.

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From the Telegraph’s travel section. Is it Airbnb?

Room Rates At Trump’s Hotels Have Fallen By Up To 63% (Tel.)

There is further evidence that Donald Trump’s occupation of the Oval Office has had a negative impact on his business empire, with new research showing that average room rates have fallen by as much as 63%at all but one of his 13 hotels. Hardest hit was Trump Las Vegas. The average cost of a two-night stay in a standard double room during January 2017, just before his inauguration, was priced at £637, according to analysis by FairFX, the currency provider. But a two-night break in January 2018, one year on, can be secured for just £237.

At Trump Turnberry, his Ayrshire golf hotel, the average cost of a two-night stay has fallen by 57%, from £498 to £215, while steep drops have also been found for stays at Trump Doral in Miami (down 53%), Trump Washington DC (down 52%), Trump Vancouver (down 48%), and Trump New York (down 32%). Only the president’s Irish hotel, Trump Doonbeg, has seen a rise in rates, from £334 to £357. “One year after Trump’s inauguration, prices for a weekend in one of his hotels have for the most part decreased,” said Ian Strafford-Taylor, FairFX CEO. “While big events, like the inauguration in Washington, will usually cause prices to rise in that city for a particular weekend, the decreases in other places suggest that it doesn’t necessarily pay to be president.”

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“Does holding hands with Saudi Arabia as it slaughters Yemeni children really reflect American values?”

Why Are We Helping Saudi Arabia Destroy Yemen? (Ron Paul)

It’s remarkable that whenever you read an article about Yemen in the mainstream media, the central role of Saudi Arabia and the United States in the tragedy is glossed over or completely ignored. A recent Washington Post article purporting to tell us “how things got so bad” explains to us that, “it’s a complicated story” involving “warring regional superpowers, terrorism, oil, and an impending climate catastrophe.” No, Washington Post, it’s simpler than that. The tragedy in Yemen is the result of foreign military intervention in the internal affairs of that country. It started with the “Arab Spring” which had all the fingerprints of State Department meddling, and it escalated with 2015’s unprovoked Saudi attack on the country to re-install Riyadh’s preferred leader.

Thousands of innocent civilians have been killed and millions more are at risk as starvation and cholera rage. We are told that US foreign policy should reflect American values. So how can Washington support Saudi Arabia – a tyrannical state with one of the worst human rights record on earth – as it commits by what any measure is a genocide against the Yemeni people? The UN undersecretary-general for humanitarian affairs warned just last week that Yemen faces “the largest famine the world has seen for many decades with millions of victims.” The Red Cross has just estimated that a million people are vulnerable in the cholera epidemic that rages through Yemen. And why is there a cholera epidemic? Because the Saudi government – with US support – has blocked every port of entry to prevent critical medicine from reaching suffering Yemenis.

This is not a war. It is cruel murder. The United States is backing Saudi aggression against Yemen by cooperating in every way with the Saudi military. Targeting, intelligence, weapons sales, and more. The US is a partner in Saudi Arabia’s Yemen crimes. Does holding hands with Saudi Arabia as it slaughters Yemeni children really reflect American values? Is anyone even paying attention?

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What they refused to do 5 years ago. Now withdraw the warrants for Catalan elected officials.

Spain ‘Ready To Discuss’ Greater Fiscal Autonomy For Catalonia (G.)

Madrid is paving the way for Catalonia to be given the power to collect and manage its own taxes, similar to the system enjoyed by the autonomous Basque country, in an attempt to defuse the crisis over an illegal referendum on independence for the region. Senior sources in the Spanish government have told the Guardian that although there remains intense opposition within the ruling People’s party (PP) to any future referendum on self-determination, there is a renewed willingness to open discussions on a new fiscal pact under which Catalonia would have greater control of its finances. “If the Catalans ask for a fiscal pact, we are ready to discuss this,” one senior source said.

“The Basque country [in northern Spain] and Navarre collect their own taxes. They have their own system and there is a meeting between the Basque country and the central government and they decide how much they contribute to foreign policy and defence. It‘s a negotiation. Every five years. “We are open to discuss this, taking into account that the constitution of Spain also establishes solidarity [among the Spanish regions].” A fiscal pact was proposed in 2012 by Catalonia’s then president, Artur Mas, but the Spanish government blocked the move over concerns that it would be destabilising at a time when Spain appeared to be in dire economic peril. A cross-party commission on potential constitutional reform opened discussions last week on a new settlement between the Catalans and the Spanish government, with the support of the prime minister, Mariano Rajoy.

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Child poverty is high all over the EU. In Greece, it’s criminal.

37.5% of Greece’s Children Are At Risk Of Poverty (KTG)

Year in, year out since 2010, the number of children at risk of poverty is continuously increasing in Greece. With 37.5%, Greece is tops among members of the eurozone and third after Romania and Bulgaria within the European union. Four in 10 children aged up to 17 years old in Greece are at risk of poverty or social exclusion, Europe’s statistical agency Eurostat has found, putting the crisis-hit country at the top of the eurozone child poverty scale. In its report published on Monday and using 2016 data, Eurostat reported that with 37.5% of children facing the threat of poverty, Greece has the highest rate of at-risk children in the eurozone and the third highest in the European Union, behind Romania (49.2%) and Bulgaria (45.6%). At the opposite end of the scale, the lowest shares of children at risk of poverty or social exclusion were recorded in Denmark (13.8%), Finland (14.7%) and Slovenia (14.9%), ahead of the Czech Republic (17.4%) and the Netherlands (17.6%).

Greece also saw the highest rise in the number of at-risk children in the period between 2010 and 2016, growing 8.8% from a pre-crisis level of 28.7%. Cyprus also saw a spike of 7.8%, followed by Sweden (5.4%) and Italy (1.1%). In total in 2016, 24.8 million children in the EU, or 26.4% of the population aged up to 17 years old, were at risk of poverty or social exclusion. This means that the children were living in households with at least one of the following three conditions: at-risk-of-poverty after social transfers (income poverty), severely materially deprived or with very low work intensity. The proportion of children at risk of poverty or social exclusion in the EU has slightly decreased over the years, from 27.5% in 2010 to 26.4% in 2016, Eurostat reported.

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Prediction: a big mess.

Greek Online Foreclosures To Start With Big Debtors’ Assets (K.)

The first online foreclosures, set to start on November 29, will concern the assets of individuals or enterprises with debts of €500,000 or more (in some cases over €2 million). Villas, large buildings, historic buildings with one owner, plots of land, professional facilities and even parking spaces are among the assets slated to go under the electronic hammer as of end-November, when the online process finally begins. The amount of debts banks are seeking from these foreclosures comes to tens of millions of euros and concerns loans issued between 2005 and the outbreak of the crisis, when credit flowed handsomely.

Such is the case of one property with a single owner that will be auctioned for that individual’s debts of over €1.5 million to two systemic banks. The amount banks hope to claim is just €100,000, as it is common practice that the starting price is far smaller than the actual debt. The banks have vowed not to auction the homes of vulnerable groups or families without any other assets, but bank sources cannot rule out any exceptions made either intentionally or not, as 98% of debtors have failed to update their property details.

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The EU shouldn’t get to order Greece to do anything.

EU Orders Greece To Recover Up To €55 Million In State Aid (R.)

The European Commission ordered Greece on Monday to recover up to €55 million in state aid from Hellenic Defense Systems (HDS), a largely state-owned company that makes defense-related products. Greece granted a number of support measures between 2004 and 2011 including a direct grant of €10 million, a capital increase of €158 million and state guarantees for loans of up to €942 million. The Commission said in a statement that its investigation had concluded that the vast majority of Greek measures fell outside the scope of EU state aid control because they served Greek security interests. However, some measures worth up to €55 million did amount to illegal state aid because they supported the HDS’s civil activities, which include small pistols, explosives for construction and fireworks.

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Global.

As Oceans Warm, the World’s Kelp Forests Begin to Disappear (Yale)

A steady increase in ocean temperatures — nearly 3 degrees Fahrenheit in recent decades — was all it took to doom the once-luxuriant giant kelp forests of eastern Australia and Tasmania: Thick canopies that once covered much of the region’s coastal sea surface have wilted in intolerably warm and nutrient-poor water. Then, a warm-water sea urchin species moved in. Voracious grazers, the invaders have mowed down much of the remaining vegetation and, over vast areas, have formed what scientists call urchin barrens, bleak marine environments largely devoid of life. Today, more than 95 percent of eastern Tasmania’s kelp forests — luxuriant marine environments that provide food and shelter for species at all levels of the food web — are gone.

With the water still warming rapidly and the long-spine urchin spreading southward in the favorable conditions, researchers see little hope of saving the vanishing ecosystem. “Our giant kelp forests are now a tiny fraction of their former glory,” says Craig Johnson, a researcher at the University of Tasmania’s Institute for Marine and Antarctic Studies. “This ecosystem used to be a major iconic feature of eastern Tasmania, and it no longer is.” The Tasmanian saga is just one of many examples of how climate change and other environmental shifts are driving worldwide losses of giant kelp, a brown algae whose strands can grow to 100 feet.

In western Australia, increases in ocean temperatures, accentuated by an extreme spike in 2011, have killed vast beds of an important native kelp, Ecklonia radiata. In southern Norway, ocean temperatures have exceeded the threshold for sugar kelp — Saccharina latissima — which has died en masse since the late 1990s and largely been replaced by thick mats of turf algae, which stifles kelp recovery. In western Europe, the warming Atlantic Ocean poses a serious threat to coastal beds of Laminaria digitata kelp, and researchers have predicted “extirpation of the species as early as the first half of the 21st century” in parts of France, Denmark, and southern England.

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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 162016
 
 November 16, 2016  Posted by at 10:03 am Finance Tagged with: , , , , , , , ,  1 Response »


Unknown Wharf, Federal artillery, and schooners, City Point, Virginia 1865

Trump Won’t Start A Trade War; He’ll Finish It (MW)
Trump Digs In For Major US Trade Reset With The World (CNBC)
Panic In Housing Market As Trump Effect Pushes Mortgage Rates To 4% (CNBC)
The Bond Vigilantes Are Back, And Trump Better Be Careful (CNBC)
Elizabeth Warren Criticizes Trump Transition Team’s Wall Street Ties (WSJ)
What Now? (Jim Kunstler)
GOP Rushes To Embrace Trump (Hill)
Rickards: Financial Crisis Coming Soon, Will Be Different (BBG)
Another Financial Warning Sign Is Flashing in China (BBG)
India’s Great Rupee Fail (BBG)
Lack Of New Building Not To Blame For Soaring House Prices (Ind.)
Fate Of Controversial US Oil Pipeline Heads Back To Court (AFP)
Assange Optimistic Sweden Will End Probe Into Rape Claim (SMH)
The Technosphere Hiccups (Dmitry Orlov)
One Quarter Of Children in Toronto, Montreal Live In Poverty (CP)

 

 

Don’t know about you, but I find it refreshing to see actual discussion going on, based on something else than pre-conceived notions.

Trump Won’t Start A Trade War; He’ll Finish It (MW)

[..] In deriding Trump for everything that comes out of his mouth, mainstream media have been quick to dismiss his repeated claims about his prowess in negotiating. These same media acknowledged early in Obama’s tenure that this former community organizer could not negotiate his way out of a paper bag, starting talks where he wanted to end them and giving up more than he intended. Now, however, anti-Trump voices want to take his threat of 45% tariffs against China as a fait accompli and paint a doomsday scenario of what that will mean for American consumers and the global economy. These critics claim Trump will start a trade war. Newsflash: We are already in a trade war started by the Chinese and others who have traditionally kept their currency devalued to flood our market with their goods while protecting their own.

And we are losing. This was precisely the point made last summer by Dan DiMicco, the former steel executive Trump has charged with managing trade issues during his transition. “Hillary Clinton has claimed Trump’s trade policies will start a ‘Trade War,’ but what she fails to recognize is we are already in one,” he wrote in his blog. “Trump clearly sees it and he will work to put an end to China’s ‘Mercantilist Trade War’! A war it has been waging against us for nearly two decades!” And hard-nosed bargaining will be the way Trump ends this war, DiMicco added. “He will do this by negotiating from a position of strength, not condescending weakness. China respects strength but takes full advantage of weakness. In the end it will be in China’s best interest to stop cheating on trade.”

China needs trade with the U.S. at least as much as we do. The idea, for instance, that China would retaliate against U.S. tariffs on some manufactured goods by blocking agricultural imports from the U.S. ignores the fact that China’s massive population has to eat. China is the focus for unfair trade practices, but let’s not forget there are many others. Germany, for instance, manipulates its currency in a much more subtle fashion. By tying it to lower performing economies to keep the value of the euro low, Germany prospers while driving other euro countries to ruin. Trade pacts with insufficient protections exacerbate this situation, as does a World Trade Organization with unenforceable restrictions. Trump is exposing this charade for what it is. Solutions may not come easy, but you can’t solve the problem if you don’t first figure out what it is.

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“When we negotiate free trade agreements, we are lousy at it [..] They are dominated by folks that have a predominant benefit from getting more exports into the world as opposed to having balanced trade, which is good for all Americans.”

Trump Digs In For Major US Trade Reset With The World (CNBC)

Donald Trump got some of his loudest campaign cheers with a simple pledge to “get tough on trade.” Now the president-elect and his supporters will find out how complex that goal will be. [..] One early indication of where a Trump administration would steer U.S. trade policy came this summer with the appointment of Dan DiMicco, former CEO of Nucor Corporation, as his trade advisor. Nucor, the largest U.S. steel producer, is a scrappy survivor of the massive consolidation of the American steel industry that shed millions of jobs in the 1970s and 1980s as the nation’s backbone supplier of postwar manufacturing fell into decline. That industry was born in the geographic intersection of rich deposits of steel’s two main ingredients: Pennsylvania coal and Michigan iron ore.

Those two states sent Trump to the White House on Election Day. Today, the fiery forges that once melted raw iron to build U.S. skyscrapers, consumer appliances and family station wagons have largely gone cold. Under CEO DiMicco, Nucor, now North America’s largest recycler, survived the decline of Big Steel by building a business melting down scrap steel produced by others — some 17 million tons last year. Last month, Trump promised to restore the Midwest as the “manufacturing hub of the world again” and “fight for steel businesses that have been taken away.” “We’re going to bring back steel,” he told a cheering crowd. “Your steel has been stolen from you.”

In DiMicco, the president-elect has chosen an outspoken advisor – and potential appointee – who shares his belief that restoring industries like steel manufacturing means getting “tough” with global competitors. “When we negotiate free trade agreements, we are lousy at it,” DiMicco told CNBC a year ago. “They are dominated by folks that have a predominant benefit from getting more exports into the world as opposed to having balanced trade, which is good for all Americans.” With DiMicco as one of the architects, the Trump campaign has sketched out initial plans for reforming U.S. trade relations with the rest of the world. In a heavily footnoted position paper in June, Trump laid out a seven-step plan to “change our failed trade policy – quickly” and “bring back our jobs.”

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The sooner credit card rates go back to ‘normal’, the better.

Panic In Housing Market As Trump Effect Pushes Mortgage Rates To 4% (CNBC)

More selling in U.S. bond markets Monday pushed mortgage rates to a psychological breaking point. The average contract rate on the popular 30-year fixed mortgage hit 4%, according to Mortgage News Daily, a level most didn’t expect to see until the middle of next year. Rates have now moved nearly a half a%age point higher since Donald Trump was elected president. “The situation on the ground is panicked. Damage control,” said Matthew Graham, chief operating officer of Mortgage News Daily. “People were trying to lock loans quickly last week and are now facing a tough choice to lock today or hope for a bounce. Many hoped for a bounce last week heading into the long weekend and we obviously didn’t get it.”

Mortgage rates follow loosely the yield on the 10-year Treasury bond. That yield on Monday hit the highest level since December, as investors flooded the stock market and pulled out of the bond markets. The runup on stocks is backed by a belief that the Trump administration will be a boon to the economy overall and the banking sector specifically. Higher mortgage rates, however, will throw a wrench into an already shaky housing recovery. Home prices have been rising dramatically in the past few months, largely due to a lack of homes for sale. During housing’s recovery from the worst crash in history, historically low mortgage rates allowed prices to gain quickly and, more recently, to rise far faster than both income and employment growth.

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“The chances are elevated that Trump starts his presidency off with a recession.”

The Bond Vigilantes Are Back, And Trump Better Be Careful (CNBC)

[..] the Federal Reserve has kept its short-term rate target anchored for the past eight years, raising just once – a quarter-point increase in December 2015 – and perhaps once more next month. The Fed had been an aggressive buyer in the Treasury market, ballooning its balance sheet to $4.5 trillion in three rounds of quantitative easing. In the meantime, investors continue to fret over a bond bull market that has been ongoing for more than three decades. Each predicted end of the fixed income rally has been wrong. But Trump’s plans for aggressive fiscal policy, the likes of which hasn’t been since before the Great Recession, have renewed fears.

“When you have inflation and growth, or the prospect for more growth, that slams smack into a bond bubble, it’s a very dangerous cocktail,” said Michael Pento, head of Pento Portfolio Strategies. Pento worries that the combination of market factors could stop the president-elect before he gets started. “There’s a lot of bad stuff that’s already occurred,” he said. “If you put them on a ledger, on the good side there’s hoped-for growth policies in 2017. On the bad side, you already have a spiking dollar, spiking interest rates. The chances are elevated that Trump starts his presidency off with a recession.”

However, if the bond vigilantes do swoop in, they could find themselves with a formidable opponent, namely the Fed and other central banks, which could adopt a whatever-it-takes approach to keeping yields in check and thwarting an economic downturn. The Fed has been at the global forefront for ambitious and unconventional monetary policies, but the Bank of Japan’s recent move to target its 10-year note yield at zero took the game to a new level. Should troubles erupt in the bond market, more action would be likely by the Fed. “Consider a scenario where a large fiscal stimulus (or the expectation of such stimulus) pushes up bond yields so sharply that risk assets and the economy suffer,” Joachim Fels, global economic adviser at bond giant Pimco, said in a note Tuesday.

“To prevent a bond tantrum, the central bank may want to limit the rise in yields by intervening in the bond market directly. The cleanest way to do this is to announce a cap on yields and stand ready to buy unlimited amounts to preserve the cap if needed.” That would be over the long term, though. In a shorter time frame, Kroll’s Whalen said he thinks a recent prediction by Jeff Gundlach at DoubleLine that the U.S. 10-year yield could hit 6% in five years is “conservative.”

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Even Warren gets back to making some sense. What she doesn’t get is that this is exactly what Trump wants her to do. If she would want to irk him, she’d stay silent and let the selection process create its own swamp. By speaking out, she helps The Donald select his crew. Because the transition team is not in disarray, as I see 1000 voices claim; it’s simply a different process. They put a name out there with the express goal of seeing what the reactions are. And in typical Trump style, the first ones are extreme (Bannon), so he has room to climb down.

Elizabeth Warren Criticizes Trump Transition Team’s Wall Street Ties (WSJ)

Sen. Elizabeth Warren warned President-elect Donald Trump against choosing “Wall Street insiders” for top financial posts, likely previewing the confirmation battles to come in the Senate. In a letter to the president-elect dated Tuesday, the Massachusetts Democrat specifically noted three members of the Trump transition team with ties to Wall Street and “demonstrated records of failure during the 2008 financial crisis” whom she would find unacceptable for top positions: David Malpass,Paul Atkins and Steve Mnuchin. Mr. Malpass, a former Bear Stearns chief economist, is working on shaping Mr. Trump’s Treasury Department, which Mr. Mnuchin is a leading candidate to lead. Mr. Atkins, a former SEC commissioner during the George W. Bush administration, is working to fill the ranks of financial regulatory agencies in the Trump administration.

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“In case you were wondering, I was not jumping up and down cheering the Trump victory, amazing as it was. I figured the good news was that Hillary lost and the bad news was that Trump won. Now, we just have to roll with it.”

What Now? (Jim Kunstler)

The USA is squandering its vitality trying to maintain a half-assed global empire of supposed interests, economic, ideological, and existential. Lately, this hapless project has only resulted in wars with no end in places we don’t belong. It includes reckless experiments such as the promotion of regime change (Iraq, Libya, Ukraine, Egypt, Syria), and senseless, provocative exercises such as the use of NATO forces to run war games near Russia’s border. The monetary cost of all this is off the hook, of course, redounding to the financial mess. Reigning in these imperial impulses could be on the Trump agenda, but his own gold-plated imperial pretensions suggest that he might actually make the situation worse by conflating a reduction of our empire with a loss of the very “greatness” he wants to reclaim.

[..] The great project awaiting this country is how we might redistribute our people into re-scaled walkable communities with re-localized economies, including re-scaled agriculture. It’s going to happen whether we like it or not. It’s only a matter of how disorderly the process may be. Obviously all the suburban crapola out there also represents a tremendous load of presumed wealth. The vested “value” in suburban houses alone is the underlayment of structured finance. There is almost no conscious political awareness in any party — including the Greens – as to how we might attempt to work this out. But, for example, and for a start, Mr. Trump might consider the effect that national chain “Big Box” shopping has had on Main Street America. It literally destroyed local commercial economies all over the land, and with it numberless vocational niches and social roles in communities.

[..] The chatter this week has been all about the upcoming “infrastructure” orgy that Trump will undertake. That depends first of all on how badly the financial sector cracks up. I hope we do not squander more of our dwindling capital on the accessories of car dependence, because that addiction is on the way out. One thing Mr. Trump might get behind is restoring the passenger railroads of America so that we can at least get around the continental nation when the Happy Motoring fiesta grinds to a halt. It would put an awful lot of people to work on something with real long-term benefit – it ties into the restoration of Main Street towns and their economies – and it is a do-able project that might give us the needed encouragement to get on with the many other necessary projects awaiting our attention.

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Imagine having to lick up to Trump.

GOP Rushes To Embrace Trump (Hill)

Republican lawmakers spent the past year keeping Donald Trump at arm’s length. Now they’re tripping over themselves to embrace him. Returning to Washington for the first time since Trump’s presidential victory, GOP leaders handed out “Make America Great Again” hats at their weekly conference meeting on Tuesday. Speaker Paul Ryan (R-Wis.) named a top Trump ally, Rep. Chris Collins (R-N.Y.), as the congressional liaison to the presidential transition team. At one point Tuesday, Ryan referred to the president-elect by his first name, “Donald.” In past months, Ryan wouldn’t even dare mention his name, often calling him only “the nominee.” This all would have been unimaginable even a month ago. Some Republicans acknowledged there had been a sea change since Trump surprised Democrats and some in his own party by defeating Hillary Clinton.

Republicans on Capitol Hill “are so excited. People are coming up to me, telling me they’ve been with Trump since day one,” Collins explained to reporters. “And I kind of look and say, ‘Well, OK, if you say so.’ “Donald Trump has accomplished for us something no one thought possible. … Everything is red, and we’ve got four solid years to get this right.” After winning the GOP nomination to be Speaker for the next two years, Ryan gave yet another shout-out to Trump – the second of the day. “This leadership team is unified. This entire House Republican Conference is unified,” said Ryan, flanked by his leadership team. “And we are so eager to get to work with our new president-elect to fix America’s pressing problems.” Never mind when Trump called Ryan a “very weak and ineffective leader” last month, after the Speaker announced he’d no longer try to defend or campaign with him.

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“They’re going to lock down the system.”

Rickards: Financial Crisis Coming Soon, Will Be Different (BBG)

Jim Rickards, West Shore Group’s chief global strategist and author of “The Road to Ruin,” discusses the possibility of another financial crisis with Bloomberg’s Vonnie Quinn and David Gura on “Bloomberg Markets.”

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It’s troubling that the Chinese have started borrowing to buy everything, holding up a mirror to us westerners. It’s more troubling that it turns banks into outlets for the shadow banking system.

Another Financial Warning Sign Is Flashing in China (BBG)

Add another credit indicator to the financial warning signs flashing in China. The adjusted loan-to-deposit ratio, which includes a range of off-balance sheet items and is an indicator of the banking system’s ability to weather stress, climbed to 80% as of June 30, according to S&P Global Ratings. For some smaller lenders, the ratio has already topped 100%, S&P estimates. S&P’s adjusted measure is rising much faster than the official loan-to-deposit ratio as banks pile into off-balance sheet lending, sidestepping government efforts to rein in credit. At the current pace, overall credit could surpass deposits on an adjusted basis within a few years – a level that would give China little leeway to stave off financial turmoil, S&P says.

“The next two to three years is a crucial window for China to rein in the ratio, or we will be in serious trouble,” said S&P’s Beijing-based director Liao Qiang. “Reaching 100% doesn’t mean a crisis will ensue immediately, but it shows China’s entire deposit base is used up and any loss of confidence from savers will severely destabilize the banking system.” Even after S&P’s adjustments, the ratio in China remains lower than in many other countries. Yet the country’s rapid loan growth, diminishing return on credit and rising bad debts combine to make deposits a particularly important buffer against future financial distress, according to Liao. Deposit-taking has formed a cornerstone of China’s banking system as it expanded in tandem with the economy, providing lenders with a stable, low-cost funding base to fuel credit growth.

Chinese households and companies hold $22 trillion of bank deposits, more than anywhere else in the world. That cushion has made lenders less dependent on short-term wholesale funding than banks elsewhere. For two decades, China imposed a cap that limited loans to a maximum 75% of deposits as part of measures to contain risks. That ceiling was abolished in October 2015, in part because it was seen as a blunt tool that encouraged illicit deposit-hoarding and moving loans off balance sheets. The official loan-to-deposit ratio among Chinese lenders stood at 67% at the end of September, up only slightly from 66% when the cap was lifted. But that measure has become less relevant as Chinese banks – especially small and mid-sized ones – have stepped up shadow lending and sales of savings-like offerings called wealth management products, which don’t get carried on their balance sheets.

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This could yet get out of control in sinister ways. Fishing industries collapse, farmers can’t buy seeds.

India’s Great Rupee Fail (BBG)

One week after India’s sudden declaration that 500- and 1,000-rupee notes were no longer legal tender, the economy is in chaos. And that’s perhaps because the policy was designed as much to shock and awe observers with the government’s command of the Indian economy as to control India’s “black money” problem. What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation. Modi is beginning to sound like he may agree. His recent speeches on the subject have been frankly bizarre. In one, he seemed to laugh at those inconvenienced by the ban; in another, he broke down while speaking of the “sacrifices” he’d made for India, and warned that he might be assassinated by “forces” desperate to protect their “loot.”

What’s changed in a week? Well, for one, it’s become clear that the government was simply too cavalier in its planning. Now that 86% of India’s currency is no longer valid, the central bank has struggled to print replacement denominations – and the new notes are the wrong size for existing ATMs. Modi’s asked people to be patient for 50 days, but the process could take as long as four months. You have to wonder if Modi truly sought expert advice, or relied once again on a small and trusted set of politicians to determine policy. India’s simply too big and complex for shock and awe. Large parts of the rural economy use cash for 80% of transactions and have been hard-hit. In seafood-mad West Bengal, for example, the fishing industry is in a state of near-collapse; in the wheat-growing states of the northwest, farmers halfway through the sowing season have run out of cash to buy seeds.

Few villagers have access to an ATM. Most have to trek to a bank branch to change their cash, which means losing out on crucial days of labor. Many Indians, particularly women, still don’t have an active bank account. Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes – probably a rhetorical question, but surely it shouldn’t have been. Someone should’ve sought the answer before shutting down India’s financial system. Among India’s middle class, Modi’s “surgical strike on black money” still appears to be popular. It’s the old “vegan fallacy” – if something tastes terrible, it must be good for you. Enough Indians are suffering that they believe it must be in a greater cause. It’s a moral project, not an economic one. Stand in line, we’re told, and you honor our brave soldiers at the border.

But will that support last? The government’s plan is likely to be ineffective in the long term. Economists agree it will have no effect on the generation of black money through corruption. Meanwhile, estimates of the amount of black money that will eventually be recovered vary widely. The optimists (wrongly) think enough cash will be destroyed by hoarders that the central bank will be able to pay a hefty dividend to the government. Others point out that a very small fraction of black money tends to be held as cash and that there are a dozen ways still available to launder that fraction.

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And anyone who ever thought otherwise was a fool to do so.

Lack Of New Building Not To Blame For Soaring House Prices (Ind.)

Soaring house prices and plummeting home ownership rates in the UK have not been driven by a lack of new housing construction, a Labour party-commissioned review has found, contradicting conventional wisdom on the nature of the housing crisis. The Redfern Review, published today, states, instead, that the biggest drivers of the large increase in house prices over the past two decades have been rising incomes, falling interest rates and, more recently, a lack of mortgage finance availability for first-time buyers and the weakness of this group’s income growth. It also warns that even substantially increasing the supply of new homes will not directly improve the home ownership rate in the near term.

“New household formation and supply have been broadly in balance over the last 20 years and therefore the significant increases in house prices over that period have not been driven primarily by supply constraints,” it concludes. It finds that tougher rules on how much first time buyers can borrow for a mortgage has been the biggest downward force on the home ownership rate since 2008, followed by rapid increase in house prices. It said that the third biggest driver was a 10 per cent fall in the incomes of young people aged 28-30 relative to those aged over 40 since the financial crisis.

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It’s high time to put the issue to rest, and show native Americans that treaties will be respected.

Fate Of Controversial US Oil Pipeline Heads Back To Court (AFP)

The operators of a North Dakota oil pipeline struck back at the US government Tuesday, asking a court to stop regulators from further delaying the contentious project opposed by Native Americans. The move by Energy Transfer Partners and Sunoco Logistics Partners came after the US Army Corps of Engineers on Monday effectively put the brakes on the four-state long Dakota Access Pipeline by calling for more analysis and discussion. The companies responded by asking a federal district court in Washington, the US capital, to declare that they had the right to complete their project without the need for more approvals from regulators.

“The Dakota Access Pipeline has waited long enough,” Kelcy Warren, chief executive of Energy Transfer Partners, said in a statement. “It is time for the Courts to end this political interference and remove whatever legal cloud that may exist.” The decision by the Corps, whose permission is required for the pipeline to be built under the Missouri River and the man-made Lake Oahe in North Dakota, was a victory for the Standing Rock Sioux Tribe. The waterways are the tribe’s drinking water source, and it has objected to building the 1,172-mile pipeline underneath the river and lake, for fear that it might leak. “The Army continues to welcome any input that the Tribe believes is relevant to the proposed pipeline crossing,” the Corps said.

The tribe, which now believes it has the momentum in its battle against the companies, wants the pipeline’s route altered away from lands near its reservation. It also claims those lands contain sacred historic artifacts. “They are wrong and the lawsuit will not succeed,” the tribe’s chairman Dave Archambault said Tuesday in a statement responding to the companies’ action. He claimed that the pipeline’s operators are in a rush to complete the project before the end of the year, or risk losing shipping contracts that would jeopardize its viability. “They made bad decisions and are now facing the consequences. The tide is turning against this project. We thank all of our water protectors who have raised their voices against it. You are being heard,” Archambault said.

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He may ask Trump to end US investigation. That would be a bold move.

Assange Optimistic Sweden Will End Probe Into Rape Claim (SMH)

Julian Assange is optimistic that Swedish prosecutors will drop their investigation into rape allegations after he spent a day and a half being questioned in London, his lawyer says. And his team will write to the new Trump administration asking that the US end its investigation of Assange over Wikileaks’ publication of leaked classified material. Swedish assistant prosecutor Ingrid Isgren was present at the interview, which was conducted by an Ecuadorian prosecutor. After Assange gave a day-long statement on Monday, Tuesday was a question-and-answer session lasting about four hours. The results of the interview will be reported from Ecuador to the Swedish prosecutors in a written statement. The prosecutors will then decide whether to continue or end their investigation.

In a brief statement, the Swedish Prosecution Authority said the investigation and the interview at the embassy were “subject to confidentiality”. Assange’s lawyer Jennifer Robinson said on Tuesday evening she was unable to give details of the day’s questioning, including whether her client was asked for a DNA sample – as the Swedish prosecutors had said they intended. [..] Wikileaks played a crucial role during the presidential election, releasing emails hacked from Democratic Party servers which linked Hillary Clinton to big business and pulled the curtain from the political machinations behind her campaign. Asked if Donald Trump would return the favour by ending the investigation into Assange, Ms Robinson said “we would always be open to a conversation about closing it down”. “We’ll have to discuss that with our US counsel but we’ve written to the Obama administration and no doubt we will write to future US administrations until this is resolved.”

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Color revolution passes from Ukraine to America.

The Technosphere Hiccups (Dmitry Orlov)

[..] it would appear that the technosphere has suffered a setback. But it will not give up so easily, and the next step for it is to deploy political technologies to, if at all possible, invalidate and nullify the results of its electoral defeat. Indeed, this has already started: Bill and Hillary Clinton have recently shown up for a meeting with another ectoplasmic emanation of the technosphere, the predatory billionaire George Soros, clad in accents of Roman imperial purple. The rationale they gave for displaying the colors of the emperor’s toga is that it is a mixture of red and blue, and thus represents compromise. However, compromise, in their case, would be to exit from public life, for both of them are too old to ever run for any office again.

No, this display of imperial colors is just that: a signal that the empire is getting ready to strike back: we should look forward to another attempt at a Color Revolution—the Purple Revolution—this time in the United States, financed by the very same George Soros. This mixed-up signaling is typical: after the Russian election, in which Putin was again elected president, the same Color Revolution syndicate organized and financed protests there, featuring little white ribbons—which, as it happens, were worn by Nazi collaborators during World War II. This nuance was not lost on the Russians, and the protests came to naught. The technosphere is powerful, but is not all-powerful or infallible, and the world is developing effective antibodies against it generally, and against its political technologies, and the technology of the Color Revolution Syndicate in particular.

Here’s an example: the US spent some $5 billion on destabilizing the Ukraine politically and turning it into an enemy of Russia. For a while people in Kiev could earn more in a day by protesting than in a month by working a job. End result: in a recent opinion survey, 84% (34,900) Ukrainians said that the person they want to be the president of the Ukraine is… Vladimir Putin, with the current president, hand-picked by the US State Department, lost somewhere in the margin of error. [..] there now exists an anti-technology for dealing with the technology of Color Revolution, and all it takes to put it into action is a few groups of patriots. To remind: patriots are not nationalists; nationalists are people who hate other nations; patriots are people who love their land, and their people, more than any other, and are willing to lay down their lives in defense of it.

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One of the world’s richest nations. Shame on you, Justin.

One Quarter Of Children in Toronto, Montreal Live In Poverty (CP)

A new report says Toronto has the highest percentage of children living in poverty of any large city in Canada – 27% – and that the closest runner-up is Montreal. In Montreal, 25% of children were living in poverty in 2014. At 24%, Winnipeg was third on a list of Canadian cities with a population higher than 500,000. The report, titled Divided City: Life in Canada’s Child Poverty Capital, says 133,000 children in Toronto were living in low-income families in 2014, the year the data were collected.

A coalition of groups including the Children’s Aid Society of Toronto issued the report as that city weighs up to $600 million in cuts to such programs and services as community housing, transit and student nutrition. It says racialized families, new immigrant families, single-parent families and families with disabilities are up to three times more likely to live in poverty. Only half of children in families with an annual income of less than $30,000 were found to participate in out-of-school art or sports programs, compared with 93% of students in families with an income of $100,000 or more.

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Nov 012016
 
 November 1, 2016  Posted by at 9:36 am Finance Tagged with: , , , , , , , , , , ,  Comments Off on Debt Rattle November 1 2016


Unknown Magazine and cannonballs at Battery Rodgers, Alexandria 1863

Donna Brazile’s Sins A Microcosm Of Biased Media (BH)
FBI Finds No Clear Link Between Trump and Russia (NY Times)
FBI Speeds Up Clinton Email Investigation After Criticism (LATimes)
Halloween Nation (Jim Kunstler)
Global Bond Markets See Worst Rout in 3 Years (BBG)
A Little-Noticed Fact About Trade: It’s No Longer Rising (NY Times)
US Trucking Companies Pare Down Fleets Amid Tepid Shipping Demand (WSJ)
October Mergers Smash All Records With $500.1 Billion In Deals (ZH)
Asset Bubbles From Stocks to Bonds to Iron Ore Threaten China (WSJ)
China Shows a Cheap Currency Doesn’t Pack the Same Punch Anymore (BBG)
Air Quality Worsens In Greece As People Burn Anything To Stay Warm (G.)
A Parting Gift To Athens From Obama (Kath.)
Creating Child Poverty For A Whole New Generation (G.)
Calais ‘Jungle’ like ‘Lord of the Flies’, With 1500 Abandoned Children (Ind.)
QPR To Bring Over 1,000 Children To UK In Kindertransport-Style Mission (G.)

 

 

Spot on from Adriana Cohen. CNN fires Brazile after she provided Clinton with debate questions. But she’s still head of the DNC, and Obama praises her: “..she is a person of high character..” What??

Donna Brazile’s Sins A Microcosm Of Biased Media (BH)

CNN was asking for it when it let Donna Brazile take a seat on the pundit desk. A plugged-in Brazile, now the interim chairwoman of the Democratic National Committee, seized on the opportunity and leaked questions to Hillary Clinton’s camp — one on Flint’s toxic water disaster before a CNN Michigan town hall in March and another a few days later on the death penalty before an Ohio showdown. CNN revealed yesterday – after WikiLeaks kept pointing out the embarrassing journalistic sins – that Brazile was no longer employed by the station. Unfortunately, it’s too late for Bernie Sanders. It’s also too late for voters hoping for an even playing field. There’s nothing wrong with having strong political opinions — I certainly have mine — but at least don’t cheat.

To put how serious this is into context, if Brazile traded stocks off inside information, the SEC would toss her in jail faster than you can say Martha Stewart. Yet, despite all of the above, the White House yesterday praised her integrity. You read that right. When asked about the hacked emails White House spokesman Josh Earnest said, “No, the president believes she has done a fine job stepping in during a very difficult situation to lead the Democratic Party … she is a person of high character. She is a true professional who is a tenacious and effective advocate for Democrats.” Guess rigging a debate is just being a good advocate. Talk about a lack of ethics. But after the targeting of conservatives via the IRS — and recent undercover videos showing how Democratic operatives deployed paid agitators to disrupt Donald Trump rallies — who’s surprised?

But that’s not all Donald Trump and other candidates are up against when challenging the almighty Democratic machine. In a study conducted by Media Research Center of TV coverage during this election, a whopping 91% of Trump coverage was hostile toward the businessman compared to a small fraction of negative stories on Clinton. If that’s not a stacked deck, what is? Can you imagine in the World Series if the umpires made 91% of bad calls against one team and not the other? A biased media is risking its lifeblood — followers — by giving an unfair advantage to the candidate of their choice. A week from today voters will decide if they’ve had enough.

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It’s full tard insane and disgusting that this is still a story. This shallow-to-flat Clinton camp narrative would have been discarded many months ago if media like the NY Times had been just a little bit more impartial. And even this is not a real mea culpa; the article is still full of insinuations and innuendo that leaves plenty traces of the empty narrative alive.

FBI Finds No Clear Link Between Trump and Russia (NY Times)

For much of the summer, the F.B.I. pursued a widening investigation into a Russian role in the American presidential campaign. Agents scrutinized advisers close to Donald J. Trump, looked for financial connections with Russian financial figures, searched for those involved in hacking the computers of Democrats, and even chased a lead – which they ultimately came to doubt – about a possible secret channel of email communication from the Trump Organization to a Russian bank. Law enforcement officials say that none of the investigations so far have found any conclusive or direct link between Mr. Trump and the Russian government. And even the hacking into Democratic emails, F.B.I. and intelligence officials now believe, was aimed at disrupting the presidential election rather than electing Mr. Trump.

Hillary Clinton’s supporters, angry over what they regard as a lack of scrutiny of Mr. Trump by law enforcement officials, pushed for these investigations. In recent days they have also demanded that James B. Comey, the director of the F.B.I., discuss them publicly, as he did last week when he announced that a new batch of emails possibly connected to Mrs. Clinton had been discovered.

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They can’t really not say anything by next weekend.

FBI Speeds Up Clinton Email Investigation After Criticism (LATimes)

The FBI accelerated its timeline for reviewing emails potentially linked to Hillary Clinton on Monday amid growing public pressure over the agency’s surprise announcement that it had found them in an unrelated case. Investigators had planned to conduct the review over several weeks but, after a torrent of criticism over the weekend, began scrambling to examine the trove of emails, according to law enforcement officials. The FBI hoped to complete a preliminary assessment in the coming days, but agency officials have not decided how, or whether, they will disclose the results of it publicly, and officials also could not say whether the entire review would be completed by election day.

The uncertainty did not stop Donald Trump from charging into the vacuum with ominous speculation that a Clinton victory would spark national upheaval. Clinton repeated that she was confident the FBI had no case against her and that voters had already made up their mind on her use of a private server while she was secretary of State. [..] FBI Director James B. Comey, a former Bush administration official appointed to run the bureau three years ago by President Obama, has come under heavy criticism from Democrats and Republicans alike for disclosing the investigation to Congress so close to the election.

Iowa Sen. Charles E. Grassley, a Republican who heads the Judiciary Committee, demanded that Comey release more information about the review by Friday. “While I disagree with those who suggest you should have kept the FBI’s discovery secret until after the election, I agree that your disclosure did not go far enough,” Grassley wrote to Comey. “Unfortunately, your letter failed to give Congress and the American people enough context to evaluate the significance or full meaning of this development.” “Without additional context, your disclosure is not fair to Congress, the American people, or Secretary Clinton,” Grassley added. He also renewed concerns that the FBI’s initial email investigation may have been hampered “by political appointees at the Justice Department.”

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Jim wrote to compliment me on my Throw Huma Under the Bus? article on Saturday. Compliments right back at you.

Halloween Nation (Jim Kunstler)

What was with James Comey’s Friday letter to congress? It looks to me like the FBI Director had to go nuclear against his parent agency, the Department of Justice, and Attorney General Loretta Lynch, his boss, in particular. Why? Because the Attorney General refused to pursue the Clinton email case when more evidence turned up in the underage sexting case against Anthony Weiner, husband of Hillary’s chief of staff, Huma Abedin. Over the weekend, the astounding news story broke that the FBI had not obtained a warrant to examine the emails on Weiner’s computer and other devices after three weeks of getting stonewalled by DOJ attorneys. What does it mean when the Director of the FBI can’t get a warrant in a New York minute? It must mean that the DOJ is at war with the FBI.

Watergate is looking like thin gruel compared to this fantastic Bouillabaisse of a presidential campaign fiasco. One way you can tell is that The New York Times is playing down the story Monday morning. Columnist Paul Krugman calls the Comey letter “cryptic.” Krugman’s personal cryptograph insinuates that Comey is trying to squash an investigation of “Russian meddling in American elections.” Senate Minority Leader Harry Reid chimed in with a statement that “it has become clear that you [Comey] possess explosive information about close ties and coordination between Donald Trump, his top advisers and the Russian government.” How’s that for stupid and ugly? It’s the Russian’s fault that Hillary finds herself in trouble again?

Earlier this week, lawyers at the DOJ attempted to quash a parallel investigation of the Clinton Foundation. They must be out of their minds to think that story will go away. Isn’t it about time that a House or Senate committee subpoenaed Bill Clinton to testify under oath about his June airport meeting with Loretta Lynch. He doesn’t enjoy any special immunity in this case. Speaking of immunity, when will we learn what kind of immunity Huma Abedin may have been granted in previous cycles of the email investigation? Plenty of other Clinton campaign associates got immunity from prosecution earlier this year, rendering bales of evidence on their own laptops inadmissible in the email server case.

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Central banks losing grip.

Global Bond Markets See Worst Rout in 3 Years (BBG)

When German bond markets sneeze, U.S. Treasuries catch a cold. That’s the conclusion drawn by analysts at TD Securities as global bonds march towards their worst streak of monthly losses since 2010. There’s a distinct rhythm to the selloff, according to the Canadian investment bank. Rising yields on benchmark bunds, and to a lesser-extent gilts, have driven the jump in long-dated Treasuries this month, strategists at TD Securities argue. They cite rising rate-market correlations, elevated selling of Treasuries during European trading hours, and market fears the ECB might moderate its monetary accommodation as factors that suggest international forces largely account for the rise in benchmark 10-year yields, which flirted with a five-month high of 1.88% on Friday.

“We believe that much of the recent rise in U.S. rates has been driven by bunds and gilts,” analysts at TD Securities, led by Priya Misra, wrote in a report on Friday. Rising U.S. Treasuries have been accompanied by an uptick in market-implied inflation expectations, combined with fears that investors are saddled with outsize duration risks. But tightening Treasury-bund spreads since September 30, in fact, throw into sharp relief the external drivers for the rout in the U.S. rate market, the strategists note. “Our analysis shows that since 2010, greater than a one-standard deviation increases in 10-year Treasury yields tend to result in a widening in Treasury-bund and Treasury-gilt spreads. However, this latest move has actually resulted in a tightening of US-Germany and U.K. spreads,” which suggests global rate-markets are dancing to a similar beat, the analysts write.

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Little-noticed? I have been writing about it for ages.

A Little-Noticed Fact About Trade: It’s No Longer Rising (NY Times)

During the 1990s, global trade grew more than twice as fast as the global economy. Europe united. China became a factory town. Tariffs came down. Transportation costs plummeted. It was the Walmart Era. But those changes have played out. Europe is fraying around the edges; low tariffs and transportation costs cannot get much lower. And China’s role in the global economy is changing. The country is making more of what it consumes, and consuming more of what it makes. In addition, China’s maturing industrial sector increasingly makes its own parts. The IMF reported last year that the share of imported components in products “Made in China” has fallen to 35% from 60% in the 1990s.

The result: The I.M.F. study calculated that a 1% increase in global growth increased trade volumes by 2.5% in the 1990s, while in recent years, the same growth has increased trade by just 0.7%. Hanjin, like other big shipping companies, bet that global trade would continue to expand rapidly. In 2009, the world’s cargo lines had enough room to carry 12.1 million of the standardized shipping containers that have played a crucial, if quiet, role in the rise of global trade. By last year, they had room for 19.9 million – much of it unneeded. India is not China redux. Most trade flows among developed nations. The McKinsey Global Institute calculates that 15 countries account for roughly 63% of the global traffic in goods and services, and for an even larger share of financial investment.

China joined this club the old-fashioned way: It used factories to build a middle class. But the automation of factory work is making it harder for other nations to follow. Dani Rodrik, a Harvard economist, calculates that manufacturing employment in India and other developing nations has already peaked, a phenomenon he calls premature deindustrialization. The weakness of the global economy is exacerbating the trend. Infrastructure investment by multinational corporations declined for the third straight year in 2015, according to the United Nations. It predicts a further decline this year. But even if growth rebounds, automation reduces the incentives to invest in the low-labor-cost developing world, and it reduces the benefits of such investments for the residents of developing countries.

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Overcapacity.

US Trucking Companies Pare Down Fleets Amid Tepid Shipping Demand (WSJ)

Big trucking companies have spent the second half of the year shrinking their fleets in hopes of changing an imbalance between the supply of rigs on the road and tepid shipping demand that has flattened industry earnings. They will learn in the coming weeks, as retailers stock up at stores and distribution centers for the holidays, whether efforts to slim down capacity have produced the rate increases that trucking companies say they need to increase profitability and to expand fleets next year. Trucking-industry reports in the coming week will take the pulse of a market at a critical point in the fourth quarter, when companies look to build off momentum in the consumer and manufacturing arenas to set business plans for 2017.

Industry data groups ACT Research and FTR are due to report this week on new heavy-duty truck orders for companies in October, a critical month for setting fleet plans for the coming year after several months in which orders have plummeted to historically low levels. DAT Solutions, which measures freight rates in the industrial-trucking market, will report the next week on whether carrier efforts to rein in capacity amid tepid demand are pushing up prices as hoped. DAT says prices for spot-market freight hauls and shipments moving under long-term contracts have been slipping for most of the year, and that rates in September were down 6.4% from the same month a year earlier. “We haven’t seen any difficulty in finding trucks,” said Ken Forster, CEO of logistics company Sunteck, that finds and books trucks for freight shippers. “It’s clear that overcapacity has driven down pricing.”

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Desperate insanity: “Low growth – which is bad for most things, but it’s good for M&A because that’s how you get growth..” No, it’s how you fake growth.

October Mergers Smash All Records With $500.1 Billion In Deals (ZH)

Last week David Rosenberg pointed out that mega Merger Manias like the one we are experiencing “invariably takes place at or near cycle peaks, as companies realize that they can no longer grow their earnings organically. We have just witnessed five multi-billion dollar deals this past week alone — $207 billion globally (AT&T/Time Warner; TD Ameritrade/Scottrade) in what has been the most active announcement list since 1999 … what do you know, near the tail end of that tech bull market too.” And now that October is officially over, we can close the books on what has been an unprecedented month for M&A.

According to Bloomberg, in the month when a chill was sent through the spines of corporate CFOs and their investment bankers over fears that rates are about to rise and thus make debt-funded deals more expensive, the scramble to acquire competitors went off the charts, leading to an all time high in global M&A with almost half a trillion dollars of mergers and acquisitions announced globally. CenturyLink’s $34 billion acquisition of Level 3 Communications, as well as General Electric’s deal to combine its oil and gas division with Baker Hughes, pushed October’s deal volumes to about $489 billion. That’s the highest amount for at least 12 years, topping the previous record of $471 billion in April 2007, the data show.

Deallogic had a slightly different higher October deal total, calculating that the value for mergers and acquisitions for October actually surpassed the half a trillion mark, hitting $500.1B, but the idea is the same and adds that global deal volume has only been higher during five other months in records going back to 1995. More than half of the deals have been based in the US, where M&A volume has already hit a monthly record of $321.2 billion. That’s about a third higher than the next biggest month on record, according to Dealogic. Cited by Bloomberg TV, Bob Profusek, partner and chair of the global M&A practice at law firm Jones Day said that “every weekend recently has been busy.”

According to the Jones Day lawyer “the fundamental drivers are still there,” Profusek said. “Low growth – which is bad for most things, but it’s good for M&A because that’s how you get growth – and very accommodating capital markets.” More important, however, are concerns that the period of low interest rates is coming to an end, prompting corporations to scramble and issue debt now while it is still cheap.

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“China’s money supply has quadrupled since 2007, and the new cash is largely trapped inside the country by government capital controls.”

Asset Bubbles From Stocks to Bonds to Iron Ore Threaten China (WSJ)

A succession of asset bubbles has formed in China, caused by a torrent of speculative money sloshing from stocks to bonds to commodities. The biggest apparent bubble is in housing, but prices have surged for niche assets, too, such as calligraphy, antiques and art. In May, futures prices for soybean meal, used as pig feed, jumped 40%. The trading volume of 600 million tons was nine times higher than China’s annual consumption. The pipe-making material PVC is up 40% so far this year on the Dalian Commodity Exchange. The world’s second-largest economy is slowing. Easy credit and successive fiscal stimuli, designed to keep China aloft, mean it is awash in money that is chasing an increasingly small number of investment opportunities.

China’s money supply has quadrupled since 2007, and the new cash is largely trapped inside the country by government capital controls. [..] The debt binge began with a crisis-related stimulus package. China’s public and corporate debt then grew threefold to about $22 trillion as Communist Party leaders used freer credit to support struggling state-owned firms and meet annual economic-growth targets. The downside of so much cash washing from one asset type to the next burst into view with a stock-market crash in the summer of 2015 that wiped out $5 trillion, or 43%, of value in Chinese stocks at one point. The Shanghai market had doubled from June 2014 to June 2015 as investors borrowed 2 trillion yuan ($300 billion) to buy stocks. To steady the stock market, authorities restricted short selling, and a “national team” of investors relied on by the Chinese government to support its stock market stepped in to purchase beaten-up shares.

Money then flowed into bonds. Many investors bought them by borrowing money against bonds they already owned, repeating the process over and over again. Such borrowing grew to 2.5 times the size of the $7 trillion bond market, according to bond-market analysts. The surge slowed only when yields tightened enough that bonds looked less attractive than other asset types. In this year’s first quarter, China’s total credit surged by another $690 billion, equivalent to about three times the economy of Ireland. Then came a bout of commodity speculation, which pushed prices for some products out of sync with economic fundamentals. Iron-ore futures surged 50% from January to April even though Chinese ports were piled with iron ore. Prices slumped in May.

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Again: world trade is shrinking.

China Shows a Cheap Currency Doesn’t Pack the Same Punch Anymore (BBG)

Chalk up China as another example where a cheapening exchange rate is failing to lift exports. As already seen in Japan in recent years, what textbooks say should happen when a country’s currency falls – its exports gain – isn’t. Bathroom accessories maker Dongguan City XinChen, in the southern Chinese province of Guangdong, is among those seeing one step forward, two steps back when it comes to the exchange rate. “The support from a weaker yuan is negligible compared to the pressure we face from rising labor and materials costs,” said owner Sandy Chang. “Foreign demand is already down. When growth is slow in our major markets, people just don’t buy.”

That tepid demand – on display in September data that showed China’s exports fell 10% from a year earlier – means factories are yet to get a sustained shot in the arm from a currency that’s weakened 9% against the dollar since August 2015. On a trade-weighted basis, the declines this year have been even more marked, with the yuan down 6.7% versus its 4.1% drop against the dollar in 2016. “China’s not going to get much out of anything from further currency depreciation in a weak global economy,” Stephen Roach, a senior fellow at Yale University and former Morgan Stanley non-executive chairman in Asia, said. “You can cut your relative prices through depreciation, but if you don’t have the external demand the impact is going to be limited.”

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Mad Max is here: “Along with chemicals from wood burning, scientists found lead, arsenic and cadmium particles, showing that people are burning painted and treated wood, and also their rubbish, to keep warm.”

Air Quality Worsens In Greece As People Burn Anything To Stay Warm (G.)

Greece’s financial recession is leaving its footprint on the environment. This follows twenty years of huge improvements in Greece’s air pollution. While most European countries struggle with the consequences of failure to control exhaust pollution from diesel vehicles, Greece benefitted from long-standing bans on diesel cars in the two biggest cities, Athens and Thessaloniki. This allowed the country to reap the full benefits of technologies to control petrol exhaust, without these being offset by the poor performance of diesel cars. As a consequence nitrogen dioxide from traffic approximately halved alongside Greek roads between 1996 and 2006, in contrast to the lack of improvement elsewhere in Europe. Lifting the diesel car ban in 2012 and lower taxes on diesel fuel acted as a huge incentive for those struggling with travel costs.

Amongst new car sales diesels leapt from less than 20% (around zero in Thessaloniki) to over 60%, but, so far, economic pressures have reduced traffic volumes averting a possible deterioration in air pollution. However, a tripling in the cost of heating oil brought about larger changes as hard-pressed Greeks have switched to burning wood. Wintertime particle pollution increased by around 30% in Thessaloniki in 2013 and air toxicity worsened on evenings when fires were lit. Analysis of wintertime air in Athens shows that it is not just logs that are being burnt. Along with chemicals from wood burning, scientists found lead, arsenic and cadmium particles, showing that people are burning painted and treated wood, and also their rubbish, to keep warm.

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Greece will get nothing from Obama.

A Parting Gift To Athens From Obama (Kath.)

[..] the key players in the euro area consistently kept the US at arm’s length when it came to dealing with the crisis, particularly in Greece. We should not forget that in February 2010, about three months before Greece’s first bailout was signed, the US Treasury secretary at the time, Timothy Geithner, had warned eurozone state leaders and ministers during a G7 meeting in Canada that they could not make moral hazard the driving force of their crisis strategy. “You can put your foot on the neck of those guys [the Greeks] if that’s what you want to do… but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece,” he said, according to the raw transcripts of his memoirs, which were published under the title “Stress Test.”

“They just wanted to take a bat to them,” added Geithner. “But in taking a bat to them, they were feeding a fare that was in its early stages.” The eurozone was not particularly interested in Washington’s message at the time, and has been similarly unimpressed by the US government’s interventions since. Washington’s position is weakened in European eyes because it does not have “skin in the game,” in other words it does not stand to lose financially or politically from any Greek debt relief, especially as the money owed to the International Monetary Fund, of which the US is the largest member with a 17.5% quota, has “super-senior status” and cannot be restructured.

To see a more recent example of US proposals for a change in approach on Greece not having an impact in the eurozone, we only need to wind back to the end of January 2015 and Obama’s comment in the wake of the SYRIZA-led government’s first election win. “You cannot keep on squeezing countries that are in the midst of a depression,” he told CNN. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits,” he added, pointing out that it is difficult to carry out structural reforms when people are seeing their living standards plummet. “Over time, the political system and society cannot sustain it,” he concluded.

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Britain does to its own children, too, what it does to refugee kids. What’s the last you heard Corbyn say about this? Where the f*ck is he?

Creating Child Poverty For A Whole New Generation (G.)

In a little council house in Birkenhead, Steve is panicking over how he’ll find an extra £304 rent money a month. He has just days to magic up an answer. If he can’t, he can guess what will happen. “Eviction. Come the end of November, I won’t have a roof.” As a single parent, Steve won’t be the only one slung out. His four boys, aged from three to eight, would also lose their home and probably be taken from their dad. “I’d be fed to the dogs.” Everything I’ve tried so hard for …” – a snap of his fingers – “Nothing.” It’s not a landlord doing this to Steve; it’s our government. It’s not his rent that’s going up; it’s his housing benefit that’s getting cut. And he’s not the only one; on official figures, almost 500 households in the borough of Wirral face a shortfall of up to £500 a month.

From next Monday 88,000 families across Britain will have their housing benefit slashed. They will no longer have the cash to pay their rent. Among all those whose lives will be turned upside down will be a quarter of a million children. That’s enough kids to fill 350 primary schools, all facing homelessness. Those figures come directly from the Department for Work and Pensions. Plenty dispute them, which is unsurprising since DWP officials keep changing their minds. Some experts believe the number of children at risk could total 500,000. This is the biggest benefit cut that you’ve never heard of. The newspapers will waste gallons of ink on Candice Bake-Off’s lipstick and Cheryl’s apparent baby bump. But about a government policy that could disrupt hundreds of thousands of lives, there is near silence.

So allow me to explain. From next week Theresa May’s government will extend the cap on household benefits. Poor families in London will not be allowed more than £442 a week. Those outside the capital will be cut to £385 a week. In some areas the cuts will be brought in straightaway; in others with a slight delay. But in the end, families above the limit will be hit twice over. First, they will be pushed further into poverty. And, like Steve, their housing benefit will be docked, so they will be left scrabbling just to make the rent and keep a roof above their heads. How those families will manage is anyone’s guess. When Steve opened the letter at the end of July he had a “panic attack”. All that went round his mind was one question: “How the hell am I going to pay this?” Then came what he calls “a depressive state” that lasted nearly two months. Now he bottles it up, for the sake of his boys. “When they’re not around, that’s when I cry. When they’re out at school, when they’re asleep: that’s when I break down.”

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Given their approach to this simple and easy-to-solve non-issue, people like Holland and May should obviously be nowhere near any decision making positions. Perhaps more than anything else, letting children perish for your own petty political reasons says you’re a sociopath.

Calais ‘Jungle’ like ‘Lord of the Flies’, With 1500 Abandoned Children (Ind.)

The Calais ‘Jungle’ has become like ‘Lord of the Flies’, with 1,500 children left unsupervised, sleeping in bare containers and free to roam the adjacent camp site, close to heavy machinery being used to dismantle and remove the wreckage, volunteers have told The Independent. Taps supplying drinking water to the children’s compound have been turned off, and food for the young refugees, who are mostly boys aged between 10 and 17, is not being supplied by the authorities, aid organisations claim. Nobody is allegedly allowed inside the containers except for a handful of security guards, raising serious concerns about the safety of the ‘Jungle’s’ most vulnerable occupants.

A small group of volunteers from three tiny charities told The Independent they are working “round the clock” to distribute bottled water, food, and blankets to the children, in a bid to support them. The task is extremely difficult, they said, because the organisations have only been given about 20 passes between them permitting access to the razed ‘Jungle’ site. Members of the grassroots aid organisations Refugee Community Kitchen, Calais Kitchens, and Little Ashram Kitchen, said they have had to distribute supplies from the roadside by the fenced-off compound. Only French officials can access the restricted container site, volunteers said, but they have not been present on a day to day basis. Volunteer Steve Bedlam told The Independent: “They’ve left them with no support whatsoever. They’ve just left these 1,500 kids since Friday and gone.”

No official organisations are distributing water, Mr Bedlam said, leaving the three volunteer-run organisations sending in thousands of litres everyday. Food is also extremely limited. “There’s running water in the toilets, but the sinks have been turned off,” Mr Bedlam said. “This has been confirmed by several of the kids. When we bring water in a truck it goes crazy. People are grabbing at it, like they want to get six bottles.” A French organisation was supplying one hot meal a day, Mr Bedlam said, but it was not nearly enough food for a teenage boy, leaving the camp occupants reliant on volunteers. Many of the children also had no blankets or shoes, he said, and some unregistered refugees are still sleeping outside in the “freezing cold”. Another volunteer told The Independent she believes there are 12 children in each container, and she said one boy told her he had slept on a table.

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Bless you.

QPR To Bring Over 1,000 Children To UK In Kindertransport-Style Mission (G.)

Queens Park Rangers (QPR), the football club, has offered to help bring refugee children stranded in France to the UK. The Championship club is part of a new plan for more than a thousand refugee children that emerged on Monday night. QPR has put a fleet of coaches on standby to go to France to collect the children. And Hammersmith & Fulham council – QPR’s local council in west London – says it has volunteer social workers ready to travel to France in the next couple of days to assess and support the children. Lord Alf Dubs, who has led plans to bring child refugees to the UK in a Kindertransport-style mercy mission, announced the plan in a letter to the home secretary, Amber Rudd, and the French ambassador, Sylvie Bermann, on Monday.

In his letter, Dubs writes: “I formally request that the French government allows us to send in coaches and social workers to collect those refugee children that have a right to be here in the UK. We will need assistance with travel documents out of France. We have people arranging the coordination of this.” Dubs added: “I am also writing the British government and hope that this intervention can bring the assistance the refugee children so desperately need. Given the urgency of this matter I should be grateful for a quick response.” The home secretary made a statement to parliament saying that the UK government had only been granted access to the camp by the French authorities and permitted to bring over Dubs-amendment children very recently. They are children with no relatives in the UK but who are deemed eligible to travel to the UK as a result of their vulnerability.

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Jun 212015
 


Unknown Army of the James at completed Dutch Gap canal, James River, Virginia 1864

Hollande Is Implored to End ‘Financial Blackmail’ of Greece (Bloomberg)
The Fight To End Greece’s Great Euro Depression (Telegraph)
Greek Episodes Of Despair And Drama As Moment Of Truth Nears (Helena Smith)
Greece, The Euro and Gunboat Diplomacy (Karl Whelan)
As Greece Stares Into The Abyss, Has Spain Escaped From Crisis? (Observer)
Greek PM Prepares Last-Ditch Offer To Avoid Default On Debts (Observer)
The Greek Crisis Reveals The EU’s Democratic Deficit (Coppola)
Rising Child Poverty Across Britain ‘Halts Progress Made Since 1990s’ (Observer)
‘It’s Time To Hold Physical Cash’: Senior UK Fund Manager (Telegraph)
Steal from Taxpayers, Blame the Poor (Paul Buchheit)
Russia Slams Renewed EU Sanctions, Says Measure Is ‘Hopeless’ (RT)
Ukraine is a ‘Black Hole’ for European Taxpayers’ Money: German Media (Sputnik)
Powerful People In The West And In Kiev Do Not Want Peace – Stephen Cohen (RT)
Nomi Prins: There Is No Saving This Global Financial System (KWN)
Liars, Cowards, Freaks & Fools: Trump for President? (Paul Craig Roberts)
Why the Pope’s Environment Encyclical Is a Big Deal (Newsweek)
All Kangaroos Are Left-Handed (Discovery)
The Latest Global Temperature Data Are Literally Off The Chart (Guardian)
The Sixth Mass Extinction Is Here (Stanford.edu)

Potential big deal. Hollande’s chance to show -independent- leadership. France is pivotal to Europe, but it must speak up to make that count.

Hollande Is Implored to End ‘Financial Blackmail’ of Greece (Bloomberg)

French President Francois Hollande received an appeal from a group of lawmakers including some from the ruling Socialist Party and other political figures to end the “financial blackmail” of Greece by its European creditors. The message of France “cannot be a docile reminder of the rules at a time when the house is burning,” the lawmakers said in an open letter to Hollande published on the website of France’s Communist Party. “We are asking you to take the initiative to unblock the talks between the euro group and the Greek political authorities.” The letter highlights the domestic political pressure Hollande faces to help broker a deal between Greece and its creditors as the region’s most indebted nation is on the brink of a default.

German Chancellor Angela Merkel and Hollande spoke by phone on Friday after a meeting of euro area finance ministers failed to advance toward an agreement with Greece. So far the two biggest economies in the 19-nation euro bloc have presented a united front against Greek Prime Minister Alexis Tsipras, who has spent his five months in power trying to roll back the austerity policies underpinning the country’s bailout. At the finance minister’s meeting in Luxembourg on Thursday, French Finance Minister Michel Sapin pressed hardest for a compromise, while his German counterpart, Wolfgang Schaeuble stayed largely silent and ministers from other countries stepped up the pressure on Greece, according to two people familiar with the matter.

The French lawmakers, including Socialists such as Pouria Amirshahi and Fanelie Carrey-Conte, told Hollande to place France “at the side of the people of Greece.” “Bring explicit support to the healthy measures taken by the Greek authorities, notably those addressing the humanitarian crisis in the country” they said. “Accept the principle of a restructuring of Greek debt, of which a large part is notoriously illegitimate.”

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“There Is No Europe Without Greece.”

The Fight To End Greece’s Great Euro Depression (Telegraph)

Nikos Athanassiou, a 61-year-old Athenian pensioner, is at the heart of Greece’s struggle to maintain its fragile 14-year membership of the euro. Like many of his compatriots, Nikos took early retirement having worked most of his life labouring in the country’s now defunct construction industry, aged 58. He is one of the 2.6m pensioners in Greece who have become the unlikely battleground in the latest game of brinkmanship between the radical Left government and its paymasters. A member of Communist Party of Greece (KKE), Nikos spends his retirement resisting Troika-imposed cuts to public services as a union representative for his local district in northern Athens “It is my duty to demand dignity for Greeks. We are collapsing as a country,” says Nikos.

His resolve is not unusual in a society where the bulk of proposed cuts will hit the elderly and newly retired. The IMF is demanding the Greek government slash €1.8bn in pensions spending in 2016. At 16.2pc of GDP, Greece’s outlay is highest in the eurozone. Even with overhauls to the retirement age and spending cuts, this will still only fall to 14.3pc in 45 years time – the third highest in the EU. Nikos’s pension is €750 a month. He is among nearly half of all Greek pensioners who provide the sole source of income to support three generations of one family. But his pension is barely enough to provide for his seven-year old granddaughter and her parents. “When I think about my granddaughter’s future, I panic. I want her to live in an independent Greece – not a protectorate.”

Resentment against creditors’ determination to suck more funds from the country’s pension system is rife. Greeks have already seen a 40pc fall in their pension provision over five years – a shrinkage that has been ruled unconstitutional by the country’s highest administrative court. One of the reasons the spending ranks so highly is due less to generosity of individual pensions than it is the extreme recession that has shrunk GDP to almost pre-euro levels. Greece’s radical Left government has vociferously defended pensions as one of the last remaining safety nets in a country where 45pc of the elderly live below the poverty line. The issue has become the immovable “red line” in Greece’s struggle to finally end what the ruling Syriza party have dubbed a “ritual humiliation.”

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One week in the life of a shattered society.

Greek Episodes Of Despair And Drama As Moment Of Truth Nears (Helena Smith)

Sunday: Five years is a long time to be in crisis. It’s freefall by a thousand cuts; loss in myriad ways, hard choices that never get easier. Last week, as Greece descended into drama, a young man appeared on the marble steps of the neoclassical building opposite my home. Head in hand, he sat there from Sunday to Wednesday, in the beating sun, a wheelie bag in front of him, a slice of cardboard perched on top that read: “I am homeless. Help please!”

When you live in Athens you do not flinch at the signs of decay: to do so would be to give in. But somehow the sight of this forlorn figure – a waif of a man, eyes fixed only at his feet, the embodiment of wounded pride, brought home as never before that Greeks are in crisis. Was he giving up or making a hard choice? If he was 22, and he barely seemed that, his entire adult life had been spent in crisis. This is the great tragedy of Greece. It has not only been needlessly impoverished – it now eats up its own. The elderly woman who occasionally rifles through the rubbish bins on the corner of the square my office overlooks – often carrying a Louis Vuitton bag – is so glad she was born at the end of the 1946-49 civil war. “At least then it could get better. Today it can only get worse.”

Monday: For five years we have all felt as if we are on a runaway train, hurtling into the unknown. Sometimes the train picks up speed, sometimes it slows down, but never enough to stop. This week, as the drumbeat of default, impending bankruptcy and disastrous euro exit thudded ever louder, the train felt as if it might derail altogether. Had a lunatic got hold of the controls? On Monday morning it began to feel like it. For me, the day started at 2am when I received a text from Euclid Tsakalotos, the point-man in negotiations between Athens and the troika.

“We made huge efforts to meet them halfway,” he wrote hours after talks reached an impasse over a reform-for-cash deal that could save Greece. “But they insisted on pension and wage cuts.” By mid-morning, global stock markets were tumbling. By midday, the world had learned that, without an agreement, Greece might not be able to honour an end-of-month debt repayment to the IMF worth €1.6bn. By midnight, newscasters, looking decidedly nervous, had broken their own taboo: many were talking openly of euro exit.

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“..unnecessary cowardice, confusion and hubris..”

Greece, The Euro and Gunboat Diplomacy (Karl Whelan)

Original decision to provide a bail out is the source of the current crisis. Time for Europe to share the blame and financial consequences.

With everyone talking about Greece being on the verge of exiting the euro after Monday’s summit meeting, it seems to be forgotten that the current crisis is not really about Greece’s currency arrangements at all. The Greek people are not demanding a return to the drachma and few within the country are arguing for the competitive benefits a currency devaluation would entail. And there are no formal rules that Greece is breaking that must lead to an exit from the euro because, legally, the euro is a fixed and irrevocable currency union. This crisis is about more basic things: Debt and power. Indeed, the current stand-off looks a lot more like the classic gunboat diplomacy conflicts of the 19th century than it does the currency crises of the 20th century.

Europe’s governments and the IMF made an enormous mistake in bailing out Greece’s private creditors in 2010 and then overseeing a botched debt restructuring in 2012. In turn, the Greek governments of this era made the mistake of accepting official loans to pay off private creditors, perhaps not realising they were jumping out the frying pan straight into the fire. Now the Greeks are learning that defaulting on private creditors is one thing (not so hard it turns out, once you’ve got Lee Buchheit in your corner) but defaulting on governments of rich European countries is quite something else. Blaming the euro for the current impasse is actually pretty strange because the euro’s founding fathers explicitly warned member states to not to get themselves into this situation.

The story of the demise of Europe’s “no bailout clause” is an interesting one. Rather than an inevitable crisis, one can credibly argue that the decisions that landed us in the current situation did not need to be taken and were taken as a result of unnecessary cowardice, confusion and hubris. I reviewed many papers on prospects for the euro written by economists in the 1990s. I was struck by the consensus that the fiscal limitations of the Stability and Growth Pact would generally be honoured, that euro members that got into fiscal troubles would not be bailed out by other countries and this would lead to sovereign defaults when countries did get into fiscal problems.

By and large, the policy heavyweights of the day, such as Rudi Dornbusch, believed there was a “categorical no-bailout injunction.” As such, it was expected that markets would understand that European governments were more likely to default once their devaluation option was taken away and that financial markets would price the sovereign debt of countries differently depending on the health of their public finances.

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Note the pattern: Spain ‘recovers’ through increasing inequality.

As Greece Stares Into The Abyss, Has Spain Escaped From Crisis? (Observer)

While the big picture is undoubtedly improving – big investors are returning to a country that barely three years ago was widely expected to need a Greece-style sovereign bailout – Spain is still mired in a period of transition. Even the IMF report that welcomed Spain’s impressive growth rate – one of the strongest in Europe – also stressed the shaky jobs outlook, noting that unemployment was “still painfully high” and that “vulnerabilities remain”. “Spain has returned to about 95% of where it was in 2008,” says Professor Javier Diaz-Giménez of the IESE business school in Madrid. “That means 2008 is still a benchmark people look back at with nostalgia. At current growth rates, the economy will get back to where it was in 2008 at the end of next year. It’s a very late recovery.”

One of the biggest worries for those yet to see any improvements in their lives is whether even a sustained recovery will be enough to repair the damage. Jobs are starting to return, currently at a rate of 400,000-500,000 a year, but more than three million were lost during the downturn, so the new jobs represent only a small improvement in an unemployment rate, which is still running at almost 24%. In Greece, which now finds itself on the edge of the economic precipice, the rate is 26%. Inequalities, meanwhile, are deepening, leaving some to wonder whether the crisis is even over at all. “The economy is certainly not improving for those without a job or a home,” says Lotta Tenhunen, a social activist in Madrid. The group she works with, PAH, campaigns on behalf of those evicted after falling into arrears on their mortgage payments, and became especially prominent at the height of the recession. In Vallecas, it still meets every week: “People and families are still being driven out of their homes – and the rate is still rising.”

Prospects for the young are particularly bleak. About half of under-25-year-olds in the labour force are without a job, and this threatens to leave the country with a listless lost generation for whom unemployment is the norm. The ranks of the long-term jobless are also swelling. “It is not just the headline unemployment figure that is worrying; it is also the type of unemployment,” says Antonio Barroso of consultancy Teneo Intelligence. “40% of unemployed people are over the age of 45, so difficult to retrain and bring back into the labour market. You also have to look at the types of jobs being created. Most new positions are temporary contracts, where people are left in a precarious position with very few rights – this does not breed confidence.”

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“Speculation is rife that Greece’s creditors at the EU, ECB and IMF would offer a six-month extension of the bailout programme..”

Greek PM Prepares Last-Ditch Offer To Avoid Default On Debts (Observer)

The race to save Greece from economic collapse intensified on Saturday night as its beleaguered leader conducted a flurry of behind-the-scenes negotiations before an EU summit on Monday that is expected to decide the country’s fate. Alexis Tsipras, the prime minister, met senior officials in an attempt to devise a package of reforms that would secure emergency funds and avoid the nation defaulting on its massive debts. It will be the third such proposal that Athens has made to its creditors in as many weeks. “We will try to supplement our proposal so that we get closer to a solution,” Greece’s minister of state, Alekos Flabouraris, told broadcaster Mega TV. “We are not going [to the summit] with the old proposal. Some work is being done to see where we can converge, so that we achieve a mutually beneficial solution.”

Flabouraris, widely seen as a mentor to the young prime minister, said Tsipras would hold crucial talks with the head of the European commission, Jean-Claude Juncker. The Greek cabinet will meet in an emergency session on Sunday with Tsipras also dispatching senior officials to Brussels. The frantic diplomacy came as Greece’s eurozone partners warned that, after five months of fruitless talks, the game was up for Tsipras’s radical leftwing government. The country, which has been thrown two lifelines since 2010, has until 30 June to secure €7.2bn (£5.1bn) in bailout funds. Failure to release the loans will result in default, as Greece owes €1.6bn to the IMF at the end of the month. Among the measures that the Syriza-led coalition was reportedly working on on Saturday were reductions in early retirement schemes.

Pension and VAT reforms, along with labour deregulation, remain sources of friction between the two sides. Speculation is rife that Greece’s creditors at the EU, ECB and IMF would offer a six-month extension of the bailout programme – disbursing more than €10bn in aid to tide the country over the summer – if agreement was reached. Discussions over a third bailout Athens will inevitably also require would be kicked down the road. Speaking to the Observer, Athens’s chief negotiator, Euclid Tsakalotos, described the prospect of a short-term deal as perhaps the worst possible outcome. Prolongation of the political uncertainty – and scenarios of Greece’s enforced exit from the euro – would, he said, do nothing for the country’s economic recovery.

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Coppola still leaves me with a host of questions. Yanis wrote yesterday that his proposals were never even read because that would mean they’d need to be sent to Bundestag. Whether that automatically implies a vote, I don’t know.

The Greek Crisis Reveals The EU’s Democratic Deficit (Coppola)

The Greek finance minister, Yanis Varoufakis, has stirred up something of a hornet’s nest. He has spilled the beans on the less-than-transparent negotiating tactics of the EU institutions – the European Commission and the ECB. The Irish finance minister, Michael Noonan, complained that he had not seen the proposals put forward by the EU institutions for consideration by the Greek government. This is a serious criticism. Failure to brief finance ministers adequately before a Eurogroup meeting is negligent, although perhaps understandable in a rapidly-changing situation. It means that the ministers are unable to make informed decisions, so they must either rubber-stamp proposals without considering then properly, or defer everything.

Kicking cans down the road is of course a Eurogroup specialty, but it really shouldn’t be forced on finance ministers through inadequate briefing. Exactly why Mr. Noonan was not briefed is unclear. Did he miss the briefing? Was it an oversight by hard-pressed bureaucrats? Were other ministers briefed? We don’t know. But it is worrying that a mistake like this can be made in such finely balanced negotiations. One false move could spell disaster. The EU negotiators must be more careful. But Mr. Varoufakis added another complaint to Mr. Noonan’s. He said that he had been prevented from briefing EU finance ministers on his own proposal ahead of the meeting. And he blamed the Germans:

In fact, as our German counterpart was later to confirm, any written submission to a finance minister by either Greece or the institutions was “unacceptable”, as he would then need to table it at the Bundestag, thus negating its utility as a negotiating bid.

I find this hard to believe. In effect, it means that anything presented to the Eurogroup in writing is deemed by the Germans to be a firm recommendation requiring a vote by the German Parliament. If this is true, then it makes negotiations far more difficult. Complex proposals have to be written down, even if they are not the final word, because otherwise there is a significant risk of misunderstanding. Even more importantly, it raises serious questions about the role of the Eurogroup. If all the Eurogroup can ever see is a finished product, they can never do more than rubber-stamp decisions made by unelected bureaucrats behind the scenes. This is not a good way of running a supposedly democratic polity. Mr. Varoufakis makes a very similar criticism:

The euro zone moves in a mysterious way. Momentous decisions are rubber- stamped by finance ministers who remain in the dark on the details, while unelected officials of mighty institutions are locked into one-sided negotiations with a solitary government-in-distress. It is as if Europe has determined that elected finance ministers are not up to the task of mastering the technical details; a task best left to “experts” representing not voters but the institutions. One can only wonder to what extent such an arrangement is efficient, let alone remotely democratic.

And in his final paragraphs, he accuses the Eurogroup of being not fit for purpose. Hmm. Whether or not this criticism is justified, I can’t for the life of me see how saying it publicly is helpful to the Greek cause. It’s only going to annoy people.

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Shame on you!

Rising Child Poverty Across Britain ‘Halts Progress Made Since 1990s’ (Observer)

Child poverty is on course for the biggest rise in a generation, reversing years of progress that began in the late 1990s, leading charities and independent experts claimed on Saturday. The stark prognosis comes before the release of government figures which experts believe will show a clear increase for the first time since the start of the decade. It also comes as the chancellor George Osborne and work and pensions minister Iain Duncan Smith announced they had agreed a plan to slash a further £12bn a year from benefits spending. In a joint letter they pledged to attack the “damaging culture of welfare dependency”, and said it would take “a decade” or more to return the welfare budget to what they called “sanity”.

The introduction of the bedroom tax and cuts in benefits between 2013 and last year are blamed for fuelling the rise in the number of families whose income is below 60% of the UK average – the definition of relative poverty. Calculations from the Institute for Fiscal Studies (IFS) have suggested that progress between the late 1990s and 2010 has been reversed and that the number of children living in relative poverty rose from 2.3 million in 2013 to 2.6 million in 2014. The Child Poverty Action Group says that with the government committed to implementing another £12bn of cuts in a new round of austerity, the problem will grow.

As tens of thousands of people joined an anti-austerity march through London on Saturday, Alison Garnham, the charity’s chief executive, said ministers were failing too many children. “The government can no longer claim that deficit reduction is about protecting children’s futures now that it’s being made to confront a child poverty crisis, with the biggest rise in a generation now expected of its own making,” she said. “With child poverty expected to rise by nearly a third in the decade to 2020 as a result of its policies, it’s clear the government’s approach is failing.”

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Pretty soon, we’ll all be Greeks.

‘It’s Time To Hold Physical Cash’: Senior UK Fund Manager (Telegraph)

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress. Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, including the flagship Moneybuilder Income fund, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008, which began in Britain with a run on Northern Rock. “Systemic risk is in the system and as an investor you have to be aware of that,” he told Telegraph Money. The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts.

But he went further, suggesting it was wise to hold some “physical cash”, an unusual suggestion from a mainstream fund manager. His concern is that global debt – particularly mortgage debt – has been pumped up to record levels, made possible by exceptionally low interest rates that could soon end, and he is unsure how well banks could cope with the shocks that may await. He pointed out that a saver was covered only up to £85,000 per bank under the Financial Services Compensation Scheme – which is effectively unfunded – and that the Government has said it will not rescue banks in future, hence his suggestion that some money should be held in physical cash. He declined to predict the exact trigger but said it was more likely to happen in the next five years rather than 10.

The current woes of Greece, which may crash out of the euro, already has many market watchers concerned. Mr Spreadbury’s views are timely, aside from Greece. A growing number of professional investors (see comment, right) and commentators are expressing unease about what happens next. The prices of nearly all assets – property, shares, bonds – have been rising for years. House prices have risen by 26pc since the start of 2009, and by 68pc in London. The FTSE 100 is up by 75pc. Although it feels counter-intuitive, this trend of rising prices should continue if economies remain weak, because it gives central banks licence to keep rates low and to carry on with their “quantitative easing” programmes.

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The MO.

Steal from Taxpayers, Blame the Poor (Paul Buchheit)

It’s a vicious circle of hypocrisy: Americans dependent on the safety net are urged to “get a job” by the same free-market system that pays them too little to avoid being dependent on the safety net. According to the Economic Policy Institute, $45 billion per year in federal, state, and other safety net support is paid to workers in the bottom 20% of wage earners. Thus the average U.S. household is paying almost $400 to employees in low-wage industries such as food service, retail, and personal care. Paul Ryan said that social programs “turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency.” But 63% of eligible working-age poor Americans are employed, and 73% are members of working families.

Yet in a show of hypocrisy by some of the leading safety net critics, Congress has killed or blocked or ignored numerous attempts to create better jobs for underemployed Americans. A Demos study found that raising wages to $25,000 per year (about $12.50 per hour) for full-time retail workers would lift 734,075 people out of poverty. It would probably help a lot more. An analysis of Bureau of Labor Statistics data reveals that about 22 million workers are underpaid (about a sixth of the total), over half of them in food service, cashiering, personal care, and housekeeping. Paying everyone $12.50 (assuming full-time) would cost an extra $80 billion. That’s about 3% of total 2014 corporate profits. Three%, compared to the 95% spent by S&P 500 companies on investor-enriching stock buybacks and dividend payouts.

About two-thirds of low-wage workers are employed by large corporations with over 100 employees. The very worst offender is probably Walmart, which pays its estimated 1.4 million U.S. employees so little that the average Walmart worker depends on about $4,400 per year in taxpayer assistance, for food stamps and other safety net programs. As Walmart was depending on us, the taxpayers, to pay $4,400 a year to each of its employees, the company was spending the equivalent of $5,000 per U.S. employee for price-boosting stock buybacks.

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The EU will split on this soon enough.

Russia Slams Renewed EU Sanctions, Says Measure Is ‘Hopeless’ (RT)

The Russian Foreign Ministry has slammed the EU’s “pushy sanctions strategy” as “political blackmail,” and said it is “absolutely hopeless” as it won’t make Russia give up its “national interests and principled position.” Coming in response to the EU’s extension of sanctions over what Brussels called “the illegal annexation of Crimea and Sevastopol,” the Russian statement said “it was time” to accept that those territories are an “integral part of the Russian Federation” and that the situation “can’t be changed by methods of economic and political blackmail.” Sanctions against Russia are “absolutely hopeless,” the ministry said, adding that “it is a mistake to expect that [the sanctions strategy] will make us sacrifice national interests and [our] principled position on key issues.”

As the prolonged restrictions target Crimea and the city of Sevastopol, the Foreign Ministry sees the sanctions as unacceptable “discrimination” against people in Crimea “on a political and territorial basis.” Recalling “historical examples,” the ministry condemned the move as “a collective punishment” of “the residents of the [Crimean] peninsula who made a free choice” for reunification with Russia. “It was hard to imagine that Europe would face this in the 21st century,” the Foreign Ministry’s statement said. On Friday, the EU extended economic sanctions against Crimea until June 23, 2016, and said it still doesn’t recognize Crimea’s reunification with Russia, calling it an “illegal annexation.”

The restrictions include a ban on imports from Crimea or Sevastopol into the EU, investment and tourism services, as well as the export of certain products and technology to Crimean companies. The EU sanctions against Russia were imposed over the Ukrainian crisis. They targeted access to foreign loans and the oil and gas industry. Moscow responded with countersanctions that hit European food producers. However, the toll the conflict is taking on the EU economy is higher than Brussels initially anticipated.

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German media should be way more vocal on this. And the rest of Europe too.

Ukraine is a ‘Black Hole’ for European Taxpayers’ Money: German Media (Sputnik)

In the coming weeks, Kiev will receive the €600 million tranche of the third EU loan package for Ukraine. It will be a new financial burden for ordinary EU taxpayers because there is no hope that the debt will be paid off, a German business newspaper reports. The €600 million euro tranche of financial aid for Ukraine is taking money from ordinary European taxpayers with no chance to return, the German newspaper Deutsche Wirtschafts Nachrichten reports. Earlier, Johannes Hahn, European Commissioner for European Neighborhood Policy and Enlargement Negotiations, said the EU completed all the procedures for the new tranche. “I’m very glad that the Verkhovna Rada [the Ukrainian Parliament] ratified the memorandum on the third package of financial aid of €1.8 billion.

I’m sure that within several weeks Kiev will receive the first tranche of €600 million,” Hahn said. “Thus, there is a new financial burden for our taxpayers. There is no hope that the money will return,” the newspaper claims. In May, Ukraine’s National Railroad Company declared bankruptcy. Part of its debt is due to be restructured. In total, its debt has reached $500 million. During the last year only, European taxpayers lost €200 million to save the company, the article reads. The Ukrainian protective wall along the border with Russia is also funded by EU taxpayers. The electrified barrier with mines and barbed wire is planned to be 2,000-kilometer-long and will cost nearly €100 million, DWN points out.

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“..there is a war party in every capital and even in the White House itself.”

Powerful People In The West And In Kiev Do Not Want Peace – Stephen Cohen (RT)

RT: A few weeks ago US Vice President Joe Biden said that “everybody wants an end to this conflict in Ukraine, but the question is on whose terms and how will it end.” Are the terms to end this conflict are still being negotiated and if so what options are on offer?

Stephen Cohen: My perspective is different from that of Vice President Biden. We are now after all in almost two years – a year and a half – of a new Cold War between the US and Russia – an exceedingly dangerous confrontation over Ukraine, which I think and I’ve said this for months could easily become as dangerous as the Cuban missile crisis was. The politics of this have now spread far and wide including in Europe. It seems to me, and this is my fundamental analysis, that in almost every capital – Washington, Brussels and certainly in Kiev, and even to some degree in Moscow – there is what I call a peace and a war party.

The Minsk agreements, which were agreed upon by the Chancellor of Germany, the President of France, the President of Ukraine and of course President Putin of Russia represented then a peace party. It set out in addition to a ceasefire in Ukraine very far reaching, fundamental terms of negotiation to end the civil war in Ukraine, to end the proxy war between the West and Russia. It’s clear to me that there are powerful people in the West and in Kiev who do not want a negotiated settlement.

RT: Vice President Biden, who recently said that he talks to either PM Yatsenyuk or President Poroshenko on almost a weekly basis – that’s what he said – do you think that Biden belongs to the peace or war camp when he is on the phone with them? Does he preach reconciliation?

SC: He says he talks to them three times per week not once a week. But we have evidence, something very dramatic just happened. As you know, in late May Secretary of State John Kerry went to Sochi. First he met with Russian Foreign Minister Sergey Lavrov and then, remarkably, he met for four hours with President Putin. It was absolutely clear from what was said in Sochi at the press conferences afterwards that Kerry’s mission had been to say that the US, the Obama administration, now fully backed the Minsk agreement. That would put Kerry in the peace party.

It was kind of a surprise because he had been taking a very hard line. However, look what then happened. Kerry was attacked, literally criticized, for having gone to Sochi by members of the Obama administration. The most vivid example reported in the New York Times last Sunday I think was that a former very close policy aide to Vice President Biden told the reporter they didn’t know why Kerry had gone to Sochi, and that he had sent bad messages and that his trip had been counterproductive. So you conclude from this – and it confirms my thesis – that there is a war party in every capital and even in the White House itself.

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For those who still needed confirmation.

Nomi Prins: There Is No Saving This Global Financial System (KWN)

Eric King: “You mentioned that we are in unprecedented times. And the concern is that when the 2008 collapse unfolded there was all this money printing and the banks were bailed out. It really fell on the shoulders of the taxpayers, but the concern as you said is that this leverage is growing. There are over one quadrillion dollars of derivatives. With the leverage totally ramped up in (terms of) the central banks’ (balance sheets), who will save the financial system (this time around)? Who will save the banks? There are all these bail-ins that have been written into law in the West and it seems like the next move is just to steal money from the public. Who will save the system this time when it implodes?

Nomi Prins: “When it implodes it will implode more dangerously. The IMF and the Fed have different ideas about whether rates should stay low or go up. In this particular round the IMF won. They want rates to stay low because they don’t know what’s going to happen to the global financial system if the availability of cheap money goes away…. “Right now everyone knows, whether they admit it or not, that (cheap money) is the only thing that’s keeping this (global financial) system afloat. It isn’t production. It isn’t savings of individuals because nobody has any money to save. So there is no there, there.

The only policy that these central banks have is to continue to do more of the same. And the only thing that does is continue to push this next crisis, or the second leg of the current crisis as I look at it, down the road. There is no saving this (global financial) system. All they can do is continue to push the current policies to make it look as if things are operating functionally — as if these banks are solvent and as if these markets are somehow elevated on the basis of value and not on the basis of the cheap money that they are infusing into the system. That’s all they can do. They just hope that somewhere along the line this will work out.”

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That’s right, might as well elect the biggest dunce.

Liars, Cowards, Freaks & Fools: Trump for President? (Paul Craig Roberts)

Perhaps it has occurred to you as it has to me that the United States is no longer capable of producing political leadership. In the current issue of Trends Journal, Gerald Celente describes the eight candidates (at the time he went to press) for the US presidential nomination as “Liars, cowards, freaks & fools.” Celente put it well. If you look at the sorry collection that aspires to be the CEO of what continues to be described as the “exceptional, indispensable, most important country with the largest economy and military, the world’s only Superpower, the Uni-power,” you see a collection of nobodies. America is like the last days of Rome when contenting factions fought to put their puppet on the throne.

There is no known politician in America who measures up to Vladimir Putin’s ankle, or to the knee of China’s leaders, or to the waist of Ecuador’s, Bolivia’s, Venezuela’s, Argentina’s, Brazil’s, or to the chests of India’s and South Africa’s. In Europe, the UK, Australia, and Canada, the natural leaders are also frozen out of the corrupt system. In the US, “leadership” positions depend on financial support from the ruling economic interests. American presidents and politicians represent about six powerful private interest groups and no one else. After Celente went to press, Donald Trump announced to much mirth. A “con man” they say, but what else is the President of the United States? Do you think you weren’t conned by Clinton, George W. Bush, and Obama? What universe do you live in?

In actual fact, Trump might be our best candidate to date. By all accounts, he is very rich. Thus, he doesn’t need the office in order to become rich by selling out America to interest groups. By all accounts, Trump has a healthy ego. Thus, he could be capable of standing up to the powerful interest groups that generally determine the governance of the American serfs. Trump’s ego might even be strong enough for him to stand up to the Israel Lobby, something my former colleague, Admiral Thomas Moorer, Chairman of the Joint Chiefs of Staff, said publicly that no American President was capable of doing. As Celente makes clear in the current Trends Journal, all politicians are con men or con women.

We are going to have them regardless, so why not try a rich one who might decide to break with tradition and serve the interests of the citizenry. This would be a unique accomplishment, affording Trump the elevation in history books that would satisfy his ego. When a person reaches Trump’s state, does he need another couple of billion dollars or is historical recognition as the savior, however temporary, more valuable? This is not my endorsement of Trump for President. It is merely my speculations on how we might think of how large egos might be brought into our service. When we put the Clintons in office, they decided to make money so that they could outdo Hollywood and show their arrival with the $3 million they spent on their daughter’s wedding. For Trump, $3 million is pocket change.

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Let’s first see where it goes.

Why the Pope’s Environment Encyclical Is a Big Deal (Newsweek)

The pope’s encyclical on climate change is a big deal. Sure, past popes have written on the importance of protecting the environment, on favoring the poorest and on rethinking our direction as a species. But this is a major piece of work, and an ardent call from one of our world’s major leaders for us to work together to address this existential problem. Most interesting and heartening to me is Francis’s linking of the fate of the poor and the future of climate change. This point is well documented in research on the injustice of climate change. For example, Bradley Parks and I found that the poorest nations of the world are far more likely to suffer the impacts of climate-related disasters, and are also far less responsible for the problem.

The timing of the pope’s remarks is also very important. This year countries are both negotiating to reach a global agreement in Paris in December and also individually putting forward their own pledges on what they will do, called INDCs (Intended Nationally Determined Contributions) in the cumbersome U.N. lingo. The pope’s statement puts it very plainly to those leaders of nations who might be laggards: It’s time to face climate change very thoughtfully, justly and aggressively. Finally, having this strong and very considered statement about the urgency and moral imperative of addressing climate change coming from a religious leader is very proper, and part of an important larger movement.

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Just to put you on the wrong paw (do skippys have paws?).

All Kangaroos Are Left-Handed (Discovery)

All kangaroos are left-handed, according to new research. Previously it was thought that “true”-handedness, meaning predictably using one hand over the other, was a feature unique to primates. The new research, published in the journal Current Biology, not only negates that but also goes one step further: kangaroos are even more true-handed than we are. “According to a special-assessment scale of handedness adopted for primates, kangaroos pulled down the highest grades,” said project leader Yegor Malashichev in a press release. “We observed a remarkable consistency in responses across bipedal species in that they all prefer to use the left, not the right, hand.”

Malashichev, a researcher from Saint Petersburg State University in Russia, and his team observed that wild kangaroos show a natural preference for their left hands when performing particular actions, such as grooming their noses, picking leaves, or bending tree branches. Left-handedness was particularly apparent in eastern grey and red kangaroos. The kangaroos that they studied were at various locations in the wild at Tasmania and Australia. The term “hand” really does apply here, because kangaroos have five-fingered hands that somewhat resemble human hands, save for the kangaroos’ long claws in place of fingernails. Not all marsupials were found to exhibit such handedness. The researchers determined that red-necked wallabies, for example, prefer their left hand for some tasks and their right for others.

Generally speaking, these wallabies use their left forelimb for tasks that involve fine manipulation and the right for tasks that require more physical strength. The researchers also found less evidence for handedness in species that spend their days in the trees. The discovery about kangaroos was unexpected because, unlike other mammals, kangaroos lack the same neural circuitry that bridges the left and right hemispheres of the brain. Now the researchers are very curious about marsupial brains, which differ from those of other mammals in additional respects too. Such studies could yield important insight into neuropsychiatric conditions, including schizophrenia and autism, the researchers said, noting links between those disorders and handedness.

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Doesn’t leave much space for ‘interpretation’.

The Latest Global Temperature Data Are Literally Off The Chart (Guardian)

Just today, NASA released its global temperature data for the month of May 2015. It was a scorching 0.71°C (1.3°F) above the long-term average. It is also the hottest first five months of any year ever recorded. As we look at climate patterns over the next year or so, it is likely that this year will set a new all-time record. In fact, as of now, 2015 is a whopping 0.1°C (0.17°F) hotter than last year, which itself was the hottest year on record. Below, NASA’s annual temperatures are shown. Each year’s results are shown as black dots. Some years are warmer, some are cooler and we never want to put too much emphasis on any single year’s temperature. I have added a star to show where 2015 is so far this year, simply off the chart. The last 12 months are at record levels as well. So far June has been very hot as well, likely to end up warmer than May.

So why talk about month temperatures or even annual temperatures? Isn’t climate about long-term trends? First, there has been a lot of discussion of the so-called ‘pause.’ As I have pointed out many times here and in my own research, there has been no pause at all. We know this first by looking at the rate of energy gain within the oceans. But other recent publications, like ones I’ve written about have taken account of instrument and measurement quality and they too find no pause. Second, there has been a lot of discussion of why models were running hotter than surface air temperatures. There was a real divergence for a while with most models suggesting more warming. Well with 2014 and 2015, we see that the models and actual surface temperatures are in very close agreement.

When we combine surface temperatures with ocean heat content, as seen below, a clear picture emerges. Warming is continuing at a rapid rate.

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What we do best.

The Sixth Mass Extinction Is Here (Stanford.edu)

Stanford biologist Paul Ehrlich calls for fast action to conserve threatened species, populations and habitat before the window of opportunity closes. There is no longer any doubt: We are entering a mass extinction that threatens humanity’s existence. That is the bad news at the center of a new study by a group of scientists including Paul Ehrlich, the Bing Professor of Population Studies in biology and a senior fellow at the Stanford Woods Institute for the Environment. Ehrlich and his co-authors call for fast action to conserve threatened species, populations and habitat, but warn that the window of opportunity is rapidly closing. “[The study] shows without any significant doubt that we are now entering the sixth great mass extinction event,” Ehrlich said.

Although most well known for his positions on human population, Ehrlich has done extensive work on extinctions going back to his 1981 book, Extinction: The Causes and Consequences of the Disappearance of Species. He has long tied his work on coevolution, on racial, gender and economic justice, and on nuclear winter with the issue of wildlife populations and species loss. There is general agreement among scientists that extinction rates have reached levels unparalleled since the dinosaurs died out 66 million years ago.

However, some have challenged the theory, believing earlier estimates rested on assumptions that overestimated the crisis. The new study, published in the journal Science Advances, shows that even with extremely conservative estimates, species are disappearing up to about 100 times faster than the normal rate between mass extinctions, known as the background rate. “If it is allowed to continue, life would take many millions of years to recover, and our species itself would likely disappear early on,” said lead author Gerardo Ceballos of the Universidad Autónoma de México.

Using fossil records and extinction counts from a range of records, the researchers compared a highly conservative estimate of current extinctions with a background rate estimate twice as high as those widely used in previous analyses. This way, they brought the two estimates – current extinction rate and average background or going-on-all-the-time extinction rate – as close to each other as possible. Focusing on vertebrates, the group for which the most reliable modern and fossil data exist, the researchers asked whether even the lowest estimates of the difference between background and contemporary extinction rates still justify the conclusion that people are precipitating “a global spasm of biodiversity loss.” The answer: a definitive yes.

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Apr 182015
 
 April 18, 2015  Posted by at 10:06 am Finance Tagged with: , , , , , , , ,  7 Responses »


George N. Barnard Atlanta, Georgia. View on Marietta Street 1864

US Is ‘World Leader’ In Child Poverty (Alternet)
‘This Is Far From Over’, ‘We’re All Frogs In Boiling Water’ (Zero Hedge)
US Should Write Laws Of Global Economy, Not China – Obama (RT)
Greece’s Main Creditors Said to Be Unwilling to Allow Euro Exit (Bloomberg)
Let’s Face Reality, Greece Is Bankrupt: Marc Faber (CNBC)
Greek Crisis Comparable to Great Depression: Blanchflower (Bloomberg)
IMF’s Lagarde To Greece: Pay Us Or Else (Forbes)
Quarantine For Greek Bank Subsidiaries In Neighboring Countries (Kathimerini)
Obama Calls For Flexibility In Brief Exchange With Varoufakis (Kathimerini)
IMF Urges EU To Slim Down Its Demands On Greece (Guardian)
ECB Examines Possible Greek IOU Currency In Case Of Default (Reuters)
Greece’s Binary Outlook Gives Markets a Headache (WSJ)
New Zealanders Make More On Their Homes Than They Earn At Work (NZ Herald)
Rock-Star Economy Loiters At Rocky Road To Recession (NZ Herald)
NATO Activity Near Russian Borders Increased By 80% in 2014 (RT)
Hillary Clinton’s Fake Populism Is a Hit (Matt Taibbi)
Ben Bernanke Isn’t the Problem, the System Is (Atlantic)
EU -Under TTIP Pressure- Clears Path For 17 New GMO Foods (Guardian)
Dry Wells Plague California as Drought Has Water Tables Plunging (Bloomberg)
Global Temperature Records Just Got Crushed Again (Bloomberg)

Well done, America.

US Is ‘World Leader’ In Child Poverty (Alternet)

America’s wealth grew by 60% in the past six years, by over $30 trillion. In approximately the same time, the number of homeless children has also grown by 60%. Financier and CEO Peter Schiff said, “People don’t go hungry in a capitalist economy.” The 16 million kids on food stamps know what it’s like to go hungry. Perhaps, some in Congress would say, those children should be working. “There is no such thing as a free lunch,” insisted Georgia Representative Jack Kingston, even for schoolkids, who should be required to “sweep the floor of the cafeteria” (as they actually do at a charter school in Texas). The callousness of U.S. political and business leaders is disturbing, shocking. Hunger is just one of the problems of our children. Teacher Sonya Romero-Smith told about the two little homeless girls she adopted: “Getting rid of bedbugs, that took us a while. Night terrors, that took a little while. Hoarding food..”

America is a ‘Leader’ in Child Poverty The U.S. has one of the highest relative child poverty rates in the developed world. As UNICEF reports, “[Children’s] material well-being is highest in the Netherlands and in the four Nordic countries and lowest in Latvia, Lithuania, Romania and the United States.” Over half of public school students are poor enough to qualify for lunch subsidies, and almost half of black children under the age of six are living in poverty.

$5 a Day for Food, But Congress Thought it was Too Much. Nearly half of all food stamp recipients are children, and they averaged about $5 a day for their meals before the 2014 farm bill cut $8.6 billion (over the next ten years) from the food stamp program. In 2007 about 12 of every 100 kids were on food stamps. Today it’s 20 of every 100.

For Every 2 Homeless Children in 2006, There Are Now 3 On a typical frigid night in January, 138,000 children, according to the U.S. Department of Housing, were without a place to call home. That’s about the same number of households that have each increased their wealth by $10 million per year since the recession.

The US: Near the Bottom in Education, and Sinking The U.S. ranks near the bottom of the developed world in the percentage of 4-year-olds in early childhood education. Early education should be a primary goal for the future, as numerous studies have shown that pre-school helps all children to achieve more and earn more through adulthood, with the most disadvantaged benefiting the most. But we’re going in the opposite direction. Head Start was recently hit with the worst cutbacks in its history.

Children’s Rights? Not in the U.S. It’s hard to comprehend the thinking of people who cut funding for homeless and hungry children. It may be delusion about trickle-down, it may be indifference to poverty, it may be resentment toward people unable to “make it on their own.” The indifference and resentment and disdain for society reach around the globe. Only two nations still refuse to ratify the UN Convention on the Rights of the Child: South Sudan and the United States. When President Obama said, “I believe America is exceptional,” he was close to the truth, in a way he and his wealthy friends would never admit.

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Hunt’s a smart dude.

‘This Is Far From Over’, ‘We’re All Frogs In Boiling Water’ (Zero Hedge)

Global debt has expanded by $35 trillion since the credit crisis and as Lacy Hunt exclaims, “that’s a net negative, debt is an increase in current consumption in exchange for a decline in future spending and we are not going to solve this problem by taking on more and more debt.” Santelli notes that debt will actually keep growth “squashed down” and points out the low rates in Europe questioning the ability of The ECB’s actions to save the economy which Hunt confirms as “longer-term rates are excellent economic indicators” and that is not a good sign for Europe. “This process is far from over,” Hunt concludes, “rates will move irregularly lower and will remain depressed for several years.” Santelli sums up perfectly, “we’re all frogs in boiling water,” as we await the consequences of central planning.

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“The laws of the global economy should be written by the United States and not by the likes of China..”

US Should Write Laws Of Global Economy, Not China – Obama (RT)

The laws of the global economy should be written by the United States and not by the likes of China according to President Obama, as concern over China’s influence is growing. Washington hopes a Pacific free trade pact will curb Beijing’s investment bank. “When 95% of our potential customers live abroad, we must be sure that we are writing the rules for the global economy, not a country like China,” Obama said in his special message to Congress on Thursday, RIA reports. The statement comes after an agreement by US lawmakers to fast-track international trade bills earlier on Thursday. The White House is now looking forward to completing the Trans-Pacific Partnership agreement this year to remove trade barriers between the participating nations which account for 40% of the global economy and more than a third of global trade.

“Our exports support more than eleven million jobs, and we know that exporting companies pay higher wages than others. Today we have the opportunity to open even more new markets to goods and services backed by three proud words: Made in America,” Obama added. Meanwhile, the US and Japan are the largest economies in the 12 Pacific nations bloc and view it as a strategic economic partnership. The two countries have been voicing concerns over China’s increasing influence in Asia and did not join the Chinese Investment bank (AIIB). The AIIB is expected to challenge the Washington-based World Bank and rival Japan’s Asian Development Bank. It currently has 57 countries from 5 continents as founding members including the biggest European nations. International trade and investment institutions are the latest contest issues between Beijing and the Washington-Tokyo alliance for influence in Asia.

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They want to keep them aboard as feudal servants?!

Greece’s Main Creditors Said to Be Unwilling to Allow Euro Exit (Bloomberg)

Greece’s major creditors are not ready to let the country drop out of the euro as long as Prime Minister Alexis Tsipras shows willingness to meet at least some key demands, according to two people familiar with the discussions. Chancellor Angela Merkel will go a long way to prevent a Greek exit from the single currency, though only so far, one of the people said. Every possibility is being considered in Berlin to pull Greece back from the brink and keep it in the 19-nation euro, the person said. For all the foot-dragging in Athens, some creditors are willing to show Greece more flexibility in negotiations over its finances to prevent a euro exit, the second person said. The red line is that the Syriza-led government shows readiness to commit to at least some economic reform measures, said both people, who asked not to be named discussing strategy.

“Our view is that Greece is not going to exit the euro,” Stephen Macklow-Smith at JPMorgan Asset Management in London, said in a Bloomberg Television interview on Friday. While both sides have “very entrenched positions” in the negotiations, “if you look at the way the euro-zone crisis has developed, in every case what you’ve seen is in return for firm action you get concessions.” The brinkmanship has sent Greek government bonds heading toward their worst week since Tsipras’s election in January at the head of an anti-austerity coalition. While the public rhetoric has escalated amid a standoff over releasing the last tranche of aid, creditors are willing to cut Greece some slack, the second person said.

Euro-area finance ministers are next due to discuss progress on Greece at their meeting on April 24 in the Latvian capital, Riga. Greece’s government remains confident an interim agreement with its creditors allowing disbursement of bailout funds can be reached by the end of April, a Greek official told reporters in Athens on Friday. “We’re of the view that Greece will hold to the commitments it made to the institutions,” Georg Streiter, Merkel’s deputy spokesman, said when asked about the chancellor’s stance. A deal won’t be ready by April 24 and could come together in the following weeks, Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem told reporters in Washington. “I don’t believe in this game-of-chicken rubbish,” Dijsselbloem said. “We don’t know what the risks are.”

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“If they don’t want to pay what are you going to do, invade and hang them all up?”

Let’s Face Reality, Greece Is Bankrupt: Marc Faber (CNBC)

Greece is bankrupt and should default, well-known investor Marc Faber told CNBC Friday, arguing that a “geopolitical game of chess” was being played out in the region. The comments by Faber, the editor of the “Gloom, Boom & Doom Report,” came at a time of heightened tensions between Greece and its international creditors. The organizations overseeing the country’s two international bailouts – worth a combined €240 billion – have said the country will not receive a last tranche of aid, worth 7.2 billion euros, until it makes far-reaching reforms. But Faber, a bearish investor known as “Dr. Doom,” said the country’s fiscal situation was unsalvageable. “Even if Greece grows at 10%per annum for the next ten years, it will not be able to pay its debts back,” he told CNBC.

“It’s bankrupt. We better face the reality and not kick the can the can down the road. Greece should default.” Faber said that while Greece could leave the euro zone and adopt a parallel currency, there that geopolitics were coming in to play and there was no appetite in Europe to let the country exit from the single currency bloc. “I personally think it’s not so much of an economic issue as a political issue,” he told CNBC Europe’s “Squawk Box.” “Europe, and in particular NATO and the U.S. do not want Greece to leave (the euro zone) because if they do, other people are going to knock on Greece’s door – like the Russians or the Chinese maybe. It’s very much a geopolitical game of chess that’s being played.” Greece and its creditors disagree on which reforms should be implemented, however, and as such the much-needed aid remains under lock and key.

T his has prompted speculation that the country could soon run out of money and default on its forthcoming debt repayments to the IMF and ECB, which could, in turn, result in the country leaving the euro zone. Greece denies this is the case and ECB President Mario Draghi said earlier this week that he has not even considered a default. On Friday, Greek Finance Minister Yanis Varoufakis will meet Draghi and IMF officials in Washington. The ECB stands to lose a lot if Greece does default, Faber argued, and thus Greece was in strong position to negotiate better terms for its bailout program and debt repayments. “I think that the ECB and European banks will have to take huge losses on their loans to Greece and bond purchases they have made (if it defaults),” he said. “I think Greece is in a very strong negotiating position. If they don’t want to pay what are you going to do, invade and hang them all up?”

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Blanchflower can’t stop laughing about the whole thing.

Greek Crisis Comparable to Great Depression: Blanchflower (Bloomberg)

Dartmouth College’s Danny Blanchflower discusses the Greek debt crisis with Bloomberg’s Pimm Fox on “Taking Stock.”

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“We’re not actually in a rules based world here, we’re in a politically determined one. If the other eurozone members think that keeping Greece solvent , in the euro and functioning is sufficiently important then they will do that.”

IMF’s Lagarde To Greece: Pay Us Or Else (Forbes)

It’s long been true that welshing on debts to the IMF is just something that a civilised country just doesn t do. Thus there’s little surprise when Christine Lagarde, the head of the IMF, points out to Greece that there’s really no mileage in that country thinking about not paying the IMF back the money it s owed. Because, you know, that s just not something that civilised countries do. There is however a sting in the tail here. For there’s no formal method of dunning a country that does fail to repay the IMF on time. It takes at least a month after the payment doesn t appear for the IMF to go through its own internal reporting processes and then another couple of weeks for it to declare actual default.

And there’s politics in there as well: they can, quite happily, say that, well, they re trying to pay, they ve paid a bit perhaps, so we ll not actually say that they are in default. The point being that the rules aren’t hard and fast. What really matters is what other people think of a skipped IMF payment and here it’s the ECB that is most important. Here’s Lagarde:

IMF Managing Director Christine Lagarde warned that she wouldn’t let Greece skip a debt payment to the lender, shutting down a potential avenue to buy the Greek government some financial leeway. We never had an advanced economy actually asking for that kind of thing, delayed payment, Lagarde said in an interview Thursday in Washington with Bloomberg Television. And I very much hope that this is not the case with Greece. I would certainly, for myself, not support it.

It’s almost ritualistic, her saying that of course. But that it has been said does bind in a way future actions. Having gone public with said statement then the IMF can’t really turn around and say Well, it doesn’t matter if Greece is late with a payment.

Christine Lagarde, the head of the International Monetary Fund, said the IMF is worried about the liquidity situation in Greece but made it clear that the institution would not give the country any leeway on ¨ 1bn of debt repayments coming due in early May.

This is almost like the Kremlinology of old of course, looking for the runes in such remarks, but by the standards of these things it’s a fairly firm statement. But it’s really the ECB that matters here. Assume that Greece did delay the IMF payment (as one minister has said they would, if faced with a choice of paying the bank or paying the country s pensions). Not a great deal would happen immediately as a direct result. What would actually matter is what the ECB did:

With Greek sovereign yields blowing wider on Thursday (and pretty much staying there), it s worth revisiting what exactly might happen if, say, May 1 arrives and Greece fails to pay the €200m due to the IMF that day. Received wisdom has it that the ECB will withdraw the ELA emergency liquidity assistance currently propping up the Greek banking system, which will promptly collapse; Tsipras and Co would then be forced to bring back the Drachma (or similar) and Greece would exit the eurozone. But what do the rules here say?

Well, actually, the rules are written in such a flaccid manner that the ECB could do anything it liked. They could conclude that it’s temporary, no biggie, and keep supporting the Greek banks. Or they could conclude that it’s not, it is a biggie, and close them down and thus force default and Grexit. But the point is that a putative default to the IMF doesn’t really change that situation. Because the rules are sufficiently flaccid that pretty much anything can be interpreted as being a reason to withdraw EULA support: or nothing. We’re not actually in a rules based world here, we re in a politically determined one. If the other eurozone members think that keeping Greece solvent , in the euro and functioning is sufficiently important then they will do that. If they don’t they won’t: there’s really no rules here that can insist that they go either way.

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“This quarantine was deemed necessary after the aggressive rhetoric of the new Greek government..”

Quarantine For Greek Bank Subsidiaries In Neighboring Countries (Kathimerini)

Neighboring countries have effectively quarantined Greece in a bid to minimize the consequences on their credit systems in case of a Greek “accident.” Kathimerini understands that the central banks of Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk (bonds, treasury bills, deposits to Greek banks, loans etc.) down to zero in order to shield themselves and minimize the danger of contagion in case the negotiations between the Greek government and the eurozone do not bear fruit. This quarantine was deemed necessary after the aggressive rhetoric of the new Greek government – particularly in the first few weeks after the election – regarding a debt restructuring, the non-completion of the creditors’ assessment and so on.

Special care was taken for the subsidiaries of Greek lenders, which have a major presence in neighboring states, to make sure that they would not proceed to new positions in Greek bonds, T-bills, deposits in Greek banks or interbank funding. The Greek government recently put press pressure on banks to think how they could get around the ECB’s ban on the acquisition of more T-bills. Another concern for local bank groups is the threat of a reduction in the Greek element of their subsidiaries in neighboring countries in case of turmoil in Greece. Don’t forget that the Cypriot-owned bank branches in Greece changed hands virtually overnight in March 2013 during the Cyprus bank bail-in process.

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“But we are not going to end up ‘being’ compromised. This not what we were elected for.”

Obama Calls For Flexibility In Brief Exchange With Varoufakis (Kathimerini)

US President Barack Obama spoke with Greek Finance Minister Yanis Varoufakis on the sidelines of an event at the White House honoring Greece’s Independence Day with the former stressing the need for flexibility from all sides in ongoing reform negotiations between Greece and its creditors, according to sources. The conversation between Obama and Varoufakis lasted for around 12 minutes, according to sources who said Varoufakis asked Obama to keep pressing European leaders so that a solution is found to Greece’s problem. Varoufakis agreed with Obama that all sides need to show flexibility and also highlighted the need to remain focused on the goal and on the process that Greece is involved in with its creditors. The event at the White House was also attended by US Vice President Joe Biden and Greek Archbishop Demetrios.

Varoufakis is to meet on Friday with US Treasury Secretary Jack Lew at 10.30 p.m. Greek time following a scheduled meeting at 6 p.m. with European Central Bank President Mario Draghi. On Thursday, in a speech at the Brookings Institution, Varoufakis underlined the difficulties in Greek negotiations with its creditors but said Greece was more keen than anyone for a deal to be reached. Nevertheless, Greece will not approve more austerity, he said. “We will not sign up to targets we know our economy cannot meet by means of policies that our partners should not wish to impose,” he said. “We will compromise, we will compromise and we will compromise in order to come to a speedy agreement. But we are not going to end up ‘being’ compromised. This not what we were elected for.”

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“..the reforms being demanded from Athens in exchange for a vital €7.2bn in rescue funds should be simplified and slimmed down.”

IMF Urges EU To Slim Down Its Demands On Greece (Guardian)

The IMF has urged EU negotiators to slim down their list of demands in debt talks with Greece amid fears that time is running out to reach a deal. The intervention by one of the country’s three main lenders came as the UK chancellor, George Osborne, said the impasse posed the biggest immediate threat to the global economy. Poul Thomsen, head of the IMF’s European department, said the reforms being demanded from Athens in exchange for a vital €7.2bn (£5.2bn) in rescue funds should be simplified and slimmed down. European finance ministers and senior officials have warned that Greece is running out of time to secure the payment and avert a disorderly exit from the eurozone. Osborne said the situation in Greece was “the most worrying for the global economy”.

Speaking at the IMF’s spring meeting in Washington,he said discussions about Greece had “pervaded every meeting” and that “the mood is notably more gloomy than at the last international gathering”. He added: “It’s clear now to me that a misstep or a miscalculation on either side could easily return European economies to the kind of perilous situation we saw three to four years ago.” Osborne’s German counterpart, Wolfgang Schäuble, repeated his criticism of the radical left Syriza government’s negotiating tactics and warned that it was harming the economy. He said Greece was in a “very difficult situation” after Syriza demanded a new deal with its creditors – the IMF, the EU and the ECB – which had delayed reforms and hit the country’s already struggling economy.

Schäuble said it was unlikely that next week’s deadline for Athens to submit reform proposals would be met. The reforms are scheduled to be discussed at a meeting of eurozone finance ministers in Riga, Latvia next Friday, followed by a further gathering in Brussels on 11 May that is being seen as the crunch point for Athens. Greece is scheduled to make a €747m repayment to the IMF on 12 May and there are fears that Athens will be unable to meet the deadline as cash runs out of state and domestic bank coffers.

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“..the so-called adverse scenarios group.”

ECB Examines Possible Greek IOU Currency In Case Of Default (Reuters)

The ECB has analysed a scenario in which Greece runs out of money and starts paying civil servants with IOUs, creating a virtual second currency within the euro bloc, people with knowledge of the exercise told Reuters. Greece is close to having to repay the IMF about €1 billion in May and officials at the ECB are growing concerned. Although the Greek government has repeatedly said that it wants to honour its debts, officials at the ECB are considering the possibility that it may not, in work undertaken by the so-called adverse scenarios group. Any default by Greece would force the ECB to act and possibly restrict Greek banks’ crucial access to emergency liquidity funding.

Officials fear however that such action could push cash-strapped Athens into paying civil servants in IOUs in order to avoid using up scarce euros. “The fact is we are not seeing any progress… So we have to look at these scenarios,” said one person with knowledge of the matter. A spokesman for the ECB said it “does not engage in speculation about how specific scenarios regarding Greece could unfold.” One Greek government official, who declined to be named, said there was no need to examine such a scenario because Athens was optimistic it would reach a deal with its international lenders by the end of the month. Greece has dismissed a recent report suggesting it would need to tap all its remaining cash reserves across the public sector, a total of €2 billion, to pay civil service wages and pensions at the end of the month.

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“But if Greece leaves, all bets are off.”

Greece’s Binary Outlook Gives Markets a Headache (WSJ)

The conundrum that Greece presents for most investors is simple, but troubling. It is either mostly irrelevant, or one of the biggest threats to markets this year. The war of words over Greece and its attempts to strike a deal with its partners in recent days has deepened. German Finance Minister Wolfgang Schäuble warned that time was “running out” for Greece to strike an accord over its bailout program. European Commission Vice President Valdis Dombrovskis said talks were nowhere near the point where money could be disbursed. And IMF Managing Director Christine Lagarde on Thursday advised Greece to “get on” with fixing the economy. Greece has so far kept up with debt service, and retained access to very short-term market funding. But some very chunky payments come due in the summer months.

Standard & Poor’s this week cut Greece’s rating to triple-C-plus, warning that without deep reforms or further relief, Greece’s obligations would become unsustainable. Fears of a eurozone exit are building again. Financial markets are beginning to feel the jitters. Thursday, Greek bonds fell sharply, with two-year yields rising above 26%. Yields on Italian, Spanish and Portuguese bonds rose, widening the gap with Northern Europe. German bond yields fell to record lows, partly due to the European Central Bank’s bond-buying program, but partly due to nerves about Greece. As long as Greece stays in the eurozone, most investors can afford to pay it little attention. It accounts for just 1.8% of the currency bloc’s economic output.

The lowly rating on Greece’s bonds means they are off-limits for most funds; the volatility of Greek stocks will have deterred others from dipping into the market. The bigger factors affecting markets have been the ECB’s actions, the pickup in eurozone economic data, and the moves in currency markets. But if Greece leaves, all bets are off. The initial impact is probably containable, again due to Greece’s relatively small size economically. The ECB’s bond-purchase program should help stem financial-market contagion. But the second-round effects and political fallout are unknowable. UBS’s economists, for instance, warn that the apparent lack of bond-market concern over Greece is an unreliable indicator of calm; they argue that the real risk would come from bank runs in other highly-indebted countries. Undoubtedly, the remaining members of the eurozone would seek to circle the wagons and declare Greece unique once more, but the credibility of that effort might fall short.

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How to destroy an economy. “God help New Zealand.”

New Zealanders Make More On Their Homes Than They Earn At Work (NZ Herald)

A three-bedroom North Shore “do-up” has earned its owner nearly $1000 a day – just shy of the salary of a High Court judge – in Auckland’s red-hot property market. A Weekend Herald investigation into soaring house prices comes amid warnings from the Reserve Bank about the housing market and calls for immediate action by the country’s chief human rights watchdog. Stuart Duncan sold his 1982 fibre-cement home at 116 Oaktree Ave in Browns Bay in November 2013 for $751,000. Now the new owners have on-sold for $1,205,000 – despite doing little work on the property – giving them a 16-month profit of $454,000 – about $940 a day. “I’m still in shock,” Mr Duncan said after learning how much his old property fetched. “It’s just disbelief. “It was an 80s house, three-bedroom do-up. Where is the market going? God help New Zealand.”

The Weekend Herald has analysed annual house sale figures and compared them to wages earned in the country’s 12 regional council areas to calculate whether people’s homes are earning them more than they get from working. In Auckland, the average house earned nearly $230 a day in the past year – about twice the average worker’s pay. That’s about the same as an entry-level doctor or high school head of department with responsibility for 10 teaching staff. The one-bathroom Browns Bay property has a CV of just $800,000 and comes with a garage and carport. It sits on 1043sq m freehold and is zoned for Rangitoto College. Barfoot & Thompson agent Eve Huang said though the vendors had done little work on the property, they had obtained resource consent for the large section to be subdivided into two lots, which increased its value.

Mr Duncan said he couldn’t believe how the market had taken off, and blamed foreign buyers with deep pockets for what was fast becoming a housing crisis. “Every auction you go to, if they want it they just don’t give up. It’s a bottomless pit. It just doesn’t seem right. We’re going to end up with a generation that don’t own property.”

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An economy on the verge of implosion. How can these people not have learned from the US et al? They do have TV and papers here after all. Oh, wait, that is the very problem..

Rock-Star Economy Loiters At Rocky Road To Recession (NZ Herald)

A much-anticipated return to surplus somehow metamorphoses into yet another unwelcome deficit; dairy prices slump ever lower; the New Zealand dollar keeps rising ever higher; the overheated Auckland property market makes the South Sea Bubble of the 1700s look like an exercise in financial probity. Is this the so-called rock-star economy? Or the rocky road to recession? It is not raining on John Key and his colleagues. It is pouring. Still smarting at the mass defection of erstwhile supporters which the party took for granted in the Northland byelection, National is currently exhibiting the self-absorbed demeanour of someone who cannot quite work out what is happening to himself or herself and is not sure what to do about it.

Not that National can do much anyway to halt the rise in the currency or stimulate the international milk market. In the past week the Prime Minister and his Finance Minister have also appeared to accept they will fail to meet their long-established target date this year for a resumption of Budget surpluses. As for Auckland house prices, well, the warning from the Reserve Bank on Wednesday of a potential downward, disruptive correction in prices could not have been blunter. The Reserve Bank’s worry is that the trading banks, which have 60% of their lending in residential mortgages, could find themselves in dire straits such that credit dries up with the result that the economy goes into a severe downturn.

Key’s response was literally “crisis, what crisis?” But that hellish scenario ought to chill Key and Bill English to the bone. But the Reserve Bank has not stopped there. It is strongly urging the Government to give “fresh consideration” to ways and means of shutting property speculators attracted by untaxed capital gains out of the Auckland market. Key’s difficulty is that he has long ruled out a capital gains tax. His one consolation is that Labour leader Andrew Little has effectively done likewise. But Little is not in Government. Key is.

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We need to stop our own war mongerers, not someone else’s.

NATO Activity Near Russian Borders Increased By 80% in 2014 (RT)

There was a sharp increase the intensity of the training of NATO troops near the borders of Russia last year, Russian General Staff said. “In 2014, the intensity of NATO’s operational and combat training activities has grown by 80%,” Lieutenant General Andrey Kartapolov, head of the Main Operation Directorate of General Staff. The leadership of NATO made no effort to hide the clear anti-Russian orientation of these activities, he added. “During this period, NATO created a grouping of its member states’ forces in the Baltic States, consisting of over 10,000 troops, about 1,500 armored vehicles, 80 planes and helicopters and 50 warships,” Kartapolov said during the IV Moscow Conference on International Security.

According to the Lieutenant General, strategic bombers from the US Air Force were used to perform strategic tasks during those exercises. He also said that the US plans to supply its Eastern European allies with JASSM-ER long-range aviation cruise missiles, which will enable NATO warplanes to hit targets 1,300 kilometers inside the Russian territory. “In the case of a military conflict, critical facilities on the territory of almost the entire European part of Russia will be vulnerable to NATO’s air attack, with the flight time of the missiles reduced by half,” Kartapolov warned.

The General Staff official also spoke about increased intelligence activity by NATO in the Black Sea. He said that US Global Hawk drones were spotted in Ukrainian air space in March, with the UAVs increasing “the depth of reconnaissance on the territory of Russia by 250-300 kilometers.” Since Russia’s reunion with Crimea and the start of the military conflict in eastern Ukraine last spring, NATO forces have stepped up military exercises along the Russian border – in the Baltic States and Eastern Europe.

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I know, I said no more Hillary, but I’ll make an exception for Taibbi.

Hillary Clinton’s Fake Populism Is a Hit (Matt Taibbi)

Hillary Clinton ran onto the playing field this week, Rock and Roll Part 2 blaring in the background, and started lying within minutes of announcing her entry into the presidential election campaign. “There’s something wrong,” she told a crowd of Iowans, “when hedge fund managers pay lower taxes than nurses or the truckers I saw on I-80 when I was driving here over the last two days.” Oh, right, that. The infamous carried interest tax break, the one that allows private equity vampires like Mitt Romney and Stephen Schwartzman to pay a top tax rate of 15% while all of the rest of us (including the truckers Hillary “saw” – note she didn’t say “hung out with Bill and me over chilled shrimp at the Water Club”) pay income taxes.

The carried interest loophole is an absurd, completely unjustifiable handout to the not merely well-off but filthy rich, and it’s been law in this country for about three decades. Raise your hand if you really think that Hillary Clinton is going to repeal the carried interest tax break. We’ll come back to that in a minute. In the meantime, the reaction to Hillary’s campaign announcement went exactly according to script. Newspapers and news sites ever-so-slightly raised figurative eyebrows at the tone of Hillary’s announcement, remarking upon its “populist” flair. This is no plutocrat who plans to ride to the White House upon a historically massive assload of corporate money, the papers declared, this is a candidate of the people!

“Hillary’s Return: Her Folksy, Populist Re-Entry,” proclaimed Politico. “Populist Theme, Convivial In Tone!” headlined the Los Angeles Times. “Hillary Lifts Populist Spirits,” commented The Hill, hook visibly protruding from its reportorial fish-mouth. Having watched this campaign-reporting process from both the inside and the outside for a long time now, I knew what was coming after the initial wave of “Hillary the Populist!” stories. In presidential politics, every time a candidate on either the left or the right veers in a populist direction – usually with immediate success, since the American populace is ready to run through a wall for anyone who makes the obvious observation that they’re being screwed by someone up above – it takes about two or three days before the “Let’s let cooler heads prevail!” editorials start trickling in.

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As I said this week, they want the Bernank not for what he knows, but who he knows: “..it’s fairly clear that what Citadel wants is inside information..”

Ben Bernanke Isn’t the Problem, the System Is (Atlantic)

So Ben Bernanke wants to make a buck. Who can blame him? The guy is one of the most esteemed economists of his generation. He served his country admirably; his term as chairman of the Federal Reserve was probably the single most stressful term in that role in history. He resigned from his tenured professorship at Princeton when he joined the Fed board. What else is the guy going to do? This is, of course, how systemic problems work—few individual cases are obviously unacceptable, but the whole is horrifying. In this case, it’s the “revolving door” of movement between government positions and the financial sector—that is to say, from modestly paying positions in the public sector, overseeing financial firms, to higher-paying jobs in the private sector.

Bernanke is going to work for Citadel, a $25 billion hedge fund that is one of the country’s largest. While Bernanke is a talented economist, he has also never worked in the industry, so it’s fairly clear that what Citadel wants is inside information—either things he knows because he remains close with people in positions of authority, or his insight into ongoing negotiations. That’s why he’s been in high demand by financial-industry powers ever since stepping down last February. For example, The New York Times noted that he analyzed the Fed’s true feelings about inflation at a dinner with hedge funders in Las Vegas—allowing several to make profitable moves. Another lamented that he didn’t pay closer attention: “He gave this stuff out, but I didn’t realize what he was saying at the time, so I didn’t do a great trade.”

Quantifying the revolving door is difficult—it involves a series of subjective choices about what constitutes the revolving door, what level of employees should be counted, and so on. (One study from Notre Dame found a double-digit increase between 2001 and 2013.) But there’s ample anecdotal evidence. In fact, Bernanke isn’t even the first Federal Reserve alum to jump to a hedge fund in the last month. Jeremy Stein, a former governor, was hired by BlueMountain Capital Management in late March. And as Rob Copeland notes, this is just the latest in a stream of prominent government officials: Former Federal Reserve chairman Alan Greenspan and ex-Reagan economic adviser Martin Feldstein accepted paid roles on a now-disbanded economic advisory board at John Paulson’s hedge-fund firm that started in 2008.

More recently, former Obama administration chief of staff William Daley joined Swiss hedge fund Argentiere Capital, while former Treasury Secretary Timothy Geithner and former CIA chief David Petraeus took posts at private-equity firms Warburg Pincus and KKR, respectively. And just this week, former Massachusetts governor Deval Patrick was introduced as a new managing director at Bain Capital. That doesn’t even include non-hedge-fund and private-equity moves. Peter Orszag, who led President Obama’s Office of Management and Budget, took a job with Citigroup when he left. The Obama administration had been closely involved with Citi in the aftermath of the financial collapse, and the bank received nearly $500 billion in bailouts.

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Nobody wants GMO, nobody wants the TTIP. So what do we get? And have we forgotten how long DDT was considered safe? Declaring GMO safe is not science. Wait a hundred years.

EU -Under TTIP Pressure- Clears Path For 17 New GMO Foods (Guardian)

Seventeen new genetically modified food products will be authorised for import to Europe before the end of May in a significant acceleration of biotech trade, the Guardian has learned. An announcement could be made as early as next week, sources said, when a meeting of EU commissioners has been pencilled in to review adoption of new rules for approving GM imports. Europe currently imports around 58 GM products from abroad, mostly US maize, cotton, soy bean and sugar beet. But Greenpeace said that the US has raised the issue of a large logjam in biotech authorisations in talks over a free trade deal known as TTIP. “With transatlantic trade talks ongoing, pressure has been mounting from the biotech industry and the US government to break open the EU market to GM imports and to speed up authorisation procedures,” Marco Contiero, Greenpeace EU’s agriculture director, told the Guardian.

“The possible authorisation of 17 GM crops by the commission in the next few days is a likely result of this pressure.” “The timing is still being discussed but it is just a question of internal procedure now,” a source familiar with the discussions told the Guardian. “It is clear that the 17 strains will be authorised at the same time as the review meeting or just after. I would say it will happen before the end of May for sure.” Under proposed new GM import rules seen by the Guardian, future authorisations would automatically follow approval of new strains by the European Food and Safety Agency (Efsa). Individual countries would be given a similar opt-out to the one agreed for GM cultivation in a law passed earlier this year.

“It will be up to each member state wanting to make use of this ‘opt-out’ to develop this justification on a case-by-case basis, taking into account the GMO [genetically-modified organism] in question, the type of measure envisaged and the specific circumstances at national or regional level that can justify such an opt-out,” the draft said. Opposition from some EU states to draft GM authorisations is “usually not based on science but on other considerations reflecting the societal debate existing in the country,” the commission argues. So opt-outs will not be granted to EU states who seek it on health or environmental grounds, after Efsa has deemed a product safe. “The scope for the exceptions [opt-outs] will probably be less than in the cultivation proposal because we are talking about the internal market here,” an informed source said. “You will have to have a really solid reason. Otherwise it would be attacked as a disruption to the market.”

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“When you’re 400 yards from the lake and you have no water, you’re in trouble..”

Dry Wells Plague California as Drought Has Water Tables Plunging (Bloomberg)

Near California’s Success Lake, more than 1,000 water wells have failed. Farmers are spending $750,000 to drill 1,800 feet down to keep fields from going fallow. Makeshift showers have sprouted near the church parking lot. “The conditions are like a third-world country,” said Andrew Lockman, a manager at the Office of Emergency Services in Tulare County, in the heart of the state’s agricultural Central Valley about 175 miles north of Los Angeles. As California enters the fourth year of a record drought, its residents and $43 billion agriculture industry have drawn groundwater so low that it’s beyond the reach of existing wells. That’s left thousands with dry taps and pushed farmers to dig deeper as Governor Jerry Brown vorders the first mandatory water rationing in state history.

“The demand we’re placing on the aquifer and the deep bedrock drilling, which is going on at an alarmingly fast pace, is really scary,” said Tricia Blattler, executive director of the Tulare County Farm Bureau. “Folks are really concerned we’re not going to be able to find water in the groundwater system much longer. We are tapping it way too quickly.” Nowhere has lack of rain been felt more than in Tulare County, in a valley dotted with dairy farms and walnut orchards at the foot of the Sierra Nevada mountains. With 458,000 residents, it’s home to 1,013 dry wells, accounting for more than half of those that have failed in the state since January 2014.

Outside Porterville, in a dusty, unincorporated hamlet populated by many Latino citrus-farm workers, some residents use donated bottled water to drink and cook. About 40 people a day wash in the 26 showers set up in trailers next to the parking lot of Iglesia Emmanuel church. They lug nonpotable water home from county tanks for their toilets. Annette Clonts began bathing at friends’ homes or sneaking middle-of-the-night showers at Lake Success’s recreation area after the well near her trailer ran low two years ago. When the lake showers started sputtering in November, she turned to those at the church. “When you’re 400 yards from the lake and you have no water, you’re in trouble,” said Clonts, a 57-year-old retired cook.

[..] “We’ve got to find a way to survive, to hold on,” said Gallegos, who lives with her husband and two daughters. “Right now, we don’t have the money to drill a deeper well. You’re talking about $15,000.” That’s the starting price for residential wells, which range from 30 to 150 feet (9 to 46 meters) and can cost as much as $45,000, said Blattler, the official with the county’s farm bureau. Agricultural wells, which are about 1,000 to 1,800 feet, run $250,000 to $750,000, she said. There are so many customers, they’ll have to wait as long as two years.

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With an El Nino yet to come.

Global Temperature Records Just Got Crushed Again (Bloomberg)

It just keeps getting hotter. March was the hottest month on record, and the past three months were the warmest start to a year on record, according to new data released by the National Oceanic and Atmospheric Administration. It’s a continuation of trends that made 2014 the most blistering year for the surface of the planet, in to records going back to 1880. Thirteen of the 14 hottest years are in the 21st century, and 2015 is on track to break the heat record again. Results from the world’s top monitoring agencies vary slightly. NOAA and the Japan Meteorological Agency both had March as the hottest month on record. NASA had it as the third-hottest. All three agencies agree that the past three months have been the hottest start to a year.

The heat was experienced differently across the world. People in the U.S. and Canadian Northeast had an unusually cool March. But vast swaths of unusually warm weather covered much of the globe, and records were broken from California to Australia. The sweltering start to 2015 may be just the beginning. The National Weather Services predicts that a pattern of unusually warm waters in the Pacific Ocean, known as El Nino, will most likely persist well into the second half of the year. And this El Nino could be a big one. El Nino conditions transfer heat that’s been building in the ocean into the atmosphere, affecting weather around the world. A strong El Nino could possibly bring relief to California’s unprecedented drought in the form of heavy rains, but would likely add yet another year to a pile of broken temperature records.

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Nov 022014
 
 November 2, 2014  Posted by at 1:40 pm Finance Tagged with: , , , , , , , , , ,  1 Response »


Russell Lee Dillon, Montana, trading center for a prosperous cattle and sheep country Aug 1942

Financial ‘Experts’ No Better At Finance Than Normal Humans (HuffPo)
Child Poverty Up In More Than Half Of Developed World Since 2008 (Guardian)
Did QE Work? (Zero Hedge)
History Will Surely See QE As A Major Mistake (Telegraph)
Beware The QE Bubble, This Feels A Lot Like 1999 (Zero Hedge)
‘Another, Bigger Market Selloff Coming’ (CNBC)
European Growth As Elusive As Quicksilver (Reuters)
The World Economy Is Flying With Only One Engine (Roubini)
Warning: Avoid This Corrupt, Third-World Country At All Costs (Simon Black)
UK Courts Islamic Finance Market (Reuters)
China’s Economy Goes From Bad To Worse (Zero Hedge)
Ukraine Rebels Hold Russia-Backed Polls Condemned by UN (Bloomberg)
Gazprom To Resume Gas Supply Once Ukraine Pays $2.2 Billion (Reuters)
Ukraine Fighting Flares After Gas Deal as Winter Nears (Bloomberg)

We already knew.

Financial ‘Experts’ No Better At Finance Than Normal Humans (HuffPo)

Knowing more about finance does not lead to better financial decisions. In fact, some of the most supposedly financially knowledgeable people – mutual-fund managers – don’t make better financial decisions than other people, according to a new study by Michigan State and Notre Dame researchers, as reported in The Atlantic. It’s the latest evidence that a years-long campaign to help normal Americans achieve “financial literacy” is ineffective at best and misguided at worst. As The Atlantic notes, expert stock-pickers in finance and forecasters in other fields have been derided for decades as no better than dart-throwing monkeys. When it comes to getting ordinary people to know more about finance, however, the consensus has been that this time it’s different. On the surface, it’s a well-intentioned and uncontroversial mission: Helping people help themselves by making better decisions. And there’s plenty of evidence that people have a scary lack of financial knowledge: One study found that just a third of Americans would correctly answer three simple financial questions.

And those questions are models of transparency compared with the opaque language consumers often face when making even the simplest financial decisions. The goal of making people financially literate seems to imply that it’s the individual’s responsibility to safely navigate what is often intentionally inscrutable financial language. The same companies who create the problem of financial products Americans can’t understand push financial literacy as the solution. For instance, Bank of America thinks the key is an online course. The financial industry’s self-regulatory organization has an entire foundation devoted to investor education. But financial literacy in this gauzy, generalized form simply doesn’t work. The Cleveland Fed found no “conclusive support that any benefit at all exists” from financial education as it is currently taught. Shocking no one who has been to high school, one study showed that taking a financial literacy class in high school does nothing to improve financial literacy.

And a study by researchers at the Brookings Institution could not find “strong evidence that financial literacy efforts have had positive and substantial impacts.” In a 2011 presentation titled “The Financial Education Fallacy,” Lauren Willis, a professor at Loyola Law School, shot down the idea that “ordinary consumers would have made better mortgage choices and would have accumulated sufficient precautionary savings to weather the recession” if they’d just been financially educated. Straightforward consumer protections, like putting limits on how many single stocks people can own in retirement accounts, are most effective. Financial education is no substitute for financial regulation, she argues.

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This is QE for you. 40.5% child poverty in Greece, 32% in the US.

Child Poverty Up In More Than Half Of Developed World Since 2008 (Guardian)

Child poverty has increased in 23 countries in the developed world since the start of the global recession in 2008, potentially trapping a generation in a life of material deprivation and reduced prospects. A report by Unicef says the number of children entering poverty during the recession is 2.6 million greater than the number who have been lifted out of it. “The longer these children remain trapped in the cycle of poverty, the harder it will be for them to escape,” it says in Children of Recession: the Impact of the Economic Crisis on Child Wellbeing in Rich Countries. Greece and Iceland have seen the biggest percentage increases in child poverty since 2008, followed by Latvia, Croatia and Ireland. The proportion of children living in poverty in the UK has increased from 24% to 25.6%. Eighteen of the 41 countries in the study have seen falls in child poverty, topped by Chile which has seen a reduction from 31.4% to 22.8%.

Norway has the lowest child poverty rate, at 5.3% (down from 9.6% in 2008), and Greece has the highest, at 40.5% (up from 23% in 2008). Latvia and Spain also have child poverty rates above 36%. In the US, the rate is 32%. “In the past five years, rising numbers of children and their families have experienced difficulty in satisfying their most basic material and educational needs,” says the report. “Unemployment rates not seen since the Great Depression of the 1930s have left many families unable to provide the care, protection and opportunities to which children are entitled. Most importantly, the Great Recession is about to trap a generation of educated and capable youth in a limbo of unmet expectations and lasting vulnerability.” It adds: “The impact of the recession on children, in particular, will be felt long after the recession itself is declared to be over.”

The study’s authors asked people about their experiences and perceptions of deprivation, based on four indicators: not having enough money to buy food for themselves or their family; stress levels; overall life satisfaction; and whether children have the opportunity to learn and grow. In 18 of the 41 countries, scores showed a worsening situation between 2007 and 2013, revealing “rising feelings of insecurity and stress”. The percentage of households with children unable to afford a meal with meat, chicken, fish or a vegetable equivalent every second day more than doubled in four European countries – Estonia (to 10%), Greece (18%), Iceland (6%) and Italy (16%).

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It did for broke banks.

Did QE Work? (Zero Hedge)

This week saw not only the end of QE but an unending parade of told-you-so talking-head willing to proclaim not only QE’s success (unemployment ~6%, stocks at record highs, corporate profits at record highs) but to scoff at the naysayers warnings that post-QE stocks will slide since ‘the whole rally has been driven by central bank liquidity’ because “see, stocks are ripping higher post-FOMC.” Obviously they fail to see the link between extraordinarily low rates (enabling cheap-funded financial engineering), printed money (repressing investors into buying stocks), and the fact that stocks are surged after another central bank – the BoJ – unleashed another round of even bigger insanity.To those that suggest QE was a victory, we have words and pictures… If it was so successful, why did they stop? And does this look like the chart of a successful monetary policy action?

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“As UK state spending has surged over recent years, with our national debt doubling to £1,400bn since 2008, we’ve kept our public finances afloat only by effectively selling government debt back to the state …” You mean, the BoE is not ‘inedependent’?

History Will Surely See QE As A Major Mistake (Telegraph)

“The final word on quantitative easing will have to wait for historians,” wrote Ambrose Evans-Pritchard this week. Now the US Federal Reserve has apparently ended QE, I’d like to take a cue from my esteemed Telegraph colleague by suggesting what future historians might say. On Wednesday, the Fed terminated QE3 – the latest incarnation of its money-creation programme. The American version of this highly unorthodox policy began in late 2008, with the Fed creating virtual balances ex nihilo and purchasing assets such as government debt and mortgage-backed securities, often from bombed-out banks. The US authorities originally billed QE as a $600bn exercise. By unlocking frozen interbank markets, it was supposed to spur growth, breaking the credit crunch. As meaningful recovery remained elusive, though, QE2 was launched in 2010, with its successor two years later. In sum, the world’s most important central bank has fired $3,700bn from its monetary bazooka. America’s QE has been six times bigger than envisaged.

The Fed’s balance sheet has grown more than three-fold in just over half a decade – an unprecedented monetary expansion. And it’s not just America, of course. Launched in March 2009, British QE was presented as a £50bn program. It has since ballooned to £375bn, some 7.5 times the official prediction. The Bank of England’s balance sheet has quadrupled, with our QE focusing on gilt purchases. The Bank now holds over a third of all outstanding sovereign bonds. Ordinarily, governments borrow from pension funds, insurance companies and other long-term investors. As UK state spending has surged over recent years, with our national debt doubling to £1,400bn since 2008, we’ve kept our public finances afloat only by effectively selling government debt back to the state, using newly-created money. If that sounds like dubious circular financing, that’s what it is. Future historians will no doubt discuss this uncomfortable reality more than we do.

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“ … we are in the midst of a big bubble that will – down the line – be referred to as ‘The QE Bubble.”

Beware The QE Bubble, This Feels A Lot Like 1999 (Zero Hedge)

It appears few remember the epic failure of Japan’s first experiment with quantitative easing from 2001 to 2006 (that even the NY Fed can’t find a silver lining to crow about) and yet, not only is QE heralded as a success (or not) but additional QE seems to be something to celebrate (even when it’s shown to fail to achieve anything economically). How’s QE working out for Japan? [..] As Michael Chadwick notes in an oddly bearish interview on CNBC, where has Japan gone in the last 14 years (since its QE started), “absolutely nowhere,” and yet, he exclaims, “sadly, across the globe all central banks are following the same failed path.” Chadwick reflects on the explosion of central bank balance sheets and asks, rhetorically, “do we really need QE every time the market gets nervous?”

Chadwick, rightly proclaims: “At this point not much matters apart from central banker comments, QE, and political promises… I wanna know about valuations, I worry about the consumer; this feels a lot like 1999 to me.” “We have to wonder, are the central banks working together; our QE ends one day; Japan QE ramps up the next – you gotta wonder?” “Right now the world is a very vulnerable place… we are in the midst of a big bubble that will – down the line – be referred to as ‘The QE Bubble'”

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I don’t think -10% is a major sell-off, that’s just a correction.

‘Another, Bigger Market Selloff Coming’ (CNBC)

U.S. stocks rallied on Friday, with the Dow industrial average and S&P 500 closing at record highs. While the recent selloff may be in the rearview mirror, there’s a bigger one coming within the next three months, Empire Execution president Peter Costa told CNBC Friday. “The market has been on a tear for over five years. We had a small pullback of 8% I don’t think that’s enough. I think that the market needs to come back a little bit more than that for a longer duration,” Costa said in an interview with “Closing Bell.” In fact, he’s predicting a selloff of “probably” more than 10%.

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It’s not elusive, it’s simple gone and it’s not coming back.

European Growth As Elusive As Quicksilver (Reuters)

Data from both sides of the Atlantic will give clues in the coming week on just how bad the euro zone economy is and just how sustainable is its U.S. counterpart. Europe offers a rate meeting from the European Central Bank and a new slate of economic forecasts; the United States will release its influential monthly jobs data. Purchasing manager indexes for the past month will also show how businesses see things shaping up in the United States and Europe. One for China’s has already come in lower than expected. For many, the ECB meeting on Thursday will be the main money event – despite the fact that it is not likely to be one of action or suspense. As usual, the attention will be on ECB President Mario Draghi’s nuances at the news conference that follows the likely non-move on rates. When it comes to the ECB, the news is often all about the journey rather than the destination. This week’s inflation data let the ECB off the hook on taking any immediate additional action to combat the threat of deflation.

At 0.4% in October, inflation is worryingly slight, but it is higher than it was a month earlier. ECB policymakers are also in no rush to move on to something new when they have not yet seen how their targeted loans and purchases of asset-backed securities are doing. Many in financial markets would like to see the ECB move to a full quantitative easing (QE) asset-buying program like the one the U.S. Federal Reserve has just closed. But as these words from ECB Governing Council member Ewald Nowotny suggest, it is not likely. “I don’t think we should be pushed by the markets to produce a new program at every meeting we have.” The bank will also be looking at the U.S. Federal Reserve’s ending of QE and relatively hawkish tone for some spillover succour. The euro is down more than 1.5% against the dollar since the Fed meeting on Wednesday, and down more than 10% since May. A weaker euro not only boosts euro zone exports, it imports inflation, both of which the ECB wants to see.

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‘Germany continues to resist a much-needed stimulus to boost eurozone demand.’ Roubini’s just another geezer proclaiming: ‘if only they picked the right policies, we’d return to growth … ‘ Yawn. It’s boring, it’s stupid, it’s costly, it’s destructive and it’s utterlyuseless. Why can’t anyone think beyond that narrow notion? Where is the power of the human brain? Where did it go? We’re stuck in a broken record rut.

The World Economy Is Flying With Only One Engine (Roubini)

The global economy is like a jetliner that needs all of its engines operational to take off and steer clear of clouds and storms. Unfortunately, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom). The second engine – the eurozone – has now stalled after an anaemic post-2008 restart. Indeed, Europe is one shock away from outright deflation and another bout of recession. Likewise, the third engine, Japan, is running out of fuel after a year of fiscal and monetary stimulus. And emerging markets (the fourth engine) are slowing sharply as decade-long global tailwinds – rapid Chinese growth, zero policy rates and quantitative easing by the US Federal Reserve, and a commodity super-cycle – become headwinds. So the question is whether and for how long the global economy can remain aloft on a single engine. Weakness in the rest of the world implies a stronger dollar, which will invariably weaken US growth.

The deeper the slowdown in other countries and the higher the dollar rises, the less the US will be able to decouple from the funk everywhere else, even if domestic demand seems robust. Falling oil prices may provide cheaper energy for manufacturers and households, but they hurt energy exporters and their spending. And, while increased supply – particularly from North American shale resources – has put downward pressure on prices, so has weaker demand in the eurozone, Japan, China, and many emerging markets. Moreover, persistently low oil prices induce a fall in investment in new capacity, further undermining global demand. Meanwhile, market volatility has grown, and a correction is still underway. Bad macro news can be good for markets, because a prompt policy response alone can boost asset prices.

But recent bad macro news has been bad for markets, owing to the perception of policy inertia. Indeed, the European Central Bank is dithering about how much to expand its balance sheet with purchases of sovereign bonds, while the Bank of Japan only now decided to increase its rate of quantitative easing, given evidence that this year’s consumption-tax increase is impeding growth and that next year’s planned tax increase will weaken it further. As for fiscal policy, Germany continues to resist a much-needed stimulus to boost eurozone demand. And Japan seems to be intent on inflicting on itself a second, growth-retarding consumption-tax increase. Furthermore, the Fed has now exited quantitative easing and is showing a willingness to start raising policy rates sooner than markets expected. If the Fed does not postpone rate increases until the global economic weather clears, it risks an aborted takeoff – the fate of many economies in the last few years.

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The land of the free and the home of the depraved.

Warning: Avoid This Corrupt, Third-World Country At All Costs (Simon Black)

John Anderson, an American tourist from San Clemente, California, was driving down a poorly-maintained highway when he saw flashing lights in his rearview mirror. After a brief exchange with the local police officer, Anderson was shocked when the cop started searching his vehicle. Anderson had $25,180 in US dollar cash in the car, which by the way was not a crime according to the local laws. When the cop saw it, he told Anderson that we would take it and threatened him with arrest if he protested. Anderson couldn’t believe it. This is the sort of stuff you always hear about in these third world countries—corrupt cops and state robbery. Ultimately Anderson gave in; the cop let him go and did not charge him with a crime, but took every last penny in the vehicle. And for the last two years, Anderson has been trying to unsuccessfully fight it in the country’s Kangaroo court system.

Clearly we should all avoid going to such dangerously corrupt third world countries. Except in this case, Anderson was in the United States of America. And he is far from being the only victim of this highway robbery known as Civil Asset Forfeiture. Since 9/11, police forces in the Land of the Free made over 62,000 seizures without charging anyone with any crime, stealing $2.5 billion in cash alone. The cost of taking legal action against the government is so high, that only about 17% of the victims actually challenged the seizures. And even then, only 41% of those that challenged have been able to get their money back. This means that the government has a better than 93% success rate in outright theft. This is worse than mafia—it’s blatant theft with impunity from the people that are sworn to protect and serve. It’s the kind of thing that is thought to only occur in heinously corrupt countries.

Here’s the good news: many people are waking up to the reality that they’re not living in a free country. They are starting to understand what I call ‘the criminalization of existence.’ Every last detail of our lives is regulated—what we can/cannot put in our bodies, whether we can collect rainwater or unplug from the grid, how we are allowed to educate our own children, etc. Driving this point home, a Tennessee woman was actually thrown in jail earlier this month for ignoring a city citation to trim some overgrown bushes in her yard. This isn’t freedom. The irony is that, even though many people are starting to realize this, they’re looking to the very institution that has enslaved them to solve the problem.

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Try that in Texas.

UK Courts Islamic Finance Market (Reuters)

The scope of Britain’s Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose one of its six full-fledged Islamic banks. In June, Britain became the first Western country to sell sovereign sukuk (Islamic bonds), helping boost its industry credentials as competition intensifies among global financial centres for a slice of Islamic business. Britain has 22 firms that offer sharia-compliant financial products and they held an estimated $19 billion in assets last year, according to a report by lobby group TheCityUK. These include six full-fledged Islamic banks such as Bank of London and the Middle East, European Islamic Investment Bank, Gatehouse Bank and the Islamic Bank of Britain (IBB).

Last week a government official said the central bank would look into developing a liquidity management tool for use by Islamic banks, while Britain’s export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus. In May, the Bank of England widened the types of sharia-compliant debt instruments that Islamic banks can use in their liquidity buffers, under a policy statement known as PS4/14.

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We know.

China’s Economy Goes From Bad To Worse (Zero Hedge)

Prepare to once again hear the word “decoupling” a whole lot more. The reason is that while the US economy is supposedly on an upward tear after the 3.5% Q3 GDP print (thanks to the war against ISIS sending defense spending soaring and a very contradictory plunge in imports which suggest US tollers are seeing far less end-demand) and despite the immediate cut to Goldman’s Q4 GDP estimate from 3.0% to 2.2% after US consumer spending tumbled in September it is, for now at least – because GDP-crushing snow is just around the corner – doing better than Europe (where Germany just joined the ranks of Spain, Italy and Portgual in the deflation column), Japan, where the BOJ just crashed recovery hopes and unleashed more QE for the official reason that the economy is tanking once more due to the inability to keep inflation steady above 1%, and certainly China, whose economy – driven by the housing market slide now in its 5th month and which has sent Y/Y prices negative for the first time since 2012 – keeps contracting, as confirmed overnight by the latest official PMI data from the National Bureau of Statistics. The Chinese data in a nutshell: overnight the official NBS PMI report indicted the October manufacturing PMI printed at a disappointing 50.8, below the 51.1 in September, and well below the consensus hopes for a rebound and uptick at 51.2.

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Elections are not free.

Ukraine Rebels Hold Russia-Backed Polls Condemned by UN (Bloomberg)

Russian-backed militias in eastern Ukraine are holding elections today in their self-proclaimed people’s republics in defiance of the United Nations and governments from Kiev to Washington. Voters in rebel-held territory in Donetsk and Luhansk will each select a head of government as well as a People’s Council, according to their websites. Voting was underway and was expected to end at 8 p.m. Both regions switched to Moscow time, one hour later than the rest of Ukraine, on Oct. 26. About 5.2 million people live in the conflict zones, according to the United Nations. Some 4.3 million and 2.2 million people, mainly Russian speakers, lived in Donetsk and Luhansk, respectively, before the uprising began. Seven months of fighting has displaced about 1 million people and claimed more than 4,000 lives, the UN says. Secretary-General Ban Ki-moon “deplores” the elections as a “breach of the constitution and national law,” according to the UN’s website. “These ‘elections’ will seriously undermine the Minsk protocol and memorandum, which need to be urgently implemented in full.”

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Neither is gas.

Gazprom To Resume Gas Supply Once Ukraine Pays $2.2 Billion (Reuters)

Russia could resume natural gas deliveries to Ukraine as soon as next week if Kiev pays $2.2 billion in debt and pre-payments, gas exporter Gazprom said on Friday, under a deal that also safeguards winter deliveries to Europe. Moscow, Kiev and the European Union reached an agreement on Thursday over the gas supplies despite tensions over a pro-Russian separatist rebellion in east Ukraine. Gazprom cut off Ukraine in June amid a bitter dispute over unpaid bills and pricing for the former Soviet republic, which is seeking closer ties with the West. Gazprom CEO Alexei Miller said Gazprom would restart the flow of gas within two days of Kiev covering part of its debt and pre-paying for deliveries in November. “Everything depends on when Ukraine makes this payment. We understand this can happen by the end of next week,” Miller told Russian state TV broadcaster Rossiya 24.

The Kremlin on Friday welcomed the deal as “an important step in the context of ensuring further uninterrupted gas transit to Europe”. The EU receives about a third of its gas from Russia and about half of that is piped across Ukraine. Speaking in Kiev, Ukraine Prime Minister Arseny Yatseniuk said he was determined to ensure safe transit to the EU, a crucial partner for Kiev in dealing with Russia over the rebellion in the east and a creditor of Ukraine’s bankrupt economy. “Ukraine will safeguard the transit and … won’t give Russia a chance to blackmail Ukraine and Europe,” Yatseniuk said. Thursday’s agreement covers November through next March and calls for Ukraine to pay $1.45 billion. Miller put the pre-payment portion of that at $760 million. Kiev must also pay off $3.1 billion for past deliveries by the end of the year, or supplies will cease from 2015, according to the protocol from Thursday’s talks in Brussels published by the Ukrainian government on Friday.

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It’s the Ukraine that keeps shelling. At least until there’s so much snow and ice no-one can figure out what happened to MH-17. A bitter winter awaits Donetsk and Luhansk.

Ukraine Fighting Flares After Gas Deal as Winter Nears (Bloomberg)

Fighting flared in Ukraine’s easternmost regions hours after the conclusion of a natural gas deal with Russia, highlighting the challenges in reaching peace as the Red Cross warned about winter’s onset. Ukrainian President Petro Poroshenko called on his parliamentary party yesterday to support Arseniy Yatsenyuk as prime minister, saying the country needs to be united “as never before” following Oct. 26 elections. “Despite the cease-fire in eastern Ukraine, acts of indiscriminate shelling and security incidents continue to put civilians at risk,” the International Committee of the Red Cross said in a statement. “The approaching winter makes the situation of both residents and displaced people even more difficult.” While the pact brokered by the European Union on Oct. 30 is designed to keep homes warm through the winter, rebels still hold large chunks of Ukraine’s east and are planning a controversial election tomorrow. Crimea remains under Russian control and the Kremlin, bristling at an EU accord Ukraine signed, is testing NATO with daily airspace violations.

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