Oct 222016
 
 October 22, 2016  Posted by at 7:29 am Finance Tagged with: , , , , , , ,  Comments Off on Why The Global Economy Will Disintegrate Rapidly


Pamir, Last Commercial Sailing Ship To Round Cape Horn 1949

 

We have written little on the topic of energy lately, other than related to oil prices going up and down, empty OPEC ‘promises’ to cut oil production, and the incredible debt load threatening to crush US -and Canadian- unconventional oil and gas. It’s a logical outcome of focusing more on finance than energy, because we feel the former has a shorter timeline than the latter. Something that harks back to our Oil Drum days.

But that doesn’t mean that the idea and/or principle of peak oil has disappeared, or that we have completely forgotten it. It has just been snowed under by the financial crisis (and by unconventinal oil and gas). And while we continue to find that the financial world will dump us into a bigger crisis sooner than energy will, it’s useful to look at oil et al from time to time.

Please note: we don’t wish to deny that oil depletion has its own dynamics, but in our view those dynamics will be hugely affected by the financial crisis that is looming big and will strike first. A crisis that, by the way, will affect not just oil and gas, but solar and wind just as much. You can get only as much ‘alternative’ energy as you can pay for, and that is before we even mention solar and wind’s EROEI (Energy Return On Energy Investment).

What the world needs to do, but we very much doubt it will voluntarily, is not to look for other forms of energy to replace oil and gas, but to look for ways to use much less energy (90% or so) while still maintaining societies that function as best they can. We doubt this because man is no more made to volunteer for downsizing than any other species.

The interview below with Louis Arnoux by the SRSrocco Report, combined with an article Louis wrote in July on the site of our old friend Ugo Bardi (is Florence really 6 years ago already?), is an excellent opportunity to catch up on energy issues.

The discussion of energy relative to finance will no doubt continue, and Louis doesn’t seem to have the exact same view as us, but that’s fine, or at least it shouldn’t deter us from listening. This graph from his work, for instance, contains a great depiction of what EROEI really means, and how it works out, and that is important to know.

And yes, we are aware of the contradiction between the provocative title of this post (borrowed from SRSrocco Report) and our own view that it’s not energy that will bring the economy down; the internal dynamics of finance don’t need any help on their way towards crashing the system. But it’s a great title nonetheless.

 

 

First, here’s the SRSrocco Report interview, below it you’ll find the article. Note: this is part 1, links to parts 2 and 3 are provided.

 

 

 

Louis Arnoux: Some reflections on the Twilight of the Oil Age – part I:
Alice looking down the end of the barrel

 

 

This three-part post was inspired by Ugo’s recent post concerning Will Renewables Ever ReplaceFossils? and recent discussions within Ugo’s discussion group on how is it that “Economists still don’t get it”?  It integrates also numerous discussion and exchanges I have had with colleagues and business partners over the last three years.

Introduction


Since at least the end of 2014 there has been increasing confusions about oil prices, whether so-called “Peak Oil” has already happened, or will happen in the future and when, matters of EROI (or EROEI) values for current energy sources and for alternatives, climate change and the phantasmatic 2oC warming limit, and concerning the feasibility of shifting rapidly to renewables or sustainable sources of energy supply.  Overall, it matters a great deal whether a reasonable time horizon to act is say 50 years, i.e. in the main the troubles that we are contemplating are taking place way past 2050, or if we are already in deep trouble and the timeframe to try and extricate ourselves is some 10 years. Answering this kind of question requires paying close attention to system boundary definitions and scrutinising all matters taken for granted.

It took over 50 years for climatologists to be heard and for politicians to reach the Paris Agreement re climate change (CC) at the close of the COP21, late last year.  As you no doubt can gather from the title, I am of the view that we do not have 50 years to agonise about oil.  In the three sections of this post I will first briefly take stock of where we are oil wise; I will then consider how this situation calls upon us to do our utter best to extricate ourselves from the current prevailing confusion and think straight about our predicament; and in the third part I will offer a few considerations concerning the near term, the next ten years – how to approach it, what cannot work and what may work, and the urgency to act, without delay.

Part 1 – Alice looking down the end of the barrel


In his recent post, Ugo contrasted the views of the Doomstead Diner‘s readers  with that of energy experts regarding the feasibility of replacing fossil fuels within a reasonable timeframe.  In my view, the Doomstead’s guests had a much better sense of the situation than the “experts” in Ugo’s survey.  To be blunt, along current prevailing lines we are not going to make it.  I am not just referring here to “business-as-usual” (BAU) parties holding for dear life onto fossil fuels and nukes.  I also include all current efforts at implementing alternatives and combating CC.  Here is why.   

The energy cost of system replacement


What a great number of energy technology specialists miss are the challenges of whole system replacement – moving from fossil-based to 100% sustainable over a given period of time.  Of course, the prior question concerns the necessity or otherwise of whole system replacement.  For those of us who have already concluded that this is an urgent necessity, if only due to CC, no need to discuss this matter here.  For those who maybe are not yet clear on this point, hopefully, the matter will become a lot clearer a few paragraphs down.

So coming back for now to whole system replacement, the first challenge most remain blind to is the huge energy cost of whole system replacement in terms of both the 1st principle of thermodynamics (i.e. how much net energy is required to develop and deploy a whole alternative system, while the old one has to be kept going and be progressively replaced) and also concerning the 2nd principle (i.e. the waste heat involved in the whole system substitution process).  The implied issues are to figure out first how much total fossil primary energy is required by such a shift, in addition to what is required for ongoing BAU business and until such a time when any sustainable alternative has managed to become self-sustaining, and second to ascertain where this additional fossil energy may come from. 

The end of the Oil Age is now


If we had a whole century ahead of us to transition, it would be comparatively easy.  Unfortunately, we no longer have that leisure since the second key challenge is the remaining timeframe for whole system replacement.  What most people miss is that the rapid end of the Oil Age began in 2012 and will be over within some 10 years.  To the best of my knowledge, the most advanced material in this matter is the thermodynamic analysis of the oil industry taken as a whole system (OI) produced by The Hill’s Group (THG) over the last two years or so (https://www.thehillsgroup.org). 

THG are seasoned US oil industry engineers led by B.W. Hill.  I find its analysis elegant and rock hard.  For example, one of its outputs concerns oil prices.  Over a 56 year time period, its correlation factor with historical data is 0.995.  In consequence, they began to warn in 2013 about the oil price crash that began late 2014 (see: https://www.thehillsgroup.org/depletion2_022.htm).  In what follows I rely on THG’s report and my own work.
Three figures summarise the situation we are in rather well, in my view.
Figure 1 – End Game
For purely thermodynamic reasons net energy delivered to the globalised industrial world (GIW) per barrel by the oil industry (OI) is rapidly trending to zero.  By net energy we mean here what the OI delivers to the GIW, essentially in the form of transport fuels, after the energy used by the OI for exploration, production, transport, refining and end products delivery have been deducted. 
However, things break down well before reaching “ground zero”; i.e. within 10 years the OI as we know it will have disintegrated. Actually, a number of analysts from entities like Deloitte or Chatham House, reading financial tealeaves, are progressively reaching the same kind of conclusions.[1]

The Oil Age is finishing now, not in a slow, smooth, long slide down from “Peak Oil”, but in a rapid fizzling out of net energy.  This is now combining with things like climate change and the global debt issues to generate what I call a “Perfect Storm” big enough to bring the GIW to its knees.

In an Alice world


At present, under the prevailing paradigm, there is no known way to exit from the Perfect Storm within the emerging time constraint (available time has shrunk by one order of magnitude, from 100 to 10 years).  This is where I think that Doomstead Diner’s readers are guessing right.  Many readers are no doubt familiar with the so-called “Red Queen” effect illustrated in Figure 2 – to have to run fast to stay put, and even faster to be able to move forward.  The OI is fully caught in it.

Figure 2 – Stuck on a one track to nowhere

The top part of Figure 2 highlights that, due to declining net energy per barrel, the OI has to keep running faster and faster (i.e. pumping oil) to keep supplying the GIW with the net energy it requires.  What most people miss is that due to that same rapid decline of net energy/barrel towards nil, the OI can’t keep “running” for much more than a few years – e.g. B.W. Hill considers that within 10 years the number of petrol stations in the US will have shrunk by 75%…  

What people also neglect, depicted in the bottom part of Figure 2, is what I call the inverse Red Queen effect (1/RQ).  Building an alternative whole system takes energy that to a large extent initially has to come from the present fossil-fuelled system.  If the shift takes place too rapidly, the net energy drain literally kills the existing BAU system.[2] The shorter the transition time the harder is the 1/RQ.  

I estimate the limit growth rate for the alternative whole system at 7% growth per year.  

In other words, current growth rates for solar and wind, well above 20% and in some cases over 60%, are not viable globally.  However, the kind of growth rates, in the order of 35%, that are required for a very short transition under the Perfect Storm time frame are even less viable – if “we” stick to the prevailing paradigm, that is.  As the last part of Figure 2 suggests, there is a way out by focusing on current huge energy waste, but presently this is the road not taken.

On the way to Olduvai


In my view, given that nearly everything within the GIW requires transport and that said transport is still about 94% dependent on oil-derived fuels, the rapid fizzling out of net energy from oil must be considered as the defining event of the 21st century – it governs the operation of all other energy sources, as well as that of the entire GIW.  In this respect, the critical parameter to consider is not that absolute amount of oil mined (as even “peakoilers” do), such as Million barrels produced per year, but net energy from oil per head of global population, since when this gets too close to nil we must expect complete social breakdown, globally. 

The overall picture, as depicted ion Figure 3, is that of the “Mother of all Senecas” (to use Ugo’s expression).   It presents net energy from oil per head of global population.[3]  The Olduvai Gorge as a backdrop is a wink to Dr. Richard Duncan’s scenario (he used barrels of oil equivalent which was a mistake) and to stress the dire consequences if we do reach the “bottom of the Gorge” – a kind of “postmodern hunter-gatherer” fate.

Oil has been in use for thousands of year, in limited fashion at locations where it seeped naturally or where small well could be dug out by hand.  Oil sands began to be mined industrially in 1745 at Merkwiller-Pechelbronn in north east France (the birthplace of Schlumberger).  From such very modest beginnings to a peak in the early 1970s, the climb took over 220 years.  The fall back to nil will have taken about 50 years.

The amazing economic growth in the three post WWII decades was actually fuelled by a 321% growth in net energy/head.  The peak of 18GJ/head in around 1973, was actually in the order of some 40GJ/head for those who actually has access to oil at the time, i.e. the industrialised fraction of the global population.

Figure 3 – The “Mother of all Senecas”

In 2012 the OI began to use more energy per barrel in its own processes (from oil exploration to transport fuel deliveries at the petrol stations) than what it delivers net to the GIW.  We are now down below 4GJ/head and dropping fast.

This is what is now actually driving the oil prices: since 2014, through millions of trade transactions (functioning as the “invisible hand” of the markets), the reality is progressively filtering that the GIW can only afford oil prices in proportion to the amount of GDP growth that can be generated by a rapidly shrinking net energy delivered per barrel, which is no longer much.  Soon it will be nil. So oil prices are actually on a downtrend towards nil. 

To cope, the OI has been cannibalising itself since 2012.  This trend is accelerating but cannot continue for very long.  Even mainstream analysts have begun to recognise that the OI is no longer replenishing its reserves.  We have entered fire-sale times (as shown by the recent announcements by Saudi Arabia (whose main field, Ghawar, is probably over 90% depleted) to sell part of Aramco and make a rapid shift out of a near 100% dependence on oil and towards “solar”.

Given what Figure 1 to 3 depict, it should be obvious that resuming growth along BAU lines is no longer doable, that addressing CC as envisaged at the COP21 in Paris last year is not doable either, and that incurring ever more debt that can never be reimbursed is no longer a solution, not even short-term.  
Time to “pull up” and this requires a paradigm change capable of avoiding both the RQ and 1/RQ constraints.  After some 45 years of research, my colleagues and I think this is still doable.  Short of this, no, we are not going to make it, in terms of replacing fossil resources with renewable ones within the remaining timeframe, or in terms of the GIW’s survival.
Next: 

Part 2 – Enquiring into the appropriateness of the question

Part 3 – Standing slightly past the edge of the cliff

 

 

Bio: Dr Louis Arnoux is a scientist, engineer and entrepreneur committed to the development of sustainable ways of living and doing business.

 

 

Oct 092016
 
 October 9, 2016  Posted by at 8:54 am Finance Tagged with: , , , , , , ,  2 Responses »


NPC Balloon at Shriners convention, Washington DC 1923

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)
The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)
World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)
Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)
Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)
Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)
US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)
UK MPs Demand Vote On Hard Brexit Plans (G.)
Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

 

 

Recovery in all its glory.

Less Than Half Of US 22-26-Year-Olds Pay Their Own Rent, Health Insurance (F.)

According to a new survey, people in their 20s and 30s are having trouble “adulting,” or achieving financial independence. Conducted by Bank of America and USA Today, the report says less than half of the 22-26-year-olds surveyed pay their own rent (47%), health insurance (41%), or contribute to a retirement account (27%). One thing they learned from the survey of Millennials (born in the early 1980s to mid ‘90s) and Generation Z’ers (born in the mid-1990s to early 2000s) said Andrew Plepler, the bank’s Enterprise, Social and Governance executive, was that “adulthood” defined by people in their 20s isn’t about age or milestones such as getting married or buying a home. “Instead, the majority said that adulthood really begins when you’re financially independent – when you can find a job, pay your own bills, cover your own rent and stop relying on mom and dad for financial support,” he said.

Indeed, the respondents who did report feeling like adults said it’s because they had help preparing from their parents (60%), because they have a job (60%) or they had a role model to guide the way (49%). They’re also thinking ahead about the economy in the wake of the presidential election : • 65% say economic issues are more important to them than social issues (34%) • Most would choose a candidate that’s best for the country (79%) over one who would improve just their own financial situation (21%) • Job growth/unemployment (27%), health care costs (25%) and college affordability/student debt (24%) rose to the top as young voters’ top campaign issues in this election. • Among those with student debt, nearly 25% say it will impact the way they vote “a great deal”

Read more …

Yeah, maybe net worth vs energy use is a good way to measure reality.

The Coming Collapse Of US Net Worth Will Wipe Out Millions Of Americans (SRSr)

As the Financial Circus continues today, pushing down the precious metals prices, millions of Americans are going to get wiped out when the collapse of U.S. net worth begins in earnest. Anyone with a tad bit of common sense realizes these financial markets today are totally disconnected from reality. With new stories of 40 million Russians to take part in “Nuclear Disaster” drill, the Philippine President telling President Obama “To Go To Hell”, he’s buying weapons from Russia, U.S. Suspends Diplomatic Relations With Russia on Syria, U.S. Ends Fiscal 2014 With $1.4 Trillion Debt Increase: Third Largest In History, Deutsche Bank Troubles Raise Fear of Global Shock, it’s completely hilarious that the gold and silver prices are selling off big time today.

With 90% of the U.S. media now in control by six large mega-corporations, Americans have no idea just how bad the U.S. financial system has become. News stories today that would have caused a stock market crash and a spike in the precious metals years ago… no longer are a realistic barometer of the market today. Instead, the broader Stock, Bond and Real Estate Markets where 99% of Americans are invested, continue to be propped up. How propped up? Well, let’s say by a staggering $31 trillion in the past six years. According to the wonderful folks at the Federal Reserve, U.S. net worth increased from $57.9 trillion Q2 2010, to a stunning $89 trillion Q2 2016:

I would imagine a lot of wealthy Americans believe they are living life “High On The Hog” today. However, that $31 trillion in additional wealth is a nothing more than a “Digital Mirage.” For wealth to grow, more energy must be burned and positive economic activity must be generated. This is the foundation of all economic principles. Unfortunately, Americans did not burn more energy to create this additional $31 trillion in U.S. net worth. Matter-a-fact, total U.S. energy consumption in 2016 will likely turn out to be less than it was in 2010. This chart is very simple to understand. The left axis shows U.S. net worth in trillions of dollars while the right axis indicates total U.S. energy consumption in quadrillion Btu’s (that’s one hell of a lot of energy). As we can see, total U.S. energy consumption has fluctuated a bit, but has been relatively flat for the past six years.

[..] How the U.S. GDP increased nearly 25% in six years while its energy consumption remained flat is one for the record books. Now, this wasn’t always the case. U.S. energy consumption nearly tripled from 34 quad Btu’s in 1950 to 98 quad Btu’s in 2000. Thus, U.S. GDP increased as total energy consumption increased.

Read more …

Obsolete.

World Leaders Vow To Boost Growth Despite Brexit, Anti-Globalization (CNBC)

World finance leaders pledged Saturday to use more resources to try to bolster economic gains as they confront stubbornly slow growth and a rising backlash against globalization. The policy committee for the 189-nation IMF said the world has “benefited tremendously from globalization” but that protectionism is a threat. Increasing anger over globalization dominated the annual meetings of the IMF and its sister lending agency, the World Bank. The unhappiness is evident in Britain’s vote in June to leave the EU and in the U.S. presidential campaign of Republican Donald Trump. Trump has said millions of Americans have lost jobs or seen wages stagnate because of unfair trade practices of countries such as China and Mexico. He is vowing to impose penalty tariffs if those practices are not halted.

The British vote sent shockwaves through financial markets this summer, and there were further troubles Friday when the British pound plunged by 6% against the dollar before recovering. Investors worry whether there will be more turbulence if the British exit proves to be messy and prolonged. IMF Managing Director Christine Lagarde said “growth has been too low for too long, benefiting too few,” and that’s what officials need to address. In their statement, IMF officials committed to designing and putting in place policies “to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.”

Read more …

Raising more debt to pay for legal costs….

Deutsche Bank CEO Cryan Doesn’t Reach Accord With US (BBG)

Deutsche Bank CEO John Cryan failed to reach an agreement with the U.S. Justice Department to resolve a years-long investigation into its mortgage-bond dealings during a meeting in Washington Friday, Germany’s Bild newspaper reported. The meeting was meant to negotiate the multi-billion-dollar settlement the bank will have to pay to resolve alleged misconduct arising from its dealings in residential-mortgage backed securities that led to the 2008 financial crisis, according to a Bild am Sonntag report. The German lender is still considering seeking damages against Anshu Jain and Josef Ackermann, who are both former CEOs of the bank, the newspaper reported. Bild said the bank froze part of the millions in bonus payments to Jain and other former top managers.

Concerns about Deutsche Bank’s ability to pay the $14 billion opening settlement bid from the Justice Department sent the lender’s stock to a record low last month. The bank, which set aside €5.5 billion ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including one into a money-laundering probe tied to its Russia operations. Analysts at Barclays speculate that could cost the bank as much as €2 billion. Cryan, a Briton who speaks fluent German, has sought for the last three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health.

The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise €5 billion, people with knowledge of the matter said this week. Qatar’s royal family is also considering increasing its stake in Deutsche Bank to as much as 25%, according to people with knowledge of the matter. Cryan has said the lender may fail to be profitable this year after posting the first annual loss since 2008 last year. With plans to eliminate thousands of jobs and cut risky assets, he called 2016 a peak restructuring year.

Read more …

The state of the German economy: selling off assets.

Qatari Investors Eyeing Control of Deutsche Bank (Spiegel)

On September 15, the Justice Department in the United States ordered the company to pay a $14 billion fine to settle accusations of fraud in Deutsche Bank’s packaging and sale of mortgage-backed securities in the free-wheeling days that led to the global financial crisis. Speculators and politicians have been in a state of near panic since the announcement, with open speculation about the possibility of a government bailout for the prestigious bank. An atmosphere of frustration and depression is currently prevailing inside the bank and Cryan is trying to combat it with messages of perseverance. For a time, Deutsche Bank’s market value plummeted below €15 billion, down from €35 billion a year ago.

Large-scale investor HBJ and his cousin – the former Emir of Qatar, Sheik Hamad bin Khalifa al-Thani, who he has since brought in as an investor as well – are believed to have lost more than a billion euros – on paper, at least. This summer, the two increased their holdings to just under 10% of the company, but Deutsche Bank’s market capital has since continued to slide. And yet, it appears that the low share price is encouraging the sheikhs to invest even more now that it wouldn’t take more than a few billion for them to gain control of Deutsche Bank. Information obtained by SPIEGEL indicates that the al-Thani cousins are considering propping up the bank with a fresh capital infusion and purchasing a blocking stake of 25% together with other investors.

To do this, they could partner with sovereign wealth funds, some of which are apparently willing to invest in the company. But the information obtained by SPIEGEL also suggests that HBJ and the former emir would only be willing to take that risk if they could have a strong say in business decisions at Deutsche Bank. They are said to be deeply frustrated over the fact that the bank has been unable to maneuver itself out of its defensive position. The Qataris are said to be increasingly unhappy with Cryan’s current management team and believe the company’s present course is dangerous. The problems can’t be fixed through cost saving measures alone, they believe, particularly with eroding revenues and profits could. This displeasure manifested itself through the appointment in July of attorney Stefan Simon to the supervisory board. He represents the Qataris’ interests inside the company.

Read more …

Might as well have said 2029. Useless and hollow.

Draghi Points to 2019 as Time for Inflation Mission Accomplished (BBG)

Inflation in the euro area should return to the European Central Bank’s target by early 2019 at the latest, ECB President Mario Draghi said. “Our inflation rate will pick up during the course of 2017, and then will continue moving in 2018 toward the objective which is close but below 2%,” Draghi said on Saturday at a press conference during the annual meeting of the IMF in Washington. “This is predicated on maintaining the extraordinary support of our monetary policy.” While the ECB hasn’t met its own definition of its mandate on inflation since early 2013, an unprecedented wave of stimulus measures during Draghi’s tenure including the current asset-purchase pace of €80 billion per month has helped keep the currency bloc away from outright deflation.

Draghi’s comments imply that fresh staff forecasts due in December – which build-in the impact of current stimulus – will show a 2019 inflation rate in line with the goal. Achieving that target would mark the end of Draghi’s fight against the euro area’s stubbornly low inflation after more than six years. The ECB has deployed negative rates, asset purchases and cheap long-term loans to banks to rein in inflation. The December round of staff forecasts may serve as the basis for a decision on whether the ECB intends to continue its quantitative easing program at the current rate beyond the end date in March 2017, whether the program will be wound down gradually after that, or if it could be stopped completely.

Read more …

Update. No escape. No velocity.

US Unemployment Rate Shows At 5% But More Realistic Rate Is Higher (CNBC)

The national unemployment rate rose slightly to 5% in September, the Labor Department reported Friday. But relying on that one headline number as an indicator of the economy’s direction leaves a lot of important information below the surface. Every month on “Big Jobs Friday,” the Bureau of Labor Statistics releases a boatload of data, each point of which provides its own unique perspective on a facet of the nation’s employment situation. Economists look past the official unemployment rate — that 5% figure, which is known as the “U-3” rate — to other metrics that provide their own nuanced views of the state of jobs. One of those figures is called the U-6 rate, which has a broader definition of what unemployment means. That figure remained unchanged at 9.7% in September.

The official unemployment rate is composed of “total unemployed, as a% of the civilian labor force,” but doesn’t include a number of employment situations in which workers might find themselves. The U-6 rate is defined as all unemployed, plus “persons marginally attached to the labor force, plus total employed part time for economic reasons, as a% of the labor force.” In other words: That’s the unemployed, the underemployed and the discouraged. The U-3 rate has in the past few months returned to the prerecession levels that economists consider full employment. The U-6 rate has remained above precession levels, though it has seen significant improvement in the past few years. Economists expected 176,000 jobs to be added in September, according to a late Reuters estimate. The report showed that the market added 156,000 jobs.

Read more …

I see busy lawyers in your future…

UK MPs Demand Vote On Hard Brexit Plans (G.)

Theresa May is under massive cross-party pressure to grant MPs a vote on any decision to leave or limit UK involvement in the European single market, amid growing outrage at the prospect that parliament could be bypassed over the biggest economic decision in decades. Tory MPs joined forces with former leaders of Labour and the Liberal Democrats, the SNP and Greens to insist that parliament have a say and a vote, pointing out that, while the British people had backed leaving the EU, they had not chosen to leave the biggest trading market in the western world. Former Labour leader Ed Miliband held discussions with pro-EU Tory MPs on Saturday, and was said to be considering tabling an urgent question in the Commons, demanding that May appear before parliament to explain its future role in Brexit decisions, when MPs return on Monday.

The SNP and pro-EU Tory MPs Nicky Morgan and Anna Soubry were also considering tabling questions, while former Lib Dem leader Nick Clegg, now the party’s Brexit spokesman, said it would be appalling if detailed terms of Brexit, including the UK’s future relations with the single market, were not voted on by MPs. Miliband told the Observer: “Having claimed that the referendum was about returning sovereignty to Britain, it would be a complete outrage if May were to determine the terms of Brexit without a mandate from parliament. “There is no mandate for hard Brexit, and I don’t believe there is a majority in parliament for [it] either. Given the importance of these decisions for the UK economy … it has to be a matter for MPs.”

Clegg said: “My great worry is that while there will be a vote on repealing the 1972 European Communities Act, which is about the decision to leave the EU, it will be left to the executive alone to decide the terms of Brexit. That would not be remotely acceptable.”

Read more …

It’s becoming a lovely nation.

Britain ‘Ignored Plea By France’ To Aid Stranded Calais Child Refugees (G.)

The Home Office has refused to respond to official requests from the French authorities to accept unaccompanied child refugees stranded in Calais who are eligible to come to Britain, the British Red Cross has said. With the planned demolition of Calais’s refugee camp only weeks away, the Red Cross says the Home Office is turning down “take charge” requests by the French on often pedantic grounds. Once such a request has been accepted by the UK government it is in effect responsible for a child who is seeking asylum. In some cases British officials claim to have “misplaced” requests from the French to help children, raising questions over Britain’s approach to what humanitarian experts call an urgent child protection issue.

The camp is scheduled to be demolished this month, with no provision agreed by the British and French for most of the 1,000 unaccompanied minors there, of whom at least 400 are eligible to enter the UK. A new report damningly articulates the Home Office’s intransigence, with research by the Red Cross revealing it takes up to 11 months on average to bring a child to the UK under an EU scheme to reunite families. Lawyers say there is no reason why the process should take more than several weeks. The report also identifies “problems ranging from basic administrative errors causing severe delays to a shortage of human resources on the French side”. It accuses the Home Office of unnecessarily forcing vulnerable children to stay in the camp for months after their case is rejected because of a basic administrative error or lack of documents. “Insufficient discretion or consideration is made for the child’s vulnerability and circumstances,” says the report, No Place For Children, released on Sunday.

Read more …

Sep 132016
 
 September 13, 2016  Posted by at 9:03 am Finance Tagged with: , , , , , , , , , ,  2 Responses »


Harris&Ewing Calvin Coolidge Inaugural Ball. March 4, Washington DC 1925

Energy Exploration & Production Debt Recoveries Hit ‘Catastrophic’ Level (BBG)
Oil Bankruptcies Leave Lenders With ‘Catastrophic’ Recovery Rate (BBG)
Strategist: If Trump Wins, ‘The U.S. Economy Would Take Off in a Big Way’ (BBG)
A Homerun For The Donald – Attack The Fed’s War On Americans (Stockman)
Fed Looks Unlikely To Hike Next Week After Brainard Warning (R.)
The Expansion in Developed Markets Might Be Over (BBG)
China’s Infrastructure Planners are on a Road to Nowhere (BBG)
Michael Pettis: Surplus Trade Statements by Schäuble “Utter Lunacy” (Mish)
ECB Lets Banks Offload Bad Loans At Own Speed (R.)
Greek Prices Keep Rising as Household Incomes Keep Shrinking (Kath.)
US Funds And Iceland Square Up Over Bond Freeze (R.)
Australia 6 Weeks From A Housing Collapse, US Report Warns (ZH)
NZ PM Wary Of Policies That Could Cause Catastrophic Housing Slump (Hickey)
Signs of Desperation (Jim Kunstler)
The Tropical Paradise The US Wants To Turn Into A War Zone (G.)

 

 

We’ve warned on just this for a long time. The US oil casino.

“Senior unsecured bondholders were hammered even more, averaging just 6 cents on the dollar.”

Energy Exploration & Production Debt Recoveries Hit ‘Catastrophic’ Level (BBG)

Creditors of energy exploration and production companies that went bankrupt last year recouped less than half the usual amount for their claims, and 2016 is shaping up just as bad, according to Moody’s Investors Service. Recovery rates for 15 U.S. E&P bankruptcies averaged a “catastrophic” 21% last year, well below the historical average of 59%, Moody’s said in a report released Monday. Senior unsecured bondholders were hammered even more, averaging just 6 cents on the dollar. Collectively, the debacle could be worse than the telecom industry’s collapse in the early 2000s, measured by both the number of companies that go bust and the recoveries, Moody’s said.

Many of the E&P firms that went bankrupt in 2015 were smaller companies with less flexibility to maneuver as energy prices crumbled, while larger companies were able to stave off failure with debt exchanges and new second-lien issuance, analysts led by David Keisman wrote. But more than half of those swaps were followed by bankruptcy, according to the report. “I don’t expect the recoveries for the companies that went bankrupt in the first half of 2016 to be any better,” Moody’s analyst Amol Joshi said in an interview. “The worst may be behind them, but the sector still remains quite stressed.”

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So who’s going to jump in to save the lenders in the “worst bust of any industry this century”?

Oil Bankruptcies Leave Lenders With ‘Catastrophic’ Recovery Rate (BBG)

U.S. oil bankruptcies haven’t been this “catastrophic” for lenders in a long time, in what may be the worst bust of any industry this century, according to Moody’s Investors Service. Creditors are recovering an average 21% of what they lent, compared with about 59% in past decades, the credit-rating agency said Monday in a report that looks into lending to 15 exploration and production companies that filed for bankruptcy protection in 2015. That may be on par with, or worse than, the telecommunications industry collapse in 2001 and 2002, the study led by David Keisman said. High-yield bonds recovered a mere 6%, compared to 30% in previous years going back to 1987.

Defaults in the oil and natural gas industry have been rising through a market slump that has exceeded two years as companies lacked the cash to make interest payments on their debt. Bankruptcies among U.S. producers so far this year are about twice the number among companies rated by Moody’s in all of 2015, the report said. The oil and gas figures have helped propel U.S. corporate defaults to the highest since 2009. Less than half of the companies that negotiated distressed-debt exchanges in 2015 to try to stave off bankruptcy succeeded, the analysts wrote.

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The opposite of what was a popular view until recently, and probably still is among many.

Strategist: If Trump Wins, ‘The U.S. Economy Would Take Off in a Big Way’ (BBG)

Financial markets are starting to “wake up” to the possibility of a Donald Trump presidency in the wake of Hillary Clinton’s recent health concerns and tightening polls, according to Bank of America Merrill Lynch Head of Global Rates and Currencies Research David Woo. He says investors are still underestimating the real estate mogul’s chances of ascending to the highest office in the land, and what a seismic change this could be for markets and the world’s largest economy. While the outsider candidate poses a risk to one of 2016’s hot investment strategies, he could prove to be a massive boost for the greenback and U.S. economy.

“The U.S. economy would take off in a big way” if Trump were elected and Republicans control both legislative houses next year, said Woo, thanks to the fiscal stimulus that Trump would enact. Trump has pledged to spend at least twice as much as the Democratic nominee on infrastructure and also enact a massive tax cut, two measures that would entail a renewed issuance of Treasuries. Against this backdrop, the greenback would strengthen and U.S. Treasury yields would rise, a view shared by Woo and other fixed income veterans as well.

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Spot on from Stockman.

A Homerun For The Donald – Attack The Fed’s War On Americans (Stockman)

The central banks have gone so far off the deep-end with financial price manipulation that it is only a matter of time before some astute politician comes after them with all barrels blasting. As a matter of fact, that appears to be exactly what Donald Trump unloaded on bubble vision this morning: By keeping interest rates low, the Fed has created a “false stock market,” Donald Trump argued in a wide-ranging CNBC interview, exclaiming that Fed Chair Janet Yellen and central bank policymakers are very political, and should be “ashamed” of what they’re doing to the country… He’s completely correct.

After all, they are crushing real wages with their 2% inflation targeting; destroying savers with NIRP and sub-zero rates; and burying unborn taxpayers in monumental debts that today’s politicians are pleased to issue with reckless abandon because the short-run carry cost is nil. Interest on the Uncle Sam’s $19.4 trillion of debt, for example, is easily $500 billion lower than its true economic cost based on a normal yield after inflation and taxes and elimination of the phony $100 billion per year in so-called Fed “profits” that are booked by the treasury as negative interest expense. Alas, when interest rates eventually normalize, the Treasury’s debt service costs will soar by hundreds of billions.

At the same time, the entirety of the Fed’s “profits”, which are conjured from thin air because it buys interest-yielding government and GSE debt with printing press liabilities which cost virtually nothing, will disappear. That’s because it will be forced to take reserve charges for giant principal losses on the falling prices of its $4.5 billion portfolio of government and GSE bonds. At that moment, the long-abused citizens of Flyover America, who have already been clobbered as savers and wage earners, will get hit with the triple whammy of soaring Federal tax bills. And this is not a matter of if or even when; it’s really just a question of how soon. When it comes to the establishment’s monetary lunacy, of course, Mario Draghi’s is always leading the charge.

So just consider what has been happening after his inartful punt during last week’s ECB meeting. First, the casino cheerleaders have insisted that there is nothing to sweat about with respect to the incredible anomaly that now plagues the euro-bond markets. To wit, socialist Europe has apparently not issued enough qualifying debt (with a yield not below the negative 0.4% threshold) to fill the ECB’s $90 billion per month purchase target. The solution is real simple according to Draghi’s acolytes in the casino. In addition to lowering the bond yield threshold as deep into the subzero freezer as necessary, they have proffered an even better solution. Just buy up the stock market, too!

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What, that was the highly anticipated speech?

Fed Looks Unlikely To Hike Next Week After Brainard Warning (R.)

The Federal Reserve should avoid removing support for the U.S. economy too quickly, Fed Governor Lael Brainard said on Monday in comments that solidified the view the central bank would leave interest rates unchanged next week. Brainard said she wanted to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates, and that the United States still looked vulnerable to economic weakness abroad. “Today’s new normal counsels prudence in the removal of policy accommodation,” Brainard, one of six permanent voters on the Fed’s rate-setting committee, told the Chicago Council on Global Affairs. She said the U.S. labor market was not yet at full strength, which means “the case to tighten policy preemptively is less compelling.”

Brainard did not comment on the specific timing of future rate policy changes but she held firm in arguing for caution in what could be the last word from a Fed policymaker before the central bank’s Sept. 20-21 meeting. Policymakers will go into the meeting divided, with some concerned current low rates will fuel a surge in inflation while another camp, which includes Brainard, has argued that the Fed should not rush to raise rates. Many other policymakers think the U.S. job market is near full strength and Fed Chair Janet Yellen argued in July the case for rate increases has strengthened. “I think circumstances call for a lively discussion next week,” said Atlanta Fed President Dennis Lockhart, who will not be a voter at next week’s policy review but will participate in discussions.

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How predictable would you like it?

The Expansion in Developed Markets Might Be Over (BBG)

As traders are settling back into their routine after the slow summer months, things have started taking a turn for the worse in global markets. Now one indicator is even pointing to the end of the expansion in developed markets. According to new research from Morgan Stanley, so many developed countries are showing enough signs of slowing, that its cycle indicators — which take macro, credit and corporate factors into account — are leading analysts led by Chief Cross-Asset Strategist Andrew Sheets to conclude that a downturn could be coming sooner than some may think.

“The Morgan Stanley Cycle Indicators across the U.S., eurozone and Japan have stalled, highlighting the increasing risk that we have moved from ‘expansion’ to ‘downturn’ in [developed markets], even as our economics team flags upside risks to its macro outlook,” the team said in a note published on Sundayy. The team points out that if this is in fact the start of a cycle change, it would represent the shallowest recovery for the U.S. in more than 30 years. Here’s a look how these cycles have played out in the past, with recessions shaded.

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“..for over half of the infrastructure investments in China made in the last three decades the costs are larger than the benefits they generate..”

China’s Infrastructure Planners are on a Road to Nowhere (BBG)

For all the roads, bridges and railways that China builds every year in an effort to keep the economy humming, the massive splurge may not be having the desired effect. That’s because more than half of China’s infrastructure investment has destroyed economic value instead of generating it, according to a study from the University of Oxford’s Saïd Business School. “The evidence suggests that for over half of the infrastructure investments in China made in the last three decades the costs are larger than the benefits they generate,” according to Atif Ansar, one of the study’s co-authors.

What’s more, unless China shifts its focus to fewer and higher quality types of public works that leave a positive legacy “the country is headed for an infrastructure-led national financial and economic crisis, which is likely also to be a crisis for the international economy,” according to the analysis that’s published in the Oxford Review of Economic Policy. China spent more than $10.8 trillion in infrastructure in the last decade alone, according to Bloomberg calculations based on official data of investment in categories such as transport, storage, power supply and water conservation. The Oxford study’s findings jar with views that China’s aggressive government-led infrastructure spending is vital to keep growth on track.

Researchers examined 21 large rail projects and 74 road projects whose starting dates ranged from 1984 to 2008. They then compared the economic value of those to 806 transport projects built in rich democracies. Instead of finding a long lasting, positive economic legacy, the Oxford study found that 75% of the transport projects in China exceeded budget. While one third of the roads built were congested, 41% of them have low usage. Both extremes are equally undesirable because “large unused capacity equals waste, as does too little capacity,” according to the paper. The buildup has also exacerbated China’s swelling debt as cost overruns equal about a third of the nation’s $28.2 trillion debt mountain, according to the paper.

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Once more, why the euro will fail: All eurozone countries get punished for not being enough like Germany. But the only way Germany can be Germany is for the others not to be.

Michael Pettis: Surplus Trade Statements by Schäuble “Utter Lunacy” (Mish)

A few days ago I pinged global trade expert Michael Pettis with my post Germany’s Finance Minister Blames ECB For German Trade Surplus; Why the Eurozone Will Destruct. His reply was interesting but not at all unexpected. Pettis labeled Wolfgang Schaeuble’s comments “utter lunacy”. Germany has no plans to reduce its export surplus, Finance Minister Wolfgang Schaeuble said on Friday, as the ECB has not changed its monetary policy which has led to a weaker euro which in turn boosts German exports. “Even before the European Central Bank decided its policies of unusual monetary policy, which also led to the euro exchange rate falling significantly, I said that we will increase German export surplus,” Schaueble told reporters. When asked whether he had any plans to decrease Germany’s export surplus, Schaeuble said: “I haven’t heard that the ECB is changing its monetary policy.”

Pettis Comments “What utter lunacy. It is one thing to defend the existing surplus by pretending to believe that it was not caused by income distortions at home but rather by foreign laziness, but to say that it is German policy to grow the surplus further is outrageous. Now that they have bankrupted Europe, and developing countries are in trouble, who but the US can possibly be forced into absorbing it? If the US were ever to decide that it cannot continuing absorbing everyone else’s deficient demand at the expense of becoming more like peripheral Europe, the consequences for Germany (and China and Japan) would be devastating.”

Target2 stands for Trans-European Automated Real-time Gross Settlement System. It is a reflection of capital flight from the “Club-Med” countries in Southern Europe (Greece, Spain, and Italy) to banks in Northern Europe. [..] Target2 is also a measure of capital flight. The Italian banking system is effectively bankrupt, and outflows from Italy have been picking up.

Six Largest Target2 Deficit Countries

Six Largest Target2 Creditor Countries

Look closely at the six countries with the highest balances. Only four countries are positive: Germany, Luxembourg, the Netherlands, and Finland. The six largest deficit countries owe a collective 797.3 billion euros to the four creditor countries. The ECB itself is in hock for another 133.5 billion euros. Monetary policy can help external balances but it cannot fix internal target2 balances. Every county in the Eurozone is stuck with the Euro and the ECB’s interest rates whether it makes any sense or not (and it doesn’t). Rates suitable for Germany were not suitable for Spain, Ireland, Greece, and many other countries.

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This sounds like the ECB is desperate (and fighting Germany). Unlike the US, European banks often still have 10+ year-old bad loans on their books, and now they get 3+ more years to get rid of them. Meanwhile the same ECB, through its NIRP and ZIRP policies, makes the banks bleed more cash. There’s no way this can end well.

ECB Lets Banks Offload Bad Loans At Own Speed (R.)

Euro zone banks will get to set their own targets for cutting the €900 billion of bad loans left over from the financial crisis, facing sanctions only if they fall way short of the mark, new guidance by the ECB showed on Monday. Banks in weak economies such as Greece, Portugal and Italy are still struggling under the burden of unpaid loans extended before the crisis, which reduce their ability to lend and undermine investor confidence. The ECB, as the euro zone’s top bank supervisor, is trying to get banks to manage down that mountain of soured credit. But it cannot push them too hard if it doesn’t want them to incur hefty losses, which would also strangle lending. Under new guidance disclosed on Monday, banks will be asked to set numerical targets for the levels of non-performing loans they aim to reach in one and three years, and follow a number of other guidelines.

Failure to comply may lead to so-called ‘supervisory measures’ by the ECB, such as higher capital requirements. But the ECB said the new guidelines would be non-binding and only “significant” deviations from them may trigger action, while solving the problem would take longer than three years in many cases. [..] When the ECB disclosed plans to work on new guidelines for non-performing loans in January, some banks worried that it would force a fire sale of those assets. That would push down their selling price and hurt bank profits. However, the guidelines showed banks will be given three years or, in many cases, longer. “We chose a three-year target because most banks have a three-year projection in their business plans … for a number of banks, this will not be the end of the story, it will likely take longer,” Donnery said.

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How the EU has designed the impossibility of a Greek recovery. If you kill consumption, you kill the economy and eventually the society. A whole range of food products went from 13% VAT to 24% since last summer. In the same time-frame pensions and wages were cut multiple times.

Greek Prices Keep Rising as Household Incomes Keep Shrinking (Kath.)

While households’ disposable income keeps shrinking, consumers also face the constant increase of prices in dozens of commodities, particularly food products, making Greece one of the most expensive countries in the EU in this domain. Successive value-added tax hikes, and particularly one imposed last summer shifting a series of food commodities from the 13% to the 23% bracket and now to 24%, have led to a decline in consumption. This means that the industry and retail commerce, in turn, raise their prices in order to offset losses from the domestic market’s downturn. Although Greece has experienced deflation in the last three-and-a-half years, data published by Eurostat are revealing:

Food prices in Greece were up 2.3% compared with the same month in 2015, while the respective rise across the eurozone averaged at 0.9%. The hikes in fruit, vegetables and various vegetable oils are reminiscent of periods when the Greek economy suffered under the burden of inflationary pressures a few decades ago. Vegetable oils, including olive oil that is dominant in Greek households, were sold at a price 9.5% higher than a year earlier, while the rise in the eurozone amounted to 2.9%. Fruit prices grew 4.2% year-on-year, just below the eurozone average of 4.9%, while vegetable prices went up 7% against 5.6% in the eurozone. The prices of bread and cereals increased 2% on an annual basis, whereas in the eurozone the hike was no more than 0.2%.

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“..barring any sudden change of tack the situation looks set to escalate.”

US Funds And Iceland Square Up Over Bond Freeze (R.)

A group of U.S. funds battling with Iceland after it froze $1.4 billion of the government’s bonds they own are limbering up for a legal fight if Reykjavik continues to stonewall efforts at a deal. While the players and amounts of money involved mean the situation is unlikely to develop into an years-long Argentina-style standoff, it is overshadowing Iceland’s comeback from one of the world’s most extreme banking crises. A few weeks ago it took a big step in dismantling its 8-year old capital controls and the smooth progress so far has earned the country a double-notch credit rating upgrade and has been driving up its currency.

One headache, however, is that it remains deadlocked with funds Autonomy Capital, Eaton Vance, Loomis Sayles and Discovery Capital Management – whose frozen bonds are worth roughly 10% of Iceland’s annual economic output – after they spurned what they saw as low-ball government offer to unlock them back in June. Two of the funds, Autonomy and Eaton Vance, have filed a complaint to the European Free Trade Association (EFTA) in Brussels which is ongoing, saying that the quarantining of their bonds amounts to a discrimination against foreign investors. Autonomy has made a separate approach to a court in Iceland. Iceland rejects the claims saying that some domestic investors are also affected and that the moves are necessary to allow a smooth lifting of capital controls, so barring any sudden change of tack the situation looks set to escalate.

[..] One of the world’s top sovereign debt lawyers, Cleary Gottlieb’s Lee Buchheit, who represented Iceland’s government in cases over its failed banks but says he is not involved in the current squabble, is skeptical of the funds’ legal chances. “I don’t want to predict the outcome but it is going to be a challenge I think for these people to mount an effective legal complaint before EFTA here,” he said, adding that it would also be difficult to pursue the case in another country’s courts. “Anyone challenging what they have done is going to have to say that it was unnecessary or disproportionate.” “And if you have got the IMF saying: no, what they are doing is perfectly necessary and perfectly proportional to protect their balance of payments and exchange rate, it is going to be a tough argument to make.”

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Let’s hope Australians take this to heart.

Australia 6 Weeks From A Housing Collapse, US Report Warns (ZH)

U.S. based think tank International Strategic Studies Association (ISSA), is warning that similar efforts to restrict Chinese investment in Australian real estate could send prices tumbling there as well. In speaking with news.com.au, Greg Copley, President of ISSA, predicted that Australia has about 6 weeks before real estate prices start to collapse.

“We estimate that Australia has about six weeks or so to turn this situation around, otherwise there would be a massive hit on property valuations and the building trades.” The urgency is, I believe, based on the fact that this is about how long it will take for the banks’ policies to start switching off a lot of existing and planned contracts for Australian properties.” “The banks clearly believe Australian real estate values will decline, so they are attempting to avoid that risk. They’ve learned from the US collapse that seizing real estate collateral is a no-win scenario when the volume is great and the market slow.” “In so doing, they precipitate the market collapse but are less exposed to it.”

Real estate prices in Australia’s largest housing markets have soared over the past couple of years fueled, in no small part, by demand from Chinese buyers looking for offshore locations to park cash. The Sydney and Melbourne markets have been the largest beneficiaries of foreign capital with real estate prices up 53% and 51%, respectively, since 2012. That said, based on data from the Australian Bureau of Statistics it looks like home prices in Australia have already started their descent.

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Key knows a lot of real estate is bought with ‘dirty money’. And chooses not to act. Time to get rid of him.

NZ PM Wary Of Policies That Could Cause Catastrophic Housing Slump (Hickey)

Prime Minister John Key has warned against any strong Government policy moves to restrict or tax foreign buyers, saying he did not want to cause a catastrophic slump in the market. Referring to moves in Australia that some say have pushed the apartment market there to the brink of collapse, Key said Government’s role was to protect the value of equity in home owners’ homes. He also talked down the prospect of urgent action to roll out a second round of Anti-Money-Laundering (AML) requirements to real estate agents, solicitors and accountants, saying it could significantly increase compliance costs and therefore increase costs for first home buyers.

[..] “Like any public policy in the area of housing, it’s always a delicate balance between being effective in trying to slow prices going up, and making sure you don’t have some catastrophic reaction you’re not expecting,” Key said. “Years ago Australia bought in a vendor’s tax in Australia and it had such a significant impact they actually cancelled it. There’s always a happy medium,” he said. “Anyone in Government has to be a bit careful, because for most people their primary asset is their house and for most people, a significant amount of the home is borrowed from the bank, so you do have to protect their equity.”

[..] in response to a NZ Herald article on Saturday detailing police concerns about money laundering in real estate and delays in a long-mooted second round of anti-money laundering (AML) reforms to include real estate agents and solicitors, Key defended the pace of reforms, which Labour Leader Andrew Little has described as “chain dragging.” The report detailed how Justice Minister Amy Adams went against a recommendation last year from her officials for an immediate start to policy work on the reforms after a warning from police that up to NZ$1.6 billion a year of dirty money was being pumped into housing markets.

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“Eliminating currency as a medium of exchange can only lead to the repudiation of “money” — which will beat a quick path to the repudiation of all authority.”

Signs of Desperation (Jim Kunstler)

Does the public understand the rationale behind zero interest rate policy (ZIRP)? Not any more than they understand the interaction of gluons and quarks or the doctrine of the Holy Trinity. It is one of the abiding mysteries of our time, for instance, that a group like AARP, purporting to represent the interests of retired persons, has offered not a peep of pushback to ZIRP, which has pounded retired people dependent on savings into penury. Of course, this might be explained by the pervasive racketeering feature of our current national life: AARP is an insurance racket masquerading as a citizen interest group. Or, stretching credulity to suppose that AARP is honest, perhaps the org’s executives don’t understand that zero interest on savings equals zero income to savers.

Kenneth Rogoff tries to justify his war on cash by invoking two of the era’s favorite bogymen: terrorists and drug dealers. Cash, he says, allows this axis of evil to do its thing(s). This is a ruse, of course. If currency is eliminated, these outfits will turn to gold and silver, it’s that simple. And so will everybody else, by the way. The real reason to abolish cash and herd all money into central banks is to permit the authorities to confiscate it one way or another, either by unavoidable taxation or by “bail-ins” – declaring deposits to be “unsecured loans” that can be repudiated in the event of a financial “accident.” The results are already in for this experiment: “money” becomes more and more dishonest, that is, it cannot be trusted to represent what it pretends to stand for: an index of account and a store of value.

Its role as the basis of capital formation is so impaired that real capital (i.e. wealth) cannot be generated, meaning that none of the credit issued as “money” will ever be paid back. Zero interest rate policy eventually equals zero interest paid. “Money” based on loans that won’t be paid back loses its legitimacy. Herding all the “money” onto central bank computers only allows for more three-card-monte maneuvers to conceal the bezzle. It would be much harder to hide the destruction of value in circulating paper currency. Eliminating currency as a medium of exchange can only lead to the repudiation of “money” — which will beat a quick path to the repudiation of all authority. And there is your recipe for really suicidal political disorder.

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As long as there are things left to destroy, we’ll destroy them.

The Tropical Paradise The US Wants To Turn Into A War Zone (G.)

Even here, in a region bursting with natural beauty, it is hard to imagine a more idyllic scene than Green Beach on Pagan island. Azure waters roll ashore before disappearing into the volcanic sand on a perfectly shaped horseshoe beach; on the horizon, cliffs plunge into darker open water that stretches, unhindered, more than 1,600 miles to the north-east coast of the Philippines. But in just a few years, Pagan’s tranquility could be shattered by the sound of heavy artillery, ending any hopes the displaced people of this 10-mile-long speck in the western Pacific have of returning to their ancestral home, more than three decades after a volcanic eruption forced all 300 residents to flee.

According to plans outlined by the US Department of Defence, as many as 5,000 marines will descend on the island to conduct war games as part of the Obama administration’s pivot towards the Asia-Pacific. The exercises will not only make human settlement impossible; campaigners say it will lead to the destruction of ancient cultural relics and threaten wildlife, including indigenous endangered animals such as fruit bats and tree snails. The marines will be among more than 8,000 who are due to be relocated to Guam and Hawaii from Okinawa as part of a controversial agreement between Washington and Tokyo to reduce the US military footprint on the southern Japanese island.

Faced with the near-certain destruction of their homeland – part of the US Commonwealth of the Northern Marianas – dozens of former residents have joined forces with environmental campaigners to launch a lawsuit they hope will expose the folly of the Pentagon’s plans to transform Pagan and Tinian, an inhabited island 200 miles to the south, into simulated theatres of war. The whole of Pagan would be turned into a simulated war zone to enable troops from the US, and regional allies Japan, South Korea and Australia, to prepare for possible confrontations sparked by China’s military buildup in the South China Sea and its claims to Japanese-administered islands in the East China Sea.

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Sep 062016
 
 September 6, 2016  Posted by at 9:13 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 6 2016


Harris&Ewing Agriculture Department, Cow jumps over moon 1920

These Are The Signs Of An Economic Collapse (Gray)
‘No Chance Of Russia And Saudi Arabia Oil Cooperation’ (CNBC)
Hanjin’s Creditors Ready To Provide $90 Million, But Debt Over $5 Billion (R.)
Trump Says US Interest Rates Must Change As Fed Weighs Rate Hike (R.)
Trump: Fed Has Created “Stock Bubble” And “False Economy” To Boost Obama (ZH)
There Has Never Been a Middle Class Without Strong Unions (I’Cept)
Auckland’s Surging House Prices Top Sydney, Parts of New York City (BBG)
New Zealand Needs Migrants As Some Kiwis Are Lazy And On Drugs, Says PM (G.)
Clouds Gathering In Brussels For Athens (Kath.)
If WalMart Held A Sale On Bullshit Filters… (Jim Kunstler)
Toxic Air Pollution Nanoparticles Found In Human Brains (G.)
We Are Making The Oceans Sick (AFP)
One Year After Launch, EU’s Dismal Failure On Refugee Relocation (EUO)
Prisoners Of Europe: The Everyday Humiliation Of Refugees Stuck In Greece (G.)
2,700 Migrants Rescued in Mediterranean on Monday, 15 Dead (R.)

 

 

“Don’t be fooled into thinking that the stock market is any indication of the health of an economy.”

These Are The Signs Of An Economic Collapse (Gray)

What does the beginning of an economic collapse look like? Do you see grocery stores closing? Do you see other retailers, like clothing stores and department stores, going out of business? Are there shuttered storefronts along your Main Street shopping district, where you bought a tool from the hardware store or dropped off your dry cleaning or bought fruits and vegetables? Are you making as much money annually as you did 10 years ago? Do you see homes in neighborhoods becoming run down as the residents either were foreclosed upon, or the owner lost his or her job so he or she can’t afford to cut the grass or paint the house? Did that same house where the Joneses once lived now become a rental property, where new people come to live every few months?

Do you know one or two people who are looking for work? Maybe professionals, who you thought were safe in their jobs? Friday’s anemic jobs numbers tell that tale. Did your high school buddy take a job at the local convenience store because he could not find work in sales? Is the pothole on your street getting larger instead of getting repaired? Is there more than one street light out in your town? Is the town pool closed this summer much more than usual? Have you seen a situation — any situation — and said, “Jeez, it wouldn’t take much money to fix that” — but it hasn’t been fixed? You may have witnessed many of these situations, but you tell yourself it can’t be an economic collapse because the stock market is at an all-time high. Does that mean all is well? No, this is what a 21st-century economic collapse looks like in the beginning.

[..] We are entering the problem months for the markets. September and October are historically times of greater market volatility to the downside. There was a time when this was very explainable. In the last two centuries, huge amounts of cash would move from the Eastern money markets over the mid- to late summer to the Midwest and Western states to buy crops, leaving the equity and bond markets in a liquidity squeeze come late summer/early fall. Now it’s down to the returning traders from the Hamptons or the Cape realizing that their trading book looks a little sick. Their bonus will depend on them making the right moves in the next three months, and they need to sell those dog stocks soon.

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Neither can afford it, and beides whatever they would not produce, someone else would.

‘No Chance Of Russia And Saudi Arabia Oil Cooperation’ (CNBC)

Energy experts poured scorn on the prospect of Russia and Saudi Arabia collaborating to stabilize the oil market, after the two countries made a joint statement to that effect on Monday. The two major oil producers announced at the G-20 summit in China that they would form a group to monitor the market and make recommendations on stabilizing prices, according to media reports. Russian Energy Minister Alexander Novak described the moment as “historic” and touted the possibility of the much-discussed-but-never-delivered crude production freeze. Commodity strategists told CNBC that the statement might push crude prices higher in the short-term, perhaps toward $50 per barrel, but insisted that little in the way of deeper cooperation was likely.

“The running gag of the ‘freeze’ means just nothing,” Eugen Weinberg, head of commodity research at Commerzbank, told CNBC on Monday. “As to the cooperation between Russia and Saudi Arabia – no chance! It’s clearly just lip service since real cooperation between these competitors is just impossible,” he later added. [..] “The press conference came and went without any significant initiatives being announced. Once again it highlights key producers’ ability to talk up the market without backing it by action,” Ole Hansen, head of commodities strategy at SaxoBank, told CNBC on Monday. “I expect the market to drift lower as this was an exercise in building up expectations without delivering anything,” he added.

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So it takes $90 million to let their ships unload their cargo. For a last time.

Hanjin’s Creditors Ready To Provide $90 Million, But Debt Over $5 Billion (R.)

Hanjin Shipping’s government-backed creditors are ready to provide the collapsed carrier with roughly 100 billion won ($90.60 million) of loans if Hanjin’s parent provides collateral, South Korean government officials said on Tuesday. The funding, however, is seen as falling far short of what the world’s seventh-largest container carrier needs after filing for court receivership last week when its creditors, led by Korea Development Bank (KDB), decided to halt support. “The 100 billion won funding, if it comes to pass, is not nearly enough to save Hanjin Shipping at all – it will most likely be used to pay fees to unload stranded cargo going forward,” said an official at a creditor bank, who was not authorized to speak with media and declined to be identified.

Hanjin Shipping shares jumped as much as 28% on Tuesday morning before trimming their gains to be up 20% by 0155 GMT. They had hit a record low on Monday. [..] Shares in Korean Air Lines, the biggest shareholder of Hanjin Shipping, fell as much as 5.7% on Tuesday. Hanjin Shipping had debt of 5.6 trillion won at the end of 2015. Last month, parent Hanjin Group submitted a plan to creditors pledging to raise up to 500 billion won for the troubled shipper, which KDB deemed inadequate.

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Sorry to say, but he’s right.

Trump Says US Interest Rates Must Change As Fed Weighs Rate Hike (R.)

Republican presidential nominee Donald Trump, who has previously accused the Federal Reserve of keeping interest rates low to help President Barack Obama, said on Monday that the U.S. central bank has created a “false economy” and that interest rates should change. “They’re keeping the rates down so that everything else doesn’t go down,” Trump said in response to a reporter’s request to address a potential rate hike by the Federal Reserve in September. “We have a very false economy,” he said. “At some point the rates are going to have to change,” Trump, who was campaigning in Ohio on Monday, added. “The only thing that is strong is the artificial stock market,” he said.

Fed Chair Janet Yellen said last month that the U.S. central bank was getting closer to raising interest rates, possibly as early as September, saying that the Fed sees the economy as close to meeting its goals of maximum employment and stable prices. The Fed raised interest rates last December for the first time in nearly a decade, and at that time projected four more hikes in 2016. The Fed later scaled back that projection to two rate hikes this year in the wake of a slowdown in global growth and continued financial market volatility. Trump, during the primary campaign, as he took on 16 Republican rivals, had called Yellen’s tenure “highly political” and said the Fed should raise interest rates but would not do so for “political reasons.”

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“We have a bad economy, everybody understands that but it’s a false economy.”

Trump: Fed Has Created “Stock Bubble” And “False Economy” To Boost Obama (ZH)

One month ago, Donald Trump urged his followers to sell stocks, warning of “very scary scenarios” for investors, and accused the Fed of setting the stage for the next market crash when he said that “interest rates are artificially low” during a phone interview with Fox Business. “The only reason the stock market is where it is is because you get free money.” Earlier today, speaking to a reporter traveling on his plane who asked Trump about a potential rate hike by the Fed in September, Trump took his vendetta to the next level, saying that the Fed is “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job.”

“It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy. The only reason the rates are low is so that he can leave office and he can say, ‘See I told you.'” He then lashed out at Yellen, whom he accused of having a political mandate when conducting monetary policy: “So far, I think she’s done a political job. You understand that.” On whether we can have a rate hike in September: “Well, the only thing that’s strong is the artificial stock market. That’s only strong because it’s free money because the rates are so low. It’s an artificial market. It’s a bubble. So the only thing that’s strong is the artificial market that they’re created until January. It’s so artificial because they have free money… It’s all free money. When rates are low like this it’s hard not to have a good stock market.”

His conclusion: “At some point the rates are going to have to change.” Indeed they will, and that’s precisely what almost every bank, from Goldman yesterday to Citi today, and many others inbetween, have been warning about in recent months. Until recently, Trump’s latest anti-Fed outburst would have been swept under the rug as just another example of the deranged ramblings of an anti-Fed conspiracy theorist (trust us, we’ve been there). However, considering the spike in anti-Fed commentary in recent weeks coming from prominent, and established institutional sellside analysts all the way to the WSJ, it may be that Trump was once again simply saying what everyone else thought but dared not mention.

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Nice connection.

There Has Never Been a Middle Class Without Strong Unions (I’Cept)

The entire Republican party and the ruling heights of the Democratic Party loathe unions. Yet they also claim they want to build a strong U.S. middle class. This makes no sense. Wanting to build a middle class while hating unions is like wanting to build a house while hating hammers. Sure, maybe hammers — like every tool humans have ever invented — aren’t 100% perfect. Maybe when you use a hammer you sometimes hit your thumb. But if you hate hammers and spend most of your time trying to destroy them, you’re never, ever going to build a house. Likewise, no country on earth has ever created a strong middle class without strong unions. If you genuinely want the U.S. to have a strong middle class again, that means you want lots of people in lots of unions.

The bad news, of course, is that the U.S. is going in exactly the opposite direction. Union membership has collapsed in the past 40 years, falling from 24% to 11%. And even those numbers conceal the uglier reality that union membership is now 35% in the public sector but just 6.7% in the private sector. That private sector%age is now lower than it’s been in over 100 years. Not coincidentally, wealth inequality – which fell tremendously during the decades after World War II when the U.S. was most heavily unionized – has soared back to the levels seen 100 years ago. The reason for this is straightforward. During the decades after World War II, wages went up hand in hand with productivity. Since the mid-1970s, as union membership has declined, that’s largely stopped happening. Instead, most of the increased wealth from productivity gains has been seized by the people at the top.

[..] the degree to which a country has created high-quality, universal health care is generally correlated with the strength of organized labor in that country. Canada’s single payer system was born in one province, Saskatchewan, and survived to spread to the rest of the country thanks to Saskatchewan’s unions. Now Canadians live longer than Americans even as their health care system is far cheaper than ours. U.S. unions were also key allies for other social movements, such as the civil rights movement in the 1950s and 1960s. Today, people generally say Martin Luther King, Jr. delivered the “I Have a Dream” speech at the March on Washington – but in fact it was the March on Washington for Jobs and Freedom, and it was largely organized by A. Philip Randolph of the Brotherhood of Sleeping Car Porters.

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Close to the brink.

Auckland’s Surging House Prices Top Sydney, Parts of New York City (BBG)

The average house price in Auckland, New Zealand’s largest city, has surged above NZ$1 million ($730,000) for the first time. The price for the Auckland area, home to a third of New Zealand’s 4.7 million people, jumped 16% in August from a year earlier and 6.1% in the last three months to NZ$1.01 million, according to data published Tuesday by government property research agency Quotable Value. The city’s average price has risen 86% since 2007. Record immigration, low interest rates and a supply shortage are driving Auckland’s housing market, and in turn fueling a nationwide boom. The central bank, which has been unable to raise borrowing costs because of weak general inflation, has introduced lending restrictions, focusing particularly on investors, in an effort to curb demand.

The Reserve Bank in October 2013 required banks to limit lending to borrowers with low deposits. It followed in November last year with measures targeting investors in Auckland. In July, the central bank announced a further round of restrictions, due to take effect Oct. 1, which require investors across the country to have a deposit of at least 40% to obtain a mortgage. Those measures may have caused an initial pick-up in buying but could now be starting to bite as banks begin to enforce the new rules early. [..] New Zealand isn’t alone in introducing new measures to try to cool surging house prices.

The Canadian province of British Columbia on Aug. 2 imposed a 15% tax on foreign buyers after average prices in Vancouver doubled over the past decade. The average price of a detached property in the city declined 17% in August from July, and 0.6% from a year earlier, to C$1.47 million ($1.1 million), according to the Real Estate Board of Greater Vancouver. Auckland’s average is still below London’s 705,600 pounds ($939,435) and some way behind New York’s $1.02 million, although that figure is boosted by Manhattan’s $2.2 million. Auckland prices are higher than those in the Bronx, Queens and Staten Island, according to the Real Estate Board of New York. CoreLogic data available for Sydney, which use the median rather than the average, show a price of A$780,000 ($593,000) in August.

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And you think your leaders are idiots?!

New Zealand Needs Migrants As Some Kiwis Are Lazy And On Drugs, Says PM (G.)

The New Zealand prime minister, John Key, has said the country is forced to rely on overseas workers to fill jobs because some Kiwis lack a strong work ethic and may have problems with drugs. The comments came on the back of record high immigration figures, showing in the year to July 69,000 people moved to New Zealand. In his weekly appearance on Radio New Zealand, Key was asked to explain high immigration figures, with 200,000 Kiwis currently unemployed. Key responded that schemes to get Kiwi beneficiaries into jobs had routinely failed because many lacked basic work skills. “Go and ask the employers, and they will say some of these people won’t pass a drug test, some of these people won’t turn up for work, some of these people will claim they have health issues later on,” Key told Radio New Zealand.

“So it’s not to say there aren’t great people who transition from Work and Income to work, they do, but it’s equally true that they’re also living in the wrong place, or they just can’t muster what is required to actually work.” Every year New Zealand brings in more than 9,000 seasonal workers from the Pacific islands to work on short-term contracts in the horticulture and wine industry. Both industries also say they are heavily reliant on overseas visitors with work permits – particularly backpackers. Leon Stallard, a director for Horticulture New Zealand and the owner of an apple orchard in Hawke’s Bay, said he had tried “for years” to get unemployed New Zealanders to pick his apples but had been let down time and again.

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Why the EU should be dismantled. Shameless. Or is that shameful?

Clouds Gathering In Brussels For Athens (Kath.)

Expectations are running low ahead of Friday’s Eurogroup meeting on Greece, as Athens is particularly late in implementing the 16 prior actions that were needed over the summer to secure the disbursement of a €2.8 billion subtranche. Friday’s meeting of eurozone finance ministers is not expected to go beyond an update on the progress of the Greek program, which is seriously lagging. Meanwhile, a report in German newspaper Handelsblatt said that Greece should not expect any disbursements for now, even though the first review was completed in May, as the government has only implemented two out of the 16 prior actions. Finance Ministry sources say that this Eurogroup was never going to approve a payment anyway as it is an informal gathering and that the delays in the prior actions will be the reason for the arrival of the creditors’ representatives in Athens on September 12.

Despite the concerns expressed by eurozone officials and the completion of just two prior actions so far, the Greek side insists everything is running “according to schedule.” In Brussels, however, the climate is souring as the failure to implement all the prior actions will push the completion of the first review beyond September. One eurozone official told Kathimerini that “I do not see the first review completed any time soon and as for the second, I do not see it being completed in the near future.” The creditors are also growing increasingly alarmed by Athens’s rhetoric and stance in asking for more independence from the bailout program, seen as backtracking on reforms. Officials monitoring the government’s moves have expressed their opposition to the Education Ministry’s law banning teacher layoffs from private schools, as this contravenes the spirit of the bailout program.

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“Both Trump and Hillary are perfect avatars for this date with a hard landing.”

If WalMart Held A Sale On Bullshit Filters… (Jim Kunstler)

The former middle class of America has lost its ability to absorb anymore smart phones or Kardashian brand Pure Glitz hairspray©. They’re pacing grooves in the faux hardwood floors of their McHomes through reams of unpayable bills trying to stave off the re-po squad while Grandma slips into a diabetic coma. These are the good folks who supposedly comprise 70% of the so-called economy, a.k.a. “consumers.” You can stick a fork in them — and maybe we’ll hear a few reports of that on Tuesday when the holiday barbeques smolder their last. More concerning, though, are the conditions of the banks. When their true insolvency is revealed — which may coincide with the height of the election season — look out below.

The bankruptcy of one measly shipping company will look like a zit on the ass of a diving blue whale as countless trade operations seize up for lack of confidence that they will ever be paid. Then what? Then we are forced to pay attention to the actual dynamics now at work in the world. Or be driven crazy by our refusal to get with the program. I tend to think we’ll opt for the latter. We’re too unused to reality. We’d rather crash and burn than change anything about our behavior, or even our perception. Both Trump and Hillary are perfect avatars for this date with a hard landing. The disorder both of them are capable of inducing will be a spectacle for the ages.

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Nasty. Move to the country.

Toxic Air Pollution Nanoparticles Found In Human Brains (G.)

Toxic nanoparticles from air pollution have been discovered in human brains in “abundant” quantities, a newly published study reveals. The detection of the particles, in brain tissue from 37 people, raises concerns because recent research has suggested links between these magnetite particles and Alzheimer’s disease, while air pollution has been shown to significantly increase the risk of the disease. However, the new work is still a long way from proving that the air pollution particles cause or exacerbate Alzheimer’s. “This is a discovery finding, and now what should start is a whole new examination of this as a potentially very important environmental risk factor for Alzheimer’s disease,” said Prof Barbara Maher, at Lancaster University, who led the new research.

“Now there is a reason to go on and do the epidemiology and the toxicity testing, because these particles are so prolific and people are exposed to them.” Air pollution is a global health crisis that kills more people than malaria and HIV/Aids combined and it has long been linked to lung and heart disease and strokes. But research is uncovering new impacts on health, including degenerative brain diseases such as Alzheimer’s, mental illness and reduced intelligence. The new work, published in the Proceedings of the National Academy of Sciences, examined brain tissue from 37 people in Manchester, in the UK, and Mexico, aged between three and 92. It found abundant particles of magnetite, an iron oxide. “You are talking about millions of magnetite particles per gram of freeze-dried brain tissue – it is extraordinary,” said Maher.

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“We are no longer the casual observers in the room [..] What we have done is unwittingly put ourselves in the test tube where the experiment is being undertaken.”

We Are Making The Oceans Sick (AFP)

Global warming is making the oceans sicker than ever before, spreading disease among animals and humans and threatening food security across the planet, a major scientific report said on Monday. The findings, based on peer-reviewed research, were compiled by 80 scientists from 12 countries, experts said at the International Union for Conservation of Nature (IUCN) World Conservation Congress in Hawaii. “We all know that the oceans sustain this planet. We all know that the oceans provide every second breath we take,” IUCN Director General Inger Andersen told reporters at the meeting, which has drawn 9,000 leaders and environmentalists to Honolulu. “And yet we are making the oceans sick.”

The report, “Explaining Ocean Warming,” is the “most comprehensive, most systematic study we have ever undertaken on the consequence of this warming on the ocean,” co-lead author Dan Laffoley said. The world’s waters have absorbed more than 93% of the enhanced heating from climate change since the 1970s, curbing the heat felt on land but drastically altering the rhythm of life in the ocean, he said. “The ocean has been shielding us and the consequences of this are absolutely massive,” said Laffoley, marine vice chair of the World Commission on Protected Areas at IUCN. The study included every major marine ecosystem, containing everything from microbes to whales, including the deep ocean. It documents evidence of jellyfish, seabirds and plankton shifting toward the cooler poles by up to 10 degrees latitude.

The movement in the marine environment is “1.5 to five times as fast as anything we are seeing on the ground,” Laffoley said. “We are changing the seasons in the ocean.” The higher temperatures will probably change the sex ratio of turtles in the future because females are more likely to be born in warmer temperatures. The heat also means microbes dominate larger areas of the ocean. “When you look overall, you see a comprehensive and worrying set of consequences,” Laffoley said. More than 25% of the report’s information is new, published in peer-reviewed journals since 2014, including studies showing that global warming is affecting weather patterns and making storms more common.

The study includes evidence that ocean warming “is causing increased disease in plant and animal populations,” it said. Pathogens such as cholera-bearing bacteria and toxic algal blooms that can cause neurological illnesses such as ciguatera poisoning spread more easily in warm water, with direct impact on human health. “We are no longer the casual observers in the room,” Laffoley said. “What we have done is unwittingly put ourselves in the test tube where the experiment is being undertaken.”

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Another reason to dismantle the disunion.

One Year After Launch, EU’s Dismal Failure On Refugee Relocation (EUO)

EU-led efforts to relocate people seeking international protection from Italy and Greece to other EU states remain dismal. The two-year plan, broadly hatched last September, aims to dispatch some 160,000 people arriving on Italian and Greek shores to other EU states. But one year in and less than 3% of that total have found a new home outside either country. Some ended up in non-EU states like Norway and Switzerland, which are also part of the scheme. As of earlier this month, just over 1,000 people left Italy and 3,493 people left Greece. The European Commission, which masterminded the scheme, on Monday urged national governments to step up efforts, but declined to answer questions on potential sanctions if they failed to meet the quotas.

“Relocations are still taking place, the last flights from Greece took place on the second of September,” an EU commission spokeswoman told reporters in Brussels. In July, the commissioner for migration, Dimitris Avramopoulos, sent a letter to the 28 EU interior ministers imploring them to relocate more people. But despite his appeal, in the period covering August and the first few days of September, member states took in just 65 more people. Finland took 40 asylum seekers from Greece. France took 18 and Cyprus took seven. Austria, Hungary, and Poland have yet to relocate anyone. Others, such as the Czech Republic, have relocated just handfuls of people. France took the most, with 1,431 from Greece alone.

Pledges from EU states to help Greece with border staff and asylum experts have also failed to fully materialise. Meanwhile, the issues and the numbers remain sensitive. Hungary has launched an anti-immigrant campaign in the lead up to a national referendum on 2 October on whether to boycott the EU relocation scheme. The German government is paying a political cost for taking in asylum seekers – on Sunday, the anti-immigrant AfD party beat chancellor Angela Merkel’s CDU party in regional elections. In Austria, the EU faces the prospect of having its first far-right head of state, as the FPO party’s candidate, Norbert Hofer, again leads opinion polls ahead of a presidential run-off on 2 October.

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Treat people as you would want to be treated.

Prisoners Of Europe: The Everyday Humiliation Of Refugees Stuck In Greece (G.)

Softex sits in an industrial wasteland on the northern fringes of Thessaloniki, Greece’s second city. Refugees have been here since the border shut in May, forcing the cash-strapped Greek authorities to hastily house people in whatever spaces they could find. Several hundred have now smuggled their way north, but about a thousand are still left. Most of them live in tents inside the gloomy warehouse. The rest sleep outside, a few hundred metres from a grim row of burnt-out trains and factory chimneys. “We’re suffering, emotionally – we’re not good,” says Mohammad Mohammad, a 30-year-old taxi driver whose wife and children are under siege in a Damascus suburb. Mohammad came to Greece in February, hoping he could make his way to Germany, claim asylum, and then apply for his family to join him.

Instead, the border shut before he could leave – meaning that he must pay a smuggler to take him north, or wait for the EU relocation programme to assign him a permanent place elsewhere in Europe. But as so many stuck in Greece point out, relocation is not working properly – with just 5,100 places made available in the space of nearly 12 months. “The system doesn’t work,” says Mohammad. “At this rate, they’ll need 10 years to get it finished. But if we’re here for another month, we’ll be in a mental asylum.” It is a familiar sentiment. Interviewees consistently said that the limbo they are trapped in – which has left them far from loved ones, without access to work and education, and without any clarity on their future – has led to a wave of depression and mental health problems.

Abouni, 17, is at Softex without his parents and sister, who are still under siege in Aleppo. As a minor, Abouni hoped to apply for family reunification after being granted asylum. Instead he is likely to turn 18 before that can happen, and he says the anxiety of the situation has led to him being taken to hospital four times with panic attacks. “Sometimes I feel so angry that I can’t breathe, and then I fall unconscious,” says Abouni, who asked to be referred to by a pseudonym to avoid being stigmatised at the camp. “I have family in Syria under the bombs, and when I talk to my little sister on the phone, she asks if she’ll ever see me again. I’m stuck here in this jail.”

At the Vasilika camp outside Thessaloniki, one of seven visited recently by the Guardian, the warehouse is brighter than at Softex but the despair is the same. Hisham worked as a medic for an international aid group for 10 years in Syria but now finds himself as its beneficiary rather than its employee. The work he did in Syria still haunts him, with the images of dead bodies flashing before him as he tries to sleep at night. “For years I saw people getting killed in Syria, and then you’re here for six months without knowing what’s going on, and I cannot sleep,” says Hisham. “What happened in Syria is playing every night like a film in front of my eyes. Psychologically, I need a doctor.”

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Rising death toll.

2,700 Migrants Rescued in Mediterranean on Monday, 15 Dead (R.)

Fifteen bodies were recovered and more than 2,700 boat migrants rescued off the coast of Libya on Monday, the Italian coastguard said, in another day of mass departures from north Africa. Italy’s navy and coastguard, ships patrolling on a European Union anti-smuggling mission, vessels run by humanitarian groups, and a commercial tug boat aided in the rescues. Earlier in the day, the Italian Navy said six bodies had been found after migrants fell out of a leaking rubber boat. The coastguard gave no further details. The migrants were saved from 19 dangerously overcrowded rubber boats and four small boats, the coastguard said. People smugglers operate freely in Libya, cashing in on migrants desperate to reach Europe.

Last week calmer seas and Libya’s lawlessness opened the way for smugglers to ship 13,000 migrants across the Mediterranean Sea in just four days. Europe’s worst migrant crisis since World War Two is now focused on Italy, at Europe’s southern frontier, where some 93,000 people had arrived by the end of August, according to Italy’s Interior Ministry. The death toll on the route from North Africa to Italy has jumped to one migrant for every 42 making the crossing, compared to one in every 52 last year, a U.N. refugee agency spokesman said last week.

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 August 31, 2016  Posted by at 8:58 am Finance Tagged with: , , , , , , , , , , , ,  3 Responses »


Esther Bubley Watching parade to recruit civilian defense volunteers, Washington DC 1943

The Central Pillar Of Global Order Is In Danger As TTIP Disintegrates (AEP)
The New TTIP? Meet TISA, ‘Secret Privatisation Pact’ (Ind.)
Debt, Deficits & Economic Warnings (Roberts)
The Academic Math of This Economy and The Long Run Consequences (Snider)
China Turmoil Looms As Traders Bet On Post-G-20 Yuan Tumble (ZH)
Chinese Banks Step Up Bad-Loan Write-Offs (WSJ)
China’s Biggest-Ever Metals Deal Snaps Up Cleveland’s Aleris (BBG)
Case Shiller Lags and Understates the Housing Bubble (Adler)
25 Email Questions Hillary Clinton Must Answer Under Oath By September 29 (SBA)
Could EU’s ‘Apple Tax’ Reboot Corporate Tax Reform In The US? (Forbes)
Bitcoin Was Brought Down By Its Own Potential – And The Banks (Qz)
The Dawn Of The Anthropocene (G.)
Greek Islands Raise Alarm Over Fast Increasing Refugee Arrivals (Kath.)
Counting The Lost And Nameless Dead Of The Mediterranean (SMH)

 

 

Another wonderful Ambrose dramatic exeggaration.

Central Pillar Of Global Order In Danger Of Collapse As TTIP Disintegrates (AEP)

The Transatlantic pact intended to unite Europe and North America in a vast free trade zone is close to collapse after France called for a complete suspension of talks, accusing the US of blocking any workable compromise. “Political support in France for these negotiations no longer exists,” said Matthias Fekl, the French commerce secretary. Mr Fekl said his country would request a formal decision by EU ministers at a summit in Bratislava to drop the hotly-contested deal, known as the Transatlantic Trade and Investment Partnership (TTIP). “The Americans are offering nothing, or just crumbs. That is not how allies should negotiate. There must be a clear and definite halt to these talks, to restart them later on a proper basis,” he said.

The project is infinitely more than a trade deal. It is part of a strategic push to bind together the two halves of North Atlantic civilisation at a dangerous moment when the Western liberal order is under threat. The two sides are currently drifting towards divorce. “TTIP was supposed to set the rules for the global trade,” said Rem Korteweg, a trade expert at the Centre for European Reform. “It was to be a central pillar of an alliance of like-minded countries. If it all falls apart in acrimony, what kind of global governance are we going to have?” he said. Mr Fekl’s hard-line comments were echoed in slightly softer language by French president François Hollande, who said on Tuesday that there was no chance of a deal on TTIP before the next administration takes power in Washington.

“The talks have become bogged down, the positions have not been respected, and the imbalance is obvious. It is better that we face up to this candidly rather than prolong a discussion on foundations that cannot succeed,” he said.

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There’s a lot more to get rid of.

The New TTIP? Meet TISA, ‘Secret Privatisation Pact’ (Ind.)

An international trade deal being negotiated in secret is a “turbo-charged privatisation pact” that poses a threat to democratic sovereignty and “the very concept of public services”, campaigners have warned. But this is not TTIP – the international agreement it appears campaigners in the European Union have managed to scupper over similar concerns – this is TISA, a deal backed by some of the world’s biggest corporations, such as Microsoft, Google, IBM, Walt Disney, Walmart, Citigroup and JP Morgan Chase. Few people may have heard of the Trade In Services Agreement, but campaign group Global Justice Now warns in a new report: “Defeating TTIP may amount to a pyrrhic victory if we allow TISA to pass without challenge.” Like the Transatlantic Trade and Investment Partnership, TISA is being negotiated in secret, even though it could have a major impact on countries which sign up.

While TTIP is only between the EU and US, those behind TISA have global ambitions as it involves most of the world’s major economies – with the notable exceptions of China and Russia – in a group they call the “Really Good Friends of Services”. The Department for International Trade dismissed the idea that public services were at risk from TISA, adding that the UK was committed to securing an “ambitious” deal. But according to Global Justice Now’s report, the deal could “lock in privatisation of public services”; allow “casino capitalism” by undermining financial regulations designed to prevent a recurrence of the 2008 recession; threaten online privacy; damage efforts to fight climate change; and prevent developing countries from improving public services.

Nick Dearden, director of group, said: “This deal is a threat to the very concept of public services. It is a turbo-charged privatisation pact, based on the idea that rather than serving the public interest, governments must step out of the way and allow corporations to ‘get on with it’. “Of particular concern, we fear TISA will include clauses that will prevent governments taking public control of strategic services, and inhibit regulation of the very banks that created the financial crash.” He suggested pro-Brexit voters should be concerned at the potential loss of sovereignty. “Many people were persuaded to leave the EU on the grounds they would be ‘taking back control’ of our economic policy,” Mr Dearden said. “But if we sign up to TISA, our ability to control our economy – to regulate, to protect public services, to fight climate change – is massively reduced. In effect, we would be handing large swathes of policy-making to big business. “

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Growth based on debt reduces productive investment.

Debt, Deficits & Economic Warnings (Roberts)

By increasing taxes, to generate additional revenue for the government, you decrease the available capital that could be used for productive investments. Since the government doesn’t want factories, office buildings, or oil wells, but rather cash, this forces the liquidation of productive investments thereby reducing capacity for economic growth. The current Administration is failing once again to recognize the problems that exist with this country, at this moment, does not lie with the “rich.” Instead, the problem is a lack of ability for consumers to maintain a standard of living that is well beyond their earnings capability. While the two most recent Administrations have been heavily criticized for running burgeoning deficits – the reality is that the average American has been doing the same for the past thirty years.

[..] as the “rich” invest in productive investments it leads to higher employment, strong consumer demand and economic growth. In turn, this leads to higher tax revenue. “However, deficits, and deficit spending, are HIGHLY destructive to economic growth as it directly impacts gross receipts and saved capital equally. Like cancer – running deficits, along with continued deficit spending, continues to destroy saved capital and damages capital formation.” Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service. As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host. The chart below shows the rise of federal debt and its impact on economic growth.

The reality is that the majority of the aggregate growth in the economy since 1980 has been financed by deficit spending, credit creation and a reduction in savings. This reduced productive investment in the economy and the output of the economy slowed. As the economy slowed, and wages fell, the consumer was forced to take on more leverage to maintain their standard of living which in turn decreased savings. As a result of the increased leverage more of their income was needed to service the debt – and with that the “debt cancer” engulfed the system.

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Excellent from Jeffrey Snider.

The Academic Math of This Economy and The Long Run Consequences (Snider)

[..] the continued and “unexpected” lack of recovery after nine years of failure in monetary policy is forcing the math to recognize what is obvious in non-mathematical terms. No regressions are at all necessary to conclude that the bond market has, in fact, made sense this whole time and that it is economists who have no idea what is going on or why. By the mathematics of 2011, real GDP “should be” $19.3 trillion in Q2 2016; it was instead just $16.6 trillion after the third straight quarter near 1%. To the academics, “gloom” is irrational and thus requires translation into math to become somehow backwards explanatory for why the economy that “should be” isn’t.

In the actual economy, “gloom” is properly called reality. In this world, people know all-too-well that jobs disappeared during and after the Great Recession and never came back. No amount of asset price manipulation can possibly make up that difference. Economists try to convince everyone but really themselves that it didn’t matter when it is this very math that proves yet again it did; in fact, the true state of labor beyond the unemployment rate and Establishment Survey is all that matters.

The math of potential and even gloom is just the frustratingly late catch-up forcing economists to come to terms with the fact they have been all wrong about all of this all along. You need no PhD to so easily understand that you just cannot substitute jobs with debt; doing so is economic suicide. At some point over the long run you must come to terms with that discrepancy. This math is finally welcoming economists to that long run, a place their patron saint, Keynes, said didn’t exist. It really does as the math has been recalculated far more toward the “impossible” [..]

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Yikes graphs. A G-20 that might actually count for something.

China Turmoil Looms As Traders Bet On Post-G-20 Yuan Tumble (ZH)

Something is different this time. For the last few years, China has ‘ensured stability’ in the Yuan ahead of major geopolitical events – no matter what – only to let things slide back into turmoiling after. Ahead of this weekend’s G-20, however, and amid notably deteriorating fundamentals (and an increasingly hawkish-sounding Fed), China has let the Yuan tumble in the last week… and traders are piling into bets on post-G-20 weakness to continue. As Bloomberg notes, history shows that the Chinese currency usually strengthens ahead of major political or economic events, such as President Xi Jinping’s state visits to the U.S. and the Boao Forum.

But this time – ahead of the G-20 gathering – onshore Yuan is being allowed to weaken… back near post-Brexit lows…

Perhaps as another warning to The Fed? But as Bloomberg reports, derivative markets are pointing to renewed bets on yuan depreciation, with a measure of expected price swings poised for the biggest monthly increase since January.

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Not even the same ballpark. “The IMF estimates China’s nonperforming-loan ratio at 15%, compared with the official 1.75% figure..”

Chinese Banks Step Up Bad-Loan Write-Offs (WSJ)

China’s largest banks are writing off huge volumes of soured loans in an effort to clean up their balance sheets, as they look to improve their future profitability despite the country’s economic slowdown. The country’s top four banks collectively wrote off 130.3 billion yuan ($19.5 billion) of bad loans in the first half of 2016, 44% more than in the same period a year earlier. The clear-out has helped banks in one sense: Overall, their nonperforming loans as a proportion of their lending book were unchanged at the close of the second quarter from the end of March, the first quarter since mid-2013 that the key metric hasn’t increased.

But the write-offs have come as a number of other challenges beset Chinese banks. New loans are shriveling—nearly all in July went to mortgages. A series of interest-rate cuts by the central bank since 2012 have squeezed banks’ earnings. And a plan by Beijing to let companies allot their equity to banks in exchange for loan forgiveness is likely to saddle lenders with more dubious assets in coming months, bankers and analysts say. The IMF estimates China’s nonperforming-loan ratio at 15%, compared with the official 1.75% figure reported by the government, because of differences in the way bad loans are recognized.

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Buying know-how.

China’s Biggest-Ever Metals Deal Snaps Up Cleveland’s Aleris (BBG)

China’s influence in global metals markets just stepped up a gear after the owner of its top supplier of aluminum products agreed to buy Aleris of the U.S. for $2.3 billion, marking the nation’s biggest-ever overseas purchase of a metals processor.
The purchase of the Cleveland, Ohio-based company by Zhongwang USA, owned by Liu Zhongtian, founder and chairman of China Zhongwang, will open up new markets for the Chinese company among aerospace and automotive companies. Monday’s deal underscores China’s shift to higher value-added products and will give Zhongwang access to technological know-how and more demanding customers, said Paul Adkins, managing director of Beijing-based aluminum consultancy AZ China.

“Aleris supplies the Boeings and the big carmakers of this world – very advanced consumers,” Adkins said by phone on Tuesday. “Buying it has to provide some sort of opportunity for Zhongwang to bring that know-how back to China. When you’ve got more than half of the world’s primary aluminum supply in China, there is a natural momentum for China to pull other parts of the supply chain into its orbit.” China Zhongwang is Asia’s biggest producer of extruded aluminum, and already has ambitions to sell aluminum sheet to China’s emerging auto and aerospace industries. It’s due this year to start up a flat-rolled aluminum plant in Tianjin, near Beijing, which will supply products that China still has to import.

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Not an entirely new criticism, but good to point out from time to time.

Case Shiller Lags and Understates the Housing Bubble (Adler)

Here’s how the Case Shiller Index (CSI) press release spun the data on the state of the US single family housing market today: “The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in June, unchanged from last month. The 10-City Composite posted a 4.3% annual increase, down from 4.4% the previous month.The 20-City Composite reported a year-over-year gain of 5.1%, down from 5.3% in May.” The problem is that Case Shiller’s methodology causes price suppression and severe lag. That gives the impression that the US housing market isn’t in a bubble. It’s a misimpression, considering that market prices on average are actually above the 2006 bubble peak.

If 2006 was the top of the most extreme bubble in US history, what does that make today’s higher prices? Case Shiller uses only public record data. The current release, which purports to be June data, is really data culled from government records for recorded sales. The closings were purportedly in June, but the contracts were entered at least a month before, and in most cases 2 months to 3 months prior. So the current CSI release doesn’t represent the current market. In fact, the lag is even greater than that. Case Shiller doesn’t merely use only the most recent month’s data, as you would think. It uses that month and the two prior months, so that effectively it represents average recorded closed sale prices for the 3 months of April May and June. It’s the average price as of the time midpoint of the period, in this case mid May.

Add the typical 45-60 day closing and the current data represents contracts signed in mid to late March. It is now almost September. The Case Shiller data is from 5 months ago. The housing market normally moves in very stable trends over years, if not decades, until there’s a crash. This lag factor isn’t too critical for those buying homes for their families to live in. It’s a little more critical for stock market traders and investors, because at major turning points, misleading data can lead to costly investing mistakes. For traders, using the Case Shiller data would be like making decisions based on where the 3 month moving average of the S&P 500 back in late March. Who would do that when current market prices are available?

It’s the same for the housing market. We have near current data on contract prices from both the NAR, and from the online Realtor firm, Redfin. The NAR compiles the MLS data on contract prices from the entire US and releases it within 30 days of the end of the previous month. Redfin compiles sales from 30 large US metros. So whereas Case Shiller is giving us a smoothed average price as of March, we have current actual prices as of July from both the NAR and Redfin. Apply a little technical analysis to that data, and we can see the state of the housing market as of last month, not 5 months ago. It has actually accelerated a bit this year relative to the prior 12 months. And it’s definitely at a new high versus the last bubble.

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No space for the whole list. Useful read though.

25 Email Questions Hillary Clinton Must Answer Under Oath By September 29 (SBA)

Judicial Watch today announced it submitted questions to former Secretary of State Hillary Clinton concerning her email practices. Clinton’s answers, under oath, are due on September 29. On August 19, U.S. District Court Judge Emmet G. Sullivan granted Judicial Watch further discovery on the Clinton email matter and ordered Clinton to answer the questions “by no later than thirty days thereafter….” Under federal court rules, Judicial Watch is limited to twenty-five questions. The questions are:

1) Describe the creation of the clintonemail.com system, including who decided to create the system, the date it was decided to create the system, why it was created, who set it up, and when it became operational.

2) Describe the creation of your clintonemail.com email account, including who decided to create it, when it was created, why it was created, and, if you did not set up the account yourself, who set it up for you.

3) When did you decide to use a clintonemail.com email account to conduct official State Department business and whom did you consult in making this decision?

4) Identify all communications in which you participated concerning or relating to your decision to use a clintonemail.com email account to conduct official State Department business and, for each communication, identify the time, date, place, manner (e.g., in person, in writing, by telephone, or by electronic or other means), persons present or participating, and content of the communication.

5) In a 60 Minutes interview aired on July 24, 2016, you stated that it was “recommended” you use a personal email account to conduct official State Department business. What recommendations were you given about using or not using a personal email account to conduct official State Department business, who made any such recommendations, and when were any such recommendations made?

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Corporations have too much political power to let that happen.

Could EU’s ‘Apple Tax’ Reboot Corporate Tax Reform In The US? (Forbes)

For years, corporate tax reform in the U.S. has been dead in the water, in part because of deep disagreements within the American business community over what such a restructuring should look like. But the European Union’s increasingly aggressive effort to force its members to collect tax on U.S.-based multinationals has the potential to change that dynamic. The EU’s push has resulted in a series of major initiatives, none bigger than its decision to order Ireland to collect a stunning $14.5 billion in back taxes from Apple. That ruling has generated a swift backlash from the U.S. high-tech industry, U.S. policymakers across the political spectrum, and from Ireland itself. Yet, for all the howling, it might open the door for long-awaited tax reform in the United States.

To understand why, think about two kinds of U.S. corporations—those that pay lots of taxes and those that pay little or none. Some—especially companies whose business is built on intellectual property—have structured themselves in a way that sharply reduces their worldwide taxes. They shift income to related firms located in low-tax or no-tax countries while allocating interest costs and other expenses to the high-rate U.S. The result: Many pay effective tax rates in the single digits. At the same time, firms such as retailers, without the ability to shift income to low-tax countries, pay quite high effective tax rates. That split hamstrings the debate over corporate tax reform, especially the version that would eliminate tax preferences in exchange for a lower corporate rate.

If you are already paying close to the top statutory rate of 35%, you love that swap. After all, you are paying a high effective rate because those tax preferences are not helping you, so why not support legislation to ditch them in exchange for a lower rate? But for low-tax firms, the political calculation is dramatically different. If tax preferences make it possible for you to pay an effective rate of 10%, why would you give them up in return for a new U.S. statutory rate of 28%, or even 25%? How do you explain to your shareholders why more than doubling your rate is a good thing?

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Too many doubts.

Bitcoin Was Brought Down By Its Own Potential – And The Banks (Qz)

The best that can be said about Bitcoin right now is that it still exists. Split by internal divisions while its most useful aspects are harvested by the very financial behemoths it once hoped to destroy, Bitcoin is fast becoming the tech world’s version of Waiting for Godot, wherein a hermetically sealed community squabbles and bickers over arcane points of code and law as their world slowly crumbles around them. In the last 12 months, attempts made to produce a road map for the cryptocurrency’s future have come to naught, all while core developers abandon the project and opaque Chinese mining concerns wield outlandish power. Welcome to today’s Bitcoin—a phenomenon so internally focused that its advocates have barely noticed the battle has already been lost.

Back at its inception, the conversation around the currency was driven by an almost unconscionable optimism. This wasn’t simply a mechanism for the easy transfer of capital: This was a tool by which the entire international financial system could be made anew, with corrupt central banks, inflationary currencies, and immoral stockbrokers consigned to the dustbin of history. In a world still reeling from the chaos of the global financial crisis, Bitcoin seemed less like a currency and more like a way of future-proofing the global economy from ever having to deal with something so awful again.

The Bitcoin boom of late 2013 brought greater mainstream attention to the cryptocurrency. Bitcoin’s value surged from $200 to $1,200 over the space of a few weeks, temporarily rendering it more valuable than gold. This was to be a short-lived state of affairs, however, as a string of scandals, hacks, exchange collapses, and—dare I say it—common sense brought the price of Bitcoin plummeting back to Earth. Cue three years of stagnation and false promise, as Bitcoin has struggled to prove its use for, well … anything, really. Even after all this time, Bitcoin is still an economy driven almost entirely by potential—by the dream that, one day soon, Bitcoin will become the lingua franca of the global economic order.

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“One criticism of the Anthropocene as geology is that it is very short,” said Zalasiewicz. “Our response is that many of the changes are irreversible.”

The Dawn Of The Anthropocene (G.)

Humanity’s impact on the Earth is now so profound that a new geological epoch – the Anthropocene – needs to be declared, according to an official expert group who presented the recommendation to the International Geological Congress in Cape Town on Monday. The new epoch should begin about 1950, the experts said, and was likely to be defined by the radioactive elements dispersed across the planet by nuclear bomb tests, although an array of other signals, including plastic pollution, soot from power stations, concrete, and even the bones left by the global proliferation of the domestic chicken were now under consideration. The current epoch, the Holocene, is the 12,000 years of stable climate since the last ice age during which all human civilisation developed.

But the striking acceleration since the mid-20th century of carbon dioxide emissions and sea level rise, the global mass extinction of species, and the transformation of land by deforestation and development mark the end of that slice of geological time, the experts argue. The Earth is so profoundly changed that the Holocene must give way to the Anthropocene. “The significance of the Anthropocene is that it sets a different trajectory for the Earth system, of which we of course are part,” said Prof Jan Zalasiewicz, a geologist at the University of Leicester and chair of the Working Group on the Anthropocene (WGA), which started work in 2009. “If our recommendation is accepted, the Anthropocene will have started just a little before I was born,” he said. “We have lived most of our lives in something called the Anthropocene and are just realising the scale and permanence of the change.”

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“The number of migrants on Lesvos has reached 5,226 while existing camps are only designed to host 3,500. The situation on Chios is equally disheartening, with 3,309 migrants in accommodation for 1,100.”

Greek Islands Raise Alarm Over Fast Increasing Refugee Arrivals (Kath.)

Local and port authorities on the islands of the eastern Aegean are demanding immediate government action to decongest overcrowded migrant camps, insisting that they cannot cope with the recent surge in arrivals from neighboring Turkey. In a letter addressed to Shipping and Island Policy Minister Theodoros Dritsas, the Lesvos Port Authority raised the alarm, saying the island simply does not have the available infrastructure to accommodate the increased flows. The number of migrants on Lesvos has reached 5,226 while existing camps are only designed to host 3,500. The situation on Chios is equally disheartening, with 3,309 migrants in accommodation for 1,100.

According to the latest data, there are 12,120 migrants on the islands. A March deal between the European Union and Turkey to stem the flow managed to limit monthly arrivals to just a few thousand. However, the figure rose to its highest in four months in August. While Interior Ministry officials have attributed the overcrowded conditions at the camps to delays in the registration process, some critics have interpreted the increased traffic as a form of pressure from Ankara, which has linked the deal’s implementation to visa-free travel for its citizens within the EU.

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“There are still an estimated 277,000 migrants in Libya, as well as 348,000 internally displaced people and 310,000 returnees..”

Counting The Lost And Nameless Dead Of The Mediterranean (SMH)

The central Mediterranean is by far the most dangerous crossing into Europe for migrants. On Monday alone, 6908 migrants were rescued in the Channel of Sicily in 35 rescue operations, pulling them from 44 rubber dinghies, eight small wooden boats and two bigger fishing boats. The surge came after a week of windy and rough conditions had kept would-be migrants on the shores of Libya. Two people were reported to have died. There has also been a surge this week in the number of migrants arriving on Greek islands, where on average 100 people come ashore each day.

Of the 3165 people who have died or went missing this year crossing the sea (as of August 28), 2725 were attempting the passage to Italy from North Africa, according to the International Organization for Migration’s figures. More people died on this route than last year in the same period. [..] As of August 28, 272,070 migrants had crossed the Mediterranean into Europe in 2016. Just under half of the arrivals, or 106,461 (as of August 24) arrived in Italy. There, most arrivals came from Nigeria, Eritrea and Gambia. There are still an estimated 277,000 migrants in Libya, as well as 348,000 internally displaced people and 310,000 returnees – refugees returned from abroad.

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Aug 292016
 
 August 29, 2016  Posted by at 5:01 am Finance Tagged with: , , , , , , , , , ,  2 Responses »


DPC Up Sutter Street from Grant Avenue, San Francisco 1906

Asia Currencies Head Down The Jackson Hole (CNBC)
German Economy Minister Says EU-US TTiP Talks Have Failed (AP)
UK Must Pay For Brexit Or EU Is In ‘Deep Trouble’, Says German Minister (G.)
German Vice Chancellor Says Can’t See Turkey In EU Anytime Soon (R.)
Brexit, Grexit: When The Sky Didn’t Fall (WSJ)
TTIP’s ‘Failure’ Signals Clues About UK’s Post-Brexit Trading (Ind.)
The 11 Bone-Chilling Things I Gleaned from Yellen’s Chart (WS)
“If This Does Not Disqualify Hillary For The Presidency, What Will?” (ZH)
There Is A Third Pole On Earth, And It’s Melting Quickly (WEF)
Italy Rescues 1,100 Migrants In Mediterranean In One Day (R.)
What Life Will Be Like After An Economic Collapse (Stewart)

 

 

Travel day today, so an early Debt Rattle

 

 

Abe won’t mind.

Asia Currencies Head Down The Jackson Hole (CNBC)

The newly resurgent dollar pressured Asian currencies as markets revived bets that the U.S. Federal Reserve could possibly raise interest rates as soon as next month. The advances in regional currencies were substantial. The dollar was fetching 102.03 yen at 9:51 a.m. HK/SIN, after flirting with levels around 100 yen just before the Fed’s conclave in Jackson Hole, Wyoming. The Australian dollar also felt the sting, fetching $0.7534 Monday morning, down from nearly $0.77 on Friday. The Singapore dollar was also lower, with the greenback fetching S$1.3614 Monday morning, up from as little as S$1.3469 on Friday.

The Malaysian ringgit also fell, with the dollar fetching 4.0425 ringgit on Monday morning, compared with as little as 4.0100 ringgit on Friday. The dollar index, which measures the greenback’s performance against a basket of currencies, jumped to 95.525 on Monday morning, from as low as 94.246 on Friday. Analysts pointed to Fed Chair Janet Yellen’s speech at the conclave on Friday as the reason for the newly resurgent dollar. While markets still saw December as the most likely timing for a Fed rate hike, Yellen opened the door to a September hike when she said the case for a rate hike strengthened in recent months.

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Not making Merkel happy.

German Economy Minister Says EU-US TTiP Talks Have Failed (AP)

Free trade talks between the European Union and the United States have failed, Germany’s economy minister said Sunday, citing a lack of progress on any of the major sections of the long-running negotiations. Both Washington and Brussels have pushed for a deal by the end of the year, despite strong misgivings among some EU member states over the Trans-Atlantic Trade and Investment Partnership, or TTIP. Sigmar Gabriel, who is also Germany’s vice chancellor, compared the TTIP negotiations unfavorably with a free trade deal forged between the 28-nation EU and Canada, which he said was fairer for both sides. “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it,” Gabriel said during a question-and-answer session with citizens in Berlin.

He noted that in 14 rounds of talks, the two sides haven’t agreed on a single common item out of 27 chapters being discussed. Gabriel accused Washington of being “angry” about the deal that the EU struck with Canada, known as CETA, because it contains elements the U.S. doesn’t want to see in the TTIP. “We mustn’t submit to the American proposals,” said Gabriel, who is also the head of Germany’s center-left Social Democratic Party. In Washington, there was no immediate comment from the office of the U.S. trade representative. Christian Wigand, a spokesman for the European Commission, the EU’s executive arm and which is leading the TTIP negotiations, said Sunday that the institution had no comment or reaction at this time.

Gabriel’s ministry isn’t directly involved in the negotiations with Washington because trade agreements are negotiated at the EU level. But such a damning verdict from a leading official in Europe’s biggest economy is likely to make further talks between the EU executive and the Obama administration harder. Gabriel’s comments contrast with those of Chancellor Angela Merkel, who said last month that TTIP was “absolutely in Europe’s interest.” Popular opposition to a free trade agreement with the United States is strong in Germany. Campaigners have called for nationwide protests against the talks on Sept. 17 — about year before Germany’s next general election.

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Same guy.

UK Must Pay For Brexit Or EU Is In ‘Deep Trouble’, Says German Minister (G.)

German economy minister Sigmar Gabriel has said that Britain must not be allowed to “keep the nice things” that come with EU membership without taking responsibility for the fallout from Brexit. As Theresa May called a cabinet meeting to discuss the UK government’s Brexit strategy on Wednesday, Gabriel warned if the issue was badly handled and other member countries followed Britain’s lead, Europe would go “down the drain”. “Brexit is bad but it won’t hurt us as much economically as some fear – it’s more of a psychological problem and it’s a huge problem politically,” he told a news conference. The world now regarded Europe as an unstable continent, said Gabriel, who is the deputy to chancellor Angela Merkel in Germany’s governing coalition. “If we organise Brexit in the wrong way, then we’ll be in deep trouble, so now we need to make sure that we don’t allow Britain to keep the nice things, so to speak, related to Europe while taking no responsibility,” Gabriel said.

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Still same guy.

German Vice Chancellor Says Can’t See Turkey In EU Anytime Soon (R.)

German Vice Chancellor Sigmar Gabriel said on Sunday he did not see Turkey joining the EU during his political career, adding that the bloc would not be in a position to take Turkey in even if Ankara met all the entry requirements tomorrow. Turkey started talks about joining the European Union in 2005 but has made little progress despite an initial burst of reforms. Many EU countries are wary about the possibility of the large, mainly Muslim country becoming a member of the bloc and Europe has long worried that Turkey’s anti-terrorism laws are used to quash dissent. A crackdown since a failed July 15 coup in Turkey has fueled tension between Ankara and Brussels.

“Even if you’re very optimistic about my political career, I certainly won’t see Turkey becoming a member of this EU,” Gabriel, 56, told a news conference on Sunday. “With the state we’re in, we’re not even in a position to take in a city state,” said Gabriel, leader of the Social Democrats (SPD) – the junior coalition partner in Chancellor Angela Merkel’s government. He said one logistical problem was Turkey’s large population, which stands at about 79 million according to the World Bank. “How would that work in a European Union that is currently losing one of its most important member states, that has been rattled, that doesn’t know how it should reorganise itself?,” he added, referring to Britain’s recent vote to leave the bloc.

He said Turkey might instead, in the distant future, become a partner “in an outer ring” of a changed EU. Earlier this month, Turkish Foreign Minister Mevlut Cavusoglu said his government could stop helping to stem the flow of refugees and migrants to Europe if Brussels failed to relax travel rules for Turks from October. Visa-free access to the EU — the main reward for Ankara’s collaboration in choking off the influx of migrants — has been subject to delays due to a dispute over the anti-terrorism legislation, as well as the post-coup crackdown. Gabriel said in an interview on Saturday that Merkel’s conservatives had “underestimated” the challenge of integrating record migrant arrivals.

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Problem of course is there are no markets, there are only central banks. So no price discovery.

Brexit, Grexit: When The Sky Didn’t Fall (WSJ)

Some economists warned the U.S. congressional budget battles in 2013, which led to sharp spending cuts known as sequestration, could throw the economy back into recession. The economy grew 2.7% that year. Then, in 2010 and 2012, some economists warned the Federal Reserve’s massive bond-buying program would cause hyperinflation, soaring commodity prices and a collapse of the dollar. Nothing of the sort occurred. Warnings abounded in 2015 that if Greece rejected an international bailout, it could spark a sovereign default or a banking crisis or Greece being cast off the euro. Greece’s economy is far from a success story, but it hasn’t gone bankrupt. Its banking system has been battered and drained of deposits, but hasn’t collapsed. It remains in the euro.

So what about Brexit? It’s now been two months since British voters on June 23 cast their ballots to exit from the European Union, and it’s becoming unclear if the recession so many feared will materialize—at least in the near term. It’s worth revisiting the level of concern prior to the vote. George Osborne, the Chancellor of the Exchequer, said a vote for Brexit would cause a “DIY recession.” In the immediate aftermath of the vote, many market economists forecast recession would begin almost immediately. In the days after the vote, global stock markets indeed fell sharply. Perhaps if it had been just a little bit worse, a broader panic would have sent things into a spiral. Instead, markets have rebounded. The FTSE 100 climbed to near-record levels by the middle of August. Nor has the wider economy shown many signs of a coming downturn.

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What good’s a clue if you’re clueless?

TTIP’s ‘Failure’ Signals Clues About UK’s Post-Brexit Trading (Ind.)

The apparent failure of the EU-US trade talks signalled by German Vice-Chancellor Sigmar Gabriel should come as little surprise – for good and bad reasons – and contains some interesting clues about the UK’s post-Brexit trading future. One “good” reason for the negotiators being unable to agree so far on a single chapter of the 27 in the draft Transatlantic Trade and Investment Partnership is that the Europeans are deeply suspicious about how much power will be given to large multinational companies in the process. The secret “court” for settling disputes is absurdly opaque and unaccountable, for example. That would be bad enough across most areas of the economy, but when it impinges on the way the NHS operates for the public good, it is plainly unacceptable.

Anti-business sentiment is often facile and hypocritical, or worse, but TTIP just offers up too many egregious potential abuses to be comfortable with. It could be made more politically palatable, at any rate, and we should always remember that free trade is good for the long-term prosperity of all. Globalisation, unfashionable as it is, has done more good than harm, not least lifting 500 million Chinese out of poverty. TTIP could be made to work, in other words. The “bad” reason for the difficulties TTIP finds itself in is because the EU’s disparate membership can’t agree on what they want, as so often. This, then, supports the Leave camp who argue that the very size and complexity of the EU makes important trade deals such as this impossible to secure. They point to similar failures on EU trade with China and India.

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As I’ve said so often: They have no clue.

The 11 Bone-Chilling Things I Gleaned from Yellen’s Chart (WS)

At the Symposium in Jackson Hole, so feverishly anticipated by the entire world, Fed Chair Janet Yellen gave an even more feverishly anticipated speech on Friday, in which she said the same stuff she’d been saying all along, such as these nuggets: “And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course.” “Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy.” To document this, she supplied the fan chart below, adding this explanation: “The line in the center is the median path for the federal funds rate based on the FOMC’s Summary of Economic Projections in June.” “The shaded region, which is based on the historical accuracy of private and government forecasters, shows a 70% probability that the federal funds rate will be between 0 and 3.25% at the end of next year and between 0 and 4.5% at the end of 2018.”

1. They have no clue about what might happen next. Their forecasts and “forward guidance” are either figments of their imagination or just efforts to manipulate the markets.

2. They have no clue how to get out of what initially was an emergency treatment of a Fed-sponsored financial system in full and self-inflicted collapse, but is now the “new normal” treatment for an economy buckling under its Fed-encouraged debt.

[..] 11. They’re trying to make us forget how long this insanity has been going on. Yellen’s chart begins in Q1 2015. But the Fed’s historic craziness began in 2008. So that we can remember for just how long the Fed has inflicted its policies on the economy, I have added to Yellen’s chart the prior six years, for a total of eight years. It shows that they have no clue about how to get back to normal, and that they have instead changed the definition of normal:

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Tyler.

“If This Does Not Disqualify Hillary For The Presidency, What Will?” (ZH)

This is the week that the steady drip, drip, drip of details about Hillary Clinton’s server turned into a waterfall. This is the week that we finally learned why Mrs. Clinton used a private communications setup, and what it hid. This is the week, in short, that we found out that the infamous server was designed to hide that Mrs. Clinton for three years served as the U.S. Secretary of the Clinton Foundation.

In March this column argued that while Mrs. Clinton’s mishandling of classified information was important, it missed the bigger point. The Democratic nominee obviously didn’t set up her server with the express purpose of exposing national secrets—that was incidental. She set up the server to keep secret the details of the Clintons’ private life—a life built around an elaborate and sweeping money-raising and self-promoting entity known as the Clinton Foundation.

Had Secretary Clinton kept the foundation at arm’s length while in office—as obvious ethical standards would have dictated—there would never have been any need for a private server, or even private email. The vast majority of her electronic communications would have related to her job at the State Department, with maybe that occasional yoga schedule. And those Freedom of Information Act officers would have had little difficulty—when later going through a state.gov email—screening out the clearly “personal” before making her records public. This is how it works for everybody else.

Mrs. Clinton’s problem—as we now know from this week’s release of emails from Huma Abedin’s private Clinton-server account—was that there was no divide between public and private. Mrs. Clinton’s State Department and her family foundation were one seamless entity—employing the same people, comparing schedules, mixing foundation donors with State supplicants. This is why she maintained a secret server, and why she deleted 15,000 emails that should have been turned over to the government.

Most of the focus on this week’s Abedin emails has centered on the disturbing examples of Clinton Foundation executive Doug Band negotiating State favors for foundation donors. But equally instructive in the 725 pages released by Judicial Watch is the frequency and banality of most of the email interaction. Mr. Band asks if Hillary’s doing this conference, or having that meeting, and when she’s going to Brazil. Ms. Abedin responds that she’s working on it, or will get this or that answer. These aren’t the emails of mere casual acquaintances; they don’t even bother with salutations or signoffs. These are the emails of two people engaged in the same purpose—serving the State-Clinton Foundation nexus.

The other undernoted but important revelation is that the media has been looking in the wrong place. The focus is on Mrs. Clinton’s missing emails, and no doubt those 15,000 FBI-recovered texts contain nuggets. Then again, Mrs. Clinton was a busy woman, and most of the details of her daily State/foundation life would have been handled by trusted aides. This is why they, too, had private email. Top marks to Judicial Watch for pursuing Ms. Abedin’s file from the start. A new urgency needs to go into seeing similar emails of former Clinton Chief of Staff Cheryl Mills.

Mostly, we learned this week that Mrs. Clinton’s foundation issue goes far beyond the “appearance” of a conflict of interest. This is straight-up pay to play. When Mr. Band sends an email demanding a Hillary meeting with the crown prince of Bahrain and notes that he’s a “good friend of ours,” what Mr. Band means is that the crown prince had contributed millions to a Clinton Global Initiative scholarship program, and therefore has bought face time. It doesn’t get more clear-cut, folks. That’s highlighted by the Associated Press’s extraordinary finding this week that of the 154 outside people Mrs. Clinton met with in the first years of her tenure, more than half were Clinton Foundation donors. Clinton apologists, like Vox’s Matthew Yglesias, are claiming that statistic is overblown, because the 154 doesn’t include thousands of meetings held with foreign diplomats and U.S. officials.

Nice try. As the nation’s top diplomat, Mrs. Clinton was obliged to meet with diplomats and officials—not with others. Only a blessed few outsiders scored meetings with the harried secretary of state and, surprise, most of the blessed were Clinton Foundation donors. Mrs. Clinton’s only whisper of grace is that it remains (as it always does in potential cases of corruption) hard to connect the dots. There are “quids” (foundation donations) and “quos” (Bahrain arms deals) all over the place, but no precise evidence of “pros.” Count on the Clinton menagerie to dwell in that sliver of a refuge.

But does it even matter? What we discovered this week is that one of the nation’s top officials created a private server that housed proof that she continued a secret, ongoing entwinement with her family foundation – despite ethics agreements – and that she destroyed public records. If that alone doesn’t disqualify her for the presidency, it’s hard to know what would.

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Lest we forget.

There Is A Third Pole On Earth, And It’s Melting Quickly (WEF)

When we think of the world’s polar regions, only two usually spring to mind – the North and South. However, there is a region to the south of China and the north of India that is known as the “Third Pole”. That’s because it is the third largest area of frozen water on the planet. Although much smaller than its north and south counterparts, it is still enormous, covering 100,000 square kilometres with some 46,000 glaciers. Scientists conducting research in the area have warned of disturbing global warming trends, and how, if they continue, they could affect the lives of 1.3 billion people. What happens to ice in the polar regions is taken as clear evidence of climate change. When the ice melts, we know that the planet is warming up.

The Earth’s north and south extremities are crucial for regulating the climate, and at the same time are particularly sensitive to global warming. The Third Pole, because it is high above sea level, is also sensitive to changes in temperatures. It also powers life for many thousands of miles. It is estimated that the water that flows from the Third Pole supports 120 million people directly through irrigation systems, and a total of 1.3 billion indirectly through river basins in China, India, Nepal, Pakistan, Bangladesh and Afghanistan. That’s nearly one fifth of the world’s population.

It is remote – the region encompasses the Himalaya-Hindu Kush mountain ranges and the Tibetan Plateau – but 10 of Asia’s largest rivers begin here, including the Yellow river and Yangtze river in China, the Irrawaddy river in Myanmar, the Ganges, which flows through India and Bangladesh, and the trans-boundary Mekong river. Australian TV company ABC was recently invited to visit one of the remote research stations in the Third Pole by lead researcher, Professor Qin Xiang. Scientists have been gathering data from this remote area for over 50 years, and recent findings are disturbing. Among them, the fact that temperatures there have increased by 1.5 degrees – more than double the global average.

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As the fighting continues.

Italy Rescues 1,100 Migrants In Mediterranean In One Day (R.)

About 1,100 migrants were rescued from boats in the Strait of Sicily on Sunday as they tried to reach Europe, Italy’s coastguard said. The migrants were picked up from eight rubber dinghies, one large boat and two punts through 11 rescue operations in the Mediterranean, the coastguard said in a statement. It did not mention the migrants’ country of origin. Latest data from the International Organization for Migration, released on Friday, said some 105,342 migrants have reached Italy by boat this year, many of them setting sail from Libya. An estimated 2,726 men, women and children have died over the same period trying to make the journey, often dangerously packed into small vessels unsuitable for the voyage. Italy has been on the front line of Europe’s migrant crisis for three years, and more than 400,000 have successfully made the voyage to Italy from North Africa since the beginning of 2014, fleeing violence and poverty.

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A useful and thorough reminder.

What Life Will Be Like After An Economic Collapse (Stewart)

If you have been waiting for a public announcement or news headline to let you know that an economic collapse has begun, you are in for the surprise of your life. If history in other countries and in Detroit, Michigan is any indication, there won’t be an announcement. An economic collapse tends to sneak up on a city, region, or country gradually over time. In some cases, the arrival of an economic collapse is so gradual that most people living in it aren’t even aware of it at first. Things just get gradually worse, often so gradually that people and families adjust as best they can until one day they actually realize that it’s not just their home or their neighborhood that has been hit so hard financially, it’s everyone. By that time, it’s often too late to take preventative action.

In March of 2011, Detroit’s population was reported as having fallen to 713,777, the lowest it had been in a century and a full 25% drop from 2000. In December 2011, the state announced its intention to formally review Detroit’s finances. In May of 2013, almost two years later, the city is deemed “clearly insolvent” and in July of 2013, the state representative filed a Chapter 9 bankruptcy petition for Motor City. Detroit became one of the biggest cities to file bankruptcy in history. So we have only to look at what happened in Detroit, Michigan post-bankruptcy, to get an indication of what might soon be widespread across the United States and what is already widespread in countries like Brazil and Venezuela.

Grocery stores and other businesses will fail one by one or be shut down from the riots and looting. In Detroit, the economic collapse left less than 5 national grocery stores for over 700,000 people. Imagine the lines even if food was still being shipped in on trucks. Small independent corner stores and family owned stores become the most convenient place to shop. These are stores with already high prices who make most of their profit from beer, wine, lottery, and cigarettes. Now imagine that shipping schedules have been affected by the economic crisis, this would mean longer lines with less certainty that any food would even be available once you got into the store to shop. People in Venezuela are actually dealing with government-run grocery stores and are limited to two days per week they can shop.

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Aug 192016
 
 August 19, 2016  Posted by at 9:51 am Finance Tagged with: , , , , , , , , ,  2 Responses »


Walker Evans Waterfront in New Orleans. French market sidewalk scene 1935

Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)
Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)
UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)
Moody’s Lowers Outlook On Australia Banks To Negative (R.)
China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)
As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)
Stiglitz: The Euro Is On Course To Fail (Economist)
The Subtle Tyranny of Blockchain (Thomas)
It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)
The US Is Promoting War Crimes In Yemen (G.)
Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)
The Fishermen of Lesbos (Hakai)

 

 

“Experience doesn’t count for much, and extreme confidence may be fatal.”

Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)

In a bleak new letter to investors, Paul Singer’s Elliott Management warns that the bond market is “broken” and that when the central bank actions of recent years no longer ward off a market downturn, the subsequent loss of confidence could be severe. The fund’s recent investor letter, which covers the second quarter, notes that Elliott’s managers are currently seeing “what is in many ways the most peculiar period we have faced in 39 years.” Too much power has been ceded to central banks, the letter adds, the value of money has been debased, inflation is probably inevitable, and when it happens, it could be swift and impossible to tamp down.

Elliott is a $28 billion fund founded in 1977 by Singer, now its president. The fund is up more than 6% for the year through July, according to an investor. Given the persistence of low or negative yields on government and other bonds and the continued stampede to buy them nonetheless, today’s environment marks “the biggest bond bubble in world history,” and “the global bond market is broken,” the investor letter states. The letter discusses, at some length, the oddity of an investor mentality that flies to an asset class regarded as a “safe haven” even when there are low or nonexistent returns attached to it and no guarantee that current conditions will persist.

In one wry aside, the letter suggests a safety warning be attached to the $12 trillion government bond market now trading at negative yields: “Hold such instruments at your own risk; danger of serious injury or death to your capital!” Trading in this market is particularly difficult, it adds. “Everyone is in the dark,” Elliott notes. “Experience doesn’t count for much, and extreme confidence may be fatal.” Moreover, “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”

Read more …

Coming soon to a theater near you. Denmark, Holland, Australia, New Zealand, UK, the list is long.

Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)

It appears that the Vancouver housing market has slammed shut. Which is hardly a surprise: virtually everyone saw it coming, the only question was when. Eilers says he’s been warning of a real estate slow-down for at least a year due to the region’s unsustainable and unsupportable prices. West Vancouver, where he does a large part of his business, had a benchmark detached home price of almost $3.4 million in July according to the Real Estate Board of Greater Vancouver. “The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been financed? By off-shore money and record debt.”

Precisely what we said at the start of the year when we first heard horror stories about Chinese buyers paying cash, sight unseen, for any and every local luxury, and not so luxury home. It appears that it is not just the 15% luxury tax implemented on on July 25 that has burst the bubble: according to Eilers sales were dropping even before the tax. According to the data, July was another slow month in West Vancouver with only 44 sales, down from 80 in 2015. June saw 74 sales, also down from 102 the year before. The pattern has left the market “devastated”, Eilers adds. While it may be too early to make a definitive conclusion, after all while earlier this month, the REBGV released its statistics for the month of July, saying the data showed the market had slowed down to “normal levels”, there was still no official August data available, and thus no actual indication of the slowdown.

Fortunately for buyers, real-time data proves otherwise. Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price” used by the REBGV. It currently shows a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago.

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What a bubble looks like. This is going to be painful. Re: Vancouver.

UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)

The total net worth of the U.K. at the end of 2015 was £8.8 trillion ($11.6 trillion), the Office for National Statistics said in London on Thursday. Much of the £493 billion jump from a year earlier came from the £355 billion increase in the value dwellings. The data also showed the U.K. was ahead of other G-7 countries in terms of growth of non-financial assets in 2014.

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More housing shock, more pain to come. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high..”

Moody’s Lowers Outlook On Australia Banks To Negative (R.)

Moody’s has lowered its outlook on Australia’s banks to negative from stable, warning of sluggish profit growth due to slow wage increases, record-low interest rates, strong lending competition and rising household debt. The agency said the banks, whose credit ratings are among the highest in the world, could be hurt by an increase in problem loans among mining companies and households in mining-dependent states. Moody’s action came after S&P in July also placed major Australian banks’ AA- ratings on negative outlook, in a signal that a downgrade was possible. Both agencies rate the banks one rung below the highest, triple-A, investment grade. A downgrade would make financing more expensive for banks at a time when regulators want them to put aside more cash to weather any repeat of the global financial crisis.

Australia’s highly profitable “Big Four” banks – National Australia Bank, ANZ Banking Group, Westpac and Commonwealth Bank – emerged from the financial crisis relatively unscathed but are facing questions over their capital levels, slowing earnings growth and rising bad debts. “The outlook change reflects Moody’s expectation of a more challenging operating environment for banks in Australia for the remainder of 2016 and beyond,” Frank Mirenzi, a vice president and senior analyst at Moody’s, said in a statement. He noted that profit growth could slow and asset quality decline, and make banks and consumers more vulnerable to economic shocks. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high,” Mirenzi noted.

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China would collapse if not for the shadow banks. It’s fully addicted.

China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)

There’s a list Ni Baixiang, head of Industrial & Commercial Bank of China’s Jiangxi branch, would love to get his hands on. Commonly referred to as the “zombie list,” it’s compiled by Jiangxi regional authorities and holds the names of the most deadbeat of borrowers: state-owned companies deemed too weak to survive and destined to be wound down. In short, the kind of enterprises banks already weighed down by rising bad loans want to steer well clear of. Only, neither Ni nor his competitors in Jiangxi are allowed to know who they are. “They won’t tell us because if we know, we’ll lose confidence,” Ni, whose bank is China’s largest, told reporters after a press briefing in Beijing earlier this month.

Ni’s dilemma underscores the challenge China faces as it tries to stem a tide of bad loans while carrying out an orderly restructuring of a state corporate sector burdened by overcapacity and bloated bureaucracies. Several provincial governments are withholding information on zombie borrowers from banks for fear that they’ll cut off financing immediately, according to officials who asked not to be identified. In several provinces, government-compiled lists of zombie companies are also kept secret from local banking regulators, the people said, asking not to be named discussing sensitive information. Knowing which state-owned companies get the “zombie” designation can be crucial for bankers because authorities ultimately decide whether they’ll fail, and local officials often meddle in banks’ lending decisions.

An economy growing at the slowest pace in a quarter century is adding urgency to President Xi Jinping’s push to steer China away from the investment-led model it’s relied on in the past. A key part of that is restructuring industries saddled with overcapacity, such as steel, cement and coal. McKinsey estimates that shedding surplus industrial capacity could add $5.6 trillion to the economy between now and 2030.

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China’s making up the numbers it goes along, but here’s how we find out how it’s really doing.

As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)

Back in 2008, Mongolia honored its revered national hero Genghis Khan with an enormous, stainless steel statue on the bank of the Tuul River about a half-hour’s drive outside of the capital of Ulaanbaatar. The 13th century conqueror’s name graces the capital’s international airport and his image is also plastered on the tugrik, the local currency. Right now, Khans aren’t getting much respect. The government, having burned through much of its foreign currency reserves, faces a crushing debt burden and is having trouble meeting its civil service payroll. On Thursday, the central bank hiked its benchmark interest rate by a remarkable 4.5 percentage points to 15% to prop up the tugrik, the world’s worst performing currency in August.

Mongolia, a mineral-rich and landlocked $12 billion economy bordering Russia and China, is staring at a full-blown balance of payments crisis. It’s caused barely a ripple in global financial markets, but the nation’s economic meltdown offers instructive lessons to far bigger resource-reliant economies like Brazil, Venezuela, Russia and Saudi Arabia. This is an economy that gives new meaning to what economists call the resource curse. An overabundance of natural resources can result in lopsided economic growth, government waste and boom-bust cycles that can leave a country’s finances in tatters. “Mongolia should be much richer than it is,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment. “There is nowhere else in the world where it is so easy to dig up resources without any problems and sell the commodities to China with such low transportation costs.”

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It’s way too late to save the euro.

Stiglitz: The Euro Is On Course To Fail (Economist)

Those in search of an antidote to the anxieties that arise from Britain’s vote to leave the European Union should avoid the latest book from Joseph Stiglitz. Its subject is the euro, which has hitherto been the main font of fears for Europe and (his analysis suggests) will soon be once again. It is a meaty subject, suited to a big-name economist. Mr Stiglitz has won a Nobel prize, served as a feather-ruffling chief economist for the World Bank and written several books with a fair claim to prescience, notably, “Globalisation and Its Discontents”, published in 2002. The main argument of his new book is that, on its current course, the euro is certain to fail—and indeed, that it was fatally flawed from birth.

It entails a fixed exchange rate and a single interest rate for its members, which means countries must forgo the option to devalue in times of economic weakness. To make up for that loss, the euro’s architects should have created institutions, such as jointly issued bonds, mutual backing of bank deposits and a common fund for unemployment insurance, so the costs of righting each economy are shared. Instead the burden falls on individual countries through austerity policies, such as tax rises and wage cuts. The results have been ugliest in Greece, where national income has shrunk by a quarter since 2007 and where the unemployment rate is 24%. There is still time to put in place better policies, thinks Mr Stiglitz. But an amicable divorce would be preferable to the current situation, which puts the considerable achievement of European integration at risk.

A good chunk of the book is taken up with a critique of policymakers’ efforts to address the euro crisis. Mr Stiglitz rightly takes issue with the blame-the-victim analysis of the euro’s failings that is commonly heard in Germany. The persistent trade surpluses of Germany and the vast deficits of boomtime Spain, Portugal and Greece are two sides of the same coin. Indeed, in a world short of aggregate demand, German thrift is the bigger failing, argues Mr Stiglitz. He favours the remedy, first proposed by John Maynard Keynes, of forcing creditor countries to adjust by taxing their trade surpluses.

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“In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same.”

The Subtle Tyranny of Blockchain (Thomas)

The past months have become a new chapter in the evolution of blockchain technology. Ethereum’s fork in the wake of the DAO hacks. Bitcoin’s almost-fork in the wake of the (still unresolved) block size debate. All of this is leading to the growing frustration and even disillusionment of key figures in the crypto-currency community. I left the Bitcoin community in 2012 for very similar reasons. In 2011, I was part of the group that helped Gavin Andresen design the Pay-to-Script-Hash (P2SH) feature. The design wasn’t very complex, it was backwards-compatible and provided crucial building blocks for improving Bitcoin’s security and performance. Unfortunately, getting it deployed turned out to be very political.

It was easy to extrapolate from this change to more advanced functionality still on the roadmap and get depressed about our chances to make important progress in the future. As the Bitcoin price rose, the number of stakeholders expanded and the amount of money at stake increasingly dominated the technical discussion. With this context in mind, the recent situation with Ethereum is not surprising in the slightest. As a blockchain grows, the larger and highly vested userbase becomes more and more difficult to shepard. When combined with time pressure (i.e. the 27-day DAO split creation period), something had to give. There wasn’t enough time to get the sort of buy-in and preparation needed to safely hardfork a system like Ethereum.

At the root of the difficulty in updating blockchains is the need to maintain shared state. In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same. Everyone’s memory (also known as “state” in computer science terms) has to be exactly the same and evolve according to the same rules. Shared state adds tremendous complexity and that has a big impact on developers: Blockchains are a pain to work with. Everyone who has done it knows what I’m talking about. The fact that blockchain has been largely ignored by major tech companies and embraced by the financial industry is partly because that industry has a relatively high tolerance for arcane and complex systems.

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To once again quote Michael Moore: You can’t declare war on a noun.

It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)

It’s difficult to pick the most destructive of America’s many senseless, futile and tragically needless wars, but the “War on Drugs” is near the top of the list.Prohibition of mind-altering substances has not just failed–it has failed spectacularly, and generated extremely destructive and counterproductive consequences. What was the result of the Prohibition of alcohol in the 1920s? Prohibition instantly criminalized 40+% of the adult populace and created hugely profitable criminal organizations. What was the result of the “War on Drugs”? This modern-day Prohibition instantly criminalized large swaths of the adult populace and created hugely profitable criminal organizations. If you want to increase drug use, criminalize innocent citizens and spawn gargantuan criminal organizations, then by all means declare “war” via Prohibition.

The results of Prohibition/War on Drugs are so visibly perverse and so destructive that the entire enterprise is sickeningly Orwellian. The well-paid apologists for Prohibition/War on Drugs claim that imprisoning millions of people “helps” them avoid drugs. If you think being tossed in prison for a few years “helps” people, then step right up and accept a fiver (5-year sentence) in an American prison, which is essentially a factory that produces one product: people damaged by imprisonment, deprived of their full citizenship, hobbled by a felony conviction–ex-con beneficiaries of years of tutorials by hardened criminals. This is as Orwellian as the Vietnam War’s famous “It became necessary to destroy the town to save it.”

If you think throwing millions of people in prison “helps” them or society, you are either insane or you’re making a living in the gulag or our sick system of “justice”. If you don’t think America has a “War on Drugs” Gulag, please glance at this chart of Americans in jail and prison – many for drug-related offenses:

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“..inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign..”

The US Is Promoting War Crimes In Yemen (G.)

Saudi Arabia resumed its appalling war in Yemen last week and has already killed dozens more civilians, destroyed a school full of children and leveled a hospital full of sick and injured people. The campaign of indiscriminate killing – though let’s call it what it is: a war crime – has now been going on for almost a year and a half. And the United States bears a large part of the responsibility. This US-backed war is not just a case of the Obama administration sitting idly by while its close ally goes on a destructive spree of historic proportions. The government is actively selling the Saudis billions of dollars of weaponry. They’re re-supplying planes engaged in the bombing runs and providing “intelligence” for the targets that Saudi Arabia is hitting.

Put simply, the US is quite literally funding a humanitarian catastrophe that, by some measures, is larger than the crisis in Syria. As the New York Times editorial board wrote this week: “Experts say the coalition would be grounded if Washington withheld its support.” Yet all we’ve heard is crickets. High-ranking Obama administration officials are hardly ever asked about the crisis. Cable television news has almost universally ignored it. Both the Clinton and Trump presidential campaigns have been totally silent on this issue despite their constant arguing over who would be better at “stopping terrorism”. Beyond the grotesque killing of civilians, it’s clear at this point that the Saudis’ bombing campaign has also boosted al-Qaida in the Arabian Peninsula (Aqap) to a level which Reuters described as “stronger and richer” than anytime in its 20-year history.

Jake Tapper commendably broke the television news blackout about Yemen on his CNN show on Wednesday. Senator Chris Murphy of Connecticut, one of the very few elected representatives talking about the crisis, told Tapper that “it’s wild to me” that the Congress isn’t debating the “unauthorized” war in Yemen. The Saudis “could not do it without the United States”, he said. “We have made the decision to go to war in Yemen” – against Saudi Arabia’s enemies, not ours – without any debate. “If you talk to Yemenis, they will tell you that inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign,” Murphy continued. “What’s happening is we are helping to radicalize the the Yemeni population against the United States.”

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Not from Turkey. Lybia is more likely.

Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)

Greece’s coast guard rescued dozens of migrants Friday whose boat ran aground on a deserted islet off the coast of southwestern Greece, hundreds of miles from the usual entry point of migrants into the European Union nation. The boat carrying about 70 people ran aground overnight on the tiny islet of Sapientza, off the southwestern tip of the Peloponnese, the coast guard said. The vast majority of migrants reach Greece’s eastern Aegean islands a few miles from the Turkish coast.

Coast guard vessels picked up the migrants Friday morning, ferrying them to the mainland where they were to be registered. It was not immediately clear what type of boat they had been on, where they had set sail from or where they had been sailing to. Separately, government figures showed 261 migrants or refugees arrived on Greek islands in the 24 hours from Thursday morning to Friday morning – a jump compared to recent figures, which had ranged from a few dozen to about 150 per day. Of those who arrived in the last 24 hours, the vast majority – 139 people – reached the eastern Aegean island of Lesvos. The rest arrived on Chios, Samos, Leros and Karpathos.

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Endearing.

The Fishermen of Lesbos (Hakai)

The Greek island of Lesbos is at the forefront of the refugee crisis as boatload after boatload of men, women, and children fleeing conflict in Syria, Iraq, Afghanistan, and elsewhere arrive on its shores. While citizen volunteers, NGOs, and governments claim much of the spotlight for rescue and recovery efforts, local people—especially those most experienced on the water—play a vital role, even at risk to their livelihoods and, perhaps, personal health. Greek video journalist Nikolia Apostolou introduces us to Lesbos fishermen on the front lines.

Read more …

Jun 192016
 
 June 19, 2016  Posted by at 2:39 pm Finance Tagged with: , , , , , , , ,  8 Responses »


DPC White Star liner S.S. Olympic, sister ship of Titanic, NY 1911

The reason the Brexit debate has gotten so out of hand is nobody understands what it’s about.

The Brexit campaigns have started anew in the UK, and from what I’ve seen here from left field barely a thing has changed since the murder of MP Jo Cox. Neither side has any qualms about using her death to make their respective points. The main, and perhaps only real, point is that nobody understands what the vote is about. Jo Cox, bless her soul, didn’t either.

This lack of understanding is also, at the same time, the reason why the debate has gotten so out of hand. Nobody seems to understand it’s not about Cameron or Nigel Farage, or Michael Gove vs Boris Johnson, it’s about voting for or against the EU, for or against Juncker and Tusk and five other unelected presidents having a say in one’s life.

And that’s not all either. It’s about voting to leave, or remain in, a Union that is already dead and preserved only in a zombie state. Brexit is just one vote and many more will inevitably follow. Brexit is not the first, Grexit had that ‘honor’ last year. Later this month, elections in Italy and Spain have the potential to turn into preliminary Italix and Spexit votes. And then there will be more.

The reason why these things are taking place, and will be, going forward, is that the economies of all these countries are fast deteriorating. The sole reason why people have accepted the rule of Brussels coming from far away over their daily lives, is the promise that it would make those lives better and more comfortable.

That promise has been shattered. The EU has made things worse for most Europeans, not improved them. And when seen in that light, why should people agree to continue to be told what to do by those who’ve made them poorer? There’s no democratic model in which that remotely makes sense. There are only undemocratic models left.

Britain’s Brexit referendum has run head first into global developments, and there is no sign that any voice in the discussion recognizes this. They all think it’s about something else. And of course Cameron’s policies have devastated the country, and of course the even more right wing Leave campaigners would make that worse. But that’s not what this is about.

 

What Cameron missed when he called the referendum is not that some of his friends could turn on him and go Leave, what he missed is that so many Brits from both the left and the right would turn on him. He never expected that to happen. He always figured his manipulated rosy pink economic numbers would outweigh people’s actual daily lives.

This is a global phenomenon, it has little to do with Cameron himself, other than his neoliberal budget cuts are often even more extreme than those of many of his pan-European and indeed American and global peers. It has a lot more to do with the neoliberalism embedded in Brussels, which has installed technocratic governments in many countries, especially in southern Europe, all with disastrous consequences for the populations.

It’s an exact mirror image of what is happening in the US. The jobs numbers the government and media feed Americans look good once filtered through a hundred layers of manipulation, but people look at what job they themselves have, and what it pays them, and they look at their families, friends and neighbors, and then decide this just ain’t working out or adding up.

The Brexit vote is, in a nutshell, Britain’s last chance to hit the lifeboats and jump the Titanic before it hits the iceberg. This is not even because of the dictatorial character Brussels has taken on, which is starting to display cartoonish properties, it’s because the global economy has hit the debt iceberg well before the EU has.

Voting Remain in next week’s referendum comes down to “Let’s stay onboard so we can help rearrange the deckchairs. And while we’re at it, pick some nice tunes for the orchestra to play on the way down as we sink.”

 

If there’s one outstanding advantage to the Brexit debate, it must be that it has opened up British society to reveal all its festering boils, pimples, pustules, ulcers and neoplasms that had before remained veiled by either stiff upper lips or outright dumb-ass ignorance. Not that the ‘discussion’ has done anything to lift the dumb-assery, mind you; the intelligence level of the Brits has been exposed as yet another hidden sore.

Nothing typically British there either. Neither the people nor the politicians nor the media in the country show any sign of comprehending what is happening to them. Nobody is capable of taking a step back and seeing a bigger picture. Jo Cox’s death has done nothing to fix that issue. Indeed, if there’s one thing Britain has been, and still is, showing the world it’s that it’s incapable of solving its problems.

But that incompetence is not going to be alleviated by handing the reins to Cameron or Johnson, or Corbyn, or indeed Juncker and Tusk. The only remedy is a cold hard look at what’s really going on in Britain itself, a look at its place in a rapidly imploding global economic system, and a look at what being a part of the EU actually means.

To gauge that last bit, all one has to do is to look at Greece, at how the EU has forced the demise of the Greek economy, of its once magnificent health-care system, and of countless other segments of a society still mired today in inexorable decline. A look at the treatment of refugees holds a lesson or two as well.

The summarized lesson from all this is that Brussels will happily throw you under a bus if it feels that would further its ambitions. Of which the EU has many.

The treatment of Greece and the refugees has redefined the term ‘Union’, and everyone should take note.

 

In America, the Democratic and Republican parties have all but internally combusted and destroyed themselves. In Britain, Labo(u)r did that years ago through Tony Blair, and the Tories are doing it today by infighting over Brexit. None of these things are incidents or stand-alone events.

They are part of a much larger pattern, as evidenced by the popularity numbers of people like French president Hollande (8%?!). All but a few incumbent parties in the west are evaporating. And all for the same reason: the demise of the existing economic models and systems that they have based their policies and popularity on.

An economy in decline means the end of centralization and the end of existing political power structures. This is inevitable. Because both can exist only by the grace of ever growing economies. It’s what our economies are based on. It’s what our entire world view is based on. Sometime in the future historians will have a hard time understanding this, but for now it’s all we have, because it’s all we’re willing to consider: growth to infinity and beyond.

Which was, or seemed to be, kind of alright as long as there indeed was growth. But there no longer is any growth. And it will not return for a long time, arguably not in our lifetimes. Which makes it a problem that we haven’t prepared for the end of growth. Which is not terrible smart given that making a point for growth having stopped decades ago looks quite solid.

 

People in Britain try desperately to link Jo Cox’s murder to some sort of larger movement or entity, even if for all they know, for all they can know, the killer is just another warped individual who didn’t take his meds for a long enough period to make him go fully off kilter.

Yeah, he ordered some right wing magazines and books. But that doesn’t mean there’s a conspiracy behind the murder. Nor does it make this fascist and/or right-wing terrorism. Those claims are made solely in an effort to connect the tragedy to the Brexit vote. And that effort all by itself is a huge blemish on Jo Cox’s life, her death and her legacy.

To truly honor her would be to make sure you understand, and help others understand, what she herself did not.

Jun 082016
 
 June 8, 2016  Posted by at 2:18 pm Finance Tagged with: , , , , , , , ,  10 Responses »


Fred Stein Evening, Paris 1934

Two months ago, there was a referendum in Holland about an association agreement between the EU and Ukraine. A relatively new Dutch law states that with an X amount of signatures a referendum can be ‘forced’ by anyone. Before, during and -especially- after the vote, its importance was -and is actively being- pooh-poohed by both the Dutch government and the EU. That in itself paints the issue better than anything else. Both the call and the subsequent support for the referendum stem from resistance against exactly that attitude.

The Dutch voted No to the EU/Ukraine agreement. It was with a turnout not much above the validity threshold, but a large majority of those who did vote agreed they want no part of the deal. This puts Dutch PM Rutte in an awkward position, he can’t be seen ignoring the population. Well, at least not openly. The EU can’t validate the agreement, and with Holland still holding the chair of the Union until July 1, a meeting on the topic has been pushed forward until the last weekend of June. With Rutte still in charge, but only just, and with the June 23 UK Brexit vote decided.

Brussels is frantically looking for a way to push through the agreement despite the Dutch vote, and likely some sort of bland compromise will be presented, which Rutte’s spin doctors will put into words that he can -with a straight face- claim honor the vote while at the same time executing what that same vote specifically spoke out against.

The EU will claim that since 27 other nations did ‘ratify’ the agreement, the 67% of the 32% of Dutch voters who bothered to show up should not be able to block it. As they conveniently fail to mention that nobody in the other 27 countries had a chance to vote on the issue. Just imagine a Brexit-like vote in all 28 EU nations on June 23. Brussels knows very well what that would mean. There’s nothing it finds scarier than people having an active say in their lives.

 

All this is a mere introduction for what is a ‘western world wide’ trend that hardly anybody is able to interpret correctly. It what seems to many to be a sudden development, votes like the Dutch one are ‘events’ where people vote down incumbents and elites. But these are not political occurrences, or at least politics doesn’t explain them.

In the US, there’s Trump and Bernie Sanders. In Britain, the Brexit referendum shows a people that are inclined not to vote FOR something, but AGAINST current political powers. In Italy, a Five-Star candidate is set to become mayor of Rome, something two Podemos affiliated -former- activists have already achieved in Barcelona and Madrid.

All across Europe, ‘traditional’ parties are at record lows in the polls. As is evident when it comes to Brexit, but what when you look closer is a common theme, anything incumbents say can and will be used against them. (A major part of this is that the ’propaganda power’ of traditional media is fast coming undone.)

The collapse of the system doesn’t mean people swing to the right, as is often claimed, though that is one option. It means people swing outside of the established channels, and whoever can credibly claim to be on that outside has a shot at sympathy, votes, power, be they left or right. Whatever else it is they may have in common, first and foremost they’re anti-establishment.

 

To understand the reason all this is happening, we must turn our heads and face economics. Or rather, the collapse of the economy. Especially in the western world – the formerly rich world-, there is no such thing as separate political and economic systems anymore (if there ever were). There is more truth in Hazel Henderson’s quote than we should like: “economics [..] has always been nothing more than politics in disguise”.

What we have is a politico-economic system, with the former media establishment clinging to (or inside?!) its body like some sort of embedded parasite. A diseased triumvirate.

With the economy in irreversible collapse, the politico part of the Siamese twin/triplet can no longer hold. That is what is happening. That is why all traditional political parties are either already out or soon will be. Because they, more than anything else, stand for the economic system that people see crumbling before their eyes. They represent that system, they are it, they can’t survive without it.

Of course the triumvirate tries as hard as it can to keep the illusion alive that sometime soon growth will return, but in reality this is not just another recession in some cycle of recessions. Or, at the very minimum this is a very long term cycle, Kondratieff style, . And even that sounds optimistic. The system is broken, irreparably. A new system will have to appear, eventually. But…

‘Associations’ like the EU, and perhaps even the US, with all the supranational and global entities they have given birth to, NATO, IMF, World Bank, you name them, depend for their existence on an economy that grows. The entire drive towards globalization does, as do any and all drives toward centralization. But the economy has collapsed. So all this will of necessity go into reverse, even if there are very powerful forces that will resist such a development.

 

Despite what the media try to tell you, as do the close to 100% manipulated economic data emanating from various -tightly controlled- sources, the economy is not growing, and it hasn’t for years; the only thing that grows is debt. And you can’t borrow growth.

You can argue in fascinating philosophical debates about when this started, arguments can be made for Nixon’s 1971 abolishment of the -last vestiges of- the gold standard anywhere up to Clinton’s 1998 repeal of Glass-Steagall, or anything in between -or even after.

It doesn’t matter much anymore, the specifics are already gathering dust as research material for historians. The single best thing to do for all of us not in positions of politico/economic power is to recognize the irreversible collapse of the system. Since we all grew up in it and have never known anything else, that is hard enough in itself. But we don’t have all that much time to lose anymore.

The whole shebang is broke. This can easily be displayed in a US nominal debt vs nominal GDP graph:

 

 

That’s really all you need to know. That’s what broke the shebang. It is easy. And even if a bit more of the ‘surplus’ debt had been allowed to go towards the common man, it wouldn’t have made much difference. We’ve replaced growth with debt, because that is the only way to keep the -illusion of- the politico-economic system going, and thereby the only way for the incumbent powers to cling on to that power.

And that is where the danger lies. It’s not just that the vast majority of westerners will become much poorer than they are now, they will be forced to face powers-that-be that face the threat of seeing their powers -both political and economic- slip sliding away and themselves heading towards some sort of Marie-Antoinette model.

The elites-that-be are not going to take that lying down. They will cling to their statuses for -literally- dear life. That right there is the biggest threat we all face (including them). It would be wise to recognize all these things for what they really are, not for what all these people try to make you believe they are. Dead seriously: playtime is over. The elites-that-be are ready and willing to ritually sacrifice you and your children. Because it’s the only way they can cling on to their positions. And their own very lives.

It may take a long time still for people to understand the above, but it’s also possible that markets crash tomorrow morning and bring the facades of Jericho down with them. Waiting for that to happen is not your best option.

Jun 062016
 
 June 6, 2016  Posted by at 8:38 am Finance Tagged with: , , , , , , , , ,  12 Responses »

Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)
World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)
China’s Hidden Unemployment Rate (BBG)
China’s Factory to the World Is in a Race to Survive (BBG)
BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)
As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)
Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)
If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)
Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)
Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)
Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)
‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)
Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)
Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

Well, I’ve pointed a zillion times to the size and power of China’s shadow banks. And here you go…

Goldman Finds That China’s Debt Is Far Greater Than Anyone Thought (ZH)

In an analysis conducted by Goldman’s MK Tang, the strategist notes that a frequent inquiry from investors in recent months is how much credit has actually been extended to Chinese households and corporates. He explains that this arises from debates about the accuracy of the commonly used credit data (i.e., total social financing (TSF)) in light of an apparent rise in financial institutions’ (FI) shadow lending activity (as well as due to the ongoing municipal bond swap program). Tang adds that while it is clear that banks’ investment assets and claims on other FIs have surged, it is unclear how much of that reflects opaque loans, and also how much such loans and off-balance sheet credit are not included in TSF. By the very nature of shadow lending, it is almost impossible to reach a conclusion on these issues based on FIs’ asset information.

Goldman circumvents these data complications by instead focusing on the “money” concept, a mirror image to credit on FIs’ funding side. The idea is that money is created largely only when credit is extended—hence an effective gauge of “money” can give a good sense of the size of credit. We construct our own money flow measure, specifically following and quantifying the money flow from households/corporates. Goldman finds something stunning: true credit creation in China was vastly greater than even the comprehensive Total Social Financing series. To wit: “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP). This is about RMB 6tn (or 9pp of GDP) higher than implied by TSF data (even after adjusting for municipal bond swaps). Divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.”

Read more …

China stocks are already down 40% in 12 months, but look down below.

World’s Most Battered Market Is the Worst Place to Find Bargains (BBG)

It’s going to take more than the world’s deepest stock-market selloff to turn China into a destination for international bargain hunters. Even after a 40% tumble in the Shanghai Composite Index over the past 12 months, valuations for China’s domestic A shares are three times as expensive as every other major market worldwide. The median price-to-earnings ratio on the nation’s exchanges is 59, higher than that of U.S. technology shares at the height of the dot-com boom in 2000. One year after China’s equity bubble peaked, valuations have yet to fall back to earth as government intervention keeps stock prices elevated at a time of shrinking corporate profits.

For money managers at Silvercrest Asset Management and Blackfriars Asset Management who predicted last year’s selloff, China’s weak economic growth and fragile investor sentiment mean it’s too early to jump back into the $6 trillion market. “We do not own any A shares,” said Tony Hann, the London-based head of equities at Blackfriars, which oversees about $270 million. The firm’s Oriental Focus Fund has outperformed 83% of peers this year. “The bull case seems to be that I can buy at this P/E because someone else will buy it from me at a higher P/E. The biggest risk is that investor psychology on the mainland changes.”

There’s plenty for investors to be worried about. After expanding at the weakest pace since 1990 last year, China’s economy shows few signs of recovery. Earnings at Shanghai Composite companies have declined by 13% since last June, while corporate defaults are spreading and the yuan is trading near a five-year low.

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Debt is hidden, losses are hidden, unemployment is hidden.

China’s Hidden Unemployment Rate (BBG)

China’s authorities may face a bigger worry than slowing economic growth. The jobless rate may be three times the official estimate, according to a new report by Fathom Consulting, whose China’s Underemployment Indicator has tripled to 12.9% since 2012 even while the official jobless rate has hovered near 4% for five years. The weakening labor market may explain China’s decision to uncork the credit spigots and revive old growth drivers in an effort to stabilize the world’s no. 2 economy. Leaders have stressed that keeping employment stable is a top priority. Fathom’s data shows that while mass layoffs haven’t materialized, the number of people not working at full capacity or hours has increased. “The degree of slack has surged in recent years,” analysts at the London-based firm wrote.

“China has a substantial hidden unemployment problem, in our view, and that explains why the authorities have come under so much pressure to re-start the old growth engines.” Leaders of the world’s most populous nation have promised to slash excess capacity in coal mines and steel mills while at the same time ensuring that the economy grows by at least 6.5% this year. Across the nation, state-backed ‘zombie’ factories are being kept alive by local governments to keep a lid on any social unrest. To keep the plants ticking over, employees in some cases have been asked to work half the time for half the pay. The official registered unemployment gauge is notorious for not changing during economic cycles. It’s compiled from the number of people who register at local governments for unemployment benefits, which excludes most of the nation’s more than 270 million migrant workers.

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China as a robotics guinea pig. What could go wrong?

China’s Factory to the World Is in a Race to Survive (BBG)

China’s shift to consumption and services lies at the heart of Xi’s quest for new growth drivers to escape the middle-income trap, when productivity and profit margins fail to keep up with wage growth. That’s spurred provincial leaders to encourage cities to attract new businesses and upgrade factories, headlined by the aphorisms that China’s administrators are fond of. “Empty the cages to welcome better birds,” demanded former Guangdong Communist Party Chief Wang Yang, meaning let the old industries leave and replace them with new, higher-value ones.

“Replace humans with robots,” added his successor, Hu Chunhua, 53, one of the youngest members of the Politburo, in a 950 billion yuan ($144 billion) plan to upgrade 2,000 companies in three years, the official Guangzhou Daily reported in March 2015, adding that the move is not expected to cause heavy layoffs. Dongguan replaced 43,684 workers with robots in 2015, cutting costs at those factories by nearly 10%, according to the local government. Lu Miao, a vice general manager of Lyric Robot in Guangdong’s Huizhou city, said the government pays as much as 50,000 yuan to Lyric’s customers for each robot they use to replace workers. “The government at all levels in Guangdong has been encouraging companies to replace human workers as rapidly as possible,” said Lu. “I can see our business increasing more than 50% this year.”

The ultimate result is so-called “dark factories” that don’t need lighting because only robots work on the production line. TCL has such a plant making LCD displays, Li said in an interview at the company’s headquarters in Huizhou, about an hour’s drive from Dongguan. “For society at large, some workers will be laid off,” said Huizhou Mayor Mai Jiaomeng. “But it’s good for companies to improve their competitiveness.” Local officials say the layoffs are under control, but are reluctant to provide details on how many plants have shut or moved away. A municipal report from Shenzhen in January said that the city has “washed out” or “transformed” more than 17,000 low-end factories over the past five years.

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Looks inevitable, just a question of where on the globe it will begin.

BOJ Board Member Warns Of “2003 Shock” Historic Bond Market Collapse (ZH)

In a somewhat shocking break from the age-old tradition of lying and obfuscation, Bank of Japan policy board member Takehiro Sato raised significant concerns about global financial stability in a speech last week. In addition to raising concerns about Japanese economic fragility, Sato warned that due to the impact of negative interest rates, he “detected a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.”

Financial institutions are facing the risk of a negative spread for marginal assets due to the extreme flattening of the yield curve and the drop in the yield on government bonds in short- to long-term zones into negative territory. When there is a negative spread, shrinking the balance sheet, rather than expanding it, would be a reasonable business decision. In the future, this may prompt an increasing number of financial institutions to take such actions as restraining loans to borrowers with potentially high credit costs and raising interest rates on loans to firms with poor access to finance.

…a weakening of the financial intermediary functioning could affect the financial system’s resilience against shocks in times of stress. In addition, an excessive drop in bond yields in the super-long-term zone could also make the financial system vulnerable by increasing the risk of a buildup of financial imbalances in the system.

There is also the risk that financial institutions that have problems in terms of profitability or fiscal soundness will make loans and investment without adequate risk valuation. From financial institutions’ recent move to purchase super-long-term bonds in pursuit of tiny positive yield, I detect a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.

Simply put, as Bloomberg notes, Sato is concerned the government bond market is heading for an historic collapse after 10-year yields plunged below zero, forcing banks to pile into super-long-term bonds in pursuit of tiny positive yields. This is creating huge concentrated positions with increasing duration risk (as we detailed previously), causing a vulnerability “similar to that seen before the so-called VaR (Value at Risk) shock in 2003,” when an initial jump in yields triggered a spectacular sell-off by breaching banks’ models for estimating potential losses.

Read more …

Reuniting OPEC.

As Iran’s Oil Exports Surge, International Tankers Help Ship Its Fuel (R.)

More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January. Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels. “Charterers are buying cargo from Iran and the rest of the world is OK with that,” said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude.

Some international shipowners remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran that remain and prohibit any trade in dollars or the involvement of U.S. firms, including banks and reinsurers. Iran is seeking to make up for lost trade following the lifting of sanctions imposed in 2011 and 2012 over its nuclear program. Port loading data seen by Reuters, as well as live shipping data, shows at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran’s Kharg Island and Bandar Mahshahr terminals.

Read more …

One more major price drop and we have panic.

Saudi Arabia Races Through Financial Toolkit to Raise Funds (BBG)

Saudi Arabia’s plans to bolster its finances are taking on a new sense of urgency as lower oil prices put the economy under more strain than at any other time in the past decade. In recent weeks, the kingdom raised a $10 billion loan, clamped down on currency speculators and informed banks of plans to raise as much as $15 billion in its first international bond sale, people with knowledge of the matter said. It’s also said to be contemplating IOUs to pay contractor bills and hired HSBC Holdings Plc banker Fahad Al Saif to set up a new debt office. The speed of the measures underscores Deputy Crown Prince Mohammed bin Salman’s urgency to shore up the country’s finances as an era of oil-fueled abundance falters.

Though currency reserves remain strong – among the world’s largest – net foreign assets are at a four-year low after declining for 15 months in a row and the kingdom may post a budget deficit of about 13.5% of economic output this year. “The pace of the decline in Saudi Arabia’s foreign assets is faster than in previous oil downturns and the period over which they’ve been falling is longer,” Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. “This generates a real sense of urgency to get the ball rolling in raising external funding.”

Five years ago, oil surged to more than $100 a barrel, adding billions of dollars to the country’s reserves. The windfall allowed the kingdom to slash its debt and post an average budget surplus of 8.2% between 2000 and 2012, according to International Monetary Fund data. Now, with crude having tumbled about 50%, the country is moving to sell assets and find other ways to raise funds.

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Just a cute graph.

If Wind/Solar Is So Cheap, Why Require Government Subsidy? (SL)

I don’t have an inherent dislike of solar and wind energy, but I am suspicious of the way they are being pushed. Here’s an example: Renewable energy advocates such as Tony Seba are talking about how solar and battery technology will enable exponential uptake in renewable technology, and that people won’t want to invest in a thermal power plant anymore. But on the other hand: Renewable advocates want government legislation to support their chosen renewable energy targets. e.g. “50% renewable energy would put Australia in line with leading nations” at the Conversation. Or another example might be where energy companies are talking about how the government has to ‘support the transition’ in this AFR article: AGL says government must support power industry exit from coal.

But wait a minute, if wind and solar are truly so amazing and so cheap – why does the government need to get involved? Why wouldn’t these renewable energy companies and advocates find a way to profitably do it and not make any fuss about wanting governmental regulation/subsidies? Borrowing from Mark Perry’s excellent Venn diagram idea over at AEI Carpe Diem blog: (Could it be that renewable advocates are using the government to push renewable energy cost and risk onto taxpayers?)

Read more …

17 days still to go. Brace for increased madness. it’s going to be so much fun.

Pound Tumbles, Volatility Jumps After Polls Show Brexit Momentum (BBG)

The pound slumped to a three-week low after polls showed more Britons favor exiting the European Union, reviving concern a June 23 referendum will throw global markets into turmoil and undermine confidence in the 28-nation trading bloc. Sterling weakened against all 10 developed-market peers after two surveys showed more voters were willing to vote to leave the EU than those wishing to stay. A gauge of the currency’s expected swings against the dollar during the next month surged to a seven-year high. The Bank of England has said uncertainty surrounding the referendum vote is damping U.K. growth, while global institutions including the IMF and OECD are warning of dire fallout if Britain votes to quit the EU.

Federal Reserve Bank of Chicago President Charles Evans said the referendum is undermining confidence in the outlook at a time when the international economy is already losing momentum. “A ‘Leave’ vote would expose a host of uncertainties,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “It would be more negative for the euro and the EU since the issue will drag on for other members.” A YouGov poll for television network ITV found 45% would choose ‘Leave,’ compared with 41% picking ‘Remain.’ A separate survey by global market research company TNS showed 43% for ‘Leave’ and 41% for ‘Remain.’

Read more …

Well, that seems modeled after the EU’s attitude towards democracy alright. They fit right in.

Constitutional Crisis: Pro-Remain MPs Consider Pre-Empting Brexit Vote (BBC)

Pro-Remain MPs are considering using their Commons majority to keep Britain inside the EU single market if there is a vote for Brexit, the BBC has learned. The MPs fear a post-Brexit government might negotiate a limited free trade deal with the EU, which they say would damage the UK’s economy. There is a pro-Remain majority in the House of Commons of 454 MPs to 147. A Vote Leave campaign spokesman said MPs will not be able to “defy the will of the electorate” on key issues. The single market guarantees the free movement of goods, people, services and capital. The BBC has learned pro-Remain MPs would use their voting power in the House of Commons to protect what they see as the economic benefits of a single market, which gives the UK access to 500 million consumers.

Staying inside the single market would mean Britain would have to keep its borders open to EU workers and continue paying into EU coffers. Ministers have told the BBC they expect pro-EU MPs to conduct what one called a “reverse Maastricht” process – a reference to the long parliamentary campaign fought by Tory eurosceptic MPs in the 1990s against legislation deepening EU integration. Like then as now, the Conservative government has a small working majority of just 17. They say it would be legitimate for MPs to push for the UK to stay in the single market because the Leave campaign has refused to spell out what trading relationship it wants the UK to have with the EU in the future. As such, a post-Brexit government could not claim it had a popular mandate for a particular model.

Read more …

Equal partners.

Brexit May Seem Like The West’s Biggest Problem. But Look At The US Economy (G.)

Britain is trapped in its own little Brexit bubble. For the next two and a half weeks, the country will be obsessed with the result of the referendum on 23 June. Nothing that is going on in the rest of the world will get much of a look-in. But beyond these shores, things are happening. The authorities in China are desperately trying to shore up growth. Eurozone finance ministers have all but guaranteed that, sooner or later, the Greek crisis will flare up again. Most pressingly, the US economy looks to be heading for serious trouble. Make no mistake, the jobs report issued in Washington on Friday was a shocker. Wall Street had been expecting the non-farm payroll – the benchmark for the strength of the US labour market – to increase by 164,000. The actual figure was 38,000, the smallest monthly increase since September 2010.

True, the total was slightly distorted because 35,000 striking workers at Verizon were counted as jobless because they were not being paid. But that still would have meant an NFP increase of just 73,000. The weak jobs report comes at a particularly sensitive time because America’s central bank, the Federal Reserve, has been softening the markets up for an increase in interest rates, either this month or next. Any such move is now out of the question. US borrowing costs will not be going up again until the autumn at the earliest. This is all rather chastening for the Fed. When it raised interest rates in December for the first time since the Great Recession, the central bank signalled that there would be four more increases during the course of 2016.

Financial markets subsequently went into freefall during the early weeks of the year, forcing the Fed into a crash rethink. In March, it indicated that the number of 2016 rate increases had been halved from four to two – but the guidance was promptly ignored by traders, who based their decisions on the assumption that there would be no further tightening of policy by the Fed until 2017. With its reputation at stake, the Fed has gone out of its way since March to convince the markets that it was serious about two rate rises in 2016. Really, really it was. Janet Yellen, the Fed’s chair, told Wall Street that it might be “confused” about the way the central bank was going about its business.

Yet if anyone is confused it is Yellen, not the markets, which have rightly calculated that the Fed is all talk and should be judged by what it does and not by what it says. Here’s the position. The US economy grew at an annualised rate of 0.8% in the first quarter of 2016, which was not just weaker than the UK but substantially worse than the eurozone. Friday’s May payrolls were not a one-off, since the totals for March and April were revised downwards by a combined 59,000.

Read more …

Not quite sure what Ambrose intends here, but yeah, Britons’ dislike of Cameron, Major and any and all EU mouthpieces may well decide the issue.

‘Brexit Voters Succumbing To Impulse Irritation And Anger’ (AEP)

British voters are succumbing to impulsive gut feelings and irrational reflexes in the Brexit campaign with little regard for the enormous consequences down the road, the world’s most influential psychologist has warned. Daniel Kahneman, the Israeli Nobel laureate and father of behavioural economics, said the referendum debate is being driven by a destructive psychological process, one that could lead to a grave misjudgment and a downward spiral for British society. “The major impression one gets observing the debate is that the reasons for exit are clearly emotional,” he said. “The arguments look odd: they look short-term and based on irritation and anger. These seem to be powerful enough that they may lead to Brexit,” he said, speaking to The Telegraph at the Amundi world investment forum in Paris.

The counter-critique is that the Remain campaign is equally degrading the debate, playing on visceral reactions and ephemeral issues of the day. In a sense the two sides are egging each other on. That is the sociological fascination of it. Professor Kahneman, who survived the Nazi occupation of France as a Jewish child in the Second World War, said the risk is that the British people will be swept along by emotion and lash out later at scapegoats if EU withdrawal proves to be a disastrous strategic error. “They won’t regret it because regret is rare. They’ll find a way to explain what happened and blame somebody. That is the general pattern when things go wrong and people are afraid,” he said. The refusal to face up to the implications of what is really at stake in the referendum comes as no surprise to a man imbued with deep sense of anthropological pessimism.

His life’s work is anchored in studies showing that people are irrational. They are prone to cognitive biases and “systematic errors in thinking”, made worse by chronic over-confidence in their own judgment – and the less intelligent they are, the more militantly certain they tend to be. People do not always act in their own economic self-interest. Nor do they strive to maximize “utility’ and minimize risk, contrary to the assumptions of efficient market theory and the core premises of the economics profession. “People are myopic. Our brain circuits respond to immediate consequences,” he said.

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Added for entertainment value. BTW, what century is this?

Erdogan: Childless Women Deficient, Incomplete: Have At Least 3 (AFP)

President Recep Tayyip Erdogan on Sunday urged Turkish women to have at least three children, saying a woman’s life was “incomplete” if she failed to have offspring. Erdogan’s comments were the latest in a series of controversial remarks aimed at encouraging women to help boost Turkey’s population, which had already risen exponentially in the last years. The president emphasised he was a strong supporter of women having careers but emphasised that this should not be an “obstacle” to having children. “Rejecting motherhood means giving up on humanity,” Erdogan said in a speech marking the opening of the new building of Turkey’s Women’s and Democracy Association (KADEM). “I would recommend having at least three children,” added the president.

“The fact that a woman is attatched to her professional life should not prevent her from being a mother,” he added, saying that Turkey had taken “important steps” to support working mothers. Erdogan had on Monday said that family planning and contraception were not for Muslim families, prompting fury among women’s activists. In his speech Sunday he went on to add: “A woman who says ‘because I am working I will not be a mother’ is actually denying her feminity.” “A women who rejects motherhood, who refrains from being around the house, however successful her working life is, is deficient, is incomplete,” he added.

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And there we go.

Turkey Shelves Refugee ‘Readmission’ Deal With EU (DS)

The agreement between Turkey and the EU that will facilitate visa liberalization for Turkish nationals and allow readmission of Syrian refugees who enter Europe illegally is practically shelved due to ongoing disagreements, according to sources from the Foreign Ministry. The Turkey-EU agreement that will pave the way for visa liberalization was initially signed on Dec. 16, 2013 and was later included in the comprehensive refugee deal by both parties. Although Brussels says the deal will succeed, it also requires Turkey to meet the EU’s 72 benchmarks, which include narrowing its counterterrorism laws.

Turkey’s Aksam daily reported over the weekend that a senior official from the Foreign Ministry said Turkey has used its administrative measures correctly to temporarily suspend the Readmission Agreement, which will return undocumented, illegal refugees who enter Europe via Turkey in exchange for registered migrants. Sources from the Foreign Ministry who spoke to Daily Sabah yesterday said: “In order for the Readmission Agreement to be successfully fulfilled, a Cabinet decision approving the bill published in the Official Gazette must be announced.” Such an approval is not expected anytime soon. Although the European Commission had announced early last week that the Readmission Agreement would come into full force as of June 1, Ankara asserted that “the EU has failed to fulfill its duties resulting from the agreement,” stressing that it suspended the Readmission Agreement as part of administrative measures.

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