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Renewables Are Dead

May 062019
 
 May 6, 2019  Posted by at 1:33 pm Primers Tagged with: , , , , , , , , , , , , , ,  23 Responses »


Gustave Courbet The man made mad by fear 1844

 

If I’ve said once that those among us who tout renewable energy should pay more attention to the 2nd law of Thermodynamics, I must have said it a hundred times. But I hardly ever get the impression that people understand why. And it seems so obvious. A quote I often use from Herman Daly and Ken Townsend, when I talk about energy, really says it all:

“Erwin Schrodinger (1945) has described life as a system in steady-state thermodynamic disequilibrium that maintains its constant distance from equilibrium (death) by feeding on low entropy from its environment – that is, by exchanging high-entropy outputs for low-entropy inputs. The same statement would hold verbatium as a physical description of our economic process. A corollary of this statement is that an organism cannot live in a medium of its own waste products.”

Using energy produces waste. Using more energy produces more waste. It doesn’t matter -much- what kind of energy is used, or what kind of waste is produced. The energy WE use produces waste, in a medium of which WE cannot survive. The only way to escape this is to use less energy. And because we have used such an enormous amount of energy the past 100 years, we must use a whole lot less in the next 100.

We use about 100 times more energy per person, and a whole lot more in the west, than our own labor can produce. We use the equivalent of what 500 billion people can produce without the aid of fossil fuel-powered machines. We won’t solve this problem with wind turbines or solar panels. There really is one way only: cut down on energy use.

Because it’s exceedingly rare to see this discussed, even among physicists, who should know better since they know thermodynamics, it’s good to hear it from someone else. An article in Forbes today discusses a May 3 article in German magazine Der Spiegel on the problems with the Energiewende, the country’s drastic turn towards renewables.

The Forbes article is written by Michael Shellenberger, President of Environmental Progress and Time Magazine “Hero of the Environment.” (sigh..) Let’s take a walk through it:

The Reason Renewables Can’t Power Modern Civilization Is Because They Were Never Meant To

Over the last decade, journalists have held up Germany’s renewables energy transition, the Energiewende, as an environmental model for the world. “Many poor countries, once intent on building coal-fired power plants to bring electricity to their people, are discussing whether they might leapfrog the fossil age and build clean grids from the outset,” thanks to the Energiewende, wrote a New York Times reporter in 2014. With Germany as inspiration, the United Nations and World Bank poured billions into renewables like wind, solar, and hydro in developing nations like Kenya.

Oh well, perhaps we shouldn’t expect journalists and politicians to understand the world they live in. They’re mostly into feel-good items, that’s a job requirement.

But then, last year, Germany was forced to acknowledge that it had to delay its phase-out of coal, and would not meet its 2020 greenhouse gas reduction commitments. It announced plans to bulldoze an ancient church and forest in order to get at the coal underneath it. After renewables investors and advocates, including Al Gore and Greenpeace, criticized Germany, journalists came to the country’s defense.


“Germany has fallen short of its emission targets in part because its targets were so ambitious,” one of them argued last summer. “If the rest of the world made just half Germany’s effort, the future for our planet would look less bleak,” she wrote. “So Germany, don’t give up. And also: Thank you.” But Germany didn’t just fall short of its climate targets. Its emissions have flat-lined since 2009.

The stage is set: everybody’s favorite renewables producer has fallen flat on its face. And don’t forget, Angela Merkel, the Mutti behind the Energiewende, is a physicist by training. Thermodynamics must have been a class she missed.

Now comes a major article in the country’s largest newsweekly magazine, Der Spiegel, titled, “A Botched Job in Germany” (“Murks in Germany”). The magazine’s cover shows broken wind turbines and incomplete electrical transmission towers against a dark silhouette of Berlin. “The Energiewende — the biggest political project since reunification — threatens to fail,” write Der Spiegel’s Frank Dohmen, Alexander Jung, Stefan Schultz, Gerald Traufetter in their a 5,700-word investigative story (the article can be read in English here).

Germany has already spent $180 billion on its switch to renewables, only to find it doesn’t work. And much much more will be needed. But for what exactly?

Over the past five years alone, the Energiewende has cost Germany €32 billion ($36 billion) annually, and opposition to renewables is growing in the German countryside. “The politicians fear citizen resistance” Der Spiegel reports. “There is hardly a wind energy project that is not fought.” In response, politicians sometimes order “electrical lines be buried underground but that is many times more expensive and takes years longer.”

 

 

As a result, the deployment of renewables and related transmission lines is slowing rapidly. Less than half as many wind turbines (743) were installed in 2018 as were installed in 2017, and just 30 kilometers of new transmission were added in 2017. Solar and wind advocates say cheaper solar panels and wind turbines will make the future growth in renewables cheaper than past growth but there are reasons to believe the opposite will be the case. Der Spiegel cites a recent estimate that it would cost Germany “€3.4 trillion ($3.8 trillion),” or seven times more than it spent from 2000 to 2025, to increase solar and wind three to five-hold by 2050.

A total expenditure of some $150 billion per year, every year from 2025 to 2050. On a rapidly failing project. Note: the numbers are “flexible”: just above, it says “Over the past five years alone, the Energiewende has cost Germany €32 billion ($36 billion)” , and seven times that is much more than $150 billion annually. Later in the article, the author says “Germans, who will have spent $580 billion on renewables by 2025 ..” General rule of thumb: it will cost much more than any estimate will tell you.

Between 2000 and 2018, Germany grew renewables from 7% to 39% of its electricity. And as much of Germany’s renewable electricity comes from biomass, which scientists view as polluting and environmentally degrading, as from solar.

Of the 7,700 new kilometers of transmission lines needed, only 8% has been built, while large-scale electricity storage remains inefficient and expensive. “A large part of the energy used is lost,” the reporters note of a much-hyped hydrogen gas project, “and the efficiency is below 40%… No viable business model can be developed from this.”

Meanwhile, the 20-year subsidies granted to wind, solar, and biogas since 2000 will start coming to an end next year. “The wind power boom is over,” Der Spiegel concludes.

Think Mutti Merkel has read this?

.The earliest and most sophisticated 20th Century case for renewables came from a German who is widely considered the most influential philosopher of the 20th Century, Martin Heidegger. In his 1954 essay, “The Question Concerning Technology,” Heidegger condemned the view of nature as a mere resource for human consumption. The use of “modern technology,” he wrote, “puts to nature the unreasonable demand that it supply energy which can be extracted and stored as such..

But then starting around the year 2000, renewables started to gain a high-tech luster. Governments and private investors poured $2 trillion into solar and wind and related infrastructure, creating the impression that renewables were profitable aside from subsidies. Entrepreneurs like Elon Musk proclaimed that a rich, high-energy civilization could be powered by cheap solar panels and electric cars.

Journalists reported breathlessly on the cost declines in batteries, imagining a tipping point at which conventional electricity utilities would be “disrupted.” But no amount of marketing could change the poor physics of resource-intensive and land-intensive renewables. Solar farms take 450 times more land than nuclear plants, and wind farms take 700 times more land than natural gas wells, to produce the same amount of energy.

Note: these issues only arise when you talk about large-scale projects, but then those are the only ones even considered.

Efforts to export the Energiewende to developing nations may prove even more devastating. The new wind farm in Kenya, inspired and financed by Germany and other well-meaning Western nations, is located on a major flight path of migratory birds. Scientists say it will kill hundreds of endangered eagles. “It’s one of the three worst sites for a wind farm that I’ve seen in Africa in terms of its potential to kill threatened birds,” a biologist explained.

We are incapable of seeing an ecosystem as a whole and functioning entity, because we have never learned to look at things that way. So we see a landscape as containing an X-amount of animals and plant life, and can’t figure out why we must be careful with its balance. Landscapes to us look, first, empty, unless there’s -lots of- human activity.

Heidegger, like much of the conservation movement, would have hated what the Energiewende has become: an excuse for the destruction of natural landscapes and local communities. Opposition to renewables comes from the country peoples that Heidegger idolized as more authentic and “grounded” than urbane cosmopolitan elites who fetishize their solar roofs and Teslas as signs of virtue.


Germans, who will have spent $580 billion on renewables by 2025, express great pride in the Energiewende. “It’s our gift to the world,” a renewables advocate told The Times. Tragically, many Germans appear to have believed that the billions they spent on renewables would redeem them. “Germans would then at last feel that they have gone from being world-destroyers in the 20th century to world-saviors in the 21st,” noted a reporter.

Germany to save the world. Yeah, they would love that. Better find another project for that, though. Germany has an enormous car industry, and electric cars, as this article should by now have shown, won’t save the environment. They can’t. Only not driving a car can.

Shellenberger then finishes with a nice, almost philosophical conclusion, which is also his headline:

Many Germans will, like Der Spiegel, claim the renewables transition was merely “botched,” but it wasn’t. The transition to renewables was doomed because modern industrial people, no matter how Romantic they are, do not want to return to pre-modern life. The reason renewables can’t power modern civilization is because they were never meant to. One interesting question is why anybody ever thought they could.

The reason why anyone ever thought renewables could power modern civilization is the same that Angela Merkel thought that: we all learn from failing education systems and have a very poor understanding of even the most basic principles of physics, including by physicists. We want to feel good more than we want reality.

Schools, universities, media and politics are all geared towards believing in growth and progress, in unlimited quantities. Because we all want to believe that there will be energy in unlimited quantities, it’s in our genes.

But look at it this way: in Nate Hagens’ presentation Earth vs. The Amoeba, which I posted a few days ago, there’s a slide that says fossil fuels provide us with a labor subsidy of the equivalent of some 500 billion people, 100 people (energy slaves) for each of us in the global workforce, and many more in the west. Is there anyone amongst you who thinks wind and solar could ever do the same, even in the most ideal conditions imaginable?

If not, it would seem to be time to reconsider a few things. First of all: stop advocating renewables, start advocating the use of less energy. I’m not saying it will be much use, I have this deep-seated fear that we, as a species, won’t be able to stop until nature itself stops us. What you don’t use, someone else can and will. But renewables are now dead. So there. Thanks for making that clear, Mutti, even if you didn’t mean to.

 

 

 

 

Debt Rattle December 18 2018

Dec 182018
 
 December 18, 2018  Posted by at 10:09 am Finance Tagged with: , , , , , , , , , , ,  9 Responses »


Caravaggio St. John the Baptist in the wilderness 1604

 

• S&P 500 Drops More Than 2% To New Low For 2018, Dow Dives 500 Points (CNBC)
• The Latest Key Death Cross Is Poised To Engulf The Stock Market (MW)
• Stock Market On Pace For Worst December Since Great Depression (CNBC)
• How The Federal Reserve Could Spark A ‘Santa Claus’ Stock Rally (Yahoo!)
• You Have A “Trading” Problem (Roberts)
• China Politics Getting In The Way Of Reforms (G.)
• China To Mark Economic Miracle That Pulled 700 Million People Out Of Poverty (RT)
• Australia’s Central Bank Sees Risks From High Debt As House Prices Fall (R.)
• ‘No Existing Countermeasures’ To Russian Hypersonic Weapons – US Gov’t (RT)
• The Bigotry Behind NY Times’ ‘Russians Targeted African-Americans’ (GJ)
• Racist ‘Russians’ Targeted African-Americans In 2016 Election – Reports (RT)
• Russia! The Gift That Keeps Giving For The BBC, Even In France (Bridge)
• Fatal Over-Reach (Kunstler)
• Coal Demand Will Remain Steady Through 2023 -IEA (CNBC)

 

 

Can’t wait for Christmas amd some days off. Close it down and it can’t fall further. Either that or give Jay Powell a call.

• S&P 500 Drops More Than 2% To New Low For 2018, Dow Dives 500 Points (CNBC)

Stocks tanked on Monday, pushing the S&P 500 to a new low for the year amid growing concerns that the Federal Reserve’s plan to raise interest rates could be too much for the economy and stock market to handle. The S&P 500 fell as much as 2.5% to 2,530.54, surpassing its February intraday low of 2,532.69. The broad market index finished the session down 2% at 2,545.94, its lowest close for the year. The Dow Jones Industrial Average lost 507.53 points to close at 23,592.98, bringing its two-day losses to more than 1,000 points. Shares of Amazon and Goldman Sachs led the declines.

The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 7% so far for the month. The S&P 500 is now in the red for 2018 by 4%. The tech-heavy Nasdaq Composite dropped 2.2% to finish the day at 6,753.73 as Microsoft dropped 2.9%. The Russell 2000 — which tracks the performance of smaller companies — entered a bear market, down 20% from its 52-week high. DoubleLine Capital CEO Jeffrey Gundlach said Monday that he “absolutely” believes the S&P 500 will go below the lows that the index hit early in 2018. “I’m pretty sure this is a bear market,” Gundlach told Scott Wapner on CNBC’s “Halftime Report. The major averages fell to session lows following his comments.

Read more …

There are so many death croses lately, the term loses meaning.

• The Latest Key Death Cross Is Poised To Engulf The Stock Market (MW)

Ominous-sounding death crosses have been emerging in the stock market like weeds, with the latest — and arguably, the last important such cross — about to take hold in the Dow. The Dow Jones Industrial Average is on the verge of joining other major equity benchmarks in a so-called death cross, where the 50-day — a short-term trend tracker — crosses below the 200-day, used to determine a long-term trend in an asset. Chart watchers believe that such a cross marks the point where a shorter-term decline graduates to a longer-term downtrend.

Currently, the Dow’s 50-day moving average stands at 25,173.14, compared against its 200-day average at 25,083.23, according to FactSet data, as of Friday’s close of trading. That puts the 50-day less than 90 points shy of breaching the long-term average, which could occur by the end of this week or next, based on the current pace of decline. The Dow has suffered a series of punishing drops on nagging fears of slowing global growth, unresolved trade worries and the pace of the Federal Reserve’s rate increases, with Monday’s action placing the Dow at its lowest close since March 23, 2018.

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Thank the Fed.

• Stock Market On Pace For Worst December Since Great Depression (CNBC)

Two benchmark U.S. stock indexes are careening toward a historically bad December. Both the Dow Jones Industrial Average and the S&P 500 are on pace for their worst December performance since 1931, when stocks were battered during the Great Depression. The Dow and S&P 500 are down 7.8% and 7.6% this month, respectively. December is typically a very positive month for markets. The Dow has only fallen during 25 Decembers going back to 1931. The S&P 500 averages a 1.6% gain for December, making it typically the best month for the market, according to the Stock Trader’s Almanac. While the S&P 500 began dissemination in 1950, the performance data was backtested through 1928. It’s worth noting that historically, the second half of December tends to see gains.

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The Fed has absolute control. I don’t see nearly enough people being afraid of that.

• How The Federal Reserve Could Spark A ‘Santa Claus’ Stock Rally (Yahoo!)

After a bruising few months for stocks, investors are banking on a ‘Santa Claus’ rally to close out 2018. Even with just a handful of trading sessions left in 2018, there is still one remaining catalyst that could spark a stock rally: the Federal Reserve. The market is pricing in a 78% chance the Fed announces a rate hike Wednesday, when it wraps up its two-day policy meeting, according to CME futures data. The rate hike itself wouldn’t spark the rally. In fact, rate hikes make stocks less attractive. But this rate hike is so priced in, that not going forward with it could signal that the Fed is worried about the economy. This would be the Fed’s fourth interest rate hike of 2018. It was in June that the Fed telegraphed this fourth rate hike.

Instead, the stock rally could be sparked by the Fed’s guidance about monetary policy in 2019. “For U.S. stocks to drift higher this week, the Fed will have to strike an easier tone about future rate hikes without signaling undue concerns about U.S. economic growth,” wrote Nick Colas, co-founder of DataTrek Research, in a note to clients Monday. But doing so may force them to downgrade U.S. economic growth forecasts for 2019, Colas said. “Changing course on rates without that air cover will make it look like the Fed is targeting asset price volatility (a.k.a. the “Fed Put”) or – worse – that the central bank is taking orders from the White House,” Colas noted, referring to President Trump’s months-long criticism — which occurred as recently as Monday — of the Fed’s monetary tightening.

[..] the Fed’s statement on Wednesday, roughly 200 words in length, will be scrutinized by investors. “The Fed could delete the words ‘gradual increases’ — meaning a hike every quarter is no longer a working assumption,” said Danielle DiMartino Booth, a former Fed advisor and CEO of Quill Intelligence. “That would take March off the table in theory and could spark a rally, even if based only on technicals, that could run into year-end.” The Fed has started to use the phrase “gradual increases” when referring to interest rate hikes in its statements starting in June. Prior to that, many of the statements included the phrase “gradual adjustments.” “Investors are hungry for even a morsel of dovishness, and what they do not say could be even more powerful than what they do say,” Booth noted.

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I don’t think the problem is where Lance sees it.

• You Have A “Trading” Problem (Roberts)

As Sy Harding says in his excellent book “Riding The Bear:” “No such creature as a ‘buy and hold’ investor ever emerged from the other side of the subsequent bear market.” Statistics compiled by Ned Davis Research back up Harding’s assertion. Every time the market declines more than 10%, (and “real” bear markets don’t even officially begin until the decline is 20%), mutual funds experience net outflows of investor money. To wit: “Lipper also found the largest outflows on record from stocks ($46BN), the largest outflows since December 2015 from taxable bond ($13.4BN) and Investment Grade bond ($3.7BN) funds, and the 4th consecutive week of outflows from high yield bonds ($2.1BN), offset by a panic rush into cash as money market funds attracted over $81BN in inflows, the largest inflow on record.”

Most bear markets last for months (the norm), or even years (both the 1929 and 1966 bear markets), and one can see how the torture of losing money week after week, month after month, would wear down even the most determined “buy and hold” investor. But the average investor’s pain threshold is a lot lower than that. The research shows that it doesn’t matter if the bear market lasts less than 3 months (like the 1990 bear) or less than 3 days (like the 1987 bear). People will still sell out, usually at the very bottom, and almost always at a loss. So THAT is how it happens. And the only way to avoid it – is to avoid owning stocks during bear markets. If you try to ride them out, odds are you’ll fail. And if you believe that we are in a “New Era,” and that bear markets are a thing of the past, your next of kin will have our sympathies.

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Xi is not reforming, he’s trying to keep China above water.

• China Politics Getting In The Way Of Reforms (G.)

Xi’s speech comes as the Chinese leadership is facing criticism over slowing growth and confrontation with the US. Observers hoped his speech would lay out new directions or reforms needed to help the Chinese economy, weighed down by debt and lagging consumption, and an overly dominant state sector. Instead, Xi stressed that the Party’s leadership and strategy up to now have been “absolutely correct.” He promised to support the state sector while continuing reforms in appropriate areas. His remarks lacked any detail about new policies and failed to inspire confidence in Asian markets. Hong Kong and Shanghai both dropped sharply during the speech. They are now off 1% for the day while losses have deepened to 1.8% in Tokyo and more than 1% in Sydney.

“President Xi was perhaps unsurprisingly long on rhetoric and short on details,” said Tom Rafferty, regional manager for China at the Economist Intelligence Unit. “There will be a sense of disappointment, among both local and international investors, that Xi did not give clearer signals about the direction of future economic reform at a time when the Chinese government’s commitment to market liberalisation is seen to have waned.” Critics say politics are getting in the way of needed reforms – a rare challenge to Xi, who has amassed power more quickly than any of his predecessors.

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Central question is how much of it was borrowed. How much is based on unproductive investments and sheer waste?

• China To Mark Economic Miracle That Pulled 700 Million People Out Of Poverty (RT)

China has pledged more economic reforms to push growth higher and help offset any impact from the US trade conflict. It comes as the world’s second-largest economy marks the 40th anniversary of “reform and opening up” this week. Statistics show that more than 700 million Chinese people have shaken off poverty since Beijing started its program of economic reforms four decades ago. The figure accounts for over 70% of global poverty reduction during that period. The first wave of reform, which lasted from 1978 to 1989, was characterized by agricultural reform and revival of the private sector. The second wave of reform (from 1992 to 2012) resulted in the legalization of the market economy, China’s accession to the WTO, and a booming private sector.

China’s record in poverty reduction since reform and opening up is without parallel in human history, according to Wang Yiwei, professor of the School of International Studies at Renmin University. “Between 1978 and 2017, China’s economy expanded at an annual average 9.5% growth rate, increasing in size almost 35 times,” he told Xinhua News. The total expansion of China’s economy over a 39 year period was almost three times as much as Japan’s, Ross noted, adding that “No other economy commencing sustained rapid economic growth even remotely approaches the 22.3% of the world’s population as China had in 1978 at the beginning of reform and opening up.”

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Australia hasn’t gone down in 2 decades. That takes a lot of debt.

• Australia’s Central Bank Sees Risks From High Debt As House Prices Fall (R.)

A combination of falling home prices, stratospheric household debt and low wage growth posed downside risks to the Australian economy, the country’s central bank warned on Tuesday, even as it predicted the next move in interest rates would likely be up. Minutes of the Reserve Bank of Australia’s (RBA) December policy meeting showed members spent a considerable time discussing the recent slowdown in global growth momentum, partly caused by a bitter tariff dispute between the United States and China. Australia is heavily leveraged to global trade with China its No.1 trading partner so any deceleration in momentum overseas will likely be negative for the A$1.8 trillion economy.

Indeed, Australia’s gross domestic product expanded at a weaker-than-expected 2.8% pace last quarter, when policy makers were hoping for “above-trend” 3%-plus growth. Dismal private consumption was a major factor hurting economic activity, even though there were some early signs of a small uptick in wages growth. “The outlook for household consumption continued to be a source of uncertainty because growth in household income remained low, debt levels were high and housing prices had declined. Members noted that this combination of factors posed downside risks,” the RBA said.

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The key to why Russia is seen as a problem. And that in turn leads to all the articles following this one.

• ‘No Existing Countermeasures’ To Russian Hypersonic Weapons – US Gov’t (RT)

The US is currently unable to repel an attack from the hypersonic weapons that are being developed by Russia and China, as they can pierce most missile defense systems, a recent US government report has revealed.
“China and Russia are pursuing hypersonic weapons because their speed, altitude, and maneuverability may defeat most missile defense systems, and they may be used to improve long-range conventional and nuclear strike capabilities,” the report by the Government Accountability Office (GAO) reads. The report also highlights the challenges to American security posed by Chinese and Russian anti-satellite weapons and stealth aircraft that “could fly faster, carry advanced weapons, and achieve further distances.”

The rapid development of the cutting-edge technology “could force US aircraft to operate at father distances and put more US targets at risk,” the report notes. Speaking at a Valdai Club session in October, Russian President Vladimir Putin said that Russia surpassed its rivals in terms of hypersonic weapons, calling Russia’s prevalence in the field “an obvious fact.” “Nobody has precise hypersonic weapons. Some plan to test theirs in 18 to 24 months. We have them in service already,” Putin said. In March Putin unveiled several advanced weapons systems, including the Avangard hypersonic glider warheads and the Kinzhal –or Dagger– hypersonic cruise missile. The Kinzhal can fly at Mach-10 speed and has a reported range of 2,000 km (1243 miles).

It was reported that Russia’s advanced Sukhoi Su-57 jet might soon be armed with a missile similar to the Kinzhal. While the Avangard is about to enter military service, the Kinzhal has already been deployed with the force. Faced with the unmatched hypersonic capabilities, the Pentagon has launched about a dozen programs to protect the US from hypersonic weapons. A project named ‘Glide Breaker’ to develop an interceptor capable of neutralizing incoming hypersonic gliders has been in the works with The Defense Advanced Research Projects Agency (DARPA).

Read more …

If you were African-American and you’re told all the time that you would have voted Hillary if not for the Russians co-opting you with $5,000 in ads, you would get mad too.

• The Bigotry Behind NY Times’ ‘Russians Targeted African-Americans’ (GJ)

This morning, the New York Times decided to stop insulting our intelligence and instead chose to insult decency. In an article written by Scott Shane and Sheera Frenkel, Russians allegedly unleashed an intricate plot to targeted African-Americans in order to foment discontent and dupe “black people” to vote against their self-interest. According to the corporate recorders at the NY Times, the reason that African-Americans did not uniformly vote for Hillary Clinton and the Democrats is because they were too dimwitted to think for themselves and were subsequently manipulated by foreign agents. [..] Let me dispel some myths here about people who refused to vote for Hillary since I happen to be one of them.

I chose to withhold my support not because Russians conditioned me to think that way but because I refused to support a warmongering sociopath otherwise known as John McCain in pantsuits. I’ve followed Hillary’s career long enough to know that she is a corporate courtesan who can’t get enough of destabilizing nations and enriching herself by trading access for cash. Eight years of Obama catering to Wall Street and furthering George Bush’s war first policies was enough for me to tap out. [..] In other words, just because my skin color is “black” does not mean I owe my vote and loyalty to Democrats. True enough, there was a time where I was an unflinching supporter of team blue, but after seeing how Democrats are no different than Republicans, I chose to wake up.

[..] The level of duplicity on display by establishment voices is truly astounding. If leading Democrats and media personalities want to know who is responsible for the rise of Trump, they should look in the mirror. After all, it was Hillary Clinton’s “pied piper” strategy—heeded by her sycophants in the press—that elevated a reality show clown into a serious contender. Hillary Clinton and her cronies rigged the primaries, spent more than $1.2 billion and Trump was given more than a billion dollars in free media by CNN, MSNBC and their ilk, yet we are supposed to believe that $5,000 in Google ads and $50,000 on Facebook was enough to tilt the outcome of the 2016 elections.

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Who exactly here operates a troll factory?

• Racist ‘Russians’ Targeted African-Americans In 2016 Election – Reports (RT)

Low voter turnout among African-Americans is usually blamed on purged voter rolls or decades of socioeconomic stasis – but in 2016, ‘evil’ Russia was the main culprit, according to two controversial reports for the US Senate. Though described as “Senate reports” by mainstream US media outlets, the two documents were actually compiled by third parties. The first was produced by a consultancy called New Knowledge, with the help of two other researchers, while the second was done by a group at Oxford University and the UK research firm Graphika. By the social media giants’ own admission, the criteria for labeling posts as “Russian” is so broad as to be practically meaningless.

That hasn’t stopped the authors of the two reports, though, who saw President Vladimir Putin’s fingerprints on every keyboard and under every bed. In particular, they argued, the “Russians” sought to depress the 2016 turnout by targeting Black Americans. Both groups relied on posts provided to the US government by Twitter, Facebook and Google and identified as coming from the St. Petersburg-based Internet Research Agency (IRA), also known as the “troll factory.” “These campaigns pushed a message that the best way to advance the cause of the African-American community was to boycott the election and focus on other issues instead,” said the Oxford report.

“The most prolific IRA efforts on Facebook and Instagram specifically targeted black American communities and appear to have been focused on developing black audiences and recruiting black Americans as assets,” says the New Knowledge report. While some African-American activists saw the reports as recognition of their community’s influence in US politics, others pointed out that blaming the “Russians” downplayed very real and long-standing racism in American society.

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African-Americans have no opinions of their own, and neither do Yellow Vests. They’re all like Putin’s zombie armies. Next up is Orban blaming Putin for Hungary’s protests.

• Russia! The Gift That Keeps Giving For The BBC, Even In France (Bridge)

Given the rash of conspiracy theories leveled against Russia of late, it is no surprise that the BBC is deep-sea fishing for a Kremlin angle to explain the protests against the government of French President Emmanuel Macron. This new and improved beast of burden to explain every uprising, lost election, accident and wart, popularly known as ‘Russia’ – a strategy rebuked by none other than President Putin as “the new anti-Semitism” – provides craven political leaders with a ready-made alibi when the proverbial poo hits the fan. Yes! It can even rescue Emmanuel Macron, who just experienced his fifth consecutive weekend of protests in the French capital and beyond.

Here is the real beauty of this new media product, which promises to outsell Chanel No.5 this holiday season. Reporting on ‘Russia’ does not require any modicum of journalistic ethics, standards or even proof to peddle it like snake oil to an unsuspecting public. Simply uttering the name ‘Russia’ is usually all it takes for the fairytale to grow wings, spreading its destructive lies around the world. ‘Russia’ is truly the gift that keeps on giving! Allow me to demonstrate how easy it is to apply. Just this weekend, BBC journalist Olga Ivshina was engaged in correspondence with a stringer in France. In an effort to explain what has sparked the French protests, Ivshina gratuitously tossed out some live ‘blame Russia’ bait.

“And maybe some Russian business is making big bucks on it,” the BBC journalist solicited in an effort to conjure up fake news out of thin air. “Maybe they are eating cutlets out there en masse, for example. Or maybe the far-right are the main troublemakers?” When the question only managed to elicit an uncomfortable laugh from the stringer, the nonplussed BBC journalist exposed more trade secrets than was probably advisable. In fact, what followed seems to have been the only nugget of truth to emerge from the discussion. Ivshina confided that she was “looking for various angles” since the broadcaster, like a modern day Dracula flick, was “out for blood.”

Read more …

“The next scheduled chapter in the story is Gen. Flynn’s sentencing this Tuesday. It would be a surprise if the Judge does not observe that Mr. Mueller has acted in contempt of court. Ditto if the charge against Gen. Flynn is not thrown out. ”

• Fatal Over-Reach (Kunstler)

Last Friday morning, we adjourned the blog in anticipation of Special Counsel Robert Mueller handing over certain FBI documents in the General Flynn matter demanded by DC District Federal Judge Emmett G. Sullivan no later than 3:00 p.m. that day. Guess what. Mr. Mueller’s errand boys did not hand over the required documents — original FBI 302 interrogation reports. Instead, they proffered a half-assed “interview” with one of the two agents who conducted the Flynn interrogation, Peter Strzok, attempting to recollect the 302 half a year after it was written. Of course, Mr. Strzok was notoriously fired from the Bureau in August for bouts of wild political fury on-the-job as FBI counter-intel chief during and after the 2016 election. (This was the second time he was fired; the first was when Robert Mueller discarded him from the SC team in 2017 as a legal liability.)

So, 3:00 p.m. Friday has come and gone. It appears that the FBI 302 docs have come and gone, too. Actually, we have reason to believe that nothing ever created on a computer connected to the internet can actually disappear entirely. Rather, the data gets sucked into the bottomless well of the NSA server-farm out in Utah. Most likely, the original 302s exist and Mr. Mueller is pretending he can’t find them. In effect, it appears that Mr. Mueller has responded by gently whispering “fuck you” to Judge Sullivan.

Interestingly, The New York Times didn’t even report the story (nor The WashPo, nor CNN, nor MSNBC). Since their “Russia Collusion” narrative is foundering, they can’t tolerate any suggestion that their Avenging Angel of Impeachment, Mr. Mueller, is less than the sanctified plain dealer he affects to be. Judge Sullivan kept his own counsel all weekend. The next scheduled chapter in the story is Gen. Flynn’s sentencing this Tuesday. It would be a surprise if the Judge does not observe that Mr. Mueller has acted in contempt of court. Ditto if the charge against Gen. Flynn is not thrown out. After all, the main articles of evidence against him apparently don’t exist.

And if it turns out that Mr. Mueller and his team are disgraced by their apparent bad faith behavior in the Flynn case, what then of all the other cases connected to Mueller one way or another: Manafort, Cohen, Papadopoulos? And the other matters still in question, such as the Trump Tower meeting with the Russian “Magnitsky” lawyer and Golden Golem Junior, the porn star payoffs… really everything he has touched. What if it all falls apart?

Read more …

This is it. Given recent claims that emissions must be cut five times more than is now recognized, and there are just 2 years left to do anything meaningful concerning climate change, this is it.

• Coal Demand Will Remain Steady Through 2023 -IEA (CNBC)

Coal consumption is expanding after two years of decline, but miners should brace for another period of sluggish growth, according to the International Energy Agency. In its latest annual report, the IEA forecasts global coal demand will remain essentially stable over the next five years, inching up by just over 1% between 2017 and 2023. The reason for coal’s stagnation remains unchanged from recent years: Developed nations are ditching the fossil fuel, while India and other emerging economies are turning to coal to quickly scale up electric power generation.

“In a growing number of countries, the elimination of coal-fired generation is a key climate policy goal. In others, coal remains the preferred source of electricity and is seen as abundant and affordable,” said the IEA, a Paris-based agency that advises developed nations on energy policy. The IEA’s forecast comes on the heels of a series of reports that the world is falling short of commitments to prevent catastrophic impacts from climate change and running out of time to take action. Burning coal for electric power and industrial purposes such as steelmaking is a major contributor to global warming.

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Debt Rattle October 15 2017

Oct 152017
 
 October 15, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


Piet Mondriaan Composition in color A 1917

 

• Tesla Shareholders: Are You Drunk On Elon Musk’s Kool-Aid? (Lewitt)
• ECB Suffers from “Corporate Capture at its Most Extreme” (DQ)
• ECB Still Believes In Eventual Inflation, Wage Rise: Draghi (R.)
• China Credit Growth Exceeds Estimates Despite Debt Curb Vow (BBG)
• PBOC Governor Zhou Says China’s 6.9% Growth ‘May Continue’ (BBG)
• In China, The War On Coal Just Got Serious (SMH)
• IMF Steering Committee Warns Global Growth Is At Risk Of Faltering (BBG)
• Corbyn Has A Washington Ally On Taxing The Rich. But No, It’s Not Trump (G.)
• Brexit Has Made The UK The Sick Man Of Europe Once More (NS)
• UK MPs Move To Block May From Signing ‘No Deal’ Brexit (G.)
• Forget Catalonia, Flanders Is The Real Test Case Of EU Separatism! (OR)
• Europe’s Migration Crisis Casts Long Shadow As Austria Votes (R.)

 

 

Funny but very serious. Recommend the whole article.

• Tesla Shareholders: Are You Drunk On Elon Musk’s Kool-Aid? (Lewitt)

Tesla shareholders (and bullish Wall Street analysts) are either geniuses or delusional and I am betting on the latter. Typical of the lack of gray matter being applied to this investment is a recent post on Seeking Alpha, often a place where amateurs go to pump stocks they own. Someone calling himself “Silicon Valley Insights” issued an ungrammatical “Strong Buy” recommendation on October 11 based on the following syllogism: (1) “Tesla CEO Elon Musk has stated very firmly that they can and will reach his goal of producing 5,000 cars per week by the end of this year.” (2) “Musk has a history of setting aggressive targets (more for his staff than investors) [Editors’s Note: That is a lie.] and then missing them on initial timing but reaching them later. [Editor’s Notes: That is another lie–Musk has NEVER reached a production target.]

(3) “Reaching anything [sic] significant portion of that 5K target (say 1-2K) by the end of December could drive TSLA shares significantly higher.” This genius then suggests that investors stay focused on the Model 3 ramp as the key price driver over the coming weeks and months and argues that the announcement that only 260 Model 3s were produced in the third quarter leaves “much of the risk…now in the stock price.” He is correct – there is a great deal of risk embedded in a stock trading at infinity-times earnings with no prospect of profitability , a track record of breaking promises, a reluctance to sell equity to fund itself even at price levels above the targets of most analysts, and a market cap larger than rivals that are pouring tens of billions of dollars into putting it out of business.

Undeterred, he offers two investment strategies. The first he terms a “reasonable and conservative” one that waits to invest in TSLA shares until the early November third quarter earnings call. In my world, a reasonable and conservative strategy would be to run for the hills or short the stock (as I am doing). A “more aggressive and risky strategy” (compared to skydiving or bungee jumping) would be “to buy shares before that third quarter report and call on the bet that the Model 3 production update will be taken positively.” No doubt investors like Mr. Silicon Valley Insights will put a positive spin on whatever fairy tales Elon Musk spins on that call, but that is a big bet indeed.

Read more …

Bankers involved in LIbor and other scandals regulate themselves. This is the exact opposite of an independent central bank. It’s a criminal racket.

• ECB Suffers from “Corporate Capture at its Most Extreme” (DQ)

No single institution has more influence over the lives of European citizens than the European Central Bank. It sets the interest rates for the 19 Member States of the Eurozone, with a combined population of 341 million people. Every month it issues billions of euros of virtually interest-free loans to hard-up financial institutions while splashing €60 billion each month on sovereign and corporate bonds as part of its QE program, thanks to which it now boasts the biggest balance sheet of any central bank on Planet Earth. Through its regulatory arm, the Single Supervisory Mechanism, it decides which struggling banks in the Eurozone get to live or die and which lucky competitor gets to pick up the pieces afterwards, without taking on the otherwise unknown risks. In short, the ECB wields a bewildering amount of power and influence over Europe’s financial system.

But how does it reach the decisions it makes? Who has the ECB’s institutional ear? The ECB has 22 advisory boards with 517 seats in total that provide ECB decision-makers with recommendations on all aspects of EU monetary policy. A new report by the non-profit research and campaign group Corporate Europe Observatory (CEO) reveals that 508 of the 517 available seats are assigned to representatives of private financial institutions. In other words, 98% of the ECB’s external advisors have some sort of skin in the game. Of the nine seats not taken by the financial sector, seven have gone to non-financial companies such as German industrial giant Siemens and just two to consumer groups, according to the CEO report. In response to questions by CEO, the ECB said that its advisory groups help it to gather information, effectively “discharge its mandate”, and “explain its policy decisions to citizens.”

[..] Many of the above institutions were implicated in two of the biggest financial crimes of this century, the Forex and Libor scandals. In fact, according to CEO, banks involved in a separate forex manipulation scandal that emerged in 2013 have been heavily represented on the ECB’s Foreign Exchange Contact Group. In other words, these banks are supposed to be under direct ECB supervision, and yet they have been repeatedly caught committing serious financial crimes. And now it turns out that they enjoy more influence over ECB decision making than anyone else..

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Spot the nonsense: ”..already bought over 2 trillion euros worth of bonds to cut borrowing costs and induce household and corporate spending..”

They buy bonds and magically households will start spending. They don’t belive that themselves either.

• ECB Still Believes In Eventual Inflation, Wage Rise: Draghi (R.)

Wages and inflation in the 19-country euro zone will eventually rise but more slowly than earlier thought, requiring continued patience from policymakers, European Central Bank President Mario Draghi said on Saturday. Wage growth has failed to respond to stimulus for a list of reasons but the ECB remains convinced that labor markets and not a structural change in the nature of inflation is the chief culprit behind low prices, Draghi told a news conference on the sidelines of the International Monetary Fund annual meeting. Having fought low inflation for years, the ECB is due to decide at its Oct. 26 meeting whether to prolong stimulus, having to reconcile rapid economic expansion with weak wage and price growth.

Sources close to the discussion earlier told Reuters that the ECB will likely extend asset purchases but at lower volumes, signaling both confidence in the outlook but also indicating that policy support will continue for a long time. “The bottom line in terms of policy is that we are confident that as the conditions will continue to improve, the inflation rate will gradually converge in a self-sustained manner,” Draghi said. “But together with our confidence, we should also be patient because it’s going to take time.” Even as the euro zone has enjoyed 17 straight quarters of economic growth, wage growth has underperformed expectations, due in part to hidden slack in the labor market and low wage demands from unions.

Some policymakers also argue that globalization and technological changes have made value chains more international, making low inflation a global phenomenon and limiting central banks’ ability to control prices in their own jurisdiction. Draghi acknowledged the debate but said the ECB was convinced the main problem was the labor market and even if there was a broader issue, it would not lead to policy change. The ECB has kept interest rates in negative territory for years and already bought over 2 trillion euros worth of bonds to cut borrowing costs and induce household and corporate spending.

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They say one thing and do another.

• China Credit Growth Exceeds Estimates Despite Debt Curb Vow (BBG)

China’s broadest gauge of new credit exceeded projections, signaling that the funding taps remain open even as the government pushes to curb excessive borrowing. Aggregate financing stood at 1.82 trillion yuan ($276 billion) in September, the People’s Bank of China said Saturday, compared with an estimated 1.57 trillion yuan in a Bloomberg survey and 1.48 trillion yuan the prior month. New yuan loans stood at 1.27 trillion yuan, versus a projected 1.2 trillion yuan. The broad M2 money supply increased 9.2%, exceeding estimates and picking up from the prior record low. Policy makers have been clamping down on shadow banking while also working to keep corporate borrowing intact to avoid impeding growth.

The central bank said Sept. 30 it will reduce the amount of cash some banks must hold as reserves from next year, with the size of the cut linked to lending to parts of the economy where credit is scarce. “Momentum continues to be very strong,” said Kenneth Courtis, chairman of Starfort Investment Holdings and a former Asia vice chairman for Goldman Sachs. “Loan demand of the private sector has finally turned up in recent months.” “This means that there is little hope of further policy easing in the fourth quarter as the monetary policy is very accommodative,” said Zhou Hao, an economist at Commerzbank in Singapore. “There could be even a tightening bias.”

“Household short-term loans have increased too rapidly, with some funds being invested in stock and property markets,” said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. “Regulators have started to pay attention to the sector and required banks to strengthen credit review. I think the momentum will show signs of slowing in the fourth quarter.” “Deleveraging is not happening if we look at any measure of credit growth,” according to Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen. “Lending in 2017 has actually accelerated significantly from 2016.”

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Yeah. Financed by debt.

• PBOC Governor Zhou Says China’s 6.9% Growth ‘May Continue’ (BBG)

Economic indicators show “stabilized and stronger growth” and the momentum of a 6.9% expansion in the first six months of 2017 “may continue in the second half,” People’s Bank of China Governor Zhou Xiaochuan said. Imports and exports increased rapidly, fiscal income grew, and prices have been steady, Zhou said, according to a statement the central bank released Saturday after he attended meetings of global finance chiefs this week in Washington. The effects of a campaign to rein in leverage are showing, and China will monitor and prevent shadow banking and real estate risk, he said. China’s broadest gauge of new credit, released Saturday, exceeded projections, signaling that the funding taps remain open even as the government pushes to curb excessive borrowing. “Positive progress has been achieved in economic transformation,” the statement said.

“China will continue to pursue a proactive fiscal policy and a prudent monetary policy, with a comprehensive set of policies to strengthen areas of weakness.” Zhou’s comments, delivered before a gathering of Group of 20 finance ministers and central bankers, come before the release of third-quarter GDP, scheduled for Oct. 19. Economists project a moderation to 6.8% growth from the 6.9% pace in the second quarter amid government efforts to reduce overcapacity and ease debt risk. Steady growth in the world’s second-largest economy gives policy makers additional room to push ahead with reforms. Zhou recently made a fresh call to further open up the financial sector, warning that such an overhaul will become more difficult if the window of opportunity is missed. Some analysts say they expect reforms will pick up should President Xi Jinping further consolidate power after the 19th Party Congress starting next week.

The IMF this week increased its global growth forecast amid brightening prospects in the world’s biggest economies. It also raised its China growth estimate to 6.8 percent this year and 6.5 percent in 2018, up 0.1 percentage point in each year versus July. “We expect that the authorities can and will maintain a sufficiently expansionary macro policy mix to meet their policy target of doubling 2010 GDP by 2020,” Changyong Rhee, the fund’s Asia and Pacific director, said at a briefing Friday in Washington. “However, as this expansionary policy comes at the cost of a further large increase in debt, it also implies that there’s more downside risk in the medium-term due to this rapid credit expansion.”

Read more …

Beijing seems to be getting scared of people’s reactions. Still, when you think about it, closing down 50% of steel production says something about the country’s needs for steel.

• In China, The War On Coal Just Got Serious (SMH)

Beijing: In Australia, politicians continue to debate the existence of climate change. Donald Trump’s Environment Protection Agency declared this week that the “war on coal is over”. In China, the outlook could not be more different. The war on coal reached fever pitch here this month. As a deadline looms to achieve clean air targets by the end of 2017, October has seen unprecedented measures come into force to curb air pollution and reduce emissions. Steel production has been halved in major steel cities, coal banned in China’s coal capital, factories closed down for failing pollution inspections, and hundreds of officials sacked for failing to meet environmental targets. The complete shutdowns, or 50% production cuts, will stay in place for an unprecedented five months.

The winter heating season in China is approaching, when coal use has traditionally spiked, worsening northern China’s notorious air pollution. But cities are under pressure to meet important domestic targets for clean air, set five years ago by the State Council in response to a public outcry over pollution. China can’t allow a repeat of last winter, when, after several years of improvement, air quality suddenly worsened in some cities. For a few days in January 2016, the sky darkened and it looked possible that the “airpocalypse” of 2013 – which first drew global attention to Beijing’s severe air pollution – was back. Social media went into overdrive. Fighting air pollution is a matter of social stability, Environment Protection Minister Li Ganjie said a fortnight ago. So now the Chinese government has brought out the “iron fist”.

That was the phrase used by the environment protection bureau in China’s most polluted province, Hebei, as 69 government officials were sacked and 154 handed over to police for investigation last month for failing to implement pollution control measures. Meeting emissions targets has become a key performance indicator for local Communist Party bosses and mayors alike. Local governments that don’t enforce the pollution controls will have environmental assessments for new property developments suspended by the Ministry for Environment Protection, effectively blocking deals. A battle plan has been drawn up by the ministry to cover 28 northern cities, including Beijing and Tianjin, where 7000 pollution inspectors will be deployed to expose violations and look for data fraud. The curbs on industry, particularly steel making, are hitting world resources prices, including Australia’s biggest exports, as demand for iron ore and coal fall.

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Let me guess. They want more reforms.

• IMF Steering Committee Warns Global Growth Is At Risk Of Faltering (BBG)

The IMF’s steering committee warned that global growth is at risk of faltering in coming years given uncomfortably low inflation and rising geopolitical risks, injecting a cautious note into an otherwise improving economic outlook. “The recovery is not yet complete, with inflation below target in most advanced economies, and potential growth remains weak in many countries,” the International Monetary and Financial Committee said in a communique released Saturday in Washington. “Near-term risks are broadly balanced, but there is no room for complacency because medium-term economic risks are tilted to the downside and geopolitical tensions are rising.” The panel didn’t specify which geopolitical risks it was most concerned about.

In the past few weeks the U.S. and North Korea have engaged in shrill rhetoric about Pyongyang’s nuclear weapons. And on Friday, U.S. President Donald Trump took steps to confront Iran and renegotiate a 2015 multinational accord to curb Tehran’s nuclear program. At the same time, the U.K. is in the middle of negotiations on the terms of its exit from the EU. The panel nonetheless described the global outlook as strengthening, with rising investment, industrial output and confidence – conditions that make it ripe for nations to “tackle key policy challenges” and enact policies that boost the speed limit of their economies. “It’s when the sun is shining that you need to fix the roof,” IMF Managing Director Christine Lagarde said at a press briefing to discuss the statement.

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The best part of the iMF is not the front office, it’s the anonymous workers.

• Corbyn Has A Washington Ally On Taxing The Rich. But No, It’s Not Trump (G.)

The IMF has been on quite a journey from the days when it was seen as the provisional wing of the Washington consensus. These days the IMF is less likely to harp on about the joys of liberalised capital flows than it is to warn of the dangers of ever-greater inequality. The fund’s latest foray into the realms of progressive economics came last week when it used its half-yearly fiscal monitor – normally a dry-as-dust publication – to make the case for higher taxes on the super-rich. Make no mistake, this is a significant moment. For almost 40 years, since the arrival of Margaret Thatcher in Downing Street and Ronald Reagan in the White House, the economic orthodoxy on taxation has been that higher taxes for the 1% are self-defeating.

Soaking the rich, it was said, would punish initiative and lead to lower levels of innovation, investment, growth and, therefore, reduced revenue for the state. As the Conservative party conference showed, this line of argument is still popular. Minister after minister took to the stage to warn that Jeremy Corbyn’s tax plans would lead to a 1970s-style brain drain. The IMF agrees that a return to the income tax levels seen in Britain during the 1970s would have an impact on growth. But that was when the top rate was 83%, and Corbyn’s plans are far more modest. Indeed, it is a sign of how difficult it has become to have a grown-up debate about tax that Labour’s call for a 50% tax band on those earning more than £123,000 and 45% for those earning more than £80,000 should be seen as confiscatory.

The IMF’s analysis does something to redress the balance, making two important points. First, it says that tax systems should have become more progressive in recent years in order to help offset growing inequality, but have actually become less so. Second, it finds no evidence for the argument that attempts to make the rich pay more tax would lead to lower growth. There is nothing especially surprising about either of the IMF’s conclusions: in fact, the real surprise is that it has taken so long for the penny to drop. Growth rates have not picked up as taxes have been cut for the top 1%. On the contrary, they are much weaker than they were in the immediate postwar decades, when the rich could expect to pay at least half their incomes – and often substantially more than half – to the taxman.

If trickle-down theory worked, there would be a strong correlation between growth and countries with low marginal tax rates for the rich. There is no such correlation and, as the IMF rightly concludes, “there would appear to be scope for increasing the progressivity of income taxation without significantly hurting growth for countries wishing to enhance income redistribution”. With a nod to the work of the French economist Thomas Piketty, the fiscal monitor also says that countries should consider wealth taxes for the rich, to be levied on land and property.

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Why am I thinking it’s the Brit(on)s themselves who’ve done that?

• Brexit Has Made The UK The Sick Man Of Europe Once More (NS)

Though it didn’t feel like it at the time, the years preceding 2017 now resemble an economic golden age for the UK. After the damage imposed by the financial crisis and excessive austerity, Britain recovered to become the fastest growing G7 country. Real earnings finally rose as wages increased and inflation fell (income per person grew by 3.5% in 2015). And then the Brexit vote happened. Though the immediate recession that the Treasury and others forecast did not materialise, the UK has already paid a significant price. Having previously been the fastest growing G7 country, Britain is now the slowest. Real earnings are again in decline owing to the inflationary spike caused by the pound’s depreciation (the UK has the lowest growth and the highest inflation – stagflation – of any major EU economy).

Firms have delayed investment for fear of future chaos and consumer confidence has plummeted. EU negotiator Michel Barner’s warning of a “very disturbing” deadlock in the Brexit talks reflects and reinforces all of these maladies. While Leavers plead with Philip Hammond to set money aside for “a no-deal scenario”, the referendum result is daily harming the public finances. The Office for Budget Responsibility has forecast a £15bn budgetary hit (the equivalent of nearly £300m a week). To the UK’s existing defects – low productivity, low investment and low pay – new ones have been added: political uncertainty and economic instability. The Conservatives, to annex former Chancellor George Osborne’s phrase of choice, failed to fix the roof when the sun was shining.

Rather than taking advantage of record-low borrowing rates to invest in infrastructure (and improve the UK’s dismal productivity), the government squandered money on expensive tax cuts. The Sisyphean pursuit of a budget surplus (now not expected until at least 2027) reduced the scope for valuable investment. Productivity in quarter two of this year was just 0.9% higher than a decade ago – the worst performance for 200 years. Having softened austerity, without abandoning it, the Conservatives are now stuck in a political no man’s land.

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Cross-party action against May. It’s quite something. But it’ll just be more fighting.

• UK MPs Move To Block May From Signing ‘No Deal’ Brexit (G.)

A powerful cross-party group of MPs is drawing up plans that would make it impossible for Theresa May to allow Britain to crash out of the EU without a deal in 2019. The move comes amid new warnings that a “cliff-edge” Brexit would be catastrophic for the economy. One critical aim of the group – which includes the former Tory chancellor Kenneth Clarke and several Conservative ex-ministers, together with prominent Labour, SNP, Liberal Democrat and Green MPs – is to give parliament the ability to veto, or prevent by other legal means, a “bad deal” or “no deal” outcome. Concern over Brexit policy reached new heights this weekend after the prime minister told the House of Commons that her government was spending £250m on preparations for a possible “no deal” result because negotiations with Brussels had stalled.

Several hundred amendments to the EU withdrawal bill include one tabled by the former cabinet minister Dominic Grieve and signed by nine other Tory MPs, together with members of all the other main parties, saying any final deal must be approved by an entirely separate act of parliament. If passed, this would give the majority of MPs who favour a soft Brexit the binding vote on the final outcome they have been seeking and therefore the ability to reject any “cliff-edge” option. A separate amendment tabled by Clarke and the former Labour minister Chris Leslie says Theresa May’s plan for a two-year transition period after Brexit – which she outlined in her recent Florence speech – should be written into the withdrawal bill, with an acceptance EU rules and law would continue to apply during that period. If such a transition was not agreed, the amendment says, exit from the EU should not be allowed to happen.

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Some nice history, but a weird anti-Islam stance. And a somewhat dubious conclusion.

• Forget Catalonia, Flanders Is The Real Test Case Of EU Separatism! (OR)

To concisely summarize, there’s a very distinct possibility that the EU’s liberal-globalist elite have been planning to divide and rule the continent along identity-based lines in order to further their ultimate goal of creating a “federation of regions”. Catalonia is the spark that could set off this entire process, but it could also just be a flash in the pan that might end up being contained no matter what its final result may be. Flanders, however, is much different because of the heightened symbolism that Belgium holds in terms of EU identity, and the dissolution of this somewhat artificially created state would be the clearest sign yet that the EU’s ruling elite intend to take the bloc down the direction of manufactured fragmentation. Bearing this in mind, the spread of the “Catalan Chain Reaction” to Belgium and the inspiration that this could give to Flanders to break off from the rest of the country should be seen as the true barometer over whether or not the EU’s “nation-states” will disintegrate into a constellation of “Balkanized” ones.

{..] It’s important to mention that the territory of what would eventually become Belgium had regularly been a battleground between the competing European powers of the Netherlands, the pre-unification German states, France, the UK, and even Spain and Austria during their control of this region, and this new country’s creation was widely considered by some to be nothing more than a buffer state. The 1830 London Conference between the UK, France, Prussia, Austria, and Russia saw the Great Power of the time recognize the fledgling entity as an independent actor, with Paris even militarily intervening to protecting it during Amsterdam’s failed “Ten Day’s Campaign” to reclaim its lost southern province in summer 1831.

[..] Flanders contributes four times as much to Belgium’s national economy as Catalonia does to Spain’s, being responsible for a whopping 80% of the country’s GDP as estimated by the European Commission, and it also accounts for roughly two-thirds of Belgium’s total population unlike Catalonia’s one-sixth or so. This means that Flemish independence would be absolutely disastrous for the people living in the remaining 55% of the “Belgian” rump state, which would for all intents and purposes constitute a de-facto, though unwillingly, independent Wallonia.

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Austria is as much of a threat to the EU as Flanders is. The Visograd anti-migrants idea is moving west. This worries Germany, which shares quite a long border with Austria.

• Europe’s Migration Crisis Casts Long Shadow As Austria Votes (R.)

Austria holds a parliamentary election on Sunday in which a young conservative star hopes to beat the far right at its own game with a hard line on refugees and pledging to prevent a repeat of Europe’s migration crisis. Foreign Minister Sebastian Kurz, who is just 31, propelled his conservative People’s Party (OVP) to the top of opinion polls when he became its leader in May, dislodging the far-right Freedom Party from the spot it had held for more than a year. He is now the clear favorite to become Austria’s next leader. Kurz has pledged to shut down migrants’ main routes into Europe, through the Balkans and across the Mediterranean. Many voters now feel the country was overrun when it threw open its borders in 2015 to a wave of hundreds of thousands of people fleeing war and poverty in the Middle East and elsewhere.

Chancellor Christian Kern’s Social Democrats (SPO) are currently in coalition with Kurz’s OVP, but Kurz called an end to the alliance when he took over the helm of his party, forcing Sunday’s snap election. Opinion polls have consistently shown the OVP in the lead with around a third of the vote, and second place being a tight race between the Social Democrats and the Freedom Party (FPO), whose candidate came close to winning last year’s presidential election. “We must stop illegal immigration to Austria because otherwise there will be no more order and security,” Kurz told tabloid daily Oesterreich on Friday night. Campaigning has been dominated by the immigration issue. Kurz plans to cap benefit payments for refugees at well below the general level and bar other foreigners from receiving such payments until they have lived in the country for five years.


Now or never

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Debt Rattle July 20 2017

Jul 202017
 
 July 20, 2017  Posted by at 8:49 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »


Margaret Bourke-White Breadline, Kentucky 1937

 

• Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)
• Did the City of London Just Press the Panic Button on Brexit?
• Single Payer Is The Only Real Answer, Says Medicare Architect (IC)
• Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)
• Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)
• When Does a Home Become a Prison? (FAFC)
• Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)
• Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)
• US-Style Mega Farms Invade The World (G.)
• Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)
• Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)
• UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)
• The World Has Made More Than 9 Billion Tons of Plastic (CNBC)
• World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

 

 

The CIA will not like this. The press just can’t mention Putin enough. But a good decision.

• Trump Ends CIA Arms Support For Anti-Assad Syria Rebels (R.)

The Trump administration has decided to halt the CIA’s covert program to equip and train certain rebel groups fighting the government of Syrian President Bashar al-Assad, two U.S. officials said, a move sought by Assad ally Russia. The U.S. decision, said one of the officials, is part of an effort by the administration to improve relations with Russia, which along with Iranian-supported groups has largely succeeded in preserving Assad’s government in the six-year-civil war. The CIA program began in 2013 as part of efforts by the administration of then-President Barack Obama to overthrow Assad, but produced little success, said the officials, both of whom are familiar with the program and spoke on the condition of anonymity.

The decision was made with National Security Adviser H.R. McMaster and CIA Director Mike Pompeo after they consulted with lower ranking officials and before Trump’s July 7 meeting with Russian President Vladimir Putin at the G-20 summit in Germany. It was not part of U.S.-Russian negotiations on a ceasefire in southwestern Syria, the two officials said. One of the officials said the United States was not making a major concession, given Assad’s grip on power, although not on all of Syria, “but it’s a signal to Putin that the administration wants to improve ties to Russia.” A downside of the CIA program, one of the officials said, is that some armed and trained rebels defected to Islamic State and other radical groups, and some members of the previous administration favored abandoning the program.

Before assuming office in January, Trump suggested he could end support for Free Syrian Army groups and give priority to the fight against Islamic State. A separate effort by the U.S. military effort to train, arm and support other Syrian rebel groups with air strikes and other actions will continue, the officials said.

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The real Macron.

• Did the City of London Just Press the Panic Button on Brexit?

Oh the irony: EU capitals are trying to attract the very institutions that caused some of the worst financial scandals of the last ten years.

In a sign of growing desperation, the City of London Corporation, the enigmatic city within the city that serves as the ultimate bastion of privilege in the UK, is now trying to appeal to brute populist sentiment to defend its position as the world’s most important financial center. In a memo to the British Treasury, MPs, and financial institutions, the City’s Brexit envoy to the EU, Jeremy Browne, bemoaned that the French are pushing for the most damaging Brexit possible, even if France doesn’t directly benefit. The memo was duly leaked to one of the UK’s most anti-EU newspapers, The Daily Mail: “Browne’s recent meeting at the Banque de France was the worst he had had “anywhere in the EU”. The French, he said, “are crystal clear about their objectives: the weakening of Britain and the ongoing degradation of the City of London” and plotting to “actively disrupt and destroy” the UK’s financial sector when Britain leaves the EU.

France isn’t the only country aggressively trying to poach business from the City of London; so too are Germany, Spain, Luxembourg, the Netherlands and even Italy. But France differs from the rest in one key aspect, says Browne: it “sees Britain and the City of London as adversaries, not partners.” The recent election as president of Emmanuel Macron, a former investment banker at Rothschild & Cie Banque, has merely intensified this dynamic. Paris has promised to unfurl the red carpet for the City of London’s highest paid bankers by offering low tax rates and bank-friendly legislation, including scrapping a proposed financial transaction tax, while also seeking to grow as a clearing center. Clearing is a huge business for the City of London. The U.K. is estimated to handle 75% of all euro-denominated derivatives transactions, equivalent to around €930 billion of trades per day.

It’s also home to roughly 90% of US dollar domestic interest-rate swaps. The world’s largest clearinghouse for interest rate swaps, LCH, is based there and is majority-owned by London Stock Exchange Group Plc. LCH functions as a middle man collecting collateral and standing between derivatives and swaps traders to prevent a default from spiraling out of control. As Bloomberg reports, the role of clearing houses like LCH in global finance has become far more entrenched since the 2008 Financial Crisis and the inexorable expansion of derivatives trading. For years the French government, together with the European Central Bank, has wanted a piece of the action. Ironically, it was the European Court of Justice (ECJ) — the same court whose jurisdiction the UK government is now determined to elude — that, in 2015, stopped that from happening on the grounds that the ECB cannot discriminate against an EU member. But if the UK leaves the EU, and thus the ECJ’s jurisdiction, that ruling will no longer be applicable.

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They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

• Single Payer Is The Only Real Answer, Says Medicare Architect (IC)

Thanks to a pair of defections from more GOP senators late yesterday, the Republican plan to repeal and replace or simply repeal the Affordable Care Act is dead — for now. But the health care status quo is far from popular, with 57% of Americans telling Gallup pollsters in March that they “personally worry” a “great deal” about health care costs. Many health care activists are now pushing to adopt what is called a “single payer” health care system, where one public health insurance program would cover everyone. The U.S. currently has one federal program like that: Medicare. Expanding it polls very well. One of the activists pushing for such an expansion is Max Fine, someone who is intimately familiar with the program — because he helped create it.

Fine is the last surviving member of President Kennedy’s Medicare Task Force, and he was also President Johnson’s designated debunker against the health insurance industry. Fine, now 91, wrote to The Intercept recently to explain that Medicare was never intended to cover only the elderly population, and that expanding it to everyone was a goal that its architects long campaigned for. “Three years after the enactment of Medicare, in Dec. 1968, a Committee of 100 leading Americans was formed to campaign for single payer National Heath Insurance. The campaign leaders were UAW pres. Walter Reuther, Dr. Michael DeBakey, Nat. Urban League Pres Whitney Young and Mary Lasker, a leader in the formation and funding of NIH,” he wrote.

”The NY Times and other newspapers gave front page play to the announcement of the campaign for ‘Medicare for All’ but the Committee gained even more attention when, shortly before xmas, pres-elect Nixon, emerging from his doctor’s office in San Diego, denounced us as socialists who were trying to create a problem when none existed.” Fine noted that this movement towards single payer has “risen and fallen over the years,” reaching a high point in the early 70s when former Democratic Massachusetts Sen. Ted Kennedy’s bill covering all Americans with government health insurance had 36 co-sponsors. But the Democratic Party decided to go a different direction, turning instead to private insurance to cover Americans.

Fine said he met with former First Lady Hillary Clinton’s health care task force in the early 1990’s, and advised them to incrementally expand Medicare, starting first with children and then lowering the age for the elderly. “They had the money but not the interest in the idea,” he lamented, “instead spending a year developing a complex bill that was DOA on [Capitol] Hill.”

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Deutsche already did a review and reported nothing suspicious. Does that make them suspect?

• Deutsche Bank Expects Subpoenas Over Trump-Russia Investigation (G.)

Executives inside Deutsche Bank, Donald Trump’s personal bankers, are expecting that the bank will soon be receiving subpoenas or other requests for information from Robert Mueller, the special counsel who is investigating possible collusion between the Kremlin and the Trump campaign. A person close to the matter who spoke to the Guardian on the condition of anonymity said that Mueller’s team and the bank have already established informal contact in connection to the federal investigation. Deutsche’s relationship with Trump and questions about hundreds of millions in loans have dogged the German bank and the White House for months. They have also been the subject of intense scrutiny among some Democrats on Capitol Hill, who have demanded the bank turn over detailed information about the president’s accounts.

The requests for information from Maxine Waters, the top Democrat on the House financial services committee, have focused on whether any Russian entities may have provided financial guarantees for the loans that were made to the president or his immediate family members. The Guardian reported in February that the bank launched a review of Trump’s account earlier this year in order to gauge whether there were any suspicious connections to Russia and did not discover anything suspicious. Ivanka Trump, the president’s daughter and adviser in the White House; her husband, Jared Kushner, who is also a presidential adviser; and Kushner’s mother, Seryl Stadtmauer, are all clients of Deutsche Bank.

US media outlets have reported that Mueller’s investigation into possible Russian collusion with the Trump campaign will include a close examination of the president’s finances and businesses. While Deutsche Bank did engage in banking transactions with Russian banks as late as 2005, including some loan activity, a person familiar with the matter said the activity was not related to Trump’s accounts or his family.

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What a surprise. The same ones that signed on to the Paris Accord, by any chance?

• Asia’s Coal-Fired Power Boom ‘Bankrolled By Foreign Governments And Banks’ (G.)

The much-discussed boom in coal-fired power in south-east Asia is being bankrolled by foreign governments and banks, with the vast majority of projects apparently too risky for the private sector. Environmental analysts at activist group Market Forces examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91% of the projects had the backing of foreign governments through export credit agencies or development banks. Export credit agencies, which provide subsidised loans to overseas projects to assist export industries in their home countries, were involved in 64% of the deals and provided 45% of the total lending. The majority of the money was coming from Japan and China, with the Japan Bank for International Cooperation (JBIC) involved in five deals and the Export-Import Bank of China (Cexim) involved in seven deals.

All the deals closed between January 2010 and March 2017. The China Development Bank was the biggest development bank lending to the projects, imparting $3bn, with a further $300,000 in development funds coming from Korea’s Korea Development Bank. The lending comes despite the world’s biggest development bank – the World Bank – warning last year that plans to build more coal-fired power plants in Asia would be a “disaster for the planet” and overwhelm the deal forged at Paris to fight climate change. “Right now, several key countries supporting the Paris climate change agreement are actively undermining it by trying to expand the polluting coal-power sector in other countries,” said Julien Vincent, executive director of Market Forces.

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The upside down logic of the First American Financial Corporation. They need people to buy and sell, or their business is dead. Your home is a prison if you don’t sell it. But the supply shortage illusion is really gone, guys.

• When Does a Home Become a Prison? (FAFC)

In most markets, the seller, or supplier, makes their decision about adding supply to the market independent of the buyer, or source of demand, and their decision to buy. In the housing market, the seller and the buyer are, in many cases, actually the same economic actor. In order to buy a new home, you have to sell the home you already own. So, in a market with rising prices and strong demand, what’s preventing existing homeowners from putting their homes on the market? The housing market has experienced a long-run decline in mortgage rates from a high of 18% for the 30-year, fixed-rate mortgage in 1981 to a low of almost 3% in 2012. Today, five years later, mortgage rates remain just a stone’s throw away from that historic low point.

This long-run decline in rates encouraged existing homeowners to both move more often and to refinance more often, in many cases refinancing multiple times between each move. It’s widely expected that mortgage rates will rise further. This is more important than we may even realize because the housing market has not experienced a rising rate environment in almost three decades! No longer is there a financial incentive to refinance for most homeowners, and there’s more to consider when moving. Why move when it will cost more each month to borrow the same amount from the bank? A homeowner can re-extend the mortgage term another 30 years to increase the amount one can borrow at the higher rate, but the mortgage has to be paid off at some point.

Hopefully before or soon after retirement. Existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate. It makes choosing a kitchen renovation seem more appealing than moving.” There is one more possibility caused by the fact that the existing-home owner is both seller and buyer. In today’s market, sellers face a prisoner’s dilemma, a situation in which individuals don’t cooperate with each other, even though it is seemingly in their best interest to do so. Consider two existing homeowners. They both want to buy a new house and move, but are unable to communicate with each other. If they both choose to sell, they both benefit because they increase the inventory of homes available, and collectively alleviate the supply shortage.

However, if one chooses to sell and the other doesn’t, the seller must buy a new home in a market with a shortage of supply, bidding wars and escalating prices. Because of this risk, neither homeowner sells (non-cooperation) and neither get what they wanted in the first place – a move to a new, more desirable home. Imagine this scenario playing out across an entire market. If everyone sells there will be plenty of supply. But, the risk of selling when others don’t convinces everyone not to sell and produces the non-cooperative outcome. Rising mortgage rates and the fear of not being able to find something affordable to buy is imprisoning homeowners and causing the inventory shortages that are seen in practically every market across the country. So, what gives in a market short of supply relative to demand? Prices. According to the First American Real House Price Index, the fast pace of house price growth, combined with rising rates, has had a material impact on affordability.

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A weird turnaround in an already weird file. Tillerson?

• Saudi-Led Bloc Drops List Of Demands For Qatar (BBC)

The four Arab nations leading a boycott of Qatar are no longer insisting it comply with a list of 13 specific demands they tabled last month. Diplomats from Saudi Arabia, the United Arab Emirates, Bahrain and Egypt told reporters at the UN they now wanted it to accept six broad principles. These include commitments to combat terrorism and extremism and to end acts of provocation and incitement. There was no immediate comment from Qatar, which denies aiding terrorists. It has refused to agree to any measures that threaten its sovereignty or violate international law, and denounced the “siege” imposed by its neighbours. The restrictions put in place six weeks ago have forced the gas-rich emirate to import food by sea and air to meet the basic needs of its population of 2.7 million.

At a briefing for a group of UN correspondents in New York on Tuesday, diplomats from the four countries said they wanted to resolve the crisis amicably. Saudi permanent representative Abdullah al-Mouallimi said their foreign ministers had agreed the six principles at a meeting in Cairo on 5 July and that they “should be easy for the Qataris to accept”. This latest development does, on the surface, hint at a possible way out of the current standoff between Qatar and its neighbours. But it is unlikely to provide a permanent solution. The problem comes down to how countries choose to interpret “extremism and terrorism”. Qatar has long prided itself on giving voice to alternative views to the edited, government-approved ones aired by its conservative neighbours. Hence one of the reasons why Qatar’s Al Jazeera network has been such a thorn in their sides. However, the charge levelled against Qatar is that those alternative voices include people committed to the overthrow of governments in the region.

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Please pay $64.450 to comply with bylaws.

• Toronto Man Builds Park Stairs For $550, Irking City After $65,000 Estimate (CTV)

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. The city is now threatening to tear down the stairs because they were not built to regulation standards. Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. “I thought they were talking about an escalator,” Astl told CTV News Channel on Wednesday.

Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. Astl’s wife, Gail Rutherford, says the stairs have already been a big help to people who routinely take that route through the park. “I’ve seen so many people fall over that rocky path that was there to begin with,” she said. “It’s a huge improvement over what was there.” Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year. “To me, the safety of people is more important than money,” Astl said. “So if the city is not willing to do it, I have to do it myself.” City bylaw officers have taped off the stairs while officials make a decision on what to do with it. However, Astl has not been charged with any sort of violation.

Mayor John Tory acknowledged that the city estimate sounds “completely out of whack with reality” on Wednesday. However, he says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. “I think everyone will understand that it will be more than $550,” he said on Wednesday. “We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

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Result: reisistant superbugs.

• US-Style Mega Farms Invade The World (G.)

Since the days of the wild west frontier, the popular image of American farming has been of cowboys rounding up steers on wide open ranches, to whoops, whips and hollers. Today, the cowboys on their ranches under wide open skies have been replaced by vast sheds, hulking over the plains, housing tens of thousands of animals each, with the noises and smells spreading far beyond their fences. The US has led the world in large-scale farming, pioneering the use of intensive livestock rearing in hog farms, cattle sheds and sheep pens. There are now more than 50,000 facilities in the US classified as concentrated animal feeding operations (CAFOs), with another quarter of a million industrial-scale facilities below that threshold. Around the world, developing countries in particular were quick to catch up.

Intensive farming of livestock offers many advantages over traditional open ranges, not least economies of cost and scale, more efficient healthcare for the herds and flocks, and ultimately cheaper food. According to the UN, globally CAFOs account for 72% of poultry, 42% of egg, and 55% of pork production. In 2000, there were an estimated 15 billion livestock in the world, according to the Worldwatch Institute. By last year, that had risen to about 24 billion, with the majority of eggs, chicken meat and pork produced on intensive farms. Ranching was never an option in the UK, but most people still expect farms to consist of green fields rather than vast industrial-scale sheds. The reality is an increasing number of livestock are “zero graze”, spending all or almost all of their time indoors in large warehouse-type facilities.

[..] at least 789 megafarms, meeting the US definition of CAFOs, now operate around the UK, with every region of the country hosting several such operations, many of them owned by foreign multinationals. These are the biggest in a wave of intensive farms that has increased by more than a quarter in six years. [..] Emma Slawinski, director of campaigns at Compassion in World Farming, said the problems of mega farms around the world included over-medication, where animals are given antibiotics whether they are needed or not. “Factory-farmed animals are regularly given antibiotics in their feed or water, because of the higher risk of disease when large numbers of animals are kept in these overcrowded conditions. There is strong evidence that this overuse of antibiotics in intensive farming is contributing to antibiotic resistance in human medicine.

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How is this new information?

• Australia Was Colonized By Humans 20,000 Years Before Europe (Ind.)

Australia was colonised about 20,000 years before humans first arrived in Europe, according to new research. The discovery of the world’s oldest stone axes with ground edges, ochre used to make “spectacular rock art” and other artefacts in northern Australia pushes back the earliest known presence of humans to 65,000 years ago. Despite the relative closeness of Europe to Africa, where modern humans first evolved about 200,000 to 3000,000 years ago, the first concrete signs of Europeans are about 45,000 years old. In addition to their sophisticated axes, the people who first arrived on Australia’s shores may also have been armed with spears. The objects were found at Madjedbebe within the traditional lands of the Mirarr clan, an area of land that was excluded from the surrounding Kakadu National Park after a lease to mine uranium in the area was granted in 1982.

Representatives of the Mirarr said the research showed the “universal importance” of the area and called for it to receive the “highest level of conservation and protection”. Writing in the journal Nature, the researchers said: “The settlement of Madjedbebe around 65,000 years ago … sets a new minimum age for the human colonisation of Australia and the dispersal of modern humans out of Africa and across south Asia. “The final stages of this journey took place at a time of lower sea level, when northern Australia was cooler and wetter. “Our chronology … extends the period of overlap of modern humans and Homo floresiensis [the hominin species better known as hobbits] in eastern Indonesia to at least 15,000 years and, potentially, with other archaic hominins – such as Homo erectus – in southeast Asia and Australasia.”

In addition to changing the story of our species’ expansion across the globe, the new much older date challenges theories that Australia’s astonishing megafauna – a two-tonne wombat, giant kangaroos that were so big they couldn’t hop and a two-metre-tall bird – were quickly wiped out by humans. “Our chronology places people in Australia more than 20,000 years before continent-wide extinction of the megafauna,” the Nature paper said.

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Deterrent is still the favorite approach for Greece as well as the EU. Cowards.

• Child Refugees Denied Care Amid Suicide And Abuse In Greek Camps (Ind.)

Unaccompanied child refugees are being wrongly identified as adults by Greek authorities and denied vital care in squalid camps, a new report has found. Human Rights Watch (HRW) interviewed children as young as 15, who said they had been denied special protections required under international law. The group found Greece’s legal age assessment procedure was not being “followed in practice” on the island of Lesbos, which has been at the epicentre of the Aegean refugee crisis. [..] Under Greek law, the government is supposed to appoint a guardian for each child to represent them in legal proceedings, hear their views and act in their best interests, separating minors into designated areas of “hotspot” processing centres.

The Greek Reception and Identification Service (RIS) is responsible for identifying unaccompanied children and other vulnerable groups, with support from the UN, Frontex border agency and EU, and referring them to social services and information. But HRW said the authority was “failing to meet its responsibilities” and sometimes “arbitrarily” recording ages above those given, sometimes using controversial dental examinations without any other evidence. Those classified as adults are left to fend for themselves at heightened risk of exploitation, trafficking and other abuse, including prostitution, aid workers have warned. “They live in official and unofficial sites with unrelated adult single men; are exposed to inhumane living conditions, including overcrowding, unsanitary conditions, and frequent incidents of violence; and are unable to go to school or otherwise access education,” HRW said.

[..] When there is no space in safe shelters for unaccompanied children, authorities frequently detain them in police stations, immigration detention facilities and asylum processing centres, with 1,149 unaccompanied minors currently awaiting places. The uncertainty and distress provoked by the process is worsening an ongoing mental health crisis in Greek camps, aid workers said, having already warned of increasing rates of suicide and self-harm. [..] Greek officials told HRW that a thorough procedure is followed to establish the ages of asylum claimants [..] The group called on authorities in Greece to bring age assessments in line with international best practice, so proper accommodation, care, education, counselling and legal aid can be given to those who need it.

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Scandalous. But at least something UK and EU can agree on: let ’em rot.

• UK Has Not Taken In Any Child Refugees Under Dubs Scheme This Year (G.)

Home Office ministers have tried to deflect cross-party anger as it emerged that not a single extra lone child refugee has been brought to Britain from Europe under the “Dubs amendment” this year. The immigration minister, Brandon Lewis, met accusations that the government was “dragging its feet” by disclosing he will visit Italy and Greece next week to follow up the invitation to refer eligible children to be brought to Britain. But during an urgent Commons question raised by the outgoing Liberal Democrat leader, Tim Farron, he faced cross-party criticism that it was taking too long to process eligible refugee children in Europe to bring them to Britain. Home Office ministers have confirmed in written answers that only 200 children were transferred under Dubs in 2016 after the closure of the Calais camp and 280 local authority places remain to be filled.

The Dubs amendment, known as section 67, was passed in April 2016 amid a campaign to bring 3,000 lone refugee children stuck in camps in Europe to Britain. Ministers initially estimated local authority capacity at 350 but extended it to 480 in April after saying there had been “an administrative error” in the initial figure. Lily Caprani, of Unicef UK, said: “It’s unacceptable that we have seen no children brought under the Dubs scheme this year. As a nation we showed our compassion and our principles when we helped refugee children stranded in Calais, but we were told this was not the end of the story. We are seeing too many children still having to make dangerous journeys to reach safety.”

In the Commons, Farron said it was hard to see the government’s response as anything more than lip service and demanded to know when the “measly commitment” of 480 would be met. “I have visited the camps in Greece and elsewhere – something neither the home secretary nor the prime minister have done. I have met these children who, through no fault of their own, find their lives paused as ministers have chosen to ignore them,” said the Lib Dem leader. “Has the UK government even signed a memorandum of understanding with Greece to get these transfers under way? I know of two young people who signed a consent form to be transferred under Dubs over a year ago. They are still stuck in Greece.”

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Bringing carbon to the surface.

• The World Has Made More Than 9 Billion Tons of Plastic (CNBC)

More than 9 billion tons of plastic have been made since the 1950s, and the vast majority of it has been thrown in the trash, says a new study. The paper says it is the first attempt to measure the total amount of plastic produced since the beginning of mass plastic production in the middle of the 20th century. A team of researchers from the University of California, Santa Barbara, the University of Georgia, and the Woods Hole Oceanographic Institution, say that although plastic materials such as Bakelite were in use in the early 20th century, the material’s popularity began to rapidly rise after World War II, making it one of the most commonly used man-made materials. For example, the researchers estimated that the amount of plastic in use now is 30% of all the plastic ever produced.

While that has brought its benefits, such as lower-cost materials or capabilities like water resistance, our love of plastic has also produced a lot of trash. About 7 billion tons of it, by their estimate. And as of 2015, only 9% of the plastic waste produced ended up recycled, and another 12% was incinerated, the researchers found in their report. The remaining 79% has built up in landfills or ended up elsewhere in the environment. The team published their results in the journal Science Advances on Wednesday. To make their estimates, the researchers cobbled together datasets on global plastic production, such as global annual pure polymer (resin) production data from 1950 to 2015, published by the Plastics Europe Market Research Group, and global annual plastic fiber production data from 1970 to 2015 published by The Fiber Year and Tecnon OrbiChem.

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Production is not just growing, growth is still accelerating.

• World’s Plastic Waste Could Bury Manhattan 2 Miles Deep (AP)

Industry has made more than 9.1 billion tons of plastic since 1950 and there’s enough left over to bury Manhattan under more than two miles of trash, according to a new cradle-to-grave global study. Plastics don’t break down like other man-made materials, so three-quarters of the stuff ends up as waste in landfills, littered on land and floating in oceans, lakes and rivers, according to the research reported in Wednesday’s journal Science Advances . “At the current rate, we are really heading toward a plastic planet,” said study lead author Roland Geyer, an industrial ecologist at the University of California, Santa Barbara. “It is something we need to pay attention to.” The plastics boom started after World War II, and now plastics are everywhere. They are used in packaging like plastic bottles and consumer goods like cellphones and refrigerators.

They are in pipes and other construction material. They are in cars and clothing, usually as polyester. Study co-author Jenna Jambeck of the University of Georgia said the world first needs to know how much plastic waste there is worldwide before it can tackle the problem. They calculated that of the 9.1 billion tons made, nearly 7 billion tons are no longer used. Only 9% got recycled and another 12% was incinerated, leaving 5.5 billion tons of plastic waste on land and in water. Using the plastics industry own data, Geyer, Jambeck and Kara Lavender Law found that the amount of plastics made and thrown out is accelerating. In 2015, the world created 448 million tons of plastic — more than twice as much as made in 1998.

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Debt Rattle December 20 2016

Dec 202016
 
 December 20, 2016  Posted by at 9:57 am Finance Tagged with: , , , , , , , ,  11 Responses »


Dorothea Lange Homeless mother and child walking from Phoenix to Imperial County CA 1939

• China Talks the Talk on Property Curbs, but Can it Walk the Walk? (BBG)
• China May Be Losing Cat-and-Mouse Game With ‘Hong Kong Insurance’ Buyers (BBG)
• New Italy PM Asks Parliament To Approve Borrowing €20 Billion For Banks (BBC)
• After Aleppo: We Need A New Syria Policy (Ron Paul)
• We’re About To Sign A Deal With Canada That’s Just As Bad As TTIP (Ind.)
• Britain’s Shame: The People Who Are Homeless, Even Though They’re In Work (G.)
• Nine In 10 Jobless Greeks Receive No Unemployment Benefit (Kath.)
• Moody’s Voices Concern At ‘Material Delay’ In Greece Debt Relief Talks (G.)
• Greek Hospitals Deepen Trauma For Refugee Women Giving Birth (Gill)
• Thousands Of US Locales Have Lead Poisoning Worse Than Flint (R.)
• Coal Continues Its March Towards Asia (IEA)
• Air Pollution In Northern Chinese City Surpasses WHO Guideline By 100 Times (R.)
• Japan Pulls Plug On Troubled Fast Breeder Reactor (AFP)
• This Is The Polar Bear Capital Of The World, But The Snow Has Gone (G.)

 

 

Now that Trump is sealed in to become America’s 45th president in a month’s time, comparisons to Hitler and nazism seem to become the flavor of the day. Sad. Almost as sad as the multiple deadly attacks that have taken place over the last 24 hours. But there is enough to read about that everywhere. I’ll focus on things that may seem less important.

 

“They absolutely cannot have any significant drop in prices without risking real social instability.”

• China Talks the Talk on Property Curbs, but Can it Walk the Walk? (BBG)

China is talking the talk about reining in the speculation that fueled spiraling property prices. The test will be whether it can walk the walk should growth start to falter. [..] With the leadership wed to Xi’s goal of annual growth averaging 6.5 percent through 2020, the challenge will be to achieve that amid another slowdown in the crucial property engine. “Policy makers are trying now to contain the property market by talking,” Zhu said. “That unfortunately is too late and does little to dispel the speculative sentiment and expectation that’s built up over the past one-and-half decades. The situation has already gone beyond a soft landing.” China’s highly leveraged developers are feeling the heat. Regulators in October choked off a key source of funding with the Shanghai Stock Exchange raising the threshold for property firms to sell bonds on their platform.

Medicine being administered to the bond market is also raising risks of dangerous side-effects as policy makers try to discourage risky investments made on borrowed money. Authorities have increased short-term money-market rates and tightened rules on using debt as collateral to buy even more securities. That’s sparked a jump in borrowing costs, prompted firms to cancel bond offerings and fueled speculation defaults will spread next year amid a near-record 4.5 trillion yuan of maturities. Christopher Balding, an associate professor at Peking University in Shenzhen, cites the risk of increased credit growth for mortgages and real estate. Longer-term household loans increased by 569.2 billion yuan last month, accounting for more than two thirds of total new yuan loans. That was just shy of the 571.3 billion yuan record in September. The growth pace is likely to moderate, though “that isn’t saying a lot,” Balding said. “They absolutely cannot have any significant drop in prices without risking real social instability.”

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“They’ve also swiped their credit or debit cards again and again – in one case, as many as 800 times – so that each transaction remained below the limit.”

• China May Be Losing Cat-and-Mouse Game With ‘Hong Kong Insurance’ Buyers (BBG)

It’s a game of cat-and-mouse that has gone on for most of this year, with Beijing showing no signs of winning yet. Each time China tightens up on money flowing out of the country for purchases of Hong Kong insurance, new routes seem to emerge. In the latest clampdown, which started on Saturday, MasterCard Inc. and Visa Inc. added restrictions on purchasing all but the cheapest insurance policies using credit cards issued in China, according to people with knowledge of the matter. Chinese have been spending billions of Hong Kong dollars on insurance products that are linked to investments, as a way of channeling money out of China. Chinese residents will “actively seek ways to get around the curbs no matter what,” said Bloomberg Intelligence analyst Steven Lam.

Mainland purchases of Hong Kong insurance may rise to fresh records after reaching a high of HK$18.9 billion ($2.4 billion) in the third quarter, he said. Tenacious mainland buyers have bypassed restrictions by channeling money through online payment services or by using Hong Kong money changers, who allow money to be received in Hong Kong based on domestic transfers to accounts within China. They’ve also swiped their credit or debit cards again and again – in one case, as many as 800 times – so that each transaction remained below the limit. The latest Visa and MasterCard rules restrict multiple swiping. Weakness in the yuan is encouraging Chinese residents to put their money into products denominated in either Hong Kong or U.S. dollars. That’s adding to the headaches for Chinese officials concerned that capital flight could further contribute to yuan depreciation. Outflows are estimated to have totaled more than $1.5 trillion since the beginning of 2015.

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One would almost hope the new technocrats fail miserably.

• New Italy PM Asks Parliament To Approve Borrowing €20 Billion For Banks (BBC)

The Italian government will seek parliamentary approval to borrow up to €20bn to support its fragile banking sector and potentially rescue Monte dei Paschi di Siena. The country’s third-largest bank needs to raise €5bn in fresh capital by the end of the month. If Monte dei Paschi cannot arrange a private sector bailout, a state rescue may come as early as this week. It is saddled with bad loans and is deemed to be the weakest major EU bank. Italian Prime Minister Paolo Gentiloni, whose government has only been in office for a week, is under pressure because private investors would suffer any losses under EU bailout rules.

He described the move as a “precautionary measure”, adding: “We believe it is our duty to take this measure to protect savings. I hope all the political movements in parliament share this responsibility.” However, Italy’s economy minister, Pier Carlo Padoan, stressed the funds would be used to ensure adequate liquidity in the banking system and support other struggling banks. Officials have also said they were examining a scheme to compensate retail investors for any losses incurred. Mr Gentiloni’s predecessor, Matteo Renzi, resigned after losing a referendum on constitutional reform and was regularly accused of being too close to the banks.

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“We are a country sitting on $20 trillion in debt, living far beyond our means. Power can oftentimes be an illusion, and in any case it doesn’t last forever.”

• After Aleppo: We Need A New Syria Policy (Ron Paul)

Over the past week, eastern Aleppo was completely brought back under control of the Syrian government. The population began to return to its homes, many of which were abandoned when al-Qaeda-linked rebels took over in 2012. As far as I know, the western mainstream media did not have a single reporter on the ground in Aleppo, but relied on “activists” to inform us that the Syrian army was massacring the civilian population. It hardly makes sense for an army to fight and defeat armed rebels just so it can go in and murder unarmed civilians, but then again not much mainstream reporting on the tragedy in Syria has made sense. I spoke to one western journalist last week who actually did report from Aleppo and she painted a very different picture of what was going on there.

She conducted video interviews with dozens of local residents and they told of being held hostage and starved by the “rebels,” many of whom were using US-supplied weapons supposed to go to “moderates.” We cannot be sure what exactly is happening in Aleppo, but we do know a few things about what happened in Syria over the past five years. This was no popular uprising to overthrow a dictator and bring in democracy. From the moment President Obama declared “Assad must go” and approved sending in weapons, it was obvious this was a foreign-sponsored regime change operation that used foreign fighters against Syrian government forces. If the Syrian people really opposed Assad, there is no way he could have survived five years of attack from foreigners and his own people.

Recently we heard that the CIA and Hillary Clinton believe that the Russians are behind leaked Democratic National Committee documents, and that the leaks were meant to influence the US presidential election in Donald Trump’s favor. These are the same people who for the past five years have been behind the violent overthrow of the Syrian government, which has cost the lives of hundreds of thousands. Isn’t supporting violent overthrow to influence who runs a country even worse than leaking documents? Is it OK when we do it? Why? Because we are the most powerful country? We are a country sitting on $20 trillion in debt, living far beyond our means. Power can oftentimes be an illusion, and in any case it doesn’t last forever. We can be sure that the example we set while we are the most powerful country will be followed by those who may one day take our place. The hypocrisy of our political leaders who say one thing and do another does not go unnoticed.

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Still not over. TISA is another one that keeps lurking.

• We’re About To Sign A Deal With Canada That’s Just As Bad As TTIP (Ind.)

CETA is an EU-Canada trade deal just like the controversial EU-US deal TTIP. It was secretly negotiated over five years, locks in the privatisation of public services and will permit corporations across the North America to sue European governments in a private justice system. Brexit may not happen for at least two years, but CETA will be voted on in February – if it passes, it will immediately apply to the UK. Inequality is grist to the mill for far-right populists, yet the European Commission and members of the European Parliament (MEPs) are failing to learn the lessons of Brexit and the rise of Nigel Farage and Donald Trump. Instead, it’s big business as usual, and continued support for policies that generate inequality and, in turn, fuel the xenophobic right.

This week there has been a clear demarcation of the crucial choice faced by the EU and UK, which may help determine the future rise of the far right in Europe – and, set against it, the decline of out-of-touch, centre-left parties. On Friday, the International Labour Organisation reported that the top 10% of highest paid workers in Europe together earn almost as much as the bottom 50%. Last week, the European Parliament’s Employment and Social Affairs Committee found that the EU-Canada trade deal CETA will only make this situation worse, “widening the income gap between unskilled and skilled workers thus increasing inequalities and social tensions.” The cross-party committee points to CETA triggering potential job losses of more than 200,000 across the EU.

It goes on to point out what campaigners across Europe have long been saying about accords like CETA, TTIP, and the Donald Trump-opposed TPP: “There is a clear disparity between the levels of protection envisaged for investors and for labour interests and rights.” These investors are not the small businesses that CETA and TTIP’s supporters repeatedly cite. As the report makes clear, CETA has no chapter with specific measures to help small business. The clear disparity between workers and investor interests is perhaps best captured in one key element found across all these deals: the widely opposed “corporate court” private justice system that grants big business the power to sue states for policies that affect their profits. Put more simply, it’s a taxpayer-funded risk insurance scheme for corporations that would swing into play were a government to decide to ban nuclear power, oppose fracking or re-nationalise public services like the railways.

Despite voting to leave the EU, CETA can still affect the UK: the deal could be passed within the next two months, with large swathes of it immediately put in place. After that happens, those already struggling in the UK’s brittle Brexit economy will feel the squeeze of yet more anti-worker policy-making. Yet despite the clear dangers posed by CETA, Liam “Take Back Control” Fox has already signed the UK up to the deal, willfully bypassing UK parliamentary scrutiny along the way.

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“.. over 170,000 Londoners are homeless..”

• Britain’s Shame: The People Who Are Homeless, Even Though They’re In Work (G.)


Illustration: Eva Bee

The former Tory minister George Young described the homeless as “what you step over when you come out of the opera”. No, Sir George: today’s homeless deliver your takeaways and pull pints at the local. Then they kip on park benches. Martin, who works for Islington council taking disabled children to school, told me how he’d spent a month sleeping either in Hampstead Heath or by the canal near London Zoo. “I was exhausted all the time,” he said. Some mornings, he’d knock for the children still clutching the bag that held all his belongings. This month, the charity Shelter calculated that over 170,000 Londoners are homeless. Its researchers pieced together the data for how many were both in a job and in temporary accommodation: it amounts to nearly half (47%) of all homeless households in the capital.

Figures like these, and shelters like Scott’s, neatly puncture many of the official boasts about work in post-crash Britain. The ministerial bragging about record employment? That economic miracle would include a third of the people dossing down at Scott’s place. The smugness with which David Cameron talked about the high-tech sharing economy? The Uber driver in that bunk over there might put him right on a few things. All the blether about how strong unions will destroy the economy? The casualised workforce in these improvised dormitories make a good argument for labour protection. Most of all, it proves that two of the hardiest orthodoxies in British politics are now a lie. First, the notion that work pays.

That is why Norman Tebbit told men to get on their bikes, why Gordon Brown fiddled about with tax credits, why George Osborne could get away with attacking “skivers”. But minimum wages, zero-hours contracts and a couple of shifts through a temping agency don’t pay. They certainly don’t pay enough to get you decent accommodation in one of the most expensive housing markets on the planet. When that belief dies, so too must its corollary: that the homeless are always unemployed. “Why are beggars despised? For they are despised universally,” asked George Orwell in Down and Out in Paris and London. “It is for the simple reason that they fail to earn a decent living.” None of the people I met were begging, but each lived within the shadow of the idea that by being homeless, they had become despicable.

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Britain is bad, Greece is worse. “350,000 families without a single employed person..”

• Nine In 10 Jobless Greeks Receive No Unemployment Benefit (Kath.)

Nine in 10 jobless Greeks do not receive unemployment benefits, according to a study by the country’s statistical authority (ELSTAT) and the Labor Institute of the General Confederation of Greek Labor (INE/GSEE). The same study found that nearly 74 percent of the unemployed population have been without work for more than 12 months. Meanwhile, there are 350,000 families without a single employed person, while about 300,000 high-skilled workers have left the country in the past six years in search of better prospects, the study showed.

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Why is the entire Eurogroup of finance ministers silent on the feact that Dijsselbloem makes decisions behind their backs?

• Moody’s Voices Concern At ‘Material Delay’ In Greece Debt Relief Talks (G.)

Fears that Greece’s seven-year debt crisis is about to enter a troubling new phase have been voiced by one of the world’s leading rating agencies. Moody’s said it was worried by the decision by the European authorities to suspend a debt-relief deal for Greece after the government in Athens gave a Christmas bonus to pensioners, promised free school meals for the poorest children and cancelled a VAT increase. The rating agency said any “material delay” in concluding talks between Greece and its European creditors would make it harder for the troubled country to meet next year’s onerous financial commitments and would increase the risks of bondholders not being paid. After months of negotiations, Europe agreed to limited debt relief to Greece earlier this month by giving Athens longer to pay and reducing the interest rate payable on its loans.

But within days the decision was put on hold by the European Stability Mechanism (ESM) – the Luxembourg-based body that provides help to countries and banks facing financial difficulties – after Alexis Tsipras’s coalition government decided to provide help to pensioners, schoolchildren and VAT payers on the Greek islands. The plans involved spending amounting to €617m – less than 0.5% of Greece’s GDP – but were made without consultation with the country’s creditors. Hardliners in Brussels and in Berlin were outraged by Tsipras’s decision, seen as evidence of backsliding on a commitment made in August 2015 to keep to a tough programme of economic reforms in return for an €86bn bailout. Tsipras says that Greece has overachieved on the budget targets set by Europe and that the money will be going to those hardest hit by austerity. Greece has seen its economy shrink by 30% since its financial crisis began in 2009.

[..] “.. a material delay in the negotiations would raise the credit risk to bondholders. Greece has large upcoming maturities in July 2017, with €2.3bn owed to private-sector bondholders and €3.9bn to the ECB. Greece will be highly challenged to meet these redemptions without completion of the programme’s second review and without the disbursement of €6.1bn of ESM funding by the summer.”

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Troubling, but do be careful about where to lay the blame.

• Greek Hospitals Deepen Trauma For Refugee Women Giving Birth (Gill)

Dr Konstantinos Spiriounis, an obstetrician-gynecologist, is a member of the department of municipal clinics and public health in Athens and until June this year worked at one of the city’s main public maternity hospitals, Elena. He says that the country’s economic problems have led to a recruitment crisis, putting hospitals under pressure, but that doctors do their best in difficult circumstances. “There are no new hires happening in the hospitals, so us doctors in Greece in public hospitals have learnt to do the work of two or three people. “Many times the doctors and nurses stay on when their shift ends because there isn’t anyone else to do it. You are always concerned in that you will make a mistake or miss something important, because you are so exhausted. Sometimes we find we’re out of things like gauze or medical tape, and we go buy it ourselves from the pharmacy.”

He says that all women are offered the same service, the best the doctors can provide. “We offer the same to everyone, whether you are Greek or a foreigner. For us, the cry of a baby and the joy of the mother is the same no matter where they are from.” But human rights lawyer Electra Leda Koutra, who worked on the research into birth experiences of refugee mothers, says vulnerable refugees need specific support. “A Greek woman will go home after birth. A refugee woman will be thrown back in a refugee camp or out on the streets [to] incredibly harsh, dangerous, unsanitary conditions.

“Treating refugee women ‘the same as Greeks’ means speaking to them in Greek, giving them no option but male obstetricians, not translating for their medical instructions upon exit from hospital, and not taking into account the conditions they will face right afterwards. All this so-called equal treatment constitutes blatant gender-based violence and discrimination.” The difficulties faced by the women in pregnancy and birth are part of a wider challenge for all refugee families in Greece, that of surviving day to day with no idea of what the future will bring. Since borders closed further west within Europe earlier in 2016, tens of thousands of refugees have been stuck in overstretched Greece and Italy. The EU has promised to disperse 160,000 to other EU countries, only 8,162 people have been found a new home, figures from the European commission show.

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Count me not surprised.

• Thousands Of US Locales Have Lead Poisoning Worse Than Flint (R.)

On a sunny November afternoon in this historic city, birthplace of the Pony Express and death spot of Jesse James, Lauranda Mignery watched her son Kadin, 2, dig in their front yard. As he played, she scolded him for putting his fingers in his mouth. In explanation, she pointed to the peeling paint on her old house. Kadin, she said, has been diagnosed with lead poisoning. He has lots of company: Within 15 blocks of his house, at least 120 small children have been poisoned since 2010, making the neighborhood among the most toxic in Missouri, Reuters found as part of an analysis of childhood lead testing results across the country. In St. Joseph, even a local pediatrician’s children were poisoned.

Last year, the city of Flint, Michigan, burst into the world spotlight after its children were exposed to lead in drinking water and some were poisoned. In the year after Flint switched to corrosive river water that leached lead from old pipes, 5 percent of the children screened there had high blood lead levels. Flint is no aberration. In fact, it doesn’t even rank among the most dangerous lead hotspots in America. In all, Reuters found nearly 3,000 areas with recently recorded lead poisoning rates at least double those in Flint during the peak of that city’s contamination crisis. And more than 1,100 of these communities had a rate of elevated blood tests at least four times higher.

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Growth at all costs.

• Coal Continues Its March Towards Asia (IEA)

Growth in global coal demand will stall over the next five years as the appetite for the fuel wanes and other energy sources gain ground, according to the latest coal forecast from the International Energy Agency. The share of coal in the power generation mix will drop to 36% by 2021, down from 41% in 2014, the IEA said in the latest Medium-Term Coal Market Report, driven by lower demand from China and the United States, along with fast growth of renewables and strong focus on energy efficiency. But in a sign of coal’s paradoxical position, the world is still highly dependent on coal. While coal demand dropped in 2015 for the first time this century, the IEA forecasts that demand will not reach 2014 levels again until 2021.

However such a path would depend greatly on the trajectory of China’s demand, which accounts for 50% of global coal demand – and almost half of coal production – and more than any other country influences global coal prices. The new report highlights the continuation of a major geographic shift in the global coal market towards Asia. In 2000, about half of coal demand was in Europe and North America, while Asia accounted for less than half. By 2015, Asia accounted for almost three-quarters of coal demand, while coal consumption in Europe and North America had declined sharply below one quarter. This shift will accelerate in the next years, according to the IEA.

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All costs, including that of human lives.

• Air Pollution In Northern Chinese City Surpasses WHO Guideline By 100 Times (R.)

Concentrations of airborne pollutants in a major northern Chinese city exceeded a World Health Organisation (WHO) guideline by 100 times on Monday as north China battled with poor air quality for the third straight day. In Shijiazhuang, capital of northern Hebei province, levels of PM 2.5, fine particulate matter, soared to 1,000 micrograms per cubic meter, state-run Xinhua News Agency reported on Monday. That compares with a WHO guideline of an annual average of no more than 10 micrograms. In nearby Tianjin city, authorities grounded dozens of flights for the second day and closed all highways after severe smog blanketed the port city, one of more than 40 in China’s northeast to issue pollution warnings.

PM 2.5 levels hit 334 micrograms per cubic meter in Tianjin as of 4 p.m. local time, according to local environmental protection authorities. In Beijing, PM 2.5 levels were at 212 micrograms per cubic meter. On Saturday, 22 cities issued red alerts, including top steelmaking city Tangshan city in Hebei and Jinan in coal-rich Shandong province. A red alert is the highest possible air pollution warning. Red alerts are issued when the Air Quality Index (AQI) is forecast to exceed 200 for more than four days in succession, 300 for more than two days or 500 for at least 24 hours. The AQI is a different measure from the PM 2.5 gauge.

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After all the fast breeder hype this is what you end up with. But I’m sure there’ll be lots more talk. Coal it is then.

• Japan Pulls Plug On Troubled Fast Breeder Reactor (AFP)

Japan has scrapped plans to generate electricity at a multi-billion dollar experimental nuclear reactor, the government said Monday, giving up on the decades-old project due to spiralling costs. Once touted as a “dream reactor,” the Monju facility was designed to generate more fuel than it consumes via nuclear chain reaction, an attractive alternative in a country with few natural resources. But its complex fast breeder reactor technology has been plagued with problems that have left it idle for more than a decade. It has also been a financial black hole since construction began in 1986, given its initial 1 trillion yen ($8.5 billion) construction cost and daily operating costs of 50 million yen, even while shut down. The government “will not restart (Monju) as a nuclear reactor and will take steps to decommission it,” science minister Hirokazu Matsuno told the governor of western Japan’s Fukui prefecture where it is located.

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Wave bye bye.

• This Is The Polar Bear Capital Of The World, But The Snow Has Gone (G.)

Churchill, on the banks of the Hudson Bay in Canada, is known as the polar bear capital of the world. Hundreds of bears gather there each year before the sea freezes over in October and November so they can hunt seals again from the ice for the first time since the summer. I first went there 12 years ago at this time of year. The place was white, the temperature was -20C, and the bears were out feeding. This year I came back to make a film for Danish TV and set up live feeds of the bears. It was so different. In mid-November there was no snow or sea ice or ice; the land was green or brown and the temperature was 2C. The bears were walking around on the land waiting for the ice to form. It was like summer.

October had seen unprecedented temperatures all around the Arctic leading to a record-breaking slowdown of sea ice formation. Local people told me they had never seen it like this before. With Geoff York, director of conservation at Polar Bears International, we pored over satellite maps every day. It was shocking. The whole 470,000 sq mile bay was completely ice-free. This is the southernmost colony of polar bears in the world and in the past about 1,000 bears would be there. But studies have shown that in the last 20 years the surface temperature of Hudson Bay has warmed by about 3C. This has had a massive effect on the bear. The western Hudson Bay population has declined by more than 20% in 30 years. It’s the same elsewhere. New analysis of data from the southern Beaufort Sea in north-west Canada and Alaska suggest even greater population declines there.

We saw about 20 bears around Churchill in the 10 days I was there. That’s actually a few more than I saw last time, when I was there 12 years ago, but that was because most of the bears were out on the ice then. The ones we did see this year appeared thin, restless and hungry, and were starting to be more aggressive. There was a mum and a cub and it was very emotional because it looked pretty certain that the cub would not survive much longer. The days of bears in this region having triplets seem to be over. The declining sea ice has decreased hunting opportunities, so the bears are smaller and fewer cubs are being born in this area.

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Debt Rattle October 5 2016

Oct 052016
 
 October 5, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 5 2016


DPC El Paso, Texas 1903

• Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)
• US High-Yield Default Rates Hit 6-Year High (S&P)
• Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)
• Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)
• Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)
• Manhattan Apartment Sales Plunge 20% (BBG)
• Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)
• China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)
• Obama Warned to Defuse Tensions with Russia (CN)
• ‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)
• At Least 28 Migrants Found Dead Off Libya (AFP)

 

 

Three things: First, in the jargon, “the backlash against globalization” has now become equal to the anti-trade movement. Which is nonsense: preferring another approach to trade is not the same as being against it altogether.

And second, look at that first graph! See that upward line at the end? Well, it’s an IMF growth ‘forecast’. Which are always so wrong, and always revised downward, that you must wonder if the term ‘forecast’ is even appropriate.

Third: “Existential Threat To World Order” ?! Isn’t that perhaps what the IMF and the rest of the elites themselves are?

• Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)

Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates. From Brexit to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years. Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that IMF Managing Director Christine Lagarde says is already “weak and fragile.” The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment, as underscored by recent jitters over Deutsche Bank’s financial health.

“The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs at Oxford Economics, a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.” In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2% in 2015, the world economy’s expansion will slow to 3.1% this year before rebounding to 3.4% in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6% this year and 2.2% in 2017. “We’d like to see an end to the creeping protectionism in the world and more progress on moving ahead with free-trade agreements and other trade-creating measures,” Maurice Obstfeld, director of the IMF’s research department, said.

[..] Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. It’s also seeking a larger role in the existing global framework, with entry of the yuan into the IMF’s basket of reserve currencies on Oct. 1 the most recent example. An all-out trade war would be a disaster for China’s economy, with Trump’s threatened tariff potentially wiping off almost 5% of its GDP, according to a calculation by Daiwa Capital Markets. John Williamson, whose Washington Consensus of open trade and deregulation was effectively the governing ethos for the IMF and World Bank for decades, said the 2008-09 financial meltdown had undercut support for economic integration. “There was agreement on globalization before the crisis and that’s one thing that’s been lost since the financial crisis,” said Williamson.

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Deteriorating quality of debt. Not good.

• US High-Yield Default Rates Hit 6-Year High (S&P)

The U.S. speculative-grade default rate has hit a six-year high of 4.79%, while the global default rate has crept to 4.04%, also a six-year high, according to S&P Global Fixed Income Research. Of course, the long-troubled energy sector plays a major role here. Excluding energy and natural gas companies, the U.S. default rate drops to 2.44%. Looking ahead, S&P says the number of ‘Weakest Links’ – issuers rated B- or lower, with either a negative outlook or implication – grew to 249 as of Sept. 20, the second-highest total since 2009.

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“You cannot save your faltering economy by killing your financial system..”

• Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)

Famed bond investor Jeffrey Gundlach said Deutsche Bank’s slumping share price highlights the impact of the negative-interest-rate policy in Europe on the region’s lenders and may help prompt central bankers to reconsider their approach. “You cannot save your faltering economy by killing your financial system and one of the clear poster children for this is Deutsche Bank’s stock price,” Gundlach, 56, said at Grant’s Fall 2016 Investment Conference on Tuesday in New York. “If you keep these negative interest rate policies for a sufficient future period of time you are going to bankrupt these banks.” Europe’s banks have seen their value shrink by about $280 billion this year, with Deutsche Bank losing almost half its market value.

Germany’s largest lender extended losses after the U.S. Department of Justice last month requested $14 billion to settle a probe into residential mortgage-backed securities, sparking concerns that it will have to raise capital. While the Frankfurt-based bank would ultimately be rescued by the German government if needed, other banks in the region wouldn’t be able to count on such support, Gundlach said. “Deutsche Bank will be supported by Germany if push comes to shove,” he said. “But what about Credit Suisse, which has shown a similar decline in stock price? Who’s there to bail them out?”

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More Gundlach. “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see..”

• Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)

Jeff Gundlach, Wall Street’s bond god, thinks the world of monetary and fiscal policy is about to pivot. “How in the world could we be talking about rates never going up when in fact rates have bottomed?” he asked the crowd of investors at the Grant’s Interest Rates Observer conference in New York City on Tuesday. He explained that it was on July 6th when he decided that the narrative that benchmark interest rates around the world would stay lower for longer was “getting quite old.” He cited several reasons: inflation is picking up, the dollar did not strengthen after the Federal Reserve raised rates the last time. Also there’s this: “In the investment world when you hear ‘never’,” ( as in rates are ‘never going up’), “it’s probably about to happen,” said Gundlach, who is CEO of DoubleLine Funds.

Now, an uptick in inflation and the dollar’s tolerance for higher rates are factors that don’t necessarily require urgency. And generally without urgency there is no change in policy. They are also factors he discussed in his last presentation, ‘Turning Points,’ back in September. But there is one thing that has changed since then. That thing is Deutsche Bank. “You cannot save your faltering economy by killing the financial system,” said Gundlach. That is, in effect, what low rates do. Over the last few weeks the world has watched as Deutsche Bank has struggled to convince investors and the public that it is in a sound fiscal position. Two weeks ago the US threatened the bank with a massive $14 billion fine for transgressions that led up to the financial crisis, and the bank’s stock really started to plummet.

In euros, Deutsche Bank’s stock price has hovered near the single digits. “There’s something about big banks being in the single digits that makes people nervous,” Gundlach said. He believes that Germany will bail out Deutsche Bank, despite the fact that the government has said that it intends to do no such thing. The problem isn’t Deutsche Bank in his mind, though — it’s other banks in a similar position that don’t have countries like Germany to bail them out. He mentioned Credit Suisse, arguing that Switzerland can’t handle a banking catastrophe its size.

So what will the new world order be if rates must go up to save international banks? “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see,” he joked. What he’s saying is that now is the time to pivot to fiscal stimulus. Both presidential candidates Donald Trump and Hillary Clinton have talked about spending hundreds of billions on infrastructure and other investments. Meanwhile, US debt to GDP has been stable since 2011, and no one is really talking about the deficit anymore. Here’s a key chart he showed to the crowd. It was also in his last presentation:

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Sounds doable.

• Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)

Sterling’s tumble isn’t finished, Koon How Heng, a senior foreign-exchange strategist at Credit Suisse, told CNBC, as the currency dropped below July’s post-Brexit referendum low. “We still have a very negative view on the sterling,” Heng said. Sterling was fetching as little as $1.2683 in Asia trading hours on Wednesday, under the $1.2796 low it hit on July 6 in the wake of Brexit. Wednesday’s levels were down from levels over $1.30 last week and well off the high of $1.5018 the currency touched before the June 23 poll. The pair is currently at their lowest level since March 1985, when the pound neared parity with the U.S. dollar amid an acrimonious miners’ strike in the U.K. “Officially, our forecast for sterling dollar is at 1.25,” Heng told CNBC’s “Street Signs” just hours before the currency took its latest leg lower. “We would think it’s going to head lower. It’s probably going to go down the tubes.”

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It’ll take more to prick that bubble.

• Manhattan Apartment Sales Plunge 20% (BBG)

There are a lot more apartments available for purchase these days in Manhattan. And fewer people are buying. Sales of previously owned condominiums and co-ops fell 20% in the third quarter from a year earlier as potential buyers grew cautious amid more choices, according to a report Tuesday from appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. There were 5,290 resale apartments on the market at the end of September, 53% more than the number available in late 2013, the lowest point for listings. The swelling inventory is providing an opportunity to New Yorkers shut out of a market in which construction has been dominated by ultra-luxury condos aimed at the wealthiest buyers.

Resales, particularly those priced at less than $1 million, were in chronically short supply in recent years, and those that made it to the market sparked bidding wars. Now, more owners are listing apartments to profit from climbing values, and they’re finding lots of company. “Rapidly rising prices over the years have pulled more sellers into the market hoping to cash out,” Jonathan Miller, president of Miller Samuel, said in an interview. “But buyers are more wary. There isn’t the same intensity of activity to burn through the new supply.”

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Funny, Don Quijones makes the same comparison I did last week between Monte dei Paschi and Goldman’s very lucrative and very shady derivatives deals enabling former Greek governments to hide debt. Italy has indicted MPS, Nomura and Deutsche Bank over MDP. Goldman was never charged over Greece.

• Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)

Shares of Monte dei Paschi di Siena, the world’s oldest bank and by now the world’s most famous penny stock, trade at €0.18. Things have gotten so bad that Italy’s financial markets regulator Consob extended the deadline and widened the scope of its ban on short selling of the bank’s shares. The restrictions were initially introduced on July 7 just after the bank’s shares had crashed 20% in one day. Since then they have shed a further 45%. Doubts continue to mount over the chances of success for the bank’s latest rescue program, its third since the Global Financial Crisis began. “The situation has got more complicated,” reported Il Corriere della Sera, one of Italy’s most influential newspapers. It’s also apparently quite “dark” — as in sinister.

“For weeks, MPS has been in the center of dark, worrying maneuvers,” said Azione Mps, an association of the bank’s retail shareholders. If the worst comes to the worst, the institution they’re invested in will either be bailed-in, resulting in a complete loss of their already basically worthless investment, and/or bailed-out by either Italy’s government or the ECB, in the process massively diluting the value of their already basically worthless shares. Nonetheless, “dark” is an interesting turn of phrase, especially given that the Italian bank’s latest desperate bid to save its derriere without outright state intervention is being led by America’s most corrupt financial institution (according to Forbes), JP Morgan Chase.

Also, in recent days MPS’ head offices, fittingly housed within a restored ancient fortress, have been transformed into a gargantuan crime scene after a Milan court ordered MPS, Nomura and Deutsche Bank to stand trial for a string of alleged financial crimes, including crimes that the Bank of Italy, under Mario Draghi’s tutelage, apparently knew about yet sat on its hands. The court also indicted 13 former and current managers from the three banks over the case, with prosecutors alleging they had used complex derivatives trades to conceal losses at MPS, in much the same way that Goldman Sachs helped the Greek government to conceal its mountain of excess debt with complex derivatives.

Read more …

Rock and a hard place or two.

• China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)

China’s efforts to shrink its bloated coal industry may have worked too well, too fast. Prices have surged more than 50% this year after the government ordered miners to cut output to ease a glut and help lift the industry out of crisis. Now, as winter looms and fuel demand peaks, the consumer and producer of about half the world’s coal is having to relax some of those controls, or face even higher fuel costs, according to analysts at Citigroup and ICIS China, as well as China Coal Transport and Distribution Association. “The extent of the production cuts earlier this year has been too severe,” David Fang, a director with the CCTD, said. “Now the government is trying to fix the problem by relaxing some controls on output, but there is only limited time now before the winter arrives.”

The government earlier this year unveiled efforts to revitalize the coal industry and throw a lifeline to miners, many of them government-controlled, who struggled to repay debts as prices of the fuel used in power stations fell to the lowest in about a decade amid excess supply. President Xi Jinping’s administration ordered miners to lower output to the equivalent of 276 days of production, from the standard 330 days. And as part of the country’s broader “supply side structural reform,” regulators went after the industry’s massive overcapacity, cutting about 150 million tons of unneeded capacity as of August, out of a target of 500 million tons by 2020. The reforms may be a victim of their own success. Output fell more than 10% in the first eight months of this year, pushing up domestic prices and helping imports, including coking coal used to make steel, rise to the highest since December 2014.

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Veteran Intelligence Professionals for Sanity.

• Obama Warned to Defuse Tensions with Russia (CN)

A group of ex-U.S. intelligence officials is warning President Obama to defuse growing tensions with Russia over Syria by reining in the demonization of President Putin and asserting White House civilian control over the Pentagon.
ALERT MEMORANDUM FOR: The President
FROM: Veteran Intelligence Professionals for Sanity
SUBJECT: PREVENTING STILL WORSE IN SYRIA

We write to alert you, as we did President George W. Bush, six weeks before the attack on Iraq, that the consequences of limiting your circle of advisers to a small, relatively inexperienced coterie with a dubious record for wisdom can prove disastrous.* Our concern this time regards Syria. We are hoping that your President’s Daily Brief tomorrow will give appropriate attention to Saturday’s warning by Russia’s Foreign Ministry spokesperson Maria Zakharova: “If the US launches a direct aggression against Damascus and the Syrian Army, it would cause a terrible, tectonic shift not only in the country, but in the entire region.”

Speaking on Russian TV, she warned of those whose “logic is ‘why do we need diplomacy’… when there is power… and methods of resolving a problem by power. We already know this logic; there is nothing new about it. It usually ends with one thing – full-scale war.” We are also hoping that this is not the first you have heard of this – no doubt officially approved – statement. If on Sundays you rely on the “mainstream” press, you may well have missed it. In the Washington Post, an abridged report of Zakharova’s remarks (nothing about “full-scale war”) was buried in the last paragraph of an 11-paragraph article titled “Hospital in Aleppo is hit again by bombs.” Sunday’s New York Times totally ignored the Foreign Ministry spokesperson’s statements.

In our view, it would be a huge mistake to allow your national security advisers to follow the example of the Post and Times in minimizing the importance of Zakharova’s remarks. Events over the past several weeks have led Russian officials to distrust Secretary of State John Kerry. Indeed, Foreign Minister Sergey Lavrov, who parses his words carefully, has publicly expressed that distrust. Some Russian officials suspect that Kerry has been playing a double game; others believe that, however much he may strive for progress through diplomacy, he cannot deliver on his commitments because the Pentagon undercuts him every time. We believe that this lack of trust is a challenge that must be overcome and that, at this point, only you can accomplish this.

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Maybe the clean-up will work. But we add more faster.

• ‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)

The vast patch of garbage floating in the Pacific Ocean is far worse than previously thought, with an aerial survey finding a much larger mass of fishing nets, plastic containers and other discarded items than imagined. A reconnaissance flight taken in a modified C-130 Hercules aircraft found a vast clump of mainly plastic waste at the northern edge of what is known as the “great Pacific garbage patch”, located between Hawaii and California. The density of rubbish was several times higher than the Ocean Cleanup, a foundation part-funded by the Dutch government to rid the oceans of plastics, expected to find even at the heart of the patch, where most of the waste is concentrated. “Normally when you do an aerial survey of dolphins or whales, you make a sighting and record it,” said Boyan Slat, the founder of the Ocean Cleanup.

“That was the plan for this survey. But then we opened the door and we saw the debris everywhere. Every half second you see something. So we had to take snapshots – it was impossible to record everything. It was bizarre to see that much garbage in what should be pristine ocean.” The heart of the garbage patch is thought to be around 1m sq km (386,000 sq miles), with the periphery spanning a further 3.5m sq km. [..] Following a further aerial survey through the heart of the patch on Sunday, the Ocean Cleanup aims to tackle the problem through a gigantic V-shaped boom, which would use sea currents to funnel floating rubbish into a cone. A prototype of the vulcanized rubber barrier will be tested next year, with a full-sized 100km (62-mile) barrier deployed by 2020 if trials go well.

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1000 on one crappy boat.

• At Least 28 Migrants Found Dead Off Libya (AFP)

Twenty-eight Europe-bound migrants were found dead on a day of frantic rescues off Libya on Tuesday, including at least 22 in an overloaded wooden boat, an AFP photographer and the Italian coastguard said. The photographer, who was able to go aboard the vessel, said it appeared that many of the dead had suffocated. He said there were about 1,000 people on three levels. He counted 22 bodies and said there were more dead in the hold. The Italian coastguard – which is coordinating rescue efforts in international waters north of Libya – said 28 bodies had been recovered over the course of 33 operations on Tuesday, while 4,655 migrants had been rescued.

The photographer was travelling on the Astral, a ship chartered by Spanish NGO ProActiva Open Arms, which rescues migrants at sea. Late on Tuesday, the Italian navy took over helping survivors and retrieving bodies, the photographer said. It was yet another day of drama at sea after more than 6,000 migrants, most of them Africans in packed rubber dinghies, were rescued off Libya on Monday. Nine bodies were found in those operations, including a pregnant woman.

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Debt Rattle September 9 2016

Sep 092016
 
 September 9, 2016  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 9 2016


NPC Daredevil John “Jammie” Reynolds, Washington DC 1917

• ECB’s Mario Draghi Has Run Out Of Magic As Deflation Closes In (AEP)
• ECB Stands Pat on Stimulus as Draghi Defends Policy (WSJ)
• German July Exports, Imports Plunge (Street)
• Goldman Calculates True Growth Rate Of China’s Debt: 40% of GDP Per Year (ZH)
• China’s Reviving the American Heartland – One Low Wage at a Time (BBG)
• Bank of Japan Risk: Running Out of Bonds to Buy (WSJ)
• Australia, New Zealand Housing Booms Set Currencies On Course For Parity (BBG)
• Coal Rises From the Grave to Become One of Hottest Commodities
• Historic Tax Fraud Rocks Denmark As Loss Estimates Keep Growing (BBG)
• Goldman Sachs Just Launched Project Fear in Italy (DQ)
• Humans Have Destroyed A Tenth Of Earth’s Wilderness In 25 Years (G.)

 

 

Why does it seem so normal to use the word ‘magic’ in this context? When did that start?

• ECB’s Mario Draghi Has Run Out Of Magic As Deflation Closes In (AEP)

Large parts of the eurozone are slipping deeper into a deflationary trap despite negative interest rates and €1 trillion of quantitative easing by the ECB, leaving the currency bloc with no safety buffer when the next global recession hits. The ECB is close to exhausting its ammunition and appears increasingly powerless to do more under the legal constraints of its mandate. It has downgraded its growth forecast for the next two years, citing the uncertainties of Brexit, and admitted that it has little chance of meeting its 2pc inflation target this decade, insisting that it is now up to governments to break out of the vicious circle. Mario Draghi, the ECB’s president, said there are limits to monetary policy and called on the rest of the eurozone to act “much more decisively” to lift growth, with targeted spending on infrastructure.

“It is abundantly clear that Draghi is played out and we’re in the terminal phase of QE. The eurozone needs a quantum leap in the nature of policy and it has to come from fiscal policy,” said sovereign bond strategist Nicholas Spiro. Mr Draghi dashed hopes for an expansion of the ECB’s monthly €80bn programme of bond purchases, and offered no guidance on whether the scheme would be extended after it expires in March 2017. There was not a discussion on the subject. “The bar to further ECB action is higher than widely assumed,” said Ben May from Oxford Economics. The March deadline threatens to become a neuralgic issue for markets given the experience of the US Federal Reserve, which suggests that an abrupt stop in QE stimulus amounts to monetary tightening and can be highly disruptive.

The ECB has pulled out all the stops to reflate the economy yet core inflation has been stuck at or below 1pc for three years. Officials are even more worried about the underlying trends. Data collected by Marchel Alexandrovich at Jefferies shows that the percentage of goods and services in the inflation basket currently rising at less than 1pc has crept up to 58pc. This is a classic precursor to deflation and suggests that the eurozone is acutely vulnerable to any external shock. The figure has spiked to 67pc in Italy, and is now significantly higher that it was when the ECB launched QE last year. The eurozone should have reached economic “escape velocity” by now after a potent brew of stimulus starting last year: cheap energy, a cheaper euro, €80bn a month of QE, and the end of fiscal austerity. [..] “The euro is far stronger than they want, and stronger than the economy deserves, but they don’t know how to weaken it. This is exactly what happened to the Japanese,” said Hans Redeker, currency chief at Morgan Stanley.

Read more …

Draghi’s starting to come down on Germany, but it’s too late: their exports just fell 10%.

• ECB Stands Pat on Stimulus as Draghi Defends Policy (WSJ)

The ECB left its €1.7 trillion stimulus unchanged at a policy meeting Thursday, brushing off concerns over economic shock waves from Britain’s vote to leave the EU and disappointing investors expecting the ECB to act again soon. The decision to stand pat, even as new forecasts showed the ECB missing its inflation target for years, underlines how central banks are approaching the limits of what they can achieve without support from other policy areas, notably governments. In China earlier this month, Group of 20 leaders warned that monetary policy alone can’t fix the world’s economic ills, and pledged to boost spending and adopt overhauls aimed at boosting growth.

At a news conference here, ECB President Mario Draghi said he was concerned about persistently low eurozone inflation, which has fallen short of the ECB’s near-2% target for more than three years. Fresh ECB staff forecasts, published Thursday, showed inflation rising very gradually, to 1.2% next year and 1.6% in 2018. Despite that, Mr. Draghi said policy makers didn’t even discuss fresh stimulus, and praised the effectiveness of the bank’s existing policy measures, which include negative interest rates and €80 billion a month of bond purchases. He also aimed an unusually direct rebuke at Germany, criticizing Berlin for not boosting spending to support the economy. “Countries that have fiscal space should use it,” Mr. Draghi said. “Germany has fiscal space.”

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Germany looks a lot like Japan and China.

• German July Exports, Imports in Shock Plunge (Street)

German imports and exports unexpectedly shrunk in July, with a sharp export contraction causing a surprise narrowing in Germany’s trade balance. Federal Statistical Office data showed seasonally adjusted exports fell by 2.6% – analysts had expected about 0.3% growth – whereas imports fell by 0.7%, as against expectations for a 0.8% rise. On the year exports slumped by 10% and imports shriveled by 6.5%. The foreign trade balance shrunk to €19.4 billion from €21.4 billion in June, as against expectations for a balance of €22 billion. The Federal Statistical Office said the pace of German exports to other EU countries fell by 7% in July, while imports from the region fell by 4.5%. The falls were slightly narrower for trade with other eurozone countries.

German trade outside the 28-nation EU fared worse, with exports plunging by 13.8% and imports by 10.1%. Faltering German exports amid lackluster worldwide growth and emerging-market volatility has long been a drag on German growth. But the sharper-than-expected export fall challenges expectations of a second-half pickup in German trade with the rest of the world, and the surprise – albeit small -import decline suggests domestic demand isn’t robust enough to step into the breach. The trade data come in a week that the statistics office reported weaker-than-expected industrial output and manufacturing production for July. But the euro held firm against the dollar after the figures and was recently up 0.11% at $1.1272.

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“..some time around 2019, China’s total Debt/GDP will be over 400%, an absolutely ridiculous number, and one which assures a banking, if not global, financial crisis.”

• Goldman Calculates True Growth Rate Of China’s Debt: 40% of GDP Per Year (ZH)

For a long time when it came to Chinese loan creation, analysts would only look at the broadest reported aggregate: the so-called Total Social Financing. And, for a long time, it was sufficient – TSF showed that in under a decade, China had created over $20 trillion in new loans, vastly more than all the “developed market” QE, the proceeds of which were used to kickstart growth after the 2009 global depression, to fund the biggest capital misallocation bubble the world has ever seen and create trillions in nonperforming loans. However, a problem emerged about a year ago, when it was revealed that not even China’s TSF statistic was sufficient to fully capture the grand total of total new loan creation in China.

[..] according to Goldman, “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP).” This massive number was 9% higher than the TSF data, which implied that “only” a quarter of China’s 2015 GDP was the result of new loans. As Goldman further noted, the “divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.” In short, in addition to everything else, China has also been fabricating its loan creation data, and the broadest official monetary aggregate was undercutting the true new loan creation by approximately a third. The reason for this is simple: China does not want the world – or its own population – to realize just how reliant it is on creating loans out of thin air (and “collateralized” by increasingly more worthless assets), as it would lead to an even faster capital outflow by the local population sensing just how unstable the local banking system is.

Here is the good news: compared to late 2015, the record credit creation has slowed down fractionally, and the gap with the TSF total has shrunk. The smaller gap seems to be in line with recent reports that listed banks’ “investment receivables” expanded less rapidly in 2016 H1, and it might partly reflect the regulators’ tougher stance against shadow lending in recent months. And now, the bad news: this “tougher stance” has not been nearly tough enough, because as the following chart shows on a 1-year moving average, nearly 40% of China’s “economic growth” is the result of new credit creation, or in other words, new loans. What this really means, is that China’s debt/GDP, estimated most recently by the IIF at 300%…

… is now growing between 30% and 40% per year, when one accounts for the unaccounted for “shadow” credit conduits. Here is how Goldman concludes this stunning observation: “The PBOC appears to have shifted to a less dovish, though still supportive, policy bias in the last few months. However, given the prospective headwinds from slower housing construction and tighter on-budget fiscal stance in the coming months, there remains a clear need to sustain a high level of infrastructure investment, which is credit intensive, to achieve the minimum 6.5% full-year growth target. This poses constraints on how much further the PBOC can keep reining in credit, in our view.”

Translating Goldman, some time around 2019, China’s total Debt/GDP will be over 400%, an absolutely ridiculous number, and one which assures a banking, if not global, financial crisis.

Read more …

The resounding success of globalization.

• China’s Reviving the American Heartland – One Low Wage at a Time (BBG)

For six years, the General Motors factory that used to make Chevy Trailblazers in Moraine, Ohio, sat abandoned, a rusting monument to the decline of the American auto industry. These days, the plant is humming again, fueled by a resurgent U.S. consumer – but now under Chinese management. On the shop floor, Chinese supervisors in sky-blue uniforms that carry the logo of the new owners, Fuyao Glass, teach American employees how to assemble windshields. Drive along Interstate 75, through America’s industrial heartland, and you’ll find no shortage of Chinese-owned firms like Fuyao. They’re setting up shop in states such as Ohio and Michigan, key voter battlegrounds in November, where traditional manufacturing has been hollowed out – in many cases, by trade. With China.

[..] Fuyao acquired roughly half the old GM plant in 2014, spending $450 million to buy and remodel it. For a company that started out as a small producer of covers for water-meters and is now the world’s second-biggest auto-glass supplier, the acquisition capped a decade-long push into U.S. markets. For the Dayton area, it meant employment: the city, hometown of the Wright brothers, was hit hard by the shutdown of the GM plant two days before Christmas in 2008. [..] “Hey, 1,700 jobs is 1,700 jobs,” said Shawn Kane, a 28-year-old chef shopping at the Kroger grocery store in Moraine last month. “At least it’s not sitting empty anymore.” They’re jobs that tend not to pay as well as factory work once did, though – and there probably aren’t as many of them.

To keep its production in the U.S. viable, Fuyao uses more automation than it does in China, said John Gauthier, president of Fuyao Glass America. “Our customers, all they care about is that their cost doesn’t increase,” he said. A line worker at Fuyao starts at $12 per hour, equivalent to an annual salary of about $25,000. GM workers at the old Moraine plant could make at least twice that, topped off by perks like defined-benefit pensions, according to union officials and former employees. “When you don’t have enough protections for American workers, and when you’ve got a globalized economy, this is what happens,” said Chris Baker, a 40-year-old sales rep based near Moraine. “This is the new normal. It’s very sad.”

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WHen will they start buying people’s homes? Cars perhaps?

• Bank of Japan Risk: Running Out of Bonds to Buy (WSJ)

Japan’s central bank is facing a new problem: It could be running out of government bonds to buy. The Bank of Japan is snapping up the equivalent of more than $750 billion worth of government debt a year in an effort to spur inflation and growth. At that rate, analysts say, banks could run out of government debt to sell within the next 18 months. The looming scarcity is a powerful sign of the limits central banks face as they turn to ever-more aggressive means of stimulating their economies. The problem is mirrored in Europe, where self-imposed rules limit how many eurozone government bonds the ECB can buy from individual governments. Facing a diminishing supply of sovereign bonds, the ECB started buying corporate debt in June.

Some economists have even called for the ECB to start buying stocks. The central bank left its bond-buying program and interest-rate policy unchanged at its meeting Thursday. The Japanese central bank has fewer options if the country’s banks, which have to hold a certain amount of safe debt to use as collateral in everyday transactions, ever become unwilling to sell more of their holdings. Its most obvious alternatives—pushing rates deeper into negative territory or buying other types of assets—have practical limitations. Meanwhile, the BOJ’s economic goals remain out of reach: Inflation is stubbornly low, and the yen has strengthened about 18% this year.

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Does nobody have any common sense down under?

• Australia, New Zealand Housing Booms Set Currencies On Course For Parity (BBG)

Housing booms in New Zealand and Australia could be putting the neighbors’ currencies on course to reach parity for the first time ever. Both nations have seen house prices surge in recent years, but the underlying causes are fundamentally different, according to Deutsche Bank analysis. Australia’s boom is largely home-grown, whereas New Zealand’s is being fueled by record immigration. That’s affecting the countries’ current accounts differently. While Aussies are feeling richer due to house-price gains, prompting them to spend more on imports and boosting their current account deficit, New Zealand is sucking more offshore capital into its housing market, narrowing its current account gap. Currencies are sensitive to trends in the current account – a country’s balance with the rest of the world – because they are a gauge of risk for investors.

“The nature of the real estate boom in Australia should have bearish currency implications because it leads to deterioration in the basic balance,” Robin Winkler, a London-based strategist for Deutsche Bank, said in a research note. “This is not the case in New Zealand and adds to our conviction that AUD/NZD should drop to parity.” The two currencies have never converged in the free-floating era that began in the 1980s. They came close in April last year, when the kiwi briefly reached 99.79 Australian cents or, to express it the other way, the Aussie dollar fell below NZ$1.01. The New Zealand dollar was worth 96.8 Australian cents at 12:35p.m. in Wellington Friday.

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Burn baby burn.

• Coal Rises From the Grave to Become One of Hottest Commodities

For all the predictions about the death of coal, it’s now one of the hottest commodities in the world. The resurrection may have further to run. A surge in Chinese imports to compensate for lower domestic production has seen European prices jump to near an 18-month high, while Australia’s benchmark is set for the first annual gain since 2010. At the start of the year, prices languished near decade lows because of waning demand from utilities seeking to curb pollution and amid the International Energy Agency’s declaration that the fuel’s golden age in China was over. Now, traders are weighing the chances of extreme weather hitting major producers and China further boosting imports as factors that could push prices even higher.

“It’s a commodity that’s been on a slippery slide for the past four years and it’s making a remarkable recovery,” said Erik Stavseth, an analyst at Arctic Securities in Oslo, who’s tracked the market for almost a decade. “There’s a strong pulse.” What could light up the market further is the occurrence of a La Nina weather pattern later this year. Last time it happened in 2010 and 2011, heavy rains flooded mines in Australia and Indonesia, the world’s two largest exporters. While some meteorologists have toned down their predictions for the weather phenomenon forming, “another strong forecast” would cause prices to rise further, according to Fitch’s BMI Research.

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Still don’t think I know what exactly the fraud was. Though I read the piece twice.

• Historic Tax Fraud Rocks Denmark As Loss Estimates Keep Growing (BBG)

About two weeks after Denmark revealed it had lost as much as $4 billion in taxes through a combination of fraud and mismanagement, the minister in charge of revenue collection says that figure may need to be revised even higher. Speaking to parliament on Thursday, Tax Minister Karsten Lauritzen said he “can’t rule out” that losses might be bigger than the most recent public estimates indicate. It would mark the latest in a string of revisions over the past year, in which Danes learned that losses initially thought to be less than $1 billion somehow ended up being about four times as big. The embarrassment caused by the tax fraud, which spans about a decade of successive administrations, has prompted Lauritzen to consider debt collection methods not usually associated with Scandinavian governments.

Denmark has long had one of the world’s highest tax burdens – government revenue as a percentage of GDP – and a well-functioning tax model is essential to maintaining its fabled welfare system. “We’re entertaining new ideas, considering more new measures,” Lauritzen told Bloomberg. Danish officials are now prepared to pay anonymous sources for evidence from the same database that generated the Panama Papers. Jim Soerensen, a director at Denmark’s Tax Authority, says the first batch of clues obtained using this method is expected by the end of the month.

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Project Fear didn’t work in Britain either.

• Goldman Sachs Just Launched Project Fear in Italy (DQ)

Project Fear began two years ago in the run up to Scotland’s national referendum. It then spread to the rest of the UK in the lead up to this summer’s Brexit referendum. But it keeps on moving. Its latest destination is Italy, where the campaign to instill fear and trepidation in the hearts and souls of Italy’s voters was just inaugurated by the world’s most influential investment bank, Goldman Sachs. It just released a 14-page report warning about the potentially dire consequences of a “no” vote in Italy’s upcoming referendum on the government’s proposed constitutional reforms. The reforms seek, among other things, to streamline Italy’s government process by dramatically restricting the powers of the senate, a major source of political gridlock, while also handing more power to the executive.

The polls in Italy are currently neck and neck, though the momentum belongs to the reform bill’s opponents. If the Italian public vote against the bill, the response of the markets could be extremely negative, warns Goldman, putting in jeopardy the latest attempt to rescue Italy’s third largest and most insolvent bank, Monte dei Paschi di Siena. The rescue is being led by JP Morgan Chase and Italian lender Mediobanca, and includes the participation of a select group of global megabanks that are desperate to prevent contagion spreading from Italy’s banking system to other European markets, and beyond. In the event of a “no” vote, MPS’ planned €5 billion capital increase would have to be put on ice, while investors wait for the political uncertainty to clear before pledging further funds.

This being Italy, the wait could be interminable and the delay fatal for Monte dei Paschi and other Italian banks, Goldman warns. It also points out that Italy is the only European country where a substantial portion of its bank bonds are held in household portfolios (about 40% according to data from Moody’s, four times more than Germany and eight times more than France and Spain). In other words, things could get very ugly, very fast, if those bank bonds collapse! As for Italian government bonds and Europe’s broader debt markets, they would be insulated from any fallout by former Goldmanite Mario Draghi’s bond binge buying.

Read more …

We are unstoppable.

• Humans Have Destroyed A Tenth Of Earth’s Wilderness In 25 Years (G.)

Humans have destroyed a tenth of Earth’s remaining wilderness in the last 25 years and there may be none left within a century if trends continue, according to an authoritative new study. Researchers found a vast area the size of two Alaskas – 3.3m square kilometres – had been tarnished by human activities between 1993 and today, which experts said was a “shockingly bad” and “profoundly large number”. The Amazon accounted for nearly a third of the “catastrophic” loss, showing huge tracts of pristine rainforest are still being disrupted despite the Brazilian government slowing deforestation rates in recent years. A further 14% disappeared in central Africa, home to thousands of species including forest elephants and chimpanzees.

The loss of the world’s last untouched refuges would not just be disastrous for endangered species but for climate change efforts, the authors said, because some of the forests store enormous amounts of carbon. “Without any policies to protect these areas, they are falling victim to widespread development. We probably have one to two decades to turn this around,” said lead author Dr James Watson, of the University of Queensland and Wildlife Conservation Society. The analysis defined wilderness as places that are “ecologically largely intact” and “mostly free of human disturbance”, though some have indigenous people living within them. The team counted areas as no longer wilderness if they scored on eight measures of humanity’s footprint, including roads, lights at night and agriculture.

Read more …

Debt Rattle April 13 2016

Apr 132016
 
 April 13, 2016  Posted by at 9:47 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »


Lewis Wickes Hine Child labor at Gorenflo Canning Co., Biloxi, Mississippi 1911

• What in the World’s Going on with Banks this Week? (WS)
• The “Independent” Fed Is About to Become Partisan (JR)
• IMF Cuts World Growth Forecast, Warns Over Brexit (AFP)
• Don’t Trust Ben Bernanke On Helicopter Money (Steve Keen)
• Bundesbank’s Weidmann Rebukes Draghi Critics In Berlin (FT)
• China Rail Freight Volume Plunges 10.5%, and The Economy Still Grows 6.9%? (WS)
• Peabody, World’s Top Private Coal Miner, Files For Bankruptcy (Reuters)
• IMF Says Greek Debt ‘Highly Unsustainable’, Debt Relief ‘Essential’ (R.)
• Pro-EU Leaflets Spark ‘Return To Sender’ Revolt In Britain (AFP)
• Why Younger People Can’t Afford A House: Money Became Too Cheap (G.)
• Iceland Shocked By Elite’s Love Of Offshore Holdings (AFP)
• Swiss Banker Whistleblower: CIA Behind Panama Papers (CNBC)
• Australia Issues The Most Hideous Banknote In History (SMH)
• Canadian First Nation Suicide Epidemic Has Been Generations In The Making (G.)
• Brussels Gives Greece Two Weeks To Tighten Borders (Kath.)
• Refugees Become Smugglers Following EU-Turkey Deal (MEE)
• Greek Coast Guard Rescues 120 Refugees Off Lesvos, Samos (Kath.)

Obama meets with Biden and Yellen. Hadn’t happened since Truman?!

• What in the World’s Going on with Banks this Week? (WS)

Just about every major banker and finance minister in the world is meeting in Washington, D.C., this week, following two rushed, secretive meetings of the Federal Reserve and another instantaneous and rare meeting between the Fed Chair and the president of the United States. These and other emergency bank meetings around the world cause one to wonder what is going down. Let’s start with a bullet list of the week’s big-bank events:
• The Federal Reserve Board of Governors just held an “expedited special meeting” on Monday in closed-door session.
• The White House made an immediate announcement that the president was going to meet with Fed Chair Janet Yellen right after Monday’s special meeting and that Vice President Biden would be joining them.
• The Federal Reserve very shortly posted an announcement of another expedited closed-door meeting for Tuesday for the specific purpose of “bank supervision.”
• A G-20 meeting of finance ministers and central-bank heads starts in Washington, D.C., on Tuesday, too, and continues through Wednesday.
• Then on Thursday the World Bank and the International Monetary Fund meet in Washington.
• The Federal Reserve Bank of Atlanta just revised US GDP growth for the first quarter to the precipice of recession at 0.1%.
• US banks are expected this coming week to report their worst quarter financially since the start of the Great Recession.
• The press stated that the German government will sue the European Central Bank if it launches a more aggressive and populist form of quantitative easing, often called “helicopter money.”
• The European Union’s new “bail-in” procedures for failing banks were employed for the first time with Austrian bank Heta Asset Resolution AG.
• Italy’s minister of finance called an emergency meeting of Italian bankers to engage “last resort” measures for dealing with €360 billion of bad loans in banks that have only €50 billion in capital.

It is rare for presidents to meet with the chair of the Federal Reserve. The last time President Obama met with Janet Yellen was in November of 2014, a year and a half ago. It is even more rare for the vice president of the United States to join them. In fact, I’ve heard but haven’t verified that it has never happened in a suddenly called meeting with the Fed before. For security reasons, the president and vice president don’t regularly attend the same events. There are, of course, many planning sessions or emergency meetings where they do get together, but not with the head of the Federal Reserve. Emergency meetings where the VP is included in the planning session would include situations related to dire national security in case the VP winds up having to take over.

In fact the meeting with the prez and vice prez is so rare that the White House is bending over backwards to assure the entire nation that the president is not meeting with Yellen to try to influence the Fed, which is required to act independently of politics (so they say). According to the White House, President Obama is meeting with the Fed chair and Biden to discuss the nation’s “longer-term economic outlook,” even though Yellen just told the entire nation that the economy was strong and had arrived nearly back at “full health.” The president says they will be “comparing notes.” Do their notes about the nation’s outlook disagree?

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Clinton and Cameron: monsters under the bed.

• The “Independent” Fed Is About to Become Partisan (JR)

Late last night it was revealed that President Obama has summoned Janet Yellen to the White House today. There’s nothing unusual in itself about the president meeting with the Chair of the Federal Reserve over lunch to discuss policy. Bush 43, for example, frequently met with Alan Greenspan to discuss the economy. But this meeting is different… This isn’t a casual lunch. It’s a high-profile, last-minute meeting Obama orchestrated. The last time something like this happened was in 1951, when Harry Truman summoned the entire Federal Reserve Board of Governors to the White House. Since this is something that hasn’t happened in almost 70 years, today’s meeting is a fairly extraordinary event. Why did Obama order the meeting? There are a few factors to consider… Number one, Obama does not want the Fed to raise rates.

If the Fed remains on its path of interest rate hikes this year, it would give the Republicans the strongest chance at the White House in this fall’s election. That’s because rate hikes would likely lead to recession, and that would bode poorly for the Democrats. Obama is deeply concerned about his legacy, which the Republicans would like to reverse. So the best chance the Democrats have in the upcoming presidential election is if rates stay low. Janet Yellen herself is a Democrat, with a background as a labor economist and a career at U.C. Berkeley. She’s not necessarily hostile to Obama’s message. By bringing her to the White House, Obama is sending Yellen a highly visible public message. Don’t raise rates. You can consider this meeting more like an implied threat. There are two openings on the Fed’s Board of Governors. Obama could nominate two of Yellen’s biggest policy opponents if he wanted to play hardball with her.

Those two opponents could fight Yellen at every turn and threaten her control. Or, Obama could no nothing if she confirms and let her maintain control of the board. He’s very cleverly held the vacancies open, which he can use as leverage to influence Yellen’s course of action. He can nominate her worst opponents if she doesn’t follow his wishes. There’s also another factor at play: The Democrats are as afraid of Bernie Sanders as Republicans are of Donald Trump. Sanders has won seven straight primaries and caucuses. One of his biggest weapons is his bashing of the big banks, Wall Street and his criticism of Hillary Clinton for being in their pocket. Sanders has demanded that Hillary release the transcripts of her three speeches to Goldman Sachs, for which she received $675,000. She has refused to release those transcripts. That’s the Achilles heel of the Clinton campaign, and Sanders is making the most of it.

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No credibility.

• IMF Cuts World Growth Forecast, Warns Over Brexit (AFP)

The IMF said Tuesday that the global economy faces wide-ranging threats from weak growth and rising protectionism, warning of possible “severe” damage should Britain quit the EU. The Fund cut its global forecast for the third straight quarter, saying economic activity has been “too slow for too long,” and stressed the need for immediate action by the world’s economic powers to shore up growth. It said intensifying financial and political risks around the world, from volatile financial markets to the Syria conflict to global warming, had left the economy “increasingly fragile” and vulnerable to recession. The IMF raised concerns over “fraying” unity in the European Union under pressure from the migration crisis and the “Brexit” possibility.

And it pointed to the contractions in large emerging market economies, most notably Brazil, where the economic downturn has been accompanied by deep political crisis that has President Dilma Rousseff facing impeachment. Seeing a broad fall in trade and investment, the IMF cut its forecast for world growth this year to a sluggish 3.2%, 0.2 percentage points down from its January outlook and down from the 3.8% pace expected last July. That reflects a glummer view of growth in both developed and emerging economies, with the forecasts for Japan and oil-dependent Russia and Nigeria all sharply lowered. Growth expectations for most leading economies were pared back by 0.2 percentage points. The outlook for the United States – hit by the impact of the strong dollar – was trimmed to 2.4% this year, from 2.6% in January.

Only the pictures in China and developing eastern Europe were better. But at a slightly upgraded pace of 6.5% growth, China was still on track for a significant slowdown from last year. The growth downgrade was expected but the tone of the IMF message was more dire than in recent months. It came as an increasing number of countries are approaching the IMF and World Bank for financial support. Last week Angola, its finances devastated by the crash in oil prices, asked the IMF for a three-year bailout program. And the World Bank said requests for loan support had reached levels seen only during financial crises. IMF chief economist Maurice Obstfeld said there was a risk of a full stall in global growth without efforts to boost investment and demand. “The weaker is growth, the greater the chance that the preceding risks, if some materialize, pull the world economy below stalling speed,” he said.

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It’s too late for helicopter money. It would evaporate before touching the ground.

• Don’t Trust Ben Bernanke On Helicopter Money (Steve Keen)

Ben Bernanke earned the sobriquet “Helicopter Ben” for his observations in a 2002 speech that “the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost”, that the existence of this technology means that “sufficient injections of money will ultimately always reverse a deflation”, and that using this technology to finance a tax cut is “essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.” But just because he’s called “Helicopter Ben” doesn’t mean that he knows how “Helicopter Money” would actually work.

His column “What tools does the Fed have left? Part 3: Helicopter money” discusses both the nuts and bolts of actually implementing a “Helicopter Drop” (or as he more accurately describes it, “an expansionary fiscal policy—an increase in public spending or a tax cut—financed by a permanent increase in the money stock”) and also discusses how such a policy might affect the real economy. While his discussion of the nuts and bolts is realistic, his discussion of how it would work is fantasy. The nuts and bolts are straightforward (and Bernanke has a good practical suggestion for how to implement it too, which I’ll discuss at the end of this post). “Helicopter money” (or as he excitingly renames it, “a Money-Financed Fiscal Program, or MFFP”) is a direct injection of money from the government into people’s bank accounts, which is financed by a loan from the Federal Reserve to the Treasury. This differs from the standard way that Government spending is financed, which is by issuing Treasury Bonds that are then bought by the public.

The standard method doesn’t put additional money into circulation in the economy, because the increase in some private sector bank accounts caused by the government spending—a tax rebate, for example—is completely offset by the fall in other private sector bank accounts as they buy the Treasury Bonds that financed the tax rebate. But with “MFFP”, the tax rebate is financed by new money created by the Federal Reserve “at essentially no cost”. It thus directly increases the money supply, and this is where Friedman’s “Helicopter” analogy comes from. In the private sector economy, the money supply is increased when private banks lend to the public. Money created by private bank lending also goes by the nickname of “inside money”, since it is created by institutions that are “inside” the private sector—private banks.

Government-created money, which is what a tax rebate financed by a direct loan from the Federal Reserve to the Treasury would be, is “outside money”, because it comes from outside the private sector. Friedman’s analogy likened it to a helicopter flying over an economy and dropping new dollar bills from the sky. So how does “Helicopter Money” differ in impact from the standard way of financing government spending? Here’s where Bernanke passes from the practical nuts and bolts to the fantasy world of mainstream economics. According to Ben, the Helicopter flies, so to speak, because it causes “a temporary increase in expected inflation,” and because it “does not increase future tax burdens.”

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Best friends?!

• Bundesbank’s Weidmann Rebukes Draghi Critics In Berlin (FT)

Bundesbank president Jens Weidmann has rebuked German politicians for attempting to pressure European Central Bank chief Mario Draghi over his easy money policies, suggesting their criticism was interfering with the bank’s independence. “It’s not unusual for politicians to have opinions on monetary policy, but we are independent,” Mr Weidmann told the Financial Times last Thursday. “The ECB has to deliver on its price stability mandate and thus an expansionary monetary policy stance is appropriate at this juncture regardless of different views about specific measures.” The head of Germany’s central bank and his counterpart at the ECB have often been at odds over how to respond to the threat of falling prices, with Mr Weidmann frequently raising objections to measures tabled by Mr Draghi.

But they have emerged as unlikely allies at a time when monetary policymakers around the world are facing mounting criticism over record-low interest rates, including the decision by some central banks – among them the ECB – to cut rates below zero and into negative territory to counter the threat of a vicious bout of deflation. The policy has been deeply unpopular in Germany, prompting criticism from senior politicians, led by finance minister Wolfgang Schäuble, that the central bank’s low interest rates are expropriating savings from the German public and fuelling the rise of rightwing populism.

While the ECB targets inflation of just below 2%, the latest reading was minus 0.1%. Mr Weidmann also said the German debate on the ECB is focused too narrowly on the consequences of low interest rates for savers. “The debate does not focus enough on the broader macroeconomic consequences of monetary policy. People are not just savers: they’re also employees, taxpayers, and debtors, as such benefiting from the low level of interest rates,” he explained. The Bundesbank built its reputation on its independence from politics, frequently falling out with German lawmakers in the 1970s and 1980s over the central bank’s use of high interest rates to tackle inflation. But Mr Weidmann faces a more sensitive challenge: defending an EU institution from criticism from within Germany at a time of acute unease fuelled by the refugee crisis.

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Riddle me this.

• China Rail Freight Volume Plunges 10.5%, and The Economy Still Grows 6.9%? (WS)

Rail freight volumes are an indicator of China’s goods-producing and goods-consuming economy, not just manufacturing, construction, agriculture, and the like, but also consumer goods. Thus they’re also an indication of consumer spending on goods. Alas, rail freight volume is collapsing: the first quarter this year puts volume for the whole year on track to revisit levels not seen since 2007. While China’s economy was strong, rail freight volumes were soaring. For example, in 2010, when China was pump-priming its economy, rail freight volume jumped 10.8% from a year earlier. In 2011, it rose 6.9%. It had soared 44% from 2005 to 2011! But 2011 was the peak. In 2012, volume in trillion ton-kilometers declined one notch and in 2013 stagnated. But in 2014, volume skidded 5.8%.

And in 2015, volume plunged 10.5% to 3.4 billion tons, according to Caixin, citing figures from the National Railway Administration. It was the largest annual decline ever booked in China. It was a year that the People’s Daily, the official paper of the Communist Party, described in this elegant manner: “Dragged by a housing slowdown, softening domestic demand, and unsteady exports, China’s economy expanded 6.9% year on year in 2015, the weakest reading in around a quarter of a century.” Which is precisely where things stop making sense: rail freight volume plunges 10.5% in 2015, and the economy still increases 6.9%? I mean, come on. At the time, Caixin said that China’s central planners aimed to increase rail freight volumes to 4.2 billion tons by 2020. This would assume an average annual growth rate of 4.3%.

So these declines are not part of the planned transition to a consumption-based economy. They’re totally against that plan or any other plan. They’re very inconvenient for the rosy scenario! Then came the first quarter of 2016. Rail freight volume plunged 9.4% year-over-year to 788 million tons, according to data from China Railway Corporation, cited today by the People’s Daily. At this rate, rail freight volume for 2016 will be down 20% from 2014, which had already been a down year! At this rate, volume in 2016 will end up where it had been in 2007! China — hobbled by soggy domestic demand, perhaps even soggier demand overseas, rampant factory overcapacity, cooling investment, an insurmountable mountain of bad debt, and a million other domestic problems — may be trying to transition from a manufacturing-based economy to an economy based on consumption.

But even consumer goods must be transported, even those purchased online! Only services don’t require much transportation. But we doubt that service sales have jumped in two years to the extent that they would even halfway make up for the crashing demand for goods transported by rail. The World Bank just figured that China’s economy would grow 6.7% in 2016, the IMF pegs it at 6.5%, both kowtowing to the GDP declarations issued by the Chinese government. Whose Kool-Aid have they been drinking? This would make 2016 another year when rail freight plunges by a dismal 10% or so while economic growth soars nearly 7% – which would make China one of the fastest growing economies in the world. So something in this convoluted, government-imposed math doesn’t add up here.

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Demand destruction and debt deflation.

• Peabody, World’s Top Private Coal Miner, Files For Bankruptcy (Reuters)

Peabody Energy, the world’s largest privately owned coal producer, filed for U.S. bankruptcy protection on Wednesday in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fueled expansion into Australia. The company listed both assets and liabilities in the range of $10 billion to $50 billion. Falling global coal demand, stricter environmental controls and a glut of natural gas have pushed big miners, including the second largest U.S. coal producer, Arch Coal, into bankruptcy protection over the past year.

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It’s cruel game that EU and IMF enjoy far too much.

• IMF Says Greek Debt ‘Highly Unsustainable’, Debt Relief ‘Essential’ (R.)

The IMF wants Greece’s European partners to grant Athens substantial relief on its debt which it sees remaining “highly unsustainable”, according to a draft IMF memorandum seen by Reuters. Earlier on Tuesday, Greece and inspectors from its EU/IMF lenders adjourned talks on a crucial bailout review, mainly due to a rift among the lenders over a projected fiscal gap by 2018 and over Athens’ resistance to unpopular reforms. They will resume the review after this week’s IMF spring meetings in Washington, where the lenders are also expected to discuss Greek reforms and debt., Greek Finance Minister Euclid Tsakalotos and German Finance Minister Wolfgang Schaeuble, who told Reuters on Tuesday that he saw no need for debt restructuring, will also be there.

“Despite generous concessional official financing and further reform plans … debt dynamics are projected to remain highly unsustainable,” the IMF draft said. “To restore debt sustainability, in addition to our reform efforts, decisive action by our European partners to grant further official debt relief will be essential.” EU institutions expect Greece to have a fiscal shorfall equivalent to 3% of economic output in 2018, while the IMF projects a 4.5% shortfall. The EU institutions also believe Athens can reach a primary surplus – the budget balance before debt-servicing costs – of 3.5% of GDP by 2018, as targeted in its latest financial bailout.

But the IMF’s draft Memorandum of Financial and Economic Policies (MFEP), which is compiled during the review, projected a primary deficit of 0.5% this year, a surplus of 0.25% in 2017 and a primary surplus of just 1.5% in 2018. It said these figures reflected reform fatigue after five years of adjustments and social pressures in Greece due to high unemployment, which rose to 24.4% in January. The draft projected an average rate of economic growth of 1.25% for the long term, which is lower than its previous forecast. The targets, which it called “ambitious, yet realistic”, could be underpinned by implementing measures that would save the equivalent of 2.5% of GDP by 2018, including reforms to its pension system, income tax, value-added tax and the public sector wage bill.

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If Cameron stays on, Brexit is here.

• Pro-EU Leaflets Spark ‘Return To Sender’ Revolt In Britain (AFP)

Britons who want to leave the EU in June’s referendum are sending the government’s pro-Europe leaflets back to Downing Street in a furious protest against a campaign critics have slammed as scaremongering. The “Post It Back” campaign on Facebook and Twitter has attracted support from hundreds of people who do not appreciate the taxpayer-funded, pro-European Union leaflets being delivered to their homes this week. Kirsty Stubbs posted a picture of her leaflet on Facebook defaced with slogans including “What scaremongering rubbish” and “Vote Leave!” before sending it back. Alex Armstrong sent his leaflet back to a freepost address for Prime Minister David Cameron’s Conservatives with an added special package in the hope of lumbering the party with a large bill for postage.

“Just sent back the propaganda leaflet to the freepost address with a suitably heavy attachment – a lump of concrete,” he wrote on Facebook. Others burnt their leaflets or said they would use them as toilet paper, coffee mats or cat litter. Eurosceptic MPs are also angry that Cameron’s government has spent over £9 million on the leaflets, which will eventually go to every home in Britain. They forced a debate on the issue in the House of Commons on Monday. “It is bad enough getting junk mail, but to have Juncker mail sent to us with our own taxes is the final straw,” said Liam Fox, a senior Conservative, punning on the name of European Commission head Jean-Claude Juncker. Another Conservative, Nigel Evans, spoke of his work as an election monitor and compared ministers’ campaign tactics to those in Zimbabwe.

“If in any of the countries I visit I witnessed the sort of spiv (racketeer) Robert Mugabe antics that I have seen carried out by this government, I would condemn the conduct of that election as not fair,” he said. More than 200,000 people have signed a petition on parliament’s website opposing the use of taxpayers’ money to pay for the “biased” leaflet, forcing MPs to schedule another debate on the issue for May 9. The glossy, 16-page leaflet makes a series of claims including that leaving the EU would “create years of uncertainty and potential disruption” and that EU membership “makes it easier to keep criminals and terrorists out of the UK”. The main pro and anti-EU campaigns will each be entitled to send a publicly-funded leaflet to all households or electors, worth up to £15 million each, in the run-up to the June 23 vote. But opponents say that by spending £9 million on this extra leaflet before the formal campaign period begins on Friday, the government is getting an unfair advantage.

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Housing bubbles save governments.

• Why Younger People Can’t Afford A House: Money Became Too Cheap (G.)

House prices have risen by 10% in the last year, the Halifax announced last week. Whoopeedoo. What that means is that the intergenerational wealth divide just rose by another 10% – and anyone born after 1985 is going to find it 10% harder to ever buy a home. There is perhaps no greater manifestation of the wealth gap in this country than who owns a house and who doesn’t, and yet it’s so unnecessary. Ignoring land prices for the moment, houses do not cost a lot of money to build – a quick search online shows you can buy the materials for a three-bed timber-framed house for less than £30,000; in China a 3D printer can build a basic home for less than £3,000 – and the building cost of the houses we already have has long since been paid. How can it be that, in the liberal, peaceful, educated society that is 21st-century Britain, a generation is priced out?

These are not times of war, nor are they, for the most part, periods of national emergency, so why should one couple be able to settle down and start a family and another not, by virtue of the fact that one was born 15 years earlier than the other? There has been a failure in both the media and government to properly diagnose the cause of high house prices. Until the causes – our systems of money and planning – are properly understood, we cannot hope to fix the problem. The standard solution is: “we need to build more”, but this is not a simple supply-and-demand issue. Between 1997 and 2007 the housing stock grew by 10%, but the population only grew by 5%. If house prices were a function of supply and demand, they should have fallen slightly over this period. They didn’t. They rose by more than 300%. The cause of house price rises is the unrestrained supply of something else: money.

Mortgage lending over the same period went up by 370%, thinktank Positive Money’s research shows. It was newly created debt that pushed up prices in a decade of extraordinarily loose lending, which gave birth to a national obsession. Houses were no longer places to live, but financial assets. Property owners became immensely wealthy without actually doing anything. And this great, unearned wealth saw the rise of a new rentier class: the buy-to-let landlord. When you have runaway inflation such as this, the Bank of England has a responsibility to quash it, usually by putting up interest rates. But – and here is the great sleight of hand – the Bank has seen fit not to include house prices in its measures of inflation. So, throughout the 90s and 00s, they could then “prove” inflation was low or moderate and interest rates meandered lower. Meanwhile, more and more mortgages were issued, and so more and more money was created, and it pushed up prices. The government didn’t mind.

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Hilarious.

• Iceland Shocked By Elite’s Love Of Offshore Holdings (AFP)

Cabinet ministers, bankers and CEOs: the offshore companies at the heart of the leaked Panama Papers have drawn large numbers of Iceland’s elite into a scandal that has already brought down the country’s premier. The documents from the Panama-based law firm Mossack Fonseca, obtained by the International Consortium of Investigative Journalists (ICIJ), revealed just how many Icelanders had holdings hidden away in tax havens.That number is astounding: some 600 Icelanders are named in the documents, in a country of just 320,000. That’s the highest per capita number for any country, according to Johannes Kristjansson, an independent Icelandic journalist who worked with the Consortium. In the streets of Reykjavik, people are disgusted.

“It’s a small clique, and even after the 2008 (financial) crisis they wouldn’t let go. It just confirms that money made during the boom years didn’t disappear into thin air,” a 50-year-old resident, Kolbrun Elfa Sigurdardottir, told AFP. “Who are the people who benefited from this system? We all want to know,” asked Alli Thor Olafsson, 32. The offshore companies are part of the legacy from the euphoria that was rampant in Iceland’s financial sector in the early 2000s when the country’s banks borrowed beyond their means to fund aggressive investments abroad, ultimately causing the 2008 collapse of the three main banks. According to Sigrun Davidsdottir, a journalist at public television RUV who has been investigating offshore holdings since the 2008 crisis, Iceland’s financial advisors were quick to suggest to all and sundry that their money should be placed offshore.

“During the heady years up to 2008, a source said to me that you just weren’t anyone unless you owned an offshore company,” she wrote on her blog. By now, the best-known case is that of ousted prime minister Sigmundur David Gunnlaugsson. In 2007, his then-future wife, Anna Sigurlaug Palsdottir, placed her inheritance from her wealthy businessman father in an offshore tax haven, the British Virgin Islands, via the Credit Suisse bank. Gunnlaugsson owned 50% of the offshore company, named Wintris, a fact he neglected to disclose as required in April 2009 when he was elected to parliament. He resigned last week after massive public protests. Offshore accounts were so well-known in Iceland that the expression “Tortola company” – referring to the most populated island in the British Virgin Islands – had been widespread in Icelandic media, though not the extent to which they were used and by whom.

Gunnlaugsson was definitely not the only government official to own an offshore company. Finance Minister Bjarni Benediktsson owns a company in the Seychelles, while Interior Minister Olof Nordal has one in Panama. Both have so far managed to hold onto their cabinet posts despite the scandal. A former central bank governor and ex-industry minister, Finnur Ingolfsson, the head of pharmaceutical group Alvogen, Robert Wessman, as well as journalist Eggert Skulason of the daily DV are all known to be on the Panama Papers list of offshore account holders.

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All files should be transferred to a Wiki-style open source server.

• Swiss Banker Whistleblower: CIA Behind Panama Papers (CNBC)

Bradley Birkenfeld is the most significant financial whistleblower of all time, so you might think he’d be cheering on the disclosures in the new Panama Papers leaks. But today, Birkenfeld is raising questions about the source of the information that is shaking political regimes around the world. Birkenfeld, an American citizen, was a banker working at UBS in Switzerland when he approached the U.S. government with information on massive amounts of tax evasion by Americans with secret accounts in Switzerland. By the end of his whistleblowing career, Birkenfeld had served more than two years in a U.S. federal prison, been awarded $104 million by the IRS for his information and shattered the foundations of more than a century of Swiss banking secrecy.

In an exclusive interview Tuesday from Munich, Birkenfeld said he doesn’t think the source of the 11 million documents stolen from a Panamanian law firm should automatically be considered a whistleblower like himself. Instead, he said, the hacking of the Panama City-based firm, called Mossack Fonseca, could have been done by a U.S. intelligence agency. “The CIA I’m sure is behind this, in my opinion,” Birkenfeld said. Birkenfeld pointed to the fact that the political uproar created by the disclosures have mainly impacted countries with tense relationships with the United States. “The very fact that we see all these names surface that are the direct quote-unquote enemies of the United States, Russia, China, Pakistan, Argentina and we don’t see one U.S. name. Why is that?” Birkenfeld said. “Quite frankly, my feeling is that this is certainly an intelligence agency operation.”

Asked why the U.S. would leak information that has also been damaging to U.K. Prime Minister David Cameron, a major American ally, Birkenfeld said the British leader was likely collateral damage in a larger intelligence operation. “If you’ve got NSA and CIA spying on foreign governments they can certainly get into a law firm like this,” Birkenfeld said. “But they selectively bring the information to the public domain that doesn’t hurt the U.S. in any shape or form. That’s wrong. And there’s something seriously sinister here behind this.” Birkenfeld also said that during his time as a Swiss banker, Mossack Fonseca was known as one piece of the vast offshore maze used by bankers and lawyers to hide money from tax authorities. But he also said that the firm that is at the center of the global scandal was also seen as a relatively small player in the overall offshore tax evasion business.

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Ha!

• Australia Issues The Most Hideous Banknote In History (SMH)

The new $5 note continues Australia’s proud history of monetary innovation. When the British founded the convict colony of NSW in 1788, Governor Arthur Phillip embarked on a unique social experiment. He would establish a society without money, as having it around would only give the convicts something else to steal. Rum became the currency of choice, with the pound making way for the pint and the shilling swapped for the shot. In 1814, Governor Lachlan Macquarie decided he could not run a colony on a currency prone to spillage and evaporation. He bought 40,000 Spanish pieces of eight, the currency more pirates prefer, and cut the centre out of each piece, creating two coins, the holey dollar and the dump. In a moment of Scottish fiscal genius, Macquarie declared the two new coins would have a combined value of one-and-a-quarter pieces of eight, generating a tidy profit for his government.

Australia’s first banknote was printed by the Bank of NSW in 1817. The bank, established by convicted criminals, was commonly known as the Convict’s Bank and is now known as Westpac. In 1988, Australia celebrated its bicentenary by revolutionising banknote design, issuing the world’s first polymer note, the brainchild of Australia’s CSIRO. The organisation was so good at the science of making money that this is now the only science the Australian government will let it do. And now, with the new $5 note, Australia is again leading the world in banknote design. The Reserve Bank is proud to announce it has designed, possibly, the most hideous banknote in history. This is the start of a campaign to make our currency so nauseatingly unappealing that people will switch to electronic payments (saving the Australian government printing costs).

The new wattle motif, designed to look like anthrax spores, will stop old people sending money by mail (saving the Australian government postage costs). The government must have retained the designer of Australia’s 1984 Olympic uniforms to come up with a startling combination of off-pink and bilious yellow, before giving the Reserve Bank’s gibbon the keys to the inkjet. Blind people will love the new banknote for its revolutionary tactile features, but mainly because they won’t be able to see it. The worst thing about the new $5 note, however, is that it dispenses with one of the greatest Australians ever, Catherine Helen Spence – who was commemorated in 2001 for the note issued to celebrate the centenary of federation.

Spence was the first Australian woman novelist to write about Australian issues, the mother of the Australian foster care system, the leading campaigner for proportional representation in government, a hero of the women’s suffrage movement, and Australia’s first female political candidate. And those are but a few of her achievements. Spence has been forced to make way for a lump of neo-brutalist architecture – our Parliament House –topped by a giant Australian flag. A non-Australian, the Queen retains pride of place on the new note.

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Canada, US, Australia and more.

• Canadian First Nation Suicide Epidemic Has Been Generations In The Making (G.)

The Attawapiskat First Nation, or the people of the parting rocks, as they are known in their indigenous Swampy Cree language, number roughly 2,000 souls. They live on a small Indian reserve 600 miles north of the Canadian capital of Ottawa, at the mouth of James Bay’s Attawapiskat River. This subarctic First Nation declared a state of emergency after 11 community members tried to take their own lives Saturday night. Since last September, more than 100 Attawapiskat people have attempted suicide in what local MP Charlie Angus has described as a “rolling nightmare” of a winter. The ghastly toll reveals a grim reality with which a nation in the midst of a process of truth and reconciliation now must reckon.

Suicide does not merely roll in like a hurricane to uproot homes and families, and drown out neighborhoods before receding from where it came. No, this has been an emergency generations in the making, tacitly supported by a Canada fully willing to mine natural resources, proselytize and brutalize generations of children in residential schools, and then leave with basic housing, education systems and healthcare in a state of disrepair. In 2011, Attawapiskat declared a state of emergency due to a “severe housing shortage”. In 2014, the community opened the first proper elementary school to serve Attawapiskat’s children in 14 years. At the same time, the De Beers mining company pulled $392m worth of diamonds out of their Victor Lake mine on lands taken from the Attawapiskat First Nation through an extension of Treaty 9 in 1930.

This is how First Nations live in the Bantustans of Canada’s north. Broke and broken people with little to no opportunities live in cold, run-down homes and suffer from generations of sexual, physical and psychological abuse. They look on as hundreds of millions of dollars worth of resources are mined from their ancestral homelands. This is not an emergency – a catastrophe for which Canada was unprepared and never saw coming. No, this is and always has been part of the design and devastation that colonization wrought. In order to take the land, Canadian settlers needed to eliminate First Nations and their prior and legitimate political claims to territories. In the late 19th and early 20th centuries, infectious diseases and state-supported starvation gave way to the institutional violence of Indian reserves and residential schools, where more than 150,000 First Nations children were taken from 1876 to 1996.

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No more Schengen.

• Brussels Gives Greece Two Weeks To Tighten Borders (Kath.)

The European Commission on Tuesday gave Greece two weeks to determine how it plans to tighten control of its borders, noting that although progress has been made, the process of registering thousands of migrants streaming through the country remained inadequate. The Commission criticized an action plan submitted by Athens, noting that it lacked “detailed time frames” for fixing problems. It also demanded guarantees that EU funding for migration will be used properly. “The Commission requests that Greece provide the additional elements and clarifications by 26 April,” it said in a statement which acknowledged Athens had made “significant progress.” If Greece fails to take remedial action, Brussels could authorize other EU member-states to extend border controls in the Schengen passport-free area for up to two years instead of the normal six months. Such a scenario would effectively suspend Greece’s participation in the Schengen zone.

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Can’t stop this.

• Refugees Become Smugglers Following EU-Turkey Deal (MEE)

Refugees and migrants in Greece have begun joining smuggling networks in growing numbers in a desperate bid to earn enough cash to pay for their own journeys north since an agreement between the EU and Turkey has made it more difficult for people to make it to places like Germany. In Idomeni, the northern border between Greece and Macedonia where more than 11,000 people have been stuck for weeks, the smugglers have been out in full force since the controversial deal officially – slated as a major blow to smuggling rings in Turkey and Europe – began to be implemented and the first migrants sent back. In contrast to the stated aim of cutting down on smuggling, smugglers can be seen in parking lots of hotels and abandoned gas stations, nor are the locals working alone.

In their bid to earn enough cash to make it north, some of the refugees and migrants stranded in Greece have started working as “fixers” for the smugglers, while smaller groups, mostly from Afghanistan, have started to self-organise and develop their own smuggling routes through parts of the Balkans. While the development is not altogether new, and some new arrivals have long stayed on with smugglers, the practice appears to be accelerating and is happening more in the open than ever before. [..] Despite the dangers, growing numbers of people feel they have no choice as border closures and barbed wire fences have made paying smugglers even more expensive. Karam, a Syrian refugee who paid smugglers to get to Germany last year and has now returned to Greece as a volunteer, says that prices have gone up and that he only paid $2,700 to make it all the way to Germany, significantly less than the journey would cost today.

“When I travelled to Germany, the smugglers did not see us as people but as commodities. We were often in risky situations during the trip and they didn’t care much. The only thing important to them was to transfer us as quickly as possible and return back for a new tour of people. I suppose they treat people even worse now,” said Karam. “I think that today, in this situation, I would apply to stay in Greece.”

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And the beat goes on and on.

• Greek Coast Guard Rescues 120 Refugees Off Lesvos, Samos (Kath.)

Greek coast guard officers rescued 120 refugees and migrants in three separate incidents off Lesvos and Samos, authorities said on Wednesday morning. Officials said that between Tuesday and Wednesday morning there had been 101 arrivals on the Aegean islands. There are currently 3,644 people at the Lesvos hotspot, 1,827 in Chios and 516 on Samos, according to authorities.

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Debt Rattle March 27 2016

Mar 272016
 
 March 27, 2016  Posted by at 11:24 am Finance Tagged with: , , , , , , , , ,  4 Responses »


NPC Pittsburg Water Heater Co., Washington DC 1920

• Hugh Hendry: “If China Devalues By 20% The World Is Over” (ZH)
• The Great Deflation: Stocks To Plunge 80-90% – Harry Dent (Maloney)
• You Are -Still- Here (ZH)
• US Banks Ramp Up Push for Home-Equity Lines (WSJ)
• China Warns Officials: No Unrest, Or Lose Your Job (WSJ)
• China Coal Use Slides Further On Weakening Industrial Demand (BBG)
• Guessing The Future Without Say’s Law (Macleod)
• Seven Ugly Latina Sisters In Deep Political Trouble (Bawerk)
• California Lawmakers, Unions Reach Deal for $15 an Hour Minimum Wage
• The Church of Economism and Its Discontents (EI)
• The State Has Lost Control: Tech Firms Now Run Western Politics (Morozov)
• Trump Questions US Position On OPEC Allies, NATO, China (NY Times)
• Greece Removes Migrants From FYROM Border Camp (AFP)
• The Bar at the End of the Road (WSJ)

Hendry finds trouble sticking to his bull position.

• Hugh Hendry: “If China Devalues By 20% The World Is Over” (ZH)

For now, as we showed just ten days ago, those short the Yuan have swung to wildly profitable to losing money as both the USD has slid and the Yuan has spiked, although both of these trades appear to be reversing now. Needless to say, Hendry disagrees with the China contrarians and believes that the way to fix the Chinese economy is through a stronger currency, even if there is no logical way how that could possibly work when China’s debt load is 350% of GDP while its NPLs are over 10% and rising.

So, borrowing form a favorite Keynesian trope, one where when the countrfactual to his prevailling – if incorrect – view of the world finally emerges, Hendry is convinced that a 20% devaluation would lead to global devastation; the same way if Paulson did not get Congress to sign off on his three page term sheet that would lead to the “apocalypse.” Only unlike Paulson who only hinted at a Mad Max world, for Hendry the alternative to him being right is a very explicit doomsday scenario, as he explains in the following excerpt from his RealVision interview:

Tomorrow we wake up and China has devalued 20%, the world is over. The world is over. Euro breaks up. The world is over. The euro breaks up. Everything hits a wall. There’s no euro in that scenario. The US economy, I mean everything hits a wall! Everything hits a wall!

The dollar strength that you imagined is devastation because you just eliminated dollars. They’re a scarce commodity. You’ve wiped them out. And China is a pariah state.

It’s a ‘Mad Max’ movie, right. OK, China gets to be the king in ‘Mad Max’ world. How appealing is that? There is no world after the tomorrow where China devalues by 20%. There is no world. Yeah, it’s looney tunes to believe that, people say, ‘oh wow, they needed to catch a break.’

Their share of world trade has never been higher. They’re facing no pressure, immense terms of trade improvement, and you would destroy world trade. World trade is down 25%. You would probably have passport restrictions, the world is over.

And while it is clear on which side of the Yuan Hugh is currently positioned (Hendry’s Eclectica is down 2.1% through March 18 and -5.9% YTD) either directly or synthetically, we can’t wait to see who is right in the end: China and its central bank (as well as Hugh Hendry) or reason and common sense (as well as some of the smartest hedge funds in the world).

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Mike Maloney’s a TAE fan.

• The Great Deflation: Stocks To Plunge 80-90% – Harry Dent (Maloney)

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Look out below.

• You Are -Still- Here (ZH)

Buybacks blacked out, option expiration ramp over, and real investors fleeing… what happens next?

Dip, Jawbone, Rip… Repeat…

 

And close-up…

 

But this time it’s different, 150 days of almost perfect correlation and co-movement means nothing – right?

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Insane that this is possible.

• US Banks Ramp Up Push for Home-Equity Lines (WSJ)

At hardware stores along the U.S. East Coast in recent weeks, TD Bank has been trying to persuade shoppers to think bigger than paint and plumbing supplies: The bank wants them to start taking cash out of their homes again. The TD Bank tour bus, equipped with a galley kitchen and iPads where homeowners can start the application process, is part of a marketing push unusual for the mortgage industry since the housing bust. As the broader mortgage market remains in the doldrums, banks are again touting home-equity lines of credit, which allow homeowners to draw down the equity in their home as they need the cash, as well as cash-out refinances, which involve taking cash out of a home while refinancing and ending up with a larger mortgage balance.

The effort is gaining steam as banks try to offset faltering mortgage originations and a refinancing wave that is fizzling out. Lenders are betting that offers for home-equity lines of credit, or helocs, will resonate with many borrowers whose home values are higher than they were just a couple of years ago and who need cash for renovations or other expenses after holding on to their homes for longer than expected. Lenders extended just over $156 billion in home-equity lines of credit last year, the largest dollar amount since 2007, the beginning of the housing bust, according to new figures from mortgage-data firm CoreLogic. That marks a 24% increase from 2014 and a 138% spike from 2010 when new approvals hit a low point. The average line amount extended to homeowners last year reached a record $119,790, according to the firm, which tracks the data back to 2002.

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No. 1 worry.

• China Warns Officials: No Unrest, Or Lose Your Job (WSJ)

In China, the timing of an announcement is sometimes more significant than the announcement itself. The Communist Party’s Central Committee and the State Council, China’s cabinet, this week warned party and state officials that they will lose their jobs if they fail to control public unrest. That’s not altogether surprising: on one level,it’s just a restatement of longstanding practice. “For more than 10 years, one of the assessment criteria for promotion of regional officials is the extent to which they can minimize protests,” said Willy Lam, a China politics analyst at the Chinese University of Hong Kong. “So most local officials pull out all stops to prevent petitioners going to Beijing.” But this week’s announcement marks the first time authorities have come up with a definitive public statement explicitly warning party and state officials “at all levels” that their jobs are on the line, state media said.

Why the urgency? The policy announcement comes two weeks after hundreds of unpaid coal workers took to the streets in the gritty northeastern city of Shuangyashan, after their provincial governor claimed a troubled coal company there did not owe its miners any wages. The governor, Lu Hao, later said he misspoke. Mr. Lu remains in office. It’s quite likely the Shuangyashan incident was pivotal in galvanizing the State Council and the party’s Central Committee, Mr. Lam and others say. The incident, widely publicized in the media, came in the thick of China’s annual meeting of its top legislature in Beijing, where Mr. Lu made his comments. At the meeting, known as the lianghui or “two sessions,” a battery of top officials including Premier Li Keqiang repeatedly vowed that they would be able to navigate a sharp slowdown in the economy without seriously affecting workers caught in the transition.

Mr. Li’s public positioning percolates through to a wide swathe of policy in the immediate wake of the congress. “In China, the political calendar doesn’t start in January – it starts with the lianghui in March,” human rights activist Hu Jia said. Government officials are likely worried that the Shuangyashan incident and others could inflict a political cost on the leadership by highlighting issues such as the deficit of labor rights in China, Mr. Hu said. Party chiefs face a difficult task. Over the next five years, they need to shut down millions of tons of industrial capacity that’s making China’s economy inefficient. This means downsizing scores of steel, coal and other large industries that currently employ hundreds of thousands of workers. They have promised to do this without large-scale layoffs. Those displaced, Mr. Li said, would be given new jobs or government assistance.

These promises now hang in the balance. The Shuangyashan incident came amid a surge in other forms of public unrest. Data from labor rights watchdog China Labour Bulletin show a 200% increase in the number of strikes, industrial action and other protests occurring in China from July last year to January this year. Disparate groups of Chinese, from jobless migrant workers to angry taxi drivers have taken to the streets to protest a new era of economic dislocation. The slowing economy has wiped out at least 156 billion yuan ($24 billion) worth of investments in wealth management products across the country, mostly involving small investors. Many of these failures have sparked public protests. Dogged by the prospect of more layoffs and deepening economic woes, the question looms: How many officials will China axe?

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Not because it wants to come clean.

• China Coal Use Slides Further On Weakening Industrial Demand (BBG)

China’s coal use is forecast to fall a third year as industrial output slows, adding force to President Xi Jinping’s drive to cut overcapacity and dimming the hopes of global miners for an uptick in demand by the world’s biggest consumer. Demand will slide 2% this year and prices will remain at a low level, according to the state-run Xinhua News Agency, citing Xu Liang, deputy secretary general of the China Coal Industry Association. Output by the world’s largest producer will also fall by 2%. Consumption has weakened amid a push to use cleaner fuels and shift a slowing economy away from heavy industry. Demand for coal, which accounted for 64% of the country’s total energy use last year, contracted 3.7% last year, following a 2.9% decline in 2014, according to the National Bureau of Statistics.

“This year’s coal situation is equally bleak,” Xinhua quoted Xu as saying. China’s easing coal appetite has helped push prices in Asia to their lowest since 2006, punishing mining companies and prompting the government to propose capacity cuts that threaten the jobs of 1.3 million coal miners. By cutting capacity in the next two to three years, production could fall to about 3.5 billion to 3.6 billion tons, balancing supply and demand, Xu said. The country aims to eliminate as much as 500 million metric tons of coal capacity by 2020, almost 9% of its total. Coal output dropped 3.3% to 3.75 billion metric tons last year, while consumption slipped to 3.965 billion tons, both sliding from record highs in 2013, according to Xu. Use of the fuel in power generation dropped 6.2% last year, while demand from industries including steel, cement and glass making declined.

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“..when an economist talks of economic growth being above or below trend, he is talking about a measure that has no place in sound economic reasoning, and that is gross domestic product.

• Guessing The Future Without Say’s Law (Macleod)

With Japanese and Eurozone interest rates becoming increasingly negative, and the Fed backing off from at least some of the planned increases in the Fed funds rate this year, economists are reassessing the interest rate outlook. Economists lack consensus, with some expecting yet more easing, based on the apparent collapse in cross-border trade last year. The fact that the Bank of Japan and the European Central Bank see fit to pursue increasingly aggressive monetary reflation is taken as evidence of underlying difficulties faced in these key economies. And lingering doubts about the sustainability of China’s credit bubble point to a high risk of a credit-induced slump in the world’s growth engine.

Other economists, citing official US data and relying on the Fed’s statements, point out that unemployment levels have more than satisfied the Fed’s target, and that core inflation has picked up to the point where the Fed would be fully justified to increase interest rates over the course of this year, or risk overheating in 2017. These two opposite camps conflict in their forecasts, but where they fundamentally differ is in expectations of future economic growth. Far from displaying the highest levels of macroeconomic discipline, their diversity of opinion should alert us that their forecasts may lack sound theoretical foundation. The purpose of reasoned theory is to reduce uncertainty, not promote it. And the explanation for most of the failures behind modern macroeconomic thinking is the substitution of market-based economics by economic planning.

The fact that today’s macroeconomics dismisses the laws of the markets, commonly referred to by economists as Say’s law, explains all. Subsequent errors confirm. The many errors are a vast subject, but they boil down to that one fateful step, and that is denying the universal truth of Say’s law. Say’s law is about the division of labour. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. Despite the best attempts of Marxism and Keynesianism along with all the other isms, attempts to override this reality have always failed. The failure is not adequately reflected in government statistics, which have evolved to the point where they actually conceal it. So when an economist talks of economic growth being above or below trend, he is talking about a measure that has no place in sound economic reasoning, and that is gross domestic product.

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The CIA still has a lot of power to the south.

• Seven Ugly Latina Sisters In Deep Political Trouble (Bawerk)

Get beyond endless Latin American headlines burning column inches and you come to far broader strategic conclusion: The seven ‘ugly Latino sisters’, namely Brazil, Venezuela, Ecuador, Bolivia, Colombia, Mexico and Argentina are all deep political trouble from collapsed benchmark prices. It’s merely a case of who’s in more advanced states of political decay where left leaning governments’ can’t hang on much longer vs. those trying to buy a bit of time with more ‘centrist’ positions. In either case, it’s going to be a classic example of too little too late where the seven ugly sisters have committed at least seven deadly sins when it comes to resource mismanagement over the past decade. This isn’t about whether crisis can be avoided, but how bad the impacts will be. Another ‘lost Latino decade’ beckons. The ugliest twins are obviously Brazil and Venezuela right now.

We firmly expect Rousseff to be impeached next month on the back of endless corruption scandals, and the drastically ill-judged return of Lula that poured far more oil on corruption cover up flames. Watch for Michel Temer to take over the reins of a coalition PMDB government, busily negotiating posts behind closed doors with other players to tee up a formal Worker’s Party split to form a caretaker government through to 2018. How much Temer can get done depends on how far the outstanding ‘car wash’ scandal still rubs off on PMDB factions for major economic reforms, where the rot still runs pretty deep. Initial rhetoric (and inevitable market lifts) on supposed ‘structural reforms’ and far broader liberalisation measures remain unlikely to play through. Although it’s possible Petrobras might push through 2017 licencing rounds purely for political appearances, it’s not going to deliver tangible results in current price environments.

Dig just ‘under the salt’, and Petrobras leverage will remain high; local content even higher. Until Brazil can properly clear its electoral decks in 2018 Mr. Temer is going to have a very limited mandate. If anything, his core challenge is trying to make sure his caretaker outfit doesn’t end up ‘washed out’ day one, given Temer is by no means beyond political reproach, with the PMDB basically as corrupt as the ruling PT. The smart move for Brazil would actually be calling fresh elections with the TSE (electoral authority) invalidating the entire Rousseff-Temer 2014 ticket to put a line under what currently shapes up to be the worst commodity driven economic crash Brazil has ever experienced. Regrettably, Brazilian politics has nothing to do with national interests at this stage, and everything to do with narrow self-preservation societies.

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“..most proposals have the wage increasing about a dollar a year until it reaches $15 an hour”

• California Lawmakers, Unions Reach Deal for $15 an Hour Minimum Wage

California legislators and labor unions on Saturday reached an agreement aims to raise the state’s minimum wage to $15 from $10 an hour, a state senator said, a move that would make for the highest statewide minimum in the nation. Sen. Mark Leno (D., San Francisco) said the proposal would go before the Legislature as part of his minimum-wage bill that stalled last year. Mr. Leno didn’t confirm specifics of the agreement, but most proposals have the wage increasing about a dollar a year until it reaches $15 an hour. The Los Angeles Times, which first reported the deal, said the wage would rise to $10.50 in 2017, with subsequent increases to take it to $15 by 2022. Businesses with fewer than 25 employees would have an extra year to comply.

At $10 an hour, California already has one of the highest minimum wages in the nation along with Massachusetts. Only Washington, D.C., at $10.50 an hour is higher. The hike to $15 would make it the highest statewide wage in the nation by far, though raises are in the works in other states. The deal means the issue won’t have to go to the ballot, Mr. Leno said. One union-backed initiative has already qualified for the ballot, and a second, competing measure is also trying to qualify. Union leaders, however, said they wouldn’t immediately dispense with planned ballot measures. Sean Wherley, a spokesman for SEIU-United Healthcare Workers West, confirmed that his group was involved in the negotiations. But he said the group would continue pushing ahead with its initiative on the ballot. “Ours is on the ballot. We want to be certain of what all this is,” Mr. Wherley said.

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The Econocene.

• The Church of Economism and Its Discontents (EI)

The global human population increased from approximately 1 billion in the year 1800 to 7 billion in 2011. Over this period, the field of economics emerged, transforming political discourse. The institutional conditions for market expansion were put in place, and the success of markets suppressed myriad other ways societies have organized themselves. Economic activity per capita increased somewhere between 10 and 30-fold, resulting in a 70 to 210-fold increase in total economic activity.1 Population growth has slowed significantly in recent decades, but both economic growth through market expansion and its attendant environmental destruction have only continued.

Econocene is a fitting term for this new era because it makes us think about the expanding market economy, the ideological system that supports it, and its impact on society and the environment. Reflecting on environmental boundaries led ecological economist Herman Daly to propose limits on material throughput. Environmental economists propose taxes on greenhouse gas emissions and the creation of markets to resolve environmental conflicts. While acknowledging the importance of making markets work within the limits of nature and for the common good, I will explore how this new dominance of economic thinking, which I will call economism, has reshaped the diverse cultures of the world and come to function as a modern secular religion.

An advantage of the term Econocene is that it evokes the everyday cosmos of modern people. Artifacts of the economy—towering buildings, sprawling shopping malls, and swirling freeways—surround the 50% of the globe’s population who live in cities. A combination of smog and bright lights now obliterates the starry heavens so important to humanity’s historic consciousness and so humbling to our species’s historic sense of importance, focusing our attention on the economic constructs all around us. The cosmos reflected in the term Econocene includes not only the material artifacts of the economy, but also the market relations that bind us and define our place in the system. Urban dwellers are now fully dependent on markets for material sustenance.

They awake to radio announcers discussing supposedly significant changes in exchange rates, stock markets, and the proportion of people looking for work. The dominance of the market is not just an urban phenomenon: its “invisible hand” guides rural life as well. The crops planted reflect expected future prices, and soils reflect their history of economic use. Farmers have become so specialized that they, too, buy most of their food in supermarkets. In order to grapple with the challenges of this new era, we need to give it a name that resonates with people’s lived experiences.

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The role of Google and Facebook clearly warrants more scrutiny.

• The State Has Lost Control: Tech Firms Now Run Western Politics (Morozov)

[..] The grim reality of contemporary politics is not that it’s impossible to imagine how capitalism will end – as the Marxist critic Fredric Jameson once famously put it – but that it’s becoming equally impossible to imagine how it could possibly continue, at least, not in its ideal form, tied, however weakly, to the democratic “polis”. The only solution that seems plausible is by having our political leaders transfer even more responsibility for problem-solving, from matters of welfare to matters of warfare, to Silicon Valley. This might produce immense gains in efficiency but would this also not aggravate the democratic deficit that already plagues our public institutions? Sure, it would – but the crisis of democratic capitalism seems so acute that it has dropped any pretension to being democratic; hence the proliferation of euphemisms to describe the new normal (with Angela Merkel’s “market-conformed democracy” probably being the most popular one).

Besides, the slogans of the 1970s that were meant to bolster the democratic pillar of the compromise between capital and labour, from economic and industrial democracy to codetermination, look quaint in an era where workers of the “gig economy” cannot even unionise, let along participate in some broader management of the enterprise. There’s something even more sinister afoot though. “Buying time” no longer seems like an adequate description of what is happening, if only because technology companies, even more so than the banks, are not only too big too fail but also impossible to undo – let alone replicate – even if a new government is elected. Many of them have already taken on the de facto responsibilities of the state; any close analysis of what’s happening with “smart cities” – whereby technology firms become key gateways to essential services of our cities – easily confirms that.

In fact, technology firms are rapidly becoming the default background condition in which our politics itself is conducted. Once Google and Facebook take over the management of essential services, Margaret Thatcher’s famous dictum that “there is no alternative” would no longer be a mere slogan but an accurate description of reality. The worst is that today’s legitimation crisis could be our last. Any discussion of legitimacy presupposes not just the ability to sense injustice but also to imagine and implement a political alternative. Imagination would never be in short supply but the ability to implement things on a large scale is increasingly limited to technology giants. Once this transfer of power is complete, there won’t be a need to buy time any more – the democratic alternative will simply no longer be a feasible option.

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Some questions must be asked. If nobody else does that, you get Trump.

• Trump Questions US Position On OPEC Allies, NATO, China (NY Times)

Donald J. Trump, the Republican presidential front-runner, said that if elected, he might halt purchases of oil from Saudi Arabia and other Arab allies unless they commit ground troops to the fight against the Islamic State or “substantially reimburse” the United States for combating the militant group, which threatens their stability. “If Saudi Arabia was without the cloak of American protection,” Mr. Trump said during a 100-minute interview on foreign policy, spread over two phone calls on Friday, “I don’t think it would be around.” He also said he would be open to allowing Japan and South Korea to build their own nuclear arsenals rather than depend on the American nuclear umbrella for their protection against North Korea and China. If the United States “keeps on its path, its current path of weakness, they’re going to want to have that anyway, with or without me discussing it,” Mr. Trump said.

And he said he would be willing to withdraw United States forces from both Japan and South Korea if they did not substantially increase their contributions to the costs of housing and feeding those troops. “Not happily, but the answer is yes,” he said. Mr. Trump also said he would seek to renegotiate many fundamental treaties with American allies, possibly including a 56-year-old security pact with Japan, which he described as one-sided. In Mr. Trump’s worldview, the United States has become a diluted power, and the main mechanism by which he would re-establish its central role in the world is economic bargaining. He approached almost every current international conflict through the prism of a negotiation, even when he was imprecise about the strategic goals he sought.

He again faulted the Obama administration’s handling of the negotiations with Iran last year — “It would have been so much better if they had walked away a few times,” he said — but offered only one new idea about how he would change its content: Ban Iran’s trade with North Korea. Mr. Trump struck similar themes when he discussed the future of NATO, which he called “unfair, economically, to us,” and said he was open to an alternative organization focused on counterterrorism. He argued that the best way to halt China’s placement of military airfields and antiaircraft batteries on reclaimed islands in the South China Sea was to threaten its access to American markets. “We have tremendous economic power over China,” he argued. “And that’s the power of trade.” He did not mention Beijing’s ability for economic retaliation.

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Keep it peaceful.

• Greece Removes Migrants From FYROM Border Camp (AFP)

Greece has begun evacuating refugees from the main Idomeni camp on the Macedonia border, while the flow of refugees arriving on the Aegean islands has slowed to a trickle, officials said on Saturday. Eight buses transported around 400 refugees from Idomeni to nearby refugee camps on Friday, police sources said. A dozen more buses were waiting for migrants reluctant to leave the border, which has been shut down since earlier this month. “People who have no hope or have no money, maybe they will go. But I have hope, maybe something better will happen tomorrow, maybe today,” said 40-year-old Fatema Ahmed from Iraq, who has a 13-year-old son in Germany and three daughters with her in the camp. She said she would consider leaving the squalid Idomeni camp – where people are sheltering even on railway tracks – if the Greek government decides to give every migrant family “a simple house”.

Those persuaded to board the first buses were mainly parents with children who can no longer tolerate the difficult conditions. Janger Hassan, 29, from Iraqi Kurdistan, who has been at the Idomeni camp for a month with his wife and two young children, thinks he will probably leave. “There’s nothing to do here. “The children are getting sick. It’s a bad situation the last two days: it’s windy, sometimes it’s raining here,” he said. “We don’t have a choice. We have to move,” he said. Desperation was evident in the camp. One tent bore the slogan: “Help us open the border”. A total of 11,603 people remained at the sprawling border camp on Saturday, according to the latest official count. Giorgos Kyritsis, spokesman of the SOMP agency, which is coordinating Athens’s response to the refugee crisis, said the operation to evacuate Idomeni will intensify from Monday.

“More than 2,000 places can be found immediately for the refugees that are at the Idomeni camp and from Monday on, this number can double,” Kyritsis added, pledging to create 30,000 more places in the next three weeks in new shelters. Meanwhile, the flow of refugees arriving in Greece is slowing. Athens on Thursday said no migrants had arrived on its Aegean islands in the previous 24 hours, for the first time since the controversial EU-Turkey deal to halt the massive influx came into force at the weekend. The agreement, under which all migrants landing on the Greek islands face being sent back to Turkey, went into effect last Sunday. Despite the deal, 1,662 people arrived on Monday, but this fell to 600 on Tuesday and 260 on Wednesday.

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“Today we had little people, but if we have all the people then we will succeed.”

• The Bar at the End of the Road (WSJ)

A tiny bar in a rundown train station in a remote Greek town has become the center of the universe for the migrants stuck at the border of Macedonia. When Macedonia shut its border to Greece in early March, the Greek border town of Idomeni, once a quick stopover for migrants on route to Europe became the end of the line for many. At least for now. But that isn’t stopping many migrants from trying to make their way across the border and beyond. On a recent cold and wet few days at the camp, migrants hang out in the bar for the warmth it provides and the food and friendship it offers. People talk over chips, pizza and beer, but mostly take solace in having a temporary escape from the misery of the camp. Out of their cold, muddy tents and playing games like checkers and backgammon, or connecting with distant relatives on their phones.

Groups are usually separated by nationality, but talking about how to get out of Greece and farther into Europe is a topic everyone discusses. One morning, someone had a plan to cross a fast-flowing, ice-cold river to the border, despite the fence and increased police presence. It was a dangerous plan, but any escape would do. Someone had a printout of a map showing the route across the river all the way to the border. People study it and take photos of it. Zakaria, a migrant from Aleppo, Syria, says, “I want to continue my studies. I don’t care which country. It can be Germany or another country so long as I can continue my studies. I will wait here until I cross somehow. I would go back home to Syria if I could. Believe me I don’t want to be here, I want to be home, but I don’t even have a home there. No country and no home.”

By noon that day, hundreds of people amassed at the meeting point on the map. Following the trail through forests and fields, this group of men and women, young and old carry their belongings and eventually come to the river. The water is freezing. People are yelling and crying. Children are terrified. But they made it across. They were lucky. Earlier that morning, a separate group attempted to cross and three people reportedly died attempting the cross. After resting, they continue to the border, but are turned back by the Macedonian army. Back at the camp, they are exhausted and downtrodden, but they have the bar, and talk soon turns to finding another way to escape. Sarwar, a migrant from Lahore, Pakistan, who has been in Idomeni for 16 days and just returned from trying to cross the border says, “They stop us today but we will try again. We are many, many people and more come now. Soon we can run through the fence. Today we had little people, but if we have all the people then we will succeed.”

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Debt Rattle March 17 2016

Mar 172016
 
 March 17, 2016  Posted by at 9:12 am Finance Tagged with: , , , , , , , , ,  9 Responses »


Christopher Helin Kissel military Highway Scout Kar at Multnomah Falls, Oregon 1918

• US Lost 30% Of Manufacturing Jobs Between 1998 And 2016 (WaPo)
• Rich Countries Have A $78 Trillion Pension Problem (CNBC)
• The Budget That Wasn’t (Halligan)
• Asia Cheers as Yellen Succumbs to Cry-Bullies (Barron’s)
• China’s Exporters Struggle as Yuan Swings Disrupt Business (BBG)
• China Banks Face Credit Risks From Ties To Wealth Management Products (CNBC)
• America’s No. 1 Coal Miner to Seek Bankruptcy Protection (WSJ)
• Energy Sector Defaults Could Start Falling Like Dominoes (MW)
• Oil Investors See $7.4 Billion Vanish as Dividends Are Targeted (BBG)
• Big-Oil Bailout Begins as Pemex’s Debt Spirals Down (WS)
• Munich Re Rebels Against ECB With Plan To Store Cash In Vaults (BBG)
• Netherlands Votes To Ban Weapons Exports To Saudi Arabia (Ind.)
• Austria’s Highest Court Proclaims Asylum Cap Illegal (NE)
• Huge Challenges Await EU’s Refugee Plan (FT)
• EU Prepares To Scale Back Resettlement Of Syrian Refugees (Guardian)
• Three Migrants Dead As 2,400 Rescued Off Libya (AFP)

Killing off your manufacturing base is the worst thing you can do.

• US Lost 30% Of Manufacturing Jobs Between 1998 And 2016 (WaPo)

Thomaston, Ga. — Not so long ago, this rural town an hour outside Atlanta was a hotbed of textile manufacturing. In the late 1990s, there were six major mills here. Their machines spun children’s clothing for Carter’s, made tire cords for B.F. Goodrich and produced bed sheets for J.C. Penney, Sears and Walmart. In all, they employed about 4,000 workers. By 2001, all of those jobs were gone. What has happened here in the 15 years since then tracks the slow comeback of manufacturing in the United States. Two textile companies have come in, investing millions in new technology and adding about 280 jobs in this town where one-third of the residents still live below the poverty line. It is becoming more affordable to produce textiles in the United States as machines become more efficient, companies say.

Major firms are more willing to pay higher prices for domestically sourced products, and rising wages in China mean there is less of an advantage to making products overseas. Last week, there was new cause for celebration when Marriott International announced that all towels in its 3,000 U.S. hotels would be manufactured by Standard Textile in plants here and in Union, S.C., a move expected to bring $23 million worth of business and 150 jobs back to the United States. The hotelier joins a number of other companies, including Walmart, Apple and General Electric, that have pushed for more U.S.-made products in recent years. But manufacturing employment here is a small fraction of what it was. Although a company such as Standard Textile once might have employed close to 1,000 people, today it has a couple of hundred workers who oversee machines that spin, scour and weave cotton.

“We’ve had to redefine who we were because we were a mill town for so long,” said Kyle Fletcher, executive director of the Thomaston-Upton Industrial Development Authority. “We lost a lot of the middle class.” The United States lost 30% of its manufacturing jobs between 1998 and 2016, according to Federal Reserve data. As of February, the country had 12.3 million workers in the sector, down from 17.6 million in April 2008. In February 2010, that figure was 11.5 million. There are hints that manufacturing is returning to the United States in small ways: The nation’s quarterly output has climbed steadily since the end of the recession, growing 35% and adding 650,000 jobs since mid-2009, according to the Fed. But the glory days are gone, Fletcher said. About one-third of Thomaston’s 9,000 residents live below the poverty line, compared with 23% in 1999. Average income has dropped more than 20% since 1999, to $14,243 from $18,193, according to U.S. Census data.

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Pon Zi.

• Rich Countries Have A $78 Trillion Pension Problem (CNBC)

Dreams of lengthy cruises and beach life may be just that, with 20 of the world’s biggest countries facing a pension shortfall worth $78 trillion, Citi said in a report sent on Wednesday. “Social security systems, national pension plans, private sector pensions, and individual retirement accounts are unfunded or underfunded across the globe,” pensions and insurance analysts at the bank said in the report. “Government services, corporate profits, or retirement benefits themselves will have to be reduced to make any part of the system work. This poses an enormous challenge to employers, employees, and policymakers all over the world.” The total value of unfunded or underfunded government pension liabilities for 20 countries belonging to the OECD – a group of largely wealthy countries — is $78 trillion, Citi said. (The countries studied include the U.K., France and Germany, plus several others in western and central Europe, the U.S., Japan, Canada, and Australia.)

The bank added that corporates also failed to consistently meet their pension obligations, with most U.S. and U.K. corporate pensions plans underfunded. Countries with large public pension systems in Europe appear to have the greatest problem. Citi noted that Germany, France, Italy, the U.K., Portugal and Spain had estimated public sector pension liabilities that topped 300% of GDP. Improvements in health care mean retirees need to string out their income for longer. Meanwhile, the increase in the retirement-age population versus the working population is straining government pension schemes. Several countries, including the U.K., France and Italy are gradually hiking retirement ages. Citi recommended that governments explicitly link the retirement age to expected longevity. It also advised that government-funded pensions should serve merely as a “safety net,” rather than the prime pension provider, and that corporate pensions should be “opt out” rather than “opt in” to encourage greater enrollment.

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Osborne’s not worried. He knew everyone would be talking about his sugar tax. Great diversion tactic.

• The Budget That Wasn’t (Halligan)

George Osborne’s latest Budget pretended to be many things it wasn’t. The Chancellor talked repeatedly about “borrowing falling”, yet in the next three years, borrowing on our behalf goes sharply up. He warned about “financial instability” and “storm clouds” on the economic horizon, yet he’s relying on growth assumptions that are surely too optimistic. While barely mentioning the EU referendum, the Chancellor’s determination to avoid Brexit pervaded almost every paragraph of his 63-minute Commons statement. Far from being “a Budget for the next generation” – a phrase wielded 18 times – his policies were aimed at attracting as many “Remain” voters as he could, while doing as little as possible to upset those still undecided. Rather than a “long-term Budget” (19 mentions), the package was designed for the next three months, ahead of the EU vote that will decide Osborne’s political future.

What we’ve just seen, then, was possibly the most short-term “long-term budget” in history. Bound to get the chattering classes chuntering (“G&T slimline, anyone?”), Osborne’s flab-fighting “sugar levy” was cynically tactical, broadening his appeal among non-Conservatives, while diverting attention from the statistical sleight of hand at the heart of this Budget. “Borrowing continues to fall,” the Chancellor told us. Really? It’s astonishing that, a full eight years after the financial crisis, and after a surge in growth and employment, the UK is still borrowing more than £72bn a year. Government debt stands at £1,591bn, 50pc up since Osborne took office, more than £50,000 per person in full or part-time employment. The Government is spending £46bn annually on interest payments alone – more than on defence – and that’s with interest rates at historic lows.

As the debt and rates spiral upwards, that interest bill can only rise, all at the expense of spending on services. Instead of cutting borrowing on Wednesday, the Budget fine print shows that, over the next three years, we’ll be adding another £116bn to our national debt – more than £36bn up on the borrowing projections in last November’s Autumn Statement. We’ll probably end up borrowing even more, of course, than these already gargantuan numbers, not least if growth is lower than forecast. Since last November, some £5 trillion has been wiped off global stock markets. Morgan Stanley now warns clients of a 30pc chance of global recession over the next year. Many financiers privately judge the chance of a financial collapse to be far higher. “As one of the most open economies in the world, the UK isn’t immune to global slowdowns and shocks,” Osborne told the Commons. Yet, over each of the next six years, the Budget borrowing projections rest on growth of 2pc or more. While I obviously hope that happens, it amounts to a mighty optimistic assumption.

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“Yellen has surrendered after achieving victory.”

• Asia Cheers as Yellen Succumbs to Cry-Bullies (Barron’s)

Well, here’s another nice mess you’ve gotten us into, Janet. U.S. Fed Chair Janet Yellen left rates unchanged this week, and confided after the Fed’s two-day policy meeting that, despite continuing improvement in the U.S. economy, weak global economic growth and turbulent markets had spooked the Fed into halving the number of times it expects to raise rates this year, to two from four. Yellen’s capitulation is already producing a predictable whoop of jubilation in Asian markets, as it confirms this column’s observation that the hot money crowd has succeeded in cry-bullying global central bankers into keeping the punchbowl of cheap cash full to overflowing. Stocks in Shanghai and Hong Kong rose by more than 1%, while Philippine stocks were up almost 2%.

While it’s often the case that Asian stocks move reflexively with those on Wall Street, today it’s all about the U.S. dollar, which fell 1% against the Japanese yen and about 0.7% against the Euro. Even though Tokyo stocks are up, the Fed’s move is bad news for Japan and Europe as well as their respective central bankers, Haruhiko Kuroda and Mario Draghi. As this column explained yesterday, both gentlemen are working furiously to use a negative interest-rate policy to weaken their currencies, boost inflation and revive economic growth. Hearing that Yellen won’t be riding to the rescue soon with another rate hike will come as bad news to them. But it’s excellent news for Asia’s smaller markets, since investors hunting for higher yields can no longer count on getting more bang for the buck out of Yellen.

Indonesia’s rupiah, which has risen 6% already this year, gained another 0.8% after the Fed’s announcement. Malaysia’s ringgit – what corruption scandal? – rose 1% and South Korea’s won soared by 2.5%. Don’t get too excited. While a more reluctant Fed extends the risk-on rally for Asian assets, it does not bode well for investors looking for fundamental value or an upturn in corporate profitability. For starters, the Fed is once again behind the market. Even as they’ve kicked and screamed after the Fed ended a 10-year, zero interest-rate policy by raising rates last December, sending Asian stocks down roughly 15% by mid-February, investors are starting to adjust to the reality that the U.S. economy is not sinking into recession. Jobs and inflation are improving and markets that early this year were predicting no rate hike until 2017 were yesterday betting on another hike as early as July. Yellen has surrendered after achieving victory.

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Will exporters force Beijing to devalue?

• China’s Exporters Struggle as Yuan Swings Disrupt Business (BBG)

The yuan’s swings are becoming a headache for the Chinese companies that should have been the biggest beneficiaries of last year’s devaluation. In rare overt comments, exporters including Midea and TCL are expressing apprehension about the nation’s exchange-rate policy. Two said the increased volatility has made it difficult to manage costs because customers are choosing to place only short-term orders, while a third said the yuan was allowed to strengthen far too much in the past few years. “Overseas clients are taking into account losses that can be caused by exchange-rate swings and are placing shorter-term orders with smaller volumes, which creates difficulty for our operations,” said Yuan Liqun, VP at Midea, China’s biggest maker of household appliances by market share.

“The fluctuations last year were relatively significant. Companies can accept a market-based yuan that moves within a reasonable range.” Exports slumped 25% in February from a year earlier and a gauge of overseas orders contracted for the 17th month in a row, while the currency’s volatility held near the highest levels since August’s shock devaluation. This illustrates the challenge facing Premier Li Keqiang as he balances the need to nudge the exchange rate lower to help an economy growing at the slowest pace in 25 years, while trying to avoid a run that would create financial instability. The currency, which has plunged 4.8% since last year’s devaluation, climbed in September and October, and dropped in the following three months before rebounding in February. It has strengthened 0.5% in March so far, almost wiping out this year’s losses. The wild swings contributed to an estimated $1 trillion in capital outflows last year.

The yuan, which Royal Bank of Canada says is currently overvalued, will face renewed selling pressure once the Federal Reserve decides to raise borrowing costs again. The median forecast in a Bloomberg survey of economists is for a drop of 4.1% by the end of the year. Its decline against the dollar in 2015 – the most in 21 years – masked a sixth straight annual gain against the exchange rates of China’s main trading partners, according to a BIS index. This shows that there is more room for depreciation, according to Fuyao Glass Industry, which makes automobile windows and whose clients include BMW and Volkswagen. “The yuan is strong, so Chinese companies can’t go abroad and most exporters are making losses,” Cho Tak Wong, chairman of Fuqing, Fujian-based Fuyao, said in an interview over the weekend. “China should allow the yuan to weaken. If the currency doesn’t depreciate, exports will be negatively influenced and export-focused firms will suffer.”

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“There were around 23.5 trillion yuan ($3.60 trillion) worth of WMPs outstanding at the end of 2015, up from around 15 trillion yuan a year earlier..”

• China Banks Face Credit Risks From Ties To Wealth Management Products (CNBC)

Chinese banks are starting to create a web of risk through their wealth management products (WMPs), raising concerns about the health of the financial system just as China’s economic growth has slowed to its weakest pace in 25 years. Retail investors are the majority of buyers of WMPs, which offer higher interest rates than a bank deposit. But it isn’t always clear what assets the funds are buying to finance those payouts. The industry publishes aggregated data on where WMPs tend to invest, but the disclosures of individual products can be vague. Overall, WMPs tend to invest in the industrial sector as well as industries related to local government and real estate, according to Fitch. All of these are segments of the economy suffering from overcapacity.

Most WMPs – as many as 74% – don’t carry the issuing bank’s guarantee that investors will be made whole at the end of the product’s term, which is usually less than six months, Fitch said. But even if the products fail to meet performance expectations, banks may choose to repay investors anyway to avoid the spectacle of mom and pop protesters in front of its branches – something that occurred outside a Hua Xia Bank branch near Shanghai in 2012, according to a Reuters report. When the WMP’s performance isn’t up to snuff, it can become a risk for more than just the issuing bank. “The fear is that investments are in industries that might not be generating cash so when they come due, the cash to repay investors might not be there.

There’s always pressure to roll them over,” Jack Yuan, associate director for financial institutions at Fitch, said last week. Additionally, some banks are investing in other banks’ WMPs – those investments are usually on banks’ balance sheets in a category called “investments classified as receivables,” Yuan noted. “There are a lot of interlinkages in the banking sector in terms of banks investing in other banks’ WMPs and calling on the interbank market for funding if they do go bad,” he said. “It’s going to be more and more difficult to resolve these if they do go bad.” There were around 23.5 trillion yuan ($3.60 trillion) worth of WMPs outstanding at the end of 2015, up from around 15 trillion yuan a year earlier, Fitch noted, with around 3,500 new ones offered each week.

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“Peabody’s share price has fallen to under $2.50 from more than $1,300 in 2008.”

• America’s No. 1 Coal Miner to Seek Bankruptcy Protection (WSJ)

Peabody Energy, the U.S.’s biggest coal miner, Wednesday posted a going-concern notice in a regulatory filing, warning of possible bankruptcy. A chapter 11 filing by Peabody, which operates 26 mines in the U.S. and Australia, would be the latest in a wave of bankruptcies to hit top American coal producers, including Arch Coal, Alpha Natural Resources, Patriot Coal and Walter Energy, as they wrestle with low energy prices, new regulations, and the conversion of coal-fired power plants to natural gas. Punctuating Peabody’s woes, the Energy Information Administration Wednesday said that 2016 “will be the first year that natural gas-fired generation exceeds coal generation.”

The EIA said Americans would get 33% of their electricity from gas in 2016, and 32% from coal. As recently as 2008, coal fed half of U.S. electricity consumption. The weakening demand is hurting markets. Coal prices have fallen 62% since 2011, and 18% in the past year, according to the EIA. That drop is crushing companies like Peabody. The company has now lost money in nine straight quarters, and in 2015 posted a $2 billion deficit. As of Dec. 31, it had $6.3 billion in debt and $261.3 million in cash. Peabody, whose biggest mining operations are in Wyoming, has also been weighed down by its ill-timed acquisition of Australia’s Macarthur Coal for $5.1 billion in 2011. Prices have been declining ever since. Company shares, which have already lost more than 95% of their value in the past 12 months, fell 44% in midday trading.

Peabody’s share price has fallen to under $2.50 from more than $1,300 in 2008. On Wednesday, Peabody pointed to uncertainty around global coal fundamentals, economic growth concerns of some major coal-importing nations and the potential for additional regulatory requirements on coal producers as reasons for its notice. Because of operating problems and other financial problems, “we may not have sufficient liquidity to sustain operations and to continue as a going concern,” the St. Louis-based miner said in a filing with the SEC. “We may need to voluntarily seek protection under chapter 11 of the U.S. bankruptcy code.” Peabody said it had delayed an interest-rate payment on two loans, triggering a 30-day grace period. If the payments aren’t made within 30 days, an event of default would be declared.

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Oh yeah!

• Energy Sector Defaults Could Start Falling Like Dominoes (MW)

Energy-sector bond defaults – and for some producers, bankruptcy risks – are piling up and coal liabilities aren’t the only culprit. Oil-and-gas producers, suffering with low crude prices after a shale revolution made the U.S. a viable energy producer, are smothered under their own junk bonds. Small- and medium-sized U.S.-based producers, especially those that expanded with the shale boom, are most vulnerable; any small blip in oil prices may not be high enough or fast enough to protect all producers. And just this week at least two more have warned about their near-term future. It’s a climate that’s driven some of this sector’s high-yield paper to trade at 30 cents on the dollar or less.

Peabody Energy said Wednesday it filed a “going concern” notice with regulators. Peabody has opted to exercise the 30-day grace period with respect to a $21.1 million interest payment due March 16 on its 6.50% notes due in September 2020, as well as a $50 million interest payment due March 16 on its 10% senior secured second lien notes due in March 2022. Costs and lost business to tougher coal regulation were cited. But Linn Energy – which on Tuesday filed its own “going concern” after missed interest payments now in a grace period — is primarily an oil-and-gas producer with shale interests in western U.S. states. If it files for bankruptcy protection, its $10 billion in debt would make it the largest U.S. oil company to do so since oil prices began their sharp decline in 2014.

In all, about 40 oil and gas producers have filed for bankruptcy protection globally since 2014, according to a February report from Deloitte. Crude traded to 12-year lows, below $30 a barrel, in February before a recent, mild rebound. Energy consulting firm Rystad Energy says smaller players typically need a minimum $50-a-barrel oil price to make a profit. Last week, Fitch said it’s raising its 2016 forecast for U.S. high-yield bond defaults to 6% from 4.5%, and said it expects energy and materials issuers to default on $70 billion of debt this year, including $40 billion for energy alone. The new rate of default is the highest that Fitch has ever forecast during a non-recessionary period, beating the 5.1% it forecast for 2000.

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Might as well sell then, right?

• Oil Investors See $7.4 Billion Vanish as Dividends Are Targeted (BBG)

The check is not in the mail. Bludgeoned by falling energy prices, at least a dozen oil and natural gas companies have opted to cut dividends this year to preserve cash, cannibalizing payouts considered sacrosanct by many investors. The cost to shareholders: more than $7.4 billion in lost income, compared to what they would have received this year if the payouts remained the same. It’s another painful measure – along with tens of thousands of layoffs and more than $100 billion in canceled investments – of the toll taken on the industry by the worst oil and gas price slump in decades. The quarterly payments, prized by conservative shareholders as a source of steady income, are unlikely to be restored any time soon. “It really reinforces the necessity of having a margin of safety if you are buying a stock primarily for its dividend,” said Josh Peters, editor of Morningstar’s DividendInvestor newsletter.

“What we have found for some of the energy companies is that the margin of safety was either slim or nonexistent.” Kinder Morgan’s 75% dividend cut was the biggest, amounting to a $3.44 billion loss for shareholders over the course of 2016. The announcement from North America’s largest pipeline operator “came as a shock to some people and obviously was deplored by some people,” founder and Executive Chairman Richard Kinder told analysts at a Jan. 27 meeting. The move was necessary to help the Houston-based company keep its investment-grade credit rating while ensuring it has enough money to pay debts and grow, Kinder said. Since the Dec. 8 announcement, shares have risen about 20%, compared with a 3% gain for the Alerian MLP stock index, which tracks energy infrastructure companies.

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It’s a miracle Pemex still exists.

• Big-Oil Bailout Begins as Pemex’s Debt Spirals Down (WS)

Pemex, Mexico’s state-owned oil giant, cannot seem to get a break these days. It notched up 13 straight quarters of rising losses. It now owes over $80 billion to international investors and banks. It needs to raise $23 billion this year to stay afloat. The cost of servicing that gargantuan debt mountain continues to rise. So it tries desperately to rein in its spending, without tackling — or even discussing — its endemic culture of corruption. In recent days, Pemex received a 15 billion peso ($840 million) lifeline from three of Mexico’s homegrown development banks, Banobras, Bancomext and Nafinsa, to help the firm pay back some of its smallest providers, consisting mainly of domestic SMEs. The loan was part of an arrangement cobbled together between the banks and the Mexican government.

By today’s standards the amount involved is pretty meager, but the operation was about more than just raising funds: it was meant to restore confidence among both investors and suppliers in the firm’s ability to repay its debts. “This sends a sign of stability and confidence to the sector, which has been very nervous” payments would not be made, explained Erik Legorreta, President of the Mexican Oil Industry Association, which represents around 3,000 service providers. “Members of the industry now have the confidence and certainty that the payments will be honored.” Not everyone agrees. Last week the U.S. credit rating agency Moody’s flagged concerns that the loan will significantly increase the three banks’ combined exposure to Pemex’s debt, calculated to grow from 44% to 62%.

“The three lenders now have high concentration risks with their 20 biggest creditors,” cautioned Moody’s, which already downgraded Pemex’s debt in November to Baa1, with a negative outlook. In its report last week, the agency piled on the pressure by warning that there’s “a high likelihood” that it will downgrade Pemex’s rating another notch in the coming weeks. What this all means is that rather than restoring investor confidence in Pemex, the loan operation has merely served to reinforce investors’ fears that lending to the debt-laden oil giant is fast becoming a very dangerous risk.

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We’ll see more of this.

• Munich Re Rebels Against ECB With Plan To Store Cash In Vaults (BBG)

Munich Re is resorting to the corporate equivalent of stuffing notes under the mattress as the world’s second-biggest reinsurer seeks to avoid paying banks to hold its cash. The German company will store at least €10 million in two currencies so it won’t have to pay for the right to access the money at short notice, Chief Executive Officer Nikolaus von Bomhardsaid at a press conference in Munich on Wednesday. “We will also observe what others are doing to avoid paying negative interest rates,” he said. Institutional investors including insurers, savings banks and pension funds are debating whether to store cash in vaults as overnight deposit rates fall deeper below zero and negative yields dent investment returns. The costs associated with insurance and logistics may outweigh the benefits of taking this step.

Munich Re’s move comes after the ECB last week cut the rate on the deposit facility, which banks use to park excess funds, to minus 0.4%. Munich Re’s strategy, if followed by others, could undermine the ECB’s policy of imposing a sub-zero deposit rate to push down market credit costs and spur lending. Cash hoarding threatens to disrupt the transmission of that policy to the real economy. Munich Re wants to test how practical it would be to store banknotes having already kept some of its gold in vaults, von Bomhard said. This comes at a time when consumers are increasingly using credit cards and electronic banking to pay for transactions. Deutsche Bank CEO John Cryan in January predicted the disappearance of physical cash within a decade. Munich Re also said on Wednesday that it expects its profit to decline this year as falling prices for its products and low interest rates weigh on investment earnings.

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UK rules!

• Netherlands Votes To Ban Weapons Exports To Saudi Arabia (Ind.)

The Dutch parliament has voted to ban arms exports to Saudi Arabia in protest against the kingdom’s humanitarian and rights violations. It sees the Netherlands become the first EU country to put in practice a motion by the European Parliament in February urging a bloc-wide Saudi arms embargo. The bill, voted through by Dutch MPs on Tuesday, quoted UN figures which suggest almost 6,000 people – half of them civilians – have been killed since Saudi-led troops entered the conflict in Yemen. It also cited the mass execution of 47 people, largely political dissidents, ordered by the Saudi judiciary on 2 January this year.

According to Reuters, the Dutch bill asks the government to implement a strict weapons embargo that includes dual-use exports which could potentially be used to violate human rights. The vote adds to the growing pressure on Britain, one of the main arms suppliers to Riyadh, to reconsider its stance. According to Campaign Against Arms Trade figures from the start of the year, the UK has sold more than £5.6 billion worth of weapons to the Saudi government under David Cameron. France is the other major European supplier of arms to the Saudi kingdom. Germany’s exports amounted to almost £140 million in the first six months of 2015, while figures for the Netherlands itself were not available.

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Has this changed their policy yet?

• Austria’s Highest Court Proclaims Asylum Cap Illegal (NE)

Austria’s asylum cap to 37,500 refugees has been declared unlawful by the country’s Constitutional Court on Tuesday, March 15. While Chancellor Werner Faymann is calling on Germany to introduce its own cap, the president of Austria’s Constitutional Court, Gerhart Holzinger, stated that Austria is obliged to grand asylum to everyone that meets the legal requirements. Vienna allows 80 asylum seekers per day and allows 3,200 to transit to Germany. Meanwhile, the Austrian Defense Minister, Peter Doskozil, suggested on Tuesday that the EU should help the Former Yugoslav Republic of Macedonia (FYROM) – an EU candidate state – to secure its borders with Greece, an EU member state. Doskozil praised the government in Skopje for the work it has done “for the whole of the EU.” Austria’s Vice-President, Reinhold Mitterlehner, reiterated that “the Balkan route must stay closed.”

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How the EU sees this: “We have a week to build a Greek state..” Insane, but true. It smells like the efficiency goal of German camps 70 years ago. If you don’t put people first, you’re going to get it wrong.

• Huge Challenges Await EU’s Refugee Plan (FT)

On paper the EU’s latest migration plan promises a straightforward solution to a crisis that has vexed European leaders for months. But in practice, it is anything but simple. By returning thousands of migrants to Turkey, Brussels and Berlin are hoping that others will become convinced the route is now impassable and join a formalised system instead. But its implementation poses an enormous administrative test, with little time to prepare. One of the EU’s weakest states, Greece, will be asked to play a central role. “We have a week to build a Greek state,” joked one senior EU official intimately involved with the planning. Frans Timmermans, the European Commission vice-president, acknowledged: “You don’t need to tell me that this is going to be very complicated in legal and logistical terms.” Here are five Herculean tasks ahead:

Preparing the ground — legally and literally Europe’s return plan violates Greek law. To address this, Greece must overhaul its asylum laws in a matter of days to enshrine Turkey as a “safe third country” to receive asylum seekers. The next step is harder: clearing the backlog. There are around 8,000 migrants on Greek islands, such as Lesbos and Chios. Officials say they ideally need to be moved before the so-called “X Day” -as early as Friday- when the returns policy officially begins. Yet Greek facilities are strained. Shelter is lacking on the mainland, where almost 40,000 migrants are already stranded. Mixing the groups — those who are trapped in Greece, awaiting relocation to Europe, and those who will be sent straight back to Turkey – could get ugly.

Creating a functioning asylum system in Greece “Unacceptable”, “degrading” and “unsanitary” were a few of the words used to describe Greece’s asylum system when the European Court of Human Rights banned other EU members from sending asylum seekers there in 2011. Yet the Greek system will now be the fulcrum of the EU’s deal with Turkey. Greece is the place where thousands of asylum seekers will land, be processed, housed and then returned to Turkey. This will require more manpower, particularly on the Aegean Islands. Everyone from judges -estimates range from 50 to 200- to a small army of Arabic or Pashto translators are required. “We’re far away from having the people, let alone trained people,” said one European official involved in preparations.

An asylum seeker’s claim is supposed to take a week to process, according to the EU plan. But the legal hoops are multiplying as Brussels attempts to guard against court challenges. This requires an assessment of each individual case and an interview. Applications must be dealt with fast – but not too fast. (In October, the European Commission criticised Budapest for rejecting applications in under an hour.) Most difficult is the appeals procedure, which must be heard by a judge. If Greece fails to jump through any of these legal hoops then judges in Greece, Luxembourg or Strasbourg could strike down the agreement. “That would bring the whole system to a halt,” said one senior EU official.

Managing unco-operative migrants So-called “hotspots” in Greece were first promised in September, yet these registration and sorting centres are only now taking shape. They can accommodate around 8,050 arrivals, according to the European Commission. Yet their role is about to change drastically. For a returns policy to work efficiently, hotspots must not simply register migrants but detain them. The centres will become containment facilities, according to EU plans, from which migrants who are about to be returned cannot escape. That requires more fences, more overnight shelter and more security guards. This is a horrible challenge. The UNHCR survey of Syrian refugees in February found almost half to be children. Some detainees will be desperate and angry at the prospect of return, having just risked their lives on a sea journey that possibly cost their life savings. The risk of disorder is high.

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Isn’t that a crazy headline, given that less than 1000 of 160,000 have actually been resettled?!

• EU Prepares To Scale Back Resettlement Of Syrian Refugees (Guardian)

The EU is preparing to scale back the number of Syrian refugees offered resettlement in Europe, as part of a controversial pact being drawn up with Turkey. The bloc’s 28 leaders will hold a summit in Brussels on Thursday, before a meeting the Turkish prime minister, Ahmet Davutoglu on Friday, to hammer out the final details of a plan aimed at stemming the flow of refugees and migrants coming to Europe. The EU has pledged to resettle Syrian refugees currently in Turkey, but figures that emerged on Wednesday suggested only 72,000 places would be available, with uncertainty about the bloc’s commitment beyond this number. As the UNHCR stepped up calls for a coordinated approach to manage the number of people, European diplomats were scrambling to finalise a deal with Turkey.

Under a proposed “one-for-one” scheme, for every Syrian refugee in Turkey who is resettled in Europe, a Syrian in Greece would be sent back across the Aegean. The vast majority of refugees and migrants in Greece can also expect to be sent back to Turkey. When these broad principles were agreed at an EU-Turkey summit 10 days ago, the numbers were vague but details are now emerging. Of the 72,000 places identified by the Commission for Syrian refugees, 18,000 places would be available under a voluntary resettlement scheme agreed last year. A further 54,000 places may be available “if needed” under a separate scheme designed to spread asylum seekers more evenly around the bloc, although this would require a change to EU law.

Frans Timmermans, vice-president of the European commission, said the EU would continue to help after these places were used up. It pointed to “a coalition of the willing”, made up of EU member states including Germany and Austria, who have pledged to resettle Syrians once irregular arrivals had stopped. “When we succeed in breaking the pattern of irregular arrivals one-for-one will not become none-for-none,” Timmermans said. But the various EU schemes to rehouse refugees are painfully slow. A plan to find homes for 160,000 refugees has led to only 937 being resettled, according to the latest data. Several countries are concerned that the Turkey deal could mean large-scale resettlement of Syrians in Europe.

A senior EU official said there “cannot be an open-ended commitment on the EU side”. The numbers discussed indicate that the EU wants to scale back help in Europe offered to refugees. Syrians in Greece will go to the back of the queue for resettlement in Europe once they are returned to Turkey. “Priority will be given to Syrians who have not previously entered the EU irregularly,” states an unpublished draft. The commission argues the plan will kill the business model of people smugglers, as potential migrants will have no incentive to come to Europe if they think they will be turned away. But the UN’s human rights chief has warned that the EU risks compromising its human rights values if it cuts corners on asylum standards.

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As the Balkan borders close, refugees will use new routes and old ones. At an even higher risk.

• Three Migrants Dead As 2,400 Rescued Off Libya (AFP)

More than 2,400 migrants and three corpses have been recovered from people smugglers’ boats off Libya since Tuesday, Italy’s coastguard said Wednesday. After several quiet weeks, the figures represent a pick-up in the flow of migrants attempting to reach Italy via Libya, a route through which around 330,000 people have made it to Europe since the start of 2014. Prior to the latest rescues, the UN refugee agency (UNHCR) had reported 9,500 people landing at Italian ports since the start of the year. This compares with more than 143,000 who have reached Greek islands by crossing the Aegean Sea since January 1.

With efforts underway to close the entry route through Greece, Italian authorities are wary of a surge in the number of migrants attempting to come through Libya. So far there has been no indication of that happening. Numbers arriving from Libya have always fluctuated in line with weather conditions in the Mediterranean and other factors. Arrivals were slightly down in 2015 compared with 2014 – a trend that may be related to the political chaos in Libya which might have deterred some migrants and has made it harder for those that do make the journey to find work there while awaiting boats to Italy.

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Merry St. Paddy’s

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