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

 


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

 

 

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

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

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

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

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

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Using cash is fast becoming a revilutionary act.

In Praise Of Cash (Aeon)

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

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

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

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

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

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

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

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

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Yeah, output cuts. Sure.

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

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

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

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“China’s great ball of money.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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And Erdogan will want something in return.

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

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

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

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

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

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

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

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

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

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

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

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

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

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Mar 052017
 
 March 5, 2017  Posted by at 10:40 am Finance Tagged with: , , , , , , , , ,  8 Responses »
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Near The Hermitage, SaintPetersburg, Russia 1930

 


The Rich Already Have a UBI (Jacobin)
The Next Market To Break *Should* Be Stocks (MA)
America’s Miserable 21st Century (CM)
China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)
China Signals Slower Increase In Defense Spending (BBG)
The Priced-In Risk of Marine Le Pen’s Victory (BBG)
Self-Fulfilling Pessimism (Vox)
Only The Rich Are Poisoned (Taleb)
Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)
Greece, Getting Smaller (Maria Katsounaki)
Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)
America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)
Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)
Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

 

 

Time to overhaul taxation. Away from income tax. Inevitable.

The Rich Already Have a UBI (Jacobin)

The universal basic income -a cash payment made to every individual in the country- has been critiqued recently by some commentators. Among other things, these writers dislike the fact that a UBI would deliver individuals income in a way that is divorced from working. Such an income arrangement would, it is argued, lead to meaninglessness, social dysfunction, and resentment. One obvious problem with this analysis is that passive income -income divorced from work- already exists. It is called capital income. It flows out to various individuals in society in the form of interest, rents, and dividends. According to Piketty, Saez, and Zucman (PSZ), around 30% of all the income produced in the nation is paid out as capital income. If passive income is so destructive, then you would think that centuries of dedicating one-third of national income to it would have burned society to the ground by now.

In 2015, according to PSZ, the richest 1% of people in America received 20.2% of all the income in the nation. Ten points of that 20.2% came from equity income, net interest, housing rents, and the capital component of mixed income. Which is to say, 10% of all national income is paid out to the 1% as capital income. Let me reiterate: one in ten dollars of income produced in this country is paid out to the richest 1% without them having to work for it. Even if you exclude the capital component of mixed income (since it is connected to work even if the income is not from labor) and housing rents (since these are imputed to homeowners rather than paid to them as cash), that still means that, from equity income and interest alone, the top 1% receives 7.5% of the national income without having to work for it. Put another way: the average person in the top 1% receives a UBI equal to 7.5 times the average income in the country.

If passive income is so destructive, then the income situation of the 1% surely is a national emergency! Where does the 1% get its meaning with all of that free cash flowing in? The fact is that capitalist societies already dedicate a large portion of their economic outputs to paying out money to people who have not worked for it. The UBI does not invent passive income. It merely doles it out evenly to everyone in society, rather than in very concentrated amounts to the richest people in society. The idea of capturing the 30% of national income that flows passively to capital every year and handing it out to everyone in society in equal chunks has been around since at least Oskar Lange wrote about it in the early parts of the last century. This is, to me, the best way to do a UBI, both practically and ideologically. Don’t tax labor to give money out to UBI “loafers.” Instead, snag society’s capital income, which is already paid out to people without regard to whether they work, and pay it out to everyone.

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Looks scary.

The Next Market To Break *Should* Be Stocks (MA)

From an intermarket perspective – and in the wake of the major breakdown in Treasuries that manifested last summer akin to 87′, we would argue that the move in equities is likely much more mature than the echo of the record January 1987 sounding that some have recently pointed to for more bullish intermediate bearings. Their reasonings being, that although the markets may be near-term extended, like in January 1987, they still gained another 30% over the following 8 months. The old market adage applied – overbought can still become more overbought. That said, what the data mining ignores here is similar to the benevolent rotation out of bonds and into equities that supported the reflationary blowoff that began after Treasuries broke down in the Spring of 1987, stocks have been under this same strong reflationary momentum since last summer.

What’s happened this week of note, and which has helped firm our own near-term expectations, is that several Fed presidents have more than candidly implied that the March meeting is very much in play for another rate hike. And although we had recently suspected that more hawkish posturing would adversely impact precious metals over the short-term, long-term Treasuries now again look vulnerable as well, which would closer resemble the final leg lower in Treasuries in 1987 and the curtain call for equities that fall.

In 1987, the initial breakdown leg in the 30-year Treasury bond registered a decline of ~14%. After remaining in a trading range for another 3 months, bond prices fell roughly another 10%, before finding a low as the equity markets broke down. Through the end of last year, the 30-year Treasury bond had fallen ~16% from its highs last summer. Although we still believe long-term Treasuries offer good relative value to investors as the limits of the US’s mature economic expansion become increasingly visible this year, the more than 2 month trading range now appears susceptible to further near-term weakness, akin to the final leg lower in 1987.

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Nice find from Tyler.

America’s Miserable 21st Century (CM)

Yes, things are very different indeed these days in the “real America” outside the bubble. In fact, things have been going badly wrong in America since the beginning of the 21st century. It turns out that the year 2000 marks a grim historical milestone of sorts for our nation. For whatever reasons, the Great American Escalator, which had lifted successive generations of Americans to ever higher standards of living and levels of social well-being, broke down around then—and broke down very badly. The warning lights have been flashing, and the klaxons sounding, for more than a decade and a half. But our pundits and prognosticators and professors and policymakers, ensconced as they generally are deep within the bubble, were for the most part too distant from the distress of the general population to see or hear it.

[..] In some circles people still widely believe, as one recent New York Times business-section article cluelessly insisted before the inauguration, that “Mr. Trump will inherit an economy that is fundamentally solid.” But this is patent nonsense. By now it should be painfully obvious that the U.S. economy has been in the grip of deep dysfunction since the dawn of the new century. And in retrospect, it should also be apparent that America’s strange new economic maladies were almost perfectly designed to set the stage for a populist storm. Ever since 2000, basic indicators have offered oddly inconsistent readings on America’s economic performance and prospects. It is curious and highly uncharacteristic to find such measures so very far out of alignment with one another.

We are witnessing an ominous and growing divergence between three trends that should ordinarily move in tandem: wealth, output, and employment. Depending upon which of these three indicators you choose, America looks to be heading up, down, or more or less nowhere. From the standpoint of wealth creation, the 21st century is off to a roaring start. By this yardstick, it looks as if Americans have never had it so good and as if the future is full of promise. Between early 2000 and late 2016, the estimated net worth of American households and nonprofit institutions more than doubled, from $44 trillion to $90 trillion. (SEE FIGURE 1.)

Although that wealth is not evenly distributed, it is still a fantastic sum of money—an average of over a million dollars for every notional family of four. This upsurge of wealth took place despite the crash of 2008—indeed, private wealth holdings are over $20 trillion higher now than they were at their pre-crash apogee. The value of American real-estate assets is near or at all-time highs, and America’s businesses appear to be thriving. Even before the “Trump rally” of late 2016 and early 2017, U.S. equities markets were hitting new highs—and since stock prices are strongly shaped by expectations of future profits, investors evidently are counting on the continuation of the current happy days for U.S. asset holders for some time to come.

A rather less cheering picture, though, emerges if we look instead at real trends for the macro-economy. Here, performance since the start of the century might charitably be described as mediocre, and prospects today are no better than guarded. The recovery from the crash of 2008—which unleashed the worst recession since the Great Depression—has been singularly slow and weak. According to the Bureau of Economic Analysis (BEA), it took nearly four years for America’s GDP to re-attain its late 2007 level. As of late 2016, total value added to the U.S. economy was just 12% higher than in 2007. (SEE FIGURE 2.) The situation is even more sobering if we consider per capita growth. It took America six and a half years—until mid-2014—to get back to its late 2007 per capita production levels. And in late 2016, per capita output was just 4% higher than in late 2007—nine years earlier. By this reckoning, the American economy looks to have suffered something close to a lost decade.

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It all means very little without new debt data. Are they still trying to borrow growth? You bet.

China Cuts GDP Growth Target to 6.5%, Targets Reforms, De-Leveraging (CNBC)

China is aiming to expand its economy by around 6.5% in 2017 as it continues to implement a proactive fiscal policy and maintain a prudent monetary policy, Premier Li Keqiang said on Sunday. Top leaders at the National People’s Congress are tolerating slightly slower economic growth this year to give them more room to push through reforms to deal with a build-up in debt. A lending binge and increased government spending last year have fueled worries about high debt levels and an overheating housing market. GDP officially grew 6.7% in 2016, the slowest in 26 years, but within the government’s target range of 6.5 to 7%. That 6.5% growth target is “needed to achieve the employment objective,” Li said in his prepared remarks.

The government announced ambitious jobs plans, including to ensure that every family has at least one breadwinner, which is key as jobs are cut in major state-owned enterprises. As the government moves away from manufacturing-led growth, Beijing is tasked with quickly finding new employment for millions of workers, or risk the possibility of social unrest as unemployment looms China says it expects 11 million new urban jobs will be created this year, but that still wont keep pace with the 15 million new workers the government estimates will enter the market, according to prepared remarks. The government will continue to focus on the coal and steel sectors, with plans in place to cut steel production capacity. But experts were skeptical of the idea that certain economic growth levels would be “needed” for employment reasons.

“There is not now nor has there ever been any magical connection between GDP and jobs. You can have capital-intensive 6.5% GDP growth and not create enough jobs and you can have 3.5% labor-intensive GDP growth and create more than enough jobs,” said Derek Scissors, a resident scholar at the American Enterprise Institute and chief economist of the China Beige Book. “The Chinese government’s position for the past 20 years has been that the nutrition content of food doesn’t matter at all, only the number of calories.” This doesn’t make any sense economically, but it’s perfectly clearly politically,” he said, noting that China had said it needed greater GDP growth when its labor force was actually expanding, as opposed to its current contraction.

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Becoming unaffordable?

China Signals Slower Increase In Defense Spending (BBG)

China indicated a continued slowdown in defense spending growth this year, as President Xi Jinping presses ahead with a sweeping military overhaul. The defense budget will rise “about 7%,” National People’s Congress spokeswoman Fu Ying told a briefing ahead of China’s annual legislative session in Beijing. An actual spending target wasn’t expected until Sunday, when the Ministry of Finance releases its 2017 budget at the start of the 11-day legislative gathering. Last year, the country budgeted a 7.6% uptick in military spending to 954.4 billion yuan (equal to $147 billion at the time), the slowest increase since a 7.3% rise in 2010. Seven% would be the slowest expansion in more than a decade, tracking the broader trend in the country’s economy.

The increase consolidates China’s lead as the world’s second-largest military spender, accounting for more than 10% of the global arms total, said Siemon Wezeman, a senior researcher with the Stockholm International Peace Research Institute. More than two decades of expansion have helped China build a modern military capable of projecting force further from its coasts, while spurring anxious neighbors to upgrade their own defenses. Fu said China was committed to peace and described tensions in the South China Sea, where the country’s land reclamation campaign has been criticized by the U.S. and rival claimants, as “easing.” “We advocate dialogue and peaceful solutions to disputes of sovereignty and maritime rights,” said Fu, a former vice foreign minister and ex-ambassador to the U.K. “Meanwhile, we should possess the capacity to protect our sovereignty and interests.”

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Don’t count her out.

The Priced-In Risk of Marine Le Pen’s Victory (BBG)

Markets trade in the probability of certain events happening. In case an event has high risk, a “tail” is priced in. Those tail risks typically show up in certain corners of the markets. Today, tail risks are priced in for a potential unexpected outcome in the French elections. That tail risk is on the rise now that polls of the second round of voting indicate a tight race between center candidate Emmanuel Macron and the far-right candidate Marine Le Pen. Tail risks can be viewed in a linear way. For example, the German 2-year bond (“Schatze”) reached an all-time negative yield of -92 basis points when Le Pen recently gained in the polls.

As a result, the German 2-year yield became negatively correlated with the price of French bonds and stocks. A generic view is that German bonds are a reflection of the “tail risk” that Le Pen is victorious. However, there are technical reasons to explain the fall of German 2-year bonds. Those technicalities are a scarcity of German bond collateral in the repurchase market and the ECB’s purchase of German bonds yielding less than the deposit rate. This is what makes the 2-year German bond “overvalued” and therefore not as accurate a reflection of the true tail risk in France. There are other areas in markets that provide a better idea of how much of a Le Pen win is priced in.

Tail risks can be seen in currency options. The options market use a measure called “skew.” This is the difference between the implied volatility of puts and calls. A negative skew means currency markets price euro puts with higher implied volatility than the currency’s calls. In the case of negative skew, the currency market thinks the risk for depreciation of a currency is large. The skew of the euro currency has been on a steady decline since President Donald Trump was elected in November, as seen in Fig. 1. On the other hand, the French bond market has seen a surge in yields discounted to the second round of the presidential election, on May 7. Rising yields are a sign of uncertainty about the outcome of the election. Fig. 1 shows how markets are pricing a “tail risk” of an adverse election outcome. And this tail risk seems to be increasing by the day.

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I like Blanchard’s notion that “the reason unemployment is decreasing is productivity growth is so low.” But I don’t get that he overlooks, when saying “why is demand growth not stronger?”, that so many people have simply lost the means to spend. That seems to be a curious blind spot for an IMF economist. it’s not about pessimism, it’s about not having any money.

Self-Fulfilling Pessimism (Vox)

Why is it that demand growth is not stronger? In this video, Olivier Blanchard discusses his research on long-run forecasts and unexpected decreases in consumption. This video was recorded at the American Economic Association in Chicago in January 2017.

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“..one is more likely to be drinking poison in a golden cup than an ordinary one.”

Only The Rich Are Poisoned (Taleb)

When people get rich, they shed their skin-in-the game driven experiential mechanism. They lose control of their preferences, substituting constructed preferences to their own, complicating their lives unnecessarily, triggering their own misery. And these are of course the preferences of those who want to sell them something. This is a skin-in-the-game problem as the choices of the rich are dictated by others who have something to gain, and no side effects, from the sale. And given that they are rich, and their exploiters not often so, nobody would shout victim. I once had dinner in a Michelin-starred restaurant with a fellow who insisted on eating there instead of my selection of a casual Greek taverna with a friendly owner operator, his second cousin as a manager and his third cousin once removed as a receptionist.

The other customers seemed, as we say in Mediterranean languages, to have a cork plugged in their behind obstructing proper ventilation, causing the vapors to build on the inside of the gastrointestinal walls, leading to the irritable type of decorum you only notice in the educated upper classes. I note that, in addition to the plugged corks, all men wore ties. Dinner consisted in a succession of complicated small things, with microscopic ingredients and contrasting tastes that forced you to concentrate as if you were taking some type of exam. You were not eating, rather visiting some type of museum with an affected English major lecturing you on some artistic dimension you would have never considered on your own. There was so little that was familiar and so little that fit my taste buds: once something on the occasion tasted like something real, there was no chance to have more as we moved on to the next dish.

Trudging through the dishes and listening to some b***t by the sommelier about the paired wine, I was afraid of losing concentration. I costs a lot of energy to fake that I was not bored. In fact I discovered an optimization in the wrong place: the only thing I cared about, bread, was not warm. It appears that this is not a Michelin requirement. I left the place starving. Now if I had a choice I would have had some time-tested recipe (say a pizza with very fresh ingredients, or a juicy hamburger) in a lively place –for a twentieth of the price. But because the fellow dinner partner could afford the expensive restaurant, we ended up the victims of some complicated experiments by a chef judged by some Michelin bureaucrat. It would fail the Lindy effect: food does better through minute variations from Sicilian grandmother to Sicilian grandmother. It hit me that the rich people were natural targets; as the eponymous Thyestes shouts in Seneca’s tragedy, thieves do not enter impecunious homes, and one is more likely to be drinking poison in a golden cup than an ordinary one.

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The Turkish foreign minister claims the right to campaign among Turkish residents in Germany and Holland. Nobody wants that. Imagine if Mexico would take its political campaigns to US streets.

Austrian Chancellor Calls For EU-Wide Ban On Turkish Campaigning (R.)

Austrian Chancellor Christian Kern on Sunday called for a European Union-wide ban on campaign appearances by Turkish politicians to avoid having individual member countries like Germany come under pressure from Ankara. Turkey said on Saturday it would defy opposition from authorities in Germany and the Netherlands and continue holding rallies in both countries to urge Turks living there to back an April 16 referendum to boost President Tayyip Erdogan’s powers. Turkish Foreign Minister Mevlut Cavusoglu criticized German and Dutch restrictions on such gatherings as undemocratic, and said Turkey would press on with them in the run-up to the vote. Kern, in an interview published in the Welt am Sonntag newspaper, said the measure would weaken the rule of law in Turkey, limit the separation of powers, and violate the values of the EU.

He also called for the EU to end discussions with Turkey about membership in the bloc and scrap or restrict €4.5 billion in aid planned for Turkey through 2020. “We should reorient relations with Turkey without the illusion of EU membership,” Kern told the newspaper. “Turkey has moved further and further away from Europe in the past few years. Human rights and democratic values are being trampled. Press freedom is a foreign word,” he said. Kern criticized Ankara’s arrest of German-Turkish journalist Deniz Yucel, a correspondent for Die Welt newspaper, and many other journalists, academics and civil servants, and called for Yucel’s immediate release. At the same time, he said, Turkey remained an important partner in issues of security, migration and economic cooperation, and said Ankara had lived up to its obligations under the migrant deal struck with the EU.

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The demise of a nation.

Greece, Getting Smaller (Maria Katsounaki)

“Instead of ‘Little Greece’ we need a serious Greece,” former Prime Minister Costas Simitis told the Delphi Economic Forum on Friday. As he spoke, Athens was suffocating again because of a mass transit strike, “unknown persons” were destroying ticket validating machines on buses, Eurostat’s figures showed that Greece is the consistent champion in unemployment, at 23% (with the next country, Spain, at 18.2% and the eurozone average at 9.6%), while a report from the Cologne Institute for Economic Research (IW) named Greece the leader in the percentage rise of poverty. The talks between the Greek government and its creditors show more differences than convergence, while Politico reported that the government has asked the World Bank for technical and financial assistance…

Each of the issues we mentioned has a past, present and future. They are not the same – some are tied to the economic crisis, other are not. One could argue that putting them together is aimed at making an impression. But let’s ask ourselves how the destruction of ticket validating machines was allowed to become a hobby. How have illegality and criminality become normal? How will unemployment and poverty be reduced when every investment crashes against denial, suspicion and compulsive behavior? When the only thing that grows is the amount of taxes and social security fees that we must pay? Let us ask ourselves this: When did the discussion that for a strike to be held “50% plus 1” of employees must agree, so as to put an end to the impunity of minorities?

Why has union leadership that is allied to political parties become “the right to strike” whereas any effort at reform serves the interests of the “economic oligarchy”? How can anyone trust a government that, while “negotiating hard” at the same time declares “the crisis is over,” while behaving as if this were a Third World country? Every day we are further gone in our illness and further from recovery. Little Greece is neither honest nor serious. It is not size that makes her lack credibility, but the ever-deeper national autism, the constant repetition of the performance “we are fighting for solutions” while caring nothing for solutions.

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Got to keep that border open.

Canada: No Plans To Clamp Down At Border To Deter Migrants (R.)

Canada will not tighten its border to deter migrants crossing illegally from the United States in the wake of a U.S. immigration crackdown because the numbers are not big enough to cause alarm, a government minister said on Saturday. Public Safety Minister Ralph Goodale said the issue had not risen to a scale that required hindering the flow of goods and people moving across the world’s longest undefended border. Hundreds of people, mainly from Africa and the Middle East, have defied winter conditions and walked across the border, seeking asylum. They are fleeing President Donald Trump’s immigration crackdown, migrants and refugee agencies say.

It is not common to have so many asylum seekers in the United States looking for refuge in Canada over such a short period. The influx poses a political risk for Prime Minister Justin Trudeau, who faces pressure from the left, which wants more let in, and from the right, which fears an increased security risk. “We are concerned and we will deal properly with the extra hundreds (crossing illegally),” Goodale told reporters at a televised news conference in Emerson, Manitoba. “But the full border deals with 400,000 people moving in both directions every day. It also handles C$2.5 billion in trade every day. “It is critically important for us to make sure that it is strong and secure. At the same time, it needs to be efficient and expeditious.”

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Since it’s impossible to deport millions of people, clearer heads are called for.

America’s Millions Of Undocumented Mexicans Live In Fear Of Deportation (G.)

The queue starts outside the consulate gate soon after dawn and stretches up Park View street. The visitors speak in low murmurs, exchanging the latest rumours. A dragnet in Glendale. Checkpoints in Highland Park. People deported for jaywalking. For speaking Spanish. Some visitors say they have sold their furniture to create an emergency fund. Others wonder if they should stop going to work and pull their kids from school. Overreactions? Wise precautions? No one knows. They’ve come here for answers. Inside the gate hulks a nondescript, cream-coloured office block. Lights flicker into life on a pale winter day and by 7am all is aglow: the consulate general of Mexico in Los Angeles is open for business. It is a lighthouse, of sorts, for undocumented Mexicans caught in the political maelstrom that is Hurricane Trump.

“I’m here to make a plan,” said Juana Sanchez, 53, a seamstress who has stitched and sewed in LA’s fashion district for 29 years. A plan for what? She managed a tight smile. “Deportation.” The immigration policies gusting out of the White House have chilled the US’s estimated 11 million undocumented people, half of whom are Mexican. The new president has vastly widened the numbers deemed priorities for expulsion. “As we speak tonight we are removing gang members, drug dealers that threaten our communities and prey on our very innocent citizens,” he told a joint session of Congress last week. “Bad ones are going out as I speak and as I promised throughout the campaign.”

The Mexicans who flock to the LA consulate say that in reality Immigration and Customs Enforcement (ICE) is sweeping up caretakers, students, mothers – anyone who entered the US illegally, and is thus a law-breaker. “Trump is the world’s worst terrorist. He has the Latino community terrorised,” said Rosa Palacios, a careworker with a nine-year-old granddaughter who weeps in fear at losing relatives. The hostility outdid previous anti-immigrant crackdowns, she said. “It is worse than when they thought we were infected.”

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Mexico may well come out of this a stronger country.

Mexico Opens Legal Aid Centers At US Consulates To Defend Migrants (R.)

Mexico opened legal aid centers at its 50 consulates across the United States on Saturday to defend its citizens, the Mexican government said, amid worries of a crackdown on illegal immigration under U.S. President Donald Trump. Foreign Minister Luis Videgaray exhorted the U.S. government to respect the rights of Mexicans and called for the United States to allow a path to legality for undocumented migrants. “We are not promoting illegality,” Videgaray said, according to a video of an event at the Mexican consulate in New York provided by the foreign ministry, saying that Mexico supported following the law, but that means respecting human rights. Trump has issued orders to initiate tougher deportation procedures during his first month in office, following up on campaign vows to fight illegal immigration and to build a wall on the U.S.-Mexico border.

“Today we are facing a situation that can paradoxically represent an opportunity, when suddenly a government wants to apply the law more severely,” Videgaray said. “It is becoming more than evident that to apply the law, which is the obligation of any state, would also imply a real economic damage to this country which highlights the need for immigration reform, an immigration reform that resolves once and for all the legal status of the people,” Videgaray said. The Pew Research Center estimates there are nearly 6 million undocumented Mexicans living in the United States. Late last month, Videgaray expressed “worry and irritation” about Trump’s new policies to U.S. Secretary of State Rex Tillerson and Homeland Security chief John Kelly when they visited Mexico for talks on immigration and security.

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There is so much international law concerning the rights of refugees, written especially after wars, but none of it seems to matter much.

Stranded Refugees Denied UK Asylum Face ‘Life In Limbo (O.)

Almost half of the refused asylum seekers who are unable to leave the UK have considered committing suicide, according to new research that criticises government rules for forcing individuals into destitution and a life in limbo. Interviews with asylum seekers refused permission to remain, in the UK but who cannot go home because they lack a passport, their nationality is disputed or there is no viable route back to their country, also found that half have considered or are applying for statelessness. The British Red Cross charity said such individuals should be allowed temporary leave to remain and work if they meet Home Office requirements, sparing people from years living in penury.

The charity said it knew of cases where women trapped in this situation had resorted to paying for a place to sleep with sex. It cited one Algerian who has been in the UK for 17 years who wassleeping on the streets and warned that those stuck in such limbo frequently suffer periods of homelessness alongside debilitating mental health issues, and that survival depended on the goodwill of friends and charities. Analysis by the Guardian last week revealed that Britain is one of the worst destinations in western Europe for people seeking asylum. Based on in-depth interviews with 15 people, the British Red Cross report found chronic stress, insomnia, anxiety and depression, with one refused asylum seeker from Sudan, a victim of torture, describing that he self-harms by banging his head against the wall.

No conclusive figures exist on the numbers of people who cannot leave the UK, although a freedom of information response from the Home Office reveals that 1,096 people lodged an application for statelessness in the UK after being refused asylum, following the introduction of new guidance in April 2013.

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Feb 182017
 
 February 18, 2017  Posted by at 4:01 pm Finance Tagged with: , , , , , , , ,  8 Responses »
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Jackson Pollock Shooting Star 1947

 

It’s amusing to see how views start to converge, at the same time that it’s tiresome to see how long that takes. It’s a good thing that more and more people ‘discover’ how and why austerity, especially in Europe, is such a losing and damaging strategy. It’s just a shame that this happens only after the horses have left the barn and the cows have come home, been fed, bathed, put on lipstick and gone back out to pasture again. Along the same lines, it’s beneficial that the recognition that for a long time economic growth has not been what ‘we’ think it should be, is spreading.

But we lost so much time that we could have used to adapt to the consequences. The stronger parties in all this, the governments, companies, richer individuals, may be wrong, but they have no reason to correct their wrongs: the system appears to work fine for them. They actually make good money because all corrections, all policies and all efforts to hide the negative effects of the gross ‘mistakes’, honest or not, made in economic and political circles are geared towards making them ‘whole’.

The faith in the absurd notion of trickle down ‘economics’ allows them to siphon off future resources from the lower rungs of society, towards themselves in the present. It will take a while for the lower rungs to figure this out. The St. Louis Fed laid it out so clearly this week that I wrote to Nicole saying ‘We’ve been vindicated by the Fed itself.’ That is, the Automatic Earth has said for many years that the peak of our wealth was sometime in the 1970’s or even late 1960’s.

Intriguing questions: was America at its richest right before or right after Nixon took the country off the gold standard in 1971? And whichever of the two one would argue for, why did he do it smack in the middle of peak wealth? Did he cause the downfall or was it already happening?

As per the St. Louis Fed report: “Real GDP growth fell and leveled off in the mid-1970s, then started falling again in the mid-2000s”. What happened during that 30-year period was that we started printing and borrowing with abandon, making both those activities much easier while we did, until the debt load overwhelmed even our widest fantasies ten years ago. And we’ve never recovered from that, if that was not obvious yet. Nor will we.

As the first graph below shows, there was still growth post-Gold Standard but the rate of growth fell and then “leveled off”, only to fall more after, to a point where Real GDP per Capita is presently 0.5% or so -little more than a margin error-. How one would want to combine that with talk of an economic recovery is hard to see. In fact, such talk should be under serious scrutiny by now.

Still, the numbers remain positive, you say. Yes, that’s true. But there’s a caveat, roughly similar to the one regarding energy and the return on it. Where we used to pump oil and get 100 times the energy in return that we needed to pump it, that ratio (EROEI) is now down to 10:1 or less. Alternative energy sources do little better, if at all. Whereas to run a complex society, let alone one like ours that must become more complex as we go along – or die-, we would need somewhere along the lines of a 20:1 to even 30:1 EROEI rate.

Another place where a similar caveat can be found is the amount of dollars it takes to produce a dollar of real growth. That amount has been increasing, and fast, to the point where it takes over $10 to create $1 or growth in the US and Europe, and China too moves towards such numbers.

Both our energy systems and our financial systems are examples of what happens when what we should perhaps call the rate of ‘productivity’ (rather than growth) falls below a critical mass: it becomes impossible to maintain, even keep alive, a society as complex as ours, which requires an increase in complexity to survive. In other words: a Real GDP per Capita growth rate of 0.5% is not enough to stand still, just like oil EROEI of 5:1 is not; there is growth, but not -nearly- enough to keep growing.

One does not get the impression that the St. Louis Fed economists who wrote the report are aware of this -though the title is suggestive enough-, they seem to lean towards the eternal desire for a recovery, but they did write it nonetheless. Do note the sharp drop that coincides with the 1973 oil crisis. We never ‘recovered’.

Why Does Economic Growth Keep Slowing Down?

The U.S. economy expanded by 1.6% in 2016, as measured by real GDP. Real GDP has averaged 2.1% growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3% per year). These lower growth rates could in part be explained by a slowdown in productivity growth and a decline in factor utilization. However, demographic factors and attitudes toward the labor market may also have played significant roles.

The figure below shows a measure of long-run trends in economic activity. It displays the average annual growth rate over the preceding 40 quarters (10 years) for the period 1955 through 2016. (Hence, the first observation in the graph is the first quarter of 1965, and the last is the fourth quarter of 2016.)

 

Long-run growth rates were high until the mid-1970s. Then, they quickly declined and leveled off at around 3% per year for the following three decades. In the second half of the 2000s, around the last recession, growth contracted again sharply and has been declining ever since. The 10-year average growth rate as of the fourth quarter of 2016 was only 1.3% per year. Total output grows because the economy is more productive and capital is accumulated, but also because the population increases over time.

The same dynamics (or lack thereof) are reflected in a recent piece by Chris Hamilton, in which he argues that global growth -as expressed by growth in energy consumption- has largely been non-existent for years, other than in China. Moreover, China has added a stunning amount of debt to achieve that growth, and since its population growth is about to stagnate -and then turn negative-, this was pretty much all she wrote.

Global Growth is All About China…Nothing but China

Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.

 

[..] here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.

 

China’s core population is essentially peaking this year and beginning a decades long decline (not unlike the world. The chart below shows total Chinese core population peaking, energy consumption stalling, and debt skyrocketing.

 

The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.

 

• China of ’85-’00 grew on population and demographic trends.

• China of ’00-’15 grew despite decelerating population growth but on accelerating debt growth…this growth in China kept global growth alive.

• China of ’15-’30 will not grow, will not drive the global economy and absent Chinese growth…the world economy is set to begin an indefinite period of secular contraction. China ceased accumulating US Treasury debt as of July of 2011 and continues to sell while busy accumulating gold since 2011.

Unfortunately, neither quasi-democracies nor quasi-communist states have any politically acceptable solutions to this problem of structural decelerating growth and eventual outright contraction…but that won’t keep them from meddling to stall the inevitable global restructuring.

I can only hope that these data will convince more people that all the times I’ve said that growth is over, it was true. And perhaps even make them think about what follows from there: that when growth is gone, so is all centralization, including globalization, other than by force. This will change the world a lot, and unfortunately not always in peaceful ways.

What seems to have started (but was in the air long before) with Brexit and Trump, is merely a first indication of what’s to come. People will not accept that important decisions that affect them directly are taken by anonymous ‘actors’ somewhere far away, unless this promises and delivers them very concrete and tangible benefits. In fact, many have lost all faith in the whole idea, and that’s why we have Trump and Brexit in the first place.

This turn inward -protectionism if you will-, in the UK, US and many other places, is an inevitable development that follows from declining growth and soaring debt. Entire societies will have to be re-built from the ground up, and people will want to do that themselves, not have it dictated by strangers. At the same time, of course, those who profit most from centralization want that to continue. They can’t, but they will try, and hard.

Equally important, people who wish to try and save existing ‘central institutions’ for less selfish and more peaceful reasons should think twice, because they will fail too. It’s centralization itself that is failing, and the demise of the structures that represent it is but a consequence of that. We will see local structures being built, and only after that possibly -and hopefully- connect to each other. This is a big change, and therefore a big challenge.

Feb 182017
 
 February 18, 2017  Posted by at 10:40 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Unknown California State Automobile Association signage 1925

 


“That War You Ordered….” (Jim Kunstler)
US ‘Unwavering’ In NATO Support – Pence (BBC)
European Union President Rejects Trump Call For More NATO Spending (CNBC)
Four NATO Nations Would Pick Russia to Defend Them If Threatened (BBG)
Who Really Rules The United States? (FreeB)
Australia Headed For ‘Economic Armageddon’ (News.com.au)
China Is Going Broke (Jim Rickards)
Brexit Was A Revolt Against Snobs Like Tony Blair (Spec.)
Small Businesses Face Being ‘Driven Out Of London’ (Ind.)
Norway Central Bank Chief Warns Of Sharp Drop In Wealth Fund (BBG)
Only Germans Love the Euro These Days (BBG)
How Do You Say Deja Vu In Greek? (R.)
Can Tax Increases Bring Inflation To Greece? (KTG)
Greek Labor Minister Says Pensioners Can Barely Make Ends Meet (K.)

 

 

Hard to find any news articles these days that are not severely biased. So let’s go with Jim.

“That War You Ordered….” (Jim Kunstler)

The Russia paranoia frenzy is serious business because it indicates that a state-of-war exists between the permanent bureaucracy of government (a.k.a. the Deep State) and the new Trump administration. There are features of the struggle that ought to be much more disturbing than the dubious alleged monkey business about Russia hacking the election and the hoo-hah around a single intercepted phone call between Michael Flynn and the Russian ambassador, made to open a line-of-communication between high-ranking officials, strictly routine business in any other administration. Most disturbing are signs that the so-called intelligence community (IC) has gone rogue in collusion with forces aligned around Democratic Party functionaries up to and including former president Obama and Hillary Clinton, along with CNN, The Times, The Wash-Po, NBC News and a few other mouthpieces of the defeated establishment.

Obama and Hillary remain conspicuously sequestered from this maelstrom, but they must be working their phones like nobody’s business. (Is the IC monitoring them, too, one wonders?) Until his Queeg-on-steroids news conference late yesterday, Trump laid pretty low after General Flynn was thrown under the bus, but he must be plotting counter-moves, with Bannon and Steven Miller straining at their leashes, slavering for blood. Will some employees over at the CIA and the — what? — sixteen other IC outposts that stud the government like shipworms in a rotting hulk — be called on the carpet of the oval office, and possibly handed pink slips? How do you drain that swamp in Langley, VA? Perhaps with subpoenas? Surely Jeff Sessions over at the Department of Justice has got to be weighing action against the IC leakers. That shit is against the law.

The next disturbing element of the situation is all the war-drum beating by the same cast of characters: the IC, the Democratic Party, and major media. Why in hell are we antagonizing Russia? In the last month of Obama’s term — and for the first time in many years — NATO moved a bunch of tanks close to Russia’s border with the Baltic states. Do you really think Russia wants to reoccupy these countries for the pleasure of subsidizing them and draining the Russian treasury? In those twilight days of Obama, government officials made wild and unspecific charges about “Russian aggression,” and vague assertions about Russian plans to dominate the global scene. ajor what-the-fuck there. There’s the ugly situation in Ukraine, of course, but that was engineered by Obama’s state department.

Do you know why Russia annexed Crimea after that? It couldn’t have been for more transparently rational reasons. And what exactly is our beef with Russia in Syria? That they’re trying to prop up the Assad government because the last thing the Middle East needs is another failed state with no government whatsoever? What’s our plan for Syria, anyway? Same as Somalia, Iraq, and Libya? These stories about Russia’s intentions seem insane on their face. It’s amazing that readers of The New York Times swallow them whole. It must say something about the deterioration of the coastal gene pool. The story-mongers have a purpose though: to promote a state of permanent hostility, neo-cold-war style, to justify the grotesquely overgrown operations of the IC.

Read more …

Hollow words.

US ‘Unwavering’ In NATO Support – Pence (BBC)

The US will be “unwavering” in its support for Nato, vice-president Mike Pence told European leaders at the Munich Security Conference. In the first major foreign policy address for the Trump administration, Mr Pence said the US would “stand with Europe today and every day”. But he told the gathered leaders that European countries were “failing to pay their fair share” on defence. That failure “erodes the foundation of our alliance”, he said. Apart from the US, only four other nations had met a commitment to spend 2% of GDP on defence, “The time has come to do more,” he said.

President Donald Trump warned before taking office that the US might not uphold its commitment to come to the defence of Nato allies who were not perceived to have contributed enough financially. Mr Pence went on to say that the US would “continue to hold Russia accountable, even as we search for new common ground, which as you know, President Trump believes can be found”. Mr Pence said Russia must honour the Minsk peace accords on Ukraine and de-escalate its military operations in the east of the country.

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Juncker makes sense for a change.

European Union President Rejects Trump Call For More NATO Spending (CNBC)

European Commission President Jean-Claude Juncker has said Europe should resist U.S. pressure to spend more spending on defense. U.S. President Donald Trump has criticized the NATO defense alliance, suggesting he could withdraw support if European countries did not raise defense spending to at least 2% of their economic output.In a speech on the sidelines of the Munich Security Conference Thursday, Juncker, who heads the EU’s executive arm, suggested some resistance to Trump’s threat was in order. “It has been the American message for many, many years. I am very much against letting ourselves be pushed into this,” he said. Juncker also said the EU’s other spending commitments made up for any shortfalls in military funding. “Modern politics cannot just be about raising defense spending,” he said.

“If you look at what Europe is doing in defense, plus development aid, plus humanitarian aid, the comparison with the United States looks rather different,” he said. Juncker added that European nations should bundle their defense spending better and spend the money more efficiently. At a NATO meeting Wednesday, the U.S. Defense Secretary James Mattis reinforced Trump’s message, warning treaty allies they must boost their defense spending or America could “moderate its commitment.” “Americans cannot care more for your children’s future security than you do. I owe it to you to give you clarity on the political reality in the United States and to state the fair demand from my country’s people in concrete terms,” he said in a speech to NATO allies in the Belgian city of Brussels on Wednesday.

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Originally filed by reporter (see URL) as: “Melania Trump’s Slovenia Would Pick Russian Over US Protection”. Say no more.

Four NATO Nations Would Pick Russia to Defend Them If Threatened (BBG)

Who you gonna call? For the citizens of four NATO countries asked which military power they’d want fighting on their side if attacked, the answer was simple – Russia. That was among the findings of a multi-nation Gallup poll published just ahead of Friday’s annual gathering of the transatlantic security community in Germany that appeared to map out shifts in the post-Cold War security alliances which have come under renewed strain and scrutiny since Donald Trump’s election to the U.S. presidency. By far the largest number of countries polled by WIN/Gallup International chose the U.S. for their go-to defense partner, suggesting that it remains the world’s only military power with truly global reach and alliances. At the same time, however, China and Russia picked each other, war-torn Ukraine and Iraq split down the middle, while those four members of the U.S.-led North Atlantic Treaty Organization – Bulgaria, Greece, Slovenia and Turkey – plumped for Russia.

As U.S. Secretary of Defense James Mattis tours Europe delivering a message of tough love to NATO allies – increase spending or see the U.S. “moderate’’ its support – the poll shows the world’s gradual political reorganization around different security poles, according to Kancho Stoychev, vice president of WIN/Gallup International. “It isn’t surprising that Russians and Chinese chose each other, but it is new,’’ said Stoychev. “It shows us something very important – that U.S. policy over the last 20 years has driven Russia into the arms of China, which is quite strange because Russia is fundamentally a part of Europe.’’ At the same time, some of the results in European NATO countries showed how their fundamental security choices were moving beyond the alliance, he said. Bulgaria and Greece, for example, see their biggest security threat coming from Turkey.

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Right wing. As I said, very hard to find anything unbiased. All heels are dug in deeply.

Who Really Rules The United States? (FreeB)

Donald Trump was elected president last November by winning 306 electoral votes. He pledged to “drain the swamp” in Washington, D.C., to overturn the system of politics that had left the nation’s capital and major financial and tech centers flourishing but large swaths of the country mired in stagnation and decay. “What truly matters,” he said in his Inaugural Address, “is not which party controls our government, but whether our government is controlled by the people.” Is it? By any historical and constitutional standard, “the people” elected Donald Trump and endorsed his program of nation-state populist reform. Yet over the last few weeks America has been in the throes of an unprecedented revolt. Not of the people against the government—that happened last year—but of the government against the people. What this says about the state of American democracy, and what it portends for the future, is incredibly disturbing.

There is, of course, the case of Michael Flynn. He made a lot of enemies inside the government during his career, suffice it to say. And when he exposed himself as vulnerable those enemies pounced. But consider the means: anonymous and possibly illegal leaks of private conversations. Yes, the conversation in question was with a foreign national. And no one doubts we spy on ambassadors. But we aren’t supposed to spy on Americans without probable cause. And we most certainly are not supposed to disclose the results of our spying in the pages of the Washington Post because it suits a partisan or personal agenda. Here was a case of current and former national security officials using their position, their sources, and their methods to crush a political enemy. And no one but supporters of the president seems to be disturbed.

Why? Because we are meant to believe that the mysterious, elusive, nefarious, and to date unproven connection between Donald Trump and the Kremlin is more important than the norms of intelligence and the decisions of the voters. But why should we believe that? And who elected these officials to make this judgment for us? Nor is Flynn the only example of nameless bureaucrats working to undermine and ultimately overturn the results of last year’s election. According to the New York Times, civil servants at the EPA are lobbying Congress to reject Donald Trump’s nominee to run the agency. Is it because Scott Pruitt lacks qualifications? No. Is it because he is ethically compromised? Sorry. The reason for the opposition is that Pruitt is a critic of the way the EPA was run during the presidency of Barack Obama. He has a policy difference with the men and women who are soon to be his employees. Up until, oh, this month, the normal course of action was for civil servants to follow the direction of the political appointees who serve as proxies for the elected president.

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Personal debt.

Australia Headed For ‘Economic Armageddon’ (News.com.au)

Australia is headed for an “economic Armageddon”, with record household debt, record foreign debt and a massive housing bubble creating a perfect storm that could “wipe out” millions of families if there is a global shock. That is the apocalyptic warning of a former government economic advisor, who says the government needs to cut tax incentives such as negative gearing and welfare handouts and the RBA needs to increase interest rates in order to avoid a “devastating depression”. Corporate governance specialist John Adams, who was an economics and policy advisor to Senator Arthur Sinodinos and management consultant to a big four accounting firm, believes he has found seven disturbing signs that the global economy is primed for a major fall. Worse still, Australia is particularly vulnerable because of significant structural imbalances, including record levels of household debt not seen since the lead up to the last great depression in the 1920s.

“Australians should be concerned over the state of both the Australian and global economy,” Mr Adams told news.com.au. “The data clearly demonstrates that there are significant structural economic imbalances in the Australian economy. Significant expansion of the broad money supply and record low interest rates by the Reserve Bank of Australia as well as generous tax incentives and welfare provisions by the Federal Government have led Australians to amass record levels of personal debt which have fuelled the creation of asset bubbles, particularly in housing. “Millions of Australians are not only doing it tough through significant cost of living and debt serving pressures, but are at significant risk of being financially wiped out if an unanticipated adverse international economic shock were to hit Australia such as a new global financial crisis.”

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End of the year?

China Is Going Broke (Jim Rickards)

[..] of the 2.9 trillion, about one trillion of that is not liquid, meaning it’s wealth of some kind, it represents investment, but China wanted to improve their returns actually on their investments, so they invested in hedge funds, they invested in private equity funds, they made direct investments in gold mines in Zambia and so forth, so about a trillion of that is, it’s wealth, but it’s not liquid. It’s not money that you can use to pay your bills. So now, we’re down to 1.9 trillion liquid. Well, about another trillion is going to have to be held in what’s called a “precautionary reserve” to bail out the Chinese banking system.

When you look at the Chinese banking system, private estimates are that the bad debts are 25% of total assets. Banks usually run with 5, maybe 7-8% capital. Even if you said 10% capital, well, if 25% of your assets are bad, that completely wipes out your capital, so the Chinese banking system is technically insolvent, even though they don’t admit that. I mean, they cook the books, they take these bad loans. Let’s say I’m a bank and I have a loan to a state owned enterprise, a steel mill or something and the guy can’t pay me, can’t even come close to paying me and the loan’s due, I say, “Well, look, you owe me 300 million dollars. I’ll tell you what. I’ll give you a new loan for 400 million dollars, but I’ll take the money and pay myself back the old loan plus the interest, and then I’ll give the new loan to your maturity and I’ll see you in two years.”

So, if you did that in the U.S. banking system you’d go to jail. You’re not allowed to do that. You’re throwing good money after bad and you’re supposed to right off a loan that is clearly not performing or where the borrower is unable to pay. But in this case, it’s just extend to pretend, and so it’s still on the books, in my example, 400 million dollar good loan with a two year maturity, but in fact it’s a rotten loan that the guy couldn’t pay in the first place, and now he just can’t pay a bigger amount. He’s probably going to go bankrupt and I’ll have to write it off at the end of the day. So, with that as background for the Chinese banking system, people kind of shrug and say, “Well, can’t China just bail it out? They’ve got all this money.”

Well, the answer is they could, and they’ve done so before, and they can bail it out, but it’s going to trust a trillion dollars, so you’ve got to put a trillion dollars to one side, for when the time comes, to bail out the banking system. Well, now you’re down to 900 billion, right? Remember, we started with four trillion, 1.1 trillion’s out door, 1 trillion’s illiquid, 1 trillion you’ve got to hold to one side to bail out the banking system, well now you only have 900 billion of liquid assets to defend your currency, to prop up the Chinese yuan. But the problem is the reserves are going out the door at a rate of, it varies month to month, 30, 40, 50 billion dollars a month. Some months more, some months over 100 billion dollars.

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Blair getting involved will be a huge boon for Brexit.

Brexit Was A Revolt Against Snobs Like Tony Blair (Spec.)

The brass neck of Tony Blair. The Brexit vote was ‘based on imperfect knowledge’, says the man who unleashed barbarism across the Middle East on the basis of a student dissertation he printed off the internet. Who marched thousands into unimaginable horror on the basis of myth and spin. That NHS claim on the side of the Leave bus is small fry, infinitesimally small fry, in comparison with the guff this bloke came out with. It didn’t cause anyone to die, for one. For Blair to lecture the British people about truth is an affront to memory and decency and reason. No self-respecting citizen should put up with it. Blair made his comments about our ‘imperfect knowledge’ – dimwits that we are – in a speech for Open Britain, a cross-party pro-EU group, in London this morning.

The speech sums up the elitism and arrogance and contempt for democracy of those Remainers who just cannot accept that they lost. ‘The people voted without knowledge of the true terms of Brexit’, Blair haughtily declared. Rubbish. We all knew what it meant to tick the box saying ‘Leave the European Union’ — it meant leaving the European Union. It meant what it said — and we meant what we said. Blair and the connected, moneyed weepers for the EU who make up Open Britain can’t get their heads around this. They think we didn’t know what we were doing. And so they’ve come to enlighten us and make us think again. Remainers must ‘rise up’, says Blair, and turn the throng’s ‘imperfect knowledge’ into ‘informed knowledge’ by giving us ‘easy to understand’ information about how Brexit will ‘cause real damage to the country’.

Risen, brave, ‘informed’ Remainers must hold back the ‘rush over the cliff’s edge’, he said. The whole thing stinks to the heavens of paternalism. Blair is positioning himself and his switched-on mates as the possessors of information that we the imperfect plebs lack. Like lemmings we’re leaping off the cliff, and this good man must save us. He must impart to us his wisdom — in ‘easy to understand’ ways, of course, because we can’t handle anything too complex — and in the process fulfil the duty of the political leader to ‘give answers’ rather than ‘ride the anger’ of the public. He depicts Open Britain as cool and knowledgable, and Leavers as uninformed and angry. It’s positively aristocratic, with Open Britain fancying itself as the small but beautiful font of wisdom in a land of madness.

[..] Blair spoke in the language of revolution. Remainers must ‘rise up’. He talked about the need for a ‘revolt’, by ‘force of argument’, against the Leave vote. Excitable media outlets have gone even further, describing his speech as a call ‘for people to “rise up” against Brexit’, a plea that ‘Britain must rise up against Brexit’.

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How to kill a city, part 826.

Small Businesses Face Being ‘Driven Out Of London’ (Ind.)

An increase in business rates is one of biggest issues concerning small businesses in London, easily trumping fears around economic uncertainty and worries relating to recruiting the right talent. According to a survey by the Federation of Small Businesses (FSB) and trade body Camden Town Unlimited, the average micro business in the city, defined as a company with fewer than 10 employees, will be paying business rates of £17,000 as of April this year under a Government hike. “London is in serious danger of losing its vital support system of micro and small businesses,” the FSB’s chair for London, Sue Terpilowski, said in a statement. “We need to realise that the hard costs of operating a business in the capital are starting to outweigh the benefits which simply does not make economic sense – and so tacking these burdens at the spring Budget is critical,” Ms Terpilowski added.

Business rates – which are sometimes referred to as non-domestic rates – are levies that companies occupying commercial properties pay. That tax goes towards covering the cost of services provided by local authorities and the emergency services. The survey found that close to three quarters – 74% – of businesses consider rates to be one of the biggest issues affecting them, while 36% cited economic uncertainty, and, one third said that the difficulty around recruiting the right staff was their biggest concern. “The new business rates will drive firms out of London, force some businesses to cut staff or close down altogether,” said Simon Pitkeathley, the chief executive of Camden Town Unlimited.

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Fast and furious. Caught in the oil wars.

Norway Central Bank Chief Warns Of Sharp Drop In Wealth Fund (BBG)

Norway’s central bank governor sharpened his warning on rising spending of oil revenue as he drew up scenarios for a 50% loss of capital over the next 10 years for the world’s biggest sovereign wealth fund. Governor Oystein Olsen said that the continued rise in oil cash spending, which now accounts for about 20% of the budget and 8% of GDP, must now be halted to protect the $900 billion fund, the world’s largest sovereign pool of cash. “With a high level of oil revenue spending, there’s a risk of a sharp reduction in the fund’s capital,” Olsen said in the traditional Annual Address in Oslo Thursday. “This could, for example, happen if a global recession triggers both a decline in oil revenue and low or negative returns on the fund’s capital.” Government withdrawals from the fund are estimated to jump about 25% this year after an historic first outflow last year. The Conservative-led government was last year forced to dip into the oil fund for the first time to cover budget needs and protect the economy amid a plunge in oil prices.

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Why the euro is doomed.

Only Germans Love the Euro These Days (BBG)

French presidential candidate Marine Le Pen unsettled investors with her pledge to pull France out of the euro and re-denominate all French debt in newly minted francs. Polls suggest Le Pen won’t get the chance; she is expected to lose a second-round runoff. Even if polls are correct this time, that doesn’t mean the euro is safe. In fact, political support for the single currency has been waning – especially in Germany’s two largest euro-zone trading partners. In both France and Italy, there is now a plurality of support for candidates who advocate a withdrawal from the euro, with pro-euro candidates gathering less than 30% in polls. In France, anti-euro candidates – Le Pen and Socialist Jean-Luc Melanchon – together have nearly 40% support.

Of course, that doesn’t mean that all of Le Pen’s supporters, or Melanchon’s, oppose the euro. Most French voters still tell pollsters they favor the euro; but clearly that support waning, as the latest Eurobarometer poll showed. Anti-euro sentiment, once a blip on the fringes of public opinion, is now credible and has found its way onto political platforms. Respondents are asked whether they think the euro is a good or bad thing for their country. In Italy, the euro gets even less love than in France, with 47% saying the euro is a “bad” thing for their country. That is in stark contrast to Germany, where there is now a clear majority in favor of the euro. This chart shows how opinion has changed over time:

This is a dramatic reversal in opinion: A German population that was initially reluctant to give up the Deutsche mark is now firmly wedded to the euro, while support in France and Italy has declined (particularly sharply in Italy’s case). But this shift is the logical result of the euro’s structural deficiencies. German industry, whose productivity has been increasing more than its European counterparts, now dominates the continental economy. While German unemployment was decreasing and its economy recovering from the financial crisis, Italy was stagnant with rising unemployment. Already saddled with a very large public debt (now over 130% of gross domestic product), Italy could neither reflate its economy, nor bail out its banks, while whole segments of its industry, particularly in lower and medium-cost goods, have disappeared.

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Damning: 56% of Greeks make less than €8,600 a year. And the Troika wants to tax them more. “..the tax- free income threshold, now at about €8,600 per person per year, a number the IMF maintains lets some 56% of wage-earning Greeks escape paying income tax.”

How Do You Say Deja Vu In Greek? (R.)

[..] it would not be trite to say that another festering row with Greece is the last thing the euro zone needs when faced with a protectionist U.S. president, Britain leaving the European Union, and anti-euro politicians vying for power or presence in French, Dutch and German elections. So EU officials have been urging speed in finding agreement and calmly warning of instability ahead if none is found. “There is a common understanding that time lost in reaching an agreement will have a cost for everyone,” the European commissioner responsible for the euro, Valdis Dombrovskis, told Greek news portal Euro2day. The issue, however, is multi-layered and thus particularly complex. Part of it is about what kind of primary surplus – what is left in a surplus budget before debt obligations – Greece must reach and run for some time.

The bailout, signed by Greece and euro zone lenders, says 3.5% of GDP(which would be by far the highest in the euro zone). The IMF, the other major lender, says that is undoable without further Greek belt-tightening. It says 1.5% of GDP and some form of debt relaxation – for example, over what is paid when – would be more realistic and sustainable. The IMF, furthermore, says it won’t participate in any bailout that it does not believe to be viable. Germany and others say that the IMF must be a part of the bailout or there is no deal. Both lenders have told Greece they want about €3.6 billion in additional savings, including a reduction in the tax- free income threshold, now at about €8,600 per person per year, a number the IMF maintains lets some 56% of wage-earning Greeks escape paying income tax.

Greece says no. Its economy contracted again in the fourth quarter of 2016, nearly one in four Greeks is unemployed and its pensioners have already seen 11 cuts to income. So plenty of scope for crisis – if not quite yet.

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Good example of why rising prices do not equal inflation. Greece is deflating like mad. Money velocity has plummeted, making recovery impossible.

Can Tax Increases Bring Inflation To Greece? (KTG)

Special consumption fees imposed on fuel, coffee, tobacco products and telecommunications beginning of the year skyrocketed consumer prices and led to the inevitable: inflation. According to Greek Statistics Authority ELSTAT inflation reached 1.5% in January from 0.3% in December. ‘This is almost a five-year high and above market expectations that were forecasting a 0.4% for January,’ Reuters notes. I do not know how ‘markets’ make their forecasts, but real Greek life shows a different picture. The supermarkets had massive discount offers in a plethora of goods in December. The special fees imposed as of 1.1.2017 were not immediately seen in supermarket prices but in fuel and tobaccoo products and telecommunications. Super markets kept offering discounts until around January 20th. Then the “households party” was over.

On February 1st, the price for half a kilo filter coffee went up to €7.68 from €5.46. Apparently sales stagnated, the import company lowered the price by 1 euro. A week later, the discount offer was just 50 cents. Officially, the special fee was supposed to be €2-3 per kilo of roasted coffee. In real life, the increase is higher €2.12 for just half a kilo. Similarly, the price for 400-gr package for a cocoa drink of a well known international brand went up to €3.40 from €2.60. At the same time, the cheaper soft package disappeared from the supermarket shelves. Here to note that for year the hard package used to contain 500gr. Sometime in 2010, I was badly surprised to see the package was down to 400gr, while the price remained the same.

In real life, I have to spend a total of €9 to €10 more per supermarket visit once a week. This makes a nice sum of €40 more per month. And that’s alone for the supermarket. Add the increases in other sectors and start the calculation.

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As the EU keeps stressing the importance of unity, the Troika inches ever closer to causing a civil war in Greece. Unity is not just a word.

Greek Labor Minister Says Pensioners Can Barely Make Ends Meet (K.)

Greece’s Minister of Labor, Social Security and Social Solidarity Effie Achtsioglou insisted in a letter published Friday in the Financial Times that Greek pensioners have barely enough to live on and urged IMF chief Christine Lagarde to listen. “We cannot accept IMF insistence on further cuts in pensions. As minister for pensions I must answer, hoping that IMF managing director Christine Lagarde will listen,” she said, ahead of Monday’s Eurogroup, in a bid to explain why Greece cannot make any more pension cuts. “The narrative about Greek pensions is driven by demands of its creditors. They argue that the pension system is overgenerous and a drain on the economy,” she said, adding that it is based on the crude statistic that pensions require annual transfers from the state budget of around 11% of GDP in Greece compared with the eurozone average of 2.25%.

This comparison, she said, is misleading. “Following the implementation of the new pension law last year, total state financing of pensions is projected at less than 9% of GDP,” she explained. “The bottom line is that Greece’s old people are much worse off than elsewhere in Europe because they do not have access to other benefits. Per capita income for individuals aged over 65 is about €9,000, compared with €20,000 in the eurozone.” she added, asking “how could the major problem confronting Greece be overgenerous pensions, when 43% of pensioners receive less than €660 a month?.”

Read more …

PRESS CONFERENCE

searching
inside his cranium

trying to find
a brain to rack,

he found the word
”uranium”

and launched
an unclear attack

Brian Bilston

Feb 172017
 
 February 17, 2017  Posted by at 11:00 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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John Collier Workmen at emergency office construction job, Washington, DC Dec 1941

 


Global Growth is All About China…Nothing but China (Econimica)
US Household Debt Is Dangerously Close To 2008 Levels (CNN)
“Seriously Delinquent” US Auto Loans Surge (WS)
3 Reasons The US Could Be Headed For A Fresh Debt Crisis (MW)
Fed President Says US Banks Have “Half The Equity They Need” (Black)
Harward Turns Down National Security Adviser Job Over Staffing Dispute (CBS)
The Swamp Strikes Back (Escobar)
Who’s Sucking Up All the World’s Safest Bonds? (WSJ)
Mary Jo White Seriously Misled the US Senate to Become SEC Chair (Martens)
European Financial Centres After Brexit (E.)
Putin Orders Russian Media To “Cut Back” On Positive Trump Coverage (ZH)
‘Bank Run’ under Capital Controls: Greeks withdraw €2.5bn in 45 days (KTG)

 

 

Let this sink in. Then realize how reliable Chinese numbers are. And that’s where all the ‘growth’ is in the world.

Global Growth is All About China…Nothing but China (Econimica)

Since 2000, China has been the nearly singular force for growth in global energy consumption and economic activity. However, this article will make it plain and simple why China is exiting the spotlight and unfortunately, for global economic growth, there is no one else to take center stage. To put things into perspective I’ll show this using four very inter-related variables…(1) total energy consumption, (2) core population (25-54yr/olds) size and growth, (3) GDP (flawed as it is), and (4) debt. First off, the chart below shows total global energy consumption (all fossil fuels, nuclear, hydro, renewable, etc…data from US EIA) from 1980 through 2014, and the change per period. The growth in global energy consumption from ’00-’08 was astounding and an absolute aberration, nearly 50% greater than any previous period.

Of that growth in energy consumption, the chart below breaks down the sources of that growth among China (red), India/Africa (gold) and the rest of the world (blue). It’s plain to see the growth of Chinese energy consumption, the decelerating growth among the rest of the world, and the stagnant growth among India / Africa.

But here is the money chart, pointing out that the growth in energy consumption (by period) has shifted away from “the world” squarely to China. From 2008 through 2014 (most recent data available), 2/3rds or 66% of global energy consumption growth was China. Also very noteworthy is that India nor Africa have taken any more relevance, from a growth perspective, over time. The fate of global economic growth rests solely upon China’s shoulders.

The chart below shows China’s core population (annual change) again against total debt, GDP, and energy consumption. The reliance on debt creation as the core population growth decelerated is really hard not to see. This shrinking base of consumption will destroy the meme that a surging Chinese middle class will drive domestic and global consumption…but I expect this misconception will continue to be peddled for some time.

Read more …

Fewer delinquencies, says the Fed. But then look at the next article: “Seriously Delinquent” US Auto Loans Surge

US Household Debt Is Dangerously Close To 2008 Levels (CNN)

Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York. For the year, household debt ballooned by $460 billion — the largest increase in almost a decade. That means the debt loads of Americans are flirting with 2008 levels, when total consumer debt reached a record high of $12.68 trillion. Rising debt hints that banks are extending more credit. Mortgage originations increased to the highest level since the Great Recession. Mortgage balances make up the bulk of household debt and ended the year at $8.48 trillion. However, growth in non-housing debt – which includes credit card debt and student and auto loans – are key factors fueling the rebound in debt.

Student loan debt balances rose by $31 billion in the fourth quarter to a total of $1.31 trillion, according to the report. Auto loans jumped by $22 billion as new auto loan originations for the year climbed to a record high. Credit card debts rose by $32 billion to hit $779 billion. At these rates, the New York Fed expects household debt to reach its previous 2008 peak sometime this year. But while that may sound alarming, there is one big difference between now and 2008, according to the Fed: Fewer delinquencies. At the end of 2016, 4.8% of debts were delinquent, compared to 8.5% of total household debt in the third quarter of 2008. There were also less bankruptcy filings – a little more than 200,000 consumers had a bankruptcy added to their credit report in the final quarter of last year, a 4% drop from the same quarter in 2015.

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“There’s nothing like loading up consumers with debt to make central bankers outright giddy.”

“Seriously Delinquent” US Auto Loans Surge (WS)

Bank regulators have been warning, now it’s happening. The New York Fed, in its Household Debt and Credit Report for the fourth quarter 2016, put it this way today: “Household debt increases substantially, approaching previous peak.” It jumped by $226 billion in the quarter, or 1.8%, to the glorious level of $12.58 trillion, “only $99 billion shy of its 2008 third quarter peak.” Yes! Almost there! Keep at it! There’s nothing like loading up consumers with debt to make central bankers outright giddy. Auto loan balances in 2016 surged at the fastest pace in the 18-year history of the data series, the report said, driven by the highest originations of loans ever. Alas, what the auto industry has been dreading is now happening: Delinquencies have begun to surge.

This chart – based on data from the Federal Reserve Board of Governors, which varies slightly from the New York Fed’s data – shows how rapidly auto loan balances have ballooned since the Great Recession. At $1.112 trillion (or $1.16 trillion according to the New York Fed), they’re now 35% higher than they’d been during the crazy peak of the prior bubble. Note that during the $93 billion increase in auto loan balances in 2016, new vehicle sales were essentially flat. No way that this is an auto loan bubble. Not this time. It’s sustainable. Or at least containable when it’s not sustainable, or whatever. These ballooning loans have made the auto sales boom possible.

Read more …

Not a new topic, but some useful numbers.

3 Reasons The US Could Be Headed For A Fresh Debt Crisis (MW)

Subprime car loansThe amount of total open car loans just topped $1 trillion, according to credit ratings firm Experian. But is that a sign of consumer confidence … or a cause for alarm? According to the latest data, from the third quarter of 2016, about 1 in 5 car loans are made to subprime borrowers, at an average interest rate of almost 11%. And broadly speaking, the average car loan in the U.S. is for a balance of almost $30,000 and a monthly payment of about $500. With stats like that, it’s no wonder the default rate on car loans is rising. A study by lending analysis firm Lending Times recently found that auto loan delinquencies are up over 21% compared with 2012 levels. A senior vice president at TransUnion, one of the three major credit rating bureaus, recently said he expects “a modest increase in delinquency” for auto loans going forward, too.

Just image what would happen if rates tick a bit higher. After all, if homeowners who were “underwater” on their homes in 2007 could shrug off the impact of a foreclosure on their credit report and simply walk away from a big mortgage, then why in the world would they stick with a double-digit interest rate on a car loan — especially as that car ages or breaks down? The real weight of these loans continues to hit the balance sheets of lenders, with net subprime losses continuing to march upward in December to 8.52%. Standard & Poor’s U.S. Auto Loan Tracker noted that while some of the acceleration was seasonal, “the year-over-year increases indicate that 2017’s losses could surpass last year’s levels.” No wonder the New York Fed called subprime auto debt a “significant concern” at the end of last year.

Student loans Hedge-fund guru Bill Ackman has said “I think that the government’s going to lose hundreds of millions of dollars” on student loans. And while that may sound like hysterics, when you consider that there is roughly $1.4 trillion in outstanding student debt, according to the Federal Reserve, that number doesn’t seem so far-fetched. Most of that is owned by the federal government via subsidized loans, too, with a recent Bloomberg report estimating the government owned some $850 billion in student loan debt as of 2014. Even a modest default rate would quite literally eat up hundreds of millions of dollars in a hurry. The losses for the government are disturbing, but at least can be made up with higher taxes or cuts elsewhere in the budget. There’s no relief for the millions of young Americans who are stuck paying for their college degree instead of spending on consumer goods.

Government-insured mortgagesAfter the collapse of subprime mortgages during the financial crisis, banks learned a hard lesson about these risky home loans. But if you think that means they avoided all loans to less-than-stellar borrowers, think again. The New York Fed recently juxtaposed the rise of government-insured mortgages vis-à-vis the decline in subprime lending to find that “government insurance programs rapidly expanded and more than filled the void.” That mirrors a report from ProPublica back in 2012 that estimated 9 in 10 mortgages issued at the time were being guaranteed by taxpayers via government-sponsored enterprises such as Fannie Mae and Freddie Mac. And while standards are moderately higher for loans with this government backstop than precrisis loans to subprime borrowers, “they are not low-risk loans,” write the New York Fed economists. “The combination of high leverage and low credit scores documented above translates into extremely high default rates.”

Read more …

It’s all about political power.

Fed President Says US Banks Have “Half The Equity They Need” (Black)

In a scathing editorial published in the Wall Street Journal today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, blasted US banks, saying that they still lacked sufficient capital to withstand a major crisis. Kashkari makes a great analogy. When you’re applying for a mortgage or business loan, sensible banks are supposed to demand a 20% down payment from their borrowers. If you want to buy a $500,000 home, a conservative bank will loan creditworthy borrowers $400,000. The borrower must be able to scratch together a $100,000 down payment. But when banks make investments and buy assets, they aren’t required to do the same thing. Remember that when you deposit money at a bank, you’re essentially loaning them your savings.

As a bank depositor, you’re the lender. The bank is the borrower. Banks pool together their deposits and make various loans and investments. They buy government bonds, financial commercial trade, and fund real estate purchases. Some of their investment decisions make sense. Others are completely idiotic, as we saw in the 2008 financial meltdown. But the larger point is that banks don’t use their own money to make these investments. They use other people’s money. Your money. A bank’s investment portfolio is almost entirely funded with its customers’ savings. Very little of the bank’s own money is at risk. You can see the stark contrast here. If you as an individual want to borrow money to invest in something, you’re obliged to put down 20%, perhaps even much more depending on the asset.

Your down payment provides a substantial cushion for the bank; if you stop paying the loan, the value of the property could decline 20% before the bank loses any money. But if a bank wants to make an investment, they typically don’t have to put down a single penny. The bank’s lenders, i.e. its depositors, put up all the money for the investment. If the investment does well, the bank keeps all the profits. But if the investment does poorly, the bank hasn’t risked any of its own money. The bank’s lenders (i.e. the depositors) are taking on all the risk. This seems pretty one-sided, especially considering that in exchange for assuming all the risk of a bank’s investment decisions, you are rewarded with a miniscule interest rate that fails to keep up with inflation. (After which the government taxes you on the interest that you receive.) It hardly seems worth it.

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Murky.

Harward Turns Down National Security Adviser Job Over Staffing Dispute (CBS)

Vice Admiral Robert Harward has rejected President Trump’s offer to be the new national security adviser, CBS News’ Major Garrett reports. Sources close to the situation told Garrett Harward and the administration had a dispute over staffing the security council. Two sources close to the situation confirm Harward demanded his own team, and the White House resisted. Specifically, Mr. Trump told Deputy National Security Adviser K. T. McFarland that she could retain her post, even after the ouster of National Security Adviser Michael Flynn. Harward refused to keep McFarland as his deputy, and after a day of negotiations over this and other staffing matters, Harward declined to serve as Flynn’s replacement.

Harward, a 60-year-old former Navy SEAL, served as deputy commander of U.S. Central Command under now-Defense Secretary James Mattis. He previously served as deputy commanding general for operations of Joint Special Operations Command at Fort Bragg in North Carolina. Harward has also commanded troops in both Iraq and Afghanistan for six years after the 9/11 attacks. Under President George W. Bush, he served on the National Security Council as director of strategy and policy for the office of combating terrorism.

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As I said: the New Cold War is being fought INSIDE the US.

The Swamp Strikes Back (Escobar)

The tawdry Michael Flynn soap opera boils down to the CIA hemorrhaging leaks to the company town newspaper, leading to the desired endgame: a resounding victory for hardcore neocon/neoliberalcon US Deep State factions in one particular battle. But the war is not over; in fact it’s just beginning. Even before Flynn’s fall, Russian analysts had been avidly discussing whether President Trump is the new Victor Yanukovich – who failed to stop a color revolution at his doorstep. The Made in USA color revolution by the axis of Deep State neocons, Democratic neoliberalcons and corporate media will be pursued, relentlessly, 24/7. But more than Yanukovich, Trump might actually be remixing Little Helmsman Deng Xiaoping: “crossing the river while feeling the stones”. Rather, crossing the swamp while feeling the crocs.

Flynn out may be interpreted as a Trump tactical retreat. After all Flynn may be back – in the shade, much as Roger Stone. If current deputy national security advisor K T McFarland gets the top job – which is what powerful Trump backers are aiming at – the shadowplay Kissinger balance of power, in its 21st century remix, is even strengthened; after all McFarland is a Kissinger asset. Flynn worked with Special Forces; was head of the Defense Intelligence Agency (DIA); handled highly classified top secret information 24/7. He obviously knew all his conversations on an open, unsecure line were monitored. So he had to have morphed into a compound incarnation of the Three Stooges had he positioned himself to be blackmailed by Moscow.

What Flynn and Russian ambassador Sergey Kislyak certainly discussed was cooperation in the fight against ISIS/ISIL/Daesh, and what Moscow might expect in return: the lifting of sanctions. US corporate media didn’t even flinch when US intel admitted they have a transcript of the multiple phone calls between Flynn and Kislyak. So why not release them? Imagine the inter-galactic scandal if these calls were about Russian intel monitoring the US ambassador in Moscow. No one paid attention to the two key passages conveniently buried in the middle of this US corporate media story. 1) “The intelligence official said there had been no finding inside the government that Flynn did anything illegal.” 2) “…the situation became unsustainable – not because of any issue of being compromised by Russia – but because he [Flynn] has lied to the president and the vice president.” Recap: nothing illegal; and Flynn not compromised by Russia. The “crime” – according to Deep State factions: talking to a Russian diplomat.

Vice-President Mike Pence is a key piece in the puzzle; after all his major role is as insider guarantor – at the heart of the Trump administration – of neocon Deep State interests. The CIA did leak. The CIA most certainly has been spying on all Trump operatives. Flynn though fell on his own sword. Classic hubris; his fatal mistake was to strategize by himself – even before he became national security advisor. “Mad Dog” Mattis, T. Rex Tillerson – both, by the way, very close to Kissinger – and most of all Pence did not like it one bit once they were informed.

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A big way in which central banks distort markets.

Who’s Sucking Up All the World’s Safest Bonds? (WSJ)

The world is running out of safe financial assets. One reason may be regulators’ push to make trading safer. A scarcity of safe collateral can create bouts of volatility in the markets where investors fund their purchases. Economists also worry that a lack of quality public-sector assets leads the private sector to create less reliable and riskier substitutes. Global rules increasingly require that investors deposit cash as security, called margin, when they trade with each other. This money is often left at clearinghouses, which are intermediaries that stand between buyers and sellers and step in if one of the parties won’t make good on a transaction. Regulators are trying to give these clearinghouses more heft to make the financial system safer.

The clearinghouses, in turn, have to do something with the cash, and they frequently take it to repurchase, or “repo,” markets, where they lend it out in exchange for high-quality assets such as German bunds or U.S. Treasurys. That has the effect of vacuuming up safe assets. Paradoxically, cash—at least its electronic form—isn’t ultrasafe: It needs to be left in bank deposits, and even the strongest banks have some risk. Treasurys and bunds don’t. Europe’s dearth of safe assets is especially acute. According to a semiannual survey released Tuesday by the International Capital Market Association, demand for collateral in the eurozone increased significantly in the second half of 2016. The ECB and other central banks across the developed world have been blamed for this safe-asset scarcity because they have bought trillions of dollars worth of government bonds in a bid to boost economic growth.

However, during a speech last month, ECB official Yves Mersch pointed to clearinghouses as a key culprit, and warned that “the requirements for trades to be centrally cleared are still being introduced, so the demand from market infrastructure to exchange cash for collateral will rise.” Data are scarce, but the latest figures from the Bank for International Settlements show that more than half of the notional amount outstanding of derivatives transactions was centrally cleared by the end of 2014, after new regulation was enacted—twice as much as in 2009.

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“Americans will continue to be relegated to the status of dumb tourist in their own country.”

Mary Jo White Seriously Misled the US Senate to Become SEC Chair (Martens)

Less than two weeks after Mary Jo White was nominated to become Chair of the Securities and Exchange Commission by President Barack Obama on January 24, 2013, White filed an ethics disclosure letter advising that she would “retire” from her position representing Wall Street banks at the law firm Debevoise & Plimpton. White wrote on this subject in great detail, stating:

“Upon confirmation, I will retire from the partnership of Debevoise & Plimpton, LLP. Following my retirement, the law firm will not owe me an outstanding partnership share for either 2012 or any part of 2013. As a retired partner, I will be entitled to the use of secretarial services, office space and a blackberry at the firm’s expense. For the duration of my appointment, I will forgo these three benefits, though I may pay for some secretarial services at my own expense. Pursuant to the Debevoise & Plimpton, LLP Partners Retirement Program, I will receive monthly lifetime retirement payments from the firm commencing the month after my retirement. However, within 60 days of my appointment, the firm will make a lump sum payment, in lieu of making monthly retirement payments for the next four years. Within 60 days of my appointment, I also will receive payouts of my interest in the Debevoise & Plimpton LLP Cash Balance Retirement plan and my capital account.”

Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. She will also fill the newly created position of Senior Chair of the law firm. This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street. The news is also highly significant because it will mark the fourth time in four decades that Mary Jo White has spun through the revolving doors of Debevoise & Plimpton (where she represented serial law violators) to government service (prosecuting serial law violators).

[..] Until there is meaningful legislative reform of political campaign financing and revolving door appointments, Americans will continue to be relegated to the status of dumb tourist in their own country.

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Bankers have too much money and too much power.

European Financial Centres After Brexit (E.)

“WHEN the vote took place,” says Valérie Pécresse, “it was an opportunity for us to promote Île de France”, the region around Paris of which she is the elected head. Two advertising campaigns were prepared, depending on the result of Britain’s referendum last June on leaving the European Union. The unused copy ran: “You made one good decision. Make another. Choose Paris region.” Brexit has made Paris bolder. Once Britain leaves Europe’s single market, the many international banks and other firms that have made London their EU home will lose the “passports” that allow them to serve clients in the other 27 states. Possibly, mutual recognition by Britain and the EU of each other’s regulatory regimes will persist. But no one can rely on the transition to Brexit being smooth, rather than a feared “cliff edge”. Best to assume the worst.

Britain is expected to start the two-year process of withdrawal next month. Given the time needed to get approval from regulators, find offices and move (or hire) staff, financial firms have long been weighing their options. London will remain Europe’s leading centre, but other cities are keen to take what they can. The Parisians are pushing hardest, pitching their city as London’s partner and peer. “I don’t see the relationship with London as a rivalry,” says Ms Pécresse. “The rivalry is not with London but with Dublin, Amsterdam, Luxembourg and Frankfurt.” Especially, it seems, Frankfurt. Paris has more big local banks, more big companies and more international schools than its German rival. London apart, say the French team, it is Europe’s only “global city”. When, they smirk, did you last take your partner to Frankfurt for the weekend?

This month the Parisians were in London, briefing 80 executives from banks, asset managers, private-equity firms and fintech companies. They are keen to dispel France’s image as an interventionist, high-tax, work-shy place. The headline corporate-tax rate is 33.3% but due to fall to 28% by 2020. A scheme giving income-tax breaks to high earners who have lived outside France for at least five years will now apply for eight years after arrival or return, not five. The Socialists, who run the city itself, and Ms Pécresse’s Republicans are joined in a business-friendly “sacred union”, says Gérard Mestrallet, president of Paris Europlace, which promotes the financial centre. Ms Pécresse and others play down the risk that Marine Le Pen, of the far-right, Eurosceptic National Front will win the presidential election this spring.

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“Crimea was TAKEN by Russia during the Obama Administration. Was Obama too soft on Russia?” the U.S. president tweeted.

Putin Orders Russian Media To “Cut Back” On Positive Trump Coverage (ZH)

Trump’s honeymoon with capital markets is on the rocks, kept alive only by the occasional soundbite about “massive” or “phenomenal” tax cuts; it now appears that the US president’s – until recently – amicable relationship with Russia is also quickly souring. According to Bloomberg, the Kremlin has ordered Russian state media to cut “way back” on their fawning coverage of President Donald Trump, in what three sources told BBG is a “reflection of growing concern among senior Russian officials that the new U.S. administration will be less friendly than first thought.” The Russian president has defended his decision saying it is the result of declining interest among the Russian viewers in Trump’s rise to power, but Bloomberg adds that some of the most popular TV segments on Trump touched on ideas the Kremlin would rather not promote, such as his pledge to “drain the swamp.”

The suggestion is that since Trump is looking to end governmental corruption, the “authoritarian” Putin should be worried; and yet instead of “draining the swamp” Trump has filled it by surrounded himself with precisely those bankers he used as populist examples of all that is wrong with the government. As such, Putin should greet Trump’s failed “swamp draining” although that part did not make it into the Bloomberg report. Putin’s decree comes at a time of rising anti-Russian sentiment in Washington, where U.S. spy and law-enforcement agencies are conducting multiple investigations to determine the full extent of contacts Trump’s advisers had with Russia during and after the 2016 election campaign.

According to Bloomberg, the order marks a stark turnaround from just a few weeks ago when Russia hailed Trump’s presidential victory as the beginning of a new era of cooperation between the former Cold War foes. “Trump’s campaign was watched with rapture as news anchors gushed over the novelty of hearing an American presidential candidate praise Putin. But the wall-to-wall coverage went too far for the Kremlin’s liking.” In January, Trump reportedly received more mentions in the media than Putin, relegating the Russian leader to the No. 2 spot for the first time since he returned to the Kremlin in 2012 after four years as premier, according to Interfax data.”

That said, there has certainly been a chilling in relations between Trump and Putin. In recent weeks, numerous White House officials, including Trump, have criticized Russia for its annexation of Crimea and the subsequent violence in Ukraine. Trump on Wednesday accused Putin of seizing Crimea from Ukraine in a series of Twitter posts that were delivered amid a flurry of allegations that his team has ties to Russia. “Crimea was TAKEN by Russia during the Obama Administration. Was Obama too soft on Russia?” the U.S. president tweeted. As Bloomberg concludes, Russian officials, who had readily commented to local media on earlier news from Washington, suddenly became less talkative after the Crimea comment. And so, with Trump-Putin relations suddenly in purgatory, and Trump’s domestic “Russia-facing” exposure in chaos, it is now unclear how Trump will pivot away to restore what many had hoped would lead to a restoration in normal relations between the two countries.

Read more …

And there we go again.

‘Bank Run’ under Capital Controls: Greeks withdraw €2.5bn in 45 days (KTG)

Delays in the talks between Greece and its lenders have brought back the ghost of Grexit. The grave disagreement between the IMF and the European lenders, Grexit bombshell flying around and Greece’s reluctance to accept additional austerity measures have increase uncertainty among citizens – for one more time. And what do citizens do when they feel political and economical insecurity? The run to banks and withdraw deposits. 2.5 billion euros left Greek banks in the last 45 days. And this despite the capital controls that allow Greeks to withdraw a maximum of just €1,800 per month. However, in better situation are those who brought back cash to the banks. Cash that was largely withdrawn before the capital controls were imposed in July 2015 as a result of a major bank run from November 2014 until end of June 2015.

Those who pulled the cash from under the mattress and brought it to bank are allowed to withdraw money above the €1800 cap. According to newspaper Eidiseis, the cash withdrawal in the last 45 days has set bankers in alert. In addition to cash withdrawals, business loans and mortgage, amounting a total of €500 million, turned red. A sign that the delay in the conclusion of the second review has increased uncertainty among the Greeks, as the daily notes. Speaking to the daily, sources from the Union of Greek Banks said that “time is not working in our favor.” They stressed that the government and the lenders should reach a compromise. Beginning of February, Greek websites for economic news had reported that more than one billion euros was withdrawn in January 2017.

According to a report of November 2015, more than €120 billion left the Greek banks during the years of the crisis. €45 billion left the banks during November 2014 – 2015. 80% of this amount, that is some €36 billion are been kept in homes, company safes or in bank lockers.

Read more …

Feb 152017
 
 February 15, 2017  Posted by at 10:34 am Finance Tagged with: , , , , , , , , ,  No Responses »
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Times Square New York City, 1958

 


The Political Assassination of Michael Flynn (BBG)
Kucinich Pins Flynn Leak on Intel Community, Warns of Another Cold War (Fox)
America’s Spies Anonymously Took Down Flynn. That Is Deeply Worrying (Week)
Russian Foreign Ministry Says Crimea Will Not Be Returned To Ukraine (R.)
China Credit Surging to Record Underscores PBOC Shift to Tighten (BBG)
China Should Prudently Manage Deleveraging Process – PBOC (R.)
Nigel Farage – You’re In For a Bigger Shock in 2017 (TNTV)
Germany’s Burden: The Euro Is The Most Crisis-Ridden Currency (MW)
Greece Defies Creditors Over More Cuts As Economy Shrinks Unexpectedly (G.)
‘Fed Up’ Exposes The Elite Rot Inside The Federal Reserve (MW)
Why “Everyone Wins” When Housing Is More Expensive (AS)
Who Will Be Blamed if the Oroville Dam Fails? (McMaken)
The Technosphere: You Are Not In Control (Dmitry Orlov)
Greece’s Frozen Children: What Will Happen To Young Refugees? (NS)

 

 

So many diffferent angles. This one from Eli Lake is bearable. “Nunes told me Monday night that this will not end well. “First it’s Flynn, next it will be Kellyanne Conway, then it will be Steve Bannon, then it will be Reince Priebus,” he said. Put another way, Flynn is only the appetizer. Trump is the entree.”

The Political Assassination of Michael Flynn (BBG)

Representative Devin Nunes, the Republican chairman of the House Permanent Select Committee on Intelligence, told me Monday that he saw the leaks about Flynn’s conversations with Kislyak as part of a pattern. “There does appear to be a well orchestrated effort to attack Flynn and others in the administration,” he said. “From the leaking of phone calls between the president and foreign leaders to what appears to be high-level FISA Court information, to the leaking of American citizens being denied security clearances, it looks like a pattern.” Nunes said he was going to bring this up with the FBI, and ask the agency to investigate the leak and find out whether Flynn himself is a target of a law enforcement investigation. The Washington Post reported last month that Flynn was not the target of an FBI probe.

The background here is important. Three people once affiliated with Trump’s presidential campaign – Carter Page, Paul Manafort and Roger Stone – are being investigated by the FBI and the intelligence community for their contacts with the Russian government. This is part of a wider inquiry into Russia’s role in hacking and distributing emails of leading Democrats before the election. Flynn himself traveled in 2015 to Russia to attend a conference put on by the country’s propaganda network, RT. He has acknowledged he was paid through his speaker’s bureau for his appearance. That doesn’t look good, but it’s also not illegal in and of itself. All of this is to say there are many unanswered questions about Trump’s and his administration’s ties to Russia. But that’s all these allegations are at this point: unanswered questions.

It’s possible that Flynn has more ties to Russia that he had kept from the public and his colleagues. It’s also possible that a group of national security bureaucrats and former Obama officials are selectively leaking highly sensitive law enforcement information to undermine the elected government. Flynn was a fat target for the national security state. He has cultivated a reputation as a reformer and a fierce critic of the intelligence community leaders he once served with when he was the director the Defense Intelligence Agency under President Barack Obama. Flynn was working to reform the intelligence-industrial complex, something that threatened the bureaucratic prerogatives of his rivals. He was also a fat target for Democrats. Remember Flynn’s breakout national moment last summer was when he joined the crowd at the Republican National Convention from the dais calling for Hillary Clinton to be jailed.

In normal times, the idea that U.S. officials entrusted with our most sensitive secrets would selectively disclose them to undermine the White House would alarm those worried about creeping authoritarianism. Imagine if intercepts of a call between Obama’s incoming national security adviser and Iran’s foreign minister leaked to the press before the nuclear negotiations began? The howls of indignation would be deafening. In the end, it was Trump’s decision to cut Flynn loose. In doing this he caved in to his political and bureaucratic opposition. Nunes told me Monday night that this will not end well. “First it’s Flynn, next it will be Kellyanne Conway, then it will be Steve Bannon, then it will be Reince Priebus,” he said. Put another way, Flynn is only the appetizer. Trump is the entree.

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Interesting 8-minute, very clear take from Kucinich: “This is like the electronic version of Mad magazine; Spy vs Spy..”

Kucinich Pins Flynn Leak on Intel Community, Warns of Another Cold War (Fox)

During an interview on the FOX Business Network’s Mornings with Maria, former Democratic presidential candidate Dennis Kucinich said the intelligence community was responsible for leaking information that Trump’s national security advisor, Mike Flynn, had secretly discussed sanctions with Russian officials before the inauguration and argued their goal was to spoil the relationship between the U.S. and Russia. “What’s at the core of this is an effort by some in the intelligence community to upend any positive relationship between the U.S. and Russia,” Kucinich said.

And in his opinion, there is a big money motive behind it. “And I tell you there’s a marching band and Chowder Society out there. There’s gold in them there hills,” he said. “There are people trying to separate the U.S. and Russia so that this military industrial intel axis can cash in.” Kucinich added the intelligence community could start a war to succeed. “There’s a game going on inside the intelligence community where there are those who want to separate the U.S. from Russia in a way that would reignite the Cold War,” he said.

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Many on both the left and the right have these worries.

America’s Spies Anonymously Took Down Flynn. That Is Deeply Worrying (Week)

The United States is much better off without Michael Flynn serving as national security adviser. But no one should be cheering the way he was brought down. The whole episode is evidence of the precipitous and ongoing collapse of America’s democratic institutions — not a sign of their resiliency. Flynn’s ouster was a soft coup (or political assassination) engineered by anonymous intelligence community bureaucrats. The results might be salutary, but this isn’t the way a liberal democracy is supposed to function. Unelected intelligence analysts work for the president, not the other way around. Far too many Trump critics appear not to care that these intelligence agents leaked highly sensitive information to the press — mostly because Trump critics are pleased with the result.

“Finally,” they say, “someone took a stand to expose collusion between the Russians and a senior aide to the president!” It is indeed important that someone took such a stand. But it matters greatly who that someone is and how they take their stand. Members of the unelected, unaccountable intelligence community are not the right someone, especially when they target a senior aide to the president by leaking anonymously to newspapers the content of classified phone intercepts, where the unverified, unsubstantiated information can inflict politically fatal damage almost instantaneously.

President Trump was roundly mocked among liberals for that tweet. But he is, in many ways, correct. These leaks are an enormous problem. And in a less polarized context, they would be recognized immediately for what they clearly are: an effort to manipulate public opinion for the sake of achieving a desired political outcome. It’s weaponized spin. This doesn’t mean the outcome was wrong. I have no interest in defending Flynn, who appears to be an atrocious manager prone to favoring absurd conspiracy theories over more traditional forms of intelligence. He is just about the last person who should be giving the president advice about foreign policy. And for all I know, Flynn did exactly what the anonymous intelligence community leakers allege — promised the Russian ambassador during the transition that the incoming Trump administration would back off on sanctions proposed by the outgoing Obama administration.

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Silly idea. The New Cold War.

Russian Foreign Ministry Says Crimea Will Not Be Returned To Ukraine (R.)

Russia will not hand back control of Crimea to Ukraine, Russia’s foreign ministry said on Wednesday, responding to comments from the White House that the United States expected the Black Sea peninsula to be returned. “We don’t give back our own territory. Crimea is territory belonging to the Russian Federation,” Maria Zakharova, spokeswoman for the Russian Foreign Ministry, told a news briefing. On Tuesday, the White House said U.S. President Donald Trump had made it clear that he expects Russia to relinquish control of the territory. Russia annexed Crimea in 2014, prompting the United States and the European Union to impose sanctions on Russia, plunging Western relations with the Kremlin to their worst level since the end of the Cold War.

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Shadow banking resurgence? It was never gone.

China Credit Surging to Record Underscores PBOC Shift to Tighten (BBG)

China added more credit last month than the equivalent of Swedish or Polish economic output, revving up growth and supporting prices but also fueling concerns about the sustainability of such a spree. Aggregate financing, the broadest measure of new credit, climbed to a record 3.74 trillion yuan ($545 billion) in January, exceeding the median estimate of 3 trillion yuan in a Bloomberg survey. New yuan loans rose to a one-year high of 2.03 trillion yuan, less than the 2.44 trillion yuan estimate. The credit surge highlights the challenges facing Chinese policy makers as they seek to balance ensuring steady growth with curbing excess leverage in the financial system. The PBOC recently moved to tighten monetary policy by raising the interest rates it charges in open-market operations and on funds lent via its Standing Lending Facility.

“China is learning what other central banks realized decades ago: trying to control monetary aggregates in a modern financial system is next to impossible,” said James Laurenceson, deputy director of the Australia-China Relations Institute in Sydney. “I expect the PBOC will focus more on interest rates and prudential regulation and supervision going forward.” China’s major state-backed banks tend to splurge at the start of the year as they seek to maximize their profits on lending. The main categories of shadow finance all increased significantly. Bankers acceptances – a bank-backed guarantee for future payment – soared to 613.1 billion yuan from 158.9 billion yuan the prior month. “The PBOC is restraining loans but allowing private credit to flow through shadow banks,” said Andrew Collier, an independent analyst and former president of Bank of China International USA. “This is not a policy designed to conquer China’s debt burden.”

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Yeah, well, it does nothing of the kind.

China Should Prudently Manage Deleveraging Process – PBOC (R.)

China should prudently manage the country’s debt deleveraging process and seek to avoid a liquidity crisis and asset bubbles, according to a central bank working paper published on Wednesday. While overall debt ratios in the world’s second-largest economy were still not high relative to many other countries, the pace of increase has been rapid in recent years, the paper said. China’s debt to GDP ratio rose to 277% at the end of 2016 from 254% the previous year, with an increasing share of new credit being used to pay debt servicing costs, UBS analysts said in a recent note.

China’s top leaders have pledged to focus on addressing rising financial risks and asset bubbles this year. The People’s Bank of China has moved to a moderate tightening bias, raising some key primary money rates this year, which analysts said was part of a bid to control risks from rising leverage. The working paper said China should avoid the negative consequences of both increases in leverage and rapid deleveraging. China should let market forces play a decisive role in the deleveraging process, including allowing defaults, the paper published on the People’s Bank of China website said.

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h/t Mish. “The people want less Europe. We see this again and again when people have referendums and they reject aspects of EU membership. But something more fundamental is going on out there.”

Nigel Farage – You’re In For a Bigger Shock in 2017 (TNTV)

I feel like I am attending a meeting of a religious sect here this morning. It’s as if the global revolution of 2016, Brexit, Trump, the Italian rejection of the referendum, has completely bypassed you. You can’t face up to the fact that this bandwagon is going to roll across Europe in these elections in 2017. A lot of citizens now recognize this form of centralized government simply doesn’t work. … At the heart of it is a fundamental point: Mr. Verhofstadt this morning said, the people want more Europe. They don’t. The people want less Europe. We see this again and again when people have referendums and they reject aspects of EU membership. But something more fundamental is going on out there. ….

No doubt, many of you here will probably despise your own voters for what I am about to say because just last week, Chatham House, the reputable group, published a massive survey from 10 Europen states, and only 20% of people want immigration from Muslim countries to continue. Just 20%. … Which means your voters have a harder line position on this than Donald Trump, or myself, or frankly any party sitting in this Parliament. I simply cannot believe you are blind to the fact that even Mrs. Merkel has now made a u-turn and wants to send people back. Even Mr. Schulz thinks it is a good idea. And the fact is, the Europen Union has no future at all in its current form. And I suspect you are in for as big a shock in 2017 as you were in 2016.

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Throw this into the German election campaign and see what happens.

Germany’s Burden: The Euro Is The Most Crisis-Ridden Currency (MW)

Target-2 occupies a central place. According to latest Bundesbank figures, the German central bank’s claims under the system rose to €796 billion at the end of January, from €754 billion at the end of December, well above the previous record €751 billion in August 2012. The Bundesbank’s ECB claims make up more than half of Germany’s net foreign assets of €1.5 trillion, which have themselves increased enormously since the euro was launched in 1999. If the eurozone broke up, or euro members redenominated their liabilities in a new, lower valued currency, Germany would relinquish a large part of these assets — a loss of German savings that would rival the country’s forced write-downs after the first and second world wars.

Both the ECB and the Bundesbank are playing down the renewed Target-2 increase, saying it reflects technical reasons linked to cross-border payments stemming from the ECB’s asset purchase program. On the one hand, these facts would argue for Germany keeping the system going. On the other, they would suggest that the Germans should try to renegotiate the Target-2 arrangements. At the present rate of increase, the Target-2 balances could be close to €1 trillion by the German elections in seven months. Target was developed during the 1990s as a technical transfer mechanism for facilitating payments within the eurozone. The innocuous name — Trans-European automated real-time gross settlement express transfer — signals its original arcane purpose.

According to Helmut Schlesinger, former Bundesbank president, the system was expected to advance credit simply for overnight settlement. Two decades later, as Schlesinger explains, it has become an overdraft system under which Germany, through its central bank, extends interest-free credit without any repayment date and without economic conditions to the central banks of heavily indebted nations.

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Paradox: BECAUSE the economy shrinks, more cuts ‘reforms’ will be demanded. The IMF wants more pension cuts. But that’s what half the population lives on.

Greece Defies Creditors Over More Cuts As Economy Shrinks Unexpectedly (G.)

The standoff between Greece and its creditors has escalated, with the embattled Athens government vowing it will not give in to demands for further cuts as data showed the country’s economy unexpectedly contracting. As thousands of protesting farmers rallied in Athens over spiralling costs and unpopular reforms, the Hellenic statistical authority revealed that Greek GDP shrank by 0.4% in the last three months of 2016. After growth of 0.9% in the previous three-month period the fall was steep and unforeseen. On Monday the European commission announced that the eurozone’s weakest member was on course to achieving a surplus on its budget of 2.3% after exceeding its 2016 fiscal targets “significantly”.

The setback came as prime minister Alexis Tsipras’ lefist-led coalition said it would not consent to additional austerity beyond the cuts the country had already agreed to administer under its third, EU-led bailout programme. Speaking on state TV, the digital policy minister Nikos Pappas, Tsipras’ closest confidant, insisted that ongoing differences between the EU and IMF over how to put the debt-stricken state back on the road to recovery were squarely to blame for the failure to conclude a compliance review at the heart of the standoff. The IMF has argued vigorously that extra measures worth 2% of GDP will have to be enforced with immediate effect if Greece is to achieve a high post-programme primary surplus of more than 1.5%. “The negotiations should have ended. Greece has done everything that it was asked to do,” he said and added there would be “no more measures”.

The future of the €86bn financial aid programme is contingent on Athens implementing agreed economic reforms. The IMF has repeatedly said it will not sign up to the programme unless the crisis-plagued country is given more generous debt relief in the form of a substantial write-down. With Greece facing a €7bn debt repayment to the ECB in July, fears of a Greek default have once again hit markets with shares falling and interest rates on Greek debt rising. But Tsipras is also under pressure from back-benchers in his fragile two-party administration. After seven years of adopting grueling austerity in return for emergency bailout aid many are openly questioning the wisdom of applying yet more measures that have already put Greece in a permanent debt deflationary cycle.

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Yellen was “oblivious as the housing market in her region imploded on multiple fronts.”

‘Fed Up’ Exposes The Elite Rot Inside The Federal Reserve (MW)

She came armed with an M.B.A., not a Ph.D., which made her suspect in the eyes of staff economists as she gradually worked her way up to Class I Clearance, with access to all policy-related material and briefings. In her columns, DiMartino Booth had warned about lax mortgage-lending standards, a housing bubble and escalating systemic risk. Once ensconced at the Fed, she was left to wonder why so many “highly educated and well-paid economists” were “oblivious as the worst financial crisis since the Great Depression was about to break over their heads.” (One of the main reasons is the Fed’s reliance on econometric models that don’t include anything related to the financial system, such as debt or credit.) It wasn’t just the staff economists who were blind to what was going on in the real world.

Neither former Fed chairman Alan Greenspan, who can boast of two bubbles on his watch, nor his successor Ben Bernanke saw the train wreck coming. Greenspan said a national housing bubble was “unlikely” while Bernanke expected any fallout from the subprime mortgage crisis to be “contained.” Janet Yellen, the current Fed chairwoman, is subject to withering criticism in the book. From 2004-2010, Yellen was president of the San Francisco Fed, whose district encompasses nine Western states and was ground zero for the housing bubble and subsequent bust. DiMartino Booth portrays Yellen as an uber-dove and devout Keynesian, someone who was “oblivious as the housing market in her region imploded on multiple fronts.”

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Why bubbles are blown.

Why “Everyone Wins” When Housing Is More Expensive (AS)

The perceived creditworthiness of a nation is largely dependent on market sentiment of that nation insofar as that the volume and indeed the acceleration of capital flow from that nation towards traditionally hedge instruments is indicative of their realisation of mania and is often known as the Minsky moment. Human nature inherently creates inefficiencies in markets as the incentives for those involved continue to grow, and it is that immutable fact that creates opportunities for those that see the market as being overwhelmingly influenced by self interest. The housing market is a fantastic example of this incentivised self interest. There are layers of self interest that largely go ignored as driving factors for housing price growth and poor risk modelling.

On the lowest level, buyers see property as a safe investment, and most of the time they seek to either make a return on their investment either through rental that exceeds the cost of the mortgage repayments (positive gearing) or to make money by a perceived increase in market value of the property that they can realise once they resell the property, or in many cases a combination of both. There are also people who seek to reduce their tax payment by charging less for rent than they pay in mortgage repayments, however these losses are eventually passed on to tax payers as the government thinks this is a suitable method for reducing rental costs for low income earners and that it reduces overall rental costs. The next level up from this is a combination of brokers, people employed to undertake property valuations and real estate agents, all of whom receive commission as a percentage of the sale price of the property.

There exists such a thing as home equity loans wherein banks and borrowers agree upon a valuation of the property which allows mortgagees or property owners to take on debt based on the perceived value of the property, which extends further credit than the initial loan. This feature of home equity lends itself to false market valuations by appraisers, real estate agents and brokers, in particular because it means that they are incentivised to originate additional loans that then pay commissions based on the appreciation of the previous property investment. Even if the current broker, appraiser or real estate agent is not used by the borrower for financing further property purchases, the industry wide practice almost certainly means that these people will continue to receive additional income as a direct result of the availability of credit in the form of home equity for property purchases.

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Maintenance is far less sexy than building.

Who Will Be Blamed if the Oroville Dam Fails? (McMaken)

While everyone likes to see a shiny new dam or railroad or bridge, the problem with infrastructure projects is that they require maintenance. Unfortunately, while it’s fun to build new dams and promise cheap water to many voters and powerful special interests, maintaining those projects is less exciting. As The Mercury News has reported, 12 years ago, both California and federal officials refused to consider a demand that California heighten precautions and maintenance standards at the Oroville Dam. In response to the demands, the Federal Energy Regulatory Commission (FERC) said the dam’s emergency features were perfectly fine and that the emergency spillway “was designed to handle 350,000 cubic feet per second and the concerns were overblown.”

But, in a development reminiscent of the Army Corp of Engineers’ failure in New Orleans, state officials began ordering evacuations when flows over the spillway reached a mere “6,000 to 12,000 cubic feet per second” or “5% of the rate that FERC said was safe.” Basically, thanks to poorly maintained spillways — and perhaps other oversights — the dam itself is being eroded away, and may soon face total failure. If it does fail, the dam will have failed less than 50 years after its initial — and very, very expensive — construction. The “experts” assure us that this sort of thing has never happened before, of course, and it’s the fault of global warming or it’s just a fluke. But, it’s not as if the dam has never been under strain before. As Reisner recounted in 1987:

“In February of 1980, in the midst of a long spell of wet Pacific fronts, Oroville Reservoir, despite its capacity of something like a trillion gallons, was full, and the dam was spilling — 70,000 cubic feet per second, the Hudson River in full flood, roaring down the spillway at forty miles per hour, sending a plume of mist a thousand feet in the air.” At the time, the dam was only 12 years old. Today, the now-49-year old dam isn’t looking nearly as robust.

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Excellent Dmitry: “..there are at least 5.8 billion people alive in the world who don’t own a car. How can something be considered a necessity if 82% of us don’t seem to need it?”

The Technosphere: You Are Not In Control (Dmitry Orlov)

A good example of how the technosphere controls our tastes is the personal automobile. Many people regard it as a symbol of freedom and see their car as an extension of their personalities. The freedom to be car-free is not generally regarded as important, while the freedoms bestowed by car ownership are rather questionable. It is the freedom to make car payments, pay for repairs, insurance, parking, towing and gasoline. It is the freedom to pay tolls, traffic tickets, title fees and excise taxes. It is the freedom to spend countless hours stuck in traffic jams and to suffer injuries in car accidents. It is the freedom to bring up neurologically damaged children by subjecting them to unsafe carbon monoxide levels (you are encouraged to have a CO detector in your house, but not in your car—because it would be going off all the time). It is the freedom to suffer indignities when pulled over by police, especially if you’ve been drinking. In terms of a harm/benefit analysis, private car ownership makes no sense at all.

It is often argued that a car is a necessity, although the facts tell a different story. Worldwide, there are 1.2 billion vehicles on the road. The population of the planet is over 7 billion. Therefore, there are at least 5.8 billion people alive in the world who don’t own a car. How can something be considered a necessity if 82% of us don’t seem to need it? In fact, owning a car becomes necessary only in a certain specific set of circumstances. Here are some of the key ingredients: a landscape that is impassable except by motor vehicle, single-use zoning that segregates land by residential, commercial, agricultural and industrial uses, a lifestyle that requires a daily commute, and a deficit of public transportation. In turn, widespread private car ownership is what enables these key ingredients: without it, situations in which private car ownership becomes a necessity simply would not arise.

Now, moving people about the landscape is not a productive activity: it is a waste of time and energy. If you can live, send your children to school, shop and work all without leaving the confines of a small neighborhood, you are bound to be more efficient than someone who has to drive between these four locations on a daily basis. But the technosphere is rational to a fault and is all about achieving efficiencies. And so, an obvious question to ask is, What is it about the car-dependent living arrangement, and the landscape it enables, that the technosphere finds to be efficient? The surprising answer is that the technosphere strives to optimize the burning of gasoline; everything else is just a byproduct of this optimization.

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Not the strongest effort, but at the same time, children should always receive our protection.

Greece’s Frozen Children: What Will Happen To Young Refugees? (NS)

The snow-covered tents were an ugly spectacle around the island of Lesbos as this harsh winter gripped Greece. It was in this same area that an accident involving a gas heater had killed a mother and child in late November, when their tent – and others near it – went up in flames. It was pure luck that there weren’t more victims. The incident served as a stark reminder that there are numerous children living in these miserable conditions and that sometimes they die as a result. I had visited the camp just days earlier, hoping to talk to some of the approximately 80 unaccompanied minors who live there. Facilities for refugees around Greece can look anything from decent to shabby, but none resembles a prison as much as the Moria camp on Lesbos. It looks the last place you would host vulnerable children, some of whom are as young as 13.

Yet more than 5,000 children have arrived in Greece without their parents and, like everyone else, they have to be sorted through “hot spots” such as Moria. About 2,500 are still in Greece, and some of them have to live in places like this. While adults and children accompanied by their parents can leave the camp, unaccompanied children, who are placed formally under the guardianship of the district attorney, cannot. The facility, guarded by police in full riot gear and surrounded by concrete walls topped with barbed wire, is both home and prison. It takes nine months on average for an unaccompanied child to be reunited with family in another country – if indeed the child has one. The alternative is that they remain in Greece until they turn 18, when they can try to claim asylum. If a child’s application is rejected, he is then deported back to the country he left years earlier as a child.

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Jan 272017
 
 January 27, 2017  Posted by at 10:11 am Finance Tagged with: , , , , , , , , , , ,  13 Responses »
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Kathimerini Trump and Evolution Jan 25 2017


Theresa May: US and UK Will No Longer Invade Foreign Countries (Ind.)
Donald Trump’s Plan For China Relations Is To Be Unpredictable (G.)
Wave Of US State Department Personnel Resign, Are Fired (ZH)
How America Could Collapse (Nation)
Outrage Dilution (Adams)
How America Lost Its Identity – Megalomania & Small-Mindedness (Spiegel)
Obama Bequeaths A More Dangerous World (Parry)
China’s Shadow Banking Crusade Risks Bond Market Crash (R.)
China’s Army of Global Homebuyers Is Suddenly Short on Cash (BBG)
Lurching Towards the New Paradigm (Art+M)
Greece Creditors Demand Legislation Of Reforms For 2018-19 (Kath.)
Greek Supreme Court Rules Against Extraditing Eight Turkish Soldiers (WSJ)
EU Looks To Camps In Africa To Cut Immigration (R.)
Europe’s Crackdown On African Immigration Is Hitting Vulnerable Refugees (G.)
EU’s Mishandled Millions Not Reaching Refugees (DW)

 

 

If it could only be true. Between this from Theresa May, and the disappearance of Victoria Nuland, not such a bad day. But I find it hard to go through all the ‘serious’ press who report on things like the US spelling Theresa without the ‘h’. Is that worth paying a journalist for? That’s the best you got? Then again, I did like the person on twitter pointing out that Teresa May is the name of a pornstar, and wondering who Trump thought he was going to meet.

Theresa May: US and UK Will No Longer Invade Foreign Countries (Ind.)

Britain and the US will never again invade sovereign foreign countries “in an attempt to make the world in their own image,” Theresa May told Republican policymakers in Philadelphia. The Prime Minister vowed never to repeat the “failed policies of the past” in reference to Western military intervention in Iraq and Afghanistan, breaking from the “liberal intervention” principle established by Tony Blair. Referencing the “special relationship” between the UK and US, Ms May also stressed the importance of cooperation between the two countries to meet their “obligations of leadership” and “stand up for our interests”. “It is in our interests – those of Britain and America together – to stand strong together to defend our values, our interests and the very ideas in which we believe,” she said.

“This cannot mean a return to the failed policies of the past. The days of Britain and America intervening in sovereign countries in an attempt to remake the world in our own image are over.” However she called for “strong, smart and hard-headed” actions to stand up for Western principles, adding: “Nor can we afford to stand idly by when the threat is real and when it is in our own interests to intervene.” She also pledged support to Mr Trump in the continued fight against the “new enemies of the west and our values”. Ms May said it was a “priority” to push back on “Iran’s aggressive efforts” to increase its “arc of influence from Tehran through to the Mediterranean”. However, she defended the nuclear deal brokered by Barack Obama despite threats from Mr Trump that he would rip up the agreement, saying it had been successful in neutralising a potential threat. [..] “With President Putin, my advice is to engage but beware.”

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What’s that worth if you announce it, though?

Donald Trump’s Plan For China Relations Is To Be Unpredictable (G.)

Donald Trump’s game plan for relations with China is to use unpredictability as a means of wrong-footing the country’s Communist party leaders and extracting economic concessions, a prominent adviser has said. Since his election, Trump and his team have repeatedly discombobulated the Chinese government with a series of interventions on sensitive issues such as the South China Sea, US relations with Taiwan and China’s alleged manipulation of its currency, the yuan. Those moves have unsettled and angered Beijing, which had expected Trump to tone down his anti-China rhetoric after his victory. In an interview with China’s state-run broadcaster, Michael Pillsbury, a former Pentagon official and longtime China scholar, suggested Trump’s decision to repeatedly tweak Beijing’s nose was part of a calculated strategy.

The US president believed the Chinese were “the best negotiators in the whole world, so to get an advantage he wants to be unpredictable in the eyes of the Chinese government,” Pillsbury told CGTN, an international mouthpiece for the Chinese government that was formerly called CCTV. “I think he has succeeded in this, don’t you?” Pillsbury, a fluent Mandarin speaker who is known for his contacts within China’s People’s Liberation Army and has been advising Trump’s team, said the president had outlined this strategy in his most recent book, Great Again: How To Fix Our Crippled America. In it Trump writes: “The element of surprise wins battles. So I don’t tell the other side what I’m doing, I don’t warn them, and I don’t let them fit me comfortably into a predictable pattern … I like being unpredictable. It keeps them off balance.”

In a chapter on foreign policy, Trump accuses his predecessors of “rolling over” for Beijing and hints it will be one of the main targets of his strategy. “There are people who wish I wouldn’t refer to China as our enemy. But that’s exactly what they are,” Trump writes. China specialists on both sides of the Pacific fear relations between Beijing and Washington could deteriorate rapidly under Trump, increasing the risks of a potentially calamitous great power conflict. However, Pillsbury, who has written a book about a supposed Chinese plot to become the world’s preeminent military, political and economic power by 2049, claimed ties could warm. “I say the road to making America great again runs through Beijing,” he told CGTN, calling for greater Chinese investment in the US.

“It can be win-win. I think it will be win-win,” Pillsbury said, using one of the favourite phrases of Chinese diplomats. Another China scholar who is understood to have offered advice to Trump’s team also said this week that he believed an improved relationship was on the cards. “I don’t quite understand why people seem to be operating under the assumption that the relationship with China was good and now all of a sudden it is going to change to be less good,” Daniel Blumenthal, the director of Asian Studies at the American Enterprise Institute told the Guardian.

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Bit confusing who left of their own accord and who got a pink slip. Been a thorough clean-up. Getting rid of Victoria Nuland is worth just about any price.

Wave Of US State Department Personnel Resign, Are Fired (ZH)

Update: according to a CNN report – so as always take with lots of salt – the story has shifted materially, because according to two senior administration officials, it wasn’t a resignation by the State Department officials, but more of a termination: “the Trump administration told four top State Department management officials that their services were no longer needed as part of an effort to “clean house” at Foggy Bottom.”

Patrick Kennedy, who served for nine years as the undersecretary for management, Assistant Secretaries for Administration and Consular Affairs Michele Bond and Joyce Anne Barr, and Ambassador Gentry Smith, director of the Office for Foreign Missions, were sent letters by the White House that their service was no longer required, the sources told CNN. All four, career officers serving in positions appointed by the President, submitted letters of resignation per tradition at the beginning of a new administration. The letters from the White House said that their resignations were accepted and they were thanked for their service.

The White House usually asks career officials in such positions to stay on for a few months until their successors are confirmed. “Any implication that that these four people quit is wrong,” one senior State Department official said. “These people are loyal to the secretary, the President and to the State Department. There is just not any attempt here to dis the President. People are not quitting and running away in disgust. This is the White House cleaning house.” Mark Toner, the State Department’s acting spokesman, said in a statement that “These positions are political appointments, and require the President to nominate and the Senate to confirm them in these roles. They are not career appointments but of limited term.”

A second official echoed that the move appeared to be an effort by the new administration to “clean house” among the State Department’s top leadership. “The department will not collapse,” the second official said. “Everyone has good deputies. It’s a huge institutional loss, but the department has excellent subordinates and the career people will step up. They will take up the responsibility.” Victoria Nuland, the State Department’s assistant secretary for Europe, was also not asked to stay on. The following org charts breaks out the unfilled appointee positions, in blue, while the red crosses show the resignations.

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America has killed its resilience and redundancy, its back-up system. All western nations have. Best argument for protectionism: produce your own essentials.

How America Could Collapse (Nation)

A few months ago, a friend in the entertainment industry told me of a new business model in Hollywood: hoarding videotapes. Apparently, the earthquake in Japan knocked offline a Sony factory that makes certain types of tape. That factory was also in the tsunami zone, so now there’s a serious tape shortage threatening the television industry. The NBA scrambled to get enough tape to broadcast the NBA finals; one executive told the Hollywood Reporter, “It’s like a bank run.” In the last few years, economists have spent a lot of time and energy thinking about bank runs. A bank run happens when depositors think a bank is weak and scramble to get their money out before it collapses. “Tight coupling” of financial institutions, like when banks are overly dependent on each other, can create a cascading series of problems for the system itself.

We saw this with Lehman Brothers when it went bankrupt. Its AAA-rated debt instruments lost value unexpectedly; that caused money market funds that held those presumably safe bonds to suddenly lose value. A shadow bank run was the result, as investors rushed to withdraw from the money market funds. Worryingly, there’s been very little consideration of how systemic collapses can happen in another, perhaps more dangerous realm—the industrial supply system that keeps us in everything from medicine to food to cars to, yes, videotape. In 2004, for instance, England closed one single factory, which caused the United States to lose half of its flu vaccine supply. Barry Lynn of the New America Foundation has been studying industrial supply shocks since 1999, when he noticed that global computer chip production was concentrated in Taiwan.

After a severe earthquake in that country, the global computer industry nearly shut down, crashing the stocks of large computer makers. This level of concentration of the production of key components in a globalized economy is a new phenomenon. Lynn’s work points to the highly dangerous side of globalization, the flip side of a hyper-efficient global supply chain. When one link in that chain is broken, there is no fallback. Lynn has continued to study industrial supply shocks and says, “What I have found most interesting recently is the apparent role supply chain shocks played in triggering a synchronized slowdown of industrial economies in April—production down (in USA, China, Europe, Southeast Asia), jobs down, demand down, GDP numbers down—due almost entirely to the loss of a single factory that makes microcontroller chips for cars.”

[..] There’s a good amount of grumbling about the state of American infrastructure—collapsing bridges, high-speed rail, etc. But American infrastructure is not just about public goods, it’s about how the corporations that enforce, inform and organize economic activity are themselves organized. Are they doing productive research? Are they spreading knowledge and know-how to people who will use it responsibly? Are they creating prosperity or extracting wealth using raw power? And most importantly, are they contributing to the robustness of our society, such that we can survive and thrive in the normal course of emergencies? The answer to all of these questions right now is “no.” And while this may not be hitting the elite segments of the economy right now, there will be no escape from a flu pandemic or significant food shortage. The re-engineering of our global supply chain needs to happen—and it will happen, either through good leadership or through collapse.

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As much as people may dislike Scott Adams, he has a story to tell that many do not understand but should.

Outrage Dilution (Adams)

I’m having a fun time watching President Trump flood the news cycle with so many stories and outrages that no one can keep up. Here’s how the math of persuasion works in this situation: 1 outrage out of 3 headlines in a week: Bad Persuasion. 25 outrages out of 25 headlines in a week: Excellent Persuasion. At the moment there are so many outrages, executive orders, protests, and controversies that none of them can get enough oxygen in our brains. I can’t obsess about problem X because the rest of the alphabet is coming at me at the same time. When you encounter a situation that is working great except for one identifiable problem, you can focus on the problem and try to fix it. But if you have a dozen complaints at the same time, none of them looks special. The whole situation just looks confusing, and you don’t know where to start. So you wait and see what happens.

Humans need contrast in order to make solid decisions that turn into action. Trump removed all of your contrast by providing multiple outrages of similar energy. You’re probably seeing the best persuasion you will ever see from a new president. Instead of dribbling out one headline at a time, so the vultures and critics can focus their fire, Trump has flooded the playing field. You don’t know where to aim your outrage. He’s creating so many opportunities for disagreement that it’s mentally exhausting. Literally. He’s wearing down the critics, replacing their specific complaints with entire encyclopedias of complaints. And when Trump has created a hundred reasons to complain, do you know what impression will be left with the public? He sure got a lot done. Even if you don’t like it. In only a few days, Trump has made us question what-the-hell every other president was doing during their first weeks in office. Were they even trying?

For a fun party trick, ask your most liberal friends if they think the Federal government should have a say in whether a woman gets an abortion or not. When they say the Federal government should stay out of that decision, inform them that President Trump shares their opinion. He doesn’t want the Federal government to be in the business of making health care choices for women. He prefers leaving that decision to the woman, her doctor, and state laws.

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Not bad at all from Der Spiegel.

How America Lost Its Identity – Megalomania & Small-Mindedness (Spiegel)

On a frigid January evening one year ago, I was standing in a line of around 1,000 people in Burlington, Vermont, to see Donald Trump. I reported my very first story on the United States in 1991 and had been living in the country since 2013. I thought I knew the country well. But on that evening in January, I realized that I had been mistaken. Burlington lay under a blanket of snow and next to me in line stood Mary and Tim Loyer, both wrapped in dark-blue parkas. Mary was unemployed and her son Tim had a job at a bar. Both told me they were Bernie Sanders supporters. Tim said he was particularly bothered by the power held by large companies, that the division of wealth was unfair and that people like him no longer had opportunities to improve their lives. It was the anthem of the working class.

When asked what he found attractive about Trump, Tim said: “Bernie and Trump are the only politicians who say what they’re thinking and do what they say,” as his mother Mary nodded along. Hillary Clinton, by contrast, is corrupt, he said. In an election pitting Trump against Clinton, Tim said he would not vote for Clinton. Again, Mary nodded. At the entrance, security personnel patted us down and asked if we were planning on voting for Trump. Only those who said yes were allowed to proceed. When Trump began speaking, a demonstrator stood up and yelled that Trump was a racist. The candidate paused, shook his fist and demanded that security throw the protester out. “Keep his coat. Confiscate his coat,” Trump said from the stage. It was 21 degrees Fahrenheit (-6 degrees Celsius) outside.

Trump snarled as his fans jumped to their feet hooting and jeering. One was reminded of a lynch mob. I learned three things on that evening in Burlington: In the fatherland of capitalism, anger with the elite is so vast that even leftists would rather vote for a narcissist billionaire than a veteran of the political establishment. In a country that values freedom of opinion higher than almost any other country in the world, there were now attitude tests prior to admission to political rallies. And many Americans, who are otherwise so polite, lose all restraint when confronted by those who think differently. Everything that I associated with America seemed no longer to apply on that evening in Burlington. What had happened to this once-proud country?

I found answers to this question on a journey through American society – to places like Vermont, Maryland, Rhode Island and Virginia. Those are just a few of the places I have visited in the last four years – places where those symptoms could be seen that together add up to the huge crisis that has gripped America. This self-confident country that has spent decades exporting its values with imperialist hubris has lost its identity. Democratic capitalism no longer works well enough to keep together a country of 325 million people and to guarantee domestic peace. The United States is not alone in having been struck by this identity crisis: It has also hit the United Kingdom, France, Germany and other countries. But America, where capitalism flourishes to a greater degree than anywhere else, has been hit the hardest of all.

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Not Robert Parry’s strongest effort, he seems to want to stick to two contradictory stories at the same time: is Obama a closet neocon or is he a coward?

Obama Bequeaths A More Dangerous World (Parry)

[..] perhaps Obama’s most dangerous legacy is the New Cold War with Russia, which began in earnest when Washington’s neocons struck back against Moscow for its cooperation with Obama in getting Syria to surrender its chemical weapons (which short-circuited neocon hopes to bomb the Syrian military) and in persuading Iran to accept tight limits on its nuclear program (another obstacle to a neocon bombing plan). In both cases, the neocons were bent on “regime change,” or at least a destructive bombing operation in line with Israeli and Saudi hostility toward Syria and Iran. But the biggest challenge to these schemes was the positive relationship that had developed between Obama and Russian President Vladimir Putin. So, that relationship had to be shattered and the wedge that the neocons found handy was Ukraine.

By September 2013, Carl Gershman, the neocon president of the U.S.-government-funded National Endowment for Democracy, had identified Ukraine as “the biggest prize” and a steppingstone toward the ultimate goal of ousting Putin. By late fall 2013 and winter 2014, neocons inside the U.S. government, including Sen. John McCain and Assistant Secretary of State for European Affairs Victoria Nuland, were actively agitating for a “regime change” in Ukraine, a putsch against elected President Viktor Yanukovych that was carried out on Feb. 22, 2014. This operation on Russia’s border provoked an immediate reaction from the Kremlin, which then supported ethnic-Russian Ukrainians who had voted heavily for Yanukovych and who objected to the coup regime in Kiev. The neocon-dominated U.S. mainstream media, of course, portrayed the Ukrainian conflict as a simple case of “Russian aggression,” and Obama fell in line with this propaganda narrative.

After his relationship with Putin had deteriorated over the ensuring two-plus years, Obama chose to escalate the New Cold War in his final weeks in office by having U.S. intelligence agencies leak unsubstantiated claims that Putin interfered in the U.S. presidential election by hacking and publicizing Democratic emails that helped Trump and hurt Hillary Clinton. The CIA also put in play salacious rumors about the Kremlin blackmailing Trump over a supposed video of him cavorting with prostitutes in a Moscow hotel. And, according to The Wall Street Journal, U.S. counterintelligence agents investigated communications between retired Gen. Michael Flynn, Trump’s national security advisor, and Russian officials. In the New McCarthyism that now surrounds the New Cold War, any conversation with Russians apparently puts an American under suspicion for treason.

The anti-Russian frenzy also pulled in The New York Times, The Washington Post and virtually the entire mainstream media, which now treat any dissent from the official U.S. narratives condemning Moscow as prima facie evidence that you are part of a Russian propaganda apparatus. Even some “progressive” publications have joined this stampede because they so despise Trump that they will tout any accusation to damage his presidency.

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Scary insane: “..WMPs jumped 42% year-on-year to 26 trillion yuan ($3.8 trillion) at the end of June, doubling in just two years.”

China’s Shadow Banking Crusade Risks Bond Market Crash (R.)

China’s campaign to cut high debt levels in its economy is aiming this year to shrink the $3 trillion shadow banking sector, which could drain a critical source of income for the country’s banks and of funding for its fragile bond market. Shadow banking, a term for financial agents that perform bank-like activity but are not regulated as banks, has boomed in China, the world’s second-largest economy, as a way of circumventing government’s tight controls on lending. It has been a key driver of the breakneck growth in debt in the economy, which UBS says rose to 277% of GDP from 254% in 2016, and is now a target as Beijing tries to reduce that figure before it destabilizes the economy.

But with banks’ shadow banking business accounting for about a fifth of total outstanding loans, analysts fear that the unintended consequences of government efforts could trigger the fate it seeks to avoid. “We see a policy-induced drastic deleveraging in shadow banking as a policy miscalculation that could trigger unexpected tail risks for the banking sector,” said Liao Qiang, credit analyst at S&P Global Ratings. Investors’ concerns stem from new rules this month that put lenders’ wealth management products (WMPs), the biggest component of shadow banking, under the scrutiny of the People’s Bank of China (PBOC) for the first time and into its calculations on prudence, capital adequacy and loan growth guidelines.

According to the latest official data, WMPs jumped 42% year-on-year to 26 trillion yuan ($3.8 trillion) at the end of June, doubling in just two years. WMPs are typically kept off banks’ balance sheets, making it difficult for regulators to assess the stability of a banking sector reliant upon them for growth. And just as in the global financial crisis of 2008, banks’ interconnectedness amplifies the risks. Banks are increasingly buying into each other’s WMPs, such that interbank WMPs hit 4 trillion yuan in June, a doubling from two years ago.

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Wonder how this connects to the shadow banks.

China’s Army of Global Homebuyers Is Suddenly Short on Cash (BBG)

China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point. “Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California. Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree.

While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls. “If it’s too difficult, I’m out,’’ said Mr. Zheng, 66, a retired civil servant in Shanghai who declined to give his first name to avoid attracting regulatory scrutiny. He may abandon a 2.4 million yuan ($348,903) home purchase in western Melbourne, even after shelling out a 300,000 yuan deposit last August. He’s due to make another big payment next month. The change spooking Zheng and his compatriots came in a statement from the State Administration of Foreign Exchange on Dec. 31, hours before the reset of Chinese citizens’ annual foreign currency quotas.

Among other requirements, SAFE said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to money-laundering investigations, SAFE said. “A lot of clients are worried and have started hesitating,’’ said Wang Ning, vice president of the international department at Fang Holdings, China’s most popular property website.

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A pity this ends in a political rant, the first part is interesting.

Lurching Towards the New Paradigm (Art+M)

The world heaved under the sudden weight of its own nervous system. Lit up and lashed to the planet in only a few decades, we lost our bearings in the paradox of connectivity: minute detail of every moment yet removed from any tangible presence, our animal bandwidth compressed to sound and vision, crowded and alone. We got connected and it’s terrifying. Direct confrontation with The Other. Massive social relativism. A fractal collage of affinity networks and sub genres and Things That Seem Really Different. Nature red in tooth and claw, in full glorious monstrosity. And now it’s like “oh shit you mean we’re responsible for all of this??” The Web is a planetary architecture that compresses and distributes information. There’s only so much bandwidth and the Web is just one modality of acting in the world.

The network compresses physical experience from 5 senses to mostly one. The lo-fidelity of text invites us to project our fears and insecurities on vagaries stripped of all the social cues we use to interrogate communication. No tone of voice, no body language, no skin flush or eye contact or simple touch. We get complete vision at the expense of physical connection. We casually act like monsters when online, say terrible things, things we would never say to someone’s face. We’d see their hurt, feel their anger. Yet, such is the new asymmetry of power that dateless trolls can destroy lives from the safety of their parents’ basement. It turns out social media is pretty sociopathic. But this couch is pretty comfortable and many of us in the developed world enjoy tremendous security, all things being equal.

Our relentless sapien modeling no longer frets about saber toothed beasts rumbling in the brush to devour us, but abstracts those same spirits, those hopes and fears, into the characters and dramatic occurrences that enchant our fickle minds. So we sat on the couch and projected ourselves into the astral theater of television. The Gods we looked to for hope and guidance, for rules and consequences, those gods became priests, then politicians, and then celebrities. The Stars of the Silver Screen. Then we broke open the screen, tore apart the TV and unbundled its business entanglements and made it so we could all walk onto the soundstage and stand beneath those glowing lights, big smile, ready to share ourselves with the masses. On the way to Godhead we are tempted by Stardom.

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The longer this takes, and there’s no end in sight, the more I’ll be thinking of the Treaty of Versailles. It won’t lead to a new Hitler, but the risk of destabilizing the entire region is very real. Destroying a country is always a bad idea, destroying a member of your own union is much worse. And entirelu unnecessary too.

Greece Creditors Demand Legislation Of Reforms For 2018-19 (Kath.)

Eurozone finance ministers turned the heat up on Athens on Thursday, demanding that it legislates measures now for the period after 2018, when the country’s bailout ends, dashing the government’s hopes of a swift conclusion to the second review of its third bailout. The Eurogroup in Brussels, which the government hoped would pave the way for the return to Athens of the representatives of the country’s quartet of creditors to continue talks, was held just two days after the emphatic refusal by Prime Minister Alexis Tsipras to enact any further measures now. Finance Minister Euclid Tsakalotos said the demands by the IMF went “well beyond the European framework of democracy.”

“It’s not correct to ask a country in a program to legislate two to three years beforehand what it will do in 2019,” he said after the Eurogroup. Moreover, what is worrisome for the leftist-led government is that Greece appears to have lost the support of the European Commission, which aligned itself with the demands made by the IMF and German Finance Minister Wolfgang Schaeuble for Athens to legislate measures now for the period after 2018. However, Eurogroup chief Jeroen Dijsselbloem said that completing the review is “in everybody’s interest,” adding that Greece’s creditors remain committed to continuing talks, and that eurozone finance ministers want to expedite procedures that will allow creditor representatives to return to Athens “as quick as possible.” The good news, he said, was that the Greek economy is recovering fiscally, and that state revenues were higher than expected.

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The only possible decision. Time for the EU to stand up for Greece. Yeah, right.

Greek Supreme Court Rules Against Extraditing Eight Turkish Soldiers (WSJ)

Greece’s Supreme Court rejected an extradition request for eight Turkish military officers who fled to Greece after a failed coup, a decision that Turkey warned would hurt the countries’ relations. The court ruled that the servicemen wouldn’t get a fair trial in Turkey and that their extradition could put their lives at risk while exposing them to torture or degrading treatment. The decision is final and cannot be appealed. “We protest this judgment which prevents these individuals who actively participated in the coup attempt which targeted the democratic order in Turkey, killed 248 members of our security forces and civilians, wounded 2193 of our citizens and attempted against the life of our President, to be brought before the independent Turkish judiciary,” Turkey’s foreign ministry said in a written statement in English.

The Turkish statement accused Greece of sheltering “putschists” and said it that in light of a decision “taken for political motives,” Turkey will evaluate bilateral ties, including cooperation against terrorism. The eight officers, with ranks up to the level of major, flew by helicopter to the northern Greek city of Alexandroupolis the day after the July 15 coup attempt in Turkey. The Turkish government requested the rapid extradition of the men, whom it has described as “traitors,” to face charges of trying to overthrow the democratic constitution. The eight men deny the charges. They say they were unaware of the coup attempt until it was under way and fled to Greece to escape violent reprisals against soldiers after the coup failed. Greek intellectuals and activists, including prominent author Apostolos Doxiadis, campaigned forcefully against the men’s extradition in recent weeks, turning the men’s plight into a high-profile political issue.

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Like Trump’s ‘safe places’. In other words, rebuild what you destroyed. Not going to happen. They’ll just throw billions at it and hope it disappears. It won’t. But then they can say they tried the best they could.

EU Looks To Camps In Africa To Cut Immigration (R.)

EU interior ministers will consider plans on Thursday to finance camps in Africa where the UN refugee agency and aid groups would process migrants to prevent them trying to cross the Mediterranean to Europe. The sea crossing from Libya to Italy, operated by people smugglers, is now the main route for migrants seeking better lives in wealthy Europe, but the EU wants to shut it down and admit only refugees. More than 4,500 people are known to have drowned last year alone trying to make the crossing. The European Union has deployed a naval mission in the Mediterranean and is training the Libyan coastguard to cut the numbers attempting the journey. Now it also wants to return migrants plucked from the sea to where they came from. “The idea is to send them to a safe place, without bringing them into Europe,” German Interior Minister Thomas de Maiziere told reporters as he arrived for the talks in the Maltese capital Valletta.

“The people taken up by the smugglers need to be saved and brought to a safe place, but then from this safe place outside Europe we would bring into Europe only those who require protection,” he said. The camps in Libya or its neighbors would be run by the UN refugee agency UNHCR or the International Organization for Migration (IOM), which would screen the migrants and help return those not eligible for asylum to their home countries. Most of those taking the Libya-Italy route are regarded as economic migrants with no chance of winning asylum in the EU. Since the influx of more than a million people in 2015, many of them fleeing the Syrian conflict, the EU has tightened border controls, making it increasingly hard for migrants and asylum seekers alike to enter the 28-nation bloc.

It is also offering money and assistance to countries along the migration routes in the hope that fewer people will seek to leave their homes or will be stopped on the way before they embark for Europe. The idea of financing camps in Africa enjoys wide political backing in the EU, but poses legal and security challenges. Libya sank into chaos following the 2011 overthrow of veteran ruler Muammar Gaddafi, and the new UN-backed government in Tripoli exercises no control over its territory. Such lawlessness means returning people to Libya would likely violate international law, which prohibits sending people back to a place where their lives could be in danger. That is why the EU needs the UNHCR and IOM to create sites there that could be deemed as meeting international humanitarian standards. It is an effort to replicate parts of existing agreements the EU has with Turkey, Jordan and Lebanon, which host several million Syrian refugees in camps on their soil.

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“The German magazine Der Spiegel revealed a warning from the European commission that “under no circumstances” should the public learn what was said during talks held in March last year.”

Europe’s Crackdown On African Immigration Is Hitting Vulnerable Refugees (G.)

Documents cited in the Guardian on Monday showing that the UK government downplayed the risk of human rights abuses in Eritrea in an attempt to reduce asylum-seeker numbers are the latest indication of Britain’s determination to reduce African immigration. But this is a Europe-wide initiative, co-ordinated in Brussels. With French, German, Dutch and Italian elections later this year, there is intense pressure across the European Union to cut the flows of refugees and migrants across the Mediterranean. European plans to deal with the question have been veiled in secrecy, since they involve close cooperation with some of Africa’s most notorious dictatorships.

The German magazine Der Spiegel revealed a warning from the European commission that “under no circumstances” should the public learn what was said during talks held in March last year. A member of staff working for Federica Mogherini, the EU high representative for foreign affairs, warned of the risk to Europe’s reputation. Plans are being formulated under arrangements agreed between the EU and African leaders in Malta in November 2015. These called for close cooperation between European security services and those of African states. Among those around the table at Valletta were representatives of repressive regimes in Sudan (whose president, Omar al-Bashir, is wanted by the International Criminal Court for war crimes) and Eritrea, which has been accused of crimes against humanity.

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Everybody accuses the other. Meanwhile, it’s going to be very cold again in Greece this weekend.

EU’s Mishandled Millions Not Reaching Refugees (DW)

On January 18, Dimitris Avramopoulos, European Commissioner for Migration, arrived on the Greek island of Lesbos. The reason for his visit was simple, if disheartening: a wave of bitterly cold weather had blanketed much of Greece in snow, and with it the country’s refugee camps. In the world’s richest continent, images emerged of refugees – many of them children, elderly or disabled -battling sub-zero temperatures with little more protection than tents and blankets. A few days earlier Ioannis Mouzalas, the country’s Minister for Migration, had stated, “No refugee or migrant is in the cold.” Avramopoulos called on authorities and NGOs to do more. Pointedly he noted that Greece was the single biggest recipient of EU Home Affairs funding, with €1 billion ($1.1 billion) made available over two years in financial support.

So where has the money gone? And why has the country proven unable to provide rudimentary living conditions for many of the roughly 50,000 refugees? The fact is that the €1 billion figure touted by Avramopoulos conflates a number of funds many of which have not yet been spent. Nevertheless the funds that have already been awarded to the government or NGOs remain substantial. Since the start of 2015, the Greek government, according to data from the European Commission and the Greek Ministry of Development, has absorbed 179 million euros of emergency funds from the Directorate General of Home Affairs (DG HOME). This is in addition to €60 million from the €509 million of long-term funding allocated to Greece for the period 2014-2020.

Meanwhile the UNHCR, the European Asylum Support Office (EASO) and the International Organization for Migration (IOM) have received €175 million from DG HOME’s emergency funds. An additional €186 million of emergency funding has also been contracted to a number of major NGO’s for humanitarian assistance in Greece from the Directorate General for European Civil Protection and Humanitarian Aid Operations (DG ECHO) for projects starting in 2016. An additional €500 million has been earmarked for this fund until 2018.

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Jan 262017
 
 January 26, 2017  Posted by at 10:32 am Finance Tagged with: , , , , , , , , , ,  14 Responses »
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Arthur Siegel Zoot suit, business district, Detroit, Michigan 1942


Trump Loves Debt, But It Won’t Love Him Back (BBG)
US Tax Reforms Could ‘Transform’ Global Oil Market (R.)
Trump Prepares Orders Aiming at Global Funding and Treaties, UN (NYT)
Trump Starts A ‘Sanctuary City’ War With Liberal America (BBC)
Kyle Bass Calls Trump ‘Gasoline’ on Smoldering Fire in China (BBG)
China Keeps 3% Budget Deficit Goal For 2017 As Debt Risks Grow (R.)
China Is Becoming ‘Increasingly Risky’ Because Of Its Economy (CNBC)
Dutch Respond To Trump’s ‘Gag Rule’ With International Safe Abortion Fund (G.)
Why the Corrupt, Worker-Hating New Democrats Must Be Purged (Bill Black)
Pippa Malmgren: The Social Contract In The West Is Broken (SLD)
Seymour Hersh Blasts Media For Promoting Russian Hacking Story (IC)
Austerity Economics Has Just Been Smashed. By The IMF. (GDB)
The Super Rich Are Preparing For The End Of The World (CNBC)
Rome Mayor Raggi Says She Received Summons From Prosecutors (BBG)
Deal On Greek Bailout’s Second Review Possible At February Eurogroup (R.)
“INAUGURATION DAY” (Bad Lip Reading)

 

 

Catch 20-something.

Trump Loves Debt, But It Won’t Love Him Back (BBG)

President Donald Trump, the self-proclaimed king of debt, may end up with a revolt on his hands.He wants to spend billions of dollars to rebuild American highways and bridges to double economic growth to about 4% a year. He wants to preserve medical benefits for the poor and elderly. And he’s selected someone to oversee the national budget who’s fundamentally opposed to huge piles of debt and pledges to reduce the nation’s deficit.This recipe doesn’t add up, either in theory or practice. Even if Trump finances his promised infrastructure plans entirely by cutting other government services, the nation’s debt load is forecast to surge by trillions of dollars over the next decade.

Trump faces two big problems when grappling with the U.S. debt load: an aging population that’s becoming sicker and inauspicious bond math. If Trump succeeds in fostering substantially higher growth rates, as he’s promised, then interest rates will most likely rise much more than forecast. That’ll make it materially more expensive for the nation to service its debt.Even without much more growth, the U.S. deficit will likely increase as interest rates rise. That’s according to the Congressional Budget Office, a nonpartisan group that analyzes the U.S. economy, which just released its forecast for the nation’s deficit and debt load over the next decade.

Its baseline scenario calls for gradually rising benchmark borrowing costs, with 10-year Treasury yields leveling out at about 3.6% by 2022 from about 2.5% today. Even with that relatively modest projection, CBO analysts wrote that “the government’s interest payments on that debt rise sharply over the next 10 years — nearly tripling in nominal terms and almost doubling relative to GDP.”Interest expense will rise to $768 billion in 2027 from $270 billion in 2017 under the CBO’s base-case scenario.But let’s say Trump succeeds in his attempt to foster more economic growth. That’ll mean that inflation will rise, prompting investors to demand higher U.S. Treasury yields to offset steadily rising consumer prices. Jeffrey Gundlach, the bond guru who runs DoubleLine Capital, said after the election that U.S. 10-year government bond yields could reach 6% in five years. In that case, the interest expense would balloon much more than expected, substantially eating into the nation’s budget.

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“We expect WTI could move to a $10 per barrel premium to Brent from a $3 discount – a $13 (+25%) relative move immediately.”

US Tax Reforms Could ‘Transform’ Global Oil Market (R.)

The push by Republicans in the U.S. House of Representatives for a shift to border-adjusted corporate tax (BTA) could push U.S. crude prices higher than the global benchmark Brent, triggering large-scale domestic production, according to analysts at Goldman Sachs on Tuesday. The measure, known as border adjustment, intends to boost U.S. manufacturing by taxing imports while exempting U.S. business export revenues from corporate taxation. Goldman said it anticipates a 25% jump in the prices of U.S. crude futures, also known as West Texas Intermediate (WTI), and refined products in comparison to the global prices if the switch is implemented.

The investment bank, however, said that uncertainty on whether such a policy will go ahead is high due to concerns about WTO-non compliance and transition issues and oil futures currently only imply a 9% probability for such a shift. “If implemented, the impacts on the oil market would be significant,” Goldman said. “We expect WTI could move to a $10 per barrel premium to Brent from a $3 discount – a $13 (+25%) relative move immediately.” Brent crude futures were trading on Tuesday at a $2.40 per barrel premium to WTI. The appreciation in prices could be an incentive for producers to sharply increase activity, the bank said warning, that the ramp up in U.S. production in a market only starting to rebalance would create a renewed large oil surplus in 2018, which could lead to an immediate sharp decline in global oil prices.

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The UN is dysfunctional, but this risks cutting the few parts that do actually work.

Trump Prepares Orders Aiming at Global Funding and Treaties, UN (NYT)

The Trump administration is preparing executive orders that would clear the way to drastically reduce the United States’ role in the United Nations and other international organizations, as well as begin a process to review and potentially abrogate certain forms of multilateral treaties. The first of the two draft orders, titled “Auditing and Reducing U.S. Funding of International Organizations” and obtained by The New York Times, calls for terminating funding for any United Nations agency or other international body that meets any one of several criteria. Those criteria include organizations that give full membership to the Palestinian Authority or Palestine Liberation Organization, or support programs that fund abortion or any activity that circumvents sanctions against Iran or North Korea.

The draft order also calls for terminating funding for any organization that “is controlled or substantially influenced by any state that sponsors terrorism” or is blamed for the persecution of marginalized groups or any other systematic violation of human rights. The order calls for then enacting “at least a 40% overall decrease” in remaining United States funding toward international organizations. The order establishes a committee to recommend where those funding cuts should be made. It asks the committee to look specifically at United States funding for peacekeeping operations; the International Criminal Court; development aid to countries that “oppose important United States policies”; and the United Nations Population Fund, which oversees maternal and reproductive health programs.

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Interesting power fight. But there are laws.

Trump Starts A ‘Sanctuary City’ War With Liberal America (BBC)

Mr Trump’s border wall announcement will make most of the headlines today, given that it was a central focus of his presidential campaign and has increased diplomatic tension with the Mexican government. His plan to target US “sanctuary cities”, however, likely sets the stage for a much tougher, uglier domestic political fight. More than 400 jurisdictions across the country, including New York, Los Angeles, Boston and Seattle – major cities in left-leaning states that did not vote for Mr Trump – have enacted policies protecting undocumented immigrants within their boundaries. Officials in these designated areas, including local law enforcement, are not allowed to enquire as to an individual’s immigration status in the course of their duties.

Candidate Trump pledged to end this practice, and on Wednesday he put some teeth into his promise – authorising the federal government to withhold funds from cities that do not co-operate with immigration officials or comply with federal law. His executive order frames the issue as one of national security. “Sanctuary jurisdictions across the United States wilfully violate Federal law in an attempt to shield aliens from removal from the United States,” it reads. “These jurisdictions have caused immeasurable harm to the American people and to the very fabric of our republic.”

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Speeding up decline. Or exposing it, rather.

Kyle Bass Calls Trump ‘Gasoline’ on Smoldering Fire in China (BBG)

Hedge fund manager Kyle Bass likened President Donald Trump’s trade and tax policies to gasoline — hastening an economic restructuring in China while stimulating capital investment and growth in the U.S. China has “recklessly built a system that’s going to need to restructure and that just so happens to be metastasizing right when Trump becomes elected,” Bass told Bloomberg TV. “This is a fire that’s been smoldering and it’s now starting to burn, and Trump is just more gasoline.” Imposing tariffs on Chinese imports could have “profound consequences” for the nation’s economy, where credit over the last 18 months has grown by $6.5 trillion while deposits expanded just $3 trillion, said Bass, founder of Hayman Capital Management.

Early last year, Bass called for a 30% devaluation in the yuan against the dollar, and he’s since opened two Asia-focused funds to wager on the imbalances in the region, which he said could extend to Hong Kong and Taiwan. “The idea that China is now the driving economic power in the world, I think, is illusory or somewhat of a fallacy,” he said. “It’s safe to say that the Asian theater is where we’ve been focused.” In the U.S., Bass said, border tax adjustments will help finance a lower corporate tax rate that Trump has proposed, which in combination with the repatriation of capital offshore will be “extremely stimulative.” He said Trump’s accelerated policies would lead to real capital investment, competitiveness and an improvement in productivity.

The impact will be “positive for the United States and slightly negative for the rest of the world,” he said. “But it’s not the globalist nightmare, in my opinion.” Inflation, set to increase in the U.S., will also spike in Germany, which will prompt a tapering of the ECB’s bond-buying program and possibly an increase in interest rates, he said. The move to do so will be sped up by Trump, he said.

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“Total fixed-asset investment rose 8.1% in 2016, the slowest pace since 1999, despite an 18.7% increase in investment by state entities..”

China Keeps 3% Budget Deficit Goal For 2017 As Debt Risks Grow (R.)

China’s policymakers plan to keep their budget deficit target for 2017 at the same level as last year to underscore a focus on debt reduction and reform, though they have wiggle room to increase fiscal stimulus if the economy needs support again. A budget deficit target of 3% of GDP, unchanged from 2016, was endorsed by top leaders at the Central Economic Work Conference in December, according to sources with knowledge of the meeting’s outcome. After government investment propped up activity for much of 2016, policymakers are looking for a recovery in private investment through public-private partnership (PPP) infrastructure projects to drive growth this year. “Fiscal policy is clear. It’s necessary to maintain last year’s 3% deficit ratio, although there is room to increase it slightly,” said one of the sources, a policy adviser.

Preliminary finance ministry data this week implied an actual deficit of 3.8% of GDP in 2016. However, China’s budget accounting allows it to use unspent money from previous years and funds from a Central Budget Stabilization Fund so it can report a final deficit in line with the target. The world’s second-largest economy grew 6.7% last year, supported by higher government spending and record bank lending, though it was still the slowest growth in 26 years. Reuters reported last week that sources said the 2017 economic growth target would be around 6.5%, down from last year’s 6.5-7%. “If this year’s growth goal is not that high, there will be less pressure on the strength of policy support,” said a second policy source. [..] Total fixed-asset investment rose 8.1% in 2016, the slowest pace since 1999, despite an 18.7% increase in investment by state entities, as private investment grew just 3.2%, the weakest on record.

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A risk to the west, that is.

China Is Becoming ‘Increasingly Risky’ Because Of Its Economy (CNBC)

A major risk to U.S. markets is looming, and it’s bigger than headlines and President Donald Trump’s tweets, Goldman Sachs’ Sharmin Mossavar-Rahmani told CNBC on Wednesday. The threat is the Chinese economy, the Goldman Sachs Private Wealth Management chief investment officer told “Squawk on the Street.” “We use the term that China could ‘submerge’ under the burden of its own debt,” Mossavar-Rahmani said. “If you look at any of the debt measures in China, they’re tremendously high.” Mossavar-Rahmani focused on the credit-to-GDP number from the BIS as a key measure of China’s accumulating debt. As of the second quarter of 2016, China’s ratio was 28.8%.

“China is about 30, the U.S. was at 12.4% just before the crisis. And if the U.S. didn’t avoid a financial crisis with all its strength, how can we assume that China will?” the wealth manager asked. China is still awaiting its 19th gathering of the National Congress of the Communist Party in the fall, which Mossavar-Rahmani said would weigh on the country’s economic position in 2018. The meeting will determine 370 of China’s Central Committee members for the next five years. “Then we have to see, in 2018, will they put structural reforms on the front burner or does it stay on the back burner?” Mossavar-Rahmani asked.

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The US has a large block of religious zealots. The rest of the west, not so much.

Dutch Respond To Trump’s ‘Gag Rule’ With International Safe Abortion Fund (G.)

Up to 20 countries have indicated support for the Netherlands’ plan to set up an international safe abortion fund to plug a $600m funding gap caused by Donald Trump’s reinstatement of the “global gag rule”, the Dutch international development minister, Lilianne Ploumen, said on Wednesday. Ploumen took soundings from a number of her colleagues around the world on Tuesday evening after the Netherlands said it would act to mitigate the impact on hundreds of charities around the world. The “global gag rule”, also known as the Mexico City policy, was reimposed by Trump on Monday, and bans US federal funding for NGOs in foreign countries that provide abortion services or abortion advocacy. ‘We’re in talks with 15 to 20 countries and we’ve also spoken to foundations,” Ploumen told the Guardian.

“As well as contacting a number of European countries that we work with on these issues, we’re also in touch with countries in South America and Africa, as well as the foundations. It’s important to have the broadest possible support for the fund.” Ploumen did not identify which countries had been approached or how much money the Dutch government might commit to the scheme. She said the aim would be to continue support for existing programmes being run by organisations such as the United Nations Population Fund (UNPFA), the International Planned Parenting Federation and Marie Stopes International. “These are successful and effective programmes: direct support, distributing condoms, making sure women are accompanied at the birth, and making sure abortion is safe if they have no other choice,” she said.

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Damning. DO read.

Why the Corrupt, Worker-Hating New Democrats Must Be Purged (Bill Black)

This article explains three critical reasons why the Democratic Party’s leaders are far more insane than all but a few Democrats understand. It focuses on the leaders of the Democratic National Committee (DNC) and the New Democrats. The DNC leadership is composed of New Democrats. Debbie Wasserman Schultz had to resign in disgrace when the leaks proved that she was putting the DNC’s thumbs on the scale to favor Hillary Clinton (a New Democrat) in the presidential nomination contest against Bernie Sanders. Wasserman Schultz also took large contributions from big finance and, until she faced the prospect of a serious primary challenger, she supported efforts by predatory lenders to use Congress to bar the regulators from stopping their abuses.

Donna Brazile, a New Democrat, now runs the DNC. In this article, I show that Brazile denounced Democrats who refused to cheer President Bush’s invasion of Iraq (and his “Mission Accomplished” declaration) as so disloyal that when their country needed them they went “AWOL.” Not satisfied with that libel, she added the homophobic smear that voters would view Democrats who failed to cheer Bush’s lies and invasion as “effete.” Best of all, she said that Democrats should take as their role models Paul Wolfowitz, Richard Perle, and Frank Gaffney – Bush’s “chicken hawks” that devised the campaign of lies that led to the disastrous invasion of Iraq. Gaffney is now spreading hate of Muslims – and advising President Trump.

The DNC is also in the news because it has just accepted a $20 million “donation” funded by Third Way, a Wall Street front group, to study why the white working class “abandoned” Hillary Clinton. Clinton is a leader of the New Democrats. Wall Street has long been the largest single funder of the New Democrats various institutions. The New Democrats, at the behest of Wall Street, have waged the “long war” against the working class since their formation in 1984. The New Democrats did not simply abandon the working class – they targeted it for scorn and assaulted it with policies that harmed many Americans, but caused the greatest harm to the working class.

Particularly in light of the Trump’s election, the logical reaction of the DNC would have been to refuse to take the Wall Street buyout and announce that the New Democrats would never again do Wall Street’s bidding. They would return to the Democratic Party’s historic role as the party that championed the rights of workers. Brazile, of course, ensured that the DNC eagerly took the $20 million Wall Street buyout. The New Democrats not only continue to be for sale (or rent) by Wall Street – they continue to show that they continue to for sale for chump change. The DNC does not need $20 million to figure out why the white working class “abandoned” the New Democrats. They can check out from their local library Tom Frank’s books warning that this would happen and explaining in detail why the New Democrats’ long war against the working class was making it happen.

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When growth could not be delivered. “There is always a deal between citizens and their governments. But now governments are defaulting on their citizens because of the debt problem. They can’t deliver retirement at 65.”

Pippa Malmgren: The Social Contract In The West Is Broken (SLD)

Question: The inability of continental Europe to grow has been a clear part of the concern in Britain about Europe. What role has this played?

Malmgren: The British received more Foreign Direct Investment than any other locartion in the EU before Brexit. It was assumed this flow would fall after Brexit. But, I hear from my clients that they are even more interested in the UK now. That’s because money is like water. It flows to wherever it faces the least resistance – the lowest tax rates and least regulatory burden. I would challenge the British to end up with more regulation and higher taxes that the EU after Brexit. Frankly, that would take a huge effort! But the problems on the Continent are deeper than this; The real issue is that the social contract between citizens and governments in the West are being broken. There is always a deal between citizens and their governments. But now governments are defaulting on their citizens because of the debt problem. They can’t deliver retirement at 65. Now everybody has to work longer.

They can’t deliver the healthcare that had been expected. Frankly they can’t deliver police, fire departments or roads without potholes. The social contract in the EU is under even greater stress because growth has been so very poor. The night of the victory of Brexit, the markets attacked Italian banks, not British banks. What did the state in Italy do? They said they’d find 5b Euros to bail out the oldest bank which had lost 98% of its shareholder value. Meanwhile, they can’t find 5 cents for the young who are experiencing over 30% unemployment rates. This breaks the social contract and helps explain the new anti-EU sentiment. The Europeans are also increasingly uneasy about immigration issues. It was not part of the original deal in the European contract to have completely open borders. In my view, the British are not xenophobic, but want more process around immigration. They want a more secure movement of people within Europe.

The media talks all the time about the proposed Wall by Trump in the US with Mexico, but the reality is there a wall-building spree going on in Europe. Look at the new walls being constructed between Hungry and Serbia, between Germany and the Czech Republic, as well as new walls in Estonia, Poland and Lithuania are constructing one around Kaliningrad with watchtowers, etc. Frankly new walls will increasingly be digital. Processing of people will begin well before you get anywhere near what you think the border is. We will pass through borders without realizing we’ve already been assessed. We are in a period of history where the Europeans are fundamentally rethinking what they want Europe to stand for, the European Union to do, and how to generate economic growth again. As everywhere else, the public are questioning the establishment because they have failed to deliver on their promises.

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“I don’t think the notion of democracy is ever going to be as tested as it’s going to be now.”

The ‘media’ have lost so much credibility, and permamently. That is dangerous.

Seymour Hersh Blasts Media For Promoting Russian Hacking Story (IC)

Pulitzer prize-winning journalist Seymour Hersh said in an interview that he does not believe the U.S. intelligence community proved its case that President Vladimir Putin directed a hacking campaign aimed at securing the election of Donald Trump. He blasted news organizations for lazily broadcasting the assertions of U.S. intelligence officials as established facts. Hersh denounced news organizations as “crazy town” for their uncritical promotion of the pronouncements of the director of national intelligence and the CIA, given their track records of lying and misleading the public. “The way they behaved on the Russia stuff was outrageous,” Hersh said when I sat down with him at his home in Washington, D.C., two days after Trump was inaugurated.

“They were just so willing to believe stuff. And when the heads of intelligence give them that summary of the allegations, instead of attacking the CIA for doing that, which is what I would have done,” they reported it as fact. Hersh said most news organizations missed an important component of the story: “the extent to which the White House was going and permitting the agency to go public with the assessment.” Hersh said many media outlets failed to provide context when reporting on the intelligence assessment made public in the waning days of the Obama administration that was purported to put to rest any doubt that Russian President Vladimir Putin ordered the hacking of the DNC and Clinton campaign manager John Podesta’s emails.

The declassified version of the report, which was released January 7 and dominated the news for days, charged that Putin “ordered an influence campaign in 2016 aimed at the U.S. presidential election” and “aspired to help President-elect Trump’s election chances when possible by discrediting Secretary Clinton and publicly contrasting her unfavorably to him.” According to the report, the NSA was said to have had a lower confidence level than James Clapper and the CIA about the conclusion that Russia intended to influence the election. Hersh characterized the report as full of assertions and thin on evidence.

“It’s high camp stuff,” Hersh told The Intercept. “What does an assessment mean? It’s not a national intelligence estimate. If you had a real estimate, you would have five or six dissents. One time they said 17 agencies all agreed. Oh really? The Coast Guard and the Air Force — they all agreed on it? And it was outrageous and nobody did that story. An assessment is simply an opinion. If they had a fact, they’d give it to you. An assessment is just that. It’s a belief. And they’ve done it many times.”

[..] While expressing fears about Trump’s agenda, Hersh also called Trump a potential “circuit breaker” of the two-party political system in the U.S. “The idea of somebody breaking things away, and raising grave doubts about the viability of the party system, particularly the Democratic Party, is not a bad idea,” Hersh said. “That’s something we could build on in the future. But we have to figure out what to do in the next few years.” He added: “I don’t think the notion of democracy is ever going to be as tested as it’s going to be now.”

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But it will just continue. Wanna bet?

Austerity Economics Has Just Been Smashed. By The IMF. (GDB)

A powerful new report finally kills off any remaining intellectual veil for a broken economics that is breaking society. Sometimes an ideology is so brilliantly propagated that observers might not even notice it’s an ideology. In the corridors of power and in mainstream discussion, it ceases to be questioned. Then it goes catastrophically wrong. And it begins to seen again for the ideology it is. It becomes questioned again. And, if they are smart, leaders hear this and start to self-correct. This is where we’ve got to with neoliberalism, austerity, and rising inequality. Except for the self-correct part. Right now, instead of self-correction, we’re seeing many mainstream politicians unable to shift away from dead economics, and what seems in too many countries like the start of social breakdown.

Change is well overdue. Who can prompt leaders to drop the old economic nostrums are causing so much harm? Enter the IMF with a sledgehammer. Progressives duck in case in the sledgehammer is meant for them. But then the IMF demolishes the case for neoliberalism and austerity. It sounds extraordinary, and it is. Today the IMF will launch a new report, “Macro-Structural Policies and Income Inequality in Low-Income Developing Countries”, the latest in series that mark the intellectual journey the IMF research department has been travelling in recent years. Packed with detailed quantitative analysis it demonstrates that much of what elites have been advancing as unquestioned economics is demonstrably harmful both to economic growth and to public wellbeing.

Of course what makes this surprising, and what may make some progressives unenthusiastic about welcoming this, is also what makes it so powerful: an institution that has been, for far too long, a defender of the free market story and the Washington Consensus – the idea that liberalizing trade, privatizing everything possible and cutting down public spending was a one-size-fits-all solution to any government in trouble – has now refuted it. This paper is not the first by the IMF to take a stand on inequality, but it is notable because it claims in no uncertain terms that public spending – i.e. the opposite of the budget cuts that it once advocated for – decreases income inequality. They even have a formula – a 1% increase in public spending, they report, leads to a 2.3% decrease in inequality after 5 years. The paper also takes a strong stand against prioritizing indirect taxes, such as VAT, showing that they increase inequality.

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Bit sensationalist, perhaps?

The Super Rich Are Preparing For The End Of The World (CNBC)

The Dow has hit 20,000 for the first time ever, but rather than celebrating, some of the richest of the rich are building bunkers to prepare for a potential apocalypse. These “preppers” are making other investments too. They’re buying houses in New Zealand, which has become a popular spot in case of calamity. Billionaire Peter Thiel just secured property and citizenship there. And they’re getting elective surgery. Steve Huffman, the 33-year-old co-founder and CEO of the online community Reddit, got Lasik so that he’d be able to be more independent in case of emergency. “If the world ends — and not even if the world ends, but if we have trouble — getting contacts or glasses is going to be a huge pain in the ass,” the San Francisco resident tells Evan Osnos as part of The New Yorker’s chronicle of the elite’s end-of-the-world preparations. “Without them, I’m f—ed.”

In addition to the eye surgery, Huffman has accumulated guns, ammunition and motorcycles so that he won’t get caught in traffic jams during an evacuation. The notion of “doomsday prepping” was popularized in the mainstream by the National Geographic channel’s show by the same name. The show’s website offers a quiz titled “How prepped are you?” so you can test your own likelihood of surviving an apocalypse. Former Facebook product manager Antonio García Martínez bought wooded land in the Pacific Northwest that he has stocked with generators, solar panels and ammo, The New Yorker reports. “You just need so many things to actually ride out the apocalypse,” García Martínez says. “I think people who are particularly attuned to the levers by which society actually works understand that we are skating on really thin cultural ice right now.”

In particular, the political climate has made many coastal elites anxious about the future. “I think, to some degree, we all collectively take it on faith that our country works, that our currency is valuable, the peaceful transfer of power — that all of these things that we hold dear work because we believe they work,” says Huffman. “While I do believe they’re quite resilient, and we’ve been through a lot, certainly we’re going to go through a lot more.”

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The war on Grillo will intensify.

Rome Mayor Raggi Says She Received Summons From Prosecutors (BBG)

Rome Mayor Virginia Raggi, a member of the anti-establishment Five Star Movement, said she has received a summons from city prosecutors over a staff appointment. Raggi, a lawyer who was elected mayor last year, wrote in a post on Facebook that the summons concerns her nomination of Renato Marra as head of the tourism department, which she has revoked. She said she had informed Five Star co-founder Beppe Grillo and the city council of the summons. “I am very serene; I have full confidence in the judiciary, as ever,” Raggi wrote. “We are ready to give every clarification.” Raggi’s city hall administration has been plagued by resignations. Five Star, which wants a referendum on Italy’s membership in the euro area, has remained neck and neck with the Democratic Party of Prime Minister Paolo Gentiloni and his predecessor Matteo Renzi in national opinion polls.

Five Star has made denunciations of political corruption one of its main themes, often calling for elected officials to resign if they are placed under investigation, long before a case comes to court. But under new rules posted on Grillo’s blog earlier this month, Five Star officials do not have to resign automatically if they are investigated. Italian newswire Ansa said Raggi was under investigation for alleged abuse of office in the personnel matter. [..] Alessandro Di Battista, a senior Five Star lawmaker, told La 7 television that Raggi had a duty to explain why she had made the appointment. “This isn’t about public money, or decisions which affect a right of citizens,” Di Battista said. “This would involve mistaken signatures, a mistaken nomination which was immediately revoked.”

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If not in February, forget 2017.

Deal On Greek Bailout’s Second Review Possible At February Eurogroup (R.)

Euro zone creditors could approve the completion of the second set of Greek bailout reforms at the next meeting of finance ministers in February, an euro zone official said on Wednesday. The approval of the outstanding reforms, mainly concerning Greek fiscal targets, the labor market and liberalization of the energy sector, would pave the way for further euro zone loans to Athens, which faces large repayments in the third quarter. Finance ministers of the 19 countries of the euro zone will meet on Thursday in Brussels but there hasn’t been sufficient progress in Greek reforms yet for them to sign off on a deal now, the senior official said, confirming what the EU economics commissioner Pierre Moscovici said on Tuesday.

Still, the ministers are likely to produce an agreement to continue talks with a view to concluding them at the next Eurogroup meeting on Feb. 20, according to the official. “There is a good chance” that an agreement will be reached on Thursday to send euro zone negotiators back to Athens so that a deal can be reached in February, the official said. “February is the last month in which there is no politically significant election in relevant member states,” the official said, and this meant “February is not formally but realistically the time when we need to reach a political agreement”. The Netherlands go to the polls in March, and the French will vote in presidential elections in April and likely also in May. Germany, the biggest economy in the euro zone, will hold a general election in September. A comprehensive deal for Greece will also have to involve the IMF, the official said.

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Pretty brilliant.

“INAUGURATION DAY” (Bad Lip Reading)

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Jan 172017
 
 January 17, 2017  Posted by at 9:17 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Arthur Rothstein Texas Panhandle Dust Bowl Mar 1936


The Cheeto Cometh (Jim Kunstler)
Donald Trump Must Stop Cheering For Brexit, Says Top EU Official (Pol.)
Abolish The CIA (Rozeff)
Theresa May To Confirm UK Exit From EU Single Market (G.)
Corbyn Labeled Russian ‘Collaborator’ for Questioning NATO Troop Build-Up (I’C)
Carney: UK Rates Could Rise Or Fall (BBC)
France Is The Least-Trusted Country In The World (CNBC)
Deutsche Bank Holding Back 90% Of Bonuses This Year (NYP)
China To Target Around 6.5% Growth In 2017 (R.)
China’s Found a New Way to Pump Record Credit (BBG)
China’s Oil Collapse Is Unintentionally Helping OPEC (BBG)
Size Matters – No Country Should Be Bigger Than This (Mises Inst.)
Greek Migration Ministry Running Out Of Options On Islands (Kath.)
Second Man Dies On Freezing Migrant Route Near Turkey In Greece (AP)

 

 

Vinatage Jim. “I’m not aware that George Washington, Thomas Jefferson, James Madison, or Andrew Jackson put their slaves in a blind trust after they became president.

The Cheeto Cometh (Jim Kunstler)

I dunno about you, but I rather enjoy watching the praetorian Deep State go batshit crazy as the day of Trump’s apotheosis approacheth. I imagine a lot of men and women running down the halls of Langley and the Pentagon and a hundred other secret operational redoubts with their hair on fire, wondering how on earth they can neutralize the fucker in the four days remaining. What’s left in their trick-bag? Bake a poison cheesecake for the inaugural lunch? CIA Chief John Brennan has been reduced to blowing raspberries at the incoming president. Maybe some code cowboys In the Utah NSA fortress can find a way to crash all the markets on Friday as an inauguration present. What does it take? A few strategic HFT spoofs? There will be lots of police sharpshooters on the DC rooftops that day. What might go wrong?

Civil War Two is underway, with an interesting echo of Civil War One: Trump dissed Civil Rights sacred icon Georgia congressman John Lewis, descendant of slaves, after said icon castigated Trump as “not a legitimate president.” That now prompts a congressional walk-out of the swearing-in ceremony. The New York Times is acting like a Manhattan socialite in a divorce proceeding, with fresh hysterics every day, reminding readers in a front-page story on Monday that “[Martin Luther] King’s birthday falls within days of the birthdays of two Confederate generals, Robert E. Lee and Stonewall Jackson.” Jeez! Who you gonna call? Ghostbusters? There’s not much Trump can do until Friday noon except tweet out his tweets, but one can’t help but wonder what the Deep State can do after that magic moment passes.

I’ve maintained for nearly a year that, if elected, Trump would be removed by a coup d’état within sixty days of assuming office, and I still think that’s a pretty good call — though I hope it doesn’t come to that, of course. My view of this was only confirmed by Trump’s performance at last week’s press conference, which seemed, shall we say, a little light on presidential decorum. Perhaps it befits this particular Deep State to go down in the manner of an opéra bouffe. History repeats itself, first as tragedy, then as farce, old Karl Marx observed. What does the Union stand for this time? The rights of former SEC employees to sell their services to CitiBank? The rights of competing pharma companies to jack the price of insulin up from $20 to $250 a vial? The rights of DIA subcontractors to sell Semtex plastic explosives to the “moderate” jihadis of the Middle East?

So the theme of the moment is that Donald Trump is a bigger crook than the servants and vassals of the Deep State. He ran for president so he could sell more steaks and whiskey under the Trump brand. He’s in violation of the emoluments clause in the constitution. Well, I’m not aware that George Washington, Thomas Jefferson, James Madison, or Andrew Jackson put their slaves in a blind trust after they became president. Anyway, at this point in our history, nobody can beat the Deep State for financial turpitude, certainly not a single real estate and hotel magnate.

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Is this an invitation to double down? Because something tells me it might just work.

Donald Trump Must Stop Cheering For Brexit, Says Top EU Official (Pol.)

US President-elect Donald Trump’s praise for Brexit and cheerleading for further divisions between European states are unacceptable, a top EU official said Monday. “Having an [U.S.] administration that hopes for the dismantling of Europe is simply not possible,” Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, told reporters in Paris. “I don’t accept this vision of things, and I don’t think that comments which in some way glorify the division of the [European] Union, including by predicting further departures, is the best thing for Euro-Atlantic relations.” He added: “I expect from President Trump that he will be at Europe’s side in this strong relationship. I hope we will not always have to debate in this fashion.”

Moscovici was reacting to a joint interview that Trump gave to the U.K.’s Times and Germany’s Bild in which the president-elect called Brexit a “great thing” and said he expected that other EU peoples would also seek to assert their identity. He also repeated his assertion that the NATO military alliance was “obsolete,” and that he wanted the United States to sign a bilateral trade deal with Britain. Moscovici retorted that no free trade deal between the United States and Britain was conceivable until Brexit actually happened. “Even in the case of a hard Brexit, this will take plenty of time,” he said, adding: “We would expect our American partners not to rejoice over this [Brexit].”

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Abolish NATO, the EU, and the CIA. And abolish Schumer while you’re at it. That was ONE DUMB remark. And he’s the Democrats’ Senate leader? Boy, they have problems.

“Let me tell you: You take on the intelligence community, they have six ways from Sunday at getting back at you. For a practical, supposedly hard-nosed businessman, he’s being really dumb to do this.”

“Schumer is saying that the CIA is so powerful that a president should not attempt to control it or else!”

Abolish The CIA (Rozeff)

Every American who looks at the CIA objectively or in a balanced way and judges it by any number of criteria, such as moral, legal and pragmatic, should reach the conclusion that the CIA should be abolished. JFK wanted to break it into a million pieces. Trump is right to dismiss its intelligence reports about DNC hacking. The CIA war on Trump shows us immediately that the CIA is a rogue organization within the U.S. government and a severe threat to America. The CIA is an internal threat to the rule of law and to the government that it supposedly serves. Senator Schumer acknowledges the CIA’s unbridled power, its subversive power, its power to undermine even a president, especially one that wishes to control or alter the organization, when he says:

“Let me tell you: You take on the intelligence community, they have six ways from Sunday at getting back at you. For a practical, supposedly hard-nosed businessman, he’s being really dumb to do this.” Schumer is saying that the CIA is so powerful that a president should not attempt to control it or else! The CIA is so powerful that elections do not matter when it comes to the CIA. The CIA stands alone. The Constitution that empowers the president as the Executive, the boss of government operations, does not matter. Basic American institutions and laws must bow before the threats that the CIA possesses. This is the assessment of a Senator beginning his 4th term and who is the highest ranking Democrat in the Senate in his post as minority leader.

The CIA is an organization that perpetually undermines traditional American values and moral values. It consistently kills innocent people. It continually causes instability and wars. It undermines other societies and our own. It interferes constantly in foreign nations, to the detriment of them and us. It is an unelected power that challenges elected officials. It favors abuses of power, including torture. Its actual value at generating usable intelligence is minimal, often wrong, often misleading, inaccurate and harmful as in the WMD that were never found in Iraq.

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Britain is incapable of conducting a grown up discussion on Brexit. Makes me fearful.

Theresa May To Confirm UK Exit From EU Single Market (G.)

Theresa May is expected to use the most important speech of her premiership to confirm that Britain will be leaving the single market while insisting that it wants to remain “the best friend” to European partners. In remarks that critics will cite as evidence that the government is pursuing a hard Brexit, the prime minister will set out 12 key priorities for the EU negotiations, with no compromise over the ability to control borders and regain sovereignty. Speaking to an audience at Lancaster House, Westminster, including ambassadors from across the world, May will stress her ambition to reach out beyond the continent to build new trading relationships in a move that suggests the UK will also leave the customs union.

However, the prime minister is likely to restate an argument that she does not see it as an either/or choice and say that whatever final deal on trade and customs duties is struck, lorries will be able to pass through Dover and other ports unhindered, despite warnings from others on the issue. “We seek a new and equal partnership – between an independent, self-governing, global Britain and our friends and allies in the EU. Not partial membership of the European Union, associate membership of the European Union or anything that leaves us half-in, half-out,” May is expected to say. “We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. The United Kingdom is leaving the European Union. My job is to get the right deal for Britain as we do.”

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To wit. The guy who said it of course should have been fired right away, but these days such comments are fully acceptable.

Corbyn Labeled Russian ‘Collaborator’ for Questioning NATO Troop Build-Up (I’C)

The leader of the UK’s Labour Party, Jeremy Corbyn, called for a “de-escalation” of tensions between NATO and Russia, adding in a BBC interview on Thursday: “I want to see a de-militarisation of the border between them.” Along with the U.S., the UK has been rapidly building up its military presence in the Baltic region, including states which border Russia, and is now about to send another 800 troops to Estonia, 500 of which will be permanently based. In response, Russia has moved its own troops within its country near those borders, causing serious military tensions to rise among multiple nuclear-armed powers. Throughout 2016, the Russian and U.S. militaries have engaged in increasingly provocative and aggressive maneuvers against one another. This week, the U.S. began deploying 4,000 troops to Poland, “the biggest deployment of US troops in Europe since the end of the cold war.”

It was in this context that Corbyn said it is “unfortunate that troops have gone up to the border on both sides,” adding that “he wanted to see better relations between Russia, NATO and the EU.” The Labour leader explained that while Russia has engaged in serious human rights abuses both domestically and in Syria, there must be a “better relationships between both sides . . . there cannot be a return to a Cold War mentality.” The response to Corbyn’s call for better relations and de-escalation of tensions with Moscow was swift and predictable. The armed forces minister for Britain’s right-wing government, Mike Penning, accused Corbyn of being a collaborator with the Kremlin:

“These comments suggest that the Labour leader would rather collaborate with Russian aggression than mutually support Britain’s Nato allies. As with Trident, everything Labour says and does shows that they cannot be trusted with Britain’s national security.” This is the same propagandistic formulation that has been used for decades in the west to equate opposition to militarism with some form of disloyalty or treason: if you oppose military confrontation with a foreign adversary or advocate better relations with it, then you are accused of harboring secret sympathy and even support for those foreign leaders, and are often suspected of being an active “collaborator” with (or “stooge” for) them.

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Obviously, worth every penny of his salary. Razor-sharp analysis.

Carney: UK Rates Could Rise Or Fall (BBC)

UK households have continued spending strongly since the referendum, but face headwinds this year, Bank of England governor Mark Carney has warned. Consumers appeared to be “entirely looking through Brexit-related uncertainties”, he said in a speech at the London School of Economics. However, Mr Carney again warned that consumer spending could be hit by rising prices from the weaker pound. He also sounded a cautionary note on the growth in household debt. Mr Carney said that in the year to November, total household borrowing had risen 4%, while consumer credit had gone up by more than 10%, ” the fastest rate since 2005″. Increasingly, the UK was relying on consumer spending for economic growth – rather than exports or investment – which boded poorly for the future, Mr Carney said on Monday.

Gerard Lyons, a UK economist who backed Brexit, said Mr Carney “did rightly highlight the extent to which growth has become more consumer led”. The UK had one of the world’s fastest-growing advanced economies last year, but the Bank of England has forecast growth will slow in 2017 as higher inflation weighs on consumer spending. “We do see a slowing in the economy and household spending this year… that’s a slowing, not a stopping,” he emphasised. Economic forecasters have predicted that inflation could rise above the Bank’s 2% target as a result of the pound’s weakness since the Brexit vote. Sterling fell against most major currencies on Monday as markets anticipated that Prime Minister Theresa May would use a major speech on Tuesday to advocate a so-called “hard Brexit” in which the UK would leave the EU’s single market and customs union. The UK was entering a “period of somewhat higher consumer price inflation”, Mr Carney said. As a result, the next interest rate move could be either up or down, he said.

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By its own people. Brilliant! And people claim Le Pen doesn’t stand a chance.

France Is The Least-Trusted Country In The World (CNBC)

France has claimed the position of the country least trusted by its people, according to an influential survey by the world’s largest public relations firm. A thumping 72% of the French population agree that the institutional system is failing them, placing the country in joint last position alongside neighboring Italy, according to the 2017 Edelman Trust Barometer. Immigration, globalization and eroding social values are highlighted as underpinning the negative results, revealing a disheartening sentiment ahead of this spring’s French presidential election.

The research warns of the consequences playing out in both France and other countries where public disillusion is heightened. “Countries that combine a lack of faith in the system with deep societal fears, such as France, Italy, South Africa, the U.S. and Mexico, are electing or moving towards populist candidates,” reads the research. The disappointment also extends beyond the least enfranchised to the better-off elements of French society. While only a very weak 38% of the mass population trust institutions in France, a mere 56% of the category described as the ‘informed public’ still maintains its faith in the same institutions.

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Don’t worry, the big boys rescued their own: “Only the top 10% of revenue generators may get a bonus for 2016..”

Deutsche Bank Holding Back 90% Of Bonuses This Year (NYP)

Deutsche Bank, the former Wall Street powerhouse, may hold back on giving out bonuses to as many as 90% of bankers and traders, The Post has learned. Only the top 10% of revenue generators may get a bonus for 2016 — and even then it will be paid out over the next five years, according to a source briefed on internal discussions. The bonus plans are still in discussion, another source cautioned, and could still change in the coming weeks. Deutsche was hit hard last month when it settled a mortgage bond probe with the Justice Department for $7.2 billion — which was only about half of what the government initially wanted. While reports have suggested that the settlement could affect the bank’s ability to pay bonuses, it couldn’t be confirmed if the bank had used incentive compensation for the settlement. This wouldn’t be the first time that John Cryan, Deutsche’s CEO, has cut bonuses since taking over in 2014. Last year, the bank cut the bonus pool by 11% and delayed paying its employees until March.

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And just to make sure, they’ll print and borrow it. Can’t miss. AKA fake news.

China To Target Around 6.5% Growth In 2017 (R.)

China will lower its 2017 economic growth target to around 6.5% from last year’s 6.5-7%, policy sources said, reinforcing a policy shift from supporting growth to pushing reforms to contain debt and housing risks. The proposed target was endorsed by top leaders at the closed-door Central Economic Work Conference in mid-December, according to four sources with knowledge of the meeting outcome. “The target will be around 6.5%, which indicates that slightly slower growth is acceptable,” said one of the sources, a policy adviser. The world’s second-largest economy likely grew around 6.7% last year – roughly in the middle of the government’s target range – but it faces increasing uncertainties in 2017, the head of China’s state planning agency said on Jan. 10.

Policy stimulus measures – evident in record lending from mostly state-owned banks and increased government spending – have fueled worries among top leaders about high debt levels and an overheating housing market that could threaten financial stability if not addressed, the sources said. Under the central bank’s recently announced “prudent and neutral” stance, it is expected to guide market interest rates higher to help put the brakes on flush credit conditions, which should also support the weakening yuan CNY=CFXS, the sources said. “They’ve put more emphasis on controlling risks, and monetary policy could be a bit tighter,” said a second policy source, though he characterized the change as ‘fine-tuning’ ahead of a key party meeting in the autumn at which there will be a change in the top leadership. “They are keen to keep economic growth stable before the 19th party congress,” the source said.

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How to get 6.5% growth.

China’s Found a New Way to Pump Record Credit (BBG)

China is increasingly managing the flow of credit with more finely-tuned instruments than its old method of changing how much of their deposits lenders must keep locked away. Banks’ required reserve requirements haven’t changed for almost a year. Instead, the central bank has used short-term lending channels to add almost six times as much funding than would have been added by lowering banks’ RRRs by half a percentage point. With the new tool playing its part in stabilizing the economy – data Friday is estimated to show a 6.7% expansion for 2016 – the People’s Bank of China is switching its focus to risk management. Another advantage of targeted lending: it adds funds without signaling broad easing that adds to downward pressure on the yuan and fuels further capital flight.

The PBOC pumped in a net 270 billion yuan ($39 billion) through open-market operations on Tuesday, the most in a year, data compiled by Bloomberg show. That followed last week’s 305.5 billion yuan of MLF operations, the main short-term lending tool used to meet banks’ medium-term cash demand. Analysts said the efforts can help stabilize liquidity before the week-long Chinese New Year holiday at the end of this month. The PBOC increased the total outstanding of its Medium-term Lending Facility last month to a record 3.46 trillion yuan. That compares with the 600 billion yuan that economists estimate was added to the banking system after the last required reserve ratio cut in February, when it was lowered by half a%age point. Bank deposits stood at 155 trillion yuan in December, greater than U.S. GDP.

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And now imagine a large devaluation of the yuan vs the dollar.

China’s Oil Collapse Is Unintentionally Helping OPEC (BBG)

OPEC’s campaign to prop up oil prices is getting unlikely support from its biggest customer. China’s production is forecast to fall by as much as 7% this year, extending a record decline in 2016, according to analysts at CLSA, Sanford C. Bernstein and Nomura. That’s about the same size as the output cut agreed by Iraq, the second-biggest producer in OPEC, which late last year reached a deal to trim supply to support prices. “China’s domestic crude output decline will certainly help OPEC’s plan to reduce global supply,” said Nelson Wang, a Hong Kong-based oil and gas analyst at CLSA, who sees a 7% slide this year. ”Even if that isn’t China’s intention, it’s just the reality that China can’t produce more under the current circumstances.” While China consumes more oil than almost any other country, it’s also one of the world’s biggest producers, with fields stretching from offshore its southern coast to the far north east.

The collapse in prices that began in 2014 is taking its toll, and the nation’s output suffered a record decline last year. That plays into the hands of OPEC as it seeks to prop up the global oil market, forcing China to depend more heavily on imports. Brent crude, benchmark for half of the world’s oil, averaged about $45 a barrel last year, more than 50% below levels in 2014, the year OPEC decided to tackle a global glut by keeping the taps open. The crash in prices triggered a rethink by the group, which banded together with 11 non-member countries late last year and agreed to a collective cut of almost 1.8 million barrels a day. Prices have since rallied above $58 a barrel. China’s output slumped in 2016 as state-owned firms shut wells at mature fields that had become too costly to operate after the crash. Crude production fell 6.9% in the first 11 months of 2016 to about 4 million barrels a day, the first decline since 2009 and the biggest in data going back to 1990.

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Very interesting discussion, but I would want to see a much stronger link to the pros and cons of centralization itself.

Size Matters – No Country Should Be Bigger Than This (Mises Inst.)

For Mises, individuals associate with each other voluntarily in order to take advantage of the division of labor. Writing in Human Action, Mises notes: “Every step by which an individual substitutes concerted action for isolated action results in an immediate and recognizable improvement in his conditions. The advantages derived from peaceful cooperation and division of labor are universal. They immediately benefit every generation, and not only Iater descendants. For what the individual must sacrifice for the sake of society he is amply compensated by greater advantages. His sacrifice is only apparent and temporary; he foregoes a smaller gain in order to reap a greater one later.” Mises continues: [H]uman action itself tends toward cooperation and association; man becomes a social being not in sacrificing his own concerns for the sake of a mythical Moloch, society, but in aiming at an improvement in his own welfare.”

In Mises’s view, these efforts to enhance trade and cooperation among human beings lead to the creation of cities and other population centers. Moreover, for Mises, the state — properly limited to the function of protecting private property — can potentially assist in creating conditions that facilitate the cooperative behavior he envisioned. Thus, it is the cost of acting as an administrator of law that leads Mises to conclude that certain “compelling technical considerations” are are likely to keep states above a certain minimum size. A problem arises, however, when we recognize that this vision of the state exists in tension with the fact that — as illustrated by Raico — the physical and geographical growth of states tends to facilitate the expansion of state power well beyond the role imagined by Mises.

When contained at a municipal or metropolitan level, state power is one thing. Relocation to a neighboring metropolitan area remains relatively easy. Once states begin to take control of sizable frontiers and multiple municipal areas, however, the situation becomes far different, and states begin to limit and regulate trade and free movement, rather than facilitate it. Thus, even if we accept Mises’s idea that there is some level at which economies of scale for state administration may be beneficial, those assumed benefits are increasingly threatened the larger a state becomes. The answer lies in limiting state size to a human scale in which human beings can still associate, travel, and trade across jurisdictional boundaries without incurring a great cost. The standard for “great cost” is subjective, of course, and over time has changed substantially.

The cost of traveling 50 miles in the 16th century, for example, is significantly different form the cost of traveling the same distance today. There are ongoing attempts by geographers, however, to determine the “natural” size of a region that encompasses a population’s economic, political, and social institutions. In a recent study, for example, Garret Dash Nelson and Alasdair Rae attempted to identify regions that “have been substantively tied together by the forces of urban development, telecommunications, the frictionless circulation of capital, and the consolidation of both public and private institutions.” Basing their standard of scale on tolerance for commute times, the geographers selected 50-mile commutes as an indicator of how closely tied together is a specific region. The end result was this:

The authors then create a suggested map of political units based on the scale of megaregions:

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Tsipras needs to grow a pair.

Greek Migration Ministry Running Out Of Options On Islands (Kath.)

The Migration Ministry appears to be at a dead end over how to manage the growing number of migrants trapped on the country’s eastern Aegean islands after an adverse court ruling on Chios and a clash with the mayor of Lesvos. On Chios, a magistrate on Monday upheld a complaint against the development of a holding facility for migrants exhibiting delinquent behavior, leaving the ministry with few options over how to separate troublemakers from the general population at the processing center in Souda, where violence has erupted on several occasions in the past few months.

On Lesvos, tensions rose during a meeting between Migration Minister Yiannis Mouzalas and Mayor Spyros Galinos on Sunday over the installation of portable toilets at the island’s harbor for migrants temporarily housed on a ship after their tents at Moria camp were snowed in last week, with the local official accusing Mouzalas of putting him on a collision course with the community. Mouzalas has sought – and largely failed – to muster support for building more camps on the islands to help ease the pressure on existing facilities that are struggling to accommodate tens of thousands of refugees and migrants, but is running into increasing opposition.

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We are beyond shame and humanity. Beyond God.

Second Man Dies On Freezing Migrant Route Near Turkey In Greece (AP)

Police in a region of Greece that borders Turkey say another person has died of hypothermia on a route used by migrant smugglers despite freezing temperatures. Authorities said the body of a man was discovered buried in snow outside a Greek village on Monday. They think he probably died over the weekend. The man was the second to succumb to the cold in less than two weeks. Another died of hypothermia in the same area on January 3. In a separate incident, a migrant man was being treated at a nearby hospital for symptoms of frostbite. Greek authorities have reported a recent surge in the number of people attempting to reach Europe while avoiding detention on the Greek islands by crossing a river that divides Turkey and Greece.

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Jan 132017
 
 January 13, 2017  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Edgar Degas Dancers in Blue 1895


Assange Agrees To Extradition If US Releases Chelsea Manning (AFP)
China Posts Worst Export Fall Since 2009 As Fears Of US Trade War Loom (R.)
Fiat Chrysler Shares Plunge 13% After EPA Cheat Software Accusation (CNBC)
Wages For Lowest-Paid UK Men Have Been Stagnant For Two Decades (Ind.)
Abolish Central Banks And Slay The Zombies (Planet Ponzi)
WHO Warns Of Outbreak Of Virulent New ‘Economic Reality’ Virus (Steve Keen)
The Utter Stupidity Of The New Cold War (SCF)
Obama’s “Farewell To Arms” As War Presidency Ends (SCF)
Massive Security Preparations Under Way For Inauguration (Fox)
Germany’s Schaeuble Urges ECB To Start Unwinding Stimulus This Year (CNBC)
Germany To Return New Asylum Seekers To Greece From March (AFP)
Greece’s Healthcare System: Train Wreck In Slow Motion (Occupy)
Weitergeleiteter Spendenaufruf für Griechenland (Das Gelbe Forum)

 

 

What does it say about us if our best and brightest feel compelled to sacrifice themselves? Where is this going to leave us? Where would we be without Assange, Snowden and Manning? Certainly not in a better place.

Assange Agrees To Extradition If US Releases Chelsea Manning (AFP)

WikiLeaks founder Julian Assange will agree to be extradited to the United States if President Barack Obama grants clemency to the former US soldier Chelsea Manning, jailed for leaking documents, the company said on Thursday. “If Obama grants Manning clemency Assange will agree to US extradition despite clear unconstitutionality of DoJ (US Department of Justice) case,” WikiLeaks wrote on Twitter. Assange has been living in the Ecuadoran embassy in London since June 2012 to avoid extradition to Sweden to face sexual assault allegations. The Australian former computer hacker said he fears Stockholm will in turn extradite him to the US, where he angered Washington over WikiLeaks’ publication of thousands of US military and diplomatic documents leaked by former US soldier Manning.

Manning is currently serving a 35-year sentence in solitary confinement for handing over the 700,000 sensitive documents from the US State Department. Supporters of the transgender soldier are putting their hopes in a pardon by Obama before he leaves office later this month, although the White House has said the president will not be granting her clemency. Manning has already made two suicide attempts and currently has an appeal pending before a military court. Washington has maintained the threat of prosecuting Assange over the 2010 leak, though no charges have been filed. WikiLeaks’ post on Twitter was accompanied by a letter addressed to US Attorney General Loretta Lynch, in which Assange’s lawyer Barry Pollack argues there is no legitimate basis for continuing the investigation into the WikiLeaks founder.

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“The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of this trend..”

China Posts Worst Export Fall Since 2009 As Fears Of US Trade War Loom (R.)

China’s massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States that is clouding the outlook for 2017. In one week, China’s leaders will see if President-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods. Even if the Trump administration takes no concrete action immediately, analysts say the specter of deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

The world’s largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7% and imports down 5.5%. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009. It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China’s exports due to greater protectionist measures, the country’s customs agency said on Friday. “The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of this trend,” customs spokesman Huang Songping told reporters. “We will pay close attention to foreign trade policy after Trump is inaugurated president,” Huang said.

China’s trade surplus with the United States was $366 billion in 2015, according to U.S. customs data, which Trump could seize on in a bid to bring Beijing to the negotiating table to press for concessions, economists at Bank of America Merrill Lynch said in a recent research note. A sustained trade surplus of more than $20 billion against the United States is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator. China is likely to point out that its own data showed the surplus fell to $250.79 billion in 2016 from $260.91 billion in 2015, but that may get short shrift in Washington. “Our worry is that Trump’s stance towards China’s trade could bring about long-term structural weakness in China’s exports,” economists at ANZ said in a note.

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And now for the rest…

Fiat Chrysler Shares Plunge 13% After EPA Cheat Software Accusation (CNBC)

Shares of Fiat Chrysler fell Thursday after the U.S. Environmental Protection Agency accused the automaker of using software that allowed excess diesel emissions in about 104,000 vehicles. The U.S.-listed shares of Fiat Chrysler plunged as much as 19% Thursday after Reuters first reported the news. The automaker’s stock was briefly halted after the EPA made the announcement. The stock later recovered some of those losses and ended the day about 10% lower. The agency alleged Fiat Chrysler violated the Clean Air Act by installing and failing to disclose “engine management software in light-duty model year 2014, 2015 and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States.”

The undisclosed software results increased nitrogen oxide emissions from the vehicles, the EPA said. The Justice Department is reportedly working with the EPA on this issue. The company could be liable for civil penalties and injunctive relief for the alleged violations, the EPA said. It said it is also investigating whether the auxiliary emission control devices constitute “defeat devices,” which are illegal. On Thursday, Attorney General Eric Schneiderman said in a statement he was deeply troubled by the evidence the EPA presented. “My office was proud to take a leading role in the multi-state investigation of Volkswagen that uncovered flagrant abuses of New York’s environmental laws and, in the case of VW, a culture of corruption that enabled blatantly illegal conduct to persist over many years,” he said.

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Huge move towards part-time work.

Wages For Lowest-Paid UK Men Have Been Stagnant For Two Decades (Ind.)

Pay for the poorest fifth of men has been flat for twenty years, according to a new report for the Institute for Fiscal Studies. At the same time the proportion of this low-paid group working part time, rather than full time, has shot up from 10% to 25% over the same period. The research helps explain what has become something of an inequality puzzle in the UK, in which official headline gauges have shown flat-lining income inequality since the early 1990s and yet there is simultaneously a widespread impression that inequality has been rising strongly.

The IFS research shows that average inflation-adjusted annualised weekly pay growth for the lowest fifth of the male income distribution was zero or less between 1994-95 and 2014-15, while for men further up the income distribution real weekly pay has grown. And while part-time work among the lowest paid men has ballooned, rates have not changed for better paid men. This all means that among working men wage inequality has increased over the past two decades. “The rise in household earnings inequality has been the product of a complex set of interactions between trends in hours and wages for men and women, but it is largely due to a rise in male earnings inequality,” said the IFS report.

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Mitch with the obvious.

Abolish Central Banks And Slay The Zombies (Planet Ponzi)

Have the [BOE]-enabled grotesque bubbles in the bond, stock and property markets or the eight years of “temporary emergency measures” and zero-interest-rate policies created infrastructure investment? Job creation? Savings? No, no and no. It has killed savers, students and seniors while generating record bonuses for chief executives. While earnings may have peaked almost 18 months ago, stock prices keep bubbling and wealth inequality continues to surge to record highs — along with homelessness and underemployment. Will Carney blame Brexit, Putin or Trump for the upcoming problems? Why not? Certainly, extreme valuations enabled by the Bank recklessly allowing debt, credit and leverage to skyrocket out of this universe had nothing to do with the coming collapse — nothing to see here, look away.

It is not only the UK but also global central bank policies that have broken our financial system beyond repair. The world’s oldest bank, Banca Monte dei Paschi di Siena, founded in 1472, is now an insolvent zombie bank thanks to the handiwork of JPMorgan, Deutsche Bank and Nomura. They sold Monte billions of dollars of derivative trades it did not understand. These predictably exploded, leaving the bank bust. JPMorgan, Deutsche and Nomura made a fortune — and Monte’s shareholders and depositors, and EU taxpayers, will get slammed with the massive bailout tab. The new normal is apparently a world of financial fraud where the only rules which apply are too big to fail, bail or jail and too connected to prosecute —steal all you can, while you can, with impunity.

After the financial crisis, I wrote extensively exposing the toxic “culture of fraud” at Deutsche, JPMorgan, Goldman Sachs, RBS, Lloyds and Barclays. So what was done? Can you guess the number of staff at these banks jailed for the numerous frauds committed during the Great Financial Crises? Zero. That’s not capitalism! Capitalism doesn’t have zero accountability or zero transparency. This is ethically, financially and socially wrong. Much of it is also, in my opinion, illegal and should be punished by long jail terms. No need for new regulation — we need to enforce existing rules rather than repeatedly turning a blind eye.

Market manipulation by central banks has destroyed price discovery in every asset class and market. This has crushed the basic concept of capitalism. Central banks now pick winners and losers rather than letting free markets decide. The Swiss National Bank holds $140 billion in stocks, including shares in Apple, Google and Amazon. Valuations, growth projections and normal business cycles are all unnecessary. The central banking bubble factory forces investors to chase yields resulting in zombie corporations and zombie banks that inhibit growth, infrastructure spending and the creation of productive assets.

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‘The WHO therefore recommends complete avoidance of “Reality” as the only effective strategy for those wishing to remain as Mainstream Economists’.

WHO Warns Of Outbreak Of Virulent New ‘Economic Reality’ Virus (Steve Keen)

The WHO today warned of a virulent new virus affecting vulnerable groups in the Mid-West and Eastern USA. The outbreak, which began in the Mid-West’s extensive Great Lakes ‘Freshwater’ river system, has recently jumped the ‘Saltwater’ barrier, meaning that the entire population of its target species – ‘Mainstream’ economists – is now at risk. Speaking on behalf of the WHO, Dr Cahuc explained that the virus works by turning off the one genetic marker that distinguishes this species from the rest of its genus, the Human Race. This is the so-called ‘Milton’ gene (Friedman 1953), which goes dormant in other Humans as they pass through puberty. Its inactivity reduces their imaginative capacity, making it impossible for them to continue believing in such endearing infantile fantasies as the Tooth Fairy and Santa Claus. While regrettable, this drop in imagination is necessary to prepare Humans for the adult phase of their existence.

‘Professor Milton Friedman found a way to re-activate this gene during PhD training, using his “as if” gene splicing technique’, Dr Zylberberg elaborated. ‘This enabled a wonderful outpouring of imaginative beliefs by Mainstream Economists, which gave birth to concepts like NAIRU, Money Neutrality, Rational Expectations, and eventually even DSGE models. This wealth of imagination was regarded by Mainstream Economists as a more than sufficient compensation for returning to the child-like phase of the Human species.’ The Milton gene conferred other advantages on Mainstream Economists, which have been highly important to their success in competition against their rival species, the Heterodox Economists. ‘Being endowed with a child-like nature, the arguments of Mainstream Economists were treated with the low level of critical evaluation that adult humans normally reserve for conversations with their infant stage’, said Dr Cahuc.

‘This made their policy recommendations much more likely to be adopted, instead of the more complicated proposals put forward by their niche rivals’, he said. The new virus – named ‘Reality’ – de-activates the Milton gene once more. ‘Consequently’, Dr Cahuc warned, ‘the very beliefs that define this unique species are at risk. Unless we are very careful, it may become extinct!’. Unfortunately, there is as yet no known cure to this virus. ‘The WHO therefore recommends complete avoidance of “Reality” as the only effective strategy for those wishing to remain as Mainstream Economists’, Dr Cahuc concluded. However, this strategy is made extremely difficult by one cunning characteristic of the Reality virus: after an initial phase of disorientation and distress, its sufferers begin to experience pleasure, and actually want to pass the virus on to others. ‘Its transmission mechanism is a particularly insidious aspect of this disease’, Dr Cahuc lamented.

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Amen.

The Utter Stupidity Of The New Cold War (SCF)

It seems so strange, twenty-seven years after the fall of the Berlin Wall, to be living through a new Cold War with (as it happens, capitalist) Russia. The Russian president is attacked by the U.S. political class and media as they never attacked Soviet leaders; he is personally vilified as a corrupt, venal dictator, who arrests or assassinates political opponents and dissident journalists, and is hell-bent on the restoration of the USSR. (The latter claim rests largely on Vladimir Putin’s comment that the dissolution of the Soviet Union was a “catastrophe” and “tragedy” – which in many respects it was. The press chooses to ignore his comment that “Anyone who does not miss the Soviet Union has no heart, while anyone who wants to restore it has no brain.” It conflicts with the simple talking-point that Putin misses the imperial Russia of the tsars if not the commissars and, burning with resentment over the west’s triumph in the Cold War, plans to exact revenge through wars of aggression and territorial expansion.)

The U.S. media following its State Department script depicts Russia as an expansionist power. That it can do so, so successfully, such that even rather progressive people—such as those appalled by Trump’s victory who feel inclined to blame it on an external force—believe it, is testimony to the lingering power and utility of the Cold War mindset. The military brass keep reminding us: We are up against an existential threat! One wants to say that this — obviously — makes no sense! Russia is twice the size of the U.S. with half its population. Its foreign bases can be counted on two hands. The U.S. has 800 or so bases abroad. Russia’s military budget is 14% of the U.S. figure. It does not claim to be the exceptional nation appointed by God to preserve “security” on its terms anywhere on the globe.

Since the dissolution of the USSR in 1991, the U.S. has waged war (sometimes creating new client-states) in Bosnia (1994-5), Serbia (1999), Afghanistan (2001- ), Iraq (2003- ), Libya (2011), and Syria (2014- ), while raining down drone strikes from Pakistan to Yemen to North Africa. These wars-based-on-lies have produced hundreds of thousands of civilian deaths, millions of refugees, and general ongoing catastrophe throughout the “Greater Middle East.” There is no understating their evil. The U.S. heads an expanding military alliance formed in 1949 to confront the Soviet Union and global communism in general. Its raison d’être has been dead for many years. Yet it has expanded from 16 to 28 members since 1999, and new members Estonia and Latvia share borders with Russia. (Imagine the Warsaw Pact expanding to include Mexico. But no, the Warsaw Pact of the USSR and six European allies was dissolved 26 years ago in the idealistic expectation that NATO would follow in a new era of cooperation and peace.)

And this NATO alliance, in theory designed to defend the North Atlantic, was only first deployed after the long (and peaceful) first Cold War, in what had been neutral Yugoslavia (never a member of either the Warsaw Pact nor NATO), Afghanistan (over 3000 miles from the North Atlantic), and the North African country of Libya. Last summer NATO held its most massive military drills since the collapse of the Soviet Union, involving 31,000 troops in Poland, rehearsing war with Russia. (The German foreign minister Frank-Walter Steinmeier actually criticized this exercise as “warmongering.”)

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it’s time to let this sink in. Tearful goodbyes or not.

Obama’s “Farewell To Arms” As War Presidency Ends (SCF)

Eight straight years of warmongering come to an end as US President Barack Obama bows out with his «farewell to the nation» speech this week, as fawning American media dubbed his valediction. In reality, Obama’s outgoing address should have been billed as a «farewell to arms» made by arguably one of the most belligerent presidents to ever have occupied the White House. Only in exceptionally delusional America could such a pernicious paradox be presented as something honorable and sentimental. Obama, the 44th US president, may have been the first black president and winner of a Nobel peace prize during his first year in office in 2009. But apart from those dubious accolades – championed by supposedly liberal Hollywood celebrities and media pundits – his actual record in office is one of blood-soaked disgrace.

Instead of ending American overseas wars as he had promised back in 2008, Obama expanded on his predecessor George W Bush’s criminal foreign interventions. At least seven countries – Iraq, Afghanistan, Pakistan, Libya, Syria, Yemen and Somalia – have been routinely bombed under Obama’s watch as the US Commander-in-Chief. That’s one repugnant record. Last year alone, the US military reportedly dropped over 26,000 bombs around the world killing countless thousands of people, the exact number buried under official secrecy and American mainstream media indifference. At that rate, American anti-war campaigner Medea Benjamin estimates that US forces deployed three bombs every hour of every day for the whole of 2016. This death from the skies included Obama’s personal ordering of drone assassinations during his weekly Terror Tuesday briefings from Pentagon chiefs, the use of which increased 10-fold under his command, killing thousands of innocent civilians as «collateral damage».

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Could be quite the party.

Massive Security Preparations Under Way For Inauguration (Fox)

The stage is set for President-elect Donald Trump’s inauguration – not just the traditional swearing-in platform on Capitol Hill, but a massive security presence amid protest plans to “shut down” the nation’s capital. Most crowd estimates for the Jan. 20 festivities are far short of the record-setting 1.8 million visitors for President Obama’s historic 2009 inauguration. But the throngs of spectators and protesters alike are enough to create transit, security and hospitality challenges. “Security is my greatest concern,” Missouri GOP Sen. Roy Blunt, chairman of the Joint Congressional Committee on Inaugural Ceremonies, recently said. “No question that on inaugural day, this would be the most appealing target in the world.” He suggested the city could have as many as 750,000 demonstrators alone.

More than three-dozen law enforcement agencies are working together on security and safety plans in anticipation, including the Capitol Police, FBI, Secret Service and National Guard. Roughly 7,500 Guardsmen from across the country will come to Washington, along with about 3,000 police officers from various states, with the Secret Service taking the lead on security. Essentially everybody involved already is rehearsing for the big weekend, which kicks off next Friday morning with the swearings-in on the Capitol’s West Front, followed by official events including the traditional parade on Pennsylvania Avenue to the White House and the inaugural balls. The Joint Task Force – National Capital Region – 58th Presidential Inauguration has held several “table top” sessions in which agencies plot strategy over a large-scale, three-dimensional map.

“It’s a rehearsal, but in the military we call it a drill,” Navy Cmdr. Jonathan Blyth, the group’s spokesman, told FoxNews.com on Wednesday. “We’ve been preparing for this since the last inauguration. We’re focused to protecting and honoring a new commander in chief.” The task force and its Capitol Hill counterpart are holding a “dress rehearsal” this weekend for the swearings-in, the Presidential Review of troops and the parade along the roughly 2.5-mile stretch of Pennsylvania Avenue. Several protest groups planning large-scale demonstrations have permits in place and have already held organizational meetings, among them the collaborative DisruptJ20. “We’re planning a series of massive, direct actions that will shut down the inauguration ceremonies and any related celebrations,” the group says. “We’re also planning to paralyze the city.”

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“Schaeuble and other German lawmakers have warned the ECB risks fuelling support for eurosceptic parties..” No, it’s Schaeuble who fuels that support.

Germany’s Schaeuble Urges ECB To Start Unwinding Stimulus This Year (CNBC)

The ECB should start unwinding its ultra-loose monetary policy this year, German Finance Minister Wolfgang Schaeuble said in an interview to be published on Friday, adding that it would not be easy. “The ECB will have the tough task of getting out of the ultra-expansionary monetary policy,” Schaeuble told the Sueddeutsche Zeitung newspaper. “It would presumably be right if the ECB dared to exit this year”. Schaeuble added it was “possible and necessary” for the next government to lower taxes after Germany’s general election in September. He said forecasts that inflation could reach 3% in Germany this year would exacerbate concerns about current low interest rates. While admitting he was no fan of the ECB’s monetary policy, he added, “The ECB has a mandate for the eurozone, and it carries it out well.”

Schaeuble said the core issue was that a number of eurozone countries had not been able to boost competitiveness as required. “The problem is the weakness of the other countries, not Germany’s strength,” he said. The conservative minister said it would take a great effort to convince German citizens that the common currency provided more employment, social and business benefits than risks and negative consequences. To help Germany make the argument, he said it was essential that Italy and other countries stuck to the agreed rules. Schaeuble’s deputy Jens Spahn told Reuters last week that a “prudent start to the exit” of the ECB’s expansive monetary policy was desirable. The ECB aims for inflation of just under 2%, but it has undershot its target for years. To fight off deflation, the central bank has cut interest rates to zero and launched a massive but controversial bond-buying programme. Schaeuble and other German lawmakers have warned the ECB risks fuelling support for eurosceptic parties if it does not change course soon.

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There are new lows to be achieved out there. But go ahead, this too will make the EU crumble.

Germany To Return New Asylum Seekers To Greece From March (AFP)

Germany will begin returning asylum seekers to Greece from mid-March, an interior ministry spokesman told AFP on Thursday, essentially lifting a five-year suspension on such transfers because of poor conditions there. Under the EU’s so-called Dublin rules, would-be refugees must file for asylum in the first member-state of the bloc they enter, often the Mediterranean nations of Greece and Italy. If asylum seekers have travelled on to other EU nations, they are to be returned to their first port of call. But that requirement had been halted for Greece, which together with Italy has been the main point of entry for the more than one million immigrants who have entered the bloc since 2015 fleeing war and poverty in the Middle East and Africa.

A German interior ministry spokesman told AFP that Germany would reinstate the Dublin rule in two months’ time and return newly arrived asylum seekers to their first EU port of call. “In line with the recommendation from the European Commission, Germany believes that such transfers will be possible from March 15th,” said the spokesman, Tobias Plate. The EU recommended on December 8th that member states resume sending asylum seekers back to Greece from March next year, after such transfers were halted since 2011. Athens has criticized the EU’s assessment, with Migration Minister Yannis Mouzalas saying the current legal framework was “unable to respond to the historic migration flows and leaves the burden to the member states that migrants first arrive in”.

German refugee relief group Pro Asyl has also raised concerns, warning that the measure would put the asylum system in Greece, a country still recovering from a deep debt and economic crisis, under further pressure. Photos of refugees living in tents amid heavy snowfall in Greece caused outrage recently, and the European Commission on Monday called such conditions “untenable”.

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This is just too sad.

Greece’s Healthcare System: Train Wreck In Slow Motion (Occupy)

In 2014, the Greek health department cut off its cancer screening prevention program, despite a number of warnings issued by professionals both within the country and abroad that such an action would lead to an explosion in otherwise preventable cases turning serious. According to a statement by Evgenia Thanou, general manager for Doctors of the World, “There are people with tumors who can’t afford the cost of chemotherapy, which costs €2,500 for a single dose. As a result there are people who have died because they have not been able to get the correct treatment from the point of diagnosis.” The rationale was that the budget cutbacks, in the range of 55%, would only take place on a short term basis, just long enough to allow for the country to recuperate from recently imposed austerity measures.

Charges for outpatient visits were also increased by 50% per visit, and almost 200 medicines were de-stocked by pharmacies. A further consequence was the artificial drug shortage, caused by companies like Novo Nordisk, which halted insulin shipments to Greece unless the retail prices were raised in a supposed effort to curb hoarding and black market export by professionals. Almost three years later, this policy is still in effect. The result was the gradual closure of 850 medical clinics, both in the capital Athens as well as in the countryside. Ten thousand beds have been shut down across the country, and 30,000 healthcare professionals removed from frontline positions. Those who remained saw their wages cut by at least 50%.

Among 11 hospitals that have shut down, three are psychiatric while the rest include rural clinics in remote parts of the country, leaving locals without access to a professional in the event of an emergency. The crisis led to the creation of numerous volunteer healthcare organizations in 2015, but their contributions couldn’t put a dent in the number of patients unable to afford any healthcare options. That same year saw the mass migration of thousands of recently graduated or established Greek healthcare professionals across Europe, with almost 4,000 headed for Germany and the Nordic countries seeking steadier employment in a more welcoming professional environment. The results of the brain drain haven’t yet been entirely felt, but experts agree the long-term effects could cripple the country’s prospects for decades to come.

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Taking my Automatic Earth for Athens fund directly to Germany.

Weitergeleiteter Spendenaufruf für Griechenland (Das Gelbe Forum)

Raul Ilargi Meijer von The Automatic Earth ist wieder in Athen und versucht, die schwierigen Bedingungen zu erleichtern, die in Griechenland bestehen. Die Aufmerksamkeit der Medien und der Welt ist abgelenkt, obwohl sich selbst diese Bedingungen zunehmend verschlechtern. Akute Probleme ziehen kollektive Aufmerksamkeit an, chronische aber leider nicht. Griechenland steckt tief in volkswirtschaftlicher Depression mit ausgewachsenem Liquiditätsengpass, Kapitalkontrollen, Massenarbeitslosigkeit, fehlender medizinischer Versorgung, Hungerepidemien und vielen anderen Schwierigkeiten.

Die von außen bereitgestellten Resourcen fließen zum größten Teil durch offizielle Kanäle, aber die Körperschaften, die mit der Auslieferung der Hilfen beauftragt sind, sind oft zu groß um zu erkennen, wo die wahren Bedürfnisse liegen, um dann rechtzeitig darauf zu reagieren, oder um die Mittel effektiv und effizient einzusetzen. Einfach gesagt neigen große Organisationen dazu, bürokratisch zu sein, und einen großen administrativen Wasserkopf zu haben, der viele Resourcen intern verschlingt. Als Außenseiter fehlen ihnen auch oft die kulturellen Verbindungen, welche notwendig sind um informelle Brücken zu bauen und Hilfmittelverteilung zu lenken. Die Regeln, welche die intitutionalisierte Hilfsindustrie befolgen muß, zum Beispiel die Bedingung für Hungernde, sich auszuweisen, bevor man berechtig ist, Lebensmittel zu erhalten, kann zu großen Hindernissen führen.

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