Jul 132018
 
 July 13, 2018  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh View of Saintes-Maries-de-la-Mer 1888

 

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)
A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)
Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)
Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)
China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)
Approval Of Brexit Negotiations Lowest On Record (Orb)
No Brand Of Brexit Can Command A Commons Majority (G.)
Donald Trump Is Right. NATO Is A Costly White Elephant (G.)
Trump Ready To Help Some NATO States Buy US Arms (R.)
Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)
Germany Puts Last Bailout Tranche to Greece on Hold (GR)
Europe’s Remarkable Ability To Remain In Denial (Varoufakis)
US Judge Asked To Create Mental Health Fund For Migrant Children (R.)
Facebook Users Marked With “Treason” Label (ZH)

 

 

“Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.”

Stock Markets See the US Winning the Trade War, Defying Propaganda (WS)

The trade war talk has been going on since the presidential campaign but markets just brushed it off and rallied. In 2018, the trade war verbiage moved to the foreground. But until June 14, the administration vacillated between thinking about tariffs and putting the trade war “on hold,” depending on who was doing the talking or tweeting. This vacillation ended on June 14 (Thursday) evening, when it was reported that Trump had approved to hit an initial list of $50 billion in goods (1,300 products) from China with tariffs of 25%. At the time, the administration was also preparing a second list of products, accounting for another $100 billion in imports from China.

On the evening of June 19 (Monday), Trump threatened to hit another $200 billion of imports from China with tariffs of 10%. And on Tuesday, the Shanghai stock market plunged. Markets were taking it seriously. Since then, Corporate America’s propaganda machine – the same that for the past two decades had extolled the unrivalled virtues of offshoring production to cheap countries – fired up the mainstream media, which launched into incessant, deafening, repetitive, and manipulative coverage of how these tariffs would hurt US jobs more than anything.

Two glorious examples are Harley-Davidson and GM, which had been laying off workers and shutting plants in the US for years as they were offshoring production to cheap countries. For example, in July 2017, Harley-Davidson announced layoffs in the US as it was building a factory in Thailand. GM has been laying off workers in the US since 2016, even as it opted to produce more models in Mexico. Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies.

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TBTF banks have no incentive to come clean.

A Decade On, Pre-Crisis Mortgages Linger For Big Banks, Homeowners (R.)

A decade on big U.S. banks are still running down and selling off crisis-era mortgages, a process executives point to as weighing on loan growth. Eager to see a turning point in loan books, analysts count these portfolios as one factor, along with home equity loan runoff and new mortgage demand, to watch for when deciphering the true loan growth picture as U.S. second-quarter bank earnings start on Friday. Wells Fargo and Bank of America executives have flagged portfolios from prior to the 2008-2009 crisis era where banks are no longer originating similar new products when they are asked to predict a turning point in consumer loans. “These are portfolios of a bygone era that were very, very painful for the banks,” said Gerard Cassidy at RBC Capital Markets.

“They are not plain vanilla portfolios, which means they are more costly to manage. It may just not be worth the headache.” Analysts have said higher loan growth is critical to driving bank’s stock prices, but they anticipate only a modest acceleration year over year, driven primarily by commercial and industrial loans, not residential. “Remember that there’s a portion of that book that, again, is pre-crisis,” Chief Executive Tim Sloan said about Wells Fargo’s mortgage book at a May conference. He added the bank continues to examine the older portfolio’s risk-return tradeoff and sells assets when the opportunity arises, factors “that could have some impact” on growth.

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Backpedalling.

Fed’s Escape From Crisis Holdings Could Hit Dead End (R.)

Not long ago the Federal Reserve expected to quietly shed nearly half of its $4.5-trillion portfolio by around 2022, leaving little trace of the extraordinary steps it took to face down the financial crisis. But an unexpected market kink could force the Fed to scrap the plan two or three years early and permanently leave it holding $1 trillion more than it wanted. The U.S. central bank is making adjustments on the fly and keeping its options open. “I don’t think that’s problematic in any way” to halt the process “somewhat earlier,” William Dudley, the former New York Fed president and key architect of the portfolio strategy, told reporters last month.

Yet if the world’s largest holder of U.S. bonds tossed out its play book and effectively took on a more accommodative stance, the result could be an across-the-board easing of market borrowing costs, the foreign-exchange value of the dollar, and of the growing strains on emerging markets. “The evidence that we have suggests that the ultimate size of the balance sheet will be bigger than what people expected,” said Matthew Luzzetti, senior economist at Deutsche Bank Securities in New York. All of this amounts to the final chapter in the Fed’s unprecedented decision over the last decade to buy some $3.5 trillion in mortgage and Treasury bonds in an effort to boost riskier investments, hiring and economic recovery from recession. In a nod to a stronger U.S. economy, the Fed since 2015 has raised interest rates well above zero and, since October of last year, begun shrinking its balance sheet to a more normal but yet-unspecified size.

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“As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits.”

Social Security, Medicare To Add Another $50 Trillion to Our National Debt (JM)

The official, on-the-books federal debt is currently about $21.2 trillion, according to the US National Debt Clock. $21.2T is the face amount of all outstanding Treasury paper, including so-called “internal” debt. This is about 105% of GDP and it’s only the federal government. If you add in state and local debt, that adds another $3.1 trillion to bring total government debt in the US to $24.3 trillion or more than 120% of GDP. Then there’s corporate debt, home mortgages, credit cards, student loans, and more. Add it all together and total debt is about 330% of GDP, according to the IIF data I cited in Debt Clock Ticking. We are in hock up to our ears. In calculating debt, however, we don’t factor in Social Security and Medicare. These aren’t yet debt because they have dedicated revenue streams: payroll taxes.

Most Medicare recipients also pay premiums. To date, these revenue sources have covered current expenditures and more, allowing the programs to build up reserves. But that’s about to change. As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner. This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026. Just for the record, those “trust funds” don’t exist except as an accounting fiction. It is like you saving $100,000 for your child’s education and then borrowing all the money from your child’s education fund.

You can pretend that you have set aside $100,000 for your child’s future education, but when it comes time to make those payments, you’ll have to pull it out of current income or liquidate other assets. The US government has borrowed (or used or whatever euphemism you want to apply) all the money in those trust funds. So, talking about running out of reserves in 2034 or 2026 is rather meaningless. We’ve already run out of reserves. Any time a politician talks about putting a “lock box” around Social Security or Medicare trust funds, he or she is either staggeringly ignorant or lying.

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Stockpiling ahead of the crash?!

China’s Record Trade Surplus With US Further Inflames Trade Tensions (R.)

China’s trade surplus with the United States swelled to a record in June as its overall exports remained solid, a result that could further inflame a bitter trade dispute with Washington. The data came after the administration of U.S. President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items. China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.

Trump, who has demanded Beijing cut the trade surplus, could use the latest result to further ratchet up pressure on China after both sides last week imposed tit-for-tat tariffs on $34 billion of each other’s goods. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods – nearly the total amount of U.S. imports from China last year. The dispute has jolted global financial markets, raising worries a full-scale trade war could derail the world economy. Chinese stocks fell into bear market territory and the yuan currency has skidded, though there have been signs in recent days its central bank is moving to slow the currency’s declines.

[..] China’s exports to the United States rose 13.6 percent in the first half of 2018 from a year earlier, while its imports from the U.S. rose 11.8 percent in the same period. Separate data showed Chinese shipments to U.S. ports rose more than expected in June, suggesting some retailers moved up orders to insulate themselves from the intensifying trade war that threatens to send up costs on a growing number of consumer products. For January-June China’s trade surplus with the United States rose to $133.76 billion, compared with about $117.51 billion in the same period last year.

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May will have to find something else.

Approval Of Brexit Negotiations Lowest On Record (Orb)

Approval of the Brexit negotiations has seen a significant fall in July – now the lowest on record. Last month 36% approved of the negotiations and it is now 29%. In June, 32% agreed that Theresa May would get the right deal for Britain in the Brexit negotiations – this has now fallen to 26% – the lowest again on record. These 2,027 interviews were carried out before the resignation of Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

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Perhaps the biggest one of a million problems.

No Brand Of Brexit Can Command A Commons Majority (G.)

Theresa May’s new cabinet has now rallied behind her Chequers plan, set out fully in the government’s white paper on future UK-EU relations. However, far from settling the Brexit debate, recent events have given rise to another nightmare scenario that is only just beginning to take shape: that every conceivable Brexit outcome may now not command a parliamentary majority. The conventional wisdom in Westminster is that since the general election last year, there is no House of Commons majority for a hard Brexit. With a working majority of only 13, including the Democratic Unionists, it would take just seven Tory MPs to oppose it. But there are at least 20-30 pro-European Tories minded to do so.

Yet May’s softer Brexit blueprint has also significantly increased the prospect of Eurosceptic Conservative MPs voting against her EU deal when it is put to parliament later this year. In the febrile atmosphere at Westminster this week, there have been rumours that up to 70 Tories could oppose it – especially if, as seems likely, May makes further concessions in order to win the EU’s backing for a bespoke deal, instead of having to choose between a Canada or Norway-style agreement. Hints in the white paper about a preferential system for EU migrants, despite May’s rhetoric about ending free movement of labour, will fuel the Tory revolt.

May’s embrace for a softer Brexit has therefore changed the Commons arithmetic – and the political calculations that come with it. It is now Labour MPs, rather than Tory ones, who may prove critical. In recognition of this, May has been reaching out to Labour MPs in the hope that soft Brexit supporters vote for her deal, neutralising the impact of the Eurosceptics voting against it. In an unusual move, David Lidington, the Cabinet Office minister and May’s de facto deputy, briefed Labour (as well as Liberal Democrat and SNP) MPs on the Chequers plan. But Labour won’t want to save May. Their leader, Jeremy Corbyn, will almost certainly whip Labour MPs to oppose May’s deal, in the hope that the ensuing chaos will result in an election.

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What I said a few days ago.

Donald Trump Is Right. NATO Is A Costly White Elephant (G.)

Nato was founded in 1949 in response to Stalin’s blockade of Berlin. It was meant to “keep the Soviet Union out, the Americans in, and the Germans down”. Since then, it has welcomed the American nuclear shield, at vast cost to America. Otherwise, its only military achievements have been the breakup of Yugoslavia and the loss of a squalid 17-year war in Afghanistan. Neither has anything to do with the North Atlantic. Nothing better symbolised this than Theresa May’s bizarre gift to Trump this week of 450 British troops for Kabul. Nato was about deterring an attack on Europe from Russia. In 1945, the west agreed the Potsdam settlement, accepting the Soviets’ “sphere of influence” over eastern Europe.

Thus when Russia invaded Hungary in 1956 and Czechoslovakia in 1968, there was no question of Nato, or Europe, retaliating. The iron curtain was iron. Come 1989 and the collapse of Potsdam Europe, Nato did not approach a broken Russia to agree some new settlement. It did the opposite. To protests from Russia’s weakened leader, Boris Yeltsin, it gathered former Warsaw Pact states under its wing and advanced its border east towards Russia. It embraced Poland, Czechoslovakia and Hungary, then the Baltic states, Romania and Bulgaria. It was like Khrushchev stationing missiles in Cuba. Only Germany counselled caution.

Nato’s provocation was so blatant as to be an open invitation to any new populist leader in Moscow to exploit Russia’s bruised patriotism: hence Vladimir Putin. He and his kleptocratic cronies are virtually a Nato creation. But the fact that America was party to the provocation does not invalidate Trump’s question. What is Nato’s policy beyond needling Russia and feebly relying on the American shield?

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But in the end, it’s all about money. That’s why NATO still exists. Nothing to do with security.

Trump Ready To Help Some NATO States Buy US Arms (R.)

U.S. President Donald Trump said on Thursday he was ready to help smaller NATO countries to buy U.S. weapons as he pushed them to spend more on their own defense. Speaking after a NATO summit, at which he said nations had agreed on new spending pledges, Trump said some less wealthy members had asked during meetings in Brussels if he could help them buy U.S. arms equipment, but did not name the countries. Asked about pressures on countries with weaker finances, he said, “We have many wealthy countries with us today but we have some that aren’t so wealthy and they did ask me if they could buy the military equipment, and could I help them out, and we will help them out a little bit,” he told a news conference.

“We are not going to finance it for them but we will make sure that they are able to get payments and various other things so they can buy – because the United States makes by far the best military equipment in the world: the best jets, the best missiles, the best guns, the best everything.” Trump claimed a personal victory at the summit after telling European allies to increase spending or lose Washington’s support. The White House has been pushing a “Buy American” initiative which aims to help drum up billions of dollars more in arms business. The initiative has raised concerns in Europe, where some see increased weapons sales as a key goal of Trump’s repeated calls for NATO members to increase their military spending.

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Americans have no business there. Go home.

Who Wants To Disrupt Strategic Balance In The Black Sea Region? (SCF)

The US-led series of drills in and around Ukraine’s Black Sea coastline is part of NATO exercise Sea Breeze that kicked off on July 9 to last until July 21. The training event involves an international armada representing 19 countries, including such non-NATO states as Ukraine, India, Georgia, the United Arab Emirates and Moldova. All in all, 29 warships, 1 submarine, and 25 aircraft are involved in the exercise held in Odessa and Mykolayiv and the northwestern Black Sea region. The Black Sea regional security is actually an issue paid little attention to. It’s not addressed by an international forum. NATO official documents adopt an openly provocative language to challenge Russia.

The North Atlantic Alliance always emphasizes the Black Sea’s role as a critical intersection. The US-led NATO activities have been intensifying since 2014 to turn the region into another hotbed along with the South China Sea and the Baltic. Turkey, Bulgaria, and Romania, three of the six Black Sea countries, are NATO members. Ukraine and Georgia are the bloc’s close partners aspiring for membership. The alliance has a significant military presence in Romania, including a US Aegis Ashore BMD system capable of firing long-range cruise missiles at Russia.

American military presence in Romania and Bulgaria is gradually growing. The US plans to deploy up to 2,500 troops at Novo Selo, Bulgaria. The facility is large enough to accommodate as many as 5,000 servicemen. Heavy tanks deployment is envisaged. The 1997 NATO-Russia Founding Act, where NATO pledged not to deploy “substantial forces” near Russia, seems to be forgotten. The US Navy’s policy is aimed at ramping up its presence there. The presence of American warships perilously close to Russia’s borders is undoubtedly provocative. For comparison, the Russian Navy does not stage regular maneuvers in the Caribbean Sea with such allies as Cuba, Nicaragua and Venezuela though nothing prevents it from doing so.

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First, Berlin forces Greece to keep the islands loaded with refugees. Then it forces them to load more taxes on the already destroyed economies there.

Germany Puts Last Bailout Tranche to Greece on Hold (GR)

Germany blocked a final 15 billion-euro ($17.5 billion) bailout payment to Greece after the government in Athens postponed a value-added tax (VAT) hike on a handful of islands that have been hit hard by the influx of migrants. For the tranche to be unblocked by early August, Finance Minister Euclid Tsakalotos pledged at yesterday’s Eurogroup that the measure to retain the 30 percent VAT discount on Lesvos, Chios, Samos, Leros and Kos will end in January 2019, and that the loss of 28 million euros of revenues will be offset from other sources.

The SYRIZA-led government postponed the VAT hike in the islands without consulting Greece’s creditors. Germany was eager to send a message to Athens that it will not tolerate any deviation from the program in the future. Commentators say that the Eurogroup decision shows how difficult it will be for the southern country to regain financial sovereignty even as it exits an eight-year bailout regime in August.

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Given how Greece gets treated, denial doesn’t sound like the correct term.

Europe’s Remarkable Ability To Remain In Denial (Varoufakis)

Europe’s establishment is luxuriating in two recent announcements that would have been momentous even if they were only partly accurate: the end of Greece’s debt crisis, and a Franco-German accord to redesign the eurozone. Unfortunately, both reports offer fresh proof of the European Union (EU) establishment’s remarkable talent for never missing an opportunity to miss an opportunity. The two announcements did not come in the same week by accident. The Greek debt implosion, back in 2010, was the ugly symptom of the eurozone’s design flaws, which is why it triggered a domino effect across the continent. Greece’s continuing insolvency reflects the deep disagreements within the Franco-German axis concerning eurozone redesign.

While three French presidents and the same German chancellor were failing to agree on the institutional changes that would render the eurozone sustainable, Greece was asked to bleed quietly. In 2015, the Greeks staged a rebellion, which Europe’s establishment ruthlessly crushed. Neither Brexit nor the EU’s steady delegitimation in the eyes of European voters managed to convince the establishment to change its ways. French President Emmanuel Macron’s election seemed the last hope for the new Berlin-Paris accord needed to prevent a suffocating Italy from triggering the next—this time lethal—domino effect.

Under Macron, new, hopeful ideas were proposed: a common budget for the eurozone; a new safe debt instrument and quasi-federal tax-raising capacities; a common unemployment insurance fund; common bank deposit insurance and a common pot from which to recapitalize failing banks. Moreover, a new investment fund would mobilize idle savings across Europe, without adding to the fiscal stress of member states. A year later, with Italy on a collision course with the EU, the Meseberg Summit between German Chancellor Angela Merkel and Macron delivered an agreement on eurozone reform. A few days later, the Eurogroup of eurozone finance ministers delivered its own “solution” to the Greek debt crisis.

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Sensible.

US Judge Asked To Create Mental Health Fund For Migrant Children (R.)

A civil rights group asked a federal judge on Thursday to order the U.S. government to provide mental health counseling for the around 2,000 immigrant children separated from their parents by officials at the U.S.-Mexican border. The request by the American Civil Liberties Union follows a chaotic week for U.S. immigration officials, who failed to meet a court-ordered deadline on Tuesday for reuniting children under the age of five. The government “must establish a fund to pay for professional mental health counseling, which will be used to treat children who are suffering from severe trauma as a result of their forcible separation from their parents,” said the ACLU in court papers filed late Thursday.

The group said the cost of the fund could be determined at a future date. The rights group brought the lawsuit that prompted U.S. Judge Dana Sabraw in San Diego last month to order the government to reunite families separated at the border. The family separation policy was instituted as part of President Donald Trump’s efforts to curtail illegal immigration. The administration ended the practice last month after widespread protests. The government, in the same court filing on Thursday, acknowledged that it had missed a Tuesday deadline for reuniting the youngest children with their parents, but said it had now complied with the judge’s order.

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How does anyone make this, too, about Russia? It’s your own people who use this for spying on you. Targeting ‘Russians’ is just a way to divert your attention from that.

Facebook Users Marked With “Treason” Label (ZH)

Beleaguered social media giant Facebook has removed “treason” from their database of the keywords assigned to users for advertising purposes, the company stated Wednesday after Danish state broadcaster DR reported its existence. Company spokesman Joe Osborne replied “National treason was an advertising interest because of its historical significance, but as it is an illegal act, we have removed it.” Facebook tags its more than 2 billion users with a wide variety of keywords depending on their interests – from shopping habits to political and religious views in order to sell more efficiently targeted advertising.

This makes Facebook a sublime sales channel for companies. Categorizing users in areas of interest means that companies with ads on Facebook can buy into an almost perfect audience. Eg. garden equipment for people with special interest in gardens, etc. But categorization also allows intelligence services in all countries to look at the population over the shoulder. DR suggests that the a government such as Russia could have used the “treason” tag to locate around 65,000 Facebook users who had been marked with the keyword. The article notes that they do not know “if the Russian authorities have used Facebook’s “treason” keyword” for nefarious purposes – adding “Only the Russian authorities know that.”

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Jul 122018
 
 July 12, 2018  Posted by at 9:09 am Finance Tagged with: , , , , , , , , , , , ,  


Blu Mural in Rome, Italy 2015 Click to enlarge See also here

 

Trade War Risk On (Hedgeye)
Corporate Bonds Are Getting Junkier (DDMB)
It’s Not Wage Rises That Are A Problem – It’s The Lack Of Them (Frank)
Britain Facing ‘State Of Emergency’ If No Deal Reached – Grieve (Ind.)
Trump Tells NATO Allies To Spend 4% of GDP On Defence (G.)
Germans Want Trump To Pull US Troops Out Of Germany (Ind.)
China’s Silky Charming of Arabia (Escobar)
The Supreme Court Is Much Too Powerful (Mises.org)
New Zealand Hospitals In Chaos As 30,000 Nurses Strike (G.)
EU Approves ‘Enhanced Surveillance’ for Post-Bailout Greece (GR)
Trash Piles Up In US As China Closes Door To Recycling (AFP)

 

 

Great cartoon.

Trade War Risk On (Hedgeye)

– Global equities are retreating materially today on fears of a commensurate escalation in the burgeoning trade war between the U.S. and China. Specifically, the Trump administration released a list of goods that it may target w/ sanctions totaling some $200 billion, while China’s Commerce Ministry described the move as “totally unacceptable bullying”, and promised to lodge complaints at the WTO without detailing what its retaliatory steps would be. Are trade wars bad for growth? Of course they are. Does anyone really possess a reliable framework for quantifying the ultimate impact ex ante? Probably not.

This we do know, however: prior to the last Friday’s tit-for-tat escalation targeting $34 billion in Chinese goods and a list of [mostly] U.S. agricultural products, Export growth was trending lower in 70% of the near-50 economies we maintain detailed predictive tracking algorithms for, while 77% of Manufacturing PMI series were trending lower. This figures reflect data through MAY and JUN, respectively, and are supportive of our view that trade tensions aren’t the driving force behind Global #Divergences; they are merely adding fuel to the fire. Global equities peaked in late-JAN for a reason.

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Anyone remember AAA?

Corporate Bonds Are Getting Junkier (DDMB)

Life insurers invest heavily in high-grade corporate bonds to fund annuities, life insurance policies and other products. Here’s a look at the possibility that the issues might be affected by credit rating grade inflation… Much has been made of the degradation of the $7.5 trillion U.S. corporate debt market. High yield offers too little, well, yield. And “high grade” now requires air quotes to account for the growing dominance of bonds rated BBB, which is the lowest rung on the investment-grade ladder before dropping into “junk” status. And then there’s the massive market for leveraged loans, where covenants protecting investors have all but disappeared.

How does that break down? Corporate bonds rated BBB now total $2.56 trillion, having surpassed in size the sum of higher-rated debentures, which total $2.55 trillion, according to Morgan Stanley. Put another way, BBB bonds outstanding exceed by 50% the size of the entire investment grade market at the peak of the last credit boom, in 2007. But aren’t they still investment grade? At little to no risk of default? In 2000, when BBB bonds were a mere third of the market, net leverage (total debt minus cash and short term investments divided by earnings before interest, taxes, depreciation and amortization) was 1.7 times. By the end of last year, the ratio had ballooned to 2.9 times.

Given the marked deterioration in fundamentals, bond powerhouse PIMCO worries that “This suggests a greater tolerance from the credit rating agencies for higher leverage, which in turn warrants extra caution when investing in lower-rated IG names, especially in sectors where earnings are more closely tied to the business cycle.” [..] why not treat the BBB portion of the bond market for what it is: a high-risk slice of the corporate debt pie. Keeping count of “fallen angels,” or those investment-grade bonds that are downgraded into junk territory, will become a spectator sport.

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“Except in the very tightest labour markets, workers simply don’t have the power to demand their fair share.”

It’s Not Wage Rises That Are A Problem – It’s The Lack Of Them (Frank)

If you study the Bureau of Labor Statistics’ numbers on wages for nonsupervisory workers over the past few decades, you will notice that wage growth has been strangely slow to pick up. Hot economies usually drive wages up pretty promptly; this recovery has been running since 2009 and it has barely moved the needle. It’s even more perverse on the other side of the Atlantic. According to a 2017 story in the Financial Times, Britain was “the only big, advanced economy in which wages contracted while the economy expanded” – an amazing achievement if you think about it. And UK thinktank the Resolution Foundation has said this decade is “set to be the worst for pay growth since the Napoleonic wars”.

How could such a thing happen in this modern and enlightened age? Well, for starters, think of all that whining we’re hearing from the US’s management, who will apparently blame anyone and do anything to avoid paying workers more. Every labour-management innovation seems to have been designed with this amazing goal in mind. Every great bipartisan political initiative, from free trade to welfare reform, points the same way. When Republicans are in charge, it’s open season on working-class organisations. And you can forget about increases in the minimum wage, regardless of who’s in the White House.

Of course it’s happening the same way in the UK; be it Thatcher’s war on unions or New Labour’s “third way”, Britain has followed the US model closely. Political decisions within both countries have had highly predictable results, and we are now fated to live with them. Good times aren’t really all that good for ordinary people any more, only for the people on top – the owners of companies, of real estate, of stocks. Except in the very tightest labour markets, workers simply don’t have the power to demand their fair share. If you ask me, this is the thing to panic about: not the possibility that workers might prosper, but that they’re not prospering yet.

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“..ordinary life will grind to a halt. That is the extent to which our lives are intermeshed with the lives of our European partners..”

Britain Facing ‘State Of Emergency’ If No Deal Reached – Grieve (Ind.)

Britain will face a “state of emergency” if no Brexit deal is reached by February, Dominic Grieve has warned at an exclusive event for Independent subscribers. Appearing on a stage with other key Brexit figures, including Jacob Rees-Mogg and Gina Miller, the leading Tory rebel said “ordinary life will grind to a halt” if the talks are still deadlocked as D-Day nears. The warning came as Mr Rees-Mogg launched his most outspoken attack yet on big businesses opposing a hard Brexit, claiming they have “got everything wrong in the whole of their history”. Andrea Leadsom, the Commons leader, suggested she would not accept any further “compromises” beyond the deal struck at Chequers by Theresa May – preferring a no-deal outcome. [..]

Last month, Mr Grieve, a former attorney general, led an aborted revolt to guarantee MPs a “meaningful vote” to prevent Britain crashing out of the EU without an agreement. In his most dramatic language yet, to underline the high stakes, Mr Grieve told the audience: “If by the end of February or early March it is clear that there is no deal on anything, there will be a declaration of a state of emergency in this country. “Actually, ordinary life will grind to a halt. That is the extent to which our lives are intermeshed with the lives of our European partners, and that is what will happen if there is no deal on anything.” Mr Grieve said hardline anti-Brexit MPs had “abdicated” their responsibilities to the public by boasting that they will do “absolutely nothing while we skated off the edge of the cliff into this major national crisis”. “That is the madness that has crept into some of the discourse in parliament,” he added.

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They won’t.

Trump Tells NATO Allies To Spend 4% of GDP On Defence (G.)

Donald Trump left the opening day of the Nato summit in Brussels in disarray on Wednesday after making a surprise demand for members to raise their defence spending to 4% of GDP, and clashing with German chancellor Angela Merkel over a proposed pipeline deal with Russia. Trump left the assembled presidents and prime ministers floundering, unsure whether he was serious about the 4% target, double the existing Nato target of 2%, which many do not meet, or whether it was just a ploy. After making the announcement, Trump walked out.

The White House press secretary, Sarah Sanders, confirmed the 4% figure. “During the president’s remarks today at the Nato summit he suggested that countries not only meet their commitment of 2% of their GDP on defence spending, but that they increase it to 4%,” she said. Sanders added: “President Trump wants to see our allies share more of the burden and, at a very minimum, meet their already stated obligations.”

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So there. WHy on earth would you need so many US bases?

Germans Want Trump To Pull US Troops Out Of Germany (Ind.)

Germans would actually welcome the withdrawal of American troops stationed in their country, a new poll has found – as Donald Trump threatens to pull the plug on military support. The finding comes on the first day of a Nato summit in which the US president is urging Europe to spend more on defence if it wants to continue to receive American military protection. But far from being seen as a threat, a YouGov poll for the dpa news agency found that more Germans would welcome the departure of the 35,000-strong American force than would oppose it.

42% said they supported withdrawal while just 37% wanted the soldiers to stay, with 21% undecided. Last month the US media reported that the US government was in the process of assessing the cost of keeping troops in Germany ahead of a possible withdrawal, citing Pentagon sources. But the policy of actually pulling out of the country has not actually reached the negotiating table in his week’s Brussels summit and is not expected to be discussed as a possibility – for now.

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At some point the Chinese will run into Americans there.

China’s Silky Charming of Arabia (Escobar)

Under the radar, away from World Cup frenzy and the merger and acquisition of Cristiano Ronaldo Inc. and Fiat, the eighth ministerial meeting of the China-Arab States Cooperation Forum (CASCF), established in 2004, sailed on in Beijing, hosted by President Xi Jinping. Amid the torrential pledge of loans and aid, China committed to invest right across the Arab world in transportation infrastructure, oil and gas, finance, digital economy and artificial intelligence (AI). Significantly, Beijing will offer $15 million in aid for Palestinian economic development, as well as $91 million distributed among Jordan, Lebanon, Syria and Yemen.

A China-Arab bank consortium will be set up, with a dedicated fund of $3 billion tied up with the financial aid and loan package. Beijing also foresees importing a whopping $8 trillion from Arab states up to 2025. Predictably, once again Xi fully connected the whole Arab world with the expansion of the New Silk Roads, or Belt and Road Initiative (BRI). And careful to navigate the geopolitical minefield, he urged “relevant sides” to respect the international consensus in the Israel-Palestine confrontation, calling for justice. That may indicate a gradual, but sure departure from trademark Chinese passive or reactive policy across the Arab world, focused exclusively on energy and political non-interference.

Xi is now openly tying up Chinese financial aid and deals with nations across the Global South to an overall economic development drive; the only roadmap to solve intractable political and religious conflict. And that includes full respect of international deals. As much as the Arab world, Iran is in Southwest Asia. A day before the China-Arab forum, Premier Li Keqiang, in Berlin, was warning of “unforeseeable consequences” if the Iran nuclear deal, known as JCPOA, were to be discarded, as the Trump administration wants.

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Stating the obvious.

The Supreme Court Is Much Too Powerful (Mises.org)

The current frenzy over the vacancy on the Supreme Court in the wake of Justice Kennedy’s retirement highlights just how much power has been centralized in the hands of a small number of people in Washington, DC. The left has grown positively hysterical over the thought of yet another Trump-appointed judge being installed, who could potentially serve on the court for decades. Right-wingers who claim the left is overreacting, however, are unconvincing. One can only imagine the right’s reaction were Hillary Clinton president. She would have already had the opportunity to appoint Scalia’s replacement, and we might now be talking about her nominee to replace Justice Ginsberg.

The right-wing media would be filled with article after article about how the new court would be a disaster for health-care freedom, private gun ownership, and, of course, the unborn. But, as it is, we live in a country where five people on a court decide what the law is for 320 million people. And for some reason, many people think this is entirely normal. It’s our own American version of the Soviet politburo, but few are even bothering to ask whether it’s a good idea. After all, if it makes sense for a small handful of people to decide law for the entire country, why even bother with a House of Representatives? Even the Senate — composed primarily of multimillionaires living full-time in Washington, DC, is [by comparison] extravagantly “democratic.”

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“be fair to those who care”

New Zealand Hospitals In Chaos As 30,000 Nurses Strike (G.)

Hospitals in New Zealand have cancelled elective surgeries and discharged patients early after 30,000 nurses walked off the job in the first such nationwide strike in 30 years. The 24-hour strike began on Thursday, and comes after months of negotiations between the government and nurses broke down on Wednesday, leaving hospitals to battle winter illnesses without crucial staff. Long delays at hospital emergency departments are expected around the country. Striking nurses held rallies in major cities, chanting “be fair to those who care” in the largest public demonstrations by the health sector ever seen on the country’s streets. Nurses said they were overworked and underpaid, with unsafe working conditions leading to burnout and exhaustion.

Patient care and staff wellbeing were routinely compromised, they said. Acting prime minister Winston Peters said the government was “very, very disappointed” that its latest offer of a 12.5% increase had been rejected, and that it would take time to address nine years of neglect under the previous National government. Although the May budget delivered a surplus, Peters said the extra funds were needed to handle unforeseen spending, such as managing the spread of mycoplasma bovis, a cow disease. “We are saying give us some time … it’s not that we’re not willing to, we haven’t got the money,” said Peters. “We’ve gone as far as we can go as a government. We got hold of a negotiated arrangement which we inherited – the nurses have had a raw nine years.”

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Straight jacket.

EU Approves ‘Enhanced Surveillance’ for Post-Bailout Greece (GR)

The European Commission on Wednesday said Greece will remain under an “enhanced surveillance framework” to ensure that it meets ambitious budget targets through 2022. The country will still be subject to quarterly inspections from creditors after the bailout program ends in late August. “Greece is now able to stand on its own two feet but that doesn’t mean it has to stand alone … The reform era has not ended,” EU Financial Affairs Commissioner Pierre Moscovici said. “Enhanced surveillance is not a fourth program: it involves no new commitments or conditions. It is a framework to support the completion and delivery of ongoing reforms,” he added.

Despite returning to growth after a massive recession, Greece leaves the program still facing major difficulties. Banks are struggling to deal with a high rate of bad loans. At over 20%, Greece has the highest unemployment rate in the euro currency union. Government bonds remain below investment grade even though their yields have fallen to manageable rates. And to help reduce its debt, Greece has committed to punishingly high primary budget surpluses — that is, the budget excluding the cost of debt servicing — of above 3.5% through 2022. “Enhanced surveillance is there to help Greece build confidence with markets, investors and companies,” Commission Vice-President Valdis Dombrovskis said. “They all want stability and predictability.”

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They’ll find a new dump.

Trash Piles Up In US As China Closes Door To Recycling (AFP)

For months, a major recycling facility for the greater Baltimore-Washington area has been facing a big problem: it has to pay to get rid of huge amounts of paper and plastic it would normally sell to China. Beijing is no longer buying, claiming the recycled materials are “contaminated.” For sure, the 900 tons of trash dumped at all hours of the day and night, five days a week, on the conveyor belts at the plant in Elkridge, Maryland – an hour’s drive from the US capital – are not clean. Amid the nerve-shattering din and clouds of brown dust, dozens of workers in gloves and masks – most of them women – nimbly pluck a diverse array of objects from the piles that could count as “contaminants.”

That could be anything from clothes to cables to tree branches to the bane of all recyclers: plastic bags, which are not supposed to go in recycling bins because they snarl up the machinery. “We’ve had to slow our machinery, and hire more people” to clean up the waste, says Michael Taylor, the head of recycling operations for Waste Management, the company that runs the plant. At the end of the sorting line is the end product — huge bales of compacted waste containing paper, cardboard or plastics. These have been bought up for decades by businesses, most of them based in China, which clean them up, crush them and transform them into raw materials for industrial plants.

Last year, China bought up more than half of the scrap materials exported by the United States. Globally, since 1992, 72% of plastic waste has ended up in China and Hong Kong, according to a study in the journal Science Advances. But since January, China has closed its borders to most paper and plastic waste in line with a new environmental policy pushed by Beijing, which no longer wants to be the world’s trash can, or even its recycle bin. For other waste products such as cardboard and metal, China has set a contamination level of 0.5% — a threshold too low for most current US technology to handle. US waste handlers say they expect China will close its doors to all recycled materials by 2020 — an impossibly short deadline.

Read more …

Jul 112018
 
 July 11, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , ,  


Edward Hopper The camel’s hump 1931

 

As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning (ZH)
US To Slap Tariffs On Extra $200 Billion Of Chinese Imports (R.)
Has the Fed Permanently Inflated Home Prices? (Whalen)
Trump Forced To Reinstate ‘Catch And Release’ After Court Defeats (G.)
40% Of Mexican Territory Is Paralyzed By Violence (G.)
EU Negotiator Michel Barnier Says 80% Of Brexit Deal Is Agreed (G.)
UK Government Draws Up Secret Plans To Stockpile Processed Food (Sun)
Red Cross Tells UK: End Damaging Immigration Detention (Ind.)
I’m A Doctor In Lampedusa. We Can’t Let These Migrant Deaths Go On (Bartolo)
US Judge Allows Lawsuits Over Monsanto’s Roundup To Proceed To Trial (R.)
Thailand Water Pumps Failed Just After Last Boy Escaped (G.)

 

 

Madness.

As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning (ZH)

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high Today was no exception: according to the IIF’s latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up by $30 trillion from the end of 2016. In other words, there is now a quarter quadrillion dollars in global debt, and it represents 318% of global GDP.

More concerning is that this was the first time since Q3 2016 that global debt to GDP increased, suggesting that the marginal utility of debt is once again below 1. This is how the debt is broken down as of Q1 2018 and compared to Q1 2013: • Non-financial corporate debt: $74 trillion, up from $58 trillion in 5 years • Government debt: $67 trillion, up from $56 trillion • Financial debt: $61 trillion, up from $56 trillion • Household debt: $47 trillion, up from $40 trillion. [..] What was surprising about the report – certainly not the latest all time high debt numbers, those are now standard – is that the IIF voiced a strongly negative opinion of recent developments in the debt arena.

“The pace is indeed a cause for concern,” warned IIF’s Managing Director Hung Tran during a call with reporters. “The problem with the pace and speed is if you borrow or if you lend very quickly, the quality of the credit tends to suffer.” It also means more governments, businesses and individuals have been borrowing that could have trouble paying the money back, or merely paying interest on it as rates rise. “The quality of creditworthiness has declined sharply,” Tran added ominously, echoing what Moody’s said at the end of May.

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“Tariffs are taxes, plain and simple..”

US To Slap Tariffs On Extra $200 Billion Of Chinese Imports (R.)

The Trump administration raised the stakes in its trade war with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports. U.S. officials released a list of thousands of Chinese imports the administration wants to hit with the tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminum. It also includes consumer goods ranging from car tires, , furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products. “For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” U.S. Trade Representative Robert Lighthizer said in announcing the proposed tariffs.

“Rather than address our legitimate concerns, China has begun to retaliate against U.S. products … There is no justification for such action,” he said in a statement. Last week, Washington imposed 25 percent tariffs on $34 billion of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of U.S. exports to China. Investors fear an escalating trade war between the world’s two biggest economies could hit global growth. President Donald Trump has said he may ultimately impose tariffs on more than $500 billion worth of Chinese goods – roughly the total amount of U.S. imports from China last year. The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms.

The tariffs will not be imposed until after a two-month period of public comment on the proposed list, but some U.S. business groups and senior lawmakers were quick to criticize the move. Senate Finance Committee Chairman Orrin Hatch, a senior member of Trump’s Republican Party, said the announcement “appears reckless and is not a targeted approach.” The U.S. Chamber of Commerce has supported Trump’s domestic tax cuts and efforts to reduce regulation of businesses, but it has been critical of Trump’s aggressive tariff policies. “Tariffs are taxes, plain and simple. Imposing taxes on another $200 billion worth of products will raise the costs of every day goods for American families, farmers, ranchers, workers, and job creators. It will also result in retaliatory tariffs, further hurting American workers,” a Chamber spokeswoman said.

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No.

Has the Fed Permanently Inflated Home Prices? (Whalen)

The importance of the fact that US bank credit metrics are showing essentially zero cost in residential lending from portfolio loans is that it begs the question as to home price valuations and thus loan-to-value (LTV) ratios. A number of analysts have predicted an imminent reset in terms of home prices, but this has not happened for several reasons. The chart below shows the Case-Shiller average for US home price appreciation. First, real estate is a local market, so generalizations such as Case-Shiller are dangerous. New York City has been slumping for the past two years, but other markets around the country such as Denver remain hot.

The work of Weiss Residential Research clearly shows a turn in some major urban markets that have been moving higher since 2012 and before. But these moves seem more a function of buyer exhaustion than a permanent move to a buyers market. They key factor is cheap money chasing a limited supply of homes. Second, the US home market is in a classic supply squeeze. Referring to the work of Laurie Goodman at Urban Institute, the US is adding less than 1 million new units per year net of attrition of obsolete homes. Basically, new household formation is 50% higher than the growth in new housing units. More, the Fed’s manipulation of interest rates and credit spreads encouraged Wall Street to allocate capital to buying residential homes as rental properties, further limiting supply of homes available for sale.

Net, net, Millennials have been priced out of the housing market because the omniscient souls on the Federal Open Market Committee think that boosting asset prices will lead to more spending and job creation. Instead, low interest rates and help from the GSES (Fannie, Freddie and Ginnie) have driven up home prices beyond the reach of many home owners in major metro areas.

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Stop. It.

Trump Forced To Reinstate ‘Catch And Release’ After Court Defeats (G.)

Donald Trump’s administration has said it will release some migrant families from detention with ankle monitors, marking a return to the so-called “catch-and-release” policy the president vehemently denounced. The announcement comes as the US government scrambles to reunite thousands of migrant children who were separated from their parents at the border under the Trump administration’s “zero tolerance” immigration policy. “Parents of children under the age of five are being reunified with their children, then released and enrolled into an alternative to detention (ATD) program, meaning they will be placed on an ankle monitor and released into the community,” said Matthew Albence, a senior official with US Immigration and Customs Enforcement.

The Trump administration was left with few options after a series of court orders. A federal judge last month ordered the reunification of children under five by 10 July. That deadline was not met, officials acknowledged, while noting plans were under way on Tuesday to reunite up to 54 migrant children under five with their parents. There are an estimated 102 migrant children under five in federal custody, with a limited number of cases not qualifying for reunification due to the parents’ criminal background or signs of child abuse. The administration additionally lost in an attempt to overturn a 1997 court precedent that says minors cannot be held for more than 20 days.

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What a job the new government has.

40% Of Mexican Territory Is Paralyzed By Violence (G.)

As much as 40% of Mexican territory is prisoner to chronic insecurity and violence, the future chief of staff of Andrés Manuel López Obrador, the incoming president, has claimed. Alfonso Romo, a prominent entrepreneur who was part of the leftist’s watershed election triumph last week, made the assertion during a summit of business leaders on Monday in Mexico City. “Veracruz is paralyzed. Tamaulipas, paralyzed; Michoacán, paralyzed. Guerrero, paralyzed,” Romo said, referring to four of the most notoriously violent states in a country that last year suffered a record 29,000 murders.

“I won’t go on, so I don’t scare you,” Romo added, according to the newspaper Unomásuno which splashed the widely-reported claim onto its front page under the bright red headline: “Paralyzed by Insecurity”. López Obrador, or Amlo as he is widely known, made cutting violence a key prong of his third presidential bid and his promise to “pacify” Mexico helped him secure more than 30 million votes. Amlo has vowed to rethink Mexico’s devastating and highly militarized war on drugs – which experts blame for at least 200,000 deaths since 2006 – and be tough on the social causes of crime.

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Hard to believe.

EU Negotiator Michel Barnier Says 80% Of Brexit Deal Is Agreed (G.)

The chief Brexit negotiator for the European Union has declared that 80% of a deal with the UK has been agreed, in a change of narrative that suggests a full agreement can be sealed before October’s deadline. Speaking in New York on Tuesday, Michel Barnier said: “After 12 months of negotiations we have agreed on 80% of the negotiations.” He added that he was determined to negotiate a deal on the remaining 20%. The declaration that four-fifths of the deal is done is a significant change of tone from the EU after months of protests that it could not negotiate because the UK had not put its own proposals on the table.

Speaking at the Council on Foreign Relations in New York, Barnier said he looked forward to a “constructive discussion” with the UK after the white paper on Brexit is published on Thursday. But he warned: “We need clarity for these negotiations to move forward for the time is very short.” Barnier said he had never been shown how Brexit provided added value when the world faced challenges from terrorism and climate change to migration, poverty and financial instability. “It will be clear, crystal clear at the end of this negotiation that the best situation, the best relationship with the EU, will be to remain a member,” he said. Barnier added: “No deal is the worst solution for everybody. It would be a huge economic problem for the UK and also for the EU. I’m not working for that deal, I’m working for a deal.”

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Fun with the Sun.

UK Government Draws Up Secret Plans To Stockpile Processed Food (Sun)

Ministers have drawn up secret plans to stockpile processed food in the event of EU divorce talks collapsing – to show Brussels that “no deal” is not a bluff. Theresa May has ordered “no deal” planning “to step up” — with the government poised to start unveiling some of the 300 contingency measures in the coming weeks. At last week’s Chequers summit, Brexiteer ministers demanded more be done to prepare for Britain leaving the EU out without a new arrangement in place. The Sun can reveal that includes emergency measures to keep Britain’s massive food and drinks industry afloat – including stockpiling ahead of exit day on 29 March next year.

More than £22 billion worth of processed food and drinks are imported in to the UK – 97 per cent from the EU – in an industry that keeps 400,000 workers employed in the UK. Similar stockpiles are also being prepared for medical supplies amid fears of chaos at British ports next year. Brexit department insiders also claim plans have also been “wargamed” to ease pressure on Calais, including importing and exporting more goods through Holland, Belgium and directly from Spain. Last night Downing Street said “no deal preparation work is to be stepped up” and led by new Brexit Secretary Dominic Raab. Yesterday the Cabinet newbie briefed fellow ministers on measures Britain is taking, with No10 saying: “It’s sensible to make preparations for all scenarios and that includes No Deal.”

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Humanity.

Red Cross Tells UK: End Damaging Immigration Detention (Ind.)

The British Red Cross has called for an overhaul of the UK’s immigration detention system. Conditions are such that detainees suffer mental health problems which sometimes lead to suicide attempts, according to the charity. Thousands of innocent asylum seekers – often fleeing war and torture – are detained each year and locked up indefinitely with no support, the charity warned. In the first intervention of its kind by a major charity, the Red Cross calls for significant reforms including a 28-day limit on detention. It found cases of asylum-seekers being detained for as long as two years and seven months. Five of the 26 detainees interviewed for the report had attempted suicide while they were detained, and just 25 of them said they had been given no access to mental health support services.

Pregnant women continue to be “needlessly detained” in breach of the Home Office’s own guidance – with 47 pregnant women detained in the year to June 2017. The charity said the “overly onerous and traumatic” experience of attending immigration reporting centres – which many are required to do every every two weeks – should be overhauled by banning the practice of detaining people when they turn up. Mike Adamson, chief executive of the British Red Cross, said: “Most of the people in the UK asylum process have fled conflict or persecution to find a place of safety. They have already experienced more trauma and anguish than the rest of us could possibly imagine.

“The threat of detention without notice hangs over many people going through the asylum process in the UK. Our research shows that not knowing whether this week will be the week they are detained again, can make the process of having to report regularly extremely distressing. “This can exacerbate existing mental health issues and mean people never truly feel free.”

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More humanity.

I’m A Doctor In Lampedusa. We Can’t Let These Migrant Deaths Go On (Bartolo)

For a long time, I was proud of my country. I work as a doctor on the small island of Lampedusa in the middle of the Mediterranean, a place that is something of a symbolic gateway between Africa and Europe. In recent decades, Italy showed how it could honour humanity, giving the word “welcome” a new meaning, without ever building walls or putting up barbed wire along its borders. These acts of openness were recognised by other countries, by the EU, and by the gratitude of the thousands of people whose lives we saved over the years. But I stopped feeling proud to be Italian from the moment our government, denying all that had previously been done, decided to establish an agreement with Libyan groups in Tripoli – which meant, directly or indirectly, with people smugglers.

I still remember how in 2016 my country had vigorously joined the outrage triggered by Europe’s decision to bankroll Turkey’s President Erdogan with €6bn so he’d ignore or stop the migration flows from Syria. Italy’s position was then sacrosanct. It has since been somehow inexplicably disavowed in deeds. There is only one dramatic difference between what Europe did with Turkey then and what Italy is doing with Libya today. Refugee camps set up in Turkey are more or less efficient; in Libya, people are detained in horror camps where they are raped, tortured and killed. Instead of the wall that Italy did not build on its own territory, we’ve erected two walls elsewhere. The one in Libya has allowed us to cut the number of arrivals on our shores by 70%; the other, within ourselves, allows us to pretend we don’t see what is being done to the 70%.

Well, I can tell you what’s being done to these people. From my workplace, the Lampedusa clinic, their fate is clear to see. They are tortured daily, atrociously, for years on end. Those brought to us, by helicopter or motorboat, are close to death, with burns, serious injuries from blows, electric currents applied to the head or genitals, gunshot wounds, and razor-blade cuts. They are almost always dehydrated, in a state of hypothermia, and so underfed they are on the brink of collapse. They bring to mind the suffering of a concentration camp – yes, a concentration camp.

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There will always be scientists willing to claim it’s not cancerous.

US Judge Allows Lawsuits Over Monsanto’s Roundup To Proceed To Trial (R.)

Hundreds of lawsuits against Monsanto by cancer survivors or families of those who died can proceed to trial, a federal judge ruled on Tuesday, finding there was sufficient evidence for a jury to hear the cases that blame the company’s glyphosate-containing weed-killer for the disease. The decision by U.S. District Judge Vince Chhabria in San Francisco followed years of litigation and weeks of hearings about the controversial science surrounding the safety of the chemical glyphosate, the key ingredient in Monsanto’s top-selling weed-killer. Monsanto is now a unit of Bayer, following a $62.5 billion takeover of the U.S. seed major which closed in June. The U.S. Environmental Protection Agency last September concluded glyphosate is likely not carcinogenic to humans.

But the World Health Organization in 2015 classified glyphosate as “probably carcinogenic to humans.” Chhabria called the plaintiffs’ expert opinions “shaky” and entirely excluded the opinions of two scientists. But he said a reasonable jury could conclude, based on the findings of four experts he allowed, that glyphosate can cause cancer in humans. The plaintiffs will next have to prove Roundup caused cancer in specific people whose cases will be selected for test trials, a phase Chhabria in his Tuesday opinion called a “daunting challenge.” Lawsuits by more than 400 farmers, landscapers and consumers who claim Roundup caused them to develop non-Hodgkin’s Lymphoma, a type of blood cell cancer, have been consolidated before Chhabria.

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Good read on what went down. Amazing people. All the equipment that was brought in. All the mud that was removed. Wow.

Thailand Water Pumps Failed Just After Last Boy Escaped (G.)

The rescue operation to free the last of the 12 boys and their football coach from a Thailand cave could have been a disaster, divers have revealed, with water pumps draining the area failing just hours after the last boy had been evacuated. Divers and rescue workers were still more than 1.5km inside the cave clearing up equipment when the main pump failed, leading water levels to rapidly increase, three Australian divers involved in the operation told the Guardian on Wednesday, in the first detailed account of the mission to be published. The trio, stationed at “chamber three”, a base inside the cave, said they heard screaming and saw a rush of head torches from deeper inside the tunnel as workers scrambled to reach dry ground. Everyone, including the last three Thai navy Seals and medic who had spent much of the past week keeping vigil with the trapped boys, was out of the cave a short time later.

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Jul 092018
 
 July 9, 2018  Posted by at 9:31 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Bridge in the rain (after Hiroshige) 1887

 

David Davis Resigns As Brexit Secretary (Ind.)
World Trade Has Decelerated Sharply (Ashoka Mody)
Market Turmoil Pushes Some China Funds To The Brink (R.)
US Faces Soaring Trade Deficits, But Rising Energy Prices Bigger Danger (CNBC)
White House Close To Refusing Interview With Russia Investigation (G.)
America the Failed State (Chris Hedges)
BOJ’s Kuroda Expresses Resolve To Keep Ultra-Easy Monetary Policy (R.)
A Parallel Currency For Italy Is Possible (Pol.eu)
Berlin Eyes Deal For Migrant Returns With Greece By End July (K.)
Italy Promises Billions To Libya If It Accepts The Return Of Migrants (EN)

 

 

Oh man, I wrote one little article and mere hours later they’re all running for cover…

David Davis Resigns As Brexit Secretary (Ind.)

David Davis has quit his cabinet job following a major row with Theresa May over her plans for post-Brexit relations with the EU. His resignation as Brexit secretary deals a heavy blow to the stability of the prime minister’s administration, with two other ministers almost immediately following suit. The departure of Mr Davis, Steve Baker and Suella Braverman, who had also served in the Department for Exiting the EU, could now embolden other senior figures to quit.
Ms May had been hoping to win over Brexiteers to her proposals agreed by the cabinet, including Mr Davis, on Friday – but since then Leave-backing Tory MPs have called for a change in leadership.

The move comes on the eve of a major test for the prime minister as she faces the house of commons on Monday, to explain her proposals, and then a stormy meeting of Conservative MPs. In his resignation letter, Mr Davis wrote: “As you know there have been a significant number of occasions in the last year or so on which I have disagreed with the Number 10 policy line, ranging from accepting the [European] Commission’s sequencing of negotiations, through to the language on Northern Ireland in the December Joint Report. “At each stage I have accepted collective responsibility because it is part of my task to find workable compromises, and because I considered it was still possible to deliver on the mandate of the referendum, and on our manifesto commitment to leave the Customs Union and the Single Market.

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China slowing down.

World Trade Has Decelerated Sharply (Ashoka Mody)

World trade has decelerated sharply. This ill omen portends severe risks in the months to come. The greatest risks are in the eurozone – where Italy is the fault line along which the most acute vulnerabilities lie. In the three months ending in April, the annual pace of world trade growth dipped slightly below 4 percent, a sharp decline from 5.5 percent rate in the second half of 2017. Trade growth in 2017 was both a barometer and cause of rare “synchronized” GDP growth with nearly every country experiencing buoyant conditions. That sweet spot is fading because the Chinese economy is slowing down. With its huge size and extensive global trade relationships, changes in Chinese domestic economic priorities have a huge impact on trade and the world economic outlook.

A blistering pace of Chinese imports propped world trade growth until January this year, and a slowdown since then in Chinese imports has dampened world trade. The shift is a consequence of the attempt by Chinese leadership to diffuse a grossly oversized credit bubble. But reduced credit has squeezed investment in infrastructure projects and, hence, in the imports of goods and materials to support those projects. Recently, retail sales have also slowed. China’s credit bubble may yet burst, causing global economic and financial mayhem. Even if the Chinese economy merely slows down, which it seems almost certain to, global trade deceleration will continue. If, in addition, the global trade war escalates, global economic conditions could deteriorate rapidly.

Growth deceleration is already evident in the eurozone. German growth relies to an extraordinary degree on exports to China and, not surprisingly, German industrial production has been in the doldrums in the past few months. Moreover, when German exporters face weaker growth prospects, they buy less from their largely European suppliers, which significantly dampens economic growth in Europe. Italy will face the ill-effects of a global slowdown most acutely. After abysmal performance through much of the last decade, Italian GDP growth had picked up to annual rate of 1.8 percent in the second half of 2017. But that did not last. Already, Italian GDP growth is slowing and forecasts for the 2018 have are down to just above a 1 percent annual growth rate.

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“.. fewer than 10 of the 800-plus Chinese equity mutual funds have made a positive return this year..”

Market Turmoil Pushes Some China Funds To The Brink (R.)

It’s already been a harsh year for Chinese funds, hit by new rules aimed at reining in debt in the country’s financial system. Now, the sell-off in China stocks induced by trade war anxiety further threatens their health and for some, their survival. Case in point: private fund house Nanjing Hu Yang Investment Co has seen its assets under management halve to 50 million yuan ($7.5 million) over the past year on redemptions and investment losses. Its chairman, Zhang Kaihua, said he is putting his funds, which bet on consumer stocks, into “a state of dormancy”. He’s also stopped publishing fund performances and shelved capital raising plans. “Our only hope is that our existing clients can stick with us so that we can survive,” he said, adding that he has seen many of his peers drop out of the market.

In the past when market turmoil has hit China’s fund industry, such as in 2015, it has managed to bounce back on loose monetary policies and relaxations in rules for the sector. But this time, asset managers face a double whammy of fleeing investors and a central bank keen to see a mopping up of excessive liquidity in the financial system – pointing to prolonged pain for the industry. And as the U.S.-China trade war heats up – the two slapped tariffs on $34 billion worth of each other’s goods on Friday – the worry is that further declines in Chinese shares, which have fallen 10 percent since late June to two year-lows, could be the last straw for some funds.

According to Morningstar, fewer than 10 of the 800-plus Chinese equity mutual funds it tracks have made a positive return this year. Even before trade war fears ramped up last month, changes to asset management rules first outlined in 2017 and aimed at encouraging banks to reel in their investments in stocks and bonds had taken their toll. Equity fundraising dwindled to minimal levels, while redemptions and liquidations spiked.

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Global trade decelerates, but US trade defecit soars.

US Faces Soaring Trade Deficits, But Rising Energy Prices Bigger Danger (CNBC)

America’s foreign trade deficits on goods transactions are getting worse. After an increase of 7.7 percent in 2017, those deficits were growing in the first five months of this year at an almost identical annual rate. Particularly disappointing is the fact that there is no progress at all in bringing trade deficits down with the European Union and China. The deficit with those two large economic systems came in at $218 billion during the January-May period, accounting for nearly two-thirds (64 percent) of America’s total trade gap. That deficit was 11.3 percent more than recorded over the same interval of last year, and, at an annual rate, it comes close to half-a-trillion dollars.

Looking at the detail of these numbers, one can clearly see that trade deficits with the EU and China, growing at respective annual rates of 15 percent and 10 percent, are driven by a strong and unrelenting import penetration of American markets by European and Chinese companies. On current evidence, the short-term outlook for American foreign trade is not good for reasons of (a) different growth dynamics, (b) confrontational trade policies and (c) the political and security fallout exacerbated by intensifying trade disputes. Barring an inflation-induced recession, of which more later, the U.S. aggregate demand components — household consumption, residential investments and business capital outlays — are underpinned by high employment, increasing inflation-adjusted after tax incomes, low credit costs and targeted fiscal incentives.

An anticipated economic growth in the area of 2.5 to 3.0 percent for the rest of this year would still be more than an entire percentage point above the estimated non-inflationary potential of the U.S. economy. That strong demand pressure will continue to spill over into the rest of the world, and will support America’s vigorous imports of foreign goods and services. That’s music to European and Chinese ears.

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And then what is Mueller going to do?

White House Close To Refusing Interview With Russia Investigation (G.)

Donald Trump’s lawyer Rudy Giuliani has warned Robert Mueller, the special counsel investigating possible collusion between Russia and the Trump campaign during the 2016 presidential election, that the White House is close to refusing to grant an interview with the president. Giuliani took the increasingly belligerent tone of the White House up a notch on Sunday when he called the Russian investigation the “most corrupt I’ve ever seen”. Speaking on This Week on ABC News, he accused the special counsel of assembling a team of investigators around him that included “very, very severe partisans working on an investigation that should have been done by people who are politically neutral”.

Asked whether they had made a decision on whether or not Trump should participate in an interview with the inquiry, he replied: “We have not determined he will not sit down with Mueller, but we are close to that.” Giuliani’s round of the Sunday TV political talkshows is the latest sign that the core Trump team has decided to abandon its earlier approach of being seen to cooperate with the Russia investigation, and move towards an antagonistic position. On Friday, Giuliani told the New York Times that Mueller would get his interview with the president only if he could satisfy the White House that he had evidence that Trump had committed a crime.

The attorney and former mayor of New York, who is a long-standing friend of Trump’s, walked back that suggestion a little on Sunday. He said the White House did not require evidence of a criminal deed but at least some factual basis supporting suspicion of a crime. Giuliani revealed to CNN’s State of the Union that the White House legal team had debriefed all the witnesses to the Mueller investigation, and reviewed 1.4m pages of documents handed over to the special counsel. As a result, he claimed, he could confidently say that Trump had nothing to answer. “I have a pretty good idea because I’ve seen all the documents they have, we’ve debriefed all their witnesses. They have nothing. They would not be pressing for this interview if they had anything.”

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John Ralston Saul is an interesting voice.

America the Failed State (Chris Hedges)

Our “corporate coup d’état in slow motion,” as the writer John Ralston Saul calls it, has opened a Pandora’s box of evils that is transforming America into a failed state. The “unholy trinity of corruption, impunity and violence,” he said, can no longer be checked. The ruling elites abjectly serve corporate power to exploit and impoverish the citizenry. Democratic institutions, including the courts, are mechanisms of corporate repression. Financial fraud and corporate crime are carried out with impunity. The decay is exacerbated by the state’s indiscriminate use of violence abroad and at home, where rogue law enforcement agencies harass and arrest citizens and the undocumented and often kill the unarmed.

A depressed and enraged population, trapped by chronic unemployment and underemployment, is overdosing on opioids and beset by rising suicide rates. It engages in acts of nihilistic violence, including mass shootings. Hate groups proliferate. The savagery, mayhem and grotesque distortions familiar to those on the outer reaches of empire increasingly characterize American existence. And presiding over it all is the American version of Ubu Roi, playwright Alfred Jarry’s gluttonous, idiotic, vulgar, narcissistic and infantile king, who turned politics into burlesque.

“Congress works through corruption,” Saul [..] said when we spoke in Toronto. “I look at Congress and I see the British Parliament in the late 18th century, the rotten boroughs. Did they have elections? Yes. Were the elections exciting? Yes. They were extremely exciting.” Rotten boroughs were the 19th-century version of gerrymandering. The British oligarchs created electoral maps through which depopulated boroughs—50 of them had fewer than 50 voters—were easily dominated by the rich to maintain control of the House of Commons.

In the United States, our ruling class has done much the same, creating districts where incumbents, who often run unchallenged, return to Congress election after election. Only about 40 of the 435 seats in the House of Representatives are actually contested. And given the composition of the Supreme Court, especially with Donald Trump poised to install another justice, it will get worse. The corruption of the British system was amended in what Saul called “a wave upwards.” The 1832 Reform Act abolished a practice in which oligarchs, such as Charles Howard, the 11th Duke of Norfolk, controlled the election results in 11 boroughs. The opening up of the British parliamentary system took nearly a century. In the United States, Saul said, the destruction of democracy is part of “a wave downwards.”

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No going back.

BOJ’s Kuroda Expresses Resolve To Keep Ultra-Easy Monetary Policy (R.)

Bank of Japan Governor Haruhiko Kuroda on Monday stressed that the central bank would maintain its ultra-loose monetary policy until inflation hits its 2 percent target. He also reiterated that Japan’s economy would see inflation accelerate towards the BOJ’s target as the output gap improved and medium- to long-term inflation expectations heightened. “Japan’s economy is expected to continue expanding moderately,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers. Under a yield curve control policy adopted in 2016, the BOJ pledges to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent.

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The EU can’t accept it.

A Parallel Currency For Italy Is Possible (Pol.eu)

In Joseph Stiglitz’s recent article for the POLITICO Global Policy Lab (“How to Exit the Eurozone,” June 29, 2018), the Nobel-prize wining economist proposes that Italy issue a parallel currency as a way to retake control of its monetary policy. It’s an insightful idea, and one worth exploring. However, Stiglitz is wrong when he suggests that “introducing a parallel currency, even informally, would almost certainly violate the eurozone’s rules and certainly be against its spirit.” Our organization — the Group of Fiscal Money — has been very active in developing and promoting such a dual-currency scheme. We call it “Fiscal Money” and believe it could be used to avoid the uncertainties of exiting the euro while allowing Italy to recover economically without breaking any EU rule.

Our proposal is for government to issue transferable and negotiable bonds, which bearers can use for tax rebates two years after issuance. Such bonds would carry immediate value, since they would incorporate sure claims to future fiscal savings. They could be immediately exchanged against euros in the financial market or used (in parallel to the euro) to purchase goods and services. Fiscal Money would be allocated, free of charge, to supplement employees’ income, to fund public investments and social spending programs, and to reduce enterprises’ tax on labor. These allocations would increase domestic demand and (by mimicking an exchange-rate devaluation) improve enterprise competitiveness through a reduction in the cost of labor.

As a result, Italy’s output gap — that is, the difference between potential and actual GDP — would close without affecting the country’s external balance. Note that under Eurostat rules, Fiscal Money bonds would not constitute debt, since the issuer would be under no obligation to reimburse them in cash. Also, as non-payable tax assets (of which many examples already exist), they would not be recorded in the budget until used for tax rebates — that is, two years after issuance when output and fiscal revenue have recovered.

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Blackmail.

Berlin Eyes Deal For Migrant Returns With Greece By End July (K.)

Even as Germany’s interior minister Horst Seehofer threatens the launch of mass returns of migrants if bilateral agreements are not achieved, German defense minister Ursula von der Leyen has suggested that such an accord with Greece may be signed by the end of the month. In comments to Der Spiegel, Seehofer said the absence of bilateral deals was “not a good strategy” and that Germany will start returning migrants reaching its border if that situation is not rectified. For his part, Alexander Dobrindt of the Christian Social Union said he believed German plans to return asylum seekers to European Union countries of first entry would not necessarily be met by cooperation.

“Whoever is not in a position to honor fundamental European regulations cannot expect cooperation in other areas,” he said. Von der Leyen, for her part, expressed her conviction that a bilateral agreement with Greece was a matter of time. “We want an agreement with Greece by the end of the month,” she told the Funke publishing group, adding that such an accord could be an example for other countries. “The Italians want us to help them in exchange,” she said. “Solidarity is significant, for everyone, irrespective of who is in government in Rome,” she said.

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1 in 10 now drown.

Italy Promises Billions To Libya If It Accepts The Return Of Migrants (EN)

Italy and Libya have agreed to reactivate a friendship treaty signed a decade ago that allowed migrants to be returned to Libyan territory. “We agreed to reactivate the 2008 Italian-Libyan friendship treaty,” said Libya’s foreign minister Mohamad Siala in a joint press conference in Tripoli with Italian counterpart Enzo Moavero Milanesi. He hailed the agreement reached during his first visit to Tripoli as “significant and promising”. The original treaty was signed by former Libyan dictator Moammar Gadhafi and Italy’s then prime minister Silvio Berlusconi, as they sought to turn a page on 40 years of stormy relations between the North African country and its former coloniser.

But the deal was suspended in February 2011, after the start of the uprising that saw Gadhafi forced from power and killed. The original treaty envisaged unlocking 4.2 billion euros of Italian investment in Libya as compensation for colonisation by Rome. In exchange, Libya would work to stop illegal migrants embarking from its shores — and receive those sent back to it. In Tripoli on Saturday the two ministers did not say if the text of the reactivated treaty had been amended. The agreement means “all the conditions are in place to work hand in hand to support stabilisation … (of) Libya’s security and unity”, Milanesi said. Libya “shares with the European Union the responsibility and the duty to deal with migrants”, he added.

The new anti-immigrant government in Rome has vowed to turn away all migrants who make it across the Mediterranean and into Italy. In recent days the UN has urged Rome to change its policy and re-allow charity rescue ships to operate in its waters and dock at its ports. It states that, whilst the amount of migrant attempting the crossing has gone down, the number of drownings has gone up.

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Jul 082018
 
 July 8, 2018  Posted by at 8:06 am Finance Tagged with: , , , , , , , , , , ,  


Utagawa Hiroshige Sudden Evening Shower on the Great Bridge near Atake 1857

 

US Debt Explosion & Weimar II (von Greyerz)
China Threatened By “Vicious Circle Of Panic Selling” (ZH)
The Demise of Toys ‘R’ Us Is a Warning (Atlantic)
Why It’s Not Too Late To Step Back From The Brexit Brink (G.)
British MPs Should Be Ashamed Of Supporting Regime Change In Tehran (Oborne)
OPEC’s Dilemma (Lacalle)
Turkey Sacks Another 18,500 State Employees In New Decree (AFP)
Trump, the Dragonbear, and the Bipolar World Order 2.0 (M.)
Trump’s Existential Threat To The Empire (Stockman)
Are All Societies Destined To Destroy Themselves? (Wef)
Inventing the Weekend (Jacobin)

 

 

“Prosperity built on debt is short lived..”

US Debt Explosion & Weimar II (von Greyerz)

[..] change starts in the periphery where very few are looking. Look at China where the Shanghai composite is down 23% since January. And look at Brazil where the Bovespa is off 17% so far this year and Turkey which has lost 20%. What is important to understand is that most major markets are now looking extremely vulnerable, be it Japan, Germany or the US. Fundamentally most markets are overvalued with the help of central bank liquidity. Also, technically we are not far from crashes in most markets. Whilst there is always a possibility of a last hurrah, it looks like all markets have topped, including the US, and that later in 2018 we will see major falls. Once the bear markets start, they are likely to turn into secular trends that last many years and result in falls of 75% to 95%.

Difficult to believe for most investors today, but nobody in 1929 believed that the Dow would fall 90% in the ensuing years and take 25 years to recover. The investment world has been lulled into a permanent state of security and euphoria. Hard to deny that central banks and governments have been extremely skilful in telling the world constant lies. And why would anyone protest, as the rich are getting incredibly rich and many normal people in the West have a higher standard of living than ever. Very few of the “normal people” understand that their prosperity is built on personal debt and their government borrowing more than ever. Nor do they understand that they are responsible for this debt that they of course can never repay.

Even less do they understand that they will be on their own when debt implodes and they lose their jobs. Because the state will at that point have run out of money and there will be no social security or unemployment benefits. Nor will there be any pension for retirees as pension funds will go from extremely underfunded to totally unfunded.

When Trump was elected in November 2016, I forecast that US debt would continue to double every 8 years on average, as it has done since Reagan become president. That would lead to $28 trillion debt by 2021 and $40 trillion by 2025. Well, it seemed quite unrealistic back in 2016 that the US would average over $2.5 trillion deficit in the ensuing 8 years to 2025. Judging by current forecasts, it looks like debt will “only” be $25 trillion in 2021. But as tax revenues decline and spending increases, I would not be surprised to see $28 trillion debt in 2021. That would put the US on course for a $40 trillion debt in 2025.That would mean a doubling of the debt from 2017 which is in line with the historical trend of a 100% increase every 8 years.

A $40 trillion debt in 2025 would be bad enough but things are likely to get worse. With debt exploding, the Fed will lose control of interest rates as foreign investors dump US bonds. A rate of 10% at that point would not be unrealistic. That would lead to an interest bill of $4 trillion per year (10% on $40T). This would mean that just interest costs are likely to be higher than total tax revenue.

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“$1 trillion worth of stocks are being pledged as collateral for loans..”

China Threatened By “Vicious Circle Of Panic Selling” (ZH)

Small caps aside, the marketwide numbers are staggering: about $1 trillion worth of stocks listed in China’s two main markets, Shanghai or Shenzhen, are being pledged as collateral for loans, according to data from the China Securities Depository and ChinaClear. More ominously, this trends has exploded in the past three years, and according to Bank of America, some 23% of all market positions were leveraged in some way by the end of last year in China, double from the start of 2015.


Source: WSJ

As a result of the recent market rout which sent the Shanghai Composite into bear market territory, in June UBS warned that it sees a growing risk in China’s stock pledges; the bank calculated that the market cap of pledged stocks that have fallen below levels triggering liquidation amounts to 440 billion yuan with some 500 billion yuan below warning line, which translates to ~1% and 1.1% of China’s entire market value of $6.8 trillion. A separate analysis by TF Securities, as of Jun 19th, stock prices of 619 companies were close to levels where margin calls will be triggered. Since then, that number has increased.

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When Toys R Us went bankrupt, they got permission to give the executives that drove the company into bankruptcy $32 million in bonuses. Store employees, regular working people, got nothing.

The Demise of Toys ‘R’ Us Is a Warning (Atlantic)

Ann marie reinhart was one of the first people to learn that Toys “R” Us was shuttering her store. She was supervising the closing shift at the Babies “R” Us in Durham, North Carolina, when her manager gave her the news. “I was almost speechless,” she told me recently. Twenty-nine years ago, Reinhart was a new mother buying diapers in a Toys “R” Us when she saw a now hiring sign. She applied and was offered a job on the spot. She eventually became a human-resources manager and then a store supervisor. She stayed because the company treated her well, accommodating her schedule. She got good benefits: health insurance, a 401(k). But she noticed a difference after the private-equity firms Bain Capital and Kohlberg Kravis Roberts, along with the real-estate firm Vornado Realty Trust, took over Toys “R” Us in 2005.

“It changed the dynamic of how the store ran,” she said. The company eliminated positions, loading responsibilities onto other workers. Schedules became unpredictable. Employees had to pay more for fewer benefits, Reinhart recalled. Reinhart’s store closed for good on April 3. She was granted no severance—like the more than 30,000 other employees who are losing their job with the company. In March, Toys “R” Us announced that it was liquidating all of its U.S. stores as part of its bankruptcy process, which began last September. Observers pointed to the company’s struggle to fight off new competition. In its court filing, the company laid the blame at the feet of Amazon, Walmart, and Target, saying it “could not compete” when they priced toys so low.

Less attention was paid to the albatross that Bain, KKR, and Vornado had placed around the company’s neck. Toys “R” Us had a debt load of $1.86 billion before it was bought out. Immediately after the deal, it shouldered more than $5 billion in debt. And though sales had slumped before the deal, they held relatively steady after it, even when the Great Recession hit. The company generated $11.2 billion in sales in the 12 months before the deal; in the 12 months before November 2017, it generated $11.1 billion.

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The legal position.

Why It’s Not Too Late To Step Back From The Brexit Brink (G.)

Last week, in response to a petition seeking a referendum on the final deal, the government not only refused to allow “the people” to decide on the terms of Brexit, it categorically stated that parliament will not be allowed to do so either. Parliament will instead be given what it calls “a meaningful vote … either [to] accept the final agreement or leave the EU with no agreement”. This is the opposite of “meaningful”; the government intends to refuse parliament the chance to reject both options – it must accept what is offered or take nothing at all. And this is the government’s position, irrespective of the dire consequences for our country or “the will of its people” to avoid them. Even though the UK could before March 2019 change its mind, the government says that it will on no account let that happen.

The reason given for this is said to be the government’s “firm policy” that “there must be no attempts to [reverse the referendum and] remain inside the European Union”; the government does not deny that reversal is legally possible. Its position accords with advice, which I am told from two good sources the prime minister has received, namely that the article 50 notification can be withdrawn by the UK at any time before 29 March 2019, resulting in the UK remaining in the EU on its current favourable terms. Such advice would also accord with the view of Lord Kerr, who was involved in drafting article 50, of Jean-Claude Piris, former director general of the Council of the EU’s legal service and of Martin Selmayr, a lawyer and head of cabinet to the president of the European commission.

As a lawyer, I agree with them. Article 50 provides for the notification – not of withdrawal but of an “intention” to withdraw. In law, an “intention” is not a binding commitment; it can be changed or withdrawn. Article 50(5) is, moreover, clear that it is only after a member state has left that it has to reapply to join. Had the drafters intended that once a notification had taken place, a member state would have to request readmission (or seek the consent of the other member states to stay), then article 50(5) would have referred not just to the position following withdrawal, but also following notification. Such an interpretation is in line with the object and purpose of article 50.

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Britain’s empire days are over. Hard to accept?!

British MPs Should Be Ashamed Of Supporting Regime Change In Tehran (Oborne)

Britain’s prime minister has been fighting a valiant, losing battle to rescue British relations with Iran in the wake of US President Donald Trump’s reckless attempts to wreck them. But last week Theresa May was dealt a devastating blow to her authority after several Tory MPs defied her by going to Paris for a meeting designed to promote regime change inside Iran. This event is the latest sign that the prime minister and her foreign secretary, Boris Johnson, are facing a mutiny over Iran. Former cabinet minister Theresa Villiers was among senior Tories who travelled to Paris last week to hear Rudy Giuliani, former mayor of New York and Trump’s highly influential lawyer, call for the downfall of the Iranian government.

This meeting was a direct defiance of British government policy, which aims to save the Iran nuclear deal intact, and is against engineering a change of government in Iran. Indeed, Johnson assured Parliament in May that “I do not believe that regime change in Tehran is the objective that we should be seeking.” The overwhelming majority of Conservative MPs favoured Trump’s policy of dismantling the JCPOA – and condemned May’s policy of keeping it Three Tory MPs – along with one Labour MP – travelled to the event, organised by the National Council of Resistance of Iran, a front organisation for Mojahedin-e-Khalq Organisation (MEK), once listed by the US as a terror organisation. There is no question that these reflect a powerful and vocal body of sentiment inside the Conservative Party.

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Sanctions on Iran conflict with lower oil prices.

OPEC’s Dilemma (Lacalle)

The fundamental problem of the last OPEC meeting is the evidence of the division between two groups. One, led by Iran, which wants higher prices and deeper cuts, and the two largest producers, Saudi Arabia and Russia, who support a more diplomatic position. Iran wants to continue increasing its own production yet wants OPEC to maintain the group cuts. Iran also faces the backlash of sanctions on exports. Today, the US exports more oil than Iran. Saudi Arabia and Russia have the lowest production costs and stand as the ones to gain more from a moderate production increase. Oil prices will not collapse and they will sell more oil.

The agreed increase in production is a good political move from Saudi Arabia because it shows that it does not aim to harm the world economy or its customers, only to return to a stabilized oil market. With this, Saudi Arabia cements its position as the Central Bank of oil. The winners from this carefully designed agreement are Saudi Arabia, Russia, and the Gulf countries. Those who enjoy lower costs and can generate higher revenues from improved exports. The agreement sets production higher but no individual quotas, so improvement in output is left to the countries with the highest excess capacity. Iran, Venezuela, Ecuador and other countries that have production and geopolitical problems suffer the most. The commitment is likely to add 600,000-650,000 barrels per day to the market.

A figure of 32 million barrels per day is agreed, but the real increase will not be the optical one million barrels per day, but rather the aforementioned 650,000 one. This figure, at a time when oil inventories are in line with the average of the past five years, relieves inflationary pressures and eliminates the risk that the US Administration will take political measures against the OPEC countries. Trump had already alerted OPEC that it could not keep inflating prices artificially. In addition to showing the tension between these two sides, the OPEC summit also reveals that the cartel has much less market control than they would like to have. The fact that the price has only reached 80 dollars a barrel (compared to 100-130 dollars a few years ago) indicates that their ability to manipulate prices to 100 dollars per barrel is very low.

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How does that country still function?

Turkey Sacks Another 18,500 State Employees In New Decree (AFP)

Turkish authorities ordered the dismissal of more than 18,500 state employees including police officers, soldiers and academics, in a decree published on Sunday. The Official Gazette said 18,632 people had been sacked including 8,998 police officers in the emergency decree over suspected links to terror organisations and groups that “act against national security”. Some 3,077 army soldiers were also dismissed as well as 1,949 air force personnel and 1,126 from the naval forces. Another 1,052 civil servants from the justice ministry and linked institutions have been fired as well as 649 from the gendarmerie and 192 from the coast guard. Authorities also sacked 199 academics, according to the new decree, while 148 state employees from the military and ministries were reinstated.

Turkey has been under a state of emergency since the July 2016 attempted overthrow of President Recep Tayyip Erdogan. Turkish media dubbed the decree as the “last” with officials indicating the state of emergency could end as early as Monday. The emergency has been renewed seven times and the latest period is officially due to end on July 19. Over 110,000 public sector employees have been removed previously from their jobs via emergency decrees since July 2016 while tens of thousands more have been suspended in a crackdown criticised by Ankara’s Western allies. [..] Sunday’s decree shut down 12 associations across the country as well as three newspapers and a television channel.

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Recommended by Jim Rickards. The changing shapes of world order.

Trump, the Dragonbear, and the Bipolar World Order 2.0 (M.)

Just a few days ago, in an unexpected move, Ray Dalio, the founder of world’s largest hedge fund -Bridgewater Associates- announced on Social Media: “Today is the first day of the war with China.” And a day earlier, Trump made a statement about the upcoming summit in Helsinki, claiming that: “Putin’s fine. He’s fine.” One might wonder what the former message has to do with the latter, and how all these contradictory statements fit together. In fact, they make sense if seen through the prism of an emerging bipolar World Order 2.0, which is about the systemic rivalry between the USA and China, and the unique position of Russia in between.

It has become apparent that most of the decision-makers, experts and scholars mistook the end of the US-led unipolarity for the beginning of multipolarity and thus overlooked the emergence of the Global System bipolarity as well as the creation of the Dragonbear (an unique systemic bond between China and Russia as opposed to the USA). Furthermore, the Global System has become too unsustainable regarding its main (man-made) socio-economic components of global finance, monetary, economy, trade, and energy networks, and, as a consequence, is now being shaped by the unprecedented systemic rivalry between the USA and China, with Russia, the EU and India being the free riders, which leads to unexpected new alliances like the Dragonbear or the one between the USA and India, and might also result in the breakup of the NATO and the EU in the long term.

Back in 1975, the West and the Soviet Union bloc met in Helsinki to negotiate and sign a final act with ten principles that have been guiding their relations until now, among which the principle of sovereign equality, the refraining from the threat or use of force, inviolability of frontiers, the territorial integrity of states, and the non-intervention in internal affairs. Indeed, these principles were constantly deteriorated by the actions of single states or organisations over the last decades but were at least recognised by all actors of the global affairs.

However, Trump and Putin might declare new rules of the game, which will reflect the growing great powers competition and the flux of the global affairs. The meeting between Trump and Putin tête-à-tête will most likely address the broader picture of the geopolitical and geoeconomic interests of the two actors in the Middle East and beyond, particularly avoiding sensitive issues such as Ukraine, Syria (except for the sake of coordination efforts) or energy sanctions, and will specifically focus on North Korea, Iran and nuclear non-proliferation.

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The old world order no longer works.

Trump’s Existential Threat To The Empire (Stockman)

[..] the NATO subservient think tanks and establishment policy apparatchiks are harrumphing up a storm, but for crying out loud most of Europe’s elected politicians are in on the joke. They are fiscally swamped paying for their Welfare States and are not about to squeeze their budgets or taxpayers to fund military muscle against a nonexistent threat. As Justin Raimondo aptly notes, “Finally an American president has woken up to the fact that World War II, not to mention the cold war, is over: there’s no need for US troops to occupy Germany. Vladimir Putin isn’t going to march into Berlin in a reenactment of the Red Army taking the Fuehrer-bunker – but even if he were so inclined, why won’t Germany defend itself?”

Exactly. If their history proves anything, Germans are not a nation of pacifists, meekly willing to bend-over in the face of real aggressors. Yet they spent the paltry sum of $43 billion on defense during 2017, or barely 1.1% of Germany’s $3.8 trillion GDP, which happens to be roughly three times bigger than Russia’s. In short, the policy action of the German government tells you they don’t think Putin is about to invade the Rhineland or retake the Brandenburg Gate. And this live action testimonial also trumps, as it were, all of the risible alarms emanating from the beltway think tanks and the 4,000 NATO bureaucrats talking book in behalf of their own plush Brussels sinecures. But now comes the piece de resistance. The Donald is going to Helsinki to make peace with Vlad Putin, and just in the nick of time.

Hopefully, in one-fell swoop they can reach an agreement to get the US military out of Syria; normalize the return of Crimea and Moscow’s historic naval base at Sevastopol to the Russian motherland; stop the civil war in Ukraine via a mutually agreed de facto partition; stand-down from the incipient military clashes from the Baltic to the Black Sea; and pave the way for lifting of the absurd sanctions on Russian businessmen and citizens. Needless to say, time is of the essence. Every hour that the Donald wastes tweeting, bloviating about his beloved Mexican wall, sabotaging American exports and jobs and watching Fox & Friends reruns is just more opportunity for the vast apparatus of the Deep State (and most of his own top officials) to deep-six the Donald’s emerging and thoroughly welcome rendition of America First.

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It’s about energy.

Are All Societies Destined To Destroy Themselves? (Wef)

In order to illustrate how civilization-planet systems co-evolve, Frank and his collaborators developed a mathematical model to show ways in which a technologically advanced population and its planet might develop together. By thinking of civilizations and planets—even alien ones—as a whole, researchers can better predict what might be required for the human project of civilization to survive. “The point is to recognize that driving climate change may be something generic,” Frank says. “The laws of physics demand that any young population, building an energy-intensive civilization like ours, is going to have feedback on its planet. Seeing climate change in this cosmic context may give us better insight into what’s happening to us now and how to deal with it.” Using their mathematical model, the researchers found four potential scenarios that might occur in a civilization-planet system:

Die-off: The population and the planet’s state (indicated by something like its average temperature) rise very quickly. Eventually, the population peaks and then declines rapidly as the rising planetary temperature makes conditions harder to survive. A steady population level is achieved, but it’s only a fraction of the peak population. “Imagine if 7 out of 10 people you knew died quickly,” Frank says. “It’s not clear a complex technological civilization could survive that kind of change.” Sustainability: The population and the temperature rise but eventually both come to steady values without any catastrophic effects. This scenario occurs in the models when the population recognizes it is having a negative effect on the planet and switches from using high-impact resources, such as oil, to low-impact resources, such as solar energy.

Collapse without resource change: The population and temperature both rise rapidly until the population reaches a peak and drops precipitously. In these models civilization collapses, though it is not clear if the species itself completely dies outs. Collapse with resource change: The population and the temperature rise, but the population recognizes it is causing a problem and switches from high-impact resources to low-impact resources. Things appear to level off for a while, but the response turns out to have come too late, and the population collapses anyway. “The last scenario is the most frightening,” Frank says. “Even if you did the right thing, if you waited too long, you could still have your population collapse.”

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Lovely treatise on how capitalism shaped leisure time.

Inventing the Weekend (Jacobin)

Although “commemoration of the Resurrection” was the official reason early Christians began observing the day of rest on Sunday instead of Saturday, they were also eager to differentiate themselves from Jews, and by the fourth century this eagerness translated into the codification of the Sunday Sabbath in ecclesiastical and civil legislation. A millennium and a half later, the Sabbatarian movement pointed to this antisemitism, along with the undue influence of pagan sun worship among early Christians, as reason to reestablish Saturday as the Christian Sabbath day. Temporal, political concerns should not have affected the observance of the true day of rest, so their argument went.

There’s another reason Saturday was re-sanctified in the nineteenth century, which has to do with the “illegitimacy” not of Sunday but of Monday. In preindustrial England, according to a poem of George Davis’s, “people of all ranks, at times, obey[ed] / the festive orgies of this jocund day.” Not just skilled laborers but all classes of workers observed “Saint Monday” as a holiday from work, much to the chagrin of emergent entrepreneurs. While it’s true that many workers spent Saint Monday in the alehouse and at cock or dog fights, it was also a day of relaxation and sociability, a day when the public gardens would be “literally swarming with a well-dressed, happy and decorous body of the working classes.”

The fact that Monday was often taken as a day of rest was a consequence of the typical rhythm of preindustrial work, in which workers would assemble to complete a certain set of tasks, work intensely for a few days until those tasks were completed, and then be at play half the week. In E. P. Thompson’s portrayal, “the work pattern was one of alternate bouts of intense labour and of idleness, wherever men were in control of their own working lives.” The idea that work was to be done during a set amount of regularly apportioned time, time that was well demarcated from another time of “leisure,” was still rather foreign. In 1806, a committee appointed by the House of Commons to assess the state of woolen manufacture in England found an “utmost distaste on the part of the men, to any regular hours or regular habits.” Work was a set of tasks, and when those tasks were completed, play began.

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Jul 062018
 
 July 6, 2018  Posted by at 8:55 am Finance Tagged with: , , , , , , , , , , , ,  


Henri Matisse Reading woman in violet dress 1898

 

China Imposes Tariffs, Says US Launching ‘Largest Trade War In History’ (CNBC)
Trump Says China Could Face More Than $500 Billion In US Tariffs (CNBC)
Merkel Open To Reducing EU Tariffs On American Cars (NC5)
US Labor Shortage Is Reaching A Critical Point (CNBC)
Theresa May’s New Customs Plan ‘Dead On Arrival’ In EU (Ind.)
Theresa May Battles To See Off Revolt Ahead Of Key Brexit Summit (G.)
The Dark Cloud Of Global Debt (GT)
“People Assume That Stocks Always Rise Over Time. They’re Wrong” (Eric Peters)
Most Dangerous Market Ever – Michael Pento (USAW)
Moscow Using UK As Dumping Ground For Poison, Says Sajid Javid (G.)
If The Novichok Was Planted By Russia, Where’s The Evidence? (G.)
Seehofer Tells Merkel, Italy And Greece To Solve Migration Row (EUO)
European Parliament Rejects Controversial Copyright Rules (Ind.)

 

 

Act like grown-ups.

China Imposes Tariffs, Says US Launching ‘Largest Trade War In History’ (CNBC)

China implemented retaliatory tariffs on some imports from the U.S. Friday, state media reported, immediately after new U.S. duties had taken effect. The move signals the start of a full-blown trade war between the world’s two largest economies, after President Donald Trump’s administration had initially made good on threats to impose steep tariffs on Chinese goods. At midnight Washington time, the U.S. imposed new tariffs on $34 billion of annual imports from China. This prompted Beijing to respond in kind with levy tariffs on 545 items of U.S. imports — also worth $34 billion, state-run newspaper The China Daily reported Friday.

A spokesperson at China’s ministry of commerce said that while the Asian giant had refused to “fire the first shot,” it was being forced to respond after the U.S. had “launched the largest trade war in economic history.” “This act is typical trade bullying,” the spokesperson said, before adding: “It seriously jeopardizes the global industrial chain … Hinders the pace of global economic recovery, triggers global market turmoil and will affect more innocent multinational companies, general companies and consumers.”

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China has already retaliated.

Trump Says China Could Face More Than $500 Billion In US Tariffs (CNBC)

President Donald Trump said on Thursday he would consider imposing additional tariffs on $500 billion in Chinese goods, should Beijing retaliate. U.S. tariffs on $34 billion worth of Chinese goods kicked in on Friday. Another $16 billion are expected to go into effect in two weeks and potentially another $500 billion, Trump told reports aboard Air Force One on his way to a rally in Montana before the tariffs kicked in. China implemented retaliatory tariffs on some imports from the U.S., state media reported about two hours later, after new U.S. duties had taken effect.

First “34, and then you have another 16 in two weeks and then as you know we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300,” Trump said. “It’s only on China,” he added. Trump’s statements reinforce earlier threats that he would escalate the trade conflict. The dispute with China has roiled financial markets worldwide, including stocks, currencies and the global trade of commodities from soybeans to coal.

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Was that so hard?

Merkel Open To Reducing EU Tariffs On American Cars (NC5)

In the midst of trade tension between the European Union and the U.S., German Chancellor Angela Merkel said she’s open to lowering tariffs on American car imports. According to Reuters, Merkel said Europe would have to first agree upon a reduction in tariffs. In addition, she cited World Trade Organization rules that state lowering U.S. auto tariffs would mean doing the same for other countries as well. Merkel’s comments come after President Donald Trump imposed steel and aluminum tariffs on U.S. allies, including the EU, and threatened to put a 20 percent tax on European car imports.

The German chancellor warned Trump on Wednesday not to implement auto tariffs to avoid inciting an all-out trade war. Auto industry experts have suggested that if the Trump administration follows through on that threat, the move would negatively affect American autoworkers’ jobs and raise car prices. Trump is scheduled to travel to Brussels next week for the NATO summit, his first big meeting with European leaders together since last month’s G-7 summit.

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With 95 million still out of the labor force.

US Labor Shortage Is Reaching A Critical Point (CNBC)

America’s labor shortage is approaching epidemic proportions, and it could be employers who end up paying. A report Thursday from ADP and Moody’s Analytics cast an even brighter light on what is becoming one of the most important economic stories of 2018: the difficulty employers are having in finding qualified employees to fill a record 6.7 million job openings. Truck drivers are in perilously low supply, Silicon Valley continues to struggle to fill vacancies, and employers across the grid are coping with a skills mismatch as the economy edges ever closer to full employment. “Business’ number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement.

“These labor shortages will only intensify across all industries and company sizes.” Private payrolls grew by 177,000 in June, a respectable number but below market expectations. It was the fourth month in a row that the ADP/Moody’s count fell short of 200,000 after four months at or above that level. The reason for the tick down in hiring certainly isn’t because there aren’t enough jobs. The Bureau of Labor Statistics reported that April closed with 6.7 million job openings. May ended with just over 6 million people the BLS classifies as unemployed, continuing a trend this year that has seen openings eclipse the labor pool for the first time. At some point that gap will have to close. Economists expect that employers are going to have to start doing more to entice workers, likely through pay raises, training and other incentives.

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“We have been telling the UK for two years that we would not accept a single market a la carte. “What do they come with? – A single market a la carte.”

Theresa May’s New Customs Plan ‘Dead On Arrival’ In EU (Ind.)

Theresa May’s new plan for future relations with the EU will be “dead on arrival”, senior figures in Brussels have told The Independent. EU officials said any hint that the UK wants to be part of the single market on goods, but not services will be rejected. It is a blow for the prime minister who has spent the last week in meetings with EU leaders, including Angela Merkel, in a bid to prevent Europe dismissing her plans out of hand when they are published next week. Ms May is expected to push her cabinet to agree to a plan at Chequers on Friday, which would see Britain remaining in full regulatory alignment with the EU on goods, but not on services.

The meeting has also been preceded by threats and warnings from the Brexiteer wing of the Conservatives that the proposals mooted by the prime minister will not be accepted by them in the UK because they keep Britain too closely tied to the EU’s rules and regulations. But before her ministers have even agreed to the deal, EU officials told The Independent the white paper would be “dead on arrival” in Brussels if, as expected, it proposes that the UK remain in the EU’s single market for goods, but not services. They claimed they had repeatedly warned UK negotiators that this option would not work. They said it had been widely discussed among EU ministers and rejected – including, crucially, by the EU’s two most powerful players, France and Germany.

One Brussels source said: “We have been telling the UK for two years that we would not accept a single market a la carte. “What do they come with? – A single market a la carte.”

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Who will be left standing by Saturday?

Theresa May Battles To See Off Revolt Ahead Of Key Brexit Summit (G.)

Theresa May was battling to see off a revolt on the eve of a critical cabinet summit, as Boris Johnson convened a meeting of pro-Brexit ministers to discuss their options amid an atmosphere of tension and recrimination. The government was forced to deny “selective leaks” that appeared to suggest that the UK could struggle to strike a trade deal with the US in the future. No 10 insisted that paperwork released to ministers ahead of Friday’s crunch Brexit meeting at Chequers said just the opposite – as a caucus of seven cabinet members including Johnson, Michael Gove, Liam Fox and David Davis met at the Foreign Office to discuss their concerns.

An early leak suggested that the UK should “maintain a common rulebook” with the European Union on food and farming standards and that could make striking a trade deal with the more free market-oriented US more difficult as a result. That prompted a series of complaints from backbench Tory MPs and led to the Thursday evening meeting at the Foreign Office hosted by Johnson, the foreign secretary. Sources at No 10 said there had been selective leaks from the paperwork and the controversial passage appeared on page 15 out of 50 from one of several documents sent to all members of the cabinet.

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It’s corporations this time around.

The Dark Cloud Of Global Debt (GT)

While everyone is debating the effects of possible trade sanctions on the global economy, few are paying attention to a far more serious issue. Enormous global debt, combined with low-interest rates, have set the stage for a global recession that has the potential for economic chaos. The combination of enormous debt and artificially low-interest rates were at the center of the 2008 credit bubble. One would expect central banks to be aware of this and show more concern. However, the overall silence has been astonishing. An exception to this is the Bank for International Settlements (BIS), which has been making loud noises about the toxic level of global debt and the anticipated bubble.

It recently reported that the global debt of 2008 was $60 trillion, small when compared to the current debt of $170 trillion. To make matters worse, today’s global debt is 40 percent higher in relation to GDP than it was in 2008, just prior to the Lehman Bros. downfall. To add to the current headache are the rising debt levels of emerging markets and corporate debts. According to McKinsey & Company, a global consulting firm, two-thirds of U.S. corporate debt are from corporations that pose a high default risk. Countries such as Brazil, India, and China have been busy issuing questionable credit. This dubious credit being issued in many emerging markets has come with extremely low-interest rates.

If the borrowers’ default, the lenders won’t be looking at enough compensation to recoup their loses. Low-interest rates have become an overall global problem, including the rates in the U.S. high-yield bond market. Central banks around the world have been keeping interest rates artificially low while printing money with abandon. The current global debt is the direct result of this policy. $2 trillion in corporate debt will be maturing annually through 2022. A considerable amount of this debt may default and cause debt repricing. The damage caused by central banks and their policy of easy credit has been done, and there is little that can be done at this point to stem the tide. It can only be hoped that they are more aware now than they were in 2008.

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Central banks don’t really matter anymore.

“People Assume That Stocks Always Rise Over Time. They’re Wrong” (Eric Peters)

We’ve all looked at the stats, and we’re now at an unemployment rate in the US of sub-4% – 3.8%–3.7%. I think what a lot of people focus on is if the participation rate were back where it was pre-2008 you’d end up with an unemployment rate that had an 8 handle or something like that. So that’s what people are referring to. But making comparisons like that is difficult because a lot of things are changing. The US labor force is shrinking because people are getting older. There is the opioid issue. And this disability issue. Which are difficult to really handicap in terms of how big an impact that’s having on the US labor force.

If the central banks have been the ones who have gotten us here, they just – by definition – they’re not the ones that are going to get us out of here. So I think – look, we’re always going to look at what central banks are doing, they will be important. But I think that they’re no longer going to be dominant. What’s going to be dominant are the politicians. You’re seeing that in the US right now. I know that everyone loves to hang on every word that Powell speaks. And they look at the Fed statement. And people are still trained to look at the Fed dot plots (which are probably going to go away). People are trained to look at all of these things because that’s what they’ve done their whole careers.

But they just are not going to matter that much anymore. Whether the Fed’s terminal rate is 2.25 or 2.5 or 2.75 – we’re not talking about much. What are we going to do in terms of immigration policy? What are we going to do in terms of trade policy? How is that going to impact all of the major corporations’ global supply chains? These are the things that are really going to matter.

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“It is a confluence of events coming in October ..”

Most Dangerous Market Ever – Michael Pento (USAW)

Money manager Michael Pento is sounding the alarm because we are getting very close to something called a “yield curve inversion.” Pento explains, “Why do I care if the yield curve inverts? Because 9 out of the last 10 times the yield curve inverted, we had a recession. . . . The spread with the yield curve is the narrowest it has been since outside of the start of the Great Recession that commenced in December of 2007. . . . The last two times the yield curve inverted, we had a stock market drop of 50%. The market dropped, and the S&P 500 lost 50% of its value.” Can we keep partying in the markets like it’s 1999 or is there an expiration date for the good times?

Pento says, “Well, I have put a check on the calendar for October because of the fact the rate of quantitative easing goes to $15 billion per year, because the trade war will reach a crescendo, then because I believe, unfortunately because I am conservative, the Republicans lose the House of Representatives, because the Chinese credit boom will be in full reverse by October. It is a confluence of events coming in October . . . we’ve already entered into the beginnings of a bear market around the world. The top 22 banks in the world are in a bear market. There are many, many examples of banks around the world that are in a bear market. You have a bear market in Chinese shares. 20% of the S&P 500 is in a bear market. This is an incipient bear market that is already beginning. I believe it manifests clearly to even the people on CNBC by October.”

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None of this makes any sense.

Moscow Using UK As Dumping Ground For Poison, Says Sajid Javid (G.)

Britain will consult its allies about a possible response to Russia over the latest poisonings in Wiltshire as it emerged that the couple taken critically ill had handled an item contaminated with the nerve agent novichok. The home secretary, Sajid Javid, accused Moscow of using the UK as a “dumping ground” for poison and urged Russia to explain “exactly what has gone on”. In Salisbury, public health and council chiefs warned people not to pick up unidentified objects but dismissed the idea of making a general sweep of the city for novichok, although they said they could not rule out the possibility that more of the nerve agent was present.

The Guardian understands that the novichok that harmed them may have been in a sealed container left following the attack on the former Russian spy Sergei Skripal and his daughter, Yulia, in March. Sources close to the investigation dropped a hint that they may now know the identity of the would-be killers who targeted the Skripals. The Metropolitan police confirmed on Thursday evening that the couple taken ill, Dawn Sturgess, 44, from Salisbury, and Charlie Rowley, 45, of Amesbury, collapsed after picking up a contaminated item.

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Even the Guardian allows itself to publish out right criticism. Putin has a really successful World Cup going. Brexit splits Britain. 1+1=2

If The Novichok Was Planted By Russia, Where’s The Evidence? (G.)

I seem to be the only person alive with no clue as to who has poisoned four people in Wiltshire. I am told that only Russians have access to the poison, known as novichok – though the British research station of Porton Down, located ominously nearby, clearly knows a lot about it. Otherwise, I repeat, I have no clue. I suppose I can see why the Kremlin might want to kill an ex-spy such as Sergei Skripal and his daughter, so as to deter others from defecting. But why wait so long after he has fled, and why during the build-up to so highly politicised an event as a World Cup in Russia? Four months on from the crime, the Skripals have been incommunicado in a “secure location”. Barely a word has been heard from them.

Theresa May has persistently blamed Russia. She has called the incident “brazen and despicable”, and MI5 condemned “flagrant breaches of international rules”. But I cannot see the diplomatic or other purchase in prejudging the case, when no one can offer a clue. As to why the same person or persons should want to kill a couple, unconnected to the Skripals, on an Amesbury housing development, the questions are even more baffling. It seems a funny sort of carelessness. Did the couple pick up the infecting agent nearer the original site, eight miles away? Might the new poisoning be an attempt to divert attention from the earlier one? Could it be a devious plot, to make it seem that novichok is available on every street corner, from your friendly neighbourhood drug dealer?

Or perhaps one of the victims, Charlie Rowley, has mates in Porton Down? Perhaps someone is showing off, or panicking, or behaving like a complete idiot. Who knows? Since I have not a smidgen of an answer to any of these questions, I feel no need to capitulate to the politics of terror and fear. I can open my front door without cleaning my hand. I can visit Wiltshire in peace and safety and marvel at the spire of Salisbury Cathedral. I can revel in the remains of the bronze age Amesbury archer – whose death from bone disease has finally been resolved by the scientists. Where knowledge is nonexistent, ignorance is bliss.

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NIMBY on steroids.

Seehofer Tells Merkel, Italy And Greece To Solve Migration Row (EUO)

German interior minister Horst Seehofer defused tensions with Austria on Thursday (5 July) but increased political pressure on his boss, chancellor Angela Merkel, as well as on Italy and Greece, to find a way how Germany can reject asylum seekers without closing its border with Austria. “There will be no measures taken by Germany at the expense of Austria,” Austrian chancellor Sebastian Kurz said after meeting Seehofer in Vienna. Under a plan agreed on Monday between Merkel’s centre-right CDU party and Seehofer’s CSU, its Bavarian conservative sister party, asylum seekers would be sent back to the EU country where they were first registered, or to Austria.

Kurz had warned that in reaction, Austria would consider closing its own border with Italy and Slovenia in order to prevent migrants from coming in. This, Vienna had warned, would lead to a “domino effect” of closing borders and imperil the free-movement Schengen area. But Seehofer assured Kurz that Austria would have to take no specific measures, and that it would be up to Italy and Greece, where three-quarters of asylum seekers come from, to take them back. The Bavarian politician has been trying for almost a month to impose his plan on Merkel, who first refused to unilaterally reject asylum seekers. She advocated instead a “European solution” to be agreed with other member states, who would accept taking refugees from Germany.

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It’s not defeated yet.

European Parliament Rejects Controversial Copyright Rules (Ind.)

The European Parliament has voted against an incredibly controversial new set of copyright rules that campaigners claim could “ban memes”. The law will now be sent for a full reconsideration and debate inside the parliament, during which activists will try and remove the controversial Article 11 and 13. Article 11 has been referred to by campaigners as instituting a “link tax”, by forcing tech companies like Google and Facebook to pay to use snippets of content on their own sites. Article 13 adds rules that make tech companies responsible for ensuring any copyrighted material is not spread over their platforms. Those rules could force technology companies to scan through everything their users post and check it doesn’t include copyrighted material.

If it is found, the post will be forced to be removed, which campaigners claim could destroy the kind of memes and remixes that spread across the internet. The revamp has triggered strong criticism from Wikipedia founder Jimmy Wales, World Wide Web inventor Tim Berners-Lee, net neutrality expert Tim Wu, internet pioneer Vint Cerf and others. Copyright campaigners claim that the rules are necessary to ensure that material isn’t illegally spread across the internet. Europe’s broadcasters, publishers and artists including Paul McCartney backed the rules, arguing the controversial Article 13 would protect the music industry.

A total of 318 law makers voted against opening talks with EU countries based on the committee’s proposal while 278 voted in favour, and 31 abstained. In practice, the vote only delays the final decision on the rules and gives the European Parliament more time to deliberate on them. Another decision will be taken in September.

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Jul 052018
 
 July 5, 2018  Posted by at 8:15 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Ravine 1889

 

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)
China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)
Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)
EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)
Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)
Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)
There Is Only Option On The Table: Soft Brexit (G.)
UK Home Office Separating Scores Of Children From Parents (Ind.)
Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)
India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)
Kim Dotcom Loses New Zealand Extradition Appeal (AFP)
Babies (CJ)

 

 

Negotiate!

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)

The United States is “opening fire” on the world with its threatened tariffs, the Chinese government warned on Thursday, saying Beijing will respond the instant U.S. measures go into effect as the two locked horns in a bitter trade war. The Trump administration’s tariffs on $34 billion of Chinese imports are due to go into effect at 12.01 am eastern time on Friday (0401 GMT Friday), which is just after midday on Friday Beijing time. U.S. President Donald Trump has threatened to escalate the trade conflict with tariffs on as much as a total of $450 billion in Chinese goods if Beijing retaliates, with the row roiling financial markets including stocks, currencies and global trade of commodities from soy beans to coal.

China has said it will not “fire the first shot”, but its customs agency said on Thursday in a short statement that Chinese tariffs on U.S. goods will take effect immediately after Washington’s tariffs on Chinese goods kick in. Speaking at a weekly news conference, Chinese Commerce Ministry spokesman Gao Feng warned the proposed U.S. tariffs would hit international supply chains, including foreign companies in the world’s second-largest economy. “If the U.S. implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and U.S. companies,” Gao said. “U.S. measures are essentially attacking global supply and value chains. To put it simply, the U.S. is opening fire on the entire world, including itself,” he said.

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Well, obviously.

China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)

China has denied it will fire the opening salvo in an escalating trade dispute with the US, insisting that it would not bring in 25% tariffs on $34bn (£26bn) of American goods before a move from Washington. Both sides have threatened to impose similarly sized tariffs on 6 July, but because of the 12-hour time difference, it was thought the Chinese tariffs on US imports ranging from soybean to stainless steel pipes could take effect earlier. However, China’s finance ministry issued a statement on Wednesday saying that it would not be the first to levy tariffs.

“The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so.” The US will implement a 25% tariff on $34bn of Chinese imports – 818 product lines ranging from cars to vaporisers and “smart home” devices – on Friday. There had been hopes the US and China might step away from the measures, but neither side has backed down. Economists have warned that the tariffs will damage economic growth and cost jobs, and could escalate into a full-blown trade war between the world’s two largest economies.

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Nonstarter.

Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)

Publicizing its growing exasperation in dealing with president Donald Trump who refuses to halt the tit-for-tat retaliation in the growing trade war with China – which is set to officially begin on Friday when the US slaps $34 billion in Chinese exports with 25% tariffs – but has a habit of doubling down the threatened US reaction to every Chinese trade counteroffer (after all the US imports far more Chinese goods than vice versa)…China has proposed a novel idea: to form an alliance with the EU – the world’s largest trading block – against the US, while promising to open up more of China’s economy to European corporations.

The idea was reportedly floated in meetings in Brussels, Berlin and Beijing, between senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, according to Reuters. Willing to use either a carrot or a stick to achieve its goals, in these meetings China has been putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month. However, perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shame – the European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

Instead, in the tradition of every grand, if ultimately worthless meeting of the G-X nations, the summit is expected to produce a “modest communique”, which affirms the commitment of both sides to the multilateral trading system and promises to set up a working group on modernizing the WTO. Incidentally, the past two summits, in 2016 and 2017, ended without a statement due to disagreements over the South China Sea and trade. Then there is China’s “free-trade” reputation: a recent Rhodium Group report showed that Chinese restrictions on foreign investment are higher in every single sector save real estate, compared to the European Union, while many of the big Chinese takeovers in the bloc would not have been possible for EU companies in China. And while China has promised to open up, EU officials expect any moves to be more symbolic than substantive.

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Caving.

EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)

European officials are considering holding talks on a tariff-cutting deal between the world’s largest car exporters to prevent an all-out trade war with the U.S., according to the Financial Times who cited diplomats briefed on the matter. The proposal is being looked at by officials in Brussels, the administrative heartland of the European Union, ahead of a meeting between Jean-Claude Juncker, the president of the European Commission, and President Donald Trump in Washington later in July, the report published Wednesday said.

The FT reported that three diplomats, which it did not name, said the European Commission “is studying whether it would be feasible to negotiate a deal with other big car exporters such as the U.S., South Korea and Japan.” Such a move could address Trump’s complaint that the U.S. sector is unfairly treated, while reducing export costs for other participating countries’ auto sectors. “Under such a deal, participants would reduce tariffs to agreed levels for a specified set of products — a concept in international trade known as a ‘plurilateral agreement’ that lets countries strike deals on tariffs without including the entire membership of the WTO,” the FT said.

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Even Italy has a big surplus.

Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)

Germany exporting more than it imports is becoming a big problem for its economy, a director from the country’s closely-watched Ifo Institute said Wednesday. “(The trade surplus) is turning out to be an increasing issue, not just with the U.S. but with other trade partners as well, and also within the European Union,” Gabriel Felbermayr, the director of the Ifo Center for International Economics at the Munich-based institute, told CNBC’s “Squawk Box Europe. “The surplus is becoming toxic, and also within Germany many argue now that we need to do something about it with the purpose of lowering it. It turns out to be a liability rather than an asset.”

Germany’s export-orientated, manufacturing economy and its resulting trade surplus — the value of its exports exceeding that of its imports — has long been a subject of criticism and Berlin has been pressured to encourage more domestic spending and boost imports. Trade surpluses are viewed as encouraging trade protectionism and worsening the economic problems of other countries. Germany’s trade surplus fell in 2017 for the first time since 2009, shrinking to $300.9 billion, data published in February by the country’s Federal Statistics Office showed. Still, its trade surplus with the U.S. was $64 billion.

[..] Eric Lonergan, macro fund manager at M&G, told CNBC on Wednesday that Trump might be mollified by European countries promising to address their current account surpluses. A current account surplus is a broader measure of the trade surplus, plus earnings from foreign investments and transfer payments. “(Regarding the trade surplus) the truth is it’s not just Germany anymore — central and eastern Europe, if you look at Hungary, Poland, the Czech Republic and take them as an aggregate, were running a big current account deficit before, now they’re running a big current account surplus,” he said. “Italy’s running a big current account surplus, the periphery is — so it’s the ‘Germanification’ of the whole of greater Europe.”

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Rumor has it that Boris Johnson will resign. Maybe he’ll wait until after England lose to Sweden in the World Cup.

Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)

Theresa May has been warned the Tories will be “toast” if they fail to deliver on their Brexit promises, as eurosceptic MPs maintain the pressure on the prime minister ahead of a crunch meeting of her top team. As the PM prepares to gather ministers at her country retreat of Chequers on Friday, she has been put on notice by the European Research Group (ERG) of Conservative backbenchers. Around 40 members of the ERG met with chief whip Julian Smith on Wednesday, reports Sky’s senior political correspondent Beth Rigby. Our correspondent said that they told Mr Smith the party will be “toast” if it “welches” on its previous Brexit promises, adding that the roughly £40bn “divorce bill” should only be paid to Brussels on condition of getting a deal.

After the meeting, Jacob Rees-Mogg, who chairs the ERG, told Sky News that Mr Smith “doesn’t determine policies” and so backbench Brexiteers remain in the dark over the government’s plans beyond media reports. Asked about suggestions the PM could propose a UK-EU deal that keeps regulatory alignment with Brussels for goods, as well as keeping the same level of tariffs as the EU, Mr Rees-Mogg warned such an agreement is “not Brexit”. He insisted continued regulatory alignment would mean the UK “cannot do trade deals with the rest of the world” and would mean “we haven’t really left the EU”. “Indeed, worse than that, we’re a vassal state because we take the EU’s rules and have no say over them,” the Leave supporter added.

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Not for the diehards.

There Is Only Option On The Table: Soft Brexit (G.)

The proverbial can has been kicked down the proverbial road ever since Britain voted to leave the European Union in 2016. Don’t get me wrong. Can-kicking has a necessary place in politics. Theresa May has often had little choice but to resort to it. But the road and the can-kicking must end at Chequers on Friday. That’s when the prime minister and her divided cabinet must finally decide what kind of relationship they seek with the EU after Brexit. In the end, May’s government faces the same two choices at Chequers that it has faced throughout all the twists and turns of the Brexit negotiations.

Either the government must embrace a form of soft Brexit that it can then persuade the rest of Europe to accept as a proper basis for good future relations – the option that May herself and the chancellor, Philip Hammond, both prefer and will put forward – or it must reject that option and prepare for a no-deal Brexit, in which all of Britain’s economic and political relations with Europe and the rest of the world become matters of pure conjecture. There are no other choices on the table. If Brexit is to go ahead, it is simply one or the other. This means, therefore, that only the first of the two choices is in fact a serious option.

If the cabinet rejects May’s and Hammond’s approach and adopts a no-deal option as government policy, there would be both a parliamentary and an extra-parliamentary revolt against it. Large businesses such as British Airways might relocate to Europe. Labour might even find an explicit anti-Brexit voice. One way or another, the no-deal approach would therefore explode on the launch pad. And Brexit might even not take place. Most ministers are neither idiots nor wreckers, so the no-deal option is not going to happen. It is even questionable as to whether any of the no-dealers will resign. The much more serious question, though, is whether the soft Brexit package that May wants to sell to the cabinet is much of a runner either.

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If they’re capable of Windrush, they can do this too.

UK Home Office Separating Scores Of Children From Parents (Ind.)

The Home Office is separating scores of children from their parents as part of its immigration detention regime – in some cases forcing them into care in breach of government policy. Schools, the NHS and social services have written letters to the department begging them to release parents from detention because of the damaging impact it is having on their children. Bail for Immigration Detainees (Bid), a charity that supports people in detention, said they have seen 170 children separated from their parents by the Home Office in the past year – and believes there are likely to be many more.While usually the youngsters remain in the care of their other parent, the charity has seen a number of cases where children are taken into local authority care as a result of the detention.

Case workers highlight that this is in breach of Home Office guidelines, which state that a child “must not be separated from both adults if the consequence of that decision is that the child is taken into care”. In one case, three young children were taken into care for several days after their dad was detained earlier this year – an experience that left them traumatised and fearful that he will be “taken away” again. Kenneth Oranyendu, 46, was detained in March while his wife was abroad for her father’s funeral. Despite the Home Office being aware of this, they kept him in detention and his four young children were forced to go into care.

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Japan’s toast without the punch bowl.

Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)

In June, total assets on the Bank of Japan’s balance sheet dropped by ¥3.79 trillion yen ($34 billion) from May, to ¥537 trillion ($4.87 trillion). It was the third month-over-month drop in seven months, and the first such drops since late 2012, when the Abenomics-designed blistering “QQE” (Qualitative and Quantitative Easing) kicked off. So has the “QQE Unwind” commenced? This chart shows the month-to-month changes of the total balance sheet. Note the trend over the past 16 months and the three “QQE unwind” episodes (red):

But this sporadic balance sheet reduction and the overall “tapering” of its growth contradict the official rhetoric. Bank of Japan Governor Haruhiko Kuroda along with most of his colleagues keep insisting that the BOJ would “patiently” maintain its ultra-easy monetary policy and that it would “keep expanding the monetary base until inflation is above 2%.” The blistering asset purchases would add about ¥80 trillion ($725 billion) to the balance sheet every year. And the BOJ has repeatedly affirmed its short-term interest-rate target of a negative -0.1%.

[..][ Under QQE, the BOJ has been buying mostly Japanese government securities (JGBs and short-term bills); it also purchased corporate bonds, Japanese REITs, and equity ETFs. But now, the party appears to be ending, despite the speeches to the contrary. From the distance, however, the flattening out (tapering) of the BOJ’s assets is barely noticeable, given the magnitude of the whole pile that amounts to about 96% of Japan’s GDP (the Fed’s balance sheet amounted to about 23% of US GDP at the peak):

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I’d say China is much worse than the graph indicates.

India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)

While bad loans in the Italian banking system have received a ton of attention from investors who fear that the Italians could inadvertently blow up the European banking union, it’s not the only financial landmine lurking among the world’s ten largest economies. To wit, while Italy has the largest percentage of non-performing loans among the world’s largest economies, India isn’t far behind and India’s economic recovery is built on an even shakier foundation. According to Bloomberg, India’s $1.7 trillion formal banking sector is presently struggling with $210 billion in bad loans, most of which are concentrated within its state-owned banks. During the 2018 fiscal year, growth slowed to 6.7%, down from the previous year’s 7.1%, back to its levels from 2014, before Modi came to power.

The state banks have been so badly mismanaged that some analysts say the country’s banking crisis is an opportunity for private sector banks, as CNBC reported. “If you take a 10-year view, currently the private sector banks’ market share is 30 percent. Probably it will become 60 percent,” Sukumar Rajah, senior managing director at Franklin Templeton Emerging Markets Equity, told CNBC. As a result, he said, “the overall health of the banking system will improve because the better banks will be a bigger portion of the market and the weaker banks will become a smaller portion of the market.”

Some also see opportunities for investment bankers looking to underwrite corporate bond issuance in the country.. “My view is that, incrementally, a lot of long-term financing of corporate India can also be met by the corporate bond market, which has developed reasonably well,” he said. “Between the corporate bond market and the private banks, I think most of the requirements can be met as far as corporate India is concerned.” When it comes to lending directly to individuals, Prasad said that is mostly done by the private banks and non-banking financial companies.

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Can’t extradite someone who has broken none of your laws.

Kim Dotcom Loses New Zealand Extradition Appeal (AFP)

Megaupload founder Kim Dotcom suffered a major setback in his epic legal battle against online piracy charges Thursday when New Zealand’s Court of Appeal ruled he was eligible for extradition to the United States. The German national, who is accused of netting millions from his file sharing Megaupload empire, faces charges of racketeering, fraud and money laundering in the US, carrying jail terms of up to 20 years. Dotcom had asked the court to overturn two previous rulings that the Internet mogul and his three co-accused be sent to America to face charges. Instead, a panel of three judges backed the FBI-led case, which began with a raid on Dotcom’s Auckland mansion in January 2012 and has dragged on for more than six years.

The court said US authorities had “a clear prima facie case to support the allegations that the appellants conspired to, and did, breach copyright wilfully and on a massive scale for commercial gain”. Dotcom is accused of industrial-scale online piracy via Megaupload, which US authorities shut down when the raid took place. They allege Megaupload netted more than US$175 million in criminal proceeds and cost copyright owners US$500 million-plus by offering pirated content including films and music. “We are disappointed with today’s judgment by the NZ Court of Appeal in the Kim Dotcom case,” his lawyer Ira Rothken tweeted, indicating there would be an appeal to the Supreme Court.

“We have now been to three courts each with a different legal analysis – one of which thought that there was no copyright infringement at all.” Dotcom and his co-accused – Finn Batato, Mathias Ortmann, Bram van der Kolk – have denied any wrongdoing and say Megaupload was simply a case of established interests being threatened by online innovation. The website was an early example of cloud computing, allowing users to upload large files onto a server so others could easily download them without clogging up their email systems. At its height in 2011, Megaupload claimed to have 50 million daily users and account for 4% of the world’s internet traffic.

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How people are made.

Babies (CJ)

When a baby is born, its parents teach it how to eat solid foods and walk and talk, which generally works out fine. Then they start teaching the baby all the lies their parents taught them, and things start to get messy. When the baby is old enough, they send it to school, where it spends twelve years being taught lies about how the world works so that one day it will be able to watch CNN and say “Yes, this makes perfect sense” instead of “This is ridiculous” or “Why does this whole entire thing seem completely fake?” or “I want to punch Chris Cuomo in the throat.” The baby is taught history, which is the study of the ancient, leftover propaganda from whichever civilization happened to win the wars in a given place at a given time.

The baby is taught geography, so that later on when its country begins bombing another country, the baby’s country won’t be embarrassed if its citizens cannot find that country on a globe. The baby is taught obedience, and the importance of performing meaningless tasks in a timely manner. This prepares the baby for the half century of pointless gear-turning it will be expected to undertake after graduation. The baby is taught that it lives in a free country, with a legitimate electoral system which facilitates meaningful elections of actual representatives in a real government. It is never taught that those elections, representatives and government are all owned and operated by the very rich, who use them to ensure policies which make them even richer while keeping everyone else as poor as possible so that they won’t have to share political power.

It is never taught that highly secretive intelligence and defense agencies form alliances with those rich people to advance murderous and exploitative agendas for profit and power. It is never taught that the things it sees on television are mostly lies. The baby is smoothly, seamlessly funneled from uterus to full-time employment through this system, often with a little religion mixed in to really drive home the importance of obedience and meekness and the nobility of poverty.

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Waiting for my man

Jun 282018
 
 June 28, 2018  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Courtesan (after Eisen) 1887

 

Same Old Greed In A Shiny New Wrapper (Felder)
Brexit To Put £29 Trillion In Derivatives Contracts At Risk – BOE (G.)
EU To Raise Pressure On May Over Chances Of No-Deal Brexit (G.)
Bank of Japan Now Owns Half the Country (ZH)
Trump Says Security Panel Can Protect US Technology From China (R.)
Whack-a-Mole: China Steps Up Property Crackdown In 30 Major Cities (R.)
Lobbyists And Business-Friendly Pundits Mourn Ocasio-Cortez’s Victory (IC)
An Upset in the Making: Joe Crowley Never Saw Defeat Coming (NYT)
Thomson Reuters Defends Its Work For ICE (IC)
How To Get Away With Financial Fraud (Davies)
After the Fall (John Lanchester)
Animals Are Becoming Nocturnal To Avoid Human Beings (Wef)

 

 

Everyone to the same side of the boat!

Same Old Greed In A Shiny New Wrapper (Felder)

The flows into tech funds of late have been absolutely astounding if not totally surprising. The FAANNG stocks have been the market darlings for quite some time now so it’s understandable investors would chase this performance just as they do during every bull market.

It’s not just tech-focused funds overweighting the FAANNG stocks. There is a huge number of non-tech-focused funds that own these stocks, as well, and in a significant way further supporting their popularity in the marketplace. You can find them represented in size today in everything from consumer discretionary, retail, media and entertainment to momentum, cloud computing, internet and social media. In fact, without Amazon and Netflix, the consumer discretionary sector would be down on the year rather than up.

What’s more, in many cases, the ownership of these companies in many funds appear to be clear violations of their implicit if not explicit mandates. To demonstrate, let’s just run through the FAANNG stocks by market cap beginning with the biggest: Apple. There are fully 92 ETFs, according to ETFdb.com, that not only own the stock but also have an overweight (relative to the S&P 500) allocation to the shares. So not only are Apple fans and traditional passive investors buying tons of Apple stock, these other ETF investors are even more aggressively acquiring shares.

What I found notable in this case was that Apple was found in both value and growth-focused ETFs. I guess this isn’t really much of a stretch theoretically. A high-growth stock can become cheap just like any other. What is strange in Apple’s case, though, is that the stock now trades at its highest price-to-free cash flow in years. At the same time, the company’s 5-year average revenue growth is now the lowest in its history. Still, these systematic funds somehow find reason to not just own it but to overweight it as both a value stock and as a growth stock.

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Deutsche Bank should be scared.

Brexit To Put £29 Trillion In Derivatives Contracts At Risk – BOE (G.)

Britain’s chief financial watchdog has warned that contracts worth trillions of pounds between UK and European Union banks remain at risk of collapse following Brexit, after Brussels’ failure to implement protective legislation. In a warning to EU officials that time is running out before next March to devise rules for EU banks, the Bank of England’s financial policy committee (FPC) said £29tn worth of contracts could be declared void. Derivatives contracts, which provide banks and corporations with protection from interest rate rises, could come to an end without fresh legislation from the UK and EU, the committee said in its latest quarterly health check on Britain’s financial services industry.

The warning will be seen as a direct response to the European Banking Authority, which argued earlier this week that the UK was dragging its feet preparing for Brexit. In an increasingly bitter war of words, EBA officials said there was little preparation by the UK authorities and individual banks for life outside the EU. The FPC hit back, saying the Treasury was well advanced in its efforts to bridge the gap between banks in London and those on the continent, but Brussels had made little obvious effort to support its own financial institutions. “The biggest remaining risks of disruption are where action is needed by both UK and EU authorities, such as ensuring the continuity of existing derivatives contracts. As yet the EU has not indicated a solution analogous to a temporary permissions regime,” it said.

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The incompetence is almost funny.

EU To Raise Pressure On May Over Chances Of No-Deal Brexit (G.)

The European Union’s 27 leaders are to ratchet up the pressure on Theresa May by giving her a strong warning about the growing risk of a no-deal Brexit, as countries across Europe confirmed they were intensifying work on their contingency plans for Britain crashing out of the bloc. With a complete absence of progress on key issues, including that of avoiding a hard border on the island of Ireland, the prime minister will be pressed at a summit in Brussels to reassure her fellow leaders about her intentions. The Danish prime minister, Lars Løkke Rasmussen, told his parliament in Copenhagen on Wednesday: “It is the first time we are saying clearly to the British that we can end, in the worst scenario, [with] no deal.”

May has agreed to address the leaders at a dinner on Thursday night after discussions with Donald Tusk, the European council president, earlier this week in Downing Street. She is expected to sketch out her intentions for the coming few weeks before they come to their conclusions on the state of the negotiations the following morning. Asked whether Tusk was more confident about the future following his last meeting with May, a senior EU official laughed, adding: “Well, I don’t think he is less optimistic.” On the so-called backstop solution for the Irish border – a default state to be in place until a free trade deal or bespoke technological solution is agreed – the official said there had “frankly been no progress, and that’s reason to express concern”.

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I made up that headline. It’s a little exaggerated. But only a little. It’s a crazy experiment Kuroda is in.

Bank of Japan Now Owns Half the Country (ZH)

The last time we looked at how much of the stock market the Bank of Japan controls, we found that as of September, Kuroda’s central bank owned a stunning 75% of all Japanese ETFs as the central bank keeps buying stocks under its ultraloose monetary policy. Since December 2010 – when The Bank of Japan held no ETFs at all – the central bank has been buying ETFs (doubling its annual buying target to 6 trillion yen in July 2016) as part of unprecedented economic stimulus. Over this period, the Nikkei 225 Stock Average has risen 89% since December 2010. It is safe to say the two are correlated. Fast forward to today, when according to the latest BOJ holdings update following even more ETF purchases, the Japanese central bank has also become a major shareholder in nearly 40% of listed companies.

According to Nikkei calculations, the bank was one of the top 10 shareholders in 1,446 listed companies out of 3,735 at the end of March. This means that just over the past year, when the BOJ was a major owner of 833 stocks, the BOJ’s equity holdings have expanded by a staggering 70%. In addition, the Central Bank bank is now the top shareholder in Tokyo Dome, Sapporo Holdings, Unitika, Nippon Sheet Glass and Aeon. This means that the BOJ has amassed an estimated 25 trillion yen ($227 billion) of equities as a result of purchasing exchange-traded funds. Putting these holdings in context, the BOJ holdings are equal to nearly 4% of the roughly 652 trillion yen aggregate market value of stocks traded on the first section of the Tokyo Stock Exchange.

In justifying the BOJ’s relentless takeover of the stock market, Kuroda has said that buying up stocks is an integral part of the BOJ’s strategy to lift inflation to 2%, a program which “has fulfilled its role to a certain extent,” according to Kuroda. But, as the Nikkei adds, the size of the buying spree could complicate an eventual exit strategy from the monetary easing and also distort basic market mechanisms.

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We’re still talking.

Trump Says Security Panel Can Protect US Technology From China (R.)

President Donald Trump on Tuesday endorsed U.S. Treasury Secretary Steven Mnuchin’s measured approach to restricting Chinese investments in U.S. technology companies, saying a strengthened merger security review committee could protect sensitive American technologies. Trump, in remarks to reporters at the White House, said the approach would target all countries, not just China, echoing comments from Mnuchin on Monday amid a fierce internal debate over the scope of investment restrictions due to be unveiled on Friday. “It’s not just Chinese” investment, Trump told reporters when asked about the administration’s plans. Mnuchin and White House trade adviser Peter Navarro sent mixed signals on Monday about the Chinese investment restrictions, ordered by Trump on May 29.

Mnuchin said they would apply to “all countries that are trying to steal our technology,” while Navarro said they would be focused specifically on China. The restrictions are being developed to help put pressure on China to address the administration’s complaints that it has misappropriated U.S. intellectual property through joint-venture requirements, unfair licensing policies and state-backed acquisitions of U.S. technology firms. Mnuchin would prefer to use new tools associated with pending legislation to enhance security reviews of transactions by the Committee on Foreign Investments in the United States (CFIUS), some administration officials have said.

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Property gains have been a substantial part of ‘growth’. Watch out Xi.

Whack-a-Mole: China Steps Up Property Crackdown In 30 Major Cities (R.)

China said on Thursday it would renew efforts to crack down on property irregularities in 30 major cities from July to end-December, mobilizing powers from seven major Chinese government agencies in a concerted effort to rein in rising prices. Property prices in China have soared since 2016, prompting the government to roll out tightening measures in more than 100 cities to dampen demand amid bubble fears. But new home prices in May posted their fastest growth in nearly a year even as prices cooled in big cities, suggesting buyers are shifting to smaller cities. Policymakers have been careful not to tap on the brakes too hard, as real estate remains a major driver of the economy.

Growth in the world’s second-largest economy is at risk of slowing as the authorities try to tame rapid domestic credit growth at a time when trade tensions are causing worries for the economic outlook. The crackdown would be carried out by government entities including the housing ministry and the Ministry of Public Security, and the banking and insurance regulators, according to a notice posted on the housing ministry’s website. They would focus on stemming speculation, cracking down on illegal agencies and developers, and fake advertisements.

Among the 30 cities that will be scrutinized are the country’s four largest or top tier cities, including Beijing and Shanghai, and tier 2 provincial capitals such as Wuhan and Chengdu, and also smaller cities, such as Yichang and Foshan. The notice said targeted irregularities include manipulating prices, deliberately holding off sales, illegally providing loans for downpayment and publishing false price information that mislead buyers.

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The party swung so far right the only way to go is left.

Lobbyists And Business-Friendly Pundits Mourn Ocasio-Cortez’s Victory (IC)

Several Democratic pundits appeared on Fox Business Network to raise the alarm about the election. “The party is swinging left,” said Robin Biro, a former DNC delegate supporting Hillary Clinton. “It’s concerning for someone who is more moderate like myself.” Mark Penn, a strategist who owns several corporate lobbying and public relations firms and previously advised both Bill and Hillary Clinton’s presidential campaigns, attempted to downplay the significance of Ocasio-Cortez’s victory. Asked by Fox Business host Maria Bartiromo if Ocasio-Cortez’s win signified a drift toward socialism, Penn said no. “I just don’t think that’s where the Democratic Party is going. I think that’s where that district is going,” said Penn.

“I think the national implications are being overblown,” he added. Crowley was seen as the next Democratic House leader and had won support from business executives as a leading moderate. As The Intercept reported, Crowley helped spearhead efforts against bank regulations, and, as a longtime leader of the New Democrat Coalition, was widely viewed as a point person for lobbyists to influence that caucus of centrist Democrats. He also voted in support of the Iraq War and the Patriot Act. The Wall Street-friendly wing of the Democratic Party similarly attempted to diminish Ocasio-Cortez’s victory.

Matt Bennett, co-founder of Third Way, a business-friendly Democratic think tank governed by a council of finance industry executives, told Axios that Crowley lost because of his gender and the particular dynamics of the district. Ocasio-Cortez’s victory “had more to do with the nature of her very blue district than it does with national politics,” Bennett said.

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Many similarities to Hillary’s loss.

An Upset in the Making: Joe Crowley Never Saw Defeat Coming (NYT)

It was less than three weeks until Primary Day and, on first blush, the poll that Representative Joseph Crowley had been shown by his team of advisers was encouraging: He led his upstart rival, Alexandria Ocasio-Cortez, by 36 percentage points. It was the last poll Mr. Crowley’s campaign would conduct. Despite his many reputed strengths — his financial might as one of the top fund-raisers in Congress, his supposed stranglehold on Queens politics as the party boss, his seeming deep roots in an area he had represented for decades — Mr. Crowley was unable to prevent his stunning and thorough defeat on Tuesday night. Ms. Ocasio-Cortez bested Mr. Crowley by 15 percentage points, delivering a victory expected to make her, at 28, the youngest woman ever elected to Congress.

If it takes a perfect storm to dislodge a congressional leader, then Ms. Ocasio-Cortez and her crusading campaign about class, race, gender, age, absenteeism and ideology proved to be just that. She and her supporters swept up Mr. Crowley in a redrawn and diversifying 14th Congressional District where the incumbent, despite two decades in Congress, had never run in a competitive primary. She flipped the levers of power he was supposed to have — his status as a local party boss and his money — against him, using that as ammunition in an insurgent bid that cut down a possible successor to Nancy Pelosi and the No. 4 Democrat in the House. No single factor led to Mr. Crowley’s defeat, more than a half-dozen officials inside and close to his campaign said in interviews, most on the condition of anonymity.

It was demographics and generational change, insider versus outsider, traditional tactics versus modern-age digital organizing. It was the cumulative weight of them all. [..] Ms. Ocasio-Cortez, in an interview on Wednesday, dismissed race as a driving factor in her win, though she had regularly highlighted her heritage on the campaign trail. “It would be a huge mistake to just say that this election happened because X demographics live here. That is to absolutely miss the entire point of what we just accomplished,” Ms. Ocasio-Cortez said. A former organizer for Bernie Sanders, Ms. Ocasio-Cortez won across the district, carrying Mr. Crowley’s home borough of Queens by a larger margin than she won the Bronx. “She won virtually everywhere,” said Steven Romalewski, a researcher at the Center for Urban Research [..], who mapped the results.

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It’s not just Facebook and Google, everyone wants a piece of the fat pie.

Thomson Reuters Defends Its Work For ICE (IC)

The reporters at Reuters have been providing crucial, unfliching coverage of the cruel treatment of would-be immigrants under policies pushed by President Donald Trump. Meanwhile, the news agency’s parent company, Thomson Reuters, has been supplying U.S. Immigration and Customs Enforcement with data from its vast stores as part of federal contracts worth close to $30 million. A letter from a Thomson Reuters executive shows that the company is ready to defend at least one of those contracts while remaining silent on the rest. Last week, advocacy and watchdog group Privacy International wrote to Thomson Reuters CEO James Smith to “express concern” over contracts between ICE and two of the company’s subsidiaries.

Thomson Reuters Special Services sells ICE “a continuous monitoring and alert service that provides real-time jail booking data to support the identification and location of aliens” as part of a $6.7 million contract, and West Publishing, another subsidiary, provides ICE’s “Detention Compliance and Removals” office with access to a vast license-plate scanning database, along with agency access to the Consolidated Lead Evaluation and Reporting, or CLEAR, system, which Thomson Reuters advertises as holding a “vast collection of public and proprietary records.” The two West contracts are together worth $26 million. The Privacy International letter cites the practice by U.S. authorities of separating children from their parents, as well as the Trump administration’s overall “zero tolerance” approach to immigration violations.

The children — thousands of them — are typically intercepted by U.S. Customs and Border Protection with their parents; the parents are then detained by ICE while the children, having been forcibly separated, are held in conditions that some have described in horrifying terms, under the supervision of Health and Human Services. (ICE agents have also been accused of sexual abusing hundreds of detainees, underhanded arrest tactics, and more.) Privacy International’s letter requested that Thomson Reuters “commit to not providing products or services to U.S. immigration agencies which may be used to enforce such cruel, arbitrary, and disproportionate measures.”

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Long read on how fraud takes place where no-one expects it. And on a scale that no-one thinks possible. Libor.

How To Get Away With Financial Fraud (Davies)

It is not a pleasant thing to see your industry subjected to criticism that is at once overheated, ill-informed and entirely justified. In 2012, the financial sector finally got the kind of enemies it deserved. The popular version of events might have been oversimplified and wrong in lots of technical detail, but in the broad sweep, it was right. The nuanced and technical version of events which the specialists obsessed over might have been right on the detail, but it missed one utterly crucial point: a massive crime of dishonesty had taken place. There was a word for what had happened, and that word was fraud. For a period of months, it seemed to me as if the more you knew about the Libor scandal, the less you understood it.

That’s how we got it so wrong. We were looking for incidental breaches of technical regulations, not systematic crime. And the thing is, that’s normal. The nature of fraud is that it works outside your field of vision, subverting the normal checks and balances so that the world changes while the picture stays the same. People in financial markets have been missing the wood for the trees for as long as there have been markets. Some places in the world are what they call “low-trust societies”. The political institutions are fragile and corrupt, business practices are dodgy, debts are rarely repaid and people rightly fear being ripped off on any transaction.

In the “high-trust societies”, conversely, businesses are honest, laws are fair and consistently enforced, and the majority of people can go about their day in the knowledge that the overall level of integrity in economic life is very high. With that in mind, and given what we know about the following two countries, why is it that the Canadian financial sector is so fraud-ridden that Joe Queenan, writing in Forbes magazine in 1989, nicknamed Vancouver the “Scam Capital of the World”, while shipowners in Greece will regularly do multimillion-dollar deals on a handshake? We might call this the “Canadian paradox”.

There are different kinds of dishonesty in the world. The most profitable kind is commercial fraud, and commercial fraud is parasitical on the overall health of the business sector on which it preys. It is much more difficult to be a fraudster in a society in which people only do business with relatives, or where commerce is based on family networks going back centuries. It is much easier to carry out a securities fraud in a market where dishonesty is the rare exception rather than the everyday rule.

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Long read on what happened since 2008.

After the Fall (John Lanchester)

Some of the more pessimistic commentators at the time of the credit crunch, myself included, said that the aftermath of the crash would dominate our economic and political lives for at least ten years. What I wasn’t expecting – what I don’t think anyone was expecting – was that ten years would go by quite so fast. At the start of 2008, Gordon Brown was prime minister of the United Kingdom, George W. Bush was president of the United States, and only politics wonks had ever heard of the junior senator from Illinois; Nicolas Sarkozy was president of France, Hu Jintao was general secretary of the Chinese Communist Party, Ken Livingstone was mayor of London, MySpace was the biggest social network, and the central bank interest rate in the UK was 5.5 per cent.

It is sometimes said that the odds you could get on Leicester winning the Premiership in 2016 was the single most mispriced bet in the history of bookmaking: 5000 to 1. To put that in perspective, the odds on the Loch Ness monster being found are a bizarrely low 500 to 1. (Another 5000 to 1 bet offered by William Hill is that Barack Obama will play cricket for England. I’d advise against that punt.) Nonetheless, 5000 to 1 pales in comparison with the odds you would have got in 2008 on a future world in which Donald Trump was president, Theresa May was prime minister, Britain had voted to leave the European Union, and Jeremy Corbyn was leader of the Labour Party – which to many close observers of Labour politics is actually the least likely thing on that list. The common factor explaining all these phenomena is, I would argue, the credit crunch and, especially, the Great Recession that followed.

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It may be smart but it can’t be good.

Animals Are Becoming Nocturnal To Avoid Human Beings (Wef)

On Thursday, ecologists at the University of California, Berkeley, released a study published in Science Magazine that indicates animals are adjusting their habits to avoid the stresses of human encroachment on their habitat. According to the research from Kaitlyn M. Gaynor, Cheryl E. Hojnowski, Neil H. Carter, and Justin S. Brashares, human population growth is having a profound influence on the way animals go about their business—specifically, when they choose to go about their business. It seems that a number of mammalian species have become nocturnal in an effort to avoid us. Scientists admit that this probably works for the animals, but could have potential “ecosystem-level consequences” we don’t yet fully understand.

It’s been acknowledged in the past that mammals have been adjusting to the presence of humans by moving less, retreating to remote areas, and spending less time looking for food, according to Phys.org, who spoke with Gaynor, the leader of the study. All these altered behaviors contribute to overall stress in the animals. Gaynor’s study indicates that even things like camping and hiking could be having a negative effect on wildlife. “It suggests that animals might be playing it safe around people,” said Gaynor. “We may think that we leave no trace when we’re just hiking in the woods, but our mere presence can have lasting consequences.”

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Jun 252018
 
 June 25, 2018  Posted by at 8:45 am Finance Tagged with: , , , , , , , , , , ,  


Edward Hopper Cape Cod morning 1950

 

China’s Central Bank Frees Up $100 Billion In Funding As Trade War Looms (SCMP)
US Plans Limits On Chinese Investment In US Technology Firms (R.)
Tit-for-Tat Tariff Battle Could Spark Downturn In Global Economy – BIS (G.)
Why The Debt Deal With The EU Is Bad For Greece (AlJ)
UK Minister Urges Gov’t to Ignore BMW, Airbus Brexit Warnings (Sp.)
Some Of The Pictures Of Border Kids That Haunt Me Most Are From 2014 (PI)
Migration Is Threat To EU Free Travel Area – Italian Prime Minister (G.)
Italy Tells Rescue Ships Not To Help Refugees In Peril At Sea (Ind.)
The US, Under Obama, Created Europe’s Refugee Crisis (Zuesse)
Merkel’s Troubles Began in Syria and End in Italy (Luongo)
Erdogan To Gain Sweeping New Powers After Declaring Election Victory (Ind.)
Erdogan Says Turkey Will Continue Advancing In Syria (R.)
‘Tourists Go Home, Refugees Welcome’ – Barcelona (G.)

 

 

Bankruptcies. Nothing to do with a trade war.

China’s Central Bank Frees Up $100 Billion In Funding As Trade War Looms (SCMP)

China’s central bank said on Sunday it would unlock at least US$100 billion for the country’s lenders to bail out troubled state firms and to help small businesses, as Beijing tries to shore up growth under the shadow of a trade war with the United States. The People’s Bank of China (PBOC) said in a statement it would cut the reserve requirement ratio, the share of deposits lenders must put aside with the central lender, for commercial banks by half a percentage point from July 5. The cut would free up 500 billion yuan (US$76.86 billion) in funds for the big banks, including Industrial and Commercial Bank of China and China Construction Bank, to finance debt-to-equity swaps, a measure often used for troubled state enterprises.

It would also free up 200 billion yuan for smaller banks to boost lending to small businesses across the country, the central bank said. The move is a “targeted operation” aimed at supporting the weak links in the economy and not a change to the country’s “neutral and prudent” monetary policy stance, the PBOC said. Although the statement did not mention China’s trade row with the United States, or its recently released weaker economic indicators, the reduction in the reserve ratio will come into effect a day before the first of US President Donald Trump’s additional tariffs on Chinese products are due to be implemented.

Deng Haiqing, a visiting scholar at Renmin University of China, wrote in a note that the PBOC’s move represented a significant shift in China’s policy, and was not just fine-tuning. “The authorities have started to see the pain inflicted on the real economy from deleveraging, and they are trying to reduce it,” he said.

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Makes sense.

US Plans Limits On Chinese Investment In US Technology Firms (R.)

The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official briefed on the matter said on Sunday. The official, whose comments matched a report by the Wall Street Journal, emphasized that the Chinese ownership threshold may change before the restrictions are announced on Friday. The move marks another escalation of President Donald Trump’s trade conflict with China, which threatens to roil financial markets and dent global growth.

Tariffs on $34 billion worth of Chinese goods, the first of a potential total of $450 billion, are due to take effect on July 6 over U.S. complaints that China is misappropriating U.S. technology through joint venture rules and other policies. The Treasury investment restrictions are expected to target key sectors, including several China is trying to develop as part of its “Made in China 2025” industrial plan, the U.S. official said. Among its objectives, the plan aims to upgrade China’s capabilities in advanced information technology, aerospace, marine engineering, pharmaceuticals, advanced energy vehicles, robotics and other high-technology industries. The Wall Street Journal also said the U.S. Commerce Department and National Security Council were proposing “enhanced” export controls to keep such technologies from being shipped to China.

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Give me a break: “Ten years after the start of the global crisis, central bankers should feel satisfied with the state of the global economy..”

Tit-for-Tat Tariff Battle Could Spark Downturn In Global Economy – BIS (G.)

An escalation of protectionist measures could spark a fresh downturn just as the global economy is picking itself up after the last one, the international body that represents the world’s central banks has warned. The Bank for International Settlements (BIS) said there were already signs that “the ratcheting up of rhetoric” was weighing on investment. It comes as Donald Trump steps up hostility with some of the US’s key trading partners and allies, raising fears of a full-blown trade war. What began with tariffs imposed on steel and aluminium imported into the US has turned into a broader trade battle with trading partners including China and the EU, as they respond with retaliatory measures.

The US president is threatening Beijing with tariffs on $200bn of goods imported from China and on Friday Trump threatened to impose tariffs on European cars after Brussels introduced levies on American goods such as Levi’s jeans, bourbon whiskey and Harley-Davidson motorbikes. Agustín Carstens, the general manager of BIS, said an increase in protectionist measures was a key vulnerability in the global economy that threatened to undermine growth and could spread to financial markets. “One possible trigger of an economic slowdown or downturn could be an escalation of protectionist measures. Its impact could be very significant, if such escalation was seen as threatening the open multilateral trading system.

“Indeed, there are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting investment.” In its annual report on the challenges facing the global economy, BIS said that the ultra-low interest rates implemented by central banks as an emergency response to the financial crisis had served the global economy well but said loose monetary policy was posing a threat to stability. “Ten years after the start of the global crisis, central bankers should feel satisfied with the state of the global economy, after expansionary and unconventional monetary policies were left to bear the burden of recovery,” Carstens said. “But this has left a legacy of higher debts on public and private balance sheets. Still reliant on central bank support and with less room for manoeuvre. Central banks cannot continue be the only game in town.”

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This is where the EU started collapsing. Immigration issues will do the rest.

Why The Debt Deal With The EU Is Bad For Greece (AlJ)

[..] there is more to this deal than the arithmetic of long-term debt sustainability. At the heart of Greece’s protracted fiscal crisis was always a highly contentious social and political question about the real meaning of European solidarity: Who should be made to pay for the presumed “profligacy” of successive Greek governments, or the “excessive risk-taking” of profit-hungry private creditors in the lead-up to the crisis? The course of action that European leaders ended up settling on turned out to be very one-sided in this respect: Greece alone was to blame for its predicament, and therefore, Greece alone would be made to pay for it.

The real motivation behind the bailouts was always to safeguard the survival of a dangerously over-exposed European banking system – but this fact was quickly obscured. Instead, right-wing politicians and the tabloid media whipped up a frenzy of anti-Greek sentiment. The Greeks were widely portrayed as splurging the money on lavish pensions and long beach holidays – or on “booze and women,” as former Dutch finance minister Jeroen Dijsselbloem infamously put it last year. But as research by the European School of Management and Technology in Berlin has since shown, 95 percent of the bailout funds that were supposedly “given” to Greece actually went straight back to private creditors.

Meanwhile, the bailout loans themselves were added to Greece’s overall debt, and the country continued to pay interest on them over subsequent years. In other words, the Greek people never received any handouts from their European creditors. Meanwhile, the Greek government reduced the size of its public sector by 26 percent, cutting pensions and welfare spending by 70 percent and slashing the public health budget in half. As a result, incomes fell by one-third and unemployment skyrocketed to a peak of over 28 percent, unleashing a veritable humanitarian catastrophe.

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But Jeremy, they have shareholders.

UK Minister Urges Gov’t to Ignore BMW, Airbus Brexit Warnings (Sp.)

Speaking to the BBC, Health Secretary Jeremy Hunt said that businesses sounding the alarm about post-Brexit job losses actually affect the UK’s negotiations with the European Union. According to him, the best way for companies to achieve the “clarity and certainty” they need is to support the PM in her talks with Europe. Hunt suggested that a “Brexit fudge” would be likely if Theresa May’s attempts to “deliver the best possible Brexit, a clean Brexit” were undermined. The statement comes several days after BMW, a German-based car giant which employs around 8,000 people in Britain, threatened to start preparing “contingency plans” if it doesn’t get details on the UK’s post-Brexit trading arrangements by the end of summer.

BMW echoed the warning of the French aviation giant Airbus, which announced on June 21 that a no-deal scenario would have a “catastrophic” outcome and would force it to reconsider its long-term position in the UK, putting some 14,000 UK-based jobs at risk. With the UK government failing to provide clarity on Brexit for the time being, a recent survey has found that nearly half of business leaders from the rest of Europe have cut investment in the country. The poll also shows that three quarters of big companies want the bloc to make concessions to Britain to enable a better trading relationship after London’s divorce with Brussels.

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I think it’s important that we see the big picture here. You won’t find a solution if you can’t define the problem. This has been going on for years.

Some Of The Pictures Of Border Kids That Haunt Me Most Are From 2014 (PI)

The other day, a veteran immigration lawyer named R. Andrew Free shared an anecdote that sheds some really critical light on what’s happening on America’s southern border — a tale that not surprisingly got buried amid a sandstorm of news about mothers not knowing where their kids are, audiotapes of anguished, crying children, and now the protests to end the human rights abuses that the current government is undertaking in our name. What Free described on Twitter was an opportunity that few people get: A chance to personally confront the president of the United States and question him about his immigration policies.

Free wrote that the answers he received from the so-called leader of the free world “shook me to my core.” The immigration lawyer had been to two large detention centers in Texas where U.S. officials were holding hundreds of migrant families from Central America, often for months at a time. Free said some of the conditions at these makeshift detention camps were appalling. “I remember hearing the constant, violent coughing and sickness of small children, and the worry of their mothers who stood in the sun outside the clinic all day only to be told their kids should ‘drink water,’” Free tweeted. “I remember nearly doubling over when I saw the line of strollers.”

When Free had a chance encounter with the president at a political event, he warned him that the detention centers would be “a stain on his legacy.” He said the president wanted to know if Free was an immigration lawyer — implying that everyday citizens weren’t worried about what goes on at the border — and then said, according to Free: “I’ll tell you what we can’t have, it’s these parents sending their kids here on a dangerous journey and putting their lives at risk.” The message that Free took away was that the president saw family detention as a deterrent to keep more refugees from coming. This happened in 2015. The president with the looming stain on his legacy was Barack Obama.

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There goes Merkel.

Migration Is Threat To EU Free Travel Area – Italian Prime Minister (G.)

Italy has warned the future of the EU’s border-free travel zone is at stake as it sought to ease the pressure on Mediterranean countries arising from hosting refugees and migrants. Italy’s prime minister, Giuseppe Conte, was speaking at a mini-EU summit in Brussels, where he said a plan from his government presented at the summit represented a paradigm shift in dealing with migration. But his ambitious move to change what he called obsolete EU rules that govern who is responsible for asylum claimants is likely to encounter opposition from other countries.

The 10-point plan by his new populist government revives many ideas proposed by previous Italian governments, such as calling on all EU member states to share responsibility for migrants rescued at sea, and countries being docked EU funds if they refuse to take in refugees. Leaders from 16 EU countries put on a show of unity, as they left an emergency summit in Brussels on Sunday. The unorthodox meeting, boycotted by several EU countries, was called to shore up the conservative coalition government of the German chancellor, Angela Merkel, which is riven by a row over migration. Spain’s prime minister, Pedro Sánchez, said the talks had been “frank and open,” although they had not resulted in “any concrete consequences or conclusions”.

Sunday’s ad-hoc meeting sets the stage for a long-planned gathering of all EU leaders on Thursday, where it will be harder to mask Europe’s deep divisions on migration. Hungary’s prime minister, Viktor Orbán, can be expected to repeat his fierce opposition to migrant quotas, a policy opposed by other central European countries.

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Salvini is going to Libya this week.

Italy Tells Rescue Ships Not To Help Refugees In Peril At Sea (Ind.)

Italy’s far-right government told aid ships in the Mediterranean Sea not to rescue thousands of refugees in peril on Sunday – despite receiving six separate distress calls from unseaworthy boats. Officials said the vessels – carrying people from North Africa to Europe – were all in Libyan waters and, therefore, Libyan responsibility. The Spanish aid group, Proactiva Open Arms, which had ships in the area, said it had been specifically told not to help. Matteo Salvini, Italy’s interior minister, said in a tweet: “It’s right that the Libyan authorities intervene, as they’ve been doing for days, without having the NGOs interrupt them and disturb them.”

The latest revelation follows a fortnight in which Italy has refused permission for aid ships carrying rescued refugees to dock in its ports. One, the Aquarius with 630 people on board, had to reroute to Spain. Another, Lifeline holding 240 people, remained at sea over the weekend. Mr Salvini has said such refugees would only see his country “on a postcard”. Italy has said it is seeing a constant stream of people coming illegally from Africa, and has threatened to withhold payments to the EU unless a more even way of dispersing refugees is agreed.

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Zuesse misses the role that Britain -remember Blair, Cameron?- and France have played.

The US, Under Obama, Created Europe’s Refugee Crisis (Zuesse)

The current US President, Donald Trump, claimed on June 18th, that Germany’s leadership, and the leadership in other EU nations, caused the refugee-crisis that Europe is facing: “The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition. Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture!” The US Government is clearly lying about this. The US Government itself caused this crisis that Europeans are struggling to deal with.

Would the crisis even exist, at all, if the US had not invaded and tried to overthrow (and in some instances actually overthrown) the governments in Libya, Syria, and elsewhere — the places from which these refugees are escaping? The US Government, and a few of its allies in Europe (the ones who actually therefore really do share in some of the authentic blame for this crisis) caused this war and government-overthrow, etc., but Germany’s Government wasn’t among them, nor were many of the others in Europe. If the US Government had not led these invasions, probably not even France would have participated in any of them. The US Government, alone, is responsible for having caused these refugees.

The US Government itself created this enormous burden to Europe, and yet refuses to accept these refugees that it itself had produced, by its having invaded and bombed to overthrow (among others) Libya’s Government, and then Syria’s Government, and by its aiding Al Qaeda in organizing and leading and arming, jihadists from all over the world to come to Syria to overthrow Syria’s Government and to replace it with one that would be selected by the US regime’s key Middle Eastern ally, the Saud family, who own Saudi Arabia, including its Government, and who are determined to take over Syria.

Trump blames Angela Merkel for — in essence — having been an ally of the US regime, a regime of aggression which goes back decades, and which Trump himself now is leading, instead of his ending, and of his restoring democracy to the United States, and, finally, thus, his restoring freedom (from America), and peace, to other nations, in Europe, and elsewhere (such as in Syria, Yemen, etc.).

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Chaos.

Merkel’s Troubles Began in Syria and End in Italy (Luongo)

It looks like we are entering the end of Merkel-ism in Europe. German Chancellor Angela Merkel is approaching her final days in that position. Be it next week or the end of this year, we are looking at unprecedented change in European politics thanks to Merkel’s insistence on taking in millions of Syrian and North African refugees from chaos unleashed by aggressive and insane foreign policy actions by the U.S. and supported by the EU. From the destruction of Libya to the manufactured ‘civil war’ in Syria the displacement of millions of people was created from the desired to destabilize the entire region for the betterment of the U.S. and its allies in the region, Saudi Arabia and Israel. Jordan, Turkey and Qatar were originally involved but have since jumped ship in the wake of Russia’s intervention there.

Merkel’s current plight politically stems from her intractability in accepting the chain of events that led us to this point. All of the problems of Europe now stem from the collision of these foreign policy disasters and the economic degradation of the euro-zone from the flawed structure of the euro itself. And the insistence of the U.S./Saudi/Israeli alliance to continue trying to manufacture a win in Syria that is clearly beyond their control at this point only tightens the noose around Merkel’s neck.

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Predictable but still scary.

Erdogan To Gain Sweeping New Powers After Declaring Election Victory (Ind.)

Recep Tayyip Erdogan has been declared triumphant in Turkey’s presidential vote by the country’s electoral board, amid accusations of manipulation by his opponents. Mr Erdogan had earlier claimed he had won after state run news outlets said he was victorious. An announcement from the broadcaster TRT came soon after the Anadolu Agency, who reported that he had won 52.51 per cent of the vote with 98.4 per cent of the total counted. Independent election monitors and the opposition both maintained that less than half the votes had been counted at that point. The president’s main rival, Muharrem Ince – who state media said had won 30.72 per cent of the vote – urged observers and his supporters to stay on at counting centres, warning that vote rigging was likely to place if they left under the impression that the result had been decided.

But speaking in the early hours of Monday, the head of the Supreme Election Council Sadi Guven confirmed the result. He said that Mr Erdogan “received the absolute majority of all valid votes” and the remaining ballots would not affect the outcome. In his speech Mr Erdogan had warned: “The Turkish public has mandated me as president according to unofficial results. I hope nobody will damage democracy by casting a shadow on this election and its results to hide their failure.”

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Doesn’t waste any time.

Erdogan Says Turkey Will Continue Advancing In Syria (R.)

Turkey will continue to “liberate Syrian lands” so that refugees can return to Syria safely, President Tayyip Erdogan said in an election victory speech on Monday. Speaking to supporters from the balcony of his ruling AK Party’s headquarters in Ankara after Sunday’s presidential and parliamentary elections, Erdogan said Turkey would also act more decisively against terrorist organizations.

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“In 1990 the city received 1.7 million tourists; last year the figure was 32 million – roughly 20 times the resident population.”

‘Tourists Go Home, Refugees Welcome’ – Barcelona (G.)

Early last year, around 150,000 people in Barcelona marched to demand that the Spanish government allow more refugees into the country. Shortly afterwards, “Tourists go home, refugees welcome” started appearing on the city’s walls; soon the city was inundated with protestors marching behind the slogans “Barcelona is not for sale” and “We will not be driven out”. What the Spanish media dubbed turismofobia overtook several European cities last summer, with protests held and measures taken in Venice, Rome, Amsterdam, Florence, Berlin, Lisbon, Palma de Mallorca and elsewhere in Europe against the invasion of visitors. But in contrast to many, as fiercely as Barcelona has pushed back against tourists, it has campaigned to welcome more refugees.

When news broke two weeks ago that a rescue ship carrying 629 migrantswas adrift in the Mediterranean, mayor Ada Colau was among the first to offer those aboard safe haven. Is it really the case that Barcelona would prefer to receive thousands of penniless immigrants rather than the millions of tourists who last year spent around €30bn in the city? The short answer, it appears, is yes. Increasingly it is tourism, not immigration, that people see as a threat to the city’s very identity – though numbers of both have risen exponentially in recent decades. In 2000 foreigners accounted for less than 2% of the population; a mere five years later, the figure was 15% (266,000). In 2018, it is now officially 18% although, according to Lola López, the city’s integration and immigration commissioner, the true figure is closer to 30%.

The influx of new residents has radically changed the face of the city, but Barcelona has not seen a single anti-immigrant protest of any substance – nor is immigration an issue at local elections. According to research by Paolo Giaccaria, a social scientist at the University of Turin, the case of Barcelona “establishes a connection between two types of mobility that are at odds with each other: northern tourism and southern migration. It subverts the common feeling about which kind of mobility is desirable which is not.” Immigration has changed the city, but tourism is destabilising it – and even people in the industry agree that it can’t go on like this. In 1990 the city received 1.7 million tourists; last year the figure was 32 million – roughly 20 times the resident population. The sheer volume of visitors is driving up rents, pushing residents out of neighbourhoods, and overwhelming the public space.

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Jun 212018
 
 June 21, 2018  Posted by at 9:05 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Avenue of Poplars at Sunset 1884

 

Short-Sellers Sense An Opportunity As China Trade Tensions Brew (R.)
The Greatest Short-Squeeze In History (ZH)
Chinese Investment In The US Drops 90% Amid Political Pressure (CNBC)
China Warns Washington’s ‘Capricious’ Trade Actions Will Hurt US Workers (R.)
China Could Strike Back At Dow-Listed Firms Over Trade: Global Times (R.)
Deutsche Bank Troubles Raise Worries About The Future Of The Eurozone (Polleit)
Greece Expects Substantive Debt Relief Conditions From Eurogroup (R.)
EU Committee Approves New Rules That Could ‘Destroy The Internet As We Know It’
Trump’s Military Drops a Bomb Every 12 Minutes, and No One Talks About It (TD)
Circle Closed: Merkel, Macron Want EU Border States To Deal With Refugees (RT)
Italian Coastguard Ship Carrying 522 Migrants Docks In Sicily (AFP)
I’ve Got Some Things to Say (Romelu Lukaku)

 

 

Something’s brewing alright…

Short-Sellers Sense An Opportunity As China Trade Tensions Brew (R.)

Escalating trade tensions between Washington and Beijing may have sent tremors across the U.S. stock market but short-sellers are taking the opportunity to boost bearish bets against U.S. companies exposed to a full-blown trade war. Planemaker Boeing, automaker General Motors, casino operator Las Vegas Sands, package delivery company FedEx and agricultural trader Bunge – companies that could feel the pain from growing trade tensions with China – have drawn a noticeable pickup in shorting activity this month, according to financial analytics firm S3 Partners.

“I think the change in short interest is directly related to the increase in trade tensions,” said Ihor Dusaniwsky, head of research at S3 in New York. Short-sellers aim to profit by selling borrowed shares with the hope of buying them back later at a lower price. On Friday, U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, and Beijing immediately vowed to respond in kind. Tensions escalated further on Monday, after Trump threatened to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated. Multinationals that rely on China for large parts of their business are seen as particularly at risk from a potential trade war.

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…but who’s going to come up on top, the shorts or the squeezers?

The Greatest Short-Squeeze In History (ZH)

A quick glance at the stock market – particularly big-tech – and once can quickly discern that “something’s up.” Every dip is met by a wall of buying, ramping the market ever higher, and ever more ignorant of the increasingly uncertain world around it.

Why? Simple… it’s a massive, unprecedented short-squeeze…

The “most shorted” stocks in America are up 20% in the last two months, almost incessantly.

While the chart above is ridiculous enough, it turns out that this is actually accelerating and is now the great short-squeeze in the history of the data…

The ‘Relative Strength Index’ of the “most shorted” stocks has never been higher and each time it has reached this level, stocks have fallen hard.

But as a reminder – amid all of this – The Dow is down for the 7th day in a row, its longest losing streak in 18 months.

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Xi needs to keep his foreign reserves at home.

Chinese Investment In The US Drops 90% Amid Political Pressure (CNBC)

Chinese acquisitions and investments in the U.S. fell 92 percent to just $1.8 billion in the first five months of this year, consulting and research firm Rhodium Group said Tuesday. Counting divestitures, net Chinese deal flow to the U.S. during that time was a negative $7.8 billion, the report said. The decline follows a sharp drop in the second half of last year as pressure from both Beijing and the Trump administration curbed a recent surge in cross-border investment. Completed Chinese deals in the U.S. hit a record $46 billion in 2016, and dropped to $29 billion in 2017, according to Rhodium. In a search for investment opportunities, Chinese companies went on an overseas buying spree in 2015 and 2016.

But now, China wants to limit capital flight and excessive leverage. The U.S. is worried about intellectual property protection and has increased scrutiny of deals on the basis of national security. The Trump administration has also threatened restrictions on investment based on a “Section 301” investigation, the same study that led to the latest tariff announcements. As a result, acquisitions worth more than $2 billion in the first five months of this year have fallen apart, Rhodium Group’s Thilo Hanemann said.

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Still negotiating.

China Warns Washington’s ‘Capricious’ Trade Actions Will Hurt US Workers (R.)

China’s commerce ministry on Thursday accused the United States of being “capricious” over bilateral trade issues, and warned that the interests of U.S. workers and farmers ultimately will be hurt by Washington’s penchant for brandishing “big sticks”. Previous trade negotiations with the United States had been constructive, but because the U.S. government is being unpredictable and challenging, Beijing has had to respond in a strong manner, commerce ministry spokesman Gao Feng said in a regular briefing in Beijing.

President Donald Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliates against his previous announcement to target $50 billion in imports. The United States has alleged that China is stealing U.S. intellectual property, a charge denied by Beijing. Washington’s accusations of forced tech transfers are a distortion of reality, and China is fully prepared to respond with “quantitative” and “qualitative” tools if the U.S. releases a new list of tariffs, Gao said. “It is deeply regrettable that the U.S. has been capricious, escalated the tensions, and provoked a trade war,” he said. “The U.S. is accustomed to holding ‘big sticks’ for negotiations, but this approach does not apply to China.”

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China will have to move.

China Could Strike Back At Dow-Listed Firms Over Trade: Global Times (R.)

China could hit back at U.S. firms listed on the Dow Jones Industrial Average if U.S. President Donald Trump keeps exacerbating tensions with China over trade, state-controlled Chinese tabloid The Global Times said on Thursday. Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if China follows through with retaliation against his previous targeting of $50 billion in imports. The Dow, which counts Boeing, Apple and Nike among its constituents, ended down 0.17 percent on Wednesday. The 30-stock share index has declined 0.25 percent year-to-date.

“If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants,” the Global Times said in a commentary. The world’s two biggest economies seemed increasingly headed towards open trade conflict after three rounds of high-level talks since early May failed to reach a compromise on U.S. complaints over Chinese trade practices and a $375 billion trade deficit with China. Despite taking steps in self-defense, China will not stray from its path of deepening reform and opening up, said the tabloid, which is run by the People’s Daily.

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Deutsche = derivatives.

Deutsche Bank Troubles Raise Worries About The Future Of The Eurozone (Polleit)

The euro banking sector is huge: In April 2018, its total balance sheet amounted to €30.9 trillion, accounting for 268% of GDP in the euro area. Unfortunately, however, many euro banks are in lousy shape. They suffer from low profitability and carry an estimated total bad loan exposure of around €759 billion, which accounts for roughly 30% of their equity capital. Share price developments suggest that investors have lost quite some confidence in the viability of euro banks’ businesses: While US bank stocks are up 24% since the beginning of 2006, the index for euro-area bank stocks is still down by around 70%. Perhaps most notably, ’Germany’s two largest banks, Deutsche Bank and Commerzbank, have lost 85 and 94%, respectively, of their market capitalization.

With a balance sheet of close to €1.5 trillion in March 2018, Deutsche Bank accounted for around 45% of German GDP. In international comparison, this an enormous, downright frightening dimension. It is mostly the result of the bank still having an extensive (though not profitable) footprint in the international investment banking business. The bank has already started reducing its balance sheet, though. Beware of big banks — this is what we could learn from the latest financial and economic crises 2008/2009. Big banks have the potential to take an entire economy hostage: When they get into trouble, they can drag everything down with them, especially the innocent bystanders – taxpayers and, if and when the central banks decide to bail them out, those holding fiat money and fixed income securities denominated in fiat money.

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Sure.

Greece Expects Substantive Debt Relief Conditions From Eurogroup (R.)

Greece expects eurozone finance ministers to deliver on promised debt relief this week so that it can at last plan its financial future “like any ordinary country,” the government spokesman said on Wednesday. Ministers in the Eurogroup will meet in Luxembourg on Thursday to consider plans for easing the debt burden, which at 179.8% of annual Greek GDP is proportionately the greatest in the 19-nation euro zone. “We are optimistic that we are on the verge of a solution with substance,” spokesman Dimitris Tzanakopoulos said, adding that this would “have a multiplying effect on the momentum of the Greek economy.” Shut out of debt markets in 2010, Greece is set to exit its international bailout program formally in August.

The Eurogroup will discuss debt relief to ensure Athens can return to market financing after eight years of loans from euro zone governments and the IMF. “The accepted criteria for all sides is that this solution be convincing for markets and embed the creditworthiness of our country – the final act in restoring the credibility of Greece to be able to plan for the next day like any ordinary country,” Tzanakopoulos told a news briefing. The European Stability Mechanism (ESM) holds more than half of the country’s public debt and, as its biggest creditor, is keen to see Greece regain market access sustainably. EU officials have repeatedly said the meeting will be crucial to seal Greece’s financial future.

Decisions will need to be made on the use of about €40 billion that remain unspent under its third, €86 billion bailout programme which expires on Aug. 20. Greece has already received substantial debt relief during the crisis. Private creditors cut the value of their holdings of Greek government bonds by more than half in 2012. As a result Greek debt stock was cut by about €107 billion. Official creditors do not accept such “haircuts” but have eased lending terms which reduced the net present value of the loans granted to Athens, resulting in further budget savings. European creditors will probably grant frontloaded debt relief to Greece by using the funds left over in the third bailout to buy out part of the IMF loans..

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“..a tool for the automated surveillance and control of its users..”

EU Committee Approves New Rules That Could ‘Destroy The Internet As We Know It’

An EU committee has approved two new copyright rules that campaigners warn could destroy the internet as we know it. The two controversial new rules – known as Article 11 and Article 13 – introduce wide-ranging new changes to the way the web works. Article 13 has been criticised by campaigners who claim that it could force internet companies to “ban memes”. It requires that all websites check posts against a database of copyrighted work, and remove those that are flagged. That could mean memes – which often use images taken from films or TV shows – could be removed by websites. The system is also likely to go wrong, campaigners say, pointing to previous examples where automated systems at YouTube have taken down a variety of entirely innocent posts.

Smaller sites might not even be able to maintain such a complicated infrastructure for scanning through posts, and therefore might not be able to continue to function, activists claim. Some companies and sites have already had to shut down as a result of the EU’s new GDPR data rules. It has been opposed by a whole host of internet experts, many of them involved with the creation of the central technologies and services of the internet. An open letter published last week was signed by more than 70 experts, including web creator Tim Berners-Lee, Wikipedia co-founder Jimmy Wales and internet pioneer Vint Cerf. “By requiring Internet platforms to perform automatic filtering all of the content that their users upload, Article 13 takes an unprecedented step towards the transformation of the Internet, from an open platform for sharing and innovation, into a tool for the automated surveillance and control of its users,” that letter read.

The authors note that copyright is an important part of law, which exists to encourage creators to ensure their work is put out into the world. But the automatic systems being considered by the EU are not the right ways of controlling that, they argue. “We support the consideration of measures that would improve the ability for creators to receive fair remuneration for the use of their works online,” the letter reads. “But we cannot support Article 13, which would mandate Internet platforms to embed an automated infrastructure for monitoring and censorship deep into their networks.”

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They all do it.

Trump’s Military Drops a Bomb Every 12 Minutes, and No One Talks About It (TD)

There was basically a media blackout while Obama was president. You could count on one hand the number of mainstream media reports on the Pentagon’s daily bombing campaigns under Obama. And even when the media did mention it, the underlying sentiment was, “Yeah, but look at how suave Obama is while he’s OK’ing endless destruction. He’s like the Steve McQueen of aerial death.” And let’s take a moment to wipe away the idea that our “advanced weaponry” hits only the bad guys. As David DeGraw put it, “According to the C.I.A.’s own documents, the people on the ‘kill list,’ who were targeted for ‘death-by-drone,’ accounted for only 2% of the deaths caused by the drone strikes.”

Two percent. Really, Pentagon? You got a two on the test? You get five points just for spelling your name right. But those 70,000 bombs dropped by Bush—it was child’s play. DeGraw again: “[Obama] dropped 100,000 bombs in seven countries. He out-bombed Bush by 30,000 bombs and 2 countries.” You have to admit that’s impressively horrific. That puts Obama in a very elite group of Nobel Peace Prize winners who have killed that many innocent civilians. The reunions are mainly just him and Henry Kissinger wearing little hand-drawn name tags and munching on deviled eggs.

However, we now know that Donald Trump’s administration puts all previous presidents to shame. The Pentagon’s numbers show that during George W. Bush’s eight years he averaged 24 bombs dropped per day, which is 8,750 per year. Over the course of Obama’s time in office, his military dropped 34 bombs per day, 12,500 per year. And in Trump’s first year in office, he averaged 121 bombs dropped per day, for an annual total of 44,096. Trump’s military dropped 44,000 bombs in his first year in office. He has basically taken the gloves off the Pentagon, taken the leash off an already rabid dog.

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Why the EU should not be in the hands of people who need to win national elections. Not Brussels either, obviously. This is disastrous.

Circle Closed: Merkel, Macron Want EU Border States To Deal With Refugees (RT)

With no end in sight to the EU refugee crisis, Berlin and Paris look to put the burden of dealing with asylum seekers on the countries where they first register. The seeming return to ‘old rules’ is poised to split Europe further. During their meeting ahead of the EU summit, German Chancellor Angela Merkel and French President Emmanuel Macron pledged to “jointly and resolutely tackle” what they euphemistically called “secondary movements inside the EU.” An elusive wording used in the so-called Meseberg Declaration adopted by the two leaders effectively means one thing: Macron and Merkel want all the newly arrived asylum seekers and migrants to stay in the EU countries where they were first registered while their cases are being processed.

This would leave the EU southern member states to deal with the new arrivals alone. The problem, however, is that the same rules embodied in what is known as the ill-fated EU Dublin Regulation already proved to be dysfunctional at the height of the 2015 refugee crisis. “It is a de-facto return to the Dublin Agreement, which was disavowed by Merkel herself when she opened Germany’s borders for refugees back in 2015,” Evgenia Pimenova, an expert at the International Studies Center of the Moscow State Institute of International Relations (MGIMO), told RT. It seems, however, that the leaders of Europe’s two powerhouses do not have much of a choice in a situation when they face a growing opposition to the old migration policies both at home and at the European level.

This apparent attempt to save face and gain some political points without giving up on their principled stance on immigration issues, however, might lead Berlin and Paris to a situation in which they only sow seeds of further discord in a bloc, which is already beset with political differences. “It is not a revolution” in a field of migration policy, Alain Corvez, a former advisor to the French Defense and Interior Ministries, told RT. “It is only a tactical decision [aimed at dealing] with the current threats” and “pressure” that Merkel and Macron and facing “in their own countries.”

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5Star must be careful with continuing support for Salvini.

Italian Coastguard Ship Carrying 522 Migrants Docks In Sicily (AFP)

An Italian coastguard ship carrying more than 500 migrants, including dozens rescued by the US Navy off Libya last week, arrived Tuesday night at a port in Sicily, days after the new far-right interior minister banned NGO rescue ships from docking in Italy. “Diciotti ship finally lands in Pozzallo taking 522 people to safe port,” the UNHCR Italy tweeted. “They were rescued in multiple operations, 42 of them survived drowning and they need urgent medical care and psychological support,” the UN refugee agency said, adding that it was at the scene along with Italian authorities and humanitarian organisations.

A dozen very dehydrated migrants, including six children, three women and one man, had already been sent to Pozzallo and taken into care by the Italian Red Cross. It is not known whether they were part of the group of 41 migrants rescued from a vessel in distress off Libya last Tuesday by the USNS Trenton, which transferred them to the Diciotti. The crew of the US fast transport ship also spotted 12 bodies in the water but were unable to locate them during a search after the rescue, the US Navy said. A nearby ship from the NGO Sea Watch offered to help provided it could dock with the migrants at an Italian port, which the Italian authorities refused.

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Wonderful story from an unexpected source, the attacker from Manchester United and Belgium. Moving.

I’ve Got Some Things to Say (Romelu Lukaku)

I remember the exact moment I knew we were broke. I can still picture my mum at the refrigerator and the look on her face. I was six years old, and I came home for lunch during our break at school. My mum had the same thing on the menu every single day: Bread and milk. When you’re a kid, you don’t even think about it. But I guess that’s what we could afford. Then this one day I came home, and I walked into the kitchen, and I saw my mum at the refrigerator with the box of milk, like normal. But this time she was mixing something in with it. She was shaking it all up, you know? I didn’t understand what was going on. Then she brought my lunch over to me, and she was smiling like everything was cool. But I realized right away what was going on.

She was mixing water in with the milk. We didn’t have enough money to make it last the whole week. We were broke. Not just poor, but broke. My father had been a pro footballer, but he was at the end of his career and the money was all gone. The first thing to go was the cable TV. No more football. No more Match of the Day. No signal. Then I’d come home at night and the lights would be shut off. No electricity for two, three weeks at a time. Then I’d want to take a bath, and there would be no hot water. My mum would heat up a kettle on the stove, and I’d stand in the shower splashing the warm water on top of my head with a cup.

There were even times when my mum had to “borrow” bread from the bakery down the street. The bakers knew me and my little brother, so they’d let her take a loaf of bread on Monday and pay them back on Friday. I knew we were struggling. But when she was mixing in water with the milk, I realized it was over, you know what I mean? This was our life. I didn’t say a word. I didn’t want her to stress. I just ate my lunch. But I swear to God, I made a promise to myself that day. It was like somebody snapped their fingers and woke me up. I knew exactly what I had to do, and what I was going to do. I couldn’t see my mother living like that. Nah, nah, nah. I couldn’t have that.

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