Apr 202017
 
 April 20, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , ,  5 Responses »
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Fra Filippo Lippi 1406-1469 The Virgin Mary

 

The IMF Says Austerity Is Over (Tel.)
Reflation Trades of 2016 Deflate With Remarkable Speed (R.)
IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)
Securities-Based Loans Are Scaring Fiscal Experts (NYP)
Telling the Truth: (P + G) – M = I (MarkGB)
You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)
Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)
The EU’s Collapse Is Now “Imminent” (Doug Casey)
Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)
40% of Spanish Children Live in Poverty (EurA)
Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)
Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)
So It Goes (Oliver Stone)
A Melting Arctic Changes Everything (BBG)

 

 

Yeah, sure, just come look in Greece. Where the IMF itself demands ever more austerity. While claiming austerity is over.

The IMF Says Austerity Is Over (Tel.)

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor. “Their aggregate fiscal stance is expected to remain broadly neutral in 2017 as well as in the following years.” The British Government is still trying to reduce the deficit but at a slower pace, as Philip Hammond, the Chancellor, wanted to ease spending cuts following the vote for Brexit last year.

Although extra spending may be welcomed by those who want funds for specific projects or public services, the IMF is worried that governments are still heavily indebted and need to be careful with their budgets. The US government, for instance, should use the current economic growth spurt as a chance to get its finances under control. “In the United States, where the economy is close to full employment, fiscal consolidation could start next year to put debt firmly on a downward path,” the IMF said. That contrasts heavily with President Donald Trump’s plans to spend more on infrastructure and defence while cutting taxes, a combination that risks ramping up the budget deficit. “These policies are expected to generate rising deficits over the medium term.

As a result, the US debt ratio is projected to increase continuously over the five-year forecast horizon,” the IMF warned. Overall the IMF believes government debts “should stabilise in the medium term, averaging more than 100pc of GDP, rather than decline as previously expected.” With debts that high, governments have to walk a fine line to use fiscal policy to support sustainable economic growth, but avoid dangerous over-indebtedness. “Fiscal policy is generally seen as a powerful tool for promoting inclusive growth and can contribute to stabilising the economy, particularly during deep recessions and when monetary policy has become less effective,” said the IMF.

Read more …

How can anyone get this right if they can’t even properly define inflation?

Reflation Trades of 2016 Deflate With Remarkable Speed (R.)

Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading. Fast. The question for investors is whether this is the play book for the rest of the year, or whether the trends of 2016 will resume in the second half of the year. What is clear is that much of the conviction with which investors went into 2017 has been lost. This week, Goldman Sachs ditched its long-standing bullish call on the U.S. dollar, and Deutsche Bank did likewise with their gloomy sterling outlook. Following the developed world’s two most seismic events last year – the U.S. presidential election and Brexit – investors around the world had positioned for a broad-based reflation trade.

Trump’s surprise election victory was supposed to unleash a wave of tax cuts, banking deregulation and fiscal largesse that would lift U.S. – and global – growth. Meanwhile, sterling’s 20% plunge after the Brexit vote was supposed to pave the way for a surge in UK equities and inflation. This, indeed, is how it played out as 2017 got underway. The Federal Reserve raised interest rates twice, the dollar reached a 14-year peak, Wall Street hit record highs, and government bond yield curves around the world steepened to the benefit of banks and financial stocks. But it is now unraveling, in large part due to a clear slowdown in U.S. growth and signs that global inflation is leveling off. Flatter yield curves where short- and long-term bond yields are close to each other suggest economic uncertainty.

[..] Citi’s economic surprises indexes for most of the world’s major economies have been heading south for the past month. The U.S. index has suddenly tumbled to lows not seen since November, and is below all its peers apart from Japan’s. And inflation expectations are showing signs of peaking too. The dollar is now down 2.5% year-to-date (but still up 2% since the U.S. election; U.S. bank stocks are down 10% from their February peak (but still up 20% from the election); and sterling is down 13% against the dollar since the Brexit vote last June (but it has been down as much as 20%). Estimates of first quarter U.S. growth have been slashed in recent weeks, with the Atlanta Fed’s closely-watched GDPNow model pointing to just 0.5% compared with around 2.5% less than two months ago.

Read more …

All it takes is a few rate hikes.

IMF Warns High US Corporate Leverage Could Threaten Financial Stability (WSJ)

U.S. corporate debt has ballooned on cheap credit to levels exceeding those prevailing just before the 2008 financial crisis, a potential threat to financial stability, the IMF warned in its latest review of the top threats to markets and banks. High corporate leverage could become problematic as the Federal Reserve raises short-term interest rates, the IMF warned, since higher borrowing costs could hinder the ability of firms to service debts. While borrowing costs remain low, debt servicing as a proportion of income has risen to its highest level since 2010, raising questions over firms’ ability to service their debts, according to the IMF’s study of nearly 4,000 U.S. firms accounting for about half of the economywide corporate sector balance sheet.

Companies have added $7.8 trillion of debt and other liabilities since 2010, while issuing $3 trillion of equity, net of buybacks, according to the IMF. The IMF’s message stands in contrast to the one being sent by the corporate bond market, which has been rallying for more than a year now. In early March, the average spread between junk-rated corporate bond yields and U.S. Treasury yields reached 3.44 percentage points, its lowest point since July 2014, according to Bloomberg Barclays data. It was most recently at 3.92 percentage points, still a very low level by historical standards, indicating that investors don’t see the debt as very risky.

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So you buy mortgage backed securities, and then use them as collateral for a loan that lets you buy more securities. The serpent and the tail.

Securities-Based Loans Are Scaring Fiscal Experts (NYP)

Forget subprime mortgages – one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets. Financial insiders are getting increasingly worried over the popularity of securities-based loans, or SBLs – a risky form of debt marketed to wealthy investors who typically use it to buy big assets like houses. The loans, which are taken against pools of stocks and bonds, offer borrowers cheap money fast without having to sell their underlying securities – an attractive option when the Dow is rising. But if markets crash, brokers can unload their clients’ holdings at fire-sale prices – and go after the house to cover the the vig. Fears of such ugly scenarios are growing as the Fed hikes interest rates, stocks are hitting all-time highs, and high-net-worth individuals are using this form of “shadow margin” to borrow more against stocks and bonds in their portfolios than ever before.

It’s not clear how much debt has been taken out in the form of SBLs, and a lack of regulatory oversight is partly to blame. Finra, the brokerage regulator, doesn’t track it, nor does the Securities and Exchange Commission — even though both have warned investors about the risks. However, several advisers surveyed by The Post estimated there is between $100 billion and $250 billion in outstanding SBLs among all brokerages. At least one concerned financial executive is in talks with lawyers to file a whistleblower case over the issue against a major bank with the Securities and Exchange Commission, The Post has learned. “When the market does turn, and it will at some point, it will be a major disaster,” said the exec, who requested confidentiality in exchange for speaking on the issue with The Post.

Read more …

Here’s what I think will lead to UBI: poor old people. I skipped all the examples and links provided here. Do read them. “Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency.”

Telling the truth: (P + G) – M = I (MarkGB)

Telling the truth has never been popular with politicians. They believe that it would prevent them from getting elected. Making new promises that will never be kept, and covering up the unaffordability of old promises…is how politicians get elected. The pattern is well worn and predictable: they use promises to ‘bribe’ people to vote for them, then they fail to deliver, then they blame someone else, then they change the subject…rinse and repeat…meanwhile the really important stuff get’s brushed under the carpet or kicked down the road…choose your own metaphor. There are few greater examples of this than the approaching crisis in pensions: A tale that has been decades in the telling, the climax will be a calamity that the corporate media doesn’t want to look at, and politicians never mention or acknowledge. Short of being strapped to a metal chair and entertained with an electrical massage they never will…which is a nice thought but regrettably still illegal, at least on the mainland.

[..] Despite the dark pleasure it would give me to label our political and economic elites: ‘as thick as two short planks’…the truth is that many of them are not. It’s far worse than that I’m afraid. They are ‘liars’. The politicians, central bankers, economists and journalists who understand the situation we face, but do nothing to address it, are discrediting the positions of responsibility that they hold…by lying through omission, by obfuscation, through denial, by issuing false and/or misleading information, and via the good old fashioned ‘art’ of bull$hitting straight to camera. Finally, and on a slightly lighter note, for anyone reading this who has been brainwashed with the idea that any theory or observation that can’t be reduced to an equation, is not real ‘economics’…here is an equation for you (but don’t expect your professor to like it):

(P + G) – M = I

Where ‘P’ is pensions, ‘G’ is ‘government intervention’, ‘M’ is media oversight, and ‘I’ is insolvency. Throughout recorded history, this equation has never failed to balance eventually…ask any legionnaire.

Read more …

Another -more palatable?!- way of phrasing UBI.

You’re Hired! A Guaranteed Job For Anyone Who Wants One (DJ)

Democrats have begun the presidency of Donald Trump exiled to the political wilderness. They’ve lost the White House, both houses of Congress, a shocking number of state governments, while the “blue state” vote has turned out to be really just the “blue city” vote. The party has cast about for solutions, battling it out over identity politics, the proper opposition strategy, and more. But Democrats might consider taking a cue from Trump himself. Namely, his relentless promises to bring back good-paying American jobs. “It’s the first and most consistent thing he discusses,” observed Mike Konczal, a fellow at the Roosevelt Institute, after reviewing Trump’s speeches. The President understands, as The New York Times’s Josh Barro noted, that most Americans think the purpose of private business is to provide good jobs, not merely turn a profit.

Even Trump’s xenophobia and white nationalism are not totally separate from this: Kicking out all the immigrants and rolling foreign competitors are critical components of how he would restore jobs. Democrats tend to treat jobs as the happy by-product of other goals like infrastructure revitalization or green energy projects. Or they treat deindustrialization and job dislocation as regrettable inevitabilities, offering training, unemployment insurance, health care, and so on to ameliorate their effects. All these policies are worthy. But a job is not merely a delivery mechanism for income that can be replaced by an alternative source. It’s a fundamental way that people assert their dignity, stake their claim in society, and understand their mutual obligations to one another. There’s pretty clear evidence that losing this social identity matters as much as the loss of financial security.

The damage done by long-term joblessness to mental and physical health is rivaled only by the death of a spouse. It wreaks havoc on marriages, families, mortality rates, alcoholism rates, and more. The 2008 crisis drove long-term unemployment into the stratosphere, and today it remains near a historic high. Trump went right at this problem, telling Michigan in October of 2016: “I am going to bring back your jobs.” Period. Democrats should consider making the same moon shot promise. But unlike Trump, they should back it up with a policy plan. And there’s an idea that could do the trick. It emerges naturally from progressive values. It’s big, bold, and could fit on a bumper sticker. It’s generally called the “job guarantee” or the “employer of last resort.” In a nutshell: Have the federal government guarantee employment, with benefits and a living wage, to every American willing and able to work.

Read more …

More pension troubles. Today Japan, tomorrow your neck of the woods.

Japan’s Middle-Aged ‘Parasite Singles’ Face Uncertain Future (R.)

Their youth long gone, members of Japan’s generation of “parasite singles” face a precarious future, wondering how to survive once the parents many depended on for years pass away. Some 4.5 million Japanese aged between 35 and 54 were living with their parents in 2016, according to a researcher at the Statistical Research and Training Institute on a demographic phenomena that emerged two decades ago, when youthful singles made headlines for mooching off parents to lead carefree lives. Now, without pensions or savings of their own, these middle-aged stay-at-homes threaten to place an extra burden on a social welfare system that is already creaking under pressure from Japan’s aging population and shrinking workforce.

Hiromi Tanaka once sang backup for pop groups, and epitomized the optimism of youth. “I got used to living in an unstable situation and figured somehow it would work out,” Tanaka told Reuters as she sat at the piano in a small parlor of an old house connected to her elderly mother’s next door. Now aged 54, Tanaka relies on income from giving private singing lessons to a dwindling number of students, and her mother’s pension to make ends meet. She has no pension plan of her own, and has used up most of her savings. “My father died last year so pension income was halved,” she said. “If things go on like this, my mother and I will fall together.” Tanaka is one of the growing ranks of “life-time singles,” whose numbers hit a record in 2015, according to data released this month that showed that among 50-year-olds, 1 in 4 men and 1 in 7 women were unmarried.

“During the ‘bubble economy’ until the mid-1990s, the 20-somethings were happily amusing themselves. They thought by the time they were in their 30s, they’d be married,” said Masahiro Yamada, a Chuo University sociologist who coined the term “parasite singles” in 1997. “But one-third never married and are now around age 50,” Yamada said. The trend is not only a factor behind Japan’s low birthrate and shrinking population. It also puts an extra damper on consumption since new household formation is a key driver of private spending. And since about 20% of the middle-aged stay-at-home singles rely on parents for support, they also threaten to weigh on social safety nets. “Once they use up inherited assets and savings, when nothing is left, they will go on the dole,” Yamada said.

Read more …

Casey gets lots of things spectacularly wrong. The EU did need trade pacts etc., to enhance, guarantee quality control. The EU did a lot of good things. But it got taken over by the shit that floats to the top: “The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway.”

The EU’s Collapse Is Now “Imminent” (Doug Casey)

A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whomever they want for their own advantage. But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the EU. They say it is about free trade, but really it’s about somebody’s arbitrary idea of “fair trade,” which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person.

Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with. The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway. The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living. Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.

Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united. You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871. In Italy 89% of the Venetians voted to separate a couple of years ago. The Italian South Tyrol region, where 70% of the people speak German, has a strong independence movement. There are movements in Corsica and a half dozen other departments in France. Even in Belgium, the home of the EU, the chances are excellent that Flanders will separate at some point.

Read more …

Another feature brought to you by the Troika.

Greece Needs To Start Having Babies Again or Face Financial Oblivion (Ind.)

People in Greece can’t afford to have more than one child, and many are opting to have none at all. Fertility doctor Minas Mastrominas tells the New York Times that some women have decided not to conceive, and single-child parents have been asking him to destroy their remaining embryos. He said: “After eight years of economic stagnation, they’re giving up on their dreams.” It isn’t just Greece suffering low birth rates. In fact the trend spreads to most of Europe, with Spain, Portugal and Italy also reporting dangerously low rates. Unemployment continues to be a serious issue in Greece. Rates are slightly lower than in 2016 when they were 23.9%, but are still very high at 23.5%. The slump has affected women more, with unemployment rates at 27% compared to 20% of men.

Child tax breaks and subsidies for large families have decreased, and the country stands at having to lowest budget in the EU for family and child benefits. During the height of the crisis, women postponed childbirth in favour of working. As the years dragged on, the rate of fertility decreased, making it biologically more difficult to conceive. Additionally, gender equality came to a standstill, and many women of ‘childbearing age’ were denied employment, or had their contract changed to part time involuntarily, as soon as they got pregnant. One of the most prominent areas that will be detrimentally affected is pensions and the welfare system. Additionally, according to Eurostat, such low birth rates – under 2.1 – could create a demographic disaster. This will have a knock-on effect on pensions, with fewer young people working.

Read more …

And the children we do have, we treat like this. No wonder there are fewer of them.

40% of Spanish Children Live in Poverty (EurA)

Spain has the EU’s third highest rate of child poverty, after Romania and Greece. EURACTIV Spain reports. After the economic crisis and years of austerity, child poverty is on the rise in wealthy countries, according to Unicef. In Spain, the proportion of children living below the poverty line increased by 9 percentage points between 2008 and 2014, to reach almost 40%. While child poverty in general rose significantly, the sharpest increase (56%) was among households of four people (two adults and two children) living on less than €700 per month, or €8,400 per year. Spain has the third widest gap in the EU, behind Latvia and Cyprus, between the levels of social protection offered to children and people over 65. During the crisis, Spain’s oldest citizens were much better protected than its youngest.

According to the Spanish Statistical Office, cited by Unicef, investment in the social protection of families fell by €11.5 billion between 2009 and 2015. Unicef also highlighted that families with children, large families, single-parent families and teenagers suffered the most from the effects of poverty. As for Madrid’s response to the crisis, the UN’s agency for children criticised its failure to contain child poverty. “Social protection policies are very fragmented and very unequal, with little focus on children,” Unicef said. For the organisation, this is due, among other causes, to the strong link between social security and workers’ contributions, and the fact that many of the state’s family aid programmes take the form of tax credits, which have little impact on low earners.

Read more …

They’ll get it awfully wrong. It’s too late in the game.

Ontario Set to Unveil Its Plan to Cool Toronto Housing (BBG)

Ontario is expected to impose a tax on “non-resident speculators” when it announces new measures Thursday to cool the red-hot housing market in Toronto, according to people familiar with the plans. The measures are intended to improve housing affordability, and address both supply and demand, the people said, speaking on condition of anonymity because the plans are not yet public. The measures are also said to include a new tax aimed at curbing purchases from non-resident speculators. [..] Home prices in the Toronto area climbed 6.2% last month, the biggest one-month gain on record, according to a benchmark price index by the Canadian Real Estate Association, and are up almost 30% in the past 12 months. Bank of Canada Governor Stephen Poloz said last week the price gains are “divorced” from the typical measures of demand, such as income growth and demographics, and said they are unsustainable.

“The focus has to be on runaway prices, more so than affordability per se,” Robert Hogue, a senior economist at Royal Bank of Canada, said in a phone interview. “The risk now is about expectations in the market, or market psychology, as you have both sellers and buyers expecting much higher prices.” The Toronto Star reported earlier, without saying where it got the information, that Sousa will announce some 10 measures ranging from rent controls to a new tax on speculators. The move comes a week before the province tables its budget on April 27, and two days after Sousa said the government recognizes that “now” is the time to address runaway home prices. Sousa on Tuesday met Canadian Finance Minister Bill Morneau and Toronto Mayor John Tory, who said that possible steps include taxing homes left empty for speculative purposes. Rent increases on newer buildings may be limited to about 1.5% above the inflation rate, which was at 2% in February, the Star reported.

Read more …

Daddy, please tell the story again of why we have regulators!

Feds Knew of 700 Wells Fargo Whistleblower Cases in 2010 (CNN)

America’s chief federal banking regulator admits it failed to act on numerous “red flags” at Wells Fargo that could have stopped the fake account scandal years earlier. One particularly alarming red flag that went unheeded: In January 2010, the regulator was aware of “700 cases of whistleblower complaints” about Wells Fargo’s sales tactics. An internal review published on Wednesday by the Office of the Comptroller of the Currency found that the regulator didn’t live up to its responsibilities. The report found that oversight of Wells Fargo was “untimely and ineffective” and federal examiners overseeing the bank “missed” several opportunities to uncover the problems that led to the creation of millions of fake accounts. The review painted a damning picture of the OCC’s ability to spot what in retrospect should have been obvious problems at one of the nation’s biggest banks.

The OCC did confront Carrie Tolstedt, then head of Wells Fargo’s community bank, about the stunning number of whistleblower claims. However, there are no records that show that federal inspectors “investigated the root cause,” or force Wells Fargo to probe it. It’s now clear that root cause of Wells Fargo’s problems – both the creation of fake accounts and the related 5,300 firings – was the notoriously aggressive sales goals targets set by senior management. At one point, rank and file bankers were asked to open as many as eight accounts per customer. That’s why the bank has eliminated them. From top management to Wells Fargo’s board of directors, everyone turned a blind eye to these issues. There’s evidence now that some of this was flagged as early as 2004 to management.

Read more …

Stone states the obvious.

So It Goes (Oliver Stone)

I confess I really had hopes for some conscience from Trump about America’s wars, but I was wrong – fooled again! – as I had been by the early Reagan, and less so by Bush 43. Reagan found his mantra with the “evil empire” rhetoric against Russia, which almost kicked off a nuclear war in 1983 – and Bush found his ‘us against the world’ crusade at 9/11, in which of course we’re still mired. It seems that Trump really has no ‘there’ there, far less a conscience, as he’s taken off the handcuffs on our war machine and turned it over to his glorified Generals – and he’s being praised for it by our ‘liberal’ media who continue to play at war so recklessly. What a tortured bind we’re in. There are intelligent people in Washington/New York, but they’ve lost their minds as they’ve been stampeded into a Syrian-Russian groupthink, a consensus without asking – ‘Who benefits from this latest gas attack?’

Certainly neither Assad nor Putin. The only benefits go to the terrorists who initiated the action to stave off their military defeat. It was a desperate gamble, but it worked because the Western media immediately got behind it with crude propagandizing about murdered babies, etc. No real investigation or time for a UN chemical unit to establish what happened, much less find a motive. Why would Assad do something so stupid when he’s clearly winning the civil war? No, I believe America has decided somewhere, in the crises of the Trump administration, that we will get into this war at any cost, under any circumstances – to, once again, change the secular regime in Syria, which has been, from the Bush era on, one of the top goals – next to Iran – of the neoconservatives. At the very least, we will cut out a chunk of northeastern Syria and call it a State.

Abetted by the Clintonites, they’ve done a wonderful job throwing America into chaos with probes into Russia’s alleged hacking of our election and Trump being their proxy candidate (now clearly disproved by his bombing attack) – and sadly, worst of all in some ways, admitting no memory of the same false flag incident in 2013, for which again Assad was blamed (see Seymour Hersh’s fascinating deconstruction of this US propaganda, ‘London Review of Books’ December 19, 2013, “Whose sarin?”). No memory, no history, no rules – or rather ‘American rules.’ No, this isn’t an accident or a one-off affair. This is the State deliberately misinforming the public through its corporate media and leads us to believe, as Mike Whitney points out in his brilliant analyses, “Will Washington Risk WW3” and “Syria: Where the Rubber Meets the Road,” that something far more sinister waits in the background.

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BBG can’t even run a story on climate anymore without adding “..the emerging risk of an emboldened and growing Russian empire..”, and more of such useful hints.

A Melting Arctic Changes Everything (BBG)

The story of the Arctic begins with temperature but it’s so much more—this is a tale about oil and economics, about humanity and science, about politics and borders and the emerging risk of an emboldened and growing Russian empire. The world as a whole has warmed about 0.9 degrees Celsius (1.7 degrees Fahrenheit) since 1880. Arctic temperatures have risen twice that amount during the same time period. The most recent year analyzed, October 2015 to September 2016, was 3.5C warmer than the early 1900s, according to the 2016 Arctic Report Card. Northern Canada, Svalbard, Norway and Russia’s Kara Sea reached an astounding 14C (25F) higher than normal last fall. Scientists refer to these dramatic physical changes as “Arctic amplification,” or positive feedback loops. It’s a little bit like compound interest.

A small change snowballs, and Arctic conditions become much less Arctic, much more quickly. “After studying the Arctic and its climate for three-and-a-half decades,” Mark Serreze, director of the National Snow and Ice Data center, wrote recently. “I have concluded that what has happened over the last year goes beyond even the extreme.” The heat is making quick work of its natural prey: ice. Scientists track the number of “freezing-degree days,” a running seasonal tally of the amount of time it’s been cold enough for water to freeze. The 2016-2017 winter season has seen a dramatic shortfall in coldness—more than 20% below the average, a record. Sea ice has diminished much faster than scientists and climate models anticipated. Last month set a new low for March, out-melting 2015 by 23,000 square miles.

Compared with the 1981-2010 baseline, the average September sea-ice minimum has been dropping by more than 13% per decade. A recent study in Nature Climate Change estimated that from 30-50% of sea ice loss is due to climate variability, while the rest occurs because of human activity. Receding ice decreases the Earth’s overall reflectivity, making the Arctic darker and therefore absorbing even more heat. The ice is not all the same age or thickness, although it has become somewhat more uniform. In 1985, about 45% of Arctic sea ice was made up of older and thicker multi-year ice. By 2016, that number shrank to 22%.

Read more …

Jan 312016
 
 January 31, 2016  Posted by at 10:07 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Edwin Rosskam Shoeshine, 47th Street, Chicago’s main Negro business street 1941

A Chinese Banker Explains Why There Is No Way Out (ZH)
China GDP Growth 4.3%, Or Lower, Chinese Professor Says (WSJ)
Yuan Vs. Yen: How China Figures Into Japan’s Negative Rates (WSJ)
IPO Market Comes to a Standstill (WSJ)
Greece’s Lenders To Start Bailout Review On Monday (Reuters)
Milk Collapse Brings a 45% Pay Cut to England’s Dairy Farmers (BBG)
‘Peak Stuff’ And The Search For Happiness (Guardian)
Merkel Says Refugees Must Return Home Once War Is Over (Reuters)
10,000 Refugee Children Are Missing, Says Europol (Observer)
Aegean Sea Refugee Crossings Rise 35 Fold Year-On-Year In January (Guardian)
Greeks Worry Threatened Closure Of EU Border ‘Definition Of Dystopia’ (Guar.)
Europe’s Immigration Bind: Morals vs Votes (Guardian)
39 Greece-Bound Refugees Drown Off Turkish Coast (AP)

“It’s not difficult to issue more loans, but let’s say in a years time when the loan is due, if the borrower defaults, then I won’t just see a pay cut, I’ll be fired, and still be responsible for loan recovery.”

A Chinese Banker Explains Why There Is No Way Out (ZH)

Friday’s adoption of NIRP by Japan, which send the US Dollar soaring, has only made any upcoming future Chinese devaluation even more likely. But whether China devalued or not, one thing is certain: it is next to impossible for China – under the current socio economic and financial regime – to stop the relentless growth in NPLs, which even by conservative estimates at in the trillion(s), accounting for at least 10% of China’s GDP. Sure enough, a cursory skimming of news from China reveals that even Chinese bankers now “admit the NPL situation is dire, but will keep on lending” anyway. As the Chiecon blog notes, NPL “ratios might be closer to 10%… supported by revelations in this article, where Chinese bankers complain of missing performance targets, spiraling bad loans, and end of year pay cuts.”

“Right now, we’ve nowhere to issue new loans” said Mr. Zhang, a general manager in charge of new loans at one of the listed commercial bank branches. Zhang believes NPL ratios have yet to peak, with SME loans the worst hit area. Ironically this has forced Zhang to direct lending back to the LGFVs, property developers and conglomerates, industries which the Chinese government had previously instructed banks to restrict lending to, based on oversupply and credit risk fears.

But the main reason why China is now trapped, and on one hand is desperate to stabilize its economy and stop growing its levereage at nosebleed levels, while on the other hand it is under pressure to issue more loans while at the same time it is unwilling to write off bad loans, can be found in the following very simple explanation offered by Mr. Zhou, a junior banker at a Chinese commercial bank.

“If I don’t issue more loans, then my salary isn’t enough to repay the mortgage, and car loan. It’s not difficult to issue more loans, but let’s say in a years time when the loan is due, if the borrower defaults, then I won’t just see a pay cut, I’ll be fired, and still be responsible for loan recovery.”

And that, in under 60 words, explains why China finds itself in a no way out situation, and why despite all its recurring posturing, all its promises for reform, all its bluster for deleveraging, China’s ruling elite will never be able to achieve an internal devaluation, and why despite its recurring threats to crush, gut and destroy all the evil Yuan shorts, ultimately it will have no choice but to pursue an external devaluation of its economy by way of devaluing its currency presumably some time before its foreign reserves run out (which at a $185 billion a month burn rate may not last for even one year). However, before it does, it will make sure that it also crushes every Yuan short, doing precisely what the Fed has done with equity shorts in the US over the past 7 years.

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While still ‘assuming the official agriculture and service sector growth figures are correct’.

China GDP Growth 4.3%, Or Lower, Chinese Professor Says (WSJ)

As growth in the world’s second-largest economy slows, the spotlight has intensified over the accuracy of China’s growth figures. This week, Xu Dianqing, an economics professor at Beijing Normal University and the University of Western Ontario, joined the debate with an estimate that China’s GDP growth rate might just be between 4.3% and 5.2%. China’s official growth rate in 2015 was 6.9%, the slowest pace in more than two decades, allowing the government to hit its target of around 7%. But longstanding questions over China’s statistical methodology have spurred a cottage industry in alternate growth indicators. Many of these analyze other measures believed to be less subject to political pressure in estimating actual growth, including indices compiled by economists at Capital Economics, Barclays Bank, the Conference Board and Oxford Economics.

Most peg China’s annual growth in the 4% to 6% range. Mr. Xu told reporters at a briefing this week that the focus of his concern is the growth rate for China’s manufacturing sector, which according to official figures grew 6.0% last year and accounts for 40.5% of the economy. A closer look at underlying indicators, however, including thermal power generation, railway freight volume, and output from the iron ore, plate glass, cement and steel industries released monthly by the National Bureau of Statistics paint a different picture, he said. Of some 60 major industrial products, nearly half saw output contract in the January to November period, while railway cargo volume fell 11.9% for all of last year, according to official sources.

Given weaker industrial output in China and more than three years of industrial deflation, a 6% expansion for manufacturing in 2015 is questionable “no matter how the number is counted,” said Mr. Xu, who added that he believes it’s more probable that industry and construction grew at most by 2% last year and perhaps not at all. That translates into economic growth that tops out at 5.2% last year and perhaps something in the 4s, assuming the official agriculture and service sector growth figures are correct, he said. Mr. Xu said it’s unlikely that the service sector– sometimes cited as an explanation for growth rate discrepancies – did better than reported by authorities.

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Twins.

Yuan Vs. Yen: How China Figures Into Japan’s Negative Rates (WSJ)

Japan’s move to negative interest rates is the latest step in a dangerous dance between the world’s second and third largest economies. The problem is currencies. China’s moves to bring down the value of the yuan have rattled markets this year, sparking a flight from risky assets that has sent investors into safer havens like the yen. The stronger yen in turn has threatened to tip Japan’s economy back into deflation, which the central bank has struggled to vanquish. The rising yen has also put more pressure on corporate profits and helped push Japanese stocks into bear market territory last week. So when the Bank of Japan announced its plan to lower interest rates below zero for the first time Friday, it makes sense that Governor Haruhiko Kuroda named just one country among the risks facing its economy China.

Now it’s China s turn to sweat. The yen fell as much as 2.1% after the announcement, which will make Chinese exports more expensive relative to Japanese products. The two countries, and most of their neighbors, are struggling against a tide of money outflows and weak trade. While governments in the rest of Asia have far more room to stimulate their economies than Japan does, a decline in the yen could spur them to try to push down their own currencies. Were China to follow and the central bank has already allowed the yuan to fall it would ignite another round of fear, which could push up the yen and force the Bank of Japan to act again. So far, the yen’s ups and downs have left it about where it was a year ago, so the risk of a cycle of competitive devaluation is limited.

In addition, the drop in the yen would have been a bigger problem for China when the yuan was pegged to the dollar. The government’s recent switch to a basket of currencies that includes the yen means the move up won’t be as big. But it still will push the currency in the wrong direction for the slowing economy. There’s another reason China does’ t want the yen to fall. Right now, thousands of Chinese are planning their Lunar New Year’s holidays in Japan early next month, hoping to take advantage of the cheap yen. During the October Golden Week, China’s other big travel week of the year, Chinese tourists descended on Japan, spending more than $830 million on shopping, according to the state-run China Daily.

China is suffering an epic capital flight in which hundreds of billions of dollars are leaving the country. A weaker yen will send more Chinese into Tokyo’s department stores and further drain China’s currency reserves. The economic fates of China and Japan are closely connected. Until their economies get on stronger footing, moves to boost growth in one country could hurt the other and risk retaliation. As the world economy stays weak, the interaction between China and Japan could play an increasingly important role both in Asia and globally.

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Zero.

IPO Market Comes to a Standstill (WSJ)

A frigid January for initial public offerings is pointing to a hard winter for fledgling biotechnology firms and other private companies. There were no U.S. IPOs in January, the first such month since the eurozone crisis in September 2011, according to data provider Dealogic. Investors and analysts attribute the dearth to the global stock-market rout of the first two weeks of the year, which signaled a broad retreat from risk by investors. If sustained, the reversal threatens to send ripples through global financial markets. Many analysts and traders view a healthy IPO sector as a necessary precondition for a sustainable advance in the broad stock indexes, as dozens of private companies have built their plans around raising cash in the public markets.

In recent years, markets were “wide open and companies that wanted to raise capital could,” said Eddie Yoon, portfolio manager of the Fidelity Select Health Care Portfolio, with $9 billion in assets. But now some companies, both public and private, could face being shut out for an extended period, as many investors seek to reduce risk by focusing on firms with histories of steady profitability and revenue growth. Several new share offerings by already-public biotech companies have floundered this year, not only pricing at steep discounts, but also falling even further the session after pricing. So far this year, new-share offerings by biotech companies have dropped 15% from the time of the announcement of the deal to the end of trading after the sale, according to data from Dealogic. “If the market does reopen, it will be for higher quality companies,” said Mr. Yoon.

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France wants debt relief?!

Greece’s Lenders To Start Bailout Review On Monday (Reuters)

Greece’s official lenders will start a review on Monday of what progress the country has made in implementing the economic reforms agreed under its third bailout, a necessary step towards debt relief talks, a finance ministry official said on Saturday. Greece’s international lenders are the IMF and the euro zone bailout fund. The reforms that Greece has to implement in exchange for loans are also reviewed by the ECB and the European Commission. “The first phase will last a few days as there will be a break at the end of next week, after which the institutions will return to conclude the negotiations,” the official said, declining to be named. Athens is keen for a speedy completion of the review, which was expected to begin late last year, and hopes a positive outcome will help boost economic confidence and liquidity.

To secure a positive result from the review Athens needs to pass legislation on pension reforms to render its social security system viable, set up a new privatization fund and come up with measures to attain primary budget surpluses for 2016-2018. A successful conclusion of the performance review will open the way for debt relief talks. The head of the bailout fund, the European Stability Mechanism (ESM), has ruled out a haircut for Greece’s debt but extending debt maturities and deferring interest are options that could be used to make it more manageable. French Finance Minister Michel Sapin told Kathimerini debt relief talks must start soon to help restore Greece’s financial stability. “France’s view is that the sooner the first review is completed, the faster we will be able to tackle the issue of debt sustainability and this will be better for everyone – for Greece as well as the entire euro zone,” Sapin told the paper.

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Stories from NZ have been bad for a while now.

Milk Collapse Brings a 45% Pay Cut to England’s Dairy Farmers (BBG)

England’s dairy farmers will see income fall by almost half this year, evidence that the global milk crisis is far from over. Earnings will average 46,500 pounds ($66,500) per farm in England for the 2015-16 season that started in March, the Department for Environment, Food & Rural Affairs said in a report Thursday. That figure, which includes European Union aid payments, is 45 percent below the prior season and the lowest in 9 years. Dairy farmers across Europe are struggling with a collapse in prices after a global oversupply of milk was compounded by slowing demand in China and Russia’s ban on EU dairy in retaliation for sanctions.

Protests over low prices broke out in France this week as more than 100 farmers, many of them livestock breeders, blocked roads and used tractors and burning tires to stop access to the port city La Rochelle. “There’s too much milk in the world,” said Robbie Turner, head of European markets at Rice Dairy International, a risk management advisory firm in London. “There are people who are hard for cash,” and prices are likely to remain low for at least the next six months, he said. On Thursday, Fonterra, the world’s largest dairy exporter, cut its milk price forecast to a nine-year low. The Auckland-based company doesn’t expect a sharp recovery in Chinese demand any time soon.

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Luckily we’re maxed out.

‘Peak Stuff’ And The Search For Happiness (Guardian)

On Monday, Walmart will start paying a minimum of $10 an hour to its 1.4 million skilled staff in America – in conventional economists’ terms, a ludicrous and unnecessary transfer of income from capital to labour. But, facing the same retail environment as Apple and Ikea, Walmart wants to motivate its frontline staff into being more engaged and innovative. Consumers want some help in understanding and interpreting their particularities, help in answering the question of what, in a profound sense, their spending is for. When you have enough, what need is being served by having more?

Economists are not equipped to address such phenomena. Faltering growth in consumer demand in all western countries is understood wholly in traditional economic terms: the story is that consumers are indebted and uncertain, they lack confidence and want to rebuild their savings. Rightwing, anti-state economists, so influential in the Republican and Conservative parties, peddle tax cuts as the universal panacea. Like Pavlov’s dog, consumers will flock back to the shops once they are emboldened by a tax cut. Obviously, there would be some increase in spending, but far less than there used to be. More fundamental forces are holding back spending .

There is a quest for meaning, aided and abetted by the knowledge and information revolutions, that is not answered by traditionally scale-produced goods and services. Economist Tomas Sedlacek, who has won an international following for his book Economics of Good and Evil, insists that contemporary societies have become slaves to a defunct economistic view of the world. When western societies were poorer, it was reasonable for economics to focus on how to produce more stuff – that was what societies wanted. Now, the question is Aristotelian: how to live a happy life – or “humanomics”, as Sedlacek calls it. Aristotle was clear: happiness results from deploying our human intelligence to act creatively on nature. To inquire and successfully to quest for understanding is the root of happiness.

Yet most people today, says Sedlacek, work in jobs they do not much like, to buy goods they do not much value – the opposite of any idea of the good life, Aristotelian or otherwise. What we want is purpose and a sense of continual self-betterment, which is not served by buying another iPhone, wardrobe or a kitchen. Yet purpose and betterment need a social context: purpose is a shared endeavour and self-betterment is to act on the world better with others. An individualistic society such as our own makes it much harder to find others with whom to make common cause.

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Well, stop the war then.

Merkel Says Refugees Must Return Home Once War Is Over (Reuters)

German Chancellor Angela Merkel tried on Saturday to placate the increasingly vocal critics of her open-door policy for refugees by insisting that most refugees from Syria and Iraq would go home once the conflicts there had ended. Despite appearing increasingly isolated, Merkel has resisted pressure from some conservatives to cap the influx of refugees, or to close Germany’s borders. Support for her conservative bloc has slipped as concerns mount about how Germany will integrate the 1.1 million migrants who arrived last year, while crime and security are also in the spotlight after a wave of assaults on women in Cologne at New Year by men of north African and Arab appearance.

The influx has played into the hands of the right-wing Alternative for Germany (AfD), whose support is now in the double digits, and whose leader was quoted on Saturday saying that migrants entering illegally should, if necessary, be shot. Merkel said it was important to stress that most refugees had only been allowed to stay for a limited period. “We need … to say to people that this is a temporary residential status and we expect that, once there is peace in Syria again, once IS has been defeated in Iraq, that you go back to your home country with the knowledge that you have gained,” she told a regional meeting of her Christian Democratic Union (CDU) in the state of Mecklenburg-Western Pomerania.

Merkel said 70 percent of the refugees who fled to Germany from former Yugoslavia in the 1990s had returned. Horst Seehofer, leader of the Christian Social Union (CSU), the CDU’s Bavarian sister party, has threatened to take the government to court if the flow of asylum seekers is not cut. Merkel urged other European countries to offer more help “because the numbers need to be reduced even further and must not start to rise again, especially in spring”. Fabrice Leggeri, the head of the European Union’s border agency Frontex, said a U.N. estimate that up to a million migrants could try to come to Europe via the eastern Mediterranean and Western Balkans next year was realistic. “It would be a big achievement if we could keep the number … stable,” he told the magazine Der Spiegel.

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Europe doesn’t care for kids.

10,000 Refugee Children Are Missing, Says Europol (Observer)

At least 10,000 unaccompanied child refugees have disappeared after arriving in Europe, according to the EU’s criminal intelligence agency. Many are feared to have fallen into the hands of organised trafficking syndicates. In the first attempt by law enforcement agencies to quantify one of the most worrying aspects of the migrant crisis, Europol’s chief of staff told the Observer that thousands of vulnerable minors had vanished after registering with state authorities. Brian Donald said 5,000 children had disappeared in Italy alone, while another 1,000 were unaccounted for in Sweden. He warned that a sophisticated pan-European “criminal infrastructure” was now targeting refugees.

“It’s not unreasonable to say that we’re looking at 10,000-plus children. Not all of them will be criminally exploited; some might have been passed on to family members. We just don’t know where they are, what they’re doing or whom they are with.” The plight of unaccompanied child refugees has emerged as one of the most pressing issues in the migrant crisis. Last week it was announced that Britain would accept more unaccompanied minors from Syria and other conflict zones. According to Save the Children, an estimated 26,000 unaccompanied children entered Europe last year. Europol, which has a 900-strong force of intelligence analysts and police liaison officers, believes 27% of the million arrivals in Europe last year were minors.

“Whether they are registered or not, we’re talking about 270,000 children. Not all of those are unaccompanied, but we also have evidence that a large proportion might be,” said Donald, indicating that the 10,000 figure is likely to be a conservative estimate of the actual number of unaccompanied minors who have disappeared since entering Europe. In October, officials in Trelleborg, southern Sweden, revealed that some 1,000 unaccompanied refugee children who had arrived in the port town over the previous month had gone missing. On Tuesday a separate report, again from Sweden, warned that many unaccompanied refugees vanished and that there was “very little information about what happens after the disappearance”.

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But they think they can stop it.

Aegean Sea Refugee Crossings Rise 35 Fold Year-On-Year In January (Guardian)

More than 52,000 refugees and migrants crossed the eastern Mediterranean to reach Europe in the first four weeks of January, more than 35 times as many as attempted the crossing in the same period last year. The daily average number of people making the crossing is nearly equivalent to the total number for the whole month of January as recently as two years ago, according to the International Organisation for Migration. More than 250 people have died attempting to make the crossing this month, including at least 39 who drowned in the Aegean Sea on Saturday morning after their boat capsized between Turkey and Greece. Turkish coastguards rescued 75 others from the sea near the resort of Ayvacik on Saturday, according to the Anadolou news agency.

They had been trying to reach the Greek island of Lesbos. The eastern route into Europe, via Greece, has overtaken the previously popular central Mediterranean route from north Africa over the past year. Refugees have continued to use the route all winter, despite rough seas and strong winds. “An estimated 52,055 migrants and refugees have arrived in the Greek islands since the beginning of the year,” the IOM said. “This is close to the total recorded in the relatively safe month of July 2015, when warm weather and calm seas allowed 54,899 to make the journey.” Turkey, which is hosting at least 2.5 million refugees from the civil war in neighbouring Syria, has become the main launchpad for migrants fleeing war, persecution and poverty.

Ankara struck a deal with the EU in November to halt the flow of refugees, in return for €3bn (£2.3bn) in financial assistance to help improve the refugees’ conditions. This week the IOM reported that a survey of migrants and refugees arriving in Greece showed 90% were from Syria, Iraq or Afghanistan. People of those nationalities are allowed to leave Greece and enter Macedonia en route to western Europe as asylum seekers. But on Wednesday the Idomeni border crossing from Greece to Macedonia remained closed from midday to midnight. Macedonian officials blamed congestion at the border with Serbia.

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“Why is Greece guilty? Because it doesn’t let them drown?”

Greeks Worry Threatened Closure Of EU Border ‘Definition Of Dystopia’ (Guar.)

With Brussels contemplating drastic measures to stem the flow, calls are mounting to seal the Greek-Macedonian border, raising fears of hundreds of thousands being stranded in Greece, the country now perceived to be the continent’s weakest link. The prospect of migrants being trapped in a member state that financially is also Europe’s most fragile may once have seemed extreme, even absurd. Its economy ravaged by six years of internationally mandated austerity and record levels of unemployment, Greece’s coping strategies are markedly strained. But as EU policymakers seek ever more desperate ways to deal with what has become the largest mass movement of people since the second world war, it is an action plan being actively worked on by mandarins at the highest level.

Like so much else in the great existential crisis facing Europe, a proposed policy that was once seen as bizarre now looks like it could become real. Last week Athens was also given a three-month ultimatum to improve the way it processes arrivals and polices its borders – at nearly 8,700 miles the longest in Europe – or face suspension from the passport-free Schengen zone. Closure of the Greek-Macedonian frontier would effectively cut it out of that fraternity. Those who have watched Greece’s rollercoaster struggle to keep insolvency at bay are united in their conviction that the move would be catastrophic. “It would place a timebomb under the foundations of Greece,” says Aliki Mouriki at the National Centre of Social Research. “Hundreds of thousands of refugees trapped in a country that is bankrupt, that has serious administrative and organisational weaknesses, with a state that is unable to provide for their basic needs?”

The question hangs in the air while she searches for the right word. “What we would witness,” she adds, “would be the definition of dystopia.” Like the mayors who have been forced to deal with the emergency on Greece’s eastern Aegean isles, federal politicians believe Turkey is the root of the problem. “With all due respect for a country that is hosting 2 million refugees, it is Turkey that must do something to stop the organised crime, the smugglers working along its coast,” Yannis Mouzalas, the minister for migration policy, told the Observer. “These flows are not Greece’s fault even if, it is true, we have been slow to set up hotspots and screening was not always what it should have been,” he said. “It is Turkey that turns a blind eye to them coming here. It is Turkey that must stop them. Why is Greece guilty? Because it doesn’t let them drown?”

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Morals? Europe?

Europe’s Immigration Bind: Morals vs Votes (Guardian)

The dream of free movement within the EU has also spawned paranoia about the movement of people into the EU. The quid pro quo for Schengen has been the creation of a Fortress Europe, a citadel against immigration, watched over by a hi-tech surveillance system of satellites and drones and protected by fences and warships. When a journalist from Germany’s Der Spiegel magazine visited the control room of Frontex, the EU’s border agency, he observed that the language used was that of “defending Europe against an enemy”. Many of the policies enacted over the past year give a sense of a continent at war. In June, an emergency EU meeting came up with a 10-point plan that included the use of military force “to capture and destroy” the boats used to smuggle migrants.

Soon afterwards, Hungary and other east European countries began erecting razor-wire fences. Germany, Austria, France, Sweden and Denmark suspended Schengen rules and reintroduced border controls. In November, the EU struck a deal with Turkey, promising it up to $3.3bn in return for clamping down on its borders. This month, Denmark passed a law allowing it to seize valuables from asylum seekers to pay for their upkeep. Despite the sense that the crisis is unprecedented, there is nothing new in it or the incoherence of the EU’s response. People have been trying to enter the EU, and dying in the attempt, for a quarter of a century and more.

Until 1991, Spain had an open border with North Africa. Migrant workers would come to Spain for seasonal work and then return home. In 1986, the newly democratic Spain joined the EU. As part of its obligations as a EU member, it had to close its North African borders. Four years after it did, it was admitted into the Schengen group. The closing of the borders did not stop migrant workers trying to enter Spain. Instead, they took to small boats to cross the Mediterranean. On 19 May 1991, the first bodies of clandestine migrants were washed ashore. Since then, it is estimated that more than 20,000 people have perished in the Mediterranean while trying to enter Europe.

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Every day.

39 Greece-Bound Refugees Drown Off Turkish Coast (AP)

Turkey’s state-run news agency says at least 39 people, including five children, have drowned in the Aegean Sea after their Greece-bound boat capsized off the Turkish coast. Anadolu Agency says coast guards rescued 75 others from the sea Saturday near the resort of Ayvacik en route to the Greek island of Lesbos. The agency has identified the survivors as natives of Afghanistan, Syria and Myanmar. The International Organization for Migration says 218 people have died this year while trying to cross by sea from Turkey to Greece. Turkey is hosting an estimated 2.5 million refugees from Syria. In November, Turkey agreed to fight smuggling networks and stem the flow of migrants into Europe. In return, the EU has pledged €3 billion to help improve the refugees’ conditions.

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Nov 022014
 
 November 2, 2014  Posted by at 9:34 pm Finance Tagged with: , , , , ,  14 Responses »
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John Vachon Boy on porch of general store, Roseland, Virginia April 1938

I often find myself wondering what people, people in the street, western people in general, my readers perhaps, think when they see something like the recent Unicef report, Children of Recession: the Impact of the Economic Crisis on Child Wellbeing in Rich Countries, which states that child poverty in developed nations has risen significantly.

How many of you who live in Europe still see the EU as something good and beneficial when you see that not only does Greece today has 25% unemployment and 55% youth unemployment, and its child poverty rate also went up from 23% to 40.5% since 2008? Or do you put the blame not with the EU, but elsewhere?

It’s not just those numbers, I wonder to what extent you Europeans think the numbers are about yourselves, to what extent you feel responsible, what they do about it. Same for Americans, who live in a country where 1 in 3 children grow up in poverty. How much of that do you think has to do with you? What would you say you can or cannot do to make those numbers better, and what do you actually try to do?

Do you even think less child poverty is better for society, and for yourself, or that less unemployment is a good thing, or do you see that as perhaps for instance the proper way to generate growth in an economy, Darwin-style? Lots of people seem to think that way, so at least you wouldn’t have to feel alone.

Obviously, the UnIcef report should be linked to recent reports that state the number of billionaires in the world has doubled in the same time slot, the past 5-6 years. One can’t very well argue that these things have nothing to do with each other. What the two combined say is that our societies are changing in very fundamental ways.

And at some point you need to ask yourself what you think about that. And if you find this a negative development, what you can do to correct it, as well as what you are in practice doing, today. If there’s too large a discrepancy somewhere in that picture the next question is obvious: why don’t you do more?

Are you comfortable getting up in the morning, go to your job, come home and watch TV, go to sleep and rinse and repeat? Are you not doing something, or not doing more, because you’re afraid if you do your own private daily rinse and repeat routine will be disturbed?

It’s an interesting issue, to which extent we share responsibility for those around us, and for the societies we share with them. We need to realize that if and when we allow large, and growing, numbers of people around us to be desperate, the societies we cherish will of necessity change. When we allow more children to grow up in poverty, our societies will change for many years to come.

There’s no inbuilt mechanism that will revert them to a situation that we would prefer; we have to put in energy to make them what we would like them to be. Our rinse and repeat lifestyles put zero energy into improving, even maintaining, and so they deteriorate. Like anything else in the world.

And there’s always that same question: why do we allow for it to happen? Are our little private cocoon lives really so important to us that we willingly allow the world outside of them to go to hell in a handbasket? Do we just not care? Or do we maybe trust a bunch of people we vote for every so many years to solve all related problems for us, so we can watch TV?

In most western countries youth unemployment is over 25%, in some it’s much higher. For those young people that do find work, wages and benefits are much lower than for their parents’ generation. Still, these young people have to compete with their parents for the amenities of life, like housing, pensions etc., and they haven’t got a chance. Unless they literally fight. is that what you want?

The EU was supposed to be a union, all for one and one for all. But it hasn’t worked out that way. The richer countries have the edge over the poorer, and within nations the richer boomers squeeze the younger generation, their very own children. While all politicians, in every country and from every faith and creed, promise a return to growth waiting just around the corner that will solve all problems.

Not one even dare suggest that growth may not return, and that even if it does, it’s immoral to sacrifice millions of children’s lives while we wait for it. That in other words, a redivision of our wealth may be needed that enables the young to find a meaningful goal in life, even if the older generations would need to give up part of their lifestyles to achieve that.

The choice we are all making right now is to make our own riches more important than the poverty that is increasingly rampant among our children. It’s hardly a political choice, because our political systems don’t offer a way out. They offer different approaches to achieving – more- riches, but none to anything other than that. A true political choice would venture beyond that narrow frame.

If you vote, you vote for more growth, even if that’s an entirely obsolete thing to do. You do it anyway because it soothes your worries, and it allows you to think you can hold on to what you got. While most people in the west could be just as happy – or unhappy – with a bit less than what they have and spend so much time trying to keep. And while you try to keep holding on to it, it slips through your fingers.

And you tell yourself that child poverty is not really your fault. It happened while you were busy doing other things. Maybe it’s time to change your priorities. Like first make sure the society you live in is alright, that the people around you live good lives, and only after that put energy into increasing your own comfort level even more.

We are the richest people who ever lived, and who ever will. We are tens of millions of medieval kings and queens. What is it that is going so horribly wrong that we need to let our children live without purpose, even without food and shelter? I think it must be a short circuit in our brains.

Most of us could easily give up half our incomes and wealth and be at least just as happy, we could save the planet and do much more that would benefit those around us. But instead we choose to destroy it all, just for some imaginary wealth we don’t even need. And blame it all on someone else. It’s not our kids who are the lost generations, we are. We’re very busy losing everything.

Oct 082014
 
 October 8, 2014  Posted by at 9:44 pm Finance Tagged with: , , ,  19 Responses »
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DPC Launch of the Western Star, Wyandotte, Michigan Oct 3 1903

Would you like to know how bankrupt our societies are? Financially AND morally? Before you say yes, please do acknowledge that you too ar eparty to the bankruptcy. Even if you have means, or you have no debt, or you’re under 25, you’re still letting it happen. And you may have tons of reasons or excuses for that, but you’re still letting it happen.

Our financial and moral bankruptcy shows – arguably – nowhere better than in the way we treat our children. A favorite theme of mine is that any parent you ask will swear to God and cross and hope to die that they love their kids to death, but the facts say otherwise. We only love them as far as the tips of our noses, or as far as the curb. That means you too.

While we swear on our mother’s graves that we love them so much, we leave them with a world that lost half of its wildlife species in 40 years, that can expect to make coastal areas around the globe uninhabitable during their lifetimes, and a world that is so mired in debt just so we can hang on to our dreams of oversized homes and cars and gadgets that all there will be left for them are nightmares.

But I always wanted what was best for them! Yeah, well, you always chose to not pay too much attention, too, and instead elected to work that job you hate and keep up with the Joneses and tell yourself there was nothing you could do about it anyway other than a yearly donation to some socially accepted charity in bed with corporations (you didn’t know? well, did you try to find out?)

You elected leaders that promised to let you keep what you had, and provide more of the same on top. You voted for the people who promised you growth, but you never questioned that promise. You never wondered, sitting in your home, the size of which would only 100 years ago have put aristocracy to shame, what would be the price to pay for your riches.

And you certainly never asked yourself if perhaps it would be your own children who were going to pay that price. Well, ‘Ich hab es nicht gewüsst’ has not been a valid defense since the Nuremberg trials, in case you were going for that.

The fact of the matter is, we can continue our lifestyles, best as we can, because we are able to make our children pay for it. We allow ourselves to continue to kill more species, at home but mostly abroad, because we never get in touch with any of those species anyway. Other than mosquitoes, which we swat. We can drive our 3 cars per family because we only see the ice melt in the Arctic on TV.

And we allow ourselves, and our governments, to get deeper into debt everyday, because we’ve been told that without – ever – more debt we would all die, that debt is the lifeblood of our very existence. We don’t understand what it means that our governments increase their debt levels by trillions every year, and we choose not to find out.

That’s a matter for the next generation; we’re good with our oversized flatscreens and coal powered central heating and all of that stuff. We are better off than the generation of our parents, and isn’t life always supposed to be like that?

Which brings us back to your kids. Because no, life is not supposed to be like that. Not every generation can be better off than the one before. In fact, you are the last one for whom that is true. It’s been a short blip in human history, let alone in the earth’s history, and now it’s over. And you must figure out what you’re going to do, knowing that not doing anything will make your sons and daughters futures even bleaker than they already are.

Europe Sacrifices a Generation With 17-Year Unemployment Impasse

Seventeen years after their first jobs summit European Union leaders are divided on how to create employment and a fifth of young people are still out of work. At a meeting in Milan today Italian Prime Minister Matteo Renzi plans to tout the new labor laws he’s pushing through. French President Francois Hollande will argue for more spending, a proposal German Chancellor Angela Merkel intends to reject. Britain’s prime minister David Cameron isn’t coming.

Their lack of progress may increase the frustration of ECB President Mario Draghi’s calling on the politicians to do their bit now and loosen the continent’s rigid labor markets even if that means facing the ire of protected workers. “An entire generation is being sacrificed in countries such as Spain,” economist Ludovic Subran said. “That has a real impact on productivity in the long run.”

How someone can talk about “a real impact on productivity” in the face of millions of lost and broken lives is completely beyond me. You have to be really dense to do that. And they pay people like that actual salaries.

When EU leaders met in Luxembourg in November 1997, the soon-to-be-born euro zone’s unemployment rate was about 11%. Jean-Claude Juncker, then prime minister of the host country, now president designate of the European Commission, promised a mix of free-market solutions and government plans would mean a “new start” for young people. Today the jobless rate is 11.5%. The Milan summit will focus on youth unemployment, which afflicts 21.6% of people under 25 across Europe, according to Eurostat. Even this number is almost identical to 1997, when it stood at 21.7%.

Average European youth unemployment numbers may not have changed much since 1997, which is bad enough, but plenty numbers did change. The young people of Greece, Spain, Italy and Portugal were not nearly as poorly off 17 years ago as they are today. That’s what the eurozone project has accomplished.

The leaders “need to discuss meaningful job creation,” Subran said. “It’s about avoiding the neither-nor situation of people being out of both work and school. This means providing jobs in the short term and training to improve skills and employability in the long term.” In February 2013, the EU allotted €6 billion ($7.6 billion) for youth-employment initiatives between 2014 and 2020, with the bulk of the spending in the first two years.

The centerpiece of the initiative is a “Youth Guarantee” that anyone under 25 should have either a job, apprenticeship, or training program within four months of leaving formal education or becoming unemployed. The initiative focuses on regions with over 25% youth unemployment, which is the whole of Spain, Greece, and Portugal, all but the north-east of Italy, about half of France, and a few regions of eastern Germany.

Lofty words. But nothing has come of them in many years, and nothing will. Politicians vie for the votes and campaign donations of the parents, not the children. Until the children are the majority block, but by then present day leaders will be gone.

Germany is opposed to discussing new spending until already allotted sums have been spent. Instead, Merkel’s government has stressed liberalization of labor markets as the best path to create jobs. France and Italy argue they are already taking steps to loosen their labor markets and those efforts won’t work without a background of growth.

Italy’s proposed rules, opposed by some lawmakers from Renzi’s Democratic Party, aim at making firing easier while providing a new system of income support for those who lose their job. European employment did improve after 1997, with the unemployment rate bottoming between 2007 and 2008 at 7%, and 15.7% for young people, as a credit bubble boosted growth in Spain and Greece.

It ballooned during the subsequent financial crisis. “I’m worried how the euro zone has detached itself from the rest of the world economy,” French Prime Minister Manuel Valls told business leaders in London Oct. 6. “If there is no strategy to support growth at the eurozone, we will be in even greater trouble.”

The only solutions in the minds of the leadership are reforms (make it easier to get rid of the older people and let the young do their jobs at half the price) and growth. Both of which have failed for all those years, but that’s all folks so they press for more of the same. Who cares about the young until they can unseat you?

The present leadership selects for a future in which they – and theirs – will still be the leadership. It’s only natural. Any victims made along the way there are seen as necessary collateral damage. Reforms and growth. Reforms being break down what generations of workers have built up in rights. Fighting squalid working conditions and miserable low pay. Think about that what you like.

But growth? What if there is no growth? Hey, even the IMF just said growth won’t return to levels of old. And then called for more reforms. But what lives will your children have if growth is gone, and what are you prepared to for them is it is? How are you going to soften the blow for them? How much are you willing to sacrifice for your children lest they be sacrificed by society?

One last thing: it seems obvious that we teach our kids the wrong skills. Or there wouldn’t be so many unemployed or in low-paying jobs. So if we want our kids to get a job, what should change in our education systems? Now, I must be honest with you, I’ve found our education so bad ever since I was even younger than I am now that I up and left.

I simply noticed that it was meant for people happy to be pawns in someone else’s game, and I knew that wasn’t me. Colleges and universities mold people into usable – not even useful – ‘things’, provided there is no independent thinking going on. Because that kills the entire set-up. It’s all been an utter disgrace for decades.

But this is not about me. The question is, what are we going to teach our kids? Well, with our present power structure, it will be a mere extension of what there is today. The overriding idea is that tomorrow will be like today, just with more of the same. That’s all we know, and all we have. And that’s what keeps our leaders happy too: a world in which they feel they can be safely settled into their comfy seats. Progress while sitting still. Don’t think I’m right? THink about it.

So would do you think the consensus would be when it comes to education? I think it would be having our kids be managers, lawyers, programmers, the same things that are ‘in’ today. More of the same, just more. But is that so wise if even the IMF says growth will never be the same it once was? What if things get really bad? What skills will they have that can help them through times like that?

Shouldn’t we perhaps teach our kids basic skills first, just in case? So they can grow and preserve food, build a home, repair machinery, that kind of thing? And only after that deal with the fancier stuff?

We have become utterly dependent on the ‘system’. Is it a good idea for our kids to be too? We lost our basic skills – or at least our parents did – at the exact same time that ‘growth’ became the magic word du jour. The idea was that we didn’t need them anymore, that other people would grow our food and take care of all the other basic necessities for us.

But what if that was just a temporary bubble, and it’s gone now? The data sure point to it. In that case, should we rush to move back our sons and daughters to the skillset our grandparents had?

And just in case you think this is all and only about Europe, this is a great portrait of America:

Jul 042014
 
 July 4, 2014  Posted by at 6:15 pm Finance Tagged with: , ,  11 Responses »
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Harris & Ewing Second look at Crescent Limited train wreck near Kenilworth, DC August 1933

The global financial system owns our societies, banks, politicians, the whole lot. It therefore owns us too, which includes you, and it’s very counterproductive to deny that. It can do what it wants and what it pleases with impunity. It took the finance wizards surprisingly long to figure that out, but they have. This has enabled them to buy everything and everyone they wanted to buy.

Starting about 40 years ago with the demise of the last slice of gold standard, a tidal wave of debt was unleashed upon western societies, and later on China, that has since taken on proportions the label absurd cannot begin to describe. Yet, as with so many things in life, if and when introduced sufficiently slow and sneaky, people don’t even notice and when they do, they simply see it as a given. “You get used to anything, sooner or later it becomes your life”.

This kind of slow and sneaky scheme gets far more persuasive if the perpetrators manage to convince people that it is actually to their benefit. That the scheme is meant to, for instance, lift them out of a crisis. “It’s very complicated, but lucky you, we know much more about this than you do, and you can trust us, since after all, we’re all in this together, we all want and need growth”. Or else, we have armageddon. Or seven plagues.

So an insane amount of money has been spent, and pledged, on all sorts of sub-schemes – QE – that ostensibly will solve our problems, and theirs. Only, theirs have to be solved first, because if they’re not, it’s still seven plagues for everyone. There is a man in the street “consumer” base consisting of many hundreds of millions of people in the west that can be drawn on to “finance” the rescue schemes. And if that is not enough, there are hundreds of millions more of their children. Who will all be forced to put in their labor to try and survive.

What the perpetrators know, and neither the people nor their children do, is that a recovery is not possible, because as things stand it would have to be built on a pile of debt so large that it makes any recovery impossible. Record stock markets, higher home prices and a tidal wave of good news stories about equal in size to the debt tidal wave, have kept the public in the dark about this painfully simple fact. Meanwhile, not only is the bankrupt financial system being kept alive, it’s made much richer.

What makes this possible is the same thing that makes it possible for us to continue our ‘normal’ lives, and to pretend that it’s normal in the first place, to let debt increase where we don’t immediately notice it. It’s like a bunch of guys with masks coming into your home at night while you’re watching TV, and taking away everything that’s not in your direct range of vision. And then the morning comes.

It’ll be very hard to pry back control over our lives from the cold hands of the rich and ruling class, not in the least because they have incorporated the military-industrial complex into their power sphere while we are stuffing our homes with trinkets and gadgets. But at some point and at some time we will need to realize that the only way we can keep up the appearances that our lives have become, is to take away from our children’s lives and wealth and well-being.

We may not at this point literally eat the flesh of our children, but we do eat their lives. We desire the same TVs and cars and homes our neighbors have, or better and bigger if at all possible, but we refuse to see what prices we pay for those things. Our world today promotes matter over mind, the biggest and ugliest trap that exists for our species. When you think about it, an opposable thumb is very handy, but what good is it if you use it only to produce bling? Are we perhaps not supposed to be smarter than that?

It’s not that hard, it really isn’t. But as long as we keep telling ourselves it’s all awfully hard to understand, we can continue to live in our comfort zones for another day, while Rome is burning. There are plenty species that eat their kids, or leave them behind, or chase them away, but we all (well, not all) pretend we love our children, and many of us would claim we’d give our lives for them. Well, here’s your chance to prove it.

You can either continue to sit in front of your TV, and work your job, and drive to the supermarket, and check your stocks 10 times a day. Or you can put your energy into ensuring that either the system ends, or that you and yours stop depending on it.

Door number 1, you eat your kids’ futures.

Door number 2, you fight for their futures.

That’s all the doors there are. And there’s precious little time left to make your choice.

Happy 4th of July to you and yours.

Yellen Is Wrong: Bubbles Are Caused By The Fed, Not The Market (Alhambra)

More of the same from Janet Yellen in her latest speech, but her focus on “resilience” caught my attention as it relates to very recent developments. The taper threat experience last year may have been a warning, but it doesn’t seem like it resonated with her or policymakers. The major bond selloff, which led to global ripples of crisis in credit, funding and currencies, was the opposite of flexibility. Perhaps a better definition of the word would be a place to start. But her meaning was a bit different, in that it is clear (from this speech and prior assertions, wrong as they were, about the mid-2000’s housing bubble) she sees bubbles as “market” events in which the central bank’s role is primarily shock absorption. In other words, idiot investors wholly of their own accord create bubbles and it’s the job of the munificent and enlightened Federal Reserve to help ensure that such “market” madness is “contained” without further economic destruction.

At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a “bubble” and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.

The primary example she used is very illuminating in that regard, particularly as it relates to monetary neutrality.

Nonetheless, some macroprudential tools can be adjusted in a manner that may further enhance resilience as risks emerge. In addition, macroprudential tools can, in some cases, be targeted at areas of concern. For example, the new Basel III regulatory capital framework includes a countercyclical capital buffer, which may help build additional loss-absorbing capacity within the financial sector during periods of rapid credit creation while also leaning against emerging excesses.

This framework wholly reverses what happened in 2008, but since the FOMC as a whole, with her along for the ride, had absolutely no idea what was taking place at the time this is really not surprising. She sees the Fed as the cleanup crew for the “market’s” mess, essentially the job as it was described anyway a century ago, when in fact the 2008 panic was actually the market finally acting like a true market and exerting some pressure on the central banks to stop the ongoing and heavy inorganic and artificial intrusions. To maintain the idea of market-based mess is to be intentionally obtuse about the nature of interest rate targeting and central bank activism.

Read more …

The Yellen “Resilience” Doctrine Is Dangerous Keynesian Blather (Stockman)

Just when you thought that nothing could be worse than bubble blindness of Greenspan and Bernanke—- along comes the Yellen doctrine of “resilience”. Its dangerous Keynesian blather, and far worse than Greenspan’s feigned agnosticism which held that the Fed does not have the capacity to recognize financial bubbles in the making and should therefore mop them up after they burst. The Maestro never did say exactly what caused the massive and destructive dot-com and housing bubbles which occurred on his watch—-except that Chinese factory girls stacked 12-to-a-dorm-room apparently saved way too much RMB. By contrast, Yellen’s primitive Keynesian mind knows exactly what causes financial bubbles. She has now militantly asserted that bubbles are entirely an irrational impulse in the private market and that the price of money and debt has absolutely nothing to do with financial stability.

That’s right, if the Fed could find a way to peg the money market rate at negative 10% to further its self-defined dual mandate of just enough inflation and always more jobs—even then any speculative excesses would presumably be attributable to still another outbreak of the market’s alleged propensity for error, irrationality and greed. Let’s see. If the central bank arranged to cause carry-traders to get paid 8% to borrow short-term money (i.e. on a negative 10% deposit rate) in order to fund the carry on junk bonds, Turkish construction loans and the Russell 2000, do ya think they might get a tad rambunctious? For crying out loud, when it comes to speculation, leverage, maturity transformation and re-hypothecation of financial assets the money market interest rates is “not nothing” as Yellen contends. Its everything!

That’s the heart of the matter and why Keynesian central banking is the most destructive and dangerous doctrine ever invented. In effect, it mandates central bankers to seize control of the single most important price in all of capitalism–the price of “carry” or gambling stakes in the financial markets—-and then asserts that this drastic pre-emption will have no impact on the behavior of speculators, traders and investors. That predicate is so perverse that it puts one in mind of the boy who killed his parents and then threw himself on the mercy of the courts on the grounds that he was an orphan! Keynesian central bankers like Yellen are doing exactly the same thing. Pegging the money market rate at zero for seven years amounts to killing all of the financial market’s inherent stability mechanisms.

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The higher and the steeper the surge, the bigger and the deeper the fall.

What Happened The Last 4 Times Stocks Rallied For 23 Quarters? (Zero Hedge)

Does this look sustainable to you? Of course, it’s different this time, right? The S&P 500 is in the 23rd quarter of its recovery – and shows a 196% gain…. the last four moves of similar magnitude ended very badly.

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Don’t miss out on the entire article. It reads like a great script for a major Hollywood movie.

Accusations Fly In Bulgaria’s Murky Bank Run (Reuters)

Just days before the run on Corpbank, the International Monetary Fund had praised the country’s financial sector as “stable and liquid”. A senior IMF official has since said the problems at the two Bulgarian banks did not reflect any underlying problems in the system, which remains well capitalized and liquid. The country’s central bank initially blamed the bank run on media reports about Corpbank’s main owner and leaked news that a central bank deputy governor was under investigation. Central Bank Governor Ivan Iskrov called the leak a deliberate “attack” on the bank. Others suggested alternative reasons. Behind closed doors some government officials blamed the run on a clash between Corpbank’s main owner Tsvetan Vassilev and his political rivals, without saying who they were. Prime Minister Plamen Oresharski publicly blamed a “corporate clash” for the run on Corpbank, without going into specifics.

When the run spread to First Investment Bank, a bigger lender, the government pointed the finger at unnamed people for launching what they called a criminal attack on the country’s financial system. Perpetrators were using phone text messages and the internet to spread malicious rumors about Bulgarian banks, the central bank, finance ministry and interior ministry all said. Much is still unclear. Who was behind the internet rumors and text messages? Why did the government not investigate sooner? How exactly was the feud connected to the run on Corpbank? “The security authorities, the Interior Ministry, are investigating. They have some suspicions and there are some people who have been accused (of the attack on the banks),” finance minister Petar Chobanov told Reuters. “What is true is that there is an investigation into malpractice at Corpbank. But what is the real situation? We are waiting to see what the external auditors will say.”

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If all else fails, eat your kids.

40% Of Unemployed Americans Are Millennials (MarketWatch)

The jobs market is improving, according to government data released Thursday, but millennials are still left out in the cold. They’re suffering more than any other age group, new research finds. Some 40% of unemployed workers are millennials, according to an analysis of U.S. Census data by the Georgetown University Center on Education and the Workforce released to MarketWatch, greater than Generation X (37%) and baby boomers (23%). That equates to 4.6 million unemployed millennials — 2 million long-term — 4.2 million unemployed Xers and 2.5 million jobless baby boomers. “I was surprised by how high that number is for millennials,” says Andrew Hanson, research analyst at Georgetown University, who conducted the analysis. “Unemployment is becoming a youth problem.” The U.S. unemployment rate fell to 6.1% in June from 6.3% in May, the government announced Thursday, adding 288,000 jobs. Average hourly earnings rose 2% on the year in June, while consumer price inflation rose 2.1% between May 2013 to May 2014.

But the unemployment rate for 18-29 year olds, including those who have given up looking for work, is 15.2% in June, according to a calculation by Generation Opportunity, a non-profit think-tank based in Arlington, Va. “The headline figure for unemployment doesn’t tell the whole story,” says Dan Schawbel, author of “Promote Yourself: The New Rules for Career Success” and founder of Millennial Branding, a management and consulting firm. Since the recession, the youngest job-hunters are being beaten by the oldest. The number of jobs held by baby boomers rose by 9% from 2007 to 2013, a gain of 1.9 million jobs, while the millennial workforce only snagged 110,000 jobs, up 0.3%, according to new analysis by software firm CareerBuilder and labor market data and software firm Economic Modeling Specialists International. (Generation X jobs fared worse, dropping 2.6 million, or 1%.) [..]

Delayed career starts could impact the earning potential of a generation of Americans. The average worker today doesn’t earn the national median salary until the age of 30; in 1980, workers reached that point in their careers at age 26, Hanson says. One reason: Between 1987 and 2000, 30 million net jobs were added in the U.S., but when many millennials were entering the workforce between 2000 and 2013 only 4 million jobs were added. “Young people are the first to be let go by companies in a recession and the last to be let back in,” he adds. And young men may also fare worse than young women. “With structural changes in the economy, there’s been a gradual decline in blue-collar jobs, which used to give more young men traction at an earlier age,” Hanson says. “Men especially have been failing to beat these entry-level standards in the labor market,” he says.

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“While US businesses have on the whole added 1.85 million low-wage jobs over the past six years, they have eliminated 1.83 million medium-wage and high-wage jobs”

US Jobs Growth Is In Part-Time, Low-Wage Work (WSWS)

The US economy added 288,000 jobs in June, while the unemployment rate fell to 6.1%, according to the latest jobs report issued Thursday by the Labor Department. While the number of new jobs created was higher than in recent months, the new jobs were largely part-time and in low-wage sectors, continuing the trend of replacing better-paid workers laid off during the 2008 crash with lower-paid, more highly exploited employees. A large share of the growth in employed people was, according to the report, attributable to an increase in workers employed part-time for economic reasons, whose numbers grew by 275,000. These workers, “who were working part time because their hours had been cut back or because they were unable to find a full-time job,” hit 7.5 million. The number of people employed full-time actually dropped.

The Obama administration seized on the jobs report to once again proclaim an economic turnaround. “This is one of the strongest reports we’ve seen since the end of the recession,” said Labor Secretary Thomas E. Perez. “There was good job creation in high-wage, mid-wage and low-wage positions. It was broad-based.” In reality, jobs growth was again led by low-wage industries. The retail trade sector added 40,000 jobs, while the leisure and hospitality sector, which pays an average of $13.83 per hour, added 39,000. The health care sector added 34,000 jobs. Relatively higher paying sectors lagged behind. The manufacturing sector added only 16,000 jobs, while construction added only 6,000. As a result, wages have remained stagnant. The average hourly wage for private sector workers increased by just six cents last month, and has increased only 2% over the past 12 months, less than the rate of inflation.

In fact, a disproportionate number of jobs created during the economic “recovery” pay less than $13 per hour, according to a report issued earlier this year by the National Employment Law Project. While US businesses have on the whole added 1.85 million low-wage jobs over the past six years, they have eliminated 1.83 million medium-wage (paying between $13 and $20 per hour) and high-wage (between $20 and $32) jobs, according to the report. The report found that low-wage industries accounted for just 22% of job losses during the 2008 recession, but 44% of jobs gained since 2008. By contrast, mid-wage jobs accounted for 37% of job losses and just 26% of jobs gained, while high-wage jobs accounted for 41% of job losses but only 30% of new jobs. The number of workers at temporary employment agencies grew by 10,000 last month. The percentage of workers employed by temp agencies has nearly doubled, from 1.3% of all employees in 2009 to 2.1% of all employees last month. [..]

The combination of falling wages and mass unemployment has had a devastating impact on workers’ incomes. The median household income in the US plummeted by 8.3% between 2007 and 2012. Meanwhile, the net worth of America’s billionaires reached $1.2 trillion last year, more than double what it was in 2009. The jobs report came as the cutoff of extended federal jobless benefits for those unemployed for more than 27 weeks entered its seventh month and the number of people whose benefits have been cut off hit more than 3 million. While the Democrats had earlier this year pledged to wage a major campaign to extend long-term jobless benefits, they have now dropped the issue for all practical purposes.

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Much more should be revealed in the Qingdao case. But both governments and bankers have vested interests in not doing that.

Chinese Trader Said to Pledge Metal 3 Times for Loans (Bloomberg)

Decheng Mining pledged the same metals stockpile three times over to obtain more than 2.7 billion yuan ($435 million) of loans in China’s Qingdao port, a person briefed on the matter said, citing preliminary findings of an official investigation. Local authorities are checking metal inventories worth about 1.54 billion yuan including 194,000 tons of alumina, 62,000 tons of aluminum and some copper, the person said, asking not to be identified as he isn’t authorized to speak publicly. Foreign and local banks are examining lending linked to metals at Qingdao amid concern that risks are more widespread in China, where traders use commodities from iron ore to rubber to get funding.

Steps by the Chinese government to rein in credit raised companies’ borrowing costs in recent years and triggered a surge in commodities financing deals that Goldman Sachs Group Inc. estimates to be worth as much as $160 billion. “The whole Qingdao probe will just keep fermenting, inevitably leading to banks increasing their scrutiny of commodities-backed financing activities,” Fu Peng, chief strategist at Galaxy Futures Co., said by phone from Beijing. Bank of China Ltd., Export-Import Bank of China, China Minsheng Banking Corp. and 15 other Chinese banks have lent a total of about 14.8 billion yuan to Chen Jihong, Decheng Mining’s owner, and his companies, the person said.

Read more …

Foreign Banks See Exposure to China Port Qingdao Topping $500 Million (WSJ)

Foreign banks at risk in a possible fraud at a Chinese port are tallying up their exposure as they prepare their quarterly earnings reports, with estimates exceeding $500 million. Industry executives believe Chinese banks could be on the hook for more if loans backed by metals stored at the port of Qingdao go bad. Estimates of the losses they could face run into the billions of dollars. Chinese authorities are investigating whether traders fraudulently used the same stockpiles of metals to secure multiple loans. Western banks, meanwhile, have been shut out of warehouses in both Qingdao and Penglai, a second port, also in Shandong province, where concern about fraud has also arisen. Banks are struggling to gauge how much of the metals-backed loans they have made were based on the potentially fraudulent use of collateral and could be at risk of default.

The estimates of exposures cover all of the warehouses at Qingdao port, but so far the probe has focused on Dagang, a smaller unit at the port. The worry for bankers is that the potential fraud may be found to be more widespread at Qingdao, or elsewhere, according to banking executives familiar with the matter. Standard Chartered disclosed a $250 million exposure to Qingdao last week, though Chief Executive Peter Sands told reporters at that time that the amount isn’t “material at this stage,” describing it as “across multiple clients, multiple exposures and multiple facilities.”

Other foreign banks that have exposure to Qingdao are Dutch bank ABN Amro, French banks BNP Paribas and Natixis, South Africa’s Standard Bank, and U.S. bank Citigroup, people familiar with the matter said. Apart from Standard Chartered, lenders including Citigroup and Standard Bank have previously acknowledged potential problems with commodity financing in China but have given no further details. People within banking who are familiar with the matter put the exposure of foreign lenders other than Standard Chartered at around several hundred million dollars, and the total exposure at more than $500 million.

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The consequences of bubbles.

Household Debt Serious Threat To UK Recovery (Guardian)

The Bank of England deputy governor, Sir Jon Cunliffe, has warned that household debt is a key risk to the UK recovery and said the Bank’s new measures to rein in the housing market should be thought of as insurance against a major crash. In a speech at the International Festival for Business in Liverpool, Cunliffe said UK household debt was equal to 135% of household earnings, compared with 110% in 2000 and 165% in the runup to the financial crisis. This is markedly higher than in other European countries, and on a par with the US, he added.

Last week, the Bank’s financial policy committee (FPC) laid out measures to limit risky lending, but stopped short of taking more drastic steps to cool the housing market. The measures – the first limits on the mortgage market in 30 years – include that lenders must check mortgage applicants can cope with a 3 percentage point rise in interest rates – slightly tougher than current affordability checks. From October, there will be a 15% cap on the number of mortgages that banks and building societies can give to people who want to borrow more than 4.5 times their income. Cunliffe, who is in charge of financial stability at the central bank, said: “An outcome in which house prices grow more rapidly relative to income and do so for longer is … quite plausible. It has certainly happened before in the UK. We know the pressure from demand for homes is great and that the supply of new homes is quite weak.”

He concluded: “The stress test of the major UK banks towards the end of the year will assess the resilience of the system to a major crash. The steps taken last week are insurance against the possibility of a sustained boom in the housing market leading a substantial increase and concentration in household debt that could make a crash more likely and more severe.” He said the main risk from the housing market was that house prices would continue to grow strongly and faster than earnings and lead to more household debt: “In short, the risk that more people take on higher debt relative to their income as they have to stretch further to buy homes.”

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Sweden’s in a very tight spot. Debt levels are extreme.

Can Sweden Avert ‘Nordic Japan’ Fate? (CNBC)

Swedish central bank meetings are generally as staid as you’d expect, but they have just got a lot more interesting, as the Nordic country contemplates the specter of Japan-style stagnation. On Thursday, the Riksbank, Sweden’s central bank, cut its main policy rate by 50 basis points to 0.25%, surprising the market, as most economists had forecast a 25 basis points cut to 0.5%. The Swedish krona tumbled to its lowest level against the dollar for close to a year, and its lowest level against the euro for more than three years, following the news. The Riksbank has also signaled very strongly that it will not start cutting interest rates until the end of 2015, later than expected. The meeting is “a lasting negative for the Swedish krona,” according to Citigroup currency strategist Josh O’Byrne.

This may be bad news for Swedish tourists setting off on holiday this summer – but ultimately, good news for their country’s economy, if it encourages exports of Swedish goods. Consumer prices are falling in Sweden, which means the country may be entering a prolonged period of deflation – one of the issues which has dogged the Japanese economy in the past couple of decades. Deflation can cause problems if it means that employment falls and consumers subsequently are not spending, which may lead to a shrinking economy. Sweden also has high levels of household debt in common with Japan. The average indebted Swede owes close to three times their annual income – and the average mortgage borrower 370% of their annual income. Unemployment has remained stubbornly high, at around 8%, since 2011.

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Recovery my donkey.

Eurozone Retail Sales Stall As Households Feel Pain (CNBC)

Retail sales across the 18 countries that share the euro were flat in May, missing expectations as consumers continue to rein in spending amid high unemployment. The European Union’s statistics agency, Eurostat released the figures as members of the European Central Bank’s governing council are gathered in Frankfurt where no new stimulus measures are expected after the bank cut interest rates to record lows last month. Eurostat said the month-on-month volume of sales was stable in May compared to a 0.2% decrease in retail sales in April. The agency said May saw a 0.3% rise for the non-food sector while fuel remained unchanged and sales in food, drinks and tobacco slipped 0.3%. Annually, retail sales are 0.7% higher compared to the same time this year, largely driven by the 1% and 0.8% gains seen in non-food items and fuel respectively.

“It now looks most likely that euro zone retail sales volumes eked out only slight growth in the second quarter, which adds to the impression that the euro zone is finding it hard to build appreciable growth momentum,” said chief U.K. and European economist at IHS Global Insight, Howard Archer. “Flat retail sales in May, coupled with a modest dip in euro zone consumer confidence in June from May’s 79-month high, reinforces suspicion that any improvement in euro zone consumer spending is more likely to be gradual than pronounced over the coming months – especially as there are still significant constraints on consumers in several countries,” said Archer. Euro zone unemployment was stable at 11.6% for the second consecutive month in May, down slightly from the 12% seen a year ago, according to Eurostat data released on Monday.

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Someone wake up the French.

IMF Warns Of Negative Spiral In France As Recession Looms Again (AEP)

France is on the cusp of a fresh recession as services contract sharply and the country braces for yet another round of austerity cuts, with record jobless levels likely to bedevil Francois Hollande’s presidency for years to come. Markit’s PMI services gauge for France fell for the third month to 48.2 in June, pointing to an outright fall in GDP following zero growth in the first quarter. The International Monetary Fund cut its growth forecast this year from 1pc to 0.7pc, warning that there would be no “appreciable decline” in French unemployment until 2016. “Volatile and uneven leading indicators point to the risk of a stalled recovery,” it said. The IMF said public debt should peak at 95pc of GDP next year but a “growth shock” would push it to 103pc by 2016. The Fund warned of a “negative spiral of low growth and falling inflation” that is pushing up real borrowing costs and further choking investment, already dismally weak. Core inflation was 0.3pc in May.

The economic relapse is a political disaster for Mr Hollande, already the least popular leader in modern times with a poll rating of 23pc, and reeling from a crushing defeat by the far-Right Front National in European elections. The country is being left behind by Spain and others as they reap the first rewards from supply-side reforms, although the France’s Socialists grumble that they are merely under-cutting France with deflationary wage cuts in a 1930s-style race to the bottom that ultimately benefits nobody. Mr Hollande is paying the price for a failed strategy in his first two years in office when he clung to the old model and relied on tax rises rather than spending cuts to cover austerity packages. The state sector has risen to 57pc of GDP, suffocating the private economy. Yet the country is also caught in a vicious circle as it tries to meet EMU deficit rules, forced to push through successive austerity packages without offsetting monetary stimulus or a weaker currency. The IMF said France’s exchange rate is over-valued by 5-10pc.

The effect of austerity has been to erode the tax base, leaving the budget deficit stuck at over 4pc of GDP. France has gained remarkably little from fiscal tightening equal to 5pc of GDP over the last three years. Undeterred, it is now pushing through extra cuts of €50bn by 2017 under the new premier Manuel Valls, dubbed the “economic Clemenceau” for his willingness to endure casualties stoically. The biggest hit will come next year, raising the risk that economy will once again to fail to achieve escape velocity. There is unlikely to be a quick rescue from the European Central Bank. Mario Draghi, the ECB’s president, offered no further clues yesterday on whether the bank would launch quantitative easing to revive credit and to build a safety buffer against deflation. Mr Draghi said the ECB’s next rounds of cheap loans for banks (TLTROs) could inject €1 trillion into the system, and signalled that borrowers would not be treated too harshly if they used the money to play the “carry trade” by investing in government bonds rather lending to the real economy.

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Time for legal action, and lots of it.

GM Received First Switch Complaints 17 Years Ago (Reuters)

General Motors car owners have been complaining to dealers about defective ignition switches since 1997, years before the automaker launched the Chevrolet Cobalt and other small cars with faulty switches linked to at least 13 deaths. GM this week expanded its recall of cars with switch issues by more than 8 million, but it did not indicate when it first learned of problems in cars including the 1997 Chevrolet Malibu and the 2000 Chevrolet Impala. A Reuters review of a consumer complaints database maintained by U.S. safety regulators showed that GM dealers were told of switch-related defects almost as soon as the Malibu was put on the market, and that many could not fix the defects. Early issues included keys that either stuck in the ignition or could be pulled out while the vehicle was running, as well as ignition switches that failed to start the engine or apparently caused the engine to stall. In later years, some owners said their cars stalled while on the highway and one quoted a dealer as saying changing the switch could solve the problem.

In one of the earliest complaints filed with the National Highway Traffic Safety Administration, a New Jersey woman in April 1997 said she had been “stranded seven times” when her new 1997 Malibu could not be started, while the key remained stuck in the ignition and could not be turned. The ignition was replaced twice by her dealer, but the problem was not resolved. “I cannot comprehend how three different… ignition cylinders can all be defective,” she wrote. A GM spokesman said he could not say what was known about the Impala issue nearly two decades ago and that GM had decided to make the recent recall after the most exhaustive safety review in company history. GM advised dealers about ignition issues on both cars in 2001, sending so-called service bulletins, which generally describe customer issues and potential solutions.

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Or should it be the other way around?

Will Japan’s Democracy Survive Abe? (Bloomberg)

For the third time since taking office in December 2012 Abe did exactly what all too many of his 126 million people oppose. Earlier, he rushed into law a controversial secrecy bill that could send reporters and whisteblowers to jail on varied and ambiguous grounds, and he pushed to restart reactors shut on safety grounds after the March 2011 Fukushima disaster. Given a mandate to end deflation, Abe’s biggest moves to date involve flexing geopolitical muscles, not building economic ones. “He has ignored popular will and made a mockery of constitutional and democratic principles on all three fronts,” says Jeff Kingston, head of Asia studies at the Tokyo campus of Temple University. “The alleged success of Abenomics has stoked his popularity and given him an opportunity to overturn Japan’s postwar order.”

Banri Kaieda, head of the opposition Democratic Party of Japan, bemoans Abe’s “authoritarian tendencies” that have nothing to do with raising living standards or restoring growth. In an April speech in Washington, Kaieda warned that the “Abe administration could move beyond the realm of healthy nationalism and become a destabilizing factor in East Asia.” China would argue that Abe crossed that line with his December 2013 visit to Tokyo’s Yasukuni Shrine, where 14 class-A war criminals are interred. But this latest move to enable Japan to deploy troops overseas, ostensibly to defend its allies, is sending shockwaves through the region, particular victims of Tokyo’s World War II militarism, China and South Korea. Japan has every right to defend itself. It’s been a good global citizen since 1945 and deserves a permanent seat on the U.N. Security Council. If its people support a change in the pacifist Article 9 of the postwar constitution, then so be it.

But Abe should hold a national referendum on the issue, and lawmakers in his Liberal Democratic Party shouldn’t give him carte blanche to pretend Japanese law allows what it forbids. “It’s an awful precedent, of course,” says Colin Jones, a legal scholar at Doshisha Law School in Kyoto. “If the cabinet can reinterpret this part of the constitution why not others?” Adds Kingston: “Abe is like a thief in the night sneaking in the backdoor to steal the heart and soul of Japan’s constitution and that’s why he has provoked such a strong backlash and anger — because Article 9 is a touchstone of national identity.” Japanese housewife Naomi Takusu even nominated Article 9 for a Nobel Peace Prize. It will be fascinating to see if the Nobel committee calls Abe’s bluff come October.

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Suppositions galore.

The Changing Correlation Between The S&P 500 And Oil (World Complex)

Today we investigate the relationship between oil and the broad US market, using the S&P 500 index as a proxy. A common thought is that the two functions are inversely correlated, with the US market in danger whenever oil rises too high. The relationship has been a complex one over the past 11 years, but the correlation is positive most of the time. In particular, we see from 2003 until late 2007, both oil and the market rose in tandem. The only time the two records show an inverse correlation was during the windup to the financial crisis–from late 2007 to July 2008. The collapse in both market index and oil price through the second half of 2008 shows up quite clearly. The two prices rise in tandem from early 2009 to the end of 2012.

It doesn’t seem logical that the S&P should be positively correlated to oil prices – so it is more likely that both records are correlated to the same thing – inflation. But what to make of the last 18 months, in which we see an almost vertical rise in the stock market without an increase in the oil price? Is an American renaissance in the works, powered by increased American oil production? Or is it due to the much rumoured mass purchase of securities by financial institutions, powered by monetary creation? Is it being done to prevent another period of negative correlation, which might foretell another economic crisis? Stay tuned . . .

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Peculiar article.

All Snowden Files To Be Published In July? (RT)

All of the National Security Agency files accessed by former contractor Edward Snowden could be published in the month of July if vaguely worded predictions tweeted this week from the digital library site Cryptome prove to be correct. A series of micro-messages published by the website — a portal for sharing sensitive documents that predates WikiLeaks by a decade — suggest further Snowden leaks may be on the way. “During July all Snowden docs released” reads an excerpt from one Cryptome tweet sent on Monday this week. “July is when war begins unless headed off by Snowden full release of crippling intel. After war begins not a chance of release,” reads another tweet sent from Cryptome on Monday this week. “Only way war can be avoided. Warmongerers [sic] are on a rampage. So, yes, citizens holding Snowden docs will do the right thing,” insists another.

Follow-up tweets from the organization have been equally vague, however, and a report published by a journalist at Vocativ on Tuesday does little to disclose what information, if any, will be published in the coming weeks. Other dispatches this week from Cryptome direct followers to watch for two upcoming conferences planned for this month: the biannual Hackers On Planet Earth (HOPE) event in New York City starting July 18, and the Aspen Institute’s yearly Security Forum the following weekend, which will feature appearances from the likes of former NSA directors Keith Alexander and Michael Hayden. Daniel Ellsberg, the former United States Department of Defense staffer attributed with leaking the so-called “Pentagon Papers” during the Vietnam War, may have a role in the possible Cryptome release. Ellsberg is scheduled to deliver a keynote address at HOPE, and Cryptome tweeted that those wanting more information on the release of Snowden docs should stayed tuned to that event for his speech and another from a yet-to-be-announced special guest.

As the tweets continued through Monday, Vocativ journalist Eric Markowitz approached Cryptome founder John Young for further details. Ahead of that article’s publication, however, Cryptome published the email exchange between Young and the reporter, the contents of which provide little more except for vaguely worded predictions that could be deciphered to conclude that Mr. Ellsberg may or may not discuss unpublished Snowden documents at HOPE later this month. “July is a summitry of anti-spy and pro-spy events, HOPE and Aspen Security Forum. Both sides will be pushing their interests, with dramatic revelations by newsmaking and news breaking speakers,” Young wrote to the reporter. “At Aspen there is a star-studded list of top military and spy officials, defense industry and main stream media parading the need to combat the Snowdens and the WikiLeakers who do not understand the necessity of a luxurious and wasteful natsec and spy warmongering.”

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Our ancestors were smarter than we are.

Scientists Rewrite Human Evolution Timeline (ANI)

Scientists have synthesized a new theory that the traits that have allowed humans to adapt and thrive in a variety of varying climate conditions evolved in Africa gradually and at separate times. Many traits unique to humans were long thought to have originated in the genus Homo between 2.4 and 1.8 million years ago in Africa and it was earlier believed that large brain, long legs, the ability to craft tools and prolonged maturation periods have evolved together at the start of the Homo lineage as African grasslands expanded and Earth’s climate became cooler and drier. However, the new analysis suggested that these traits did not arise as a single package but several key ingredients once thought to define Homo evolved in earlier Australopithecus ancestors between 3 and 4 million years ago, while others emerged significantly later.

Richard Potts, Smithsonian paleoanthropologist, has developed a new climate framework for East African human evolution that depicts most of the era from 2.5 million to 1.5 million years ago as a time of strong climate instability and shifting intensity of annual wet and dry seasons. Susan Anton, professor of anthropology at New York University, said that they could tell the species apart based on differences in the shape of their skulls, especially their face and jaws, but not on the basis of size and the differences in their skulls suggest early Homo divvied up the environment, each utilizing a slightly different strategy to survive. Leslie Aiello, president of the Wenner-Gren Foundation for Anthropological Research, said that the data suggested that species of early Homo were more flexible in their dietary choices than other species, while the team also concluded that this flexibility likely enhanced the ability of human ancestors to successfully adapt to unstable environments and disperse from Africa.

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Great Barrier Reef’s Coral Faces Ravaging By Expected El Niño (Guardian)

The Great Barrier Reef is set to be ravaged by the expected El Niño weather phenomenon and scientists warn that similar warming events have significantly impacted upon the reef’s coral. Research by the University of Queensland studied large Porites coral colonies, a type of coral considered more resistant than others to changes in the environment. By analysing and dating coral samples, researchers found there was a significant correlation between mass coral mortality events and spikes in sea surface temperature over the past 150 years. This finding raises “serious concern” for the wellbeing of the Great Barrier Reef, the scientists said, because of the long-term threat of climate change and, more immediately, the arrival of El Niño. El Niño is a climate phenomenon, occurring every few years, when water in the western part of the Pacific Ocean becomes exceptionally warm. It has different impacts in different parts of the world but in Australia it is associated with warmer temperatures and increased risk of droughts.

The chances of El Niño hitting this year has been measured at 90%; scientists are concerned it could cause widespread damage to the reef, which is already weakened because of pollution, cyclones and a plague of coral-eating starfish. It has suffered a number of coral bleaches, notably in 1997 and 1998, after an El Niño. Bleaching is where the coral loses life and colour and turns white and brittle. Professor Jian-xin Zhao, who led the University of Queensland project, said there has been a rise in Porites coral deaths in recent decades. “The 1997-98 bleaching followed a strong El Niño event on top of a decline in water quality and a long-term global warming trend, which seems to have pushed the most robust corals past their tolerance limit,” he said. “Considering that a similar El Niño event is predicted to occur this coming summer, we have grave concerns for the reef.”

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Oklahoma Earthquakes Linked To Fracking Wastewater Wells (Guardian)

Scientists have, for the first time, linked hundreds of earthquakes across a broad swath of Oklahoma to a handful of wastewater wells used by the fracking industry. The research, published in the journal Science on Thursday, said about one-fifth of the quakes that helped turn Oklahoma into the earthquake capital of America were caused by just four wells. Oklahoma has had about 240 magnitude 3.0 or higher earthquakes just since the start of the year. The state now has twice the number of 3.0 earthquakes as California. Before 2008, when the oil and gas boom got underway, the state averaged about one a year. The researchers from Cornell University and other institutions traced a large number of earthquakes through 2012 to just four wells, south-east of Oklahoma city.

Those wells were pumped with significantly higher volumes of fracking wastewater and chemicals than the thousands of other disposal wells in the state. The findings were the first to show such waste wells can trigger earthquakes up to 40kms away from the injection site. They are bound to further deepen the controversy surrounding fracking, which has vastly expanded America’s oil and natural gas production, but with rising consequences for health, safety and the environment. Another Cornell-led team this week found that 40% of the fracked wells in north-eastern Pennsylvania were at risk of leaking methane into groundwater and air. The researchers said faulty cement casings could be responsible.

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Canada’s Big, Ugly Environmental Problem (Pacific Standard)

Since Stephen Harper’s election as prime minister in 2006, and especially since his Conservative Party won a parliamentary majority in 2011, Canada’s once-celebrated record of environmental science research and climate change policy has been swiftly and thoroughly turned on its head. Dramatic funding cuts, censorship, and other acts of what many environmental scientists, activists, and journalists are calling thinly veiled sabotage have plagued the once emblematically green country. Over 2,300 government scientists have lost their jobs; groundbreaking research projects such as the Experimental Lakes Area (ELA) and Polar Environment Atmospheric Research Lab (PEARL) have been ended or handed over to third-party management; and seven of 11 Department of Fisheries libraries were shuttered late last year, much of their valuable research and archival material allegedly thrown away or burned.

In perhaps the biggest blow to environmental sovereignty, the 2012 omnibus budget bill C-38 repealed and amended 70 laws, nearly 20 of them concerning environmental regulation and protection, and easing the path for the energy industry. Government scientists—whose research is funded with public money—have been effectively banned from speaking with the press when their findings have differed in any way from Canada’s official policies or positions. Revenue Canada was given $8 million specifically in order to audit a number of environmental organizations, looking for violations of Canada’s tax code, which allow a maximum of 10% of a registered charity’s budget to be spent on political activities; of the nearly 900 audited, only one was found to be exceeding limits on political activity.

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