Oct 122018
 
 October 12, 2018  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , , , ,  


M. C. Escher Order and chaos 1950

 

Donald Trump is Right About the Fed (Whalen)
Stocks Could Fall 40% To 50% To Reach Fair Value – Yusko (CNBC)
4 Pillars of Debt in Danger of Collapse (Nomi Prins)
The Dollar and its Discontents (Eichengreen)
China September Exports Surge, Creating Record Surplus With US (R.)
Facebook, Twitter Purge More Dissident Media Pages (CJ)
Italian Parliament Approves Controversial New Spending Targets (AP)
Turks Had Saudi Consulate Bugged With Audio (ZH)
Journalist’s Disappearance Hardens Congress Stance On Saudi Arms Deals (R.)
More Than A Million UK Residents Live In ‘Food Deserts’ (G.)

 

 

Chris Whalen on the absence of price discovery.

Donald Trump is Right About the Fed (Whalen)

President Donald Trump has been criticizing the Federal Open Market Committee for raising interest rates. The reaction of the US equity markets is self explanatory. But while the economist love cult in the Big Media may take umbrage at President Trump’s critique of the central bank, in fact Trump is dead right. First, the Fed’s actions in terms of buying $4 trillion in Treasury debt and mortgage paper has badly crippled the value of the fixed income market as a measure of risk. The Treasury yield curve no longer accurately describes the term structure of interest rates or risk premiums. This means that the Treasury yield curve is useless as an indicator of or guide for policy. Nobody at the Federal Reserve Board understands this issue or cares.

Second, Operation Twist further manipulated and distorted the Treasury market. By selling short-term paper and buying long dated securities, the Fed suppressed long-term interest rates, again making indicators like the 10-year Treasury bond useless as an measure of risk. Without QE 2-3 and Operation Twist, the 10-Year Treasury would be well over 4% by now. Instead it is 3% and change and will probably rally to test 3% between now and year end. Third is the real issuing bothering President Trump, even if he cannot find the precise words, namely liquidity. We have the illusion of liquidity in the financial markets today. Sell Side firms are prohibited by Dodd-Frank and the Volcker Rule from deploying capital in the cash equity and debt markets. All bank portfolios are now passive. No trading, no market making. There is nobody to catch the falling knife.

The only credit being extended today in the short-term markets is with collateral. There is no longer any unsecured lending between banks and, especially, non-banks. As we noted in The Institutional Risk Analyst earlier this week, there are scores of nonbank lenders in mortgages, autos and consumer unsecured lending that are ready to go belly up. Half of the non-bank mortgage lenders in the US are in default on their bank credit lines. As in 2007, the model builders at the Fed in Washington have no idea nor do they care to hear outside opinions. If you understand that the Fed’s previous “extraordinary” policy actions have the effect of understating LT interest rates by at least a percentage point, then you know why President Trump is howling like a wounded hound. Nobody understands the danger of leverage better than a real estate developer.

Read more …

But nobody says it’ll take 70-80%. Why?

Stocks Could Fall 40% To 50% To Reach Fair Value – Yusko (CNBC)

Investors should brace themselves for a significant stock market correction, as well as a recession in the first half of next year, investor Mark Yusko warned on Thursday. In fact, he says, fair value for equities would be down about 40 percent to 50 percent. However, that doesn’t necessarily mean the stock market will have to go to fair value, Yusko said. “If interest rates keep normalizing, if liquidity keeps falling, if earnings go to where I think they are going to go, which is lower, I think we are going to have a meaningful correction,” the founder and chief investment officer at Morgan Creek Capital said on CNBC’s “Power Lunch.”

Yusko, a noted stock picker who took first place in Portfolios with Purpose’s fantasy stock-picking contest in 2016, predicts a recession in the first or second quarter of 2019. “Things are paying out now just like they did in 2000, 2001, 2002,” he said. In the back part of 2000, the stock market went down, 2001 brought a recession, and in 2002 the stock market took a big turn down. “It’s just going to be painful for a while to adjust this overvaluation,” Yusko added. [..] Yusko also questioned whether the economy is really strong. “We had one good quarter. We’ve been sub 2 percent [economic growth] for six years,” he said. Plus, forecasts are that GDP is going to be lower than expectations in the third quarter and even lower in the fourth quarter, and there are bad demographics and bad debt, he added.

Read more …

“..there’s now even less reason to believe the Fed will raise rates at the next meeting in December.”

4 Pillars of Debt in Danger of Collapse (Nomi Prins)

Last month I was in a series of high-level meetings with members of Congress and the Senate in Washington. While there’s been major news about the Supreme Court, my discussions were on something that both sides of the aisle are coming to consensus over. You see, issues that impact your own bottom line are way more about economics than they are about politics. On Capitol Hill, leaders know that. They also know that voters react to what impacts their money. That’s why, behind the scenes, I’ve been discussing issues focused on protecting the economy. Behind closed doors, we’ve been working on how to shield the economy from Too Big to Fail banks and how the U.S. can better fund infrastructure projects. These are initiatives that all politicians should care about.

Underneath the surface of the economy is a financial system that is heavily influenced by the Federal Reserve. That’s why political figures and the media alike have all tried to understand what direction the system is headed. Also last week I joined Fox Business at their headquarters to discuss the economy, the Fed and what they all mean for the markets. On camera, we discussed this week’s Federal Reserve meeting and the likely outcomes. Off camera, we jumped into a similar discussion that those in DC have pressed me on. Charles Payne, the Fox host, asked me what I thought of new Fed chairman, Jerome Powell, in general. Payne knew that I view the entire central bank system as a massive artificial bank and market stimulant.

What I told him is that Powell actually has a good sense of balance in terms of what he does with rates, and the size of the Fed’s book. He understands the repercussion that moving rates too much, too quickly, or selling off the assets, could have on the global economy and the markets. Savvy investors know that if the U.S. economy falters, because everything is connected, it could reverberate on the world. That’s why I could forecast that the Fed would raise rates by 25 basis points last week ahead of time. And they did. However, there’s now even less reason to believe the Fed will raise rates at the next meeting in December.

Read more …

Could USD lose its position in just 5-10 years?

The Dollar and its Discontents (Eichengreen)

It is worth recalling how the dollar gained international prominence in the first place. Before 1914, it played essentially no international role. But a geopolitical shock, together with an institutional change, transformed the dollar’s status. The geopolitical shock was World War I, which made it hard for neutral countries to transact with British banks and settle their accounts using sterling. The institutional change was the Federal Reserve Act, which created an entity that enhanced the liquidity of markets in dollar-denominated credits and allowed US banks to operate abroad for the first time. By the early 1920s the dollar had matched and, on some dimensions, surpassed sterling as the principal vehicle for international transactions.

This precedent suggests that 5-10 years is a plausible time frame over which the US could lose what Valéry Giscard d’Estaing, then France’s finance minister, famously called the “exorbitant privilege” afforded it by issuing the world’s main international currency. This doesn’t mean that foreign banks and companies will shun the dollar entirely. US financial markets are large and liquid and are likely to remain so. US banks operate globally. In particular, foreign companies will continue to use dollars in transactions with the US itself.

But in an era of US unilateralism, they will want to hedge their bets. If the geopolitical shock of Trump’s unilateralism spurs an institutional innovation that makes it easier for European banks and companies to make payments in euros, then the transformation could be swift (as it were). If Iran receives euros rather than dollars for its oil exports, it will use those euros to pay for merchandise imports. With companies elsewhere earning euros rather than dollars, there will be less reason for central banks to hold dollars in order to intervene in the foreign exchange market and stabilize the local currency against the greenback. At this point, there would be no going back.

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Before more tariffs kick in.

China September Exports Surge, Creating Record Surplus With US (R.)

China reported on Friday an unexpected acceleration in export growth in September and a record trade surplus with the United States, which could exacerbate an already-heated dispute between Beijing and Washington. September exports rose 14.5 percent from a year earlier, Chinese customs data showed. That blew past forecasts for an 8.9 percent increase in a Reuters poll and was well above August’s 9.8 percent gain. Growth in imports for September instead showed a moderate slowdown to 14.3 percent from 19.9 percent in August, slightly missing analysts’ forecast of a 15.0 percent growth.

China’s trade surplus with the United States widened to a record in September despite wider application of U.S. tariffs, an outcome that could push President Donald Trump to turn up the heat on Beijing in their trade dispute. The politically-sensitive surplus was $34.13 billion in September, surpassing the record of $31.05 billion in August. China’s export data has been surprisingly resilient to tariffs, possibly because companies ramped up shipments before broader and stiffer U.S. duties went into effect.

Read more …

Is it election time?

Facebook, Twitter Purge More Dissident Media Pages (CJ)

Facebook has purged more dissident political media pages today, this time under the pretense of protecting its users from “inauthentic activity”. In a statement co-authored by Facebook Head of Cybersecurity Nathaniel Gleicher (who also happens to be the former White House National Security Council Director of Cybersecurity Policy), the massive social media platform explained that it has removed “559 Pages and 251 accounts that have consistently broken our rules against spam and coordinated inauthentic behavior.”

This “inauthentic behavior”, according to Facebook, consists of using “sensational political content -regardless of its political slant- to build an audience and drive traffic to their websites,” which is the same as saying they write about controversial things, and posting those political articles “in dozens of Facebook Groups, often hundreds of times in a short period, to drum up traffic for their websites.” In other words, the pages were removed for publishing controversial political content and trying to get people to read it. Not for writing “fake news”, but for doing what they could to get legitimate indie media news stories viewed by people who might want to view it.

[..] Two of the most high-profile pages which were shut down have probably been seen at some point by any political dissident who uses Facebook; the Free Thought Project, which had 3.1 million followers, and Anti-Media, which had 2.1 million. [..] As if that wasn’t creepy enough, some of the accounts purged by Facebook appear to be getting censored on Twitter as well, bringing back memories of the August cross-platform coordinated silencing of Alex Jones. The aforementioned Anti-Media has now been suspended from Twitter just hours after tweeting about being removed from Facebook, along with one of its top writers Carey Wedler, and a Unicorn Riot activist named Patti Beers who had more than 30,000 Twitter followers has just been removed from both sites as well.

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“EU rules do not allow the ECB to help a country unless this has already agreed on a rescue “program”..

Italian Parliament Approves Controversial New Spending Targets (AP)

Italy’s parliament approved on Thursday deficit-raising spending targets, defying markets and Italy’s eurozone partners who had been pressing for changes. The parliamentary vote clears the proposals to be forwarded to the European Commission for review. But the document already has been criticized as unrealistic by the parliament’s own budget office and the Bank of Italy. The new spending targets are set to raise Italy’s deficit to 2.4 per cent of GDP next year. In a slight softening, Italy’s leaders pledged to lower the deficit in the subsequent two years. But that has done little to assuage concern over the boost in spending to meet a raft of campaign promises made by the two populist parties that formed the governing coalition, and the impact it will have on Italy’s high public debt.

Also on Thursday, five senior sources told Reuters that the European Central Bank won’t come to Italy’s rescue if its governments or bank sector run out of cash unless the country secures a bailout from the European Union. Italy has seen its borrowing costs surge on financial markets since its new government unveiled plans to increase its budget deficit, defying EU rules and reawakening concerns about its huge pile of public debt. The sources, attending an economic summit in Indonesia, said Italy could still avoid a debt crisis if its government changed course but should not count on the central bank to tame investors or prop up its banks.

This is because EU rules do not allow the ECB to help a country unless this has already agreed on a rescue “program” – political jargon for a bailout in exchange for belt-tightening and painful economic reforms, an option the Italian government has firmly rejected. Any attempt to circumvent those rules would damage the ECB’s credibility beyond repair and undermine acceptance of the monetary union in creditor countries, such as Germany, the sources said. “It’s a test-case to show Europe and its mechanisms work,” said one of the sources on the sidelines of the IMF’s annual meetings in the Indonesian resort town of Nusa Dua.

Read more …

You don’t need 15 guys to kill someone.

Turks Had Saudi Consulate Bugged With Audio (ZH)

The Washington Post has provided further details on its prior reporting that US intelligence knew full well that Saudi Arabia was seeking to lure the now disappeared and allegedly murdered journalist Jamal Khashoggi to its embassy in Istanbul in order detain or kill him. In an interesting new revelation the Post speculates based on intel sources that the whole October 2nd incident may have been an attempted “rendition” gone wrong. As more damning evidence emerges showing a Saudi “hit team” of 15 military and intelligence individuals murdered Khashoggi and chopped up his body to carry out of the country, there now appears a strong consensus that the order may have come straight from the top, most likely from crown prince Mohammed bin Salman (MbS) himself.

Middle East Eye, for example, concludes based on WaPo’s prior report, “Saudi Arabia’s Crown Prince Mohammed bin Salman, the country’s de facto ruler, ordered an operation targeting journalist and US resident Jamal Khashoggi… citing US intelligence intercepts.” What’s more is that NBC now reports that the Turks had the Saudi consulate bugged with listening devices before the disappearance and what now appears to be gruesome murder — which suggests Turkey is currently in possession of an audio recording of the alleged killing.

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Yeah, right..

Journalist’s Disappearance Hardens Congress Stance On Saudi Arms Deals (R.)

The disappearance of Saudi journalist Jamal Khashoggi has hardened resistance in the U.S. Congress to selling weapons to Saudi Arabia, already a sore point for many lawmakers concerned about the humanitarian crisis created by Yemen’s civil war. Even before Turkish reports said Khashoggi was killed at a Saudi consulate in Istanbul, Democratic U.S. lawmakers had placed “holds” on at least four military equipment deals, largely because of Saudi attacks that have killed Yemeni civilians. President Donald Trump was wary of halting arms sales over the case, saying on Thursday the kingdom would just move its money into Russia and China.

[..] An informal U.S. review process lets the top Republicans and Democrats on the Senate Foreign Relations and House Foreign Affairs Committees stall major foreign arms deals if they have concerns such as whether weapons would be used to kill civilians. Corker said he recently told a defense contractor not to push for a deal with the Saudis, even before the Khashoggi case. “I shared with him before this happened, please do not push to have any arms sales brought up right now because they will not pass. It will not happen. With this, I can assure it won’t happen for a while,” Corker said. While details of all the blocked Saudi deals were not immediately available, one was the planned sale of hundreds of millions of dollars worth of high-tech munitions to Saudi Arabia and the United Arab Emirates.

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“She occasionally gets a taxi but finds that depletes her food budget. “A taxi is a meal..”

More Than A Million UK Residents Live In ‘Food Deserts’ (G.)

More than a million people in the UK live in “food deserts” – neighbourhoods where poverty, poor public transport and a dearth of big supermarkets severely limit access to affordable fresh fruit and vegetables, a study has claimed. Nearly one in 10 of the country’s most economically deprived areas are food deserts, it says – typically large out-of-town housing estates and deprived inner-city wards served by a handful of small, relatively expensive corner shops. Public health experts are concerned that these neighbourhoods – which are often also “food swamps” with high densities of fast-food outlets – are helping to fuel a rise in diet-related conditions such as obesity and diabetes, as well as driving food insecurity.

The most deprived areas include Marfleet in Hull, Hartcliffe in Bristol, Hattersley in Greater Manchester, Everton in Liverpool and Sparkbrook in Birmingham. Eight of Scotland’s 10 most deprived food deserts are in Glasgow, and three of Wales’s nine worst are in Cardiff. The study, by the Social Market Foundation thinktank and food company Kellogg’s, says poor, elderly and disabled people are disproportionately affected, as they cannot afford or are physically unable to travel to large supermarkets.

Food deserts are defined by the report as neighbourhoods of between 5,000-15,000 people served by two or fewer big supermarkets. In “normal” areas of this size there are typically between three and seven large food stores, it says. Small shops are less likely to sell fresh or healthy food. The report cites Lisa Cauchi, a mother of eight in Salford, in the north-west of England, who said the nearest reliable source of affordable fresh fruit and vegetables was a big supermarket half an hour’s walk away. She occasionally gets a taxi but finds that depletes her food budget. “A taxi is a meal,” she said.

Read more …

Aug 122018
 
 August 12, 2018  Posted by at 1:21 pm Finance Tagged with: , , , , , , , , , , , , ,  


Henri Matisse View of Nôtre Dame 1914

 

Recep Tayyip Erdogan became Prime Minister of Turkey in 2003. His AKP party had won a major election victory in 2002, but Erdogan was banned from political office until his predecessor Gül annulled the ban. Which he had gotten in 1997 for reciting an old poem to which he had added the lines “The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers….”

The Turkish courts of the time saw this as “an incitement to violence and religious or racial hatred..” and sentenced him to ten months in prison (of which he served four in 1999). The courts saw Erdogan as a threat to the secular Turkish state as defined by Kemal Ataturk, the founder of modern Turkey in the 1920’s. Erdogan is trying to both turn the nation towards Islam and at the same time not appearing to insult Ataturk.

The reality is that many Turks today lean towards a religion-based society, and no longer understand why Ataturk insisted on a secular(ist) state. Which he did after many years of wars and conflicts as a result of religious -and other- struggles. Seeing how Turkey lies in the middle between Christian Europe and the Muslim world, it is not difficult to fathom why the ‘father’ of the country saw secularism as the best if not only option. But that was 90 years ago.

And it doesn’t serve Erdogan’s purposes. If he can appeal to the ‘silent’ religious crowd and gather their support, he has the power. To wit. In 2003, one of his first acts as prime minister was to have Turkey enter George W.’s coalition of the willing to invade Saddam Hussein’s Iraq. As a reward for that, negotiations for Turkey to join the EU started. These are officially still happening, but unofficially they’re dead.

In 2014 Erdogan finally got his dream job: president. Ironically, in order to get the job, Erdogan depended heavily on the movement of scholar and imam Fethullah Gülen, who, despite moving to Pennsylvania in 1999, still had (has?) considerable influence in Turkish society. Two years after becoming president, Erdogan accused Gülen of being the mastermind behind a ‘failed coup’ in 2016, after which tens of thousands of alleged Gülenists were arrested, fired, etc.

 

Fast forward to the past week. Donald Trump imposed tariffs on Turkey, ostensibly because Erdogan refuses to free an American pastor. The result was a god-almighty drop in the Turkish lira. Analysts at Goldman Sachs said if it reached 7:1 vs the USD, it would be game over for Turkish banks. It got to 6.8:1 before falling back to 6.4:1. And without support from China or the IMF, it would indeed appear the game’s up.

With a stronger dollar, investors’ urge to have their money in emerging markets fades away. And with Turkey being the ugliest horse in the EM factory (perhaps after Argentina, but that’s a whole different story), it’s only logical it would be the first emerging market to see foreign investment disappear. It’s the easiest thing in the world, and It looks something like this:

Here, Turkey’s the main outlier. Tyler Durden’s comment: “as JPMorgan showed 2 months ago, Turkey faces a secondary threat in addition to its gaping current account deficit: a massive and growing debt load. If foreign buyers of Turkish debt go on strike, or if Turkey is unable to rollover near-term maturities, watch how quickly the currency crisis transforms into a broad economic collapse.”

 

 

This next graph from the IIF shows how much debt Turkey has, and in which sectors. Not much household debt, which is positive, but a monster non-financial corporate debt, which is definitely not. NOTE: Hungary is no. 2 on this one, but look at the graph above, and you see that while Turkey has a current account DEFICIT and RISING external debt, Hungary has a current account SURPLUS and FALLING external debt. Don’t do the apples and oranges thing! Also note that Argentina’s debt is almost all government (bonds)

Along that same line, I saw Tom Luongo today compare Turkey anno now to Russia in 2014/15, but Moscow’s USD and EUR debt is about 25%, while Turkey’s is at 70%. it’s a very bad comparison. Russia has had sanctions for ages, and it’s and plenty time to adapt its economy to them. They have to hold some USD and Treasury’s, but they’re largely fine. Turkey is not.

 

 

The third graph is useful because it depicts what currencies countries’ non-financial sectors have borrowed in. Again, Turkey is an outlier, this time in its USD exposure.

 

 

And unsurprisingly, we have EU banks exposed to Turkey. What’s wrong with BBVA? What’s wrong with Draghi?

 

 

But this is easy stuff. We know all this, or we could have. Turkey has been splurging on debt at least ever since Erdogan became PM 15 years ago. He bought his popularity to a large extent with large scale infrastructure projects, without letting on the country -and its corporate sector- were financing the projects with money borrowed from abroad (he built a $100 million, 1000-room palace for himself as well).

Where I think it gets really interesting, and I’ve been keeping away a bit from what others have written the past few days, is in what Erdogan knows about this, and how long he’s known how dire the situation is, and what he’s planning to do next. Because if he knows how bad things are, and he has it for a while, he may well have orchestrated the recent fall-out with Trump et al, to use it as a political tool.

What Erdogan needs is someone to blame for his collapsing economy. And also, if he can get it, a bail-out from somewhere anywhere. Problem with the bail-out thing is, no matter what option might be available, and it’s only might be, he will be forced to relinquish a lot of the central control he’s carefully built up through constitution amendments etc.

His -maybe- options are the IMF, Russia and China. The IMF equals America, and even if they feel a loan to Istanbul is better than an outright collapse, they will take his control over the central bank away, and probably much more – austerity on steroids.

Russia might want to assist, if only to get Turkey away from NATO, which Putin sees as a growing threat now it keeps approaching his borders ever more. Greece is presently in an angry spat with Moscow because the latter is trying to frustrate the Macedonia name deal that the US has been encouraging, which would lead to Macedonia NATO membership, and even more NATO troops right on Russian borders.

But Putin hasn’t forgotten Erdogan shooting down a Russian jet fighter in 2015, and you can bet he will avenge that ‘incident’. He’s at best ambivalent about supporting Erdogan, but he recognizes the potential advantages. Then again, he also recognizes the pluses of letting Turkey slide into a position where Erdogan will be forced out and the secular state reinstated. Russia doesn’t want more Muslim states on its borders anymore than it wants more NATO. Suffice it to say Putin’s watching closely. And he’s got his moves ready.

China sees things differently; it can of course appreciate the potential of Turkey as a strategic gem, if only for its Belt and Road Initiative, but Beijing can also see the potential problems. It’s easier -and much cheaper- to buy up Greek assets for that same purpose -and for pennies on the dollar- now that the EU and US have forced the country’s economy to slide into third world territory. Still if Erdogan gets desperate enough, XI may yet jump in. But Erdogan will not be an independent actor anymore, in his own country. Xi does not dole out Christmas gifts.

 

On Saturday, Erdogan -again- summoned Turks to bring home their foreign funds and to change all dollars and euros and bonds for lira. That may seem strange -and it probably is- because the first reaction is for people to do the exact opposite as long as the lira is plunging. But it appeals to that same religious sentiment that he has founded his entire political power on. Without it, he’s done anyway.

His approach now is to blame someone else for Turkey’s economic problems. Which is nonsense for anyone who has the valid details, but remember, his gutting of the press after the alleged ‘coup’ two years ago has left precious little information available to the Turkish people.

Erdogan has said he will look for other friends than the US. As detailed above, that will not be easy unless he’s prepared to give up substantial amounts of his power. He’s not prepared for that. It’s much easier for him, let alone advantageous, to claim there’s an economic war against Turkey being leveled. And he wouldn’t even be 100% wrong.

Thing is, to prevent the latest escalation, all he would have had to do was to release an American pastor. The fact that he didn’t is perhaps more telling than anything in all this. He’s looking for someone, come country, some organization perhaps, to present as an enemy to the Turkish people.

Since I’ve spent a lot of time in Athens in the past few years, I wouldn’t be surprised if Turkey, whose jetfighters’ violations of Greek air space have become so routine not even the Greek press tries to keep track, would invade, and claim ownership of, some Greek islands in the Aegean Sea, even if they’re just some uninhabited rocks, to whip up nationalist sentiment back home.

Recep Tayyip has long seen this coming. His economy is collapsing, his currency is collapsing, so he’ll focus on what’s left: Turkey’s strategic position on the map, its NATO membership, the negotiations for EU membership, and most of all the support of the Muslim contingent in Turkey that solidifies his power.

I don’t really want to make any historical comparisons, they appear obvious enough. Suffice it to say this ain’t over by a long shot, and it could lead to big trouble.

And don’t let’s forget that Turkey presently hosts millions of Syrian refugees. Erdogan can just buy a bunch of dinghies (he can still afford that) and cause absolute chaos in Greece and the EU.

Who’s going to be buying lira’s on Monday?

 

 

Jul 102018
 
 July 10, 2018  Posted by at 9:04 am Finance Tagged with: , , , , , , , , , , , ,  


John Swope Trees in fog (Chile) 1939

 

Leveraged-Loan Risks Are Piling Up (WS)
UK House Prices Should Be Frozen For Five Years – Think Tank (Ind.)
24 Hours of Brexit Mayhem (Ind.)
Britain Has Gone To Huge Trouble To Humiliate Itself (Fintan O’Toole)
Novichok In Wiltshire Death ‘Highly Likely’ From Batch Used On Skripals (G.)
Nissan Says Emissions And Fuel Economy Tests Were Falsified (R.)
Trump Slams Pfizer After July 1 Drug Price Hikes (R.)
Judge Rejects Trump Request For Long-Term Detention Of Immigrant Children (R.)
Egypt Rejects Europe’s Intent To Set Up ‘Regional Disembarkation Centres’ (AW)
If You Love Greece, Help Us Get Rid Of Alexis Tsipras And His Zombie Party (G.)
When Collapse Goes Kinetic (Kunstler)
As Trial Opens, Man Dying Of Cancer Blames Monsanto’s Roundup (AFP)

 

 

Not learned a single thing in the past 10 years.

Leveraged-Loan Risks Are Piling Up (WS)

US junk-bond issuance in June plunged 31% from a year ago to just $14.5 billion, the lowest of any June in five years, according to LCD of S&P Global Market Intelligence. During the first half of the year, junk bond issuance dropped 23% from a year ago to $110.6 billion. Is investor appetite for risky debt drying up? Have investors given up chasing yield? On the contrary! They’re chasing harder than before, but they’re chasing elsewhere in the junk-rated credit spectrum: leveraged loans. Leveraged loans are another way by which junk-rated companies can raise money. These loans are arranged by banks and sold either as loans or as Collateralized Loan Obligation (CLOs) to other investors, such as pension funds or loan funds.

They’re a $1 trillion market and trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them. In the first half, companies issued $274 billion of non-amortizing leveraged loans, and $97 billion in revolving and amortizing leveraged loans, according to LCD, for a total of $371 billion, on par with the record set in the first half last year. This is well over triple the amount of junk bonds issued in same period ($110 billion). Many of these loans have floating interest rates, typically pegged to the dollar-Libor. And in an investment environment where the Fed has been trying to push up interest rates, Libor has surged, and floating-rate loans, whose interest payments increase as Libor ratchets higher, are very appealing to investors – despite the additional risks these higher interest payments pose for the companies that are already struggling with negative cash flows.

[..] Leveraged loans come with covenants that are supposed to protect investors during the term of the loan and in case of default. With strong covenants and good collateral, leveraged loans tend to be less risky than junk bonds issued by the same company. Alas, investors have the hots for this debt, and companies are taking advantage of it by weakening covenants, giving investors fewer protections and the company more leeway – such as paying interest with more debt rather than cash if it runs out of cash (payment-in-kind or PIK); normally, not being able to pay interest would constitute a default, but not with these “covenant lite” or “cov-lite” loans. The boom in cov-lite has started years ago and has surged to massive record proportions. When these loans default, investors are exposed to much greater losses.

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Interesting idea. Decades too late though.

UK House Prices Should Be Frozen For Five Years – Think Tank (Ind.)

UK house prices should be frozen for five years to help prevent another financial crisis, the think tank IPPR has said. The group has urged the Bank of England to freeze property prices under a separate new inflation target and said this could lead to house prices falling by around 10 per cent in real terms as other prices and wages continue to rise, making homes more affordable. Under the IPPR’s proposals, house prices would be allowed to increase “only after expectations of constantly rising house prices have been ‘reset’”. The think tank also said prices would be allowed to grow “no faster than the general consumer price inflation target of 2 per cent, meaning no further growth in the real value of people’s homes”.

The IPPR said its recommendations were part of a wider plan to “rebalance the UK economy away from finance” so as to avoid another financial crisis. According to the IPPR, the financial sector’s “dominance” since the 1980s has contributed to a strong pound, which has hurt exporters, and has attracted surplus money from other countries, which has been channelled into loans for speculative investors, including mortgage lending. This speculation over house prices, the think tank said, has helped drive up prices and at the same time made the economy more vulnerable to a crisis, because it has reduced funds available for more productive investment, created regional inequalities with disproportionate growth in London and the South East, and “concentrated market power into the hands of a small number of large banks”.

[..] Grace Blakeley, IPPR research fellow, said: “Since the 1980s, the UK’s business model has rested on attracting capital from the rest of the world, which it has channelled into debt for UK consumers. The 2008 crisis proved that this is unsustainable. “We need to move towards a more sustainable growth model, one built on production and investment rather than debt and speculation. To do this, we must break the cycle of ever-rising house prices driving property speculation, crowding out investment in the real economy.”

Read more …

A confidence vote looks inevitable.

24 Hours of Brexit Mayhem (Ind.)

Theresa May is clinging on to power following the dramatic resignation of Boris Johnson and a bruising 24 hours of conflict with Tory Brexiteers. Mr Johnson became the third minister to quit in the space of a day, accusing Ms May of pursuing a Brexit that would lock Britain into “the status of colony”. In a scathing letter, he said her plans for negotiating with Europe decided at Chequers last week equated to going into battle with “white flags fluttering”. But despite the resignations and the looming threat of a “vote of no confidence”, Ms May survived the day and finished it with a swipe at Mr Johnson, in which she appeared to question his motives for quitting.

After David Davis left his job as Brexit secretary just before midnight on Sunday, speculation grew as to whether there would be a slew of resignations, bringing down the government. He had been followed by fellow Brexit minister Steve Baker, but it was not until 3pm on Monday, when it emerged that Mr Johnson was walking, that Ms May looked at her most precarious. It was claimed that Downing Street leaked news of his resignation before he could write his letter, which the prime minister’ aides guessed would be wounding. When it came it said: “Brexit should be about opportunity and hope. It should be a chance to do things differently, to be more nimble and dynamic, and to maximise the particular advantages of the UK as an open, outward looking global economy. “The dream is dying, suffocated by needles doubt.”

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“Instead of the Star Trek vision of boldly going where no imperial nostalgic society had gone before, this Brexit would not have enough thrust to get the UK out of the gravitational pull of the European Union”

Britain Has Gone To Huge Trouble To Humiliate Itself (Fintan O’Toole)

The best headline about British prime minister Theresa May’s short-lived triumph over the hard Brexiteers last Friday was undoubtedly the one on Pádraig Collins’s report in the Guardian: “Possum rescued after getting head stuck in Nutella jar”. Admittedly, Collins was actually reporting, not from Chequers, but from Brisbane, Australia. Yet the accompanying photograph was the perfect image of what May is trying to do. It showed the furry creature all curled up and immobilised with its head completely encased in a glass jar streaked with visible residues of sticky brown stuff. As a spokesman for the Australian RSPCA explained, the dumb animal “managed to get his head in the jar, but obviously couldn’t get it out”.

The rescuer put “towels around the possum so she could get him out of the jar without getting scratched by his claws”. The story saves me the trouble of thinking up a metaphor. The Brexiteers have their heads stuck in a jar of sticky brown stuff that seemed so sweet and enticing. May’s compromise deal and the White Paper she is still expected to publish this week are the towels wrapped round the Brexiteers’ claws so that their heads can be pulled out of the jar without her premiership getting scratched to death.

The only problem is that David Davis and Boris Johnson, having been successfully extracted, decided to bare their claws again. As any possum or two-year-old child will tell you, sticking your head inside a glass jar is quite a thrill. You get to see the world through a distorting lens that creates a comforting distance between you and reality. You can’t hear unwanted voices raising awkward questions. Brexit has so far been conducted through a glass darkly. It has been seen through glorious fantasies of imperial revival and layers of self-pity about imaginary oppression. What May has been attempting, very late in the day, is to force her more deluded colleagues to get their heads out of the jar and look directly at Brexit.

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The story is the two have been exposed to high dose of novichok. That is not possible; they would have died in instants.

Novichok In Wiltshire Death ‘Highly Likely’ From Batch Used On Skripals (G.)

Britain’s counter-terrorism chief has said it is highly likely the novichok that killed Dawn Sturgess in Wiltshire came from the same batch used four months earlier to attack a former Russian spy and his daughter at their Salisbury home. The Metropolitan police assistant commissioner Neil Basu also said the substance that led to Sturgess and her partner Charlie Rowley falling ill on Saturday was in a vessel or container when the couple came across it. Police have opened a murder investigation after Sturgess died in hospital on Sunday at 8.26pm. Basu said: “It is both shocking and utterly appalling that a British citizen has died having being exposed to a Novichok nerve agent.

“But make no mistake, we’re determined to find out how Dawn and her partner, Charlie Rowley, came into contact with such a deadly substance; and we will do everything we possibly can to bring those responsible to justice.” Basu said Sturgess and Rowley got a high dose of novichok after handling a container containing the nerve agent. It was most likely that the container police are hunting for was linked to the attack four months earlier on the Skripals. [..] “In the four months since the Skripals and Nick Bailey were poisoned, no other people besides Dawn and Charlie have presented with symptoms. Their reaction is so severe it resulted in Dawn’s death and Charlie being critically ill. This means they must have got a high dose. Our hypothesis is they must have handled the container we are now seeking.”

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“The carmaker blamed staffing shortages for the scandal..”

Nissan Says Emissions And Fuel Economy Tests Were Falsified (R.)

Nissan has said it has found evidence of misconduct relating to exhaust emissions and fuel economy measurements for 19 models sold in Japan. The Japanese carmaker said on Monday it had discovered the testing environments for emissions and fuel economy in final vehicle inspections at most of its factories in Japan were not in line with requirements, and inspection reports were based on altered measurements. “A full and comprehensive investigation of the facts … including the causes and background of the misconduct, is under way,” Nissan said. The problems were found during voluntary compliance checks following an improper vehicle inspection scandal last year.

In October, a recall of 1.2m vehicles was triggered after Nissan said uncertified inspectors had signed off on final checks for cars sold in Japan. The carmaker blamed staffing shortages for the scandal, which caused annual operating profit to slide. Nissan said the latest misconduct did not compromise the safety of the affected models, and mileage readings were in line with levels presented in product catalogues. It was in the process of compiling data for the GT-R sports car to confirm it satisfied safety standards. The carmaker said it would take appropriate action to prevent similar problems in future.

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Time to keep promises.

Trump Slams Pfizer After July 1 Drug Price Hikes (R.)

U.S. President Donald Trump on Monday took aim at Pfizer Inc and other U.S. drugmakers after they raised prices on some of their medicines on July 1, saying his administration would act in response. “Pfizer & others should be ashamed that they have raised drug prices for no reason.” Trump wrote in a post on Twitter on Monday. “We will respond!” Health and Human Services Secretary Alex Azar followed up with his own tweet saying that drugmakers who have raised prices have created a tipping point in U.S. drug pricing policy. “Change is coming to drug pricing, whether painful or not for pharmaceutical companies,” Azar wrote. Neither Trump nor Azar detailed what policy changes would be implemented to decrease prices.

Trump had said in May that some drug companies would soon announce “voluntary, massive” cuts in prices, but none have materialized yet. During his presidential campaign, he promised lower U.S. drug costs. Pfizer raised list prices on around 40 medicines earlier this month. Those include Viagra, cholesterol drug Lipitor and arthritis treatment Xeljanz, according to Wells Fargo. List prices do not include rebates and discounts drugmakers may offer. “The list price remains unchanged for the majority of our medicines. Our portfolio includes more than 400 medicines and vaccines. We are modifying prices for approximately 10 percent of these, including some instances where we’re decreasing the price,” Pfizer spokeswoman Sally Beatty told Reuters.

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Enough of this already. Stop it.

Judge Rejects Trump Request For Long-Term Detention Of Immigrant Children (R.)

A U.S. federal judge on Monday rejected the Trump administration’s request to allow long-term detention of illegal immigrant children, a legal setback for President Donald Trump’s push to detain immigrant families taken into custody at the U.S.-Mexico border. Los Angeles U.S. District Court Judge Dolly Gee dismissed as “dubious” and “unconvincing” the U.S. Justice Department’s proposal to modify a 1997 settlement known as the Flores Agreement, which says that children cannot be held in detention for long periods. The government made its request in June after public outcry over its policy of separating children from parents who entered the United States illegally.

A judge in a different case in San Diego ordered the government last month to reunite the families it had separated. The government asserted in its Flores filing that the San Diego ruling would necessitate longer-term detention of children, since that would be the only way to both reunite them with their parents and keep the parents incarcerated during their immigration proceedings. Gee rejected that argument. “Defendants advance a tortured interpretation of the Flores Agreement in an attempt to show that the … injunction permits them to suspend the Flores release and licensure provisions,” she wrote.

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“The solution to the problem will be to resettle these refugees in their countries..” “This can only happen when the conflicts raging in these countries are settled.”

Egypt Rejects Europe’s Intent To Set Up ‘Regional Disembarkation Centres’ (AW)

Egypt’s opposition to establishing camps for screening migrants heading to Europe has made the European Union’s “regional disembarkation centres” proposal seem even more implausible. Cairo’s stand has underscored the deep worries in the Egyptian administration about the country’s increasing refugee responsibilities, analysts said. “This is a burden Egypt shoulders alone, without any support from the international community,” said MP Ghada Agamy, a member of the Egyptian parliament’s Foreign Relations Committee.

Egypt said it would not be able to accommodate “regional disembarkation centres” for migrants trying to cross the Mediterranean to Europe just hours after European leaders reached a controversial migration deal that included refugee centres in North Africa and “controlled centres” in European countries. Egypt, Tunisia, Morocco and Algeria have rejected the idea of regional disembarkation centres. The Egyptian government said establishing refugee camps would violate the Egyptian constitution. Refugees, Egyptian parliament Speaker Ali Abdel A’al said, can live wherever they want in Egypt. “We do not establish camps here,” he said. Egyptian officials are concerned about Cairo’s ability to shoulder refugee-related burdens, analysts said, particularly at a time of economic transition.

[..] Instead of asking economically struggling countries to act as refugee hosts, European leaders need to solve the problems that cause these refugees to leave their countries in the first place, particularly the unrest that has engulfed many countries, Egyptian specialists said. “The solution to the problem will be to resettle these refugees in their countries,” said Youssef al-Metany, a refugee lawyer at local NGO Egyptian Network for International Law. “This can only happen when the conflicts raging in these countries are settled.”

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Zoe Konstantopoulou is the former president of the Hellenic parliament.

If You Love Greece, Help Us Get Rid Of Alexis Tsipras And His Zombie Party (G.)

Last week was the third anniversary of the 2015 referendum, in which the Greek people voted no to more austerity, and no to the violation of democracy by the creditors. The week before Alexis Tsipras, the prime minister who betrayed the brave no of the Greek people, visited London to present his capitulation to the troika of the European commission, the International Monetary Fund and the European Central Bank as an achievement.

Imagine how the British people would view a prime minister elected to end privatisation, and who instead privatised almost every piece of public property; who was elected to serve peace, and who instead facilitated military action against targets in Syria and agreed to sell weapons to countries accused of committing international crimes; who was elected to protect people’s homes, and who stood by while banks seized them, leaving people homeless; who was elected to serve democracy and the independence of his country, and who instead turned it over to the EU, the IMF and the ECB. This is what Tsipras did to the Greek people.

I was a Syriza MP and president of the Greek parliament during the seven months of the first Syriza government. When Tsipras signed the toxic third memorandum in 2015, I fought hard to protect our parliamentary procedures that he and the troika violated. In spite of continuous pressure, I refused to bend our democratic rules and accept more illegal debt for our people. Together with dozens of other Syriza MPs, I voted against the monstrous agreement. Tsipras then dissolved parliament prematurely to get rid of me and the dissenting MPs.

Three years on, his capitulation to the troika has proved the disaster many of us predicted. People’s lives have become unbearable. Youth unemployment has become the norm and an estimated 8% of the population has left in search of work. The minimum salary doesn’t pay the bills, and hundreds of thousands of families go without electricity for extended periods of time. This tragedy began in 2010, but Tsipras’s so-called left government has done everything to prove that it can implement austerity better than its predecessors. It even brags about exceeding the troika’s cruel targets in cuts and taxes.

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“..the landscape as demolition derby..”

When Collapse Goes Kinetic (Kunstler)

I suppose many who think about the prospect of economic collapse imagine something like a Death Star implosion that simply obliterates the normal doings of daily life overnight, leaving everybody in a short, nasty, brutish, Hobbesian free-for-all that dumps the survivors in a replay of the Stone Age — without the consolation of golden ages yet to come that we had the first time around. The collapse of our techno-industrial set-up has actually been going on for some time, insidiously and corrosively, without shattering the scaffolds of seeming normality, just stealthily undermining them. I’d date the onset of it to about 2005 when the world unknowingly crossed an invisible border into the terra incognito of peak oil, by which, of course, I mean oil that societies could no longer afford to pull out of the ground.

It’s one thing to have an abundance of really cheap energy, like oil was in 1955. But when the supply starts to get sketchy, and what’s left can only be obtained at an economic loss, the system goes quietly insane. In the event, popular beliefs and behavior have turned really strange. We do things that are patently self-destructive, rationalize them with doctrines and policies that don’t add up, and then garnish them with wishful fantasies that offer hypothetical happy endings to plot lines that do not really tend in a rosy direction. The techno-narcissistic nonsense reverberating through the echo-chambers of business, media, and government aims to furnish that nostrum called “hope” to a nation that simply won’t admit darker outcomes to the terrible limits facing humanity.

Thus, we have the Tesla saga of electric motoring to save the day for our vaunted way of life (i.e. the landscape as demolition derby), the absurd proposals to colonize distant, arid, frigid, and airless Mars as a cure for ruining this watery blue planet ideally suited for our life-form, and the inane “singularity” narratives that propose to replace grubby material human life with a crypto-gnostic data cloud of never-ending cosmic orgasm. The psychological desperation is obvious. Apparently, there are moments in history when flying up your own butt-hole is the most comforting available option.

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But how do you prove it?

As Trial Opens, Man Dying Of Cancer Blames Monsanto’s Roundup (AFP)

A lawyer for a California groundskeeper dying of cancer took aim at Monsanto Monday as a jury began hearing the lawsuit accusing the chemical giant of ignoring health risks of its top-selling weed killer Roundup. “For the past 40 years, Monsanto has known the primary ingredient in Roundup can produce tumors in lab animals,” attorney Brent Wisner told a California state court. A jury is hearing the case brought by Dewayne Johnson, a 46-year-old father of two. Diagnosed in 2014 with non-Hodgkin’s lymphoma, a cancer that affects white blood cells, Johnson used a Monsanto generic version of Roundup called “Ranger Pro” repeatedly in his job at a school in Benicia, California, after being promoted to groundskeeper in 2012.

In his opening statement, Wisner said Monsanto opted against warning consumers of the risks and that instead “they have fought science” by playing down the suspected link between the chemical herbicide and cancer. “Monsanto has gone out of its way to bully scientists and fight researchers,” he told the jury. The case in California Superior Court is the first trial in which Roundup is said to have caused cancer, a claim repeatedly denied by the chemical company. If Monsanto loses, the case could open the door to hundreds of additional lawsuits against the company recently acquired by German-based pharmaceutical and chemical group Bayer.

Johnson had little warning about the risks of Roundup, his lawyer said. “He was told you could drink it, it was completely non toxic,” Wisner said with his client sitting in the San Francisco courtroom. “You will hear testimony from him that he got drenched in it, repeatedly.” The lawyer said Johnson, who is between rounds of chemotherapy, “is actually on borrowed time, he is not supposed to be alive today.” A key to Johnson’s case will be convincing jurors that Monsanto’s pesticide — whose main ingredient is glyphosate — is responsible for the illness. Wisner contended glyphosate combined with an ingredient intended to help it spread over leaves in a cancer-causing “synergy.”

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Jun 042018
 


Roy Lichtenstein Crying girl 1964

 

This Is Why The Global Collapse Will Be Devastating (von Greyerz)
If Trump Wants To Win A Trade War, The Market Has To Crash – Goldman (ZH)
Deutsche Bank Faces Another Challenge With Fed Stress Test (R.)
The Big Con: How Neoliberals Convinced Us There Wasn’t Enough To Go Around (G.)
Greece Relaxes Capital Controls To Prove Worst Of Turmoil Is Over (G.)
Australia’s Commonwealth Bank Agrees To $530M Fine Over Money-Laundering (AFP)
Merkel’s Comeuppance is Europe’s – and the World’s – Misfortune (Varoufakis)
Dozens Drown After Migrant Boat Sinks Off Tunisia Coast (G.)
Six Children, Three Adult Migrants Drown Off Turkish Coast (AFP)
Bayer To Close Monsanto Takeover, To Retire Target’s Name (R.)
Global Airport Capacity Crisis Amid Passenger Boom (AFP)
Eerie Silence Falls On Shetland Cliffs That Once Echoed Seabirds’ Cries (G.)
Notes on Heartache and Chaos (Jim Kunstler)

 

 

“.. If the above forecast of a major fall in the population as well as a substantial increase in debt is even vaguely accurate, Italy is on its way to the Dark Ages..”

This Is Why The Global Collapse Will Be Devastating (von Greyerz)

“The ECB (European Central Bank) just had its 20th birthday. But there is really nothing to celebrate. The EU is in a total mess and the Euro, which was launched on January 1, 1999, is a failed currency. Every president of the ECB has had to deal with fires that had very little to do with price stability but were more a question of survival. Most of these fires were a lot more serious than the candles in the Euro cake above which Draghi is trying to blow out. During the Frenchman Trichet’s watch, he had to deal with the Great Financial Crisis that started in 2006…

[..] The EU now has major economic and/or political problems in many countries. Italy’s new coalition government is a protest against the EU and Euro. With debt to GDP already the highest in Europe, the new regime will exacerbate the problems. Lower taxes and higher spending will guarantee that. As the chart below shows, Italian debt to GDP is already 140%. By 2050 this is projected to grow to 210%. As interest rates go up, servicing the growing debt will soon absorb all tax revenue. Italy will be bankrupt long before 2050 and default on all its debt.

Between now and 2050, the Italian working age population is forecast to decline by 1/3, from 36 million to 24 million. There will be a lot less people to pay for a much higher debt.

The consequences of massive debt, economic stagnation and population decline will be a much lower GDP, which is expected to decline 35% by 2050.

If the above forecast of a major fall in the population as well as a substantial increase in debt is even vaguely accurate, Italy is on its way to the Dark Ages. I must stress here that I find it so sad that this glorious country is suffering so much already and will suffer a lot more. Personally I love Italy — the people, the food, the architecture, the history and the Giola di Vivere (joie de vivre) of the Italians. It will be so tragic to see all of this disintegrate. Hopefully it will take a long time, although, sadly, the crisis might actually be around the corner.

But Italy is just one of many countries which will collapse in coming years. Spain is in a similar situation and the prime minister has just been kicked out. Greece’s problems have never been resolved and this fine country is also bankrupt and so are the Greek banks. I could go on with Portugal, France, Ireland, the UK and many others. Most of these countries have insoluble problems. It is only a matter of degree and time when the EU/Eurozone house of cards comes down.

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To make tariffs threats credible.

If Trump Wants To Win A Trade War, The Market Has To Crash – Goldman (ZH)

[..] to maintain leverage in negotiations, the Administration must convince trading partners that the US intends to impose trade restrictions. However, and this is the key part, “it is unlikely that the White House can convince trading partners that tariff threats are credible without also convincing financial markets.” In other words, for Trump’s trade negotiations to be successful, and for US trade partners to take a flip-flopping Trump credibly, the market has to crash. Incidentally, this makes sense when one considers that when Trump officially launched the trade war with China in early April, the president explicitly warned that stocks “may take a hit”, and told investors to prepare for “pain” in the market, a statement which promptly became a self-fulfilling prophecy and sent the market sharply lower.

The other consequence is that markets may tumble not as an effect, but as a cause of the trade war: after all Trump needs to be taken seriously, and that could mean another slide in the S&P. Goldman agrees as much: “… we do not expect trade policy risks to fade anytime soon. While we think that financial market sentiment around trade issues is unlikely to become as negative again as it was in early April, when the President floated the possibility of tariffs on another $100 billion in imports from China, we do not expect markets to become entirely comfortable with the outlook for trade policy, either.”

The punchline: “The challenge that the White House faces is that, to maintain leverage in negotiations, trading partners must believe that the US intends to follow through with proposed actions like tariffs. However, repeated threats begin to lose credibility unless they are followed up with action.” In short, just as China said earlier, the US can’t have its cake and eat it too: Trump can’t have trade war, or the threat thereof, and record high stocks.

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It’s going to be public. But can the Fed afford to damage Deutsche?

Deutsche Bank Faces Another Challenge With Fed Stress Test (R.)

Deutsche Bank AG will face another challenge this month when the Federal Reserve publishes the results of a “stress test” on the bulk of its U.S. operations for the first time. Germany’s largest lender is already facing challenges with U.S. bank regulators and in financial markets, with its stock price falling to historic lows on Thursday. Standard & Poor’s downgraded its credit rating to BBB+ from A- on Friday. The downgrade came after reports earlier in the week that the Fed designated one of Deutsche Bank’s U.S. businesses as “troubled” last year, something a person with knowledge of the matter confirmed to Reuters on Friday. The Fed’s stress test results, expected to be released sometime this month, will be the next big public barometer of Deutsche Bank’s financial strength.

It could be difficult for a bank with a subsidiary on the “troubled” list to pass the scenarios, according to a person familiar with the tests who was not authorized to speak publicly. That is because the capital, liquidity and risk management failures that would land a bank on the list are similar to those that lead banks to flunk the stress test, the person said. The Fed has been examining how the biggest U.S. banks would handle a range of adverse economic and market scenarios since 2009, requiring many to shore up their capital buffers and risk management controls. But this is the first year it will publicly release results of six foreign lenders, including Deutsche Bank, after requiring them to create consolidated U.S. holding companies with ring-fenced capital. The Fed tested those new entities last year in a trial run, the results of which are confidential.

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Austerity eats people.

The Big Con: How Neoliberals Convinced Us There Wasn’t Enough To Go Around (G.)

Australia just experienced one of the biggest mining booms in world history. But even at the peak of that boom, there was no talk of the wonderful opportunity we finally had to invest in world-class mental health or domestic violence crisis services. Nor was there much talk from either major party about how the wealth of the mining boom gave us a once-in-a-generation opportunity to invest in remote Indigenous communities. Nope, the peak of the mining boom was not the time to help those who had missed out in decades past, but the Howard government thought it was a great time to introduce permanent tax cuts for high-income earners. These, of course, are the tax cuts that caused the budget deficits we have today.

Millions of tonnes of explosives were used during the mining boom to build more than 100 new mines, but it wasn’t just prime farmland that was blasted away in the boom, it was access to the middle class. At the same time that Gina Rinehart was becoming the world’s richest woman on the back of rising iron-ore prices, those on the minimum wage were falling further and further behind their fellow Australians. Australia isn’t poor; it is rich beyond the imagining of anyone living in the 1970s or ’80s. But so much of that new wealth has been vacuumed up by a few, and so little of that new wealth has been paid in tax, that the public has been convinced that ours is a country struggling to pay its bills.

Convincing Australians that our nation is poor and that our governments “can’t afford” to provide the level of services they provided in the past has not just helped to lower our expectations of our public services and infrastructure, it has helped to lower our expectations of democracy itself. A public school in Sydney has had to ban kids from running in the playground because it was so overcrowded. Trains have become so crowded at peak hours that many people, especially the frail and the disabled, are reluctant to use them.

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Relax capital controls when nobody has any money left to get out of the bank.

Greece Relaxes Capital Controls To Prove Worst Of Turmoil Is Over (G.)

Greece is to take a substantial step towards easing capital controls – restrictions associated with the worst days of economic crisis – as it prepares to exit its current bailout programme. Signalling that confidence is gradually returning to the country’s banking system, the leftist-led government has doubled the amount depositors will be able to withdraw from their accounts as of Monday. “As is usually the case with the economy, this is about psychology,” said a senior official at the Bank of Greece. “The relaxation is as much about boosting confidence among investors and savers as showing banks can now afford to work under normal conditions.” Barely three months before its third international bailout programme expires, the country once at the epicentre of the euro crisis is keen to prove its financial turmoil is over.

Under the new rules, the limit on cash withdrawals from local banks will be raised from €2,300 to €5,000 per month. Business transactions will also be facilitated, with cash transfers abroad being doubled to €40,000 a month. The Greek finance ministry said it had similarly decided to increase the amount depositors can take abroad, in euros or foreign currency, from €2,300 to €3,000 per trip. From 1 July, banks will be allowed to accept customer orders for money transfers overseas for up to €4,000 bi-monthly. In a statement the finance ministry said the aim was to fully lift restrictions “as soon as possible” while ensuring macroeconomic and financial stability.

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“serious and systemic non-compliance” of anti-money laundering laws more than 53,000 times…”

Australia’s Commonwealth Bank Agrees To $530M Fine Over Money-Laundering (AFP)

The Commonwealth Bank Monday agreed to the largest civil penalty in Australian corporate history to settle claims it breached anti-money laundering and counter-terrorism financing laws. The Aus$700 million (US$530 million) fine – which is subject to court approval – comes after mediation between the nation’s biggest lender and the country’s financial intelligence agency AUSTRAC. It follows the bank being taken to court last August for “serious and systemic non-compliance” of anti-money laundering laws more than 53,000 times, with AUSTRAC filing 100 further claims in December. CBA was also accused of failing to adequately monitor suspected terrorist financiers.

“While not deliberate, we fully appreciate the seriousness of the mistakes we made,” said CBA chief executive Matt Comyn in a statement. “Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologise to the community for letting them down.” The bank, which in the fallout has replaced senior leadership overseeing financial crimes and pumped millions of dollars into improving its systems, also agreed to pay AUSTRAC’s Aus$2.5 million legal fees.

After slumping more than 10 percent over the past month, during which it admitted losing financial records for almost 20 million customers, CBA’s share price rallied 1.44 percent on the settlement to close at Aus$69.69. The scandal is only the latest issue to damage the reputation of Australian banks, which have been under intense scrutiny amid allegations of dodgy financial advice, life insurance and mortgage fraud, and rigging benchmark interest rates. Last week, ANZ Bank was accused of “cartel arrangements” over a multi-billion-dollar capital raising, along with its advisers Deutsche Bank and Citigroup. They face potential criminal charges.

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Germany blows up the EU in slow motion.

Merkel’s Comeuppance is Europe’s – and the World’s – Misfortune (Varoufakis)

The causal link between Germany’s two political headaches has an economic basis. Trump understands one thing well: Germany and the eurozone are at his mercy, owing to their increasing dependence on large net exports to the US and the rest of the world. And this dependence has grown inexorably as a result of the austerity policies that were first tried out in Greece and then implemented in Italy and elsewhere.

To see the link, recall the “fiscal compact” to eliminate structural budget deficits that Germany insisted upon as a condition of agreeing to bailout loans for distressed governments and banks. Then note that this pan-European austerity drive took place against the backdrop of massive excess savings over investment. Finally, note that large excess savings and balanced government budgets necessarily mean large trade surpluses – and thus the increasing reliance of Germany, and Europe, on massive net exports to the United States and Asia. In other words, the same incompetent policies that gave rise to the xenophobic, anti-Europeanist Italian government also bolstered Trump’s power over Merkel.

Europe’s inability to get its own house in order has engendered a new Italian majority that is planning to expel a half-million migrants, blowing fresh winds into the sails of militant racists in Hungary, Poland, France, Britain, the Netherlands, and, of course, Germany itself. Meanwhile, with Europe too enfeebled to tame Trump, the US will aim to force China to deregulate its financial and tech sectors. If it succeeds, at least 15% of China’s national income will gush out of the country, adding to the deflationary forces that are breeding political monsters in Europe and in the US.

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And still no UN emergency meeting. The shame will not wash away.

Dozens Drown After Migrant Boat Sinks Off Tunisia Coast (G.)

At least 47 people died and 68 others were rescued after their migrant boat sank off Tunisia’s southern coast, according to the country’s defence ministry. Authorities said about 180 people, of both Tunisian and other nationalities, were hemmed in onboard the vessel. A survivor said the captain had abandoned the boat after it hit trouble in order to escape arrest. “I survived by clinging to wood for nine hours,” he told Reuters from a hospital in the city of Sfax where people were arriving in search of relatives and friends. Flavio Di Giacomo, a spokesman for the International Organisation for Migration (IOM), warned on Twitter that the final number of missing was still not known.

Tunisia has recently seen growing use of its coasts by human traffickers ferrying migrants from Africa to Europe, as Libyan authorities have cracked down on similar activity on their own shores. Tunisia has been suffering from an economic crisis since the toppling of Zine al-Abidine Ben Ali as president in 2011, which led to rocketing unemployment and inflation. In a separate incident, nine people including six children were killed off the coast of Turkey on Sunday after their speedboat sank, the Turkish coast guard said. By 30 May, the IOM had recorded 32,080 people as having reached Europe by boat in 2018 and around 660 as having died or gone missing in the attempt.

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And there’s always more.

Six Children, Three Adult Migrants Drown Off Turkish Coast (AFP)

Nine migrants, including six children, seeking to head to Europe in a speedboat drowned on Sunday when the vessel sank off Turkey’s Mediterranean coast, state media reports said. The boat hit trouble off the Demre district of Turkey’s Mediterranean Antalya province, a popular holiday spot, the state-run Anadolu news agency said. Five were rescued while one person was still missing, it added. Two adults, one woman and six children lost their lives, it said. The Dogan news agency said that they were seeking to head illegally to Europe but their planned route was not immediately clear. The nearest EU territory is the small Greek island of Kastellorizo to the west which lies off the Turkish resort of Kas.

The nationalities of those on board have yet to be made clear. Over a million people, many fleeing the war in Syria, crossed to European Union member Greece from Turkey in 2015 after the onset of the bloc’s worst migration crisis since World War II. [..] According to the International Organisation for Migration (IOM), 10,948 people crossed to Greece this year up to May 30, sharply more than in the same period in 2017. Thirty-five people lost their lives using this route so far this year, according to the IOM. As well as migrants from countries such as Syria, Eritrea, Iraq and Afghanistan, the route has been used by Turkish citizens fleeing the crackdown that followed the 2016 failed coup.

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Bayer wants to get rid of the bad name Monsanto has. Let’s give Bayer an even worse name.

Bayer To Close Monsanto Takeover, To Retire Target’s Name (R.)

Germany’s Bayer will wrap up the $62.5 billion takeover of Monsanto on Thursday this week and also retire the name of the U.S. seeds maker, it said on Monday. The German drugmaker had received all required approvals from regulatory authorities, it said in a statement. “Bayer will remain the company name. Monsanto will no longer be a company name. The acquired products will retain their brand names and become part of the Bayer portfolio,” it said. Bayer launched a 6 billion euro ($7 billion) rights issue on Sunday, a cornerstone of the financing package for the deal.

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Yeah. We need more air travel. Without counting the externalities.

Global Airport Capacity Crisis Amid Passenger Boom (AFP)

Governments need to urgently tackle a capacity crisis facing airports as demand for international travel grows, but they should be cautious about private sector involvement, airline industry group IATA warned Monday. With passenger levels projected to nearly double to 7.8 billion by 2036, infrastructure such as airports and air traffic control systems were not keeping pace, the International Air Transport Association said. Major airports have sought to address the crisis by managing slots — giving airlines specific operating rights at particular times. But there was still a need for new airports, IATA chief Alexandre de Juniac said at the body’s annual meeting in Sydney.

“We are in a capacity crisis. And we don’t see the required airport infrastructure investment to solve it,” he said, adding that cash-strapped governments were increasingly turning to private firms to increase airport capacity. But he cautioned against privatised airports, warning that they have “not lived up to airline expectations” with many carriers having “far too many bitter experiences”. [..] IATA Monday projected global air passenger traffic to rise by 6.5 percent this year to 4.36 billion, after increases of 7.0 and 7.3 percent in 2016 and 2017 respectively.

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Not sure it’s wise to blame this on climate change. The extinction stories come too fast. How about blaming Monsanto and booming air travel?

Eerie Silence Falls On Shetland Cliffs That Once Echoed Seabirds’ Cries (G.)

Sumburgh Head lies at the southern tip of mainland Shetland. This dramatic 100-metre-high rocky spur, crowned with a lighthouse built by Robert Louis Stevenson’s grandfather, has a reputation for being one of the biggest and most accessible seabird colonies in Britain. Thousands of puffins, guillemots, razorbills, kittiwakes and fulmars gather there every spring to breed, covering almost every square inch of rock or grass with teeming, screeching birds and their young. Or at least they used to – for this year Sumburgh Head is a quiet and largely deserted place. Where seabirds once swooped and cried in their thousands, only a handful of birds wheel round the cliffs.

The silence is uncanny – the result of a crash in seabird numbers that has been in progress for several years but which has now reached an unprecedented, catastrophic low. One of the nation’s most important conservation centres has been denuded of its wildlife, a victim – according to scientists – of climate change, which has disrupted food chains in the North Sea and North Atlantic and left many seabirds without a source of sustenance. The result has been an apocalyptic drop in numbers of Arctic terns, kittiwakes and many other birds. “In the past, Sumburgh Head was brimming with birds, and the air was thick with the smell of guano. The place was covered with colonies of puffins, kittiwakes, fulmars, and guillemots,” said Helen Moncrieff, manager of RSPB Scotland’s office in Shetland.

“There were thousands and thousands of birds and visitors were guaranteed a sight of puffins. Today they have to be very patient. At the same time, guillemots have halved in numbers. It is utterly tragic.” This grim description is backed by figures that reveal the staggering decreases in seabird numbers in Shetland, the most northerly part of the British Isles. In 2000, there were more than 33,000 puffins on the island in early spring. That figure dropped to 570 last year and there are no signs of any recovery this year, although it is still early in the season. Similarly, Shetland’s kittiwake population plummeted from over 55,000 in 1981 to 5,000 in 2011, and observers believe those numbers have declined even further in the past few years.

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Absolutely wonderful from Jim.

Notes on Heartache and Chaos (Jim Kunstler)

I was interviewing a couple of homesteaders on an island north of Seattle at twilight last night when they noticed that the twelve-year-old family dog, name of Lacy, had not come home for dinner as ever and always at that hour. A search ensued and they soon found her dead in the meadow a hundred feet behind the house with two big puncture wounds in her body. Nobody had heard a gunshot. We’d just been talking inside and a nearby window was open. They suspect the dog met up with a black-tailed deer buck out there and was gored to death. We hadn’t heard a yelp, or anything. A week ago, an eagle got one of their geese, and some land-based monster got its companion just the other day.

Nature is what it is, of course, and it’s natural for human beings to think of its random operations as malevolent. That aspersion probably inclines us to think of ourselves as beings apart from nature (some of us, anyway). We at least recognize the tragic side of this condition we’re immersed in, and would wish that encounters between its denizens might end differently — like maybe that two sovereign creatures meeting up by sheer chance on a mild spring evening would exchange pleasantries, ask what each was up to, and go on their ways.

Malevolent nature visited me the night before, back home in upstate New York. Something slit the screened window of my henhouse, got inside, and slaughtered two of my birds. Big Red was missing altogether except for a drift of orange feathers. I found Little Blue just outside in a drift of her own feathers, half-eaten. I suspect a raccoon got them, slitting the window screen cleverly with its dexterous hand-like paws — yes, so much like our own clever hands. (In classic after-the-fact human style, I fortified the window with steel hardware cloth the next day.)

It’s the time of year when the wild critters of field and woodland are birthing their young and anxious to procure food for them. Who can blame them for that. Chicken is an excellent dish. I eat it myself, though never my own hens. I actually rescued Little Blue from the clutches of a red-tailed hawk last year as the hawk struggled to get airborne with her and let go as I screeched at it. Blue recovered from the talon punctures and had a good year — one good year on this earth with all its menace, when it is not busy being beautiful.

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May 072018
 


John French Sloan Sunday, Women Drying Their Hair 1912

 

Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)
Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)
WTF Just Happened to Argentina’s Peso? (Fernet)
Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)
In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)
Mueller Investigation is In Jeopardy (ZH)
Why The Justice Department Defies Congress (WSJ)
Merkel Allies Reject Idea Of European Finance Minister (R.)
Weak Foreign Demand Pushes Down German Industrial Orders (R.)
A Million More UK Children In Poverty Than In 2010 (G.)
Air France Survival In Doubt Over Strikes (BBC)
Greece’s Incredibly Shrinking Middle Class (K.)
Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

 

 

Argentina, Turkey, Indonesia. Brazil in a bit. The list will grow. As the dollar rises, emerging countries need more dollars to pay their debt, pushing the dollar up even more. And investors pull their money out of these countries. Vicious circles everywhere.

Behold The Sudden Stop. Risk of Emerging Markets Collapse (Lacalle)

Argentina even issued a one-hundred-year bond at a spectacularly low rate (8.25%) with a very high demand, more than 3.5 times bid-to-cover. That $ 2.5 billion issuance seemed crazy. A one-hundred-year bond from a nation that has defaulted at least six times in the previous hundred years! Worse of all, those funds were used to finance current expenditure in local currency. The extraordinary demand for bonds and other assets in Argentina or Turkey was justified by expectations of reforms and a change that, as time passed, simply did not happen. Countries failed to control inflation, deliver lower than expected growth and imbalances soared just as the U.S. started to see some inflation, rates started to rise.

Suddenly, the yield spread between the U.S. 10-year bond and emerging markets debt was unattractive, and liquidity dried up faster than the speed of light even with a modest decrease of the Federal Reserve balance sheet. Liquidity disappears because of extremely leveraged bets on one single trade – a weaker dollar, higher global growth- unwind. However, another problem exacerbates the reaction. An aggressive increase in the monetary base by the Argentine central bank made inflation rise above 23%. With an increase in the monetary base of 28% per year, and seeking to finance excess spending by printing money and raising debt to “buy time”, the seeds of the disaster were planted. Excess liquidity and the US dollar weakness stopped. Local currencies and external funding face risk of collapse.

The Sudden Stop. When most of the emerging economies entered into twin deficits -trade and fiscal deficits- and consensus praised “synchronized growth”, they were sealing their destiny: When the US dollar regains some strength, US rates rise due to an increase in inflation, the flow of cheap money to emerging markets is reversed. Synchronized indebted growth created the risk of synchronized collapse.

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Is this really the end of cheap debt? It’s dangerous too: if Turkey gets into real trouble, Erdogan will seek a scapegoat.

Dollar Surge Bringing Emerging Market Rate Cut Cycle To A Halt (R.)

A resurgent dollar and higher borrowing costs are smashing through Argentina and Turkey’s currencies like a wrecking ball and raising the likelihood more broadly that emerging markets’ three-year long interest rate cutting cycle is at an end. Emerging markets came into the year flying, riding on the back of a healthy global economy and rising commodity prices alongside tame inflation and a weak dollar. It looked more than likely that a wave of rate cuts would keep rolling, allowing a bond rally to continue. From Brazil and Russia to Armenia and Zambia, developing countries, big and small, have been on a rate cutting spree. With hundreds of rate cuts since Jan. 2015, the average emerging market borrowing cost fell under 6% earlier this year from over 7% at the time.

Fund managers’ profits too have soared in this time, with emerging local currency debt among the best performing asset classes, with dollar-based returns of 14% last year. Even in the first quarter of 2018, returns were a buoyant 4.3% Now though, almost exactly five years since the so-called taper tantrum shook an emerging market rally, these gains appear to be on the cusp of reversal. Argentina has jacked up its interest rates to 40% in response to a rout in its peso currency, while Turkey was also forced into a rate rise as its lira hit record lows against the dollar. Indonesia, after heavy interventions to stem rupiah bleeding, has also said it could resort to policy tightening.

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Déja vu.

WTF Just Happened to Argentina’s Peso? (Fernet)

If you’re watching Argentina’s economy, it hasn’t been a banner week. This week, Argentina had to raise its key interest rate three times to keep the Argentine peso from losing even more value against the dollar. Three interest rate hikes in one week is a lot – it implies the first two didn’t work, and the Central Bank is not in control. The interest rate currently sits at 40%. That means the Central Bank pays 40% per year on peso-denominated debt, which can imply that they expect the value of the peso to fall somewhere in the ballpark of 40% over a one year period. A year ago in April, the rate was closer to 26%. Yikes. And the exchange rate kicked off the week at around 20.5 ARS/USD. It jumped almost to 23 ARS/USD, and is currently hovering around 21.8 ARS/USD.

[..] When the US dollar increases in value, emerging market currencies decrease, meaning in Argentina’s case it will take increasingly more pesos to buy dollars. This then amplifies the risk that emerging markets will be unable to make payments on dollar denominated debt, causing investors to sell their emerging market investments, further amplifying the currency stress. The timing specifically in the case of Argentina is uncannily bad. Until this week, non-residents investing in Argentina were exempt from paying the equivalent of capital gains taxes across the board, including local-currency peso-denominated central bank notes, or LEBACs. This Tuesday, this exemption on LEBACs officially no longer applied, meaning foreign holders of these notes now incur a tax equal to 5% on profits.

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“Increased American consumption born of an overstimulated economy..”

Remedies Trump Prescribes For Trade Problems Harm US (Xinhua)

Remedies the Trump administration is prescribing for U.S. trade problems won’t work, and forays in trade disputes with China will harm the United States, a veteran China expert with decades of experience in bilateral relations said [in Silicon Valley] on Saturday. “I believe that Washington has misdiagnosed our trade problems, that its remedies for them won’t work, and that what it is doing will harm the United States and other countries as much or more than it does China,” said Chas Freeman, senior fellow at Brown University’s Watson Institute, when addressing the annual conference of a prominent Chinese American group, the Committee of 100 (C100).

“The United States and China are each too globalized and dynamic to contain, too big and influential to ignore, and too successful and entangled with each other to divorce without bankrupting ourselves and all associated with us,” Freeman, also former U.S. assistant secretary of defense, said in an opening keynote speech. Pointing out that there are many reasons for the United States to seek cooperative relations with a rising China, Freeman added that the Trump administration has decided “to pick a fight — to confront China both militarily and economically.” “The fact that we Americans consume more than we save means that we import more than we produce. That creates an overall trade deficit. Ironically, the Trump administration has just taken steps guaranteed to increase this deficit,” he said.

“It has reduced tax revenues and boosted deficit spending, mostly on military research, development, and procurement. These actions take the national savings rate even lower while inflating domestic demand for goods and services. They cause imports to surge,” he added. “Increased American consumption born of an overstimulated economy explains why China’s trade surplus with the United States is again rising even as its surplus with the rest of the world falls,” he said. “Unless Americans boost our national savings rate by hiking taxes or cut our consumption by falling into recession, our overall trade deficit is sure to bloat,” he said.

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The Market Will Plummet if Global Central Banks Pull Plug

“..the reality is when a financial crisis happens, banks close their doors to depositors..”

In the Coming Crash We’ll be Falling from a Higher Height – Nomi Prins (USAW)

Join Greg Hunter as he goes One-on-One with two-time, best-selling author Nomi Prins, who just released “Collusion: How Central Bankers Rigged The World.” Will the next crash be worse than the last one? Prins says, “Yes, it will because we will be falling from a higher height. The idea here is you are sinking on the Titanic as opposed to sinking on a canoe somewhere. All of this artificial conjured money is puffing up the system, along with money that is borrowed cheaply is also puffing up the system and creating asset bubbles everywhere. So, when things pop, there is more leakage to happen. The air in all these bubbles has created larger bubbles than we have had before.”

How does the common man protect himself? Prins says, “They have to own things, and by that I mean real assets, hard assets like silver and gold. That’s not as liquid, so taking cash out of banks and sort of keeping it in real things and keeping it on site . . . keeping cash physically. You need to extract it from the system because the reality is when a financial crisis happens, banks close their doors to depositors. . . . Also, basically try to decrease your debt.”

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Did Flynn plead guilty because he couldn’t pay the legal bills?

How much longer until Mueller is whistled back by his superiors? Can Rosenstein keep silent as one judge after another slams the Special Counsel?

Mueller Investigation In Jeopardy (ZH)

A funny thing happened on the way to impeaching Donald Trump. After two-years of investigations by a highly politicized FBI and a Special Counsel stacked with Clinton supporters, Robert Mueller’s probe has resulted in the resignation of National Security Advisor Michael Flynn, the arrests of Paul Manafort and Rick Gates, and the indictment of 13 Russian nationals on allegations of hacking the 2016 election – along with the raid of Trump’s personal attorney, Michael Cohen.

The nation has been on the edge of insanity waiting for that much-promised and long awaited link tying President Trump to Vladimir Putin we were all promised, only to find out that there is no link, the deck appears to have been heavily stacked against Donald Trump by bad actors operating at the highest levels of the FBI, DOJ, Obama admin and Clinton camp, and the real Russian conspiracy in the 2016 election was the participation of high level Kremlin sources used in the anti-Trump dossier that Hillary Clinton paid for. Now, as the out-of-control investigation moves from the headlines and into court, the all-encompassing “witch hunt,” as Trump calls it, may be in serious jeopardy.

As of Friday, three separate Judges have rendered harsh setbacks to the Mueller investigation – demanding, if you can believe it, facts and evidence to back up the Special Counsel’s claims – in unredacted format as one Judge demands, or risk having the cases tossed out altogether. [..] And as we noted yesterday, some have suggested that Flynn pleaded guilty due to the fact that federal investigations tend to bankrupt people who aren’t filthy rich – as was the case with former Trump campaign aide Michael Caputo, who told the Senate Intelligence Committee “God damn you to hell” after having to sell his home due to mounting legal fees over the inquiry. “Your investigation and others into the allegations of Trump campaign collusion with Russia are costing my family a great deal of money — more than $125,000 — and making a visceral impact on my children.”

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Quite strong for the Wall Street Journal: “Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust.”

Why The Justice Department Defies Congress (WSJ)

Until this week, Deputy Attorney General Rod Rosenstein and fellow institutionalists at the department had fought Congress’s demands for information with the tools of banal bureaucracy – resist, delay, ignore, negotiate. But Mr. Rosenstein took things to a new level on Tuesday, accusing House Republicans of “threats,” extortion and wanting to “rummage” through department documents. A Wednesday New York Times story then dropped a new slur, claiming “Mr. Rosenstein and top FBI officials have come to suspect that some lawmakers were using their oversight authority to gain intelligence about [Special Counsel Bob Mueller’s ] investigation so that it could be shared with the White House.”

Mr. Rosenstein isn’t worried about rummaging. That’s a diversion from the department’s opposite concern: that it is being asked to comply with very specific – potentially very revealing – demands. Two House sources confirm for me that the Justice Department was recently delivered first a classified House Intelligence Committee letter and then a subpoena (which arrived Monday) demanding documents related to a new line of inquiry about the Federal Bureau of Investigation’s Trump investigation. The deadline for complying with the subpoena was Thursday afternoon, and the Justice Department flouted it. As the White House is undoubtedly monitoring any new congressional demands for information, it is likely that President Trump’s tweet Wednesday ripping the department for not turning over documents was in part a reference to this latest demand.

Republicans also demand the FBI drop any objections to declassifying a section of the recently issued House Intelligence Committee report that deals with a briefing former FBI Director James Comey provided about former national security adviser Mike Flynn. House Republicans say Mr. Comey told them his own agents did not believe Mr. Flynn lied to them. On his book tour, Mr. Comey has said that isn’t true. Someone isn’t being honest. Is the FBI more interested in protecting the reputations of two former directors (the other being Mr. Mueller, who dragged Mr. Flynn into court on lying grounds) than in telling the public the truth?

We can’t know the precise motivations behind the Justice Department’s and FBI’s refusal to make key information public. But whether it is out of real concern over declassification or a desire to protect the institutions from embarrassment, the current leadership is about 20 steps behind this narrative. Mr. Comey, Peter Strzok, Lisa Page, Andrew McCabe – they have already shattered the FBI’s reputation and public trust. There is nothing to be gained from pretending this is business as usual, or attempting to stem continued fallout by hiding further details.

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And debt pooling. So much for closer integration.

Merkel Allies Reject Idea Of European Finance Minister (R.)

Leading politicians from Chancellor Angela Merkel’s conservatives want to pass a resolution at a meeting this week to reject any pooling of debts in Europe and any fiscal policy without national parliamentary controls, Handelsblatt reported. The daily business newspaper, citing sources from the conservative bloc’s parliamentary leadership, said the senior politicians also oppose European Commission plans for a European finance minister. The group includes the parliamentary leaders of the conservative bloc in the Bundestag, the European Parliament as well as from Germany’s 16 states, Handelsblatt reported.

Merkel will join them on Monday for a meeting in Frankfurt. The report highlights the resistance among Merkel’s conservatives to any euro zone reforms that could see more German taxpayers’ money being used to fund other member states. The conservatives are nervous about European Union reform after bleeding support to the anti-euro Alternative for Germany (AfD) party at national elections last September. Last month, Merkel called for a spirit of compromise on reforming the euro zone at a meeting with French President Emmanuel Macron, who pressed for solidarity among members of the currency union.

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No smooth sailing.

Weak Foreign Demand Pushes Down German Industrial Orders (R.)

German industrial orders unexpectedly dropped for the third month running in March due to weak foreign demand, data showed on Monday, suggesting factories in Europe’s largest economy are shifting into a lower gear. Contracts for German goods fell 0.9% after a downwardly revised drop of 0.2% the previous month, data from the Federal Statistics Office showed. Analysts polled by Reuters had on average predicted a 0.5% rise in orders. “The economy is slowing down, that’s the sure take-away from today’s industrial orders data,” VP Bank Group analyst Thomas Gitzel said, adding that some growth forecasts would soon have to be revised down.

The government last month cut its 2018 growth forecast to 2.3% from 2.4% and expressed concern about international trade tensions. “The debate about tariffs has probably created great uncertainty in Europe’s export-driven industry,” Gitzel added. As Europe’s biggest exporter to the United States, Germany is desperate to avoid an EU trade war with the United States. In the run-up to a June 1 deadline for U.S. President Donald Trump to decide on whether to impose steel and aluminum tariffs on the EU, Berlin is urging its European partners to be flexible and pursue a broad deal that benefits both sides. The drop in industrial orders was led by foreign orders which fell by 2.6%, while domestic orders rose 1.5%, the data showed.

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But the government says there a million LESS people in poverty.

A Million More UK Children In Poverty Than In 2010 (G.)

The number of children growing up in poverty in working households will be a million higher than in 2010, a new study has found. Research for the TUC estimates that 3.1 million children with working parents will be below the official breadline this year. About 600,000 children with working parents have been pushed into poverty because of the government’s benefit cuts and public sector pay restrictions, according to the report by the consultancy Landman Economics. The east Midlands will have the biggest increase in child poverty among working families, followed by the West Midlands and Northern Ireland, the research found. Frances O’Grady, the TUC general secretary, said child poverty in working households had shot up since 2010.

“Years of falling incomes and benefit cuts have had a terrible human cost. Millions of parents are struggling to feed and clothe their kids,” she said. “The government is in denial about how many working families just can’t make ends meet. We need ministers to boost the minimum wage now, and use the social security system to make sure no child grows up in a family struggling to get by.” [..] A government spokeswoman said it did not recognise the TUC’s figures. She said: “The reality is there are now 1 million fewer people living in absolute poverty compared with 2010, including 300,000 fewer children. “We want every child to get the very best chances in life. We know the best route out of poverty is through work, which is why it’s really encouraging that both the employment rate and household incomes have never been higher.”

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Shares down 13% this morning.

Air France Survival In Doubt Over Strikes (BBC)

The survival of strike-hit Air France is in the balance, according to the country’s economy minister. Bruno Le Maire’s warning that Air France could “disappear” comes as staff begin another round of industrial action over a pay dispute. Despite the French state owning 14.3% of the Air France-KLM parent group, the loss-making airline would not be bailed out, he said. On Friday Air France-KLM’s chief executive quit over the crisis. Air France-KLM is one of Europe’s biggest airlines, but has seen a series of strikes in recent weeks. Monday’s walk-out is the 14th day of action, as staff press for a 5.1% salary increase this year. The government’s response is seen as a test of labour reforms launched by French President Emmanuel Macron. There have also been strikes at the state-owned SNCF rail company.

On Sunday, Mr Le Maire told French news channel BFM: “I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes. “The survival of Air France is in the balance,” he said, adding that the state would not serve as a backstop for the airline’s debts. “Air France will disappear if it does not make the necessary efforts to be competitive,” he warned. Despite the strike, the airline insisted that it would be able to maintain 99% of long-haul flights on Monday, 80% of medium-haul services and 87% of short-haul flights. On Friday, Jean-Marc Janaillac, chief executive of parent company Air France-KLM, resigned after staff rejected a final pay offer from him, which would have raised wages by 7% over four years.

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That’s about 1 in 20: “From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more..”

Greece’s Incredibly Shrinking Middle Class (K.)

For salaried workers to bring home 1,500 euros per month net on a 12-month basis, or 18,000 euros per year not including holiday bonuses, their employers need to pay 2,610 euros a month or over 31,300 euros a year, given Greece’s particularly high taxes and social security contributions. For a self-employed professional to pocket the same amount , about 18,000 euros per annum, he or she would have to earn at least 50,000 euros on a yearly basis so as to cover professional expenses, taxes and contributions. As for new pensioners, a net income of 1,500 euros/month or 18,000 euros/year can only be achieved if they worked without pause for 40 years at an average monthly salary of 2,400 euros over that entire period.

The framework that has emerged in the last three years with tax and contribution hikes, in particular, as well as the new way pensions are being calculated are drastically reducing the chances of any worker or pensioner to have a decent monthly salary or pension. Official figures already highlight the shrinking of the so-called middle class: From the 8.8 million individual taxpayers who submitted a declaration last year, no more than 450,000 showed a net annual income of 18,000 euros or more, down from 840,000 in 2010. The shrinking trend of the middle class is expected to continue both for taxation and for practical reasons.

An employer will face the same cost hiring five or six part-timers offering a total of 20-24 working hours per day as in hiring one full-timer offering eight hours of work. Particularly in sectors where there is no need for highly skilled workers, such as retail commerce or tourism, the trend to replace well paid positions has already become dominant. Among the self-employed, overtaxation is this year anticipated to reduce the number of those declaring a taxable income of over 30,000 euros per year. As for pensioners, already the first pensions issues on the basis of the new system of calculation prove that the chances for anyone to secure a benefit of 1,500 euros after retirement are next to zero, and will shrink further in the years to come.

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Curious. Bonaire and St. Eustatius are part of the Dutch Kingdom. Conoco can’t move without their permission.

Conoco Moves To Take Over Venezuelan PDVSA’s Caribbean Assets (R.)

U.S. oil firm ConocoPhillips has moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award over a decade-oil nationalization of its projects in the South American country, according to two sources familiar with its actions. The U.S. firm targeted Caribbean facilities on the islands of Bonaire and St. Eustatius that play critical roles in PDVSA’s oil exports, the country’s main source of revenue. PDVSA relies on the terminals to process, store and blend its oil. “We will work with the community and local authorities to address issues that may arise as a result of enforcement actions,” ConocoPhillips said in a statement to Reuters.

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May 012018
 
 May 1, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , ,  


Théodore Géricault Prancing Grey Horse 1812

 

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)
The Global Debt Addiction: China’s Out of Control Debt (GT)
Governments Are Nothing Like Households (Coppola)
St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)
US Extends Tariff Exemptions For European Union And Other Allies (CNBC)
Brexit Talks At Risk Of Collapse Over Irish Border (G.)
South Korea President Says Trump Deserves Nobel Peace Prize (R.)
Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)
First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)
That Collapse You Ordered…? (Kunstler)
Are Our Online Lives About To Become ‘Private’ Again? (BBC)
Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

 

 

“..spending increased at three times the pace of revenue growth..”

The US Just Borrowed $488 Billion, a Record High for the First Quarter (BBG)

U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter. “It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said in a Bloomberg TV interview on Monday. “But I think the market can easily handle it.” Earlier on Monday the Treasury said net borrowing totaled $488 billion from January through March, a record for that period and about $47 billion more than it had previously estimated, according to a statement released in Washington. The end-of-March cash balance was $290 billion, compared with an initial estimate of $210 billion.

“By definition supply and demand will equate,” Mnuchin said. “I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries,” he said when asked about the risks of reduced demand for Treasuries and increased supply. The Treasury’s debt-management plans were complicated earlier this year by a political fight that was resolved when lawmakers agreed to suspend the federal debt limit in a two-year budget agreement in February. The U.S.’s need to issue more Treasuries is expected to grow as the fiscal picture deteriorates. The budget deficit widened to $600 billion halfway through the fiscal year, as spending increased at three times the pace of revenue growth in the October-to-March period, according to Treasury figures released earlier this month.

Tax and spending measures approved by Congress and President Donald Trump are expected to push the budget gap to $804 billion in the current fiscal year, from $665 billion in fiscal 2017, and then surpass $1 trillion by 2020, according to the Congressional Budget Office. In an accompanying statement about the state of the economy, the Treasury said Monday that tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”

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The debt keeps the economy going.

The Global Debt Addiction: China’s Out of Control Debt (GT)

China has developed a craving for consumer goods, the more luxurious, the better. Along with most other countries, China’s credit boom and spending spree are being followed by out-of-control debt. While household debt is spiraling, the Chinese government is pushing to double the size of the economy by 2020 (setting this goal in 2010). This ambitious project will almost certainly entail more lending and increased debts. There is a question as to exactly how much more debt China can handle. China’s debt has been rising steadily, from 141 percent of GDP in 2008 to 256 percent of GDP in 2017. This type of rapidly-increasing debt level has frequently been the precursor of a hard economic fall, and the world is watching China carefully.

While countries such as the U.S. and the U.K. also have large debt-to-GDP ratios, the difference is that both are high-income countries, while China has only reached middle-income status, with only $15,400 in household purchasing power. This is a quarter of the household purchasing power of the US. Getting out of debt on China’s low level of income will be far more difficult than in higher-income nations. [..] China’s economic growth has encouraged widespread home buying and mortgage debts as property prices soar. Mortgage debt has increased by 25 percent in two years. People who have bought during the economic boom are now facing monthly mortgage payments that equal up to half of their monthly income.

Household budgets are stretching to the breaking point. This has forced many to curtail spending elsewhere and putting off other necessary big purchase items. This at a time when the government is encouraging greater consumer consumption.

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“Austerity is for the good times, not the bad times.”

Governments Are Nothing Like Households (Coppola)

Politicians like to describe government as like a household. When you’ve borrowed too much, you cut your spending so you can pay off debt, don’t you? You might be able to get a better-paid job, which helps you to pay it off faster. But you still budget to reduce your debt over time. Going on a spending spree means tightening your belt later. Similarly, if government borrows too much, there must be austerity to pay it down. Stands to reason, doesn’t it? People understand this reasoning. It is politically popular, especially when times are hard. In March 2009, when the U.S. was in the deepest recession since the 1930s, John Boehner, former Speaker of the House of Representatives, said on CBS News that “it’s time for government to tighten their belts and show the American people that we ‘get it.’”

“Government is like a household” can even win elections. At the height of the financial crisis in 2008, David Cameron, then leader of the U.K.’s Conservative party, wrote this in the (now defunct) News of the World: “This [Labour] government has maxed out our nation’s credit card—and they want to keep on spending by getting another. We believe we need to get a grip, be responsible and help families now in a way that doesn’t cost us our future.” He became the U.K.’s Prime Minister in May 2010. Keynesian economists such as Paul Krugman argue that instead of trying to reduce public deficits in a recession, government should increase spending, helping businesses to grow and providing employment. Government debt will rise, of course, but the government can run fiscal surpluses to pay it down when growth returns. Austerity is for the good times, not the bad times.

But this message has not been heard. In the name of “living within our means,” “balancing the books” and “paying down the debt,” governments on both sides of the Atlantic have pursued austerity policies ever since the Great Recession. The terrible story of Greece shows us that harsh austerity is the wrong medicine for a poorly-performing, highly indebted economy. But Greece is merely the worst example. Many Western countries have suffered deep and lasting damage, both from the Great Recession itself and from premature attempts to reduce public deficits.

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“..bitcoin units have no intrinsic value” – but currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.”

St. Louis Fed: Bitcoin is ‘Like Regular Currency’ (Fortune)

The Federal Reserve Bank of St. Louis has provided some high-profile validation for a core premise of Bitcoin and other cryptocurrency. A blog post this week based on an earlier Fed research paper said that “bitcoin units have no intrinsic value” – but added that currencies “such as the U.S. dollar, the euro, and the Swiss france . . . have no intrinsic value either.” The post, titled “Three Ways Bitcoin is Like Regular Currency,” doesn’t precisely endorse Bitcoin or cryptocurrency. In another recent report, the St. Louis Fed was critical of Bitcoin’s inefficiency. Cryptocurrency has also become rife with scams since its surge in value last year, and may constitute a global risk because it enables clandestine money laundering, capital flight, and tax evasion.

But the St. Louis Fed has provided a credible rebuttal to one of the most widespread and misguided criticisms of cryptocurrency: That, because it isn’t tied to a particular real-world commodity, it should have a monetary value of zero. As Fed researchers point out, since decoupling from the gold standard in the early 1970s, almost all global reserve currencies rely on nothing but trust to function as a media of value exchange. In the case of the dollar, that’s mostly trust in the U.S. government and economy. For Bitcoin and other cryptocurrencies, it’s trust in computer code and, at least to some extent, developers.

Surprisingly, the Fed’s new statement also echoes one of the predominant arguments that cryptocurrency fans use to disparage government-backed currency – though in a rather roundabout way. The post argues in part that “there’s a limited supply” of both cash and Bitcoin. The libertarian boosters at the heart of the crytpocurrency movement have often argued that Bitcoin is better than government currency because central banks can devalue national currencies through inflation, while Bitcoin has a strictly fixed supply. Though the Fed’s post points out that it doesn’t actually print cash – in the sense of physical notes – it acknowledges its ability to expand the money supply.

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Concessions will be forthcoming.

US Extends Tariff Exemptions For European Union And Other Allies (CNBC)

The May 1 deadline for steel and aluminum tariff exemptions for U.S. allies has been extended, the White House said. Instead, the White House has decided to postpone the decision on some allies, including the European Union, for 30 days to allow further discussions. Those extensions will affect the EU, Canada and Mexico. As for Argentina, Australia and Brazil, a senior White House official said agreements have been reached in principle, and they will also receive a 30-day extension so details can be finalized. South Korea’s exemption from tariffs is permanent because it agreed to quotas as part of a new trade deal. Administration officials have asked other countries what level of quotas they would agree to.

One person briefed by the administration told CNBC: “Quotas are an active part of the discussion with every country on the exemption list.” U.S. Trade Representative Robert Lighthizer is leading the process for country exemptions, except for the European Union, which Commerce Secretary Wilbur Ross is leading. The Department of Commerce is also spearheading the process for product exemptions. The National Security Council is overseeing the entire process. The May 1 deadline on the tariff exemptions was set in a presidential memorandum on the topic.

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UK says they have a solution, but not what that is.

Brexit Talks At Risk Of Collapse Over Irish Border (G.)

The EU’s chief Brexit negotiator has warned that talks are at risk if the UK does not soften its red line on the Irish border issue. Speaking to reporters on his third visit to Ireland since the referendum, Michel Barnier said he was “not optimistic” and “not pessimistic” but “determined” that the two sides can break the current impasse on talks. He repeated recent declarations that unless Britain came up with fresh thinking on how to avoid a hard border by the June EU council summit, further talks were in danger of collapsing. “Until we reach this agreement and this operational solution for Northern Ireland, a backstop [solution], and we are ready for any proposal … there is a risk, a real risk,” he said.

But he hinted that the UK would not have to come up with the final deal for Ireland, describing the June summit as “a stepping stone” to the October deadline for the wider Brexit deal to be completed. The Irish prime minister, Leo Varadkar, said Britain’s “approach to negotiations will need to change in some way” if there is to be agreement over the issue. Appearing alongside Varadkar and his deputy, Simon Coveney, Barnier said the EU was “absolutely united” on the Irish question but wanted to work with the UK to find a practical solution. Coveney warned that there would be “difficulties” at the next EU council summit in June in progressing to wider Brexit talks unless the UK commited to wording for a “backstop” solution for the Irish border.

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It would be fun.

South Korea President Says Trump Deserves Nobel Peace Prize (R.)

South Korean President Moon Jae-in said U.S. President Donald Trump deserves a Nobel Peace Prize for his efforts to end the standoff with North Korea over its nuclear weapons program, a South Korean official said on Monday. “President Trump should win the Nobel Peace Prize. What we need is only peace,” Moon told a meeting of senior secretaries, according to a presidential Blue House official who briefed media. Moon and North Korean leader Kim Jong Un on Friday pledged at a summit to end hostilities between their countries and work toward the “complete denuclearization” of the Korean peninsula. Trump is preparing for his own summit with Kim, which he said would take place in the next three to four weeks.

The Trump administration has led a global effort to impose ever stricter sanctions on North Korea and the U.S. president exchanged bellicose threats with Kim in the past year over North Korea’s development of nuclear missiles capable of reaching the United States. In January, Moon said Trump “deserves big credit for bringing about the inter-Korean talks. It could be a resulting work of the U.S.-led sanctions and pressure”. Trump’s predecessor, Barack Obama, won the 2009 Nobel Peace Prize just months into his presidency, an award many thought was premature, given that he had little to show for his peace efforts beyond rhetoric.

Even Obama said he was surprised and by the time he collected the prize in Oslo at the end of that year, he had ordered the tripling of U.S. troops in Afghanistan. As well as Obama, three U.S. presidents have won the Nobel Peace Prize: Theodore Roosevelt, Woodrow Wilson, and Jimmy Carter. Moon’s Nobel Prize comment came in response to a congratulatory message from Lee Hee-ho, the widow of late South Korean President Kim Dae-jung, in which she said Moon deserved to win the prize, the Blue House official said. Moon responded by saying Trump should get it.

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Nothing leaks like Washington.

Leaked Questions Reveal What Mueller Wants To Ask Trump About Russia (G.)

Robert Mueller, the special counsel investigating Russian interference in the US election, wants to ask Donald Trump about contact between his former election campaign manager Paul Manafort and Russia, the New York Times reported on Monday. The paper said it had obtained a list of nearly 50 questions that Mueller, investigating Russian meddling in the 2016 presidential election, wants to put to the US president. More than half relate to potential obstruction of justice. “What knowledge did you have of any outreach by your campaign, including by Paul Manafort, to Russia about potential assistance to the campaign?” is one of the more dramatic questions published by the Times.

The pointed reference to Manafort breaks tantalising new ground, since there was no previous evidence linking him to outreach to Moscow. Benjamin Wittes, a senior fellow at the Brookings Institution thinktank in Washington, tweeted: “This is very interesting – strong evidence that there are still collusion threads that are not yet public.” Manafort and his deputy, Rick Gates, pleaded not guilty last October to a 12-count indictment accusing them of conspiring to defraud the US by laundering $30m from their work for a Russia-friendly political party in Ukraine. a dramatic insight into the special counsel’s mind and make clear that Trump is a subject, not a mere witness, in the investigation. It is not yet known whether the president will agree to be interviewed.

One batch of questions relates to alleged coordination between the Trump election campaign and Moscow. Donald Trump Jr’s June 2016 meeting at Trump Tower in New York with a Russian lawyer who promised damaging information about rival Hillary Clinton is naturally under scrutiny. Mueller wants to ask when Trump became aware of the meeting; Trump Jr claimed his father did not know about it in advance.

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Set up a program to bring peace to Central America. Kick out the CIA. They will stop coming.

First Members Of Migrant ‘Caravan’ Enter US Seeking Asylum (R.)

The first eight members of a “caravan” of Central American migrants entered U.S. territory to seek asylum on Monday, after a month-long journey through Mexico that drew the wrath of President Donald Trump. The eight women and children walked through a door into the San Ysidro port of entry on the bidding of a customs and border patrol officer, a Reuters witness said, hours after Vice President Mike Pence promised they would be processed in line with U.S. law. About three quarters of claims by Central American asylum seekers are ultimately unsuccessful, resulting in detention and deportation.

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Medium or well-done?

That Collapse You Ordered…? (Kunstler)

I had a fellow on my latest podcast, released Sunday, who insists that the world population will crash 90-plus percent from the current 7.6 billion to 600 million by the end of this century. Jack Alpert heads an outfit called the Stanford Knowledge Integration Lab (SKIL) which he started at Stanford University in 1978 and now runs as a private research foundation. Alpert is primarily an engineer. At 600 million, the living standard in the USA would be on a level with the post-Roman peasantry of Fifth century Europe, but without the charm, since many of the planet’s linked systems — soils, oceans, climate, mineral resources — will be in much greater disarray than was the case 1,500 years ago.

Anyway, that state-of-life may be a way-station to something more dire. Alpert’s optimal case would be a world human population of 50 million, deployed in three “city-states,” in the Pacific Northwest, the Uruguay / Paraguay border region, and China, that could support something close to today’s living standards for a tiny population, along with science and advanced technology, run on hydropower. The rest of world, he says, would just go back to nature, or what’s left of it. Alpert’s project aims to engineer a path to that optimal outcome. I hadn’t encountered quite such an extreme view of the future before, except for some fictional exercises like Cormac McCarthy’s The Road. (Alpert, too, sees cannibalism as one likely byproduct of the journey ahead.)

Obviously, my own venture into the fictionalized future of the World Made by Hand books depicted a much kinder and gentler re-set to life at the circa-1800 level of living, at least in the USA. Apparently, I’m a sentimental softie. Both of us are at odds with the more generic techno-optimists who are waiting patiently for miracle rescue remedies like cold fusion while enjoying re-runs of The Big Bang Theory. (Alpert doesn’t completely rule out as-yet-undeveloped energy sources, though he acknowledges that they’re a low-percentage prospect.) We do agree with basic premise that the energy supply is mainly what supports the way we live now, and that it shows every evidence of entering a deep and destabilizing decline that will halt the activities necessary to keep our networks of dynamic systems running.

A question of interest to many readers is how soon or how rapid the unraveling of these systems might be. When civilizations crumble, it tends to fast-track. The Roman empire seems to be an exception, but in many ways it was far more resilient than ours, being a sort of advanced Flintstones economy, with even its giant-scale activities (e.g. building the Coliseum) being accomplished by human-powered work.

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Never again.

Are Our Online Lives About To Become ‘Private’ Again? (BBC)

In May, tough new privacy laws are being introduced across Europe, offering EU consumers far greater control over their data and large fines for firms which break the rules. It is worth pausing to think about how we got to this point. To begin to understand, we must remember that data can easily be copied, shared and collected from multiple sources. Whenever we use digital devices – everything from web browsers, to phones, loyalty cards and CCTV cameras – we create data that allows advertisers, insurers, the police and others to understand aspects of our lives. Only its availability and the ingenuity of its handler limits what it can tell us. This is very different to a traditional commodity that can be bought and sold: a house, for example.

If you sell your house, the buyer might come to understand something of your personality, perhaps through a taste for high-spec kitchens and red carpets. Beyond that, the potential insight into your life is limited – your diaries and photo albums will have moved with you. With data, it is more complicated. Once you sign up for an online service, constant and often seamless data collection starts. Minimal understanding and agreement are often sufficient for this collection to begin: clicking “I agree” to terms and conditions you may or may not have read can be enough. It’s as if, rather than handing over a clean and tidy house, you have invited the buyer to move in with you and start taking notes: how you behave, whom you talk to, who visits you and who spends the night.

Many people never have a clear understanding of how the data they produce is shared, collected and interpreted. It can be combined with data from other sources, and investigated in unpredictable and unforeseen ways to gain in-depth knowledge about our lives, preferences, and likely future behaviours. This knowledge can be used to influence us in subtle but powerful ways. The advertisements, news, and friends we encounter online are often the result of this nudging. And, unlike a house, the data can be copied again and again at little to no cost, reaching an unlimited number of people. It is clear that the risks to privacy with data are substantial. Recognising this, additional safeguards are being introduced.

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The damage being done to Britain is unbelievable.

Food, Clothes, A Mattress And Three Funerals. What Teachers Buy For Children (G.)

In 2014 Gemma Morton, the headteacher of a large secondary school, told Education Guardian her school had helped to pay for the funeral of a student whose family couldn’t afford it, even after they had sold their car. Three years on, she has helped to pay for two more funerals. “When a child dies, nobody’s saved for it,” says Morton. “There is literally nowhere for families to go apart from the people they already know, and most of them are poverty-struck too.” Over the past few years, as austerity has deepened, more schools and individual teachers are bailing out disadvantaged families because they simply can’t say no. The latest government figures show 100,000 more children propelled into poverty in just 12 months.

There are 4.1 million children – nearly a third of the entire child population – living in households on less than 60% of the average income. At Gill Williams’s primary school in the north-west of England, local supermarkets deliver bread and fresh vegetables three times a week, which are placed in the playground for parents to help themselves. There is rarely a crumb left. Williams says it is not so much that poverty is more severe, but that it has spread. “It’s everybody. Your average family is like that now.” The core group of those needing support in her school is three times larger than when she became a head 10 years ago.

Evidence of hungry children is clear, say teachers. “You notice kids borrowing money from friends to buy food, kids falling asleep, kids saying they’ve got a tummy ache, and they didn’t have breakfast because Mummy didn’t have anything in,” says Morton. She has also seen children taking scraps from the school bins. Heads in poor catchments notice a difference when they attend meetings at other schools. “If you go and see kids in two different areas, they’ll be noticeably different heights,” says Morton.

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Mar 302018
 
 March 30, 2018  Posted by at 7:07 pm Finance Tagged with: , , , , , , , , , , ,  


Jerome Liebling May Day Union Square Park New York City 1948

 

 

Dr. D. peels the American political onion to get down to what it’s all about. I’m impressed. He explains America better than just about anyone. Turns out, there ain’t much left. So yeah, what happened?

 

 

Dr. D: The news cycle runs so frenetically it’s easy to lose track of the bigger tide. Let’s go back a week and look at something the Automatic Earth has been talking about since the beginning.

This weekend at a speech in Mumbai, Hillary Clinton said:

“If you look at the map of the United States, there’s all that red in the middle where Trump won. …I win the coast….I won the places that represent two-thirds of America’s gross domestic product. So I won the places that are optimistic, diverse, dynamic, moving forward. And his whole campaign, ‘Make America Great Again,’ was looking backwards.”

There are many ways to look at this: for one thing, by number, over 90% of the counties are Red. Yet over 50% of the population is concentrated in the cities and Blue counties. Clinton officially won the popular vote. Yet the United States has always had a geographical Electoral College system. A compromise of representation between small, weak states and strong, large states, and the rules of the 2016 campaign were no mystery or surprise. Yet that’s only the middle-sized picture.

The Big Picture is Mrs. Clinton saying she’s representing the important people, the right people – even the working people – and that 2/3rds of those people live exclusively in Blue districts on both coasts. While this is arguably true, it wasn’t always true. NYC or San Francisco have always been important, but from their founding until now, places like Dayton, St. Paul, Pittsburgh, or New Orleans were considered vital, important places, places where their own specialty happened: tires or flour, steel or shipping, lumber or mining.

What Happened? In a way the election was a referendum on “What Happened?” What happened to my community, my country, my area, and all the vital work those long-abandoned areas used to do, what happened to the massive GDP those areas used to contribute, and the answer is simple:

 

An organism contracts from the periphery to the core.

 

There’s a lot in that statement. As it took decades, even a century to happen, you can see which peripheries were sacrificed first and next, who had power, who didn’t, and how long they could maintain it; and that’s interesting, because it was not East or West, white or black, rural or urban as they might have you believe. There are as many hopeless, abandoned people in Baltimore as there are in Billings, Montana, possibly more, and possibly started far sooner. But if it’s not ethnic or geographical, then what is it?

 

An organism contracting from the periphery to the core is a consequence of centralization.

 

The Automatic Earth began with discussing the shrinking of the country, of industrialization, in terms of who would receive the ever-dwindling supplies oil and energy, the infrastructure and attention, but that is not necessarily a function of practicality. It is more often a function of political power, and we largely have a political problem and not a practical one.

The Core has been using their power to attract and concentrate more wealth and more power to themselves and their areas until most of the nation’s wealth and power are concentrated in Clinton’s 2/3rds of GDP, the sub-10% of the counties. All top 10 richest zip codes are now in one region: the Washington D.C. area.

Economic wealth and power is used to expand political power, further extracting the wealth of the Periphery to maintain the lifestyle of the Core. While this may seem a practical strategy, it isn’t. At one time the Periphery was creating maybe 2/3rds of the wealth of the nation, costing nothing, and that was with no more infrastructure than remains today.

So when those places are idled, 2/3rds of the nation’s GDP also vanishes, and while the Core can maintain their lifestyle by cannibalizing the remaining energy and attention, the entire nation they are part of only becomes far poorer. So far from the concentration of power making them stronger , it’s making them weaker , as they have a fraction of the former wealth and ability, cohesion and cooperation, men and materials to draw on.

 

This leads to the problem she highlights, which is social and political fracturing. With a majority of the wealth pulled to the Core, the Periphery withdraws its economic and social consent in a sense of unfairness that is only validated by further extractions, concentrations, and non-cooperations.

This can make it more difficult to run even the Core economy as disagreements develop between Core vs Periphery or entitled vs disenfranchised peoples even within the Core itself, leading to a difficulty maintaining compliance, resource supplies, disagreements on how to allocate wealth, support infrastructure, and so on.

This may seem an engineering issue, but this is also Tainter’s “Collapse of Complex Societies”, where cultures weather many storms, many expansions and contractions, but what causes “Collapse” is the attempt to maintain expensive infrastructure built up during the good times, at the expense of one portion of society. If compromise can be reached, Society survives.

If a compromise cannot be reached and the Core attempts to force its will via social and military force, the price of compliance becomes too high and fails, and with it, the cooperation, the social contract that makes a people or a nation one unit. It fractures, and when it does, those pieces break up and become, as he says, simpler, Less Complex societies. Less specialized, less concentrated, and less centralized, or by our modern pejorative view, “Primitive.”

As our American society has measurably less energy since 1974, we have seen the re-allocation and distribution of that energy ring-fenced into an ever-dwindling core of fewer counties, and fewer participants in those counties, and like other complex societies, we have been socially fracturing since that time as well, as fewer and fewer within the system benefit from it.

There’s much more to unpack in this, but let’s just ask some questions:

• What makes a “Core”? What constitutes the “Periphery”?

• Since the Periphery has and could contribute a majority of overall GDP, what inspires the Core to sacrifice it rather than expand their wealth through it?

• As a metaphor for a bodily process, a biological “contraction” occurs during emergencies such as starvation, freezing, or flight. But would the body really survive if it crippled the legs, lost its fingers, or its hearing to save itself? Contrarily, would the body survive and function if the brain, liver, or heart swelled to 3 times their original size?

• What is the resource load of a brain or stomach that is 3x larger than necessary?

• Since from an engineering perspective all parts of a machine must be in working order for it to work at all, what impractical, non-engineering priorities must be established to cause the core and periphery to become so mismatched?

• How are those impracticalities decided? How are they maintained?

• Is the deciding and maintaining of inequity and non-function a benefit to the Core? To the Periphery? Both? Neither?

• Once the Periphery has been sacrificed to the Core, what must happen for them to be re-joined and freely cooperate again?

• Can this be done? What would have to be sacrificed that wasn’t sacrificed before? By which side? One? Both?

 

Mrs. Clinton’s idle quote has meaning. If her places are “optimistic, diverse, dynamic, moving forward” then logically the other , the 90% of Red America is “pessimistic, oppressive, racist, dull, lazy, and backwards.” “Deplorable,” if you will. Aside from how this doesn’t seem to be a good pitch to win votes among 90% of voting counties, you have to ask, “How did they get this way?” and “What is your plan to gather your countrymen and make them optimistic, productive, and to work again, and thus help all?” Yet oddly, that was her opponent’s slogan.

If she’s not asking the question of how to include and elevate everyone, isn’t she really saying “I’m in favor of further enriching my Core at your expense”? And while historically that is indeed a common response to dwindling energy, Tainter warns it may also be one that can collapse both the economy and the society.

Since large, concentrated societies contract to the Core to protect themselves and their critical assets, those in the core historically won’t offer time or resources to help anyone but themselves: the army, the police, the roads, the tax officials. When that is true, you may want to localize, decentralize and maintain your own Core, with your own people, at home. This re-localizing will re-establish the balance of power in the Periphery where most people live.

 

 

Mar 232018
 
 March 23, 2018  Posted by at 9:48 am Finance Tagged with: , , , , , , , , , ,  


Edvard Munch Spring 1889

 

China Hits Back on Trump Tariffs as Europe Off the Hook for Now (BBG)
Asian Stocks Plunge As Trump’s Trade War Heats Up (MW)
Dow Jones Closes Down More Than 700 Points (Ind.)
UK Politicians To Be Exempt From Data Crackdown (Ind.)
Steve Bannon: ‘Facebook Data Is For Sale All Over The World’ (G.)
Facebook Gave Data About 57 Billion Friendships To Academic (G.)
The Digital Military Industrial Complex (NYBooks)
EU Countries Prepare To Follow May And Expel Russian Diplomats (G.)
Number Of British Children In Poverty Surges By 100,000 In A Year (Ind.)
UK Rebel Bank Prints Its Own Notes And Buys Back People’s Debts (G.)
Shaking the Superflux (Varoufakis)
‘Great Pacific Garbage Patch’ 16 Times Larger Than Previously Estimated (G.)
Great Pacific Garbage Patch Is Rapidly Accumulating Plastic (Nature)
‘Collapse Of Civilisation Is A Near Certainty Within Decades’ – Ehrlich (G.)
Mammoth Survey Of Nature’s Vital Signs Released (AFP)

 

 

All involved know a realignment was inevitable. This is simply the art of the deal.

China Hits Back on Trump Tariffs as Europe Off the Hook for Now (BBG)

The trade conflict between China and the U.S. escalated, with Beijing announcing its first retaliation against metals levies hours after President Donald Trump outlined fresh tariffs on $50 billion of Chinese imports and pledged there’s more on the way. On Friday, China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come.

Equity indexes from Tokyo to Shanghai tumbled more than 3% and U.S. stock futures fell, signaling a further retreat for the S&P 500 Index after it fell 2.5%, on risks a further escalation in trade tensions will undermine an unusual phase of synchronized global economic growth. Suppliers to Apple were among the hardest hit in Hong Kong and mainland markets on Friday, as investors focused on potential losers from the trade spat. “China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come,” said Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia and now a senior fellow at Yale University. “As America’s third largest and most rapidly growing export market and as the largest foreign owner of Treasuries, China has considerably more leverage over the U.S. than Washington politicians care to admit.”

[..] The White House gave the European Union, Argentina, Australia, Brazil, Canada, Mexico, and South Korea, until May 1 to negotiate levies on steel and aluminum. The administration said the suspensions can be renewed or revoked then, “pending discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security.” “This has been long in the making,” Trump said signing the intellectual-property order, adding that the tariffs could affect as much as $60 billion in goods. He told reporters, “This is the first of many.”

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There’ll be a bit of to and fro, with big words and big numbers and big threats, and then everyone will get back to business.

Asian Stocks Plunge As Trump’s Trade War Heats Up (MW)

The global equities swoon rolled over to Asia on Friday, where markets reacted negatively to the Trump administration’s trade broadside against China. Although the import tariffs had been telegraphed for weeks, Thursday’s package, covering about $60 billion in goods, sent investors running for havens. Bonds and gold prices rose and the Japanese yen hit its highest point against the U.S. dollar since Donald Trump won the presidential election. “Yes, the news was out for a while, but the actual action was a bit of a surprise to the market,” said Shinchiro Kadota, a senior forex and rates strategist at Barclays. “Maybe they thought it would be smaller, maybe later.”

China’s commerce ministry responded Friday morning and announced it would levy tariffs against $3 billion worth of U.S. goods including pork and recycled aluminum. Japan’s Nikkei Stock Average closed down 4.5% as the yen’s sharp gains on Thursday also pressured stocks lower. The yen rose further on Friday, hitting 16-month highs as the dollar went below ¥105. The WSJ Dollar Index fell 0.2% in Asia, extending the afternoon pullback seen during U.S. trading. Stocks in China also fell with the Shanghai Composite Index down 4%, the Shenzhen Composite Index down 5.3% and the small-cap-heavy Chinext Index down 5.1%.

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Realignment.

Dow Jones Closes Down More Than 700 Points (Ind.)

The Dow Jones Industrial Average closed down more than 700 points, with investors fearing that trade tensions will spike between the US and China after President Donald Trump unveiled new tariffs against Beijing. Industrial and technology companies, which depend heavily on foreign trade, took some of the worst losses with Boeing, Caterpillar and Microsoft all falling sharply. The Dow sank 724 points, or 2.9%, to 23,957. The Nasdaq lost 178 points, or 2.4%, to 7,166. The S&P 500 index dropped 68 points, or 2.5%, to 2,643, erasing its gain for the year. It is the fifth-worst daily point drop ever for the Dow and the worst since the beginning of February.

Earlier on Thursday, Mr Trump unveiled a plan to impose up to $60bn in new tariffs on Chinese goods, as well as limiting the country’s investment in the US as payback for what his administration alleges is years of intellectual property theft. The president’s order – which report from the White House had previously suggested would be nearer $50bn – is likely to trigger retaliation by Beijing and could further stoke fears of a global trade war. Just before signing the trade action, Mr Trump said it was “the first of many” as he looks to correct what has repeatedly called “unfair” trade deals with nations around the world.

“Markets are saying that these tariffs are going to cut into the global growth story that looked pretty strong just a few weeks ago. The prospect of more tariffs is making markets very unsettled and you’re going to see choppy trading until we see the effect they are having on earnings,” Jamie Cox, a managing partner for Harris Financial Group told Reuters.

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All you need to know about the Cambridge Analytica outrage. It’s theater.

UK Politicians To Be Exempt From Data Crackdown (Ind.)

Britain’s political parties are poised to grant themselves special powers to use personal data to find out how people are likely to vote, despite the Cambridge Analytica scandal, The Independent can reveal. Legislation set to clear Parliament within weeks will allow the profiling of voters to help infer their political opinions, privacy campaigners have warned. The move comes as controversy has engulfed Cambridge Analytica over its collection of Facebook data, with the aim of using it to profile and target people during election campaigns. Even before the scandal erupted, political parties had faced questions about their use of social media to carry out online campaigning.

All the major parties have agreed to the exemption from new data protection laws, arguing it clarifies their widely recognised right to canvas voters in order to target possible supporters. But critics say technological advances now enable such data to be mined to discover people’s opinions without their active consent. Organisations outside of the main political parties will be barred from collating voting data in this way. Ailidh Callander, a lawyer at the group Privacy International, told The Independent that “no meaningful justification” had been given for the powers in the Data Protection Bill. “This exemption is open to abuse by political parties and those working for them and can be used to facilitate targeted and exploitative political advertising,” she warned.

[..] “As we can see from the work of Cambridge Analytica, personal data that might not have previously revealed political opinions can now be used to infer information about the political opinions of an individual,” Ms Callander added. It would allow private firms, under contract to political parties, to “process personal data revealing political opinions for a wide range of purposes” without the explicit consent of the person concerned, Ms Callander said. Mr Bernal said data that could reveal voting preferences should be given “more protection”, warning: “Almost anything can be used to at least have a guess at your political leanings.”

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Business model. And if anyone can buy this stuff, you wonder what the NSA keeps for itself.

Steve Bannon: ‘Facebook Data Is For Sale All Over The World’ (G.)

Steve Bannon tried to distance himself from the Cambridge Analytica scandal on Thursday, claiming: “I didn’t even know anything about the Facebook mining.” Bannon is a former vice-president and board member of the political consultancy, which he agreed he “put together.” He claimed to a conference in New York that neither he nor Cambridge Analytica had anything to do with “dirty tricks” in the use of information harvested from Facebook to make computer models to sway elections. Besides, he said, “Facebook data is for sale all over the world”.

Bannon – Donald Trump’s former chief strategist – later said outside the conference room that he “did not remember” being part of any scheme to buy data that came from Facebook and divert it to use for election propaganda, as the Observer revealed last weekend. He blamed any “dirty tricks” on Cambridge Analytica’s parent company, SCL, which he described as “the British guys, old Etonians and guys from Oxford and Cambridge” [..] Bannon denied there was any scandal involving companies acquiring people’s personal information from Facebook and using it for other purposes.

“It’s just about the cost of it. It’s bought and sold every day, it’s just a marketplace,” he said, adding: “I didn’t even know about the Facebook mining, that’s Facebook’s business … They went to Barack Obama’s campaign in 2008 and told him all about the power of personal data.” Bannon turned to the conference audience and said: “You’re all serfs. Well paid serfs, but still serfs … The data is all out there, they [Facebook] take your stuff for free and monetize it for huge margins, they take over your life.”

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About that claim that Facebook was cheated, it wasn’t. It was always part of the whole thing. This is not something Kogan ‘harvested’, Facebook had already done that.

Facebook Gave Data About 57 Billion Friendships To Academic (G.)

Before Facebook suspended Aleksandr Kogan from its platform for the data harvesting “scam” at the centre of the unfolding Cambridge Analytica scandal, the social media company enjoyed a close enough relationship with the researcher that it provided him with an anonymised, aggregate dataset of 57bn Facebook friendships. Facebook provided the dataset of “every friendship formed in 2011 in every country in the world at the national aggregate level” to Kogan’s University of Cambridge laboratory for a study on international friendships published in Personality and Individual Differences in 2015. Two Facebook employees were named as co-authors of the study, alongside researchers from Cambridge, Harvard and the University of California, Berkeley. Kogan was publishing under the name Aleksandr Spectre at the time.

A University of Cambridge press release on the study’s publication noted that the paper was “the first output of ongoing research collaborations between Spectre’s lab in Cambridge and Facebook”. Facebook did not respond to queries about whether any other collaborations occurred. “The sheer volume of the 57bn friend pairs implies a pre-existing relationship,” said Jonathan Albright, research director at the Tow Center for Digital Journalism at Columbia University. “It’s not common for Facebook to share that kind of data. It suggests a trusted partnership between Aleksandr Kogan/Spectre and Facebook.”

Facebook downplayed the significance of the dataset, which it said was shared with Kogan in 2013. “The data that was shared was literally numbers – numbers of how many friendships were made between pairs of countries – ie x number of friendships made between the US and UK,” Facebook spokeswoman Christine Chen said by email. “There was no personally identifiable information included in this data.”

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Excellent long background by Tamsin Shaw for the Facebook story. It’s a who’s who.

The Digital Military Industrial Complex (NYBooks)

In a 2014 interview, Lt. Gen. Michael Flynn, speaking then as head of the Defense Intelligence Agency, said that such open-source data initiatives, and in particular the study of social media such as Facebook, had entirely transformed intelligence-gathering. He reported that traditional signals intelligence and human intelligence were increasingly being replaced by this open-source work and that the way in which intelligence agents are trained had been modified to accommodate the shift. A growing portion of the military’s $50 billion budget would be spent on this data analytics work, he claimed, creating a “gold rush” for contractors. A few weeks after this interview, Flynn left the DIA to establish the Flynn Intel Group Inc. He later acted as a consultant to the SCL Group.”

Carole Cadwalladr reported in The Observer last year that it was Sophie Schmidt, daughter of Alphabet founder Eric Schmidt, who made SCL aware of this gold rush, telling Alexander Nix, then head of SCL Elections, that the company should emulate Palantir, the company set up by Peter Thiel and funded with CIA venture capital that has now won important national security contracts. Schmidt threatened to sue Cadwalladr for reporting this information. But Nix recently admitted before a parliamentary select committee in London that Schmidt had interned for Cambridge Analytica, though he denied that she had introduced him to Peter Thiel. Aleksandr Kogan and Christopher Wylie allowed Cambridge Analytica to evolve into an extremely competitive operator in this arena.

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Proof is overrated.

EU Countries Prepare To Follow May And Expel Russian Diplomats (G.)

EU leaders have thrown their weight behind Theresa May’s stance on Russia, with several countries poised to announce expulsions of diplomats, in a bid to dismantle Vladimir Putin’s spy network. Following a summit in Brussels to discuss the response to the Salisbury nerve agent attack, EU leaders gave their full-throated backing to the prime minister by adopting a statement declaring it was “highly likely Russia is responsible” for poisoning Sergei Skripal and his daughter, Yulia. Donald Tusk, the president of the European council, tweeted that all leaders agreed Russia’s responsibility for the attack was highly likely. In a significant point for May, the statement goes further than a declaration by foreign ministers earlier this week, which avoided pinning the blame on Russia.

British diplomats believe that a strong message of solidarity with the UK, from Russia’s closest European neighbours, will hit home with President Putin. France, Poland, Estonia, Latvia and Lithuania are understood to be considering expelling Russian diplomats, as requested by the UK government, in a coordinated strike against Moscow. The Lithuanian president, Dalia Grybauskaite, said: “All of us, we are considering such measures.” She added that she had not congratulated Putin on his election victory. EU leaders discussed their response to the Salisbury poisoning over a European council summit dinner in Brussels. The UK prime minister told her fellow leaders the attack formed part of a long-term pattern of behaviour by Russia, and urged them to present a united front.

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What all the talk about Russia serves to hide…

Number Of British Children In Poverty Surges By 100,000 In A Year (Ind.)

The number of children in poverty across the UK has surged by 100,000 in a year, new figures show, prompting calls for ministers to urgently review cuts to child welfare. Government statistics published on Thursday show 4.1 million children are now living in relative poverty after household costs, compared with four million the previous year, accounting for more than 30% of children in the country. Compared to the overall population, children remained the most likely to be in relative poverty, at almost one in three compared with 21% of working age adults and 16% of pensioners.

The figures will fuel concerns that benefit cuts and tax credits under the Tory Government are seeing children hardest hit, with around one and a half million more under-18s forecasted to live in households below the relative poverty line by 2022. Relative child poverty is measured as children living in homes where the income is 60% of the median household income in the UK, adjusted for family size and after housing costs. Separate government statistics published on Thursday show the number of households in temporary accommodation has surged 64% since the Tories came to power in 2010, of which more than 2,000 had children.

Responding to the rise in child poverty levels, Labour MP Margaret Greenwood, the Shadow Work and Pensions Secretary, said: “These figures show that after eight years of Conservative austerity, Labour’s progress in tackling child poverty has been reversed with a shocking increase in the numbers of children living in poverty.

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Don’t get too successful, or else…

UK Rebel Bank Prints Its Own Notes And Buys Back People’s Debts (G.)

First there were the banks. Sending credit cards through the post, offering easy loans. They overstretched, teetered. Then came the billion-dollar bailouts, recession, austerity, poverty and payday loans. Then, slowly, came the movement: a piecemeal, sporadic effort to buy back the debt of ordinary people. Now in north-east London, an enterprise that is part art installation, part stunt and part charitable endeavour, has brought all the threads together: a bank that prints its own money, sells it for real tender and uses the proceeds to buy back the debt.

Hilary Powell and Dan Edelstyn have taken over an old Co-op Bank on a high street in Walthamstow and are printing money featuring the faces of people behind four local services – a primary school, a foodbank, a youth project and a soup kitchen. As well as raising money for those projects, Hoe Street Central Bank aims to raise enough money to buy out £1m of debt owned by people within the E17 postcode, in a London borough ranked 35th most deprived in the country.

“We see it as a community heist taking on the economic discourse,” says Powell. One of the delightful ironies of the undertaking is that the ‘bank’ could only have to raise as little as £20,000 to buy out £1m of local debt, because bad loans are often written down to a fraction of their face value in the secondary market. “The system forces people into debt for basic needs,” says Powell. “We are the forerunners of what we hope will be a bigger movement for debt abolition.” As the bank did its unusual trade this week, schoolchildren were invited in to watch a batch of £5, £10 and £20 notes, all designed by artists, roll off the presses. After all, it’s not every day that you see your headteacher’s face on a fiver.

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Varoufakis’ Shakespeare lecture. The recent Facebook and Novichok stories would fit right in.

Shaking the Superflux (Varoufakis)

As is, alas, well known, my country went bankrupt in 2010. And the oligarchies, Greek and European, in power decided to cover it up by means of largest loan in History to the most bankrupt European state – money that was, always, meant to flow on to France’s and Germany’s bankrupt bankers while the Greeks were thrown indefinitely into debtor’s prison and treated to the harshest austerity this planet has ever seen. Yes, there was method to the madness of the powers-that-be, just as in any Shakespearean play. Watching them stumble from one idiotic decision to the next, making things up as they were going along, and intensifying the crisis that they were trying to quell, was like watching a version of Othello, wondering how smart people could be so foolish, or of a Macbeth scheming in the land of Oedipus.

Like King Laius of Thebes unwittingly brought about his own murder by his son Oedipus because he believed the prophecy that Oedipus would kill him once he grew up, so too did Europe’s Deep Establishment, in a bid to save their bankers while safeguarding their legitimacy, undermined their legitimacy by committing successive, Macbeth-like, crimes against logic – so much so that, today, the so-called political centre traditionally in the service of the Establishment lays in ruins everywhere in Europe: Think France, Austria, Germany, recently Italy, where political monsters are rising up across Europe bringing to mind Brutus’ line in Julius Caesar about the hatchling of the serpent’s egg that must be “killed in the shell” before it emerges. Except that, instead of crushing the shell before the new serpents hatched, the Establishment kept it warm, facilitated its hatching, and is now repeatedly bitten by them.

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Global plastic production is increasing exponentially.

‘Great Pacific Garbage Patch’ 16 Times Larger Than Previously Estimated (G.)

An enormous area of rubbish floating in the Pacific Ocean is teeming with far more debris than previously thought, heightening alarm that the world’s oceans are being increasingly choked by trillions of pieces of plastic. The sprawling patch of detritus – spanning 1.6m sq km, (617,763 sq miles) more than twice the size of France – contains at least 79,000 tons of plastic, new research published in Nature has found. This mass of waste is up to 16 times larger than previous estimates and provides a sobering challenge to a team that will start an ambitious attempt to clean up the vast swath of the Pacific this summer.

The analysis, conducted by boat and air surveys taken over two years, found that pollution in the so-called Great Pacific garbage patch is almost exclusively plastic and is “increasing exponentially”. Microplastics, measuring less than 0.5cm (0.2in), make up the bulk of the estimated 1.8tn pieces floating in the garbage patch, which is kept in rough formation by a swirling ocean gyre. While tiny fragments of plastic are the most numerous, nearly half of the weight of rubbish is composed of discarded fishing nets. Other items spotted in the stew of plastic include bottles, plates, buoys, ropes and even a toilet seat.

“I’ve been doing this research for a while, but it was depressing to see,” said Laurent Lebreton, an oceanographer and lead author of the study. Lebreton works for the Ocean Cleanup, a Dutch-based non-profit that is aiming to tackle the garbage patch. [..] The organization is developing a system of large floating barriers with underwater screens that capture and concentrate plastics into one area ready to be scooped out of the ocean. A prototype, to be launched from San Francisco this summer with the aim of spawning a clutch of devices each of which can collect five tons of waste a month, will, if successful, be followed by dozens of other boom-like systems measuring up to 2km (1.2 miles) long.

The project comes with caveats, however – its system will not catch the proliferation of microplastics measuring under 10 millimeters (0.39in) and the whole operation will require further funding from next year. Any successful clean-up may also be overwhelmed by a global surge in plastic production – a recent UK government report warned the amount of plastic in the ocean could treble within the next decade. “There is a big mine of microplastics there coming from larger stuff that’s crumbling down, so we need to get in there quickly to clean it up,” said Joost Dubois, a spokesman for the Ocean Cleanup.

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The official report. Half of the garbage is fishing nets. A recent report estimated 70% of all visible plastic is discarded nets.

Great Pacific Garbage Patch Is Rapidly Accumulating Plastic (Nature)

Ocean plastic can persist in sea surface waters, eventually accumulating in remote areas of the world s oceans. Here we characterise and quantify a major ocean plastic accumulation zone formed in subtropical waters between California and Hawaii: The Great Pacific Garbage Patch (GPGP). Our model, calibrated with data from multi-vessel and aircraft surveys, predicted at least 79 (45-129) thousand tonnes of ocean plastic are floating inside an area of 1.6 million km2; a figure four to sixteen times higher than previously reported.

We explain this difference through the use of more robust methods to quantify larger debris. Over three-quarters of the GPGP mass was carried by debris larger than 5 cm and at least 46% was comprised of fishing nets. Microplastics accounted for 8% of the total mass but 94% of the estimated 1.8 (1.1-3.6) trillion pieces floating in the area. Plastic collected during our study has specific characteristics such as small surface-to-volume ratio, indicating that only certain types of debris have the capacity to persist and accumulate at the surface of the GPGP. Finally, our results suggest that ocean plastic pollution within the GPGP is increasing exponentially and at a faster rate than in surrounding waters.

Global annual plastic consumption has now reached over 320 million tonnes with more plastic produced in the last decade than ever before. A significant amount of the produced material serves an ephemeral purpose and is rapidly converted into waste. A small portion may be recycled or incinerated while the majority will either be discarded into landfill or littered into natural environments, including the world’s oceans. While the introduction of synthetic fibres in fishing and aquaculture gear represented an important technological advance specifically for its persistence in the marine environment, accidental and deliberate gear losses became a major source of ocean plastic pollution. Lost or discarded fishing nets known as ghostnets are of particular concern as they yield direct negative impacts on the economy and marine habitats worldwide.

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Ehrlich still claims it’s preventable. Why?

‘Collapse Of Civilisation Is A Near Certainty Within Decades’ – Ehrlich (G.)

A shattering collapse of civilisation is a “near certainty” in the next few decades due to humanity’s continuing destruction of the natural world that sustains all life on Earth, according to biologist Prof Paul Ehrlich. In May, it will be 50 years since the eminent biologist published his most famous and controversial book, the Population Bomb. But Ehrlich remains as outspoken as ever. The world’s optimum population is less than two billion people – 5.6 billion fewer than on the planet today, he argues, and there is an increasing toxification of the entire planet by synthetic chemicals that may be more dangerous to people and wildlife than climate change.

Ehrlich also says an unprecedented redistribution of wealth is needed to end the over-consumption of resources, but “the rich who now run the global system – that hold the annual ‘world destroyer’ meetings in Davos – are unlikely to let it happen”. The Population Bomb, written with his wife Anne Ehrlich in 1968, predicted “hundreds of millions of people are going to starve to death” in the 1970s – a fate that was avoided by the green revolution in intensive agriculture. Many details and timings of events were wrong, Paul Ehrlich acknowledges today, but he says the book was correct overall. “Population growth, along with over-consumption per capita, is driving civilisation over the edge: billions of people are now hungry or micronutrient malnourished, and climate disruption is killing people.”

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I doubt that “it’s not too late”.

Mammoth Survey Of Nature’s Vital Signs Released (AFP)

Scientists will deliver a comprehensive assessment Friday of the state of biodiversity — the animals and plants that humankind depends on to survive but has driven into a mass species extinction. The labor of some 600 scientists over three years, four reports will be unveiled in Medellin, Colombia, under the umbrella of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). The diagnosis is expected to be dire. “If we continue the way we are, yes the… sixth mass extinction, the first one ever caused by humans, will continue,” IPBES chairman Robert Watson told AFP ahead of the much-anticipated release. But the good news, he said, “It’s not too late” to slow the rate of loss.

Scientists say mankind’s voracious consumption and wanton destruction of Nature has unleashed the first mass species die-off since the demise of the dinosaurs – only the sixth on our planet in half-a-billion years. The first major biodiversity assessment in 13 years comes in the same week that Sudan, the world’s last male northern white rhino, died in Kenya – a stark reminder of the stakes. “The IPBES conference is going to tell us that the situation is continuing to deteriorate, they are going to tell us some ecosystems are being brought to the brink of collapse,” WWF director general Marco Lambertini told AFP on Thursday. “The IPBES is going to make a strong case for the importance of protecting Nature for our own wellbeing.”

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Mar 212018
 
 March 21, 2018  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , , , ,  


Dirk de Herder Amstel Bridge, Amsterdam1946

 

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)
EU To Unveil Digital Tax Targeting Facebook, Google (AFP)
UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)
Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)
The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)
Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)
German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)
Capitalism And The Veil Of Ignorance (Claire Connelly)
Libya: The True Face Of ‘Humanitarian Intervention’ (RT)
France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

 

 

Net worth my ass.

Sign of Pending Recession? Total American Net Worth Ratio At New High (CNBC)

Nine years into the second-longest bull market run in history, the level of total net worth compared with income has reached a record, according to Joe LaVorgna, chief economist for the Americas at Natixis, citing Federal Reserve data. Since the Great Recession ended in June 2009, the disparity between net worth and income has soared, attributable in large part to the growth in financial assets, which have increased by $33.9 trillion, compared with $10.4 trillion in nonfinancial assets. Essentially, that means that American wallets have grown fatter from the accumulation of financial assets like stocks and mutual fund holdings than they have from gains in their homes and other physical assets like autos.

In all, total net worth of $98.75 trillion is now 6.79 times the $14.55 trillion in disposable income for households as of the fourth quarter, according to Fed financial accounts figures. That’s up from 6.71 times in the third quarter. The previous tops came in the first quarter of 2006, with 6.51, and the first quarter of 2000, at 6.12. Those two levels cast ominous signals over the U.S. economy. “A recession started four quarters from the peak of the former and eight quarters from the zenith in the latter,” LaVorgna said Tuesday in a note to clients. As a practical matter, the level should serve as a yellow flag for Fed officials, who are on a course of hiking rates gradually but steadily.

[..] The Fed is an important part of the equation in that it helped boost financial assets through historically low interest rates and an aggressive policy of monthly bond buying called quantitative easing. This is the first meeting for new Chairman Jerome Powell, who must navigate the Fed through rate increases aimed at controlling but not stopping growth. After years of mostly steady gains since the bull market run began in 2009, volatility has crept in 2018 and raised the specter that forward gains will be tougher to achieve. “Powell needs to be mindful of the current backdrop and not signal aggressive rate hikes to come,” LaVorgna said. “Otherwise, stock prices and the economy are in trouble.”

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Brussels and Facebook: they’re going to come for part of the loot of selling your data.

EU To Unveil Digital Tax Targeting Facebook, Google (AFP)

The EU will unveil proposals for a digital tax on US tech giants on Wednesday, bringing yet more turmoil to Facebook after revelations over misused data of 50 million users shocked the world. The special tax is the latest measure by the 28-nation European Union to rein in Silicon Valley giants and could further embitter the bad-tempered trade row pitting the EU against US President Donald Trump. EU Economics Affairs Commissioner Pierre Moscovici will present proposals aimed at recovering billions of euros from mainly US multinationals that shift earnings around Europe to pay lower tax rates.

The transatlantic blow has been championed by French President Emmanuel Macron and will be discussed over dinner at an EU leaders summit on Thursday. “This will be given top priority as tax file. There is a lot of political momentum on this issue,” an EU official said ahead of the announcement. The unprecedented tech tax follows major anti-trust decisions by the EU that have cost Apple and Google billions and also caught out Amazon. The commission’s tax, expected to be about 3% of sales, would affect revenue from digital advertising, paid subscriptions and the selling of personal data.

The EU tax plan will target mainly US companies with worldwide annual turnover above 750 million euros ($924 million), such as Facebook, Google, Twitter, Airbnb and Uber. Spared are smaller European start-ups that struggle to compete with them. Companies like Netflix, which depend on subscriptions, will also avoid the chop. Brussels is seeking to choke tax-avoidance strategies used by the tech giants that, although legal, deprive EU governments of billions of euros in revenue.

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Got to admit, hard to say who I’d trust least with this, Facebook or the UK deep state.

UK Tells Facebook’s Auditors Visiting Cambridge Analytica To Stand Down (CNBC)

The U.K.’s data protection watchdog ordered Facebook’s auditors to back down from a probe into a political analytics company accused of wrongly harvesting the data of millions of its users. The tech giant was planning to investigate Cambridge Analytica’s servers and systems, but the Information Commissioner’s Office told Facebook on Monday that it should withdraw from the research firm’s London premises. The ICO said it would seek to gain its own warrant to access the company’s computers and servers.

Facebook had said Monday that it was pursuing a forensic audit of Cambridge Analytica and had hired digital forensics firm Stroz Friedberg to determine whether the data analytics company still possessed Facebook user data. But in an updated statement later that day, Facebook said: “Independent forensic auditors from Stroz Friedberg were on site at Cambridge Analytica’s London office this evening. At the request of the U.K. Information Commissioner’s Office, which has announced it is pursuing a warrant to conduct its own on-site investigation, the Stroz Friedberg auditors stood down.”

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Sold his shares first?!

Whatsapp Co-Founder Who Made Billions From Facebook Now Says To Delete It (MW)

WhatsApp co-founder Brian Acton left Facebook last year. Now he’s saying others should do the same. In a tweet Tuesday, Action said: “It is time. #deletefacebook,” referencing the online movement that is gaining steam in the wake of revelations that the personal data of 50 million Facebook users was used without their permission by political data company Cambridge Analytica during the 2016 presidential campaign. He did not immediately expand on his comment. While his Facebook profile was still active for hours after his tweet, it appeared deactivated later Tuesday night.

Acton and fellow co-founder Jan Koum sold the messaging service WhatsApp to Facebook in 2014 for $22 billion. Acton received about $3 billion in the deal, and has a net worth of about $5.5 billion, according to Forbes. After staying on for three years, Acton quit Facebook in September, and is now a major backer of rival messaging service Signal, which boasts encryption to make its messages resistent to government surveillance. In February, he joined the newly launched nonprofit Signal Foundation as executive chairman, and invested $50 million into the app.

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Now connect this to the Facebook stories.

The NSA Worked To “Track Down” Bitcoin Users – Snowden Documents (IC)

Classified documents provided by whistleblower Edward Snowden show that the National Security Agency indeed worked urgently to target bitcoin users around the world — and wielded at least one mysterious source of information to “help track down senders and receivers of Bitcoins,” according to a top-secret passage in an internal NSA report dating to March 2013. The data source appears to have leveraged the NSA’s ability to harvest and analyze raw, global internet traffic while also exploiting an unnamed software program that purported to offer anonymity to users, according to other documents. Although the agency was interested in surveilling some competing cryptocurrencies, “Bitcoin is #1 priority,” a March 15, 2013 internal NSA report stated.

The documents indicate that “tracking down” bitcoin users went well beyond closely examining bitcoin’s public transaction ledger, known as the Blockchain, where users are typically referred to through anonymous identifiers; the tracking may also have involved gathering intimate details of these users’ computers. The NSA collected some bitcoin users’ password information, internet activity, and a type of unique device identification number known as a MAC address, a March 29, 2013 NSA memo suggested. In the same document, analysts also discussed tracking internet users’ internet addresses, network ports, and timestamps to identify “BITCOIN Targets.”

The agency appears to have wanted even more data: The March 29 memo raised the question of whether the data source validated its users, and suggested that the agency retained bitcoin information in a file named “Provider user full.csv.” It also suggested powerful search capabilities against bitcoin targets, hinting that the NSA may have been using its XKeyScore searching system, where the bitcoin information and wide range of other NSA data was cataloged, to enhance its information on bitcoin users. An NSA reference document indicated that the data source provided “user data such as billing information and Internet Protocol addresses.” With this sort of information in hand, putting a name to a given bitcoin user would be easy.

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One took 519 days, the other 35 days. That’s an actual compariosn?

Bitcoin Bust Is Like Nasdaq Crash, But Faster (BBG)

Bitcoin has long been compared to the dot-com bubble. Morgan Stanley says its recent moves are similar to the tech boom and bust, but on steroids. Bitcoin’s recent moves almost mirror that of the Nasdaq Composite Index in the lead-up to and aftermath of 2000, but at 15 times the speed, Morgan Stanley said. The Nasdaq climbed 278% in 519 days in the rally leading up to its high in March 2000, while Bitcoin soared 248% in 35 days in the last leg of the rally to its $19,511 high in December, according to the report. There have been three waves of weakness since Bitcoin peaked in December, with prices falling between 45% and 50% each time, before rebounding.

The Nasdaq’s bear market from 2000 had five price declines, averaging a similar 44%. The bear market also looks similar on the way up. There have been two Bitcoin bear market rallies of 43% on average, while the Nasdaq bear market rallies averaged 40%. Bear markets are nothing new for the first decentralized digital currency. Since the coin’s creation in 2009 there have been four bear markets with price declines ranging from 28% to 92%. From the December peak to the most recent low on February, Bitcoin’s price fell by 70%, “nothing out of the ordinary,” Morgan Stanley said.

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C’mon, close them down already. This movie’s getting boring.

German Prosecutors Launch New Enquiry Into VW Over Market Manipulation (R.)

German prosecutors said on Tuesday they had searched Volkswagen’s headquarters as part of a new investigation into whether the carmaker had overstated the fuel efficiency of more vehicles than previously disclosed. The news is the latest setback in the German company’s efforts to move on from a 2015 scandal in which it admitted to cheating U.S. emissions tests on diesel engines. Prosecutors from the city of Braunschweig searched 13 offices at Volkswagen’s (VW) headquarters in nearby Wolfsburg at the start of March, seizing documents and computer files that will now be reviewed, a spokesman for the prosecutor’s office said, confirming a report by German magazine WirtschaftsWoche.

They were checking a statement issued by VW on Dec. 9, 2015—about three months after its “dieselgate” scandal broke in the United States—over suspicions its contents were incorrect In that statement, VW said its own investigations found it had understated fuel consumption, and hence carbon dioxide (CO2) emissions, on no more than 36,000 vehicles. That was much lower than its preliminary estimate of around 800,000 diesel and gasoline vehicles produced five weeks earlier, which caused VW to warn it could face a 2 billion euro ($2.5 billion) hit to profits from the disclosure. VW also said in its December 2015 statement that it had found no evidence of unlawful alterations to CO2 emissions data.

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We might as well keep thinking as long as we still can.

Capitalism And The Veil Of Ignorance (Claire Connelly)

So our taxes don’t pay for spending, so what? So the government can’t run out of money. Big deal. Does that change anything? ‘We can’t afford it’ has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days. Perhaps even earlier. And while it might make you feel good to believe that, it is simply untrue. This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment if it keeps export prices low. Or the currency competitive. Or their bottom line stable. Ultimately, this comes down to what government is for, and what role markets should play in our lives. People are divided on this. And that is ok. Civil disagreements are a hallmark of a civilised society.

Economies and markets are complex beasts, that perform differently in different environments, under different conditions. Arguably across the duration of time, a range of potential solutions could apply at any given scenario. And the best solution is to pick and choose from a range of different economic schools of thought, and use them in combination. Unfortunately, across the world, the economists and historians that are seeking to gain greater clarity of how to do just that, by understanding the true function of economies and markets are being pushed out of universities and barred from institutions and organisations that would allow their research to come to fruition. This is not a mark of a civilised society, but corporate fascism that is actively suppressing research that threatens the dominance of late-stage capitalism.

If you feel comfortable convincing yourself that unemployment and homelessness is acceptable, if you think the fact that wages have not only stagnated but are in many countries actually going backwards somehow doesn’t affect you, that what most people earn in a lifetime will be insufficient to cover a modestly comfortable retirement should not concern you, that addressing any one of these things would be a detriment not only to your bottom line but to the economy itself, if you can justify that position without relying on arguments over deficits and balanced budgets, well, more power to you, I guess. But we should be honest about our disagreements. And our opinions should be informed by an as accurate understanding of how wealth is created as possible.

For many people, whether or not government can afford to address unemployment and social spending isn’t the issue, the question is whether it should. The argument over budgets, debt ceilings and deficits have been used as a national pacifier that would have us believe that the health of the economy and our ability to earn a living relies on a degree of human suffering. We have been convinced that the balancing of federal budgets somehow relates to our ability to put food on the table, when in fact the opposite is true. These lies have made us paranoid and competitive, where the well-being of everyone else is a direct threat to our own. It’s a pretty genius strategy, really.

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On the 15th anniversary of the invasion of Iraq.

“Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.”

Libya: The True Face Of ‘Humanitarian Intervention’ (RT)

Seven years ago today, NATO began its “humanitarian bombing” of Libya. While “humanitarian bombing” is an oxymoron, many believe that a country is not truly advancing human rights if it’s not bombing another back to the Stone Age. As an initial matter, it must be said that while the UN had authorized a NATO fly-zone over Libya to protect civilians – all civilians, by the way – there was never authorization for the full-scale invasion which was carried out and which quickly became aimed at regime change. Therefore, the NATO operation which actually took place was illegal.

[..] the intervention was spearheaded by Hillary Clinton, Samantha Power and Susan Rice – three self-described warriors for human and women’s rights. Instead, they became three ushers of the Apocalypse. In addition, Italy and France, which also helped lead the charge for invasion, had their own reasons for intervening in Libya. For his part, French President Nicolas Sarkozy appeared to be singularly focused on killing Libyan leader Muammar Gaddafi, who allegedly gave him €50 million for his presidential campaign – a claim which was just coming to light and to which Gaddafi was the chief witness.

[..] Gaddafi had taken Libya from being the least prosperous country in Africa to the being the most prosperous by the time of the NATO operation. Thus, as one commentator explains, before the intervention, “Libya had the highest GDP per capita and life expectancy on the continent. Less people lived below the poverty line than in the Netherlands.” Moreover, one of the main reasons, we were told, that NATO needed to intervene in 2011 was to save Benghazi from imminent harm from the government forces of Gaddafi.

However, Hillary Clinton’s own internal emails show that her team recognized that any humanitarian problems confronting Benghazi had passed by the time of the NATO bombing. For example, Clinton’s assistant, Huma Abedin, in an email dated February 21, 2011 – that is, just a mere four days after the initial anti-government protests broke out in Libya – explains that the Gaddafi forces no longer controlled Benghazi and that the mood in the city was indeed “celebratory” by that time. Then, on March 2, just over two weeks before the bombing began, Harriet Spanos of USAID sent an email describing “[s]ecurity reports” which “confirm that Benghazi has been calm over the past couple of days.”

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Rhinos, insects, birds. You are next.

Bird populations in France have fallen by 33% in just 15 years.

France’s Bird Population Collapses As Pesticides Kill Off Insects (AFP)

Bird populations across the French countryside have fallen by a third over the last decade and a half, researchers have said. Dozens of species have seen their numbers decline, in some cases by two-thirds, the scientists said in a pair of studies – one national in scope and the other covering a large agricultural region in central France. “The situation is catastrophic,” said Benoit Fontaine, a conservation biologist at France’s National Museum of Natural History and co-author of one of the studies. “Our countryside is in the process of becoming a veritable desert,” he said in a communique released by the National Centre for Scientific Research (CNRS), which also contributed to the findings.

The common white throat, the ortolan bunting, the Eurasian skylark and other once-ubiquitous species have all fallen off by at least a third, according a detailed, annual census initiated at the start of the century. A migratory song bird, the meadow pipit, has declined by nearly 70%. The museum described the pace and extent of the wipe-out as “a level approaching an ecological catastrophe”. The primary culprit, researchers speculate, is the intensive use of pesticides on vast tracts of monoculture crops, especially wheat and corn. The problem is not that birds are being poisoned, but that the insects on which they depend for food have disappeared.

“There are hardly any insects left, that’s the number one problem,” said Vincent Bretagnolle, a CNRS ecologist at the Centre for Biological Studies in Chize. Recent research, he noted, has uncovered similar trends across Europe, estimating that flying insects have declined by 80%, and bird populations has dropped by more than 400m in 30 years. Despite a government plan to cut pesticide use in half by 2020, sales in France have climbed steadily, reaching more than 75,000 tonnes of active ingredient in 2014, according to EU figures. “What is really alarming, is that all the birds in an agricultural setting are declining at the same speed, even ’generalist’ birds,” which also thrive in other settings such as wooded areas, said Bretagnolle.

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Jul 112017
 
 July 11, 2017  Posted by at 9:39 am Finance Tagged with: , , , , , , , , ,  


Max Ernst Santa Conversazione 1921

 

Trump Bump for President’s Media Archenemies Eludes Local Papers (BBG)
How Economics Became A Religion (Rapley)
The Breaking Point & Death Of Keynes (Roberts)
Central Banks’ Focus on Financial Stability Has Unintended Consequences (BBG)
Janet Yellen’s Complacency Is Criminal (Bill Black)
‘We’re Flowing Toward The Path Of 1928-29’ – Yusko (CNBC)
Fresh Fears Of UK Housing Market Collapse (Sun)
The European Union Has a Currency Problem (NI)
Schaeuble Says Italy Bank-Liquidation Aid Shows Rule Discord (BBG)
Is This the End of China’s Second Housing Bubble? (ET)
The World Is Facing A ‘Biological Annihilation’ Of Species (Ind.)

 

 

The echo chamber is highly profitable. Gossip sells. It’s not personal. It’s only business. And in many boardrooms the question these days is: Why are we not more like the New York TImes?

Trump Bump for President’s Media Archenemies Eludes Local Papers (BBG)

President Donald Trump loves to hurl his Twitter-ready insult at the New York Times: #failingnytimes. But in the stock market, the New York Times Co. has been looking like a roaring success lately, particularly by the standards of the beleaguered newspaper industry. Since Trump won the presidency in November, the publisher’s share price has soared 57%. Online subscriptions are up, bigly – about 19% in the first quarter alone. Scrutinizing the president turns out to be good business, at least for top national papers like the Times and the Washington Post. A different story is playing out for local publications, which are still suffering through the industry’s long decline and need to retain subscribers who are sympathetic to Trump.

Consider McClatchy Co., which owns about 30 papers, including the Miami Herald. Its shares have plummeted 31% since Election Day. Subscriptions have barely budged. The diverging fortunes in the industry have underscored what many in the traditional news business know only too well: Famous titles can lumber on as they grope for a digital future, but most local papers are fighting for survival. “For us in Texas, the bump has definitely been more muted because we’re not the primary source of news out of the White House,” said Mike Wilson, editor of the Dallas Morning News. “We serve a community with many deeply conservative pockets. That may be a different demographic from the New York Times and Washington Post audience.”

[..] The Washington Post, owned by Amazon.com founder Jeff Bezos, has more than 900,000 digital subscribers, including hundreds of thousands who signed up in the first quarter, according to a person familiar with the matter who asked not to be identified discussing private information. The newspaper declined to comment on its subscriber figures. The Post and the Times have been competing for scoops on the biggest story of the year: the Trump administration’s alleged ties to Russia. On several occasions, they’ve published blockbuster stories within hours of each other. Trump often attacks their coverage on Twitter, which seems to drive even more readers to subscribe.

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We adhere to the school of economics that suits the powerful best.

How Economics Became A Religion (Rapley)

Although Britain has an established church, few of us today pay it much mind. We follow an even more powerful religion, around which we have oriented our lives: economics. Think about it. Economics offers a comprehensive doctrine with a moral code promising adherents salvation in this world; an ideology so compelling that the faithful remake whole societies to conform to its demands. It has its gnostics, mystics and magicians who conjure money out of thin air, using spells such as “derivative” or “structured investment vehicle”. And, like the old religions it has displaced, it has its prophets, reformists, moralists and above all, its high priests who uphold orthodoxy in the face of heresy. Over time, successive economists slid into the role we had removed from the churchmen: giving us guidance on how to reach a promised land of material abundance and endless contentment.

For a long time, they seemed to deliver on that promise, succeeding in a way few other religions had ever done, our incomes rising thousands of times over and delivering a cornucopia bursting with new inventions, cures and delights. This was our heaven, and richly did we reward the economic priesthood, with status, wealth and power to shape our societies according to their vision. At the end of the 20th century, amid an economic boom that saw the western economies become richer than humanity had ever known, economics seemed to have conquered the globe. With nearly every country on the planet adhering to the same free-market playbook, and with university students flocking to do degrees in the subject, economics seemed to be attaining the goal that had eluded every other religious doctrine in history: converting the entire planet to its creed.

Yet if history teaches anything, it’s that whenever economists feel certain that they have found the holy grail of endless peace and prosperity, the end of the present regime is nigh. On the eve of the 1929 Wall Street crash, the American economist Irving Fisher advised people to go out and buy shares; in the 1960s, Keynesian economists said there would never be another recession because they had perfected the tools of demand management. The 2008 crash was no different. Five years earlier, on 4 January 2003, the Nobel laureate Robert Lucas had delivered a triumphal presidential address to the American Economics Association. Reminding his colleagues that macroeconomics had been born in the depression precisely to try to prevent another such disaster ever recurring, he declared that he and his colleagues had reached their own end of history:

“Macroeconomics in this original sense has succeeded,” he instructed the conclave. “Its central problem of depression prevention has been solved.”

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Will the last days of our economics coincide with the last days of our economic model? Will Keynes die in a collapse?

The Breaking Point & Death Of Keynes (Roberts)

Keynes contended that “a general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers.” In other words, when there is a lack of demand from consumers due to high unemployment then the contraction in demand would, therefore, force producers to take defensive, or react, actions to reduce output. In such a situation, Keynesian economics states that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth.

The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment. Unfortunately, as shown below, monetary interventions and the Keynesian economic theory of deficit spending has failed to produce a rising trend of economic growth.

Take a look at the chart above. Beginning in the 1950’s, and continuing through the late 1970’s, interest rates were in a generally rising trend along with economic growth. Consequently, despite recessions, budget deficits were non-existent allowing for the productive use of capital. When the economy went through its natural and inevitable slowdowns, or recessions, the Federal Reserve could lower interest rates which in turn would incentivize producers to borrow at cheaper rates, refinance activities, etc. which spurred production and ultimately hiring and consumption.

However, beginning in 1980 the trend changed with what I have called the “Breaking Point.” It’s hard to identify the exact culprit which ranged from the Reagan Administration’s launch into massive deficit spending, deregulation, exportation of manufacturing, a shift to a serviced based economy, or a myriad of other possibilities or even a combination of all of them. Whatever the specific reason; the policies that have been followed since the “breaking point” have continued to work at odds with the “American Dream,” and economic models.

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Central banks focus on their member banks.

Central Banks’ Focus on Financial Stability Has Unintended Consequences (BBG)

Central bankers are spending a lot of time talking about financial stability. So much so that many economists, strategists and investors are saying financial stability has become a de facto third mandate for policy makers along with price stability and full employment. This development, however, has the potential to bring about some unintended consequences such as central banks adopting a much shallower tightening path than they currently envision. It’s important to understand two things. First, in highly levered economies, like those we currently see in developed nations around the world, interest rates and financial stability are closely linked. That was evident in the recent “synchronized” global sell-off in the rates markets triggered by central banks signaling concern about relatively high asset prices brought on by artificially low borrowing costs, and their potential to foster financial instability.

Second, central banks have, perhaps paradoxically, contributed to financial instability by employing so-called forward guidance that provided investors with a sense of how long they would be keeping rates at record-low levels. So, with economies gradually recovering and employment generally robust, it’s understandable that investors would behave in a manner that suggests they expect favorable financial conditions to seemingly last in perpetuity. Consider the dollar. Its weakness against both developed and emerging-market currencies this year occurred even though expectations for stronger economic growth and fiscal stimulus rose. The decline in the value of the dollar value means the cost to borrow in the currency has dropped despite the Federal Reserve’s three interest-rate increases since mid-December.

It also means hedging costs in currencies ranging from the euro to the South Korean won are rising at a less-than-ideal time. That can be seen in cross-currency basis swap rates, which are essentially the cost to exchange a fixed-rate obligation for a floating-rate obligation. In the case of the won, the swap rate has turned more negative, suggesting a possible “shortage” of the currency to borrow in the interbank market as geopolitical tensions in the region reach levels not seen in years. And, the almost 8% appreciation in the euro in both nominal and real effective exchange rate terms has driven the cost to borrow in the shared currency higher as European Central Bank officials surprise markets by starting to talk about pulling back from unprecedented monetary easing measures.

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Looks like the world would have been much better off without central banks.

Janet Yellen’s Complacency Is Criminal (Bill Black)

[..] her inaction as Fed chairman has encouraged criminal behaviour. First, Yellen’s “lifetime” pronouncement in 2017 ignored Yellen’s pronouncements in 1996 – and how disastrously they fared in the most recent financial crisis. In 1996, Yellen gave a talk at a conference at the Levy Institute at Bard College, which Minsky attended. The Minneapolis Fed published her speech as an article entitled “The New Science of Credit Risk Management.” The speech was an ode to financial securitization and credit derivatives. The Minneapolis Fed, particularly in this era, was ultra-right wing in its economic and social views. Yellen’s piece is memorable for several themes. With the exception of two passages, it reads as gushing propaganda for the largest banks. It is relentlessly optimistic. Securitization and credit derivatives will reduce individual and systematic risk.

Yellen assures the reader that finance is highly competitive and that the banks will pass on the savings from reducing risk to even unsophisticated borrowers in the form of lower interest rates. The regulators should reduce capital requirements, particularly for credit instruments with high credit ratings. Banks now have a vastly more sophisticated understanding of their credit risks and manage them prudently. There is no discussion of perverse incentives even though bank CEOs were making them ever more perverse at an increasing rate. There is no discussion of the fate of the first collateralized debt obligations (CDOs). Michael Milken, a confessed felon, devised and sold the first CDO – backed by junk bonds. That disaster blew up five years before she gave her speech. At the time Yellen published her article the second generation of CDOs was becoming common.

That generation of CDOs was backed by a hodgepodge of risky loans. They blew up about four years after she gave her speech. The third wave of CDOs was backed by toxic mortgages, particularly endemically fraudulent “liar’s” loans. They blew up in 2008. Securitization contributed to the disaster. The Fed championed vastly lower capital requirements for banks – particularly he largest banks. Fortunately, the Federal Deposit Insurance Corporation (FDIC) fought a ferocious rearguard opposition that blocked this effort. The Fed succeeded, however, in allowing the largest banks to calculate their own capital requirements through proprietary risk models that (shock) massively understated actual risk. Bank CEOs used the lower capital requirements, the biased risk models, and the opaque CDOs to massively increase risk and predate on black and Latino home borrowers.

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We have a hard time remembering and learning.

‘We’re Flowing Toward The Path Of 1928-29’ – Yusko (CNBC)

Although the economy has been steady this year, at least one analyst has dire predictions, comparing the current period to the buildup to the Great Depression and warning that this fall is when things will come to a head. Mark Yusko, CEO of Morgan Creek Capital, has been predicting bad news for the economy since January and he is sticking by that, saying Monday on CNBC’s “Power Lunch” that he believes too much stimulus and quantitative easing has resulted in a “huge” bubble in U.S. stocks. “I have this belief that we’re flowing toward the path of 1928-29 when Hoover was president,” Yusko said. “Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises, lots of things that don’t happen and the fall is when people realize, ‘Wait, it hasn’t played out the way we thought.'”

He points to evidence of declining growth as well as that fall is a weak time traditionally for the U.S. economy as people return from vacation. “[By the fall], we’ll have a lot more evidence of declining growth. Growth has been slipping,” he said. However, it was not all gloom and doom as Yusko said the emerging markets were still strong places to invest. “Growth is where you want to invest,” he said. “All the growth is in the emerging markets, the developing world. It’s really tough if you look around the developed world.” he said profits in the United States are the same as they were in 2012. Yusko said at the beginning of the year “every single analyst” said emerging markets were going to underperform the U.S. “That hasn’t been the case,” he said. Indeed, in 2017 the iShares MSCI Emerging Markets ETF (EEM) has been up more than 18% while the S&P 500 index has risen more than 8%.

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“..the number of homes sold in May for less than the asking price rose to 77%.”

Fresh Fears Of UK Housing Market Collapse (Sun)

New signs of the housing market slipping are expected this week when one of the best lead indicators of house price movement is released. The UK Residential Market Survey from the Royal Institution of Chartered Surveyors is expected to show a decrease in the number of members reporting house price rises. It comes after last weekend, it was reported is on the edge of a property price crash which could be as bad as the collapse in the 1990s according to experts who are also warning property value could plunge by 40%. Ahead of this week’s survey, Howard Archer, chief economic adviser to consultancy EY Item Club, told the Mail on Sunday: ‘It may well be that heightened uncertainty after the General Election weighed down on an already fragile housing market in June.’

The expectation of a crash has raised alarms about whether we could see a return of “negative equity” which is when a house falls so much in value it is worth less than the mortgage. Around one million people were hit with negative equity in the 1990s, the Mail on Sunday has reported. Paul Cheshire, professor of Economic Geography at the London School of Economics, said: “We are due a significant correction in house prices. “I think we are beginning to see signs that correction may be starting.” Prices plunged by 37% in 1989 when the price boom fell apart. In its most recent figures, The National Association of Estate Agents reported the number of homes sold in May for less than the asking price rose to 77%. Prof Chesire added that falls in real incomes is also likely to spark for a fall in house prices.

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The EU has a power problem. Germany dictates all important decisions, and in its favor.

The European Union Has a Currency Problem (NI)

Donald Trump, for all his rhetorical clumsiness and intellectual limitations, still sometimes makes a valid point. He does when he says that Germany is “very bad on trade.” However much Berlin claims innocence and good intentions, the fact remains that the euro heavily stacks the deck in favor of German exporters and against others, in Europe and further afield. It is surely no coincidence that the country’s trade has gone from about balance when the euro was created to a huge surplus amounting at last measure to over 8% of the economy—while at the same time every other major EU economy has fallen into deficit. Nor could an honest observer deny that the bias distorts economic structures in Europe and beyond, perhaps most especially in Germany, a point Berlin also seems to have missed.

The euro was supposed to help all who joined it. When it was introduced at the very end of the last century, the EU provided the world with white papers and policy briefings itemizing the common currency’s universal benefits. Politically, Europe, as a single entity with a single currency, could, they argued, at last stand as a peer to other powerful economies, such as the United States, Japan and China. The euro would also share the benefits of seigniorage more equally throughout the union. Because business holds currency, issuing nations get the benefit of acquiring real goods and services in return for the paper that the sellers hold. But since business prefers to hold the currencies of larger, stronger economies, it is these countries that tend to get the greatest benefit. The euro, its creators argued, would give seigniorage advantages to the union as a whole and not just its strongest members.

All, the EU argued further, would benefit from the increase in trade that would develop as people worried less over currency fluctuations. With little risk of a currency loss, interest rates would fall, giving especially smaller, weaker members the advantage of cheaper credit and encouraging more investment and economic development than would otherwise occur. Greater trade would also deepen economic integration, allow residents of the union to choose from a greater diversity of goods and services, and offer the more unified European economy greater resilience in the face of economic cycles, whether they had their origins internally or from abroad. It was a pretty picture, but it did not quite work as planned. Instead of giving all greater general advantages, the common currency, it is now clear, locked in distorting and inequitable currency mispricings.

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Those rules only last until they get in the way of some greater good anyway.

Schaeuble Says Italy Bank-Liquidation Aid Shows Rule Discord (BBG)

German Finance Minister Wolfgang Schaeuble joined his counterparts from the Netherlands and Austria in calling for a review of European Union bank-failure rules after Italy won approval to pour as much as €17 billion ($19.4 billion) of taxpayers’ cash into liquidating two regional lenders. Schaeuble said Italy’s disposal of Banca Popolare di Vicenza and Veneto Banca revealed differences between the EU’s bank-resolution rules and national insolvency laws that are “difficult to explain.” That’s why finance ministers convening in Brussels on Monday have to discuss the Italian cases and consider “how this can be changed with a view to the future,” he told reporters in Brussels before the meeting.

Dutch Finance Minister Jeroen Dijsselbloem said the focus should be on EU state-aid rules for banks that date from 2013, before the resolution framework was put in place. Italy relied on these rules for its state-funded liquidation of the two Veneto banks and its plan to inject €5.4 billion into Banca Monte dei Paschi di Siena SpA. The EU laid down new bank-failure rules in the 2014 Bank Recovery and Resolution Directive after member states provided almost €2 trillion to prop up lenders during the financial crisis. The BRRD foresees small banks going insolvent like non-financial companies. Big ones that could cause mayhem would be restructured and recapitalized under a separate procedure called resolution, in which losses are borne by owners and creditors, including senior bondholders if necessary.

Elke Koenig, head of the euro area’s Single Resolution Board, said last week that the framework for failing lenders needs to be reviewed to “see how to align the rules better.” The EU commissioner in charge of financial-services policy, Valdis Dombrovskis, said that this could only happen once banks have built up sufficient buffers of loss-absorbing debt. The EU’s handling of the Italian banks was held up by U.S. Federal Reserve Bank of Minneapolis President Neel Kashkari as evidence that requiring banks to have “bail-in debt” doesn’t prevent bailouts. The idea that rules on loss-absorbing liabilities that can be converted to equity or written down to cover the costs of a bank collapse “rarely works this way in real life,” he wrote in an op-ed in the Wall Street Journal.

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“..the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016.”

Is This the End of China’s Second Housing Bubble? (ET)

When the economy started to cool in the beginning of 2016, China opened up the debt spigots again to stimulate the economy. After the failed initiative with the stock market in 2015, Chinese central planners chose residential real estate again. And it worked. As mortgages made up 40.5% of new bank loans in 2016, house prices were rising at more than 10% year over year for most of 2016 and the beginning of 2017. Overall, they got so expensive that the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016. Because housing uses a lot of human resources and raw material inputs, the economy also stabilized and has been doing rather well in 2017, according to both the official numbers and unofficial reports from organizations like the China Beige Book (CBB), which collects independent, on-the-ground data about the Chinese economy.

“China Beige Book’s new Q2 results show an economy that improved again, compared to both last quarter and a year ago, with retail and services each bouncing back from underwhelming Q1 performances,” states the most recent CBB report. However, because Beijing’s central planners must walk a tightrope between stimulating the economy and exacerbating a financial bubble, they tightened housing regulations as well as lending in the beginning of 2017. Research by TS Lombard now suggests the housing bubble may have burst for the second time after 2014. “We expect the latest round of policy tightening in the property sector to drive down housing sales significantly over the next six months,” states the research firm, in its latest “China Watch” report. One of the major reasons for the concern is increased regulation. Out of the 55 cities measured in the national property price index, 25 have increased regulation on housing purchases.

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The most tragic species.

“..Earth’s capacity to support life, including human life, has been shaped by life itself..”

The World Is Facing A ‘Biological Annihilation’ Of Species (Ind.)

The world is experiencing a “biological annihilation” of its animal species because of humans’ effect on the Earth, a new study has found. Researchers mapped 27,600 species of birds, amphibians, mammals and reptiles – nearly half of known terrestrial vertebrate species – and concluded the planet’s sixth mass extinction even was much worse than previously thought. They found the number of individual animals that once lived alongside humans had now fallen by as much as 50%, according to a paper in the journal Proceedings of the National Academy of Sciences. The study’s authors, Rodolfo Dirzo and Paul Ehrlich from the Stanford Woods Institute for the Environment, and Gerardo Ceballos, of the National Autonomous University of Mexico, said this amounted to “a massive erosion of the greatest biological diversity in the history of the Earth”.

The authors argued that the world cannot wait to address damage to biodiversity and that the window of time for effective action was very short, “probably two or three decades at most”. Mr Dirzo said the study’s results showed “a biological annihilation occurring globally, even if the species these populations belong to are still present somewhere on Earth”. The research also found more that 30% of vertebrate species were declining in size or territorial range. Looking at 177 well-studied mammal species, the authors found that all had lost at least 30% of the geographical area they used to inhabit between 1990 and 2015. And more than 40% of these species had lost more than 80% of their range. The authors concluded that population extinction were more frequent than previously believed and a “prelude” to extinction.

“So Earth’s sixth mass extinction episode has proceeded further than most assume,” the study said. About 41% of all amphibians are threatened with extinction and 26% of all mammals, according to the International Union for Conservation of Nature (IUCN), which keeps a list of threatened and extinct species. [..] “When considering the frightening assault on the foundations of human civilisation, one must never forget that Earth’s capacity to support life, including human life, has been shaped by life itself,” the paper stated.

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