Dec 052020
 


Paul Cézanne Young Italian Woman at a Table c1900

 

Jerusalem Hospital Orders 1.5 Million Doses of Russian COVID Vaccine (Haaretz)
Moderna Says Its Vaccine Provides COVID19 Immunity For At Least 3 Months (NYP)
Intent to Get a COVID19 Vaccine Rises to 60% (Pew)
Nursing Homes Create ‘Perfect Storm’ For COVID Outbreaks (CNBC)
The Jobs Report is a Mess, December Will Be Messier (WS)
The Beltway Left Is Normalizing Corruption And Corporatism (DP)
Joe Biden’s Cabinet Is a Lost Cause for the Left (TNR)
Barr’s Appointment Of Special Counsel Leaves Biden, Dems In A Muddle (Turley)
A Hall of Smoke and Mirrors (Kunstler)
Sidney Powell: Plenty of Time for Trump to Overturn Election Results (NM)
Judge Emmet Sullivan Still Refusing To Dismiss Michael Flynn Case (JTN)
AZ Senate, House Call For Audit Of Dominion Machines In Maricopa County (JTN)
Dutch Taxi Company Is Taking Tesla To Court Over “Defective” Cars (Sifted)
Oliver Stone, America Firster (AC)

 

 

 

 

“There’s a good probability that the vaccine is safe. And there’s a reasonable probability … that it’s also effective.”

Jerusalem Hospital Orders 1.5 Million Doses of Russian COVID Vaccine (Haaretz)

Jerusalem’s Hadassah Medical Center has ordered 1.5 million doses of a Russian vaccine against the coronavirus, hospital director Zeev Rotstein said Tuesday. First reported on Army Radio, Rotstein added that the hospital will give the Health Ministry all necessary data about the vaccine this week, with the goal of obtaining a permit to administer it to Israelis. Rotstein, who has clashed repeatedly with the ministry in recent months, is convinced that the fears voiced in the media about the vaccine aren’t well-founded, and that they have more to do with the global struggle between Russia and the United States than with the scientific data. But even if the ministry refuses to approve the vaccine, he said in an interview with Haaretz, “We’ll have something do with it,” because Hadassah also operates overseas.

The Russian vaccine has been in phase three clinical trials since August and has already been given to tens of thousands of people. Hadassah’s branch in Moscow has both given the vaccine to people and monitored them afterward, “and the results and safety we’ve seen have been very good,” Rotstein said. Hadassah’s activities in Moscow are what led the Russian authorities to propose that the hospital seek Israeli approval for the vaccine, he added. If the phase three trials show that the vaccine is both safe and effective, and if the Health Ministry approves its use, the vaccine could be available in Israel in two to three months.

Rotstein stressed that until the phase three trial ends and the data has been analyzed, it’s impossible to know if the vaccine will be effective in preventing the virus. But based on the data so far, he said, “There’s a good probability that the vaccine is safe. And there’s a reasonable probability … that it’s also effective.” Both the development of the Russian vaccine and Russia’s unusual decision to administer it to its own citizens, even before the phase three trials ended, have been widely criticized worldwide. But Rotstein insisted that much of this criticism stems from the American-Russian battle over who will develop a vaccine first.

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Yeah, very convincing.

Moderna Says Its Vaccine Provides COVID19 Immunity For At Least 3 Months (NYP)

Moderna’s vaccine against COVID-19 has been shown to create immunity against the bug for at least three months, the biotech company said. Thirty-four healthy adults who received two doses of Moderna’s vaccine candidate, mRNA-1273, were shown to have antibodies for 90 days, according to new findings published Thursday in the New England Journal of Medicine. The first dose “produced high levels of binding and neutralizing antibodies that declined slightly over time, as expected, but they remained elevated in all participants 3 months after the booster vaccination,” the study said. The two doses were administered 28 days apart.


The report did not make clear what level of risk people would have after 90 days and whether another shot would be needed. Earlier this week, Moderna asked the US Food and Drug Administration for emergency use authorization, saying data shows its vaccine is more than 94 percent effective against coronavirus. On Friday, the Massachusetts-based company said it would be able to produce 500 million doses of the vaccine in 2021. “For 500 million, I am very comfortable we are gonna get there,” chief executive officer Stéphane Bancel said at the Nasdaq Investor Conference.

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More confidence? Based on what? Just news stories?

Intent to Get a COVID19 Vaccine Rises to 60% (Pew)

As vaccines for the coronavirus enter review for emergency use by the U.S. Food and Drug Administration, the share of Americans who say they plan to get vaccinated has increased as the public has grown more confident that the development process will deliver a safe and effective vaccine. Still, the U.S. public is far from uniform in views about a vaccine. A majority says they would be uncomfortable being among the first to take it, and a sizable minority appear certain to pass on getting vaccinated. Overall, 60% of Americans say they would definitely or probably get a vaccine for the coronavirus, if one were available today, up from 51% who said this in September.

39% say they definitely or probably would not get a coronavirus vaccine, though about half of this group – or 18% of U.S. adults – says it’s possible they would decide to get vaccinated once people start getting a vaccine and more information becomes available. Yet, 21% of U.S. adults do not intend to get vaccinated and are “pretty certain” more information will not change their mind. Public confidence has grown that the research and development process will yield a safe and effective vaccine for COVID-19: 75% have at least a fair amount of confidence in the development process today, compared with 65% who said this in September.

These findings come on the heels of preliminary analysis from two separate clinical trials that have produced vaccines that are over 90% effective; the FDA is expected to issue decisions about the emergency authorization of these vaccines in the coming weeks. While public intent to get a vaccine and confidence in the vaccine development process are up, there’s considerable wariness about being among the first to get a vaccine: 62% of the public says they would be uncomfortable doing this. Just 37% would be comfortable.


The toll of the pandemic is starkly illustrated by the 54% of Americans who say they know someone personally who has been hospitalized or died due to the coronavirus. Among Black Americans, 71% know someone who has been hospitalized or died because of COVID-19.

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What is being done about this? Why do we never read about that?

Nursing Homes Create ‘Perfect Storm’ For COVID Outbreaks (CNBC)

The coronavirus death toll at U.S. nursing homes at the beginning of the coronavirus pandemic was brutal and unrelenting. The Life Care Center nursing home outside Seattle made international headlines in March after the coronavirus infected residents and staff, resulting in at least 123 cases and dozens of deaths. In New Jersey, public officials discovered 17 bodies piled into a makeshift morgue in a nursing home in April when Covid-19 fatalities overwhelmed the facility. Nursing homes, which house the most vulnerable of society, quickly became ground zero for countless coronavirus outbreaks across the U.S. in the early months of the pandemic. While the outbreak subsided somewhat this fall, long-term care facilities are now seeing their most intense surge in Covid cases since at least the summer.

As new cases break record after record most days, infections at long-term care facilities reached a new weekly high in late November, according to data from the COVID Tracking Project, an organization launched by The Atlantic magazine. More than 46,000 infections at those facilities were recorded in what was the worst week in six months; reliable data only goes back that far. Despite making up just 5.7% of all U.S. Covid cases, nursing home and assisted living facilities residents and staff accounted for 39.3% of the deaths, according to tracking project data. That number is generally considered low since many nursing home deaths tend to get reported without an underlying cause, physicians have said.

Deaths at U.S. nursing homes for the week ended last Thursday topped 3,000 — the highest weekly death toll since June, pushing cumulative fatalities over 100,000, according to the tracking project. “I’ve likened nursing homes to being like a tinderbox. It takes one person, one person, to unknowingly bring the virus into a facility and it could kill several people, make a lot of people sick,” said Dr. Joseph Ouslander, a geriatrician at Florida Atlantic University who works as a clinician in nursing homes. No matter what precautions staff take, it’s going to be difficult to prevent outbreaks in nursing homes, said Ouslander, who is also a professor of integrated medical science. “All those elements of the perfect storm are in place.”

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The Households Survey showed an actual decline of 74,000 working people. 100s of 1000s no longer count as in the labor force.

The Jobs Report is a Mess, December Will Be Messier (WS)

Everyone seems to be baking the highly anticipated potential future vaccines into the economic cake, but what has been happening for weeks is a spike in Covid cases across the US that has already triggered economic restrictions, including various versions of stay-at-home orders in Los Angeles County, San Francisco, and some other Bay Area counties, with restaurants closed for outdoor dining, strict capacity restrictions in retail stores, and many other restrictions. These moves are ahead of the State of California’s new framework for dealing with the spiking infections. Other states and cities have similar programs, either on the front burner or on the back burner. The Covid spike has already crimped economic activity and jobs over the past few weeks and is going to do more severely going forward.

But the jobs report released today by the Bureau of Labor Statistics was based on surveys of “establishments” for the pay period through November 12; and on surveys of households for the week through November 14. So the data we got today largely missed the labor market consequences of the spike in Covid cases. Those consequence are coming in the next employment reports, starting with the report for December. Despite the cut-off dates having kept much of the Covid-impacted jobs data out of the results, the data have actually deteriorated in several aspects, including the number of people with jobs as reported by households, the employment-population rate, and the labor force.

The headline number of 245,000 jobs created came from surveys of establishments (companies, governments, nonprofits, educational institutions, etc.). That survey doesn’t track gig workers. It depicted a lousy recovery. But lousy as it was, it was the more benign part. The survey of households, on the other hand, tracks people who are working full or part time, including gig workers. And households reported that the number of people with jobs ticked down to 149.7 million. This wasn’t a slowdown in growth, but an actual decline of 74,000 working people – the first month-to-month decline since April.

The chart shows both results, from establishments (green) and from households (red) – the biggest part of the difference being gig workers. It’s obvious that even by November 12, before the real impact of the Covid surge, this was no good, in terms of catching up with population growth, or in terms of anything else:

The employment-population ratio, which tracks the number of employed workers against the working-age population (16 years or older) also dipped in November, to 57.3%, a level first seen since in 1972:

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From Bernie campaigner Sirota. He’ll never be left near a Dem campaign again.

The Beltway Left Is Normalizing Corruption And Corporatism (DP)

Last night, CNN’s Jake Tapper asked Joe Biden and Kamala Harris a straightforward question: “Who would you point to now as a leading progressive voice in the cabinet?” Harris had no answer, saying only that “we’re not even halfway there” on nominations. Biden touted only his Homeland Security nominee, who previously helped run Immigration and Customs Enforcement. The spectacle was revelatory and honest: A month after the election, Biden’s nominations make clear that the president-elect is most focused on trying to fulfill his promise to donors that nothing fundamentally changes. And yet, that tacit admission may have stunned those who keep hearing from liberal and progressive groups in Washington that, in fact, the left has been notching monumental victories in Biden’s cabinet appointments.

This disconnect between Biden nominating business-friendly corporatists and Beltway liberals effusively celebrating those nominees spotlights the latter groups’ decision to genuflect for access and influence — rather than being brutally honest about the situation. That strategy of appeasement has almost never worked in an America where change has typically come only through opposition, struggle and sacrifice. And yet somehow, prostration remains the dominant strategy among the professional left. Why? In some cases, liberal groups are naively trying to curry favor with an incoming Democratic administration. Others are probably just trying to demonstrate to their supporters and future donors they won’t be completely irrelevant in Biden’s Washington.

Some are just too chickenshit to ever stand up and have any real fight with Democrats — and still others are just auctioning off their principles because the establishment counterrevolution offers better, stable career prospects. The result, though, is the same: What little organized left political infrastructure exists in Washington is largely valorizing or publicly defending swamp creatures who at minimum deserve a loyal opposition. The good work being done by a small handful of under-resourced groups to mount a real opposition is getting trampled by a culture of obsequiousness. This culture of acquiescence gives swamp creatures a free pass — and it may not just deliver an incrementalist Biden administration that takes progressives for granted and consequently fails to address national emergencies. It could also help permanently change what is even considered politically possible in the future.

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Seems the left has little to no spine.

Joe Biden’s Cabinet Is a Lost Cause for the Left (TNR)

Few portions of political discourse are as predictably shallow as presidential Cabinet discourse. Who should run the Department of Transportation? An affable also-ran in the Democratic primary who once said something about trains? A moderate politician or a businessman who might bring the country together from their perch at the agency that handles civil aviation and our highways? “No,” a sage voice somewhere in Washington, or Delaware, says. “It should be Rahm Emanuel.” As Chicagoans know, Emanuel’s most ambitious step into transportation policy as mayor was his endorsement of a high-speed tunnel project from Elon Musk that has yet to materialize. Chicagoans also know that Emanuel’s efforts to cover up video of a black teen’s murder by a Chicago policeman probably better qualify him for a post at the CIA.

That agency, we’ve been told this week, might finally be headed by a Black man; we also know a woman has been chosen to run the Department of Defense. Overall, Democratic policy professionals of all identities and stripes have been given plenty of reasons to rejoice at Biden’s choices so far. Civilians in Yemen have not. It’s been noted elsewhere that the left has responded much more quickly and aggressively to Biden’s selections than it did to Obama’s as he put together his first presidential Cabinet. If so, it doesn’t seem like the flurries of statements, social media posts, and articles that have been written to counter every stray rumor and announcement have mattered very much at all—the process is chugging along, and Biden’s nominees are just a couple of notches left of the Obama team; activists might take a small victory in torpedoing an Emanuel nomination.

There was never good reason to expect more. This is partially because a Republican Senate, should Democrats lose in Georgia’s runoff elections next month, will be an obstacle to the confirmation of even moderate nominees. But it’s more substantially because the moderates in the Democratic Party don’t share the left’s policy goals and would oppose giving them a meaningful presence in the Biden administration even if they could. The conventional wisdom about the left’s relationship with the Democratic Party has fully reversed itself in the space of six to eight months. As the Democratic primary ended, it was often argued that Sanders and the left lost because they had marginalized themselves—anti-establishment rhetoric, refusals to accept compromise, and the toxicity of prominent voices had alienated not only most of the Democratic electorate but also Democratic elites who might have otherwise been won over.

“Twitter isn’t real life,” it was said. But naturally, after Election Day, Democratic underperformance down-ballot from Biden was blamed mostly on the left’s influence. Democratic elites, it’s said now, were persuaded by the left to take on or accept unpopular messaging about socialism and policing—thanks in part, evidently, to the awesome and terrible power of tweets from left activists, writers, and podcasters.

Read more …

Turley points out that the timing indicates Durham now focuses on members of the perspective Biden administration.

“From a political perspective, the move is so elegantly lethal that it would make Machiavelli green with envy.”

Barr’s Appointment Of Special Counsel Leaves Biden, Dems In A Muddle (Turley)

Attorney General Bill Barr made two important evidentiary decisions yesterday that delivered body blows to both President Donald Trump and President-elect Joe Biden. First, Barr declared that the Justice Department has not found evidence of systemic fraud in the election. Second, he declared that there was sufficient evidence to appoint United States Attorney John Durham as a Special Counsel on the origins of the Russia probe. The move confirmed that, in a chaotic and spinning political galaxy, Bill Barr remains the one fixed and immovable object. By appointing Durham as a Special Counsel, Barr contradicted news reports before the election that Durham was frustrated and found nothing of significance despite Barr’s pressure.

Some of us expressed doubts over those reports since Durham asked for this investigation to be upgraded to a criminal matter, secured the criminal plea of former FBI lawyer Kevin Clinesmith, and asked recently for over a thousand pages of classified intelligence material. Under the Justice Department regulations, Barr had to find (and Durham apparently agreed) that there is need for additional criminal investigation and “[t]hat investigation or prosecution of that person or matter by a United States Attorney’s Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances.” He must also find the appointment in the public interest. Notably, the investigation of Clinesmith is effectively completed. So, what is the criminal investigation and what is the conflict?

Presumably, the conflict is not in the current administration since it would have required an earlier appointment. The conflict would seem to be found in the upcoming Biden administration. Some conflicts developing seem obvious as Biden turns to a host of former Obama officials for positions, including the possible selection of Sally Yates as Attorney General. Yates was directly involved in the Russian investigation and signed off on the controversial surveillance of Trump associate Carter Page. She now says that she would never have signed the application if she knew what she knows today.

Durham is now authorized to investigate anyone who may have “violated the law in connection with the intelligence, counter-intelligence, or law-enforcement activities directed at the 2016 presidential campaigns, individuals associated with those campaigns, and individuals associated with the administration of President Donald J. Trump, including but not limited to Crossfire Hurricane and the investigation of Special Counsel Robert S. Mueller, III.” The list of the names of people falling within that mandate is a who’s who of Washington from Hillary Clinton to James Comey to . . . yes . . . Joe Biden. Bizarrely, reports have claimed that Trump was irate at the move as a “smokescreen” to delay the release of the report. That ignores not just the legal but political significance of the action. From a political perspective, the move is so elegantly lethal that it would make Machiavelli green with envy.

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“Is it outlandish to wonder if Joe Biden is a national security risk?”

A Hall of Smoke and Mirrors (Kunstler)

Is it outlandish to wonder if Joe Biden is a national security risk? Is it, at least, worth looking into, considering the evidence trail? Many people on the Left, who read and view only the captive Left news media, may know nothing about Hunter B’s laptop and the tales it told because social media blacked out all the news about it and the mainstream media went along with the blackout. Meanwhile, Facebook founder Mark Zuckerberg gave $350-million to a “safe elections” project run by the non-profit Center for Technology and Civic Life (CTCL), that was chiefly active in setting up Democratic vote-harvesting operations. Could he be liable for prosecution in enabling ballot fraud? Has the FBI asked him any questions?

Another story ‘out there’ says that behind the election hijinks a war is underway between the DOD and the CIA. On Wednesday, acting Secretary of Defense Christopher Miller announced that all special operations run by the CIA would henceforward report to the SecDef. In effect, the President has ordered the dismantling of the CIA’s troublemaking capabilities, reducing the agency to the task of intel analysis. This means, for instance, ending the CIA’s ability to foment “color revolutions” (coups d’état) in foreign lands — with the implication that irregularities around the Dominion System may have amounted to an attempted color revolution in the USA. Is it worth wondering whether former CIA Director John Brennan, a leftist activist and probably an architect of RussiaGate, was involved in any of the election ops? If the FBI won’t question him about it, who will? (Answer: The Department of Defense.) Ditto Gina Haspel, current CIA Director. After all, what were the Dominion servers doing at the CIA’s server farm in Germany?

Events are moving quickly under the plodding surface of the ongoing swing state hearings, which are largely concerned with on-site mail-in ballot fraud shenanigans. Will the Supreme Court take a case in the few days left before the state vote certification deadline next Tuesday? Will Mr. Trump intervene with some extraordinary measure — martial law, the Insurrection Act? — to actually abort the election and bring about some kind of do-over? Will the country survive its own feckless inability to hold a credible vote? Stand by with me on all that.

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Let the dice roll where they may. Still, Dec 14 doesn’t sound like “plenty of time”.

Sidney Powell: Plenty of Time for Trump to Overturn Election Results (NM)

Attorney Sidney Powell says there’s plenty of time for President Donald Trump’s legal team to overturn the results of the 2020 presidential election. ‘With the fraud case, the Dec. 8 deadline doesn’t apply,” Powell said Friday during an appearance on Newsmax TV’s ”Stinchfield” in reference to the ”safe harbor” deadline that frees a state from further challenge if it resolves all disputes and certifies its voting results. ”We have at least until Dec. 14,” she said. ”We might file more suits. The court in Michigan or Wisconsin today just gave us a great order recognizing that. These are not pure election contests we are filing. These are massive fraud suits that can set aside the results of the election due to this fraud at any time. The states should not be certifying election results in the face of it.”


Powell, a former member of Trump’s legal team, has been a part of multiple lawsuits in a crusade to overturn results from the 2020 election. Several states have certified Joe Biden as the winner of the election. Newsmax has yet to project a winner as Trump continues to contest the results in court. The Wisconsin Supreme Court on Friday said it wouldn’t accept a lawsuit by Trump’s legal team, sidestepping a decision on the merits of the claims and instead ruling that the case must first wind its way through the lower courts. The president asked the court to disqualify more than 221,000 ballots in the state’s two biggest Democrat counties, alleging irregularities in the way absentee ballots were administered.

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It doesn’t shut up Flynn anymore.

Judge Emmet Sullivan Still Refusing To Dismiss Michael Flynn Case (JTN)

In a Freedom of Information case related to former National Security Adviser Michael Flynn, District Judge Reggie Walton said on Friday that Judge Emmet Sullivan doesn’t have a lot of options in dealing with the fact that President Trump granted Flynn a full pardon, “unless he takes the position that the wording of the pardon is too broad, in that it provides protections beyond the date of the pardon.” “I don’t know what impact that would have, what decision he would make, if he makes that determination that the pardon of Mr. Flynn is for a period that the law does not permit,” said Walton, according to the National Law Journal. “I don’t know if that’s correct or not,” the judge continued. “Theoretically, the decision could be reached because the wording in the pardon seems to be very, very broad. It could be construed, I think, as extending protections against criminal prosecutions after the date the pardon was issued. I don’t know if Judge Sullivan will make that determination or not,” Walton added.


[..] Emmet Sullivan, who was presiding over the case, refused to dismiss the charges even though there was no one attempting to prosecute the case. The legal process has dragged on through the appeals process, and finally President Trump issued a full pardon on November 25. On November 30, the DOJ notified Sullivan of the pardon, but he has still refused to drop the case. Judge Walton appears to have hinted at what Sullivan is thinking as he refuses to dismiss the case. Solomon Wisenberg, former deputy independent counsel, told Just the News that “It is disappointing but not surprising that Sullivan has yet to dismiss the case.”

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Shouldn’t all these machines be audited? And then be retired?

AZ Senate, House Call For Audit Of Dominion Machines In Maricopa County (JTN)

Leaders in the Arizona state legislature on Friday called for an audit of Dominion Voting Systems software and equipment in Maricopa County, a request of which county leaders appear “supportive.” The Arizona Senate Republican Caucus announced it intent to seek such an audit via Twitter on Friday afternoon. “As a longtime advocate for improving and modernizing our election system,” incoming Senate Government Chairperson Michelle Ugenti-Rita said in the news release, “I am pleased to learn that the Maricopa County Board of Supervisors is supportive of conducting an independent audit of their voting software and equipment.” House Majority Leader Warren Petersen said: “A significant number of voters believe that fraud occurred. And with the number of irregularities it is easy to see why.” Petersen also called it “imperative” that officials conduct a forensic audit on Dominion’s setup in the county. Democrat Joe Biden currently has a lead of about 0.3% in Arizona in the Nov. 3 presidential balloting.

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“Tesla owners reported 250 problems per 100 vehicles..”

Dutch Taxi Company Is Taking Tesla To Court Over “Defective” Cars (Sifted)

The Netherlands was one of Europe’s most prolific buyers of Teslas but now the Dutch honeymoon seems to be over, with Tesla facing a lawsuit from a large taxi company, and a group of disgruntled car owners considering a class action suit. Bios Group, a taxi firm that operates a fleet of more than 70 Teslas out of Amsterdam’s Schiphol airport is taking Elon Musk’s company to court over €1.3m in damages, citing a high number of defects in the vehicles and difficulties in getting them repaired. There are defects with some 20 of the 70 taxis, ranging from broken power steering to broken drive shafts and broken power steering, according to the Hella Hueck’s story in Dutch financial newspaper Financieele Dagblad.

Bios had to have 75 defects repaired in 2018 and another 60 in 2019. Even more problematically Bios says there have been problems with odometer readings in the cars being inaccurate, registering journeys from the wrong location or for the wrong distance, something which could land the taxi company in legal difficulties. Though the European car industry may feel like it has been outcompeted by Tesla in electric vehicles — Tesla has a bigger share of the electric vehicle market than all the European carmakers combined — these types of service quality problems may yet give the incumbent automakers an opportunity to win back customers. Bios says it has recently bought 5 Audi E-trons, in part because it expects better after-sales service from Audi.

There have been many recent reports about problems with Tesla vehicles. In June, JD Power, a consumer intelligence company whose car reliability report is considered the industry standard found that Tesla owners reported more problems in their first 90 days of ownership than the other 31 US auto brands included in the study. Tesla owners reported 250 problems per 100 vehicles, compared with an industry average of 166 problems per 100 vehicles. Bios bought the fleet of 72 Model S Teslas in 2014 for €5.7m, one of Europe’s biggest fleets at the time, creating a splash of publicity for the young car company as the fleet paraded around the streets surrounding Schiphol, proclaiming the airport’s commitment to going 100% electric.

But in the last few years, Bios says, it has grown steadily more difficult to get the faulty cars repaired, finally leaving them with no option but to launch a court case to get a resolution. In October, meanwhile, a group of disgruntled Dutch Tesla owners have started the Tesla Claims Foundation, bringing together owners who want Tesla to do more to repair faults in their cars. Some 200 people have so far joined the foundation, with complaints ranging from relatively simple things like rattling noises and poorly working windscreen wipers to broken computers and charging problems.

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Stoen in the conservative press.

Oliver Stone, America Firster (AC)

Ah, a left-wing America Firster! Not quite, as his subsequent work and his entertaining new memoir, Chasing the Light, illumine, but Oliver Stone, our most political major filmmaker, evinces a rowdily heterodox vision shaped by the unusual quartet of Jim Morrison, Sam Peckinpah, Frank Capra, and Jean-Luc Godard. What do you call a man who joins the Merchant Marine on a whim, runs up big pro football gambling debts, and takes the Old Right view of FDR’s foreknowledge of the Japanese attack on Pearl Harbor? I’d call him an American. Stone was a rich kid, the son of an FDR-hating Jewish Republican who had served on Eisenhower’s Supreme Headquarters Allied Expeditionary Force staff and a French Catholic party girl. He attended the Hill School, played on the tennis team, was devastated by his parents’ divorce, and then went seriously off script.


Avid for experiences, Stone dropped out of Yale, taught in a Catholic school in Taiwan, and volunteered to fight in Vietnam. He came home with a Bronze Star, shrapnel in his ass, and a taste for “powerful Vietnamese weed.” Stone’s politics hadn’t changed all that much, though. He had supported Barry Goldwater in 1964 and would vote for Ronald Reagan in 1980. In later years he became more explicitly libertarian, expressing support for Ron Paul and making a film about Edward Snowden. At root, Oliver Stone is a patriot who despises the American Empire for corrupting his country. JFK, his fantasia on the Deep State, echoes Dwight Eisenhower’s warning that “we must guard against the acquisition of unwarranted influence” by “the military-industrial complex.” Platoon and Salvador bespeak an old-fangled American anti-interventionism in an age when that tendency, once the default position of ordinary Americans, is a virtual thoughtcrime.

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Oct 252020
 


Henri Matisse Sorrow of the King 1952

 

Politics Can Never Really ‘Follow The Science’ (G.)
Costco Sells Coronavirus Saliva Test Kits Online — Here’s What They Cost (Fox)
Long-Standing Claims Of Biden Corruption All But Confirmed (Schweizer/Bruner)
Chinese Hunter Biden Leaker: Over 10,000 Pictures Coming, More Videos (GP)
CNN’s Van Jones: Trump ‘Has Done Good Stuff For The Black Community’ (JTN)
Make America Jeffersonian Again (Escobar)
After 224 Years, Virginia To Let Judges Decide Sentences (DM)
Global Wealth Shrugs Off Pandemic To Hit $400 Trillion For First Time Ever (F.)
Capitalism Double-Bills: We Pay For Our Future To Be Stolen From Us (Cook)
France Recalls Turkey Envoy After Erdogan Says Macron Needs Mental Check (BBC)
BBC White Helmets ‘Documentary’ Targets Syria War Narratives Challengers (RT)
Amy Coney Barrett Adopts Local Troubled Youngster Named Hunter (BBee)

 

 

“Now he speaks for almost no one. He is making his own decisions, which is what we pay him to do.”

“In the end, political decision-making has to rest on personal judgment – there is no scientific manual to tell leaders what to do.”

Politics Can Never Really ‘Follow The Science’ (G.)

What happened to following the science? In the spring, when Boris Johnson and his scientific advisers were proceeding in lockstep, there was no disagreement about the necessity of shutting the country down. Now the government is coming to its own conclusions about what is needed, and the scientists on the Sage advisory group have started distancing themselves from No 10’s decisions. Critics complain that the politicians are chancing it rather than being led by the evidence. But as the German sociologist Max Weber argued a century ago, politics can never really follow the science. Pretending that it can is where the trouble starts. Weber believed that politics and science do not mix. In the end, political decision-making has to rest on personal judgment – there is no scientific manual to tell leaders what to do.

More to the point, scientists are not well suited to making those decisions. They want the facts to speak for themselves. That is wishful thinking: facts alone cannot tell us what to do. In politics, expecting the evidence to point the way does not reduce the arbitrariness of the outcome. All political choices are arbitrary to a degree. Using statistics to justify difficult decisions just makes them appear more arbitrary for anyone who happens to disagree. The widespread consensus in March that a national lockdown was needed – shared not just by national politicians and their expert advisers, but by the public too – was not primarily driven by the science. It came from a joint conviction that things were getting out of control. Something had to be done. Most people began social distancing well before the government mandated it, and many stopped before the government told them it was safe.

In the spring, Johnson could plausibly claim to speak for the country as a whole when he took drastic action. Now he speaks for almost no one. He is making his own decisions, which is what we pay him to do. His problem is that he can’t admit it. He has to pretend that nakedly political judgments – about who gets what, and who pays the price – are being calibrated to a more nuanced understanding of the evidence. He is weighing up a virus whose health impacts are concentrated locally against economic consequences where the effects are national. Manchester v London is not a problem that can be solved by an algorithm or better stats.

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What happens when politics does follow science. The last thing you want is for the cost to keep people from being tested.

Costco Sells Coronavirus Saliva Test Kits Online — Here’s What They Cost (Fox)

A saliva PCR test kit alone costs $129.99, but the kit with a video observation costs $139.99 It turns out, you really can get everything at Costco. The wholesale retailer is now selling at-home coronavirus test kits on its website. The saliva PCR tests are administered by telemedicine platform AZOVA and cost $129.99 for just the test kit or $139.99 for the test kit with a “video observation,” according to the product descriptions. People who buy the $129.99 test kit are expected to get their results within 24-72 hours after the lab receives their kit. Those who buy the more expensive test can expect their results within 24-48 hours from when the kit gets to the lab.


A PCR test, according to the AZOVA website, is “a type of ‘molecular diagnostic test’” that is “much more sensitive than most antigen tests.” On the Costco website, the PCR tests are described as “the gold standard testing method with the most accurate sensitivity and specificity currently on the market.” And unlike many other coronavirus tests, the AZOVA saliva test doesn’t involve “a painful nasal swab,” the product description says. According to the product pages, the tests are FSA eligible and have been authorized by the FDA under the Emergency Use Act. The tests are “highly accurate, with a sensitivity of 98% (meaning 98% of positive tests are correct) and a specificity of 99% (meaning 99% of negative tests are correct),” the description says.

Read more …

What we know so far.

Long-Standing Claims Of Biden Corruption All But Confirmed (Schweizer/Bruner)

In response to [our 2018 book]“Secret Empires,” one of Joe Biden’s aides said “we aren’t going to engage on a politically motivated hit pieces …” Team Biden did not bother to respond to specific allegations that the Biden family vacuumed up millions, in the exact locales where Biden was Obama’s policy “point man.” When the issue reemerged during the campaign, Team Biden continued to call it a “conspiracy theory” but this time, Joe Biden firmly put himself on record. “I have never discussed with my son or my brother or anyone else anything having to do with their businesses — period,” he told reporters in August 2019. “I never talk with my son or my brother or anyone else in the distant family about their business interests, period.” He repeated similar blanket denials on numerous occasions. These denials all proved to be untruthful. Period.

We now know that Joe Biden met directly with his son’s Chinese business partner, Jonathan Li, in a Chinese hotel lobby on a fateful trip in 2013 (a trip that allowed Hunter to spend hours with his father, the vice president, on a transoceanic flight to Beijing aboard Air Force Two). Ten days later, Hunter landed an unprecedented $1 billion private equity deal, bankrolled by the Chinese government. But this was not the only meeting Joe Biden had with Biden family business partners. As the New York Post reported, e-mails on Hunter Biden’s hard drive reveal that on April 16, 2015, Joe Biden met with a high-level official of a controversial Ukrainian energy company, Burisma, which had put Hunter on its board. And a recently unearthed photo shows that Vice President Biden met with Hunter’s Kazakh business associate in Washington D.C.

After first dismissing the gathering scandal as a “conspiracy theory,” the Biden team shifted to the position that Joe had never talked with his family about their business dealings, then shifted again to the position that he’d never met with his family’s business partners. Now, with the latest document revelations, Joe Biden unveiled his latest defense in the recent debate: “I have not taken a single penny from any country whatsoever, ever.” Team Biden points to Joe and Jill Biden’s tax returns as evidence that Joe did nothing improper. It is worth noting that the family members upon whom foreign entities showered money are not required to disclose their finances.

We now know the Biden paydays were anything but conspiracy theories. Hunter was getting roughly $1 million per year from Burisma. Treasury Department alerts reveal that Russian oligarch Elena Baturina wired $3.5 million to Biden’s interests. New text messages reveal that China Energy Company Ltd (CEFC) apparently paid $5 million to the Biden family. Another e-mail indicates Hunter demanded a $10 million per year “fee” from one of his Chinese business partners. There is no more doubt.

Read more …

Where did this guy come from? Where did he get the material?

Chinese Hunter Biden Leaker: Over 10,000 Pictures Coming, More Videos (GP)

The Chinese billionaire behind the website where explicit photographs and videos of Hunter Biden were leaked on Saturday night has warned that “there will be more than 10,000 pictures” and “more and more videos.” Lude (Wang DingGang), founder of Lude Media and part of the Whistle-Blower Movement that is aimed at exposing the Chinese Communist Party (CCP), was banned on Twitter soon after the leaks started. Undeterred, Lude began posting about the leaks on Parler, a freer speech alternative to Twitter, where he quickly gained thousands of followers. “There will more and more than 10000 pictures coming,” Lude wrote on the social network. “There will be more and more videos coming!” The explicit leaks are riddled with drugs and what appear to be prostitutes. They have called into question whether or not a Biden presidency would be a national security threat with the amount of blackmail material on his son.

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You heretic!

CNN’s Van Jones: Trump ‘Has Done Good Stuff For The Black Community’ (JTN)

CNN commentator Van Jones on Friday gave unexpected praise of President Trump during a roundtable, arguing that the president should be recognized more for what Jones said are the beneficial things his administration has done for black Americans. “… I get beat up by liberals every time I say it but I keep saying it, he has done good stuff for the Black community,” Jones, who is black himself, said during the panel discussion. “Opportunity Zone stuff, black college stuff, I worked with him on criminal stuff, I saw Donald Trump have African-American people, [formerly] incarcerated, in the White House, embraced them, treated them well.”


“There is a side to Donald Trump that I think he does not get enough credit for,” added Jones, who once served as an adviser for Barack Obama. The commentator during his remarks did express disappointment at Trump’s recent comparison of himself to Abraham Lincoln. He also said that Trump’s alleged “playing footsie on Twitter with … white nationalists organizations” turns off many black voters to Trump’s overall message. “[T]hat’s the tragedy of these mixed messages from the Trump White House,” he argued.

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“Self-evident truths” were back with a bang. One can’t make this stuff up.”

Make America Jeffersonian Again (Escobar)

The whole planet has every reason to be terminally puzzled at how all those lofty Enlightenment ideals Thomas Jefferson embedded in the 1776 Declaration of Independence ended up with… Trump vs. Biden. Jefferson borrowed freely from Locke, Rousseau, Hume to come up with an eminently quotable Greatest Hits, featuring “self-evident” truths such as “all men are created equal”, “unalienable rights”, and that searing “life, liberty and the pursuit of happiness.” Well, Baudrillard would have dubbed the exercise a mere simulacrum, because in real life none of this uplifting rhetoric applied to Native Americans and enslaved Africans. Still, there’s something endlessly fascinating about these “self-evident truths”.


They actually radiated like Spinoza axioms, spawning abstract truths that can be extrapolated at will. Jefferson’s “self-evident truths” ended up creating the whole, massive structure of what we define as “Western liberal democracy”. So it’s no wonder that America – perennially self-described as “leader of the free world” – consider these “self-evident truths” as the basis of an ideal society. And it’s this messianic river of fervent truth flowing out of a Himalaya of Morality that leads Americans to dismiss as “malign actors” every nation or society that is judged to be “deviating” from such obvious evidence. Cut to a mini-remix of the last Trump-Biden presidential debate. In foreign policy terms, it went something like this.

The moderator is desperate to move on as she’s very much aware of time constraints and looming, incandescent clashes: “Now I want to move on to Defense. It’s established Russia and China are interfering in our election process…” Here’s classic “self-evident truth” material, delivered according to strict Council on Foreign Relations guidelines. Cut to Biden: any country that interferes with the American elections “will pay a price”. Russia’s “been involved, China has been involved to some degree, and Iran’s been involved.” They are interfering with “American sovereignty”. Rudy Giuliani was used “as a Russian pawn”. Trump is “unwilling” to confront Putin. Russia has “destabilized NATO” and is “paying bounties to kill Americans in Afghanistan.” And China “has to play by the rules” – or else.

Cut to Trump: “You mean the laptop from hell is another Russia, Russia, Russia hoax?” For the record: Joe Biden did blame the contents of son Hunter’s laptop from hell on Russia. And discussing North Korea, when Trump said he got along fine with Kim Jong-Un, Biden stated, “We had a good relationship with Hitler before he invaded Europe.” Incidentally, Germany is and remains in Europe. And it’s quite something to see Biden acknowledging in public proven US industrial and political support to Nazism. So, inevitably, the laptop from hell had to show up. The FBI had Hunter Biden’s laptop since December 2019 – as it had issued a subpoena for it in the first place. And yet the FBI sat on the laptop for 11 months doing nothing.

That must have given plenty of time for those pesky Russians to steal the laptop and plant incriminating evidence. Well, not really. The FBI was busy mulling how to conduct an investigation on “money laundering”. And not on child porn – which, according to Giuliani, is the piece de resistance in the laptop. No one knows if these alleged “investigations” are ongoing. Now, the FBI and the Department of Justice have finally “concurred”: Hunter Biden’s laptop and emails were not part of a Russian disinformation campaign – directly contradicting what Joe Biden said in the debate. But then, right before the debate, a bombshell presser – including the FBI and Homeland Security – had announced those pesky Russians and Iranians were in fact “trying to influence opinion” on the US elections. “Self-evident truths” were back with a bang. One can’t make this stuff up.

Read more …

‘Jurors have no idea what a normal sentence is..’

After 224 Years, Virginia To Let Judges Decide Sentences (DM)

Virginia juries have been allowed to decide punishments for criminals for more than 200 years, but a new state bill could put that sentencing power in the hands of judges. Defense attorneys call it ‘the jury penalty’ – a centuries-old sentencing system in Virginia that calls for juries to decide punishment for criminal defendants, which often leads to stiffer sentences than what judges give or prosecutors offer in plea deals. This sentencing structure has been in place for 224 years, but under a bill recently approved by the state legislature, Virginia is expected to turn sentencing over to judges, joining the vast majority of states around the country. Democratic Gov. Ralph Northam, a strong supporter of criminal justice reform, is expected to sign the bill into law.

The proposal sparked fierce debate during a special legislative session focused on criminal justice and police reform. Supporters of the change said giving judges the sentencing responsibility will result in fairer sentences, but prosecutors predicted it will result in more jury trials and therefore require additional judges, court clerks and public defenders. The bill’s sponsor, Democratic Sen. Joe Morrissey from Richmond, said that under the current system, many people charged with crimes in Virginia are so fearful of getting a severe sentence from a jury that they often accept a plea deal from prosecutors that includes a longer sentence than they would typically get from a judge. Unlike judges, juries in Virginia are not given state sentencing guidelines that would tell them what a typical sentence would be for a particular crime, and they tend to hand out stiffer sentences.

In fiscal year 2019, sentences handed down by juries went above sentencing guidelines 37 per cent of the time, and in 2018, juries exceeded sentencing guidelines nearly 50 per cent of the time, according to annual reports by the Virginia Criminal Sentencing Commission. ‘Jurors have no idea what a normal sentence is,’ Morrissey said. ‘That’s why it is important to have a judge sentencing who has the guidelines and can put it into context.’

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Unparalelled wealth transfer.

Global Wealth Shrugs Off Pandemic To Hit $400 Trillion For First Time Ever (F.)

Despite the pandemic plunging economies worldwide into their deepest slumps on record and tens of millions being made unemployed, global wealth has risen to its highest level ever. Since the start of the year, total household wealth has grown by $1 trillion, or 0.25%, to top $400 trillion for the first time, according to Credit Suisse’s annual global wealth report. Most of this increase has been due to the rapid rebound of stock markets from their March lows. This was driven by governments pumping billions into their economies to stave off collapse as the pandemic gathered pace. On the face of it, the average global household’s wealth is little changed in 2020, despite the economic turmoil. But drilling deeper into the numbers reveals huge disparities, with the headline figures masking a vast gulf between the economic winners and losers this year.


Average household wealth rose by 0.25% between the start of the year and the end of June. However, average wealth per adult actually fell slightly, by 0.4% to $76,984 because the number of adults rose quicker during the six months. Anthony Shorrocks, Credit Suisse’s economist and the report author, said: “Given the damage inflicted by Covid-19 on the global economy, it seems remarkable that household wealth has emerged relatively unscathed.”The volatility this year has been a marked contrast to the upward trajectory of wealth growth seen in 2019. Last year, total global wealth rose by $36.3 trillion, or 8.5%, a record pace as global stock markets surged. In the first three months of this year, $17.5 trillion was wiped off household wealth worldwide as the onset of the Covid-19 pandemic sparked a savage equity crash. The subsequent recovery meant that total household wealth is slightly up on the year.

Read more …

“..externalities – and capitalism – are inherently violent…”

Capitalism Double-Bills: We Pay For Our Future To Be Stolen From Us (Cook)

Here is a word that risks deterring you from reading on much further, even though it may hold the key to understanding why we are in such a terrible political, economic and social mess. That word is “externalities”. It sounds like a piece of economic jargon. It is a piece of economic jargon. But it is also the foundation stone on which the west’s current economic and ideological system has been built. Focusing on how externalities work and how they have come to dominate every sphere of our lives is to understand how we are destroying our planet – and offer at the same time the waypost to a better future. In economics, “externalities” are usually defined indifferently as the effects of a commercial or industrial process on a third party that are not costed into that process.

Here is what should be a familiar example. For decades, cigarette manufacturers made enormous profits by concealing scientific evidence that over time their product could prove lethal to customers. The firms profited by externalising the costs associated with cigarettes – of death and disease – on to those buying their cigarettes and wider society. People gave Philip Morris and British American Tobacco their money as these companies made those smoking Marlboros and Lucky Strikes progressively unhealthier. The externalised cost was paid – is still paid – by the customers themselves, by grieving families, by local and national health services, and by the taxpayer. Had the firms been required to pick up these various tabs, it would have proved entirely unprofitable to manufacture cigarettes.

Externalities are not incidental to the way capitalist economies run. They are integral to them. After all, it is a legal obligation on private companies to maximise profits for their shareholders – in addition, of course, to the personal incentive bosses have to enrich themselves, and each company’s need to avoid making themselves vulnerable to more profitable and predatory competitors in the marketplace. Companies are therefore motivated to offload as many costs as possible on to others. As we shall see, externalities mean someone other than the company itself pays the true cost behind its profits, either because those others are too weak or ignorant to fight back or because the bill comes due further down the line. And for that reason, externalities – and capitalism – are inherently violent.

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The lira plunged again this week. Everytime that happens, Erdogan plays more to his hardcore supporters to blame outsiders.

France Recalls Turkey Envoy After Erdogan Says Macron Needs Mental Check (BBC)

France has recalled its ambassador to Turkey for consultations after President Recep Tayyip Erdogan insulted his French counterpart Emmanuel Macron. He said Mr Macron needed a mental health check for pledging to defend secular values and fight radical Islam. Mr Macron has spoken out forcefully on these issues after a French teacher was murdered for showing cartoons of the Prophet Muhammad in class. France “will not give up our cartoons”, he said earlier this week. Depictions of the Prophet Muhammad can cause serious offence to Muslims because Islamic tradition explicitly forbids images of Muhammad and Allah (God). But state secularism – or laïcité – is central to France’s national identity.


Curbing freedom of expression to protect the feelings of one particular community, the state says, undermines the country’s unity. Responding to Mr Macron’s campaign to defend such values – which began before the teacher was murdered – Mr Erdogan asked in a speech: “What’s the problem of the individual called Macron with Islam and with the Muslims?” He added: “Macron needs treatment on a mental level. “What else can be said to a head of state who does not understand freedom of belief and who behaves in this way to millions of people living in his country who are members of a different faith?” In the wake of the remarks, a French presidential official told AFP news agency that France’s ambassador to Turkey was being recalled for consultations, and would be meeting Mr Macron.

Read more …

The UK gov’t needs this, to maintain the Skripal and Navalny narratives.

BBC White Helmets ‘Documentary’ Targets Syria War Narratives Challengers (RT)

The BBC is preparing an attack against journalists, former diplomats, academics and scientists who challenge the dominant pro-war narratives against Syria underpinned by the pseudo-humanitarian White Helmets. The British public broadcaster has sent out requests for comments to those who have dared to expose the role the UK government and its intelligence agencies have played in the destabilization of Syria, which look more like neo-McCarthyist charge sheets. The producer of an upcoming Radio 4 documentary series had been in email and telephone conversation with the author of this article, as well as Peter Ford, former UK ambassador to Syria, and members of the Working Group on Syria, Media and Propaganda (WGSMP) since June 2020. The result of those conversations, during which the evidence emanating from serious scientific research and on-the-ground testimony was presented to the producer, was a familiar list of accusations of “conspiracy theorism” and suggestions of “incentivized” Russian or Syrian bias.

Fellow independent journalist Eva Bartlett has spent long periods of time inside Syria, reporting from many of the most high-risk areas during the Syrian Arab Army allied campaigns to liberate swathes of Syrian territory from the US coalition-proxy occupation. She had this to say about the email she received a few days ago: “The questions emailed to me by the BBC evidence a predetermined intent to character assassination. This approach shows an utter lack of journalistic integrity on the part of the BBC. The BBC’s hostile insinuations against me arrogantly infer that neither I nor the Syrians I interview think for ourselves, but are puppets of the Syrian and Russian governments. My journalism dates back to 2007 and is quite extensive, with 13 years of on the ground experience, from Palestine and Syria, to Venezuela and eastern Ukraine, and elsewhere.

[..] The former UK ambassador to Syria, Peter Ford, also received the BBC bill of indictment and he issued this statement in response: “The BBC have systematically tried to suppress views on Syria which run counter to the standard one-sided narrative. This programme’s efforts to smear dissenters takes BBC conduct to a new low. By alleging conspiracy theorising where there is only evidence-based reporting and analysis, the BBC is showing its frustration at being unable to stifle truth-telling. The only conspiracy here is whatever coordination has taken place between the BBC and British authorities responsible for failing to achieve regime change in Syria despite throwing many millions of taxpayer money at the effort. Why is the BBC not drawing attention to the biggest failure of British foreign policy since Suez, as judged by its self-proclaimed objective of removing Assad, rather than busying itself with trying to take down unsupported individual dissenters who have ranged against them the vast wealth and resources of the establishment?

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“He has also renounced his old ways and paid back a Ukrainian gas company fourfold.”

Amy Coney Barrett Adopts Local Troubled Youngster Named Hunter (BBee)

According to sources, Supreme Court nominee Amy Coney Barrett has adopted her 8th child, a troubled local youngster named Hunter. In a touching story of love triumphing over all odds, the Barrett family fought for custody of Hunter and welcomed him into their family for the first time this week. “This family has love to spare,” said Judge Barrett. “We just knew we had another child out there somewhere. We were told by the agency that young Hunter had his fair share of issues, but we knew we would be up to the challenge.” According to friends of the family, Hunter is slowly adjusting to his new home and family. He has kicked an old drug habit and is now attending church with the rest of the family.

He has also renounced his old ways and paid back a Ukrainian gas company fourfold. “We love having Hunter with us!” said the leader of the small church group Hunter attends every week. “Whenever we share testimonies, he puts our testimonies to shame with stories of drugs, corruption, and horrific scandal, unlike anything we’ve heard. Awesome!” Judge Barrett is still struggling to teach Hunter the value of hard work. He is being paid a few dollars to do chores around the house when he’s used to being paid $50,000 per month for nothing. “We’re still working on it,” she said.

Read more …

 

 

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Sep 172018
 


René Magritte Companions of fear 1942

 

Repo 105 (Ben Hunt)
The Everything Bubble” Threatens $400 Trillion In Assets (ZH)
What Can Cause the Next Mortgage Crisis in the US? (WS)
Dollar Dominant & Dangerous, System Not Stable – Catherine Austin Fitts (USAW)
Shell Faces One Of The Biggest Corruption Cases In Corporate History (Ind.)
Only Alternative To Chequers Is No Brexit Deal, Says Theresa May (G.)
Brussels Nearing Impasse With May Over Irish Border Proposal (G.)
Four In 10 Think British Culture Is Undermined By Multiculturalism (G.)
Musk Says Tesla Now In ‘Delivery Logistics Hell’ (R.)
The EU Needs A Stability And Wellbeing Pact, Not More Growth (G.)
7 Endangered Species That Could (Almost) Fit In A Single Train Carriage (G.)

 

 

Lehman sold bad loans to banks for a fee so it could look better, only to buy them back days later. It was very basic fraud. And Dick Fuld walked away.

Repo 105 (Ben Hunt)

Every time Dick Fuld’s publicists succeed in getting a “redemption story” published in the Wall Street Journal or New York Times, I’m going to write an Epsilon Theory brief about Repo 105, the fraudulent scheme that Lehman Brothers ran for years to hide its deteriorating financial condition from investors and regulators alike.

[..] Repo 105 was a multiyear scheme by Lehman to defraud the government and its own investors by falsifying the actual amount of loans it had on the books, making Lehman look safer than it actually was. It worked like this. A few days before the end of the calendar quarter, Lehman would “sell” billions of dollars worth of loans to another bank. I put “sell” in quotation marks, because Lehman ALSO had an agreement with these other banks to buy the loans back a few days after the quarter ended for the same price as they were sold, plus enough money to cover whatever the going interest rate was on that cash for the few days it was in Lehman’s hands. This is what’s called a repurchase agreement, or repo, hence the name Repo 105 (the 105 refers to the 5% overcollateralization that counterparty banks required to lend the cash to Lehman even for a few days – THEY knew Lehman was in trouble).

Since financial reporting happens at the end of the quarter, Lehman’s books would look like they had more cash and fewer loans than they actually did. Surely, you say, no law firm would bless this blatant attempt to cook the books? And I say, don’t call me Shirley. I say, well … no US law firm would bless this, so naturally Lehman found a UK firm, Linklaters, to say that this was, in fact, technically a “true sale”. Even then, to pull this off Lehman had to run Repo 105 through their offshore subsidiaries, not through their US-chartered entities. It was really expensive for Lehman to run Repo 105. But also entirely necessary, or else the entire house of cards that WAS Lehman would have collapsed well before September, 2008.

Read more …

Risk. It’s back.

The Everything Bubble” Threatens $400 Trillion In Assets (ZH)

By now, it’s a very familiar question: how high can the Fed hike rates before it causes a major market “event.” Two weeks ago, Stifel analyst Barry Banister became the latest to issue a timeline on how many more rate hikes the Fed can push through before the market is finally impacted. According to his calculations, just two more rate hikes would put the central bank above the neutral rate – the interest rate that neither stimulates nor holds back the economy. The Fed’s long-term projection of its policy rate has risen from 2.8% at the end of 2017 to 2.9% in June. As the following chart, every time this has happened, a bear market has inevitably followed.

A similar argument was made recently by both Deutsche Bank and Bank of America, which in two parallel analyses observed last year that every Fed tightening cycle tends to end in a crisis. In a report issued on Friday, BCA’s strategists make the key point that the performance of bonds – and stocks – in an inflation scare would depend on the relative size of the inflationary impulse compared with the disinflationary impulse that resulted from sharply lower risk-asset prices. They make the point that if central banks were more concerned about the inflationary impulse, which at least for Fed chair Powell appears to be the case for now – Janet Yellen’s “lower for longer revised forward guidance” notwithstanding – they would have to keep tightening – in which case, bond yields would be liberated to reach elevated territory.

Conversely, if the bigger worry was the disinflationary impulse, which arguably is the case from a legacy standpoint, central banks would quickly reverse course, and bond yields would return to the lowlands. Thus, the disinflationary impulse from lower risk-asset prices would end up as the bigger issue. [..] BCA estimates that the total value of global risk-assets is $400 trillion, equal to about five times the size of the global economy. The takeaway is that any inflationary impulse would – through higher bond yields – undermine the valuation support of global risk-assets that are worth several times the size of the global economy.

Read more …

“In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.”

What Can Cause the Next Mortgage Crisis in the US? (WS)

Mortgage delinquencies at all commercial banks in the US inched down to 3.14% in the second quarter, the lowest since Q2 2007, according to the Federal Reserve. But after those soothingly low delinquency rates in 2007, something happened. By Q3 2008, the delinquency rate hit 5.2%, and in Q4 2009, it went over 10%, and stayed in the double-digits until Q1 2013. This was the mortgage crisis. And we’re a million miles away from it, thank God. Or are we? This chart compares home prices in the US (green, left scale) to delinquency rates (red, right scale). Delinquency rates started surging after home prices started falling. The inflection point is marked by the vertical purple line, labeled “it starts”:

Home prices began falling in 2006. By 2008, some homeowners were seriously “underwater” – they owed more on their house than the house was worth. When they ran into financial trouble because they were in over their heads, or because one of the breadwinners in the household lost their jobs, or because they’d lied on their mortgage application and never had enough income to begin with, or because they were investors who couldn’t make the math work out anymore, or whatever, they were stuck. In a rising housing market, they would just sell the home and pay off the mortgage. But they couldn’t sell their home because it was worth less than the mortgage, and default was the only option. The chart above shows the relationship between home prices and delinquencies. In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.

Read more …

“The U.S. government is “missing” $21 trillion between the DOD and HUD.”

Dollar Dominant & Dangerous, System Not Stable – Catherine Austin Fitts (USAW)

Investment advisor and former Assistant Secretary of Housing, Catherine Austin Fitts, predicts the global financial system “will take some big hits before the end of the year.” Fitts explains, “Right now, economists say the dollar is ‘dangerous and dominant.’ It’s still, if you look at the market shares around the world, it’s still very, very significant portion of total reserves. So, it’s still very important. At the same time, the U.S. dollar hegemony is probably not going to last forever . . . So, I think the long term dollar looks very weak. Short term, it doesn’t look like it’s coming apart anytime soon, as far as I can see. What that means is when you have something that is dangerous and dominant, you have the possibility of extreme volatility events.

That’s the new code word for the ‘you know what’ hits the, you know what. Whether it’s different countries exploding economically, or we whether are pressuring people that makes them very uncomfortable, these kinds of fights over shrinking pies are very dangerous because they mean covert wars. They mean overt wars, and the more we steal pies from each other instead of make new pies, the worse the situation gets. That’s what you are seeing. The system is not stable.” [..] There is good reason people are going to real assets. The U.S. government is “missing” $21 trillion between the DOD and HUD. This fact was uncovered by Fitts and economist Dr. Mark Skidmore last year.

What was the government’s answer to this gigantic accounting fraud that is the size of the federal deficit? Give the government’s budgets basically classified national security status. Fitts says, “Apparently, the people leading the audit have come to them and said if we do this audit, we will disclose classified projects. So, the board (Federal Accounting Standards Advisory Board – FASAB) came out with a new policy. I say it is illegal. You cannot do it under the financial management laws, and you certainly cannot do it under the Constitution, and it said you can keep classified off the books, which means you can cook the books and you can basically do whatever you want.

Read more …

What was that about reality and fiction?

Shell Faces One Of The Biggest Corruption Cases In Corporate History (Ind.)

Giant oil companies, offshore accounts, ex-MI6 agents, champagne lunches, a former Nigerian president and allegations of one of the biggest bribes ever paid – the corruption case against Shell and Italy’s Eni filed by prosecutors in Milan over a shady $1.3bn deal for a vast African oil field has all the elements of an espionage thriller. The latest twists thicken the plot further with a cache of documents seized in a raid on a Swiss financier’s apartment that could be crucial to the case, leaving prosecutors in a race against time to get them to Milan as trial hearings get underway this week. The Geneva raid uncovered a briefcase belonging to Emeka Obi, a middleman who received millions of dollars from the deal and is in the dock along with several senior Shell and Eni executives.

Inside the briefcase, Swiss prosecutors found a laptop, two Nigerian passports, five sim cards and a hard drive containing 41,000 documents that prosecutors believe could be crucial to the trial playing out on the other side of the Alps. The stakes are high. Italian prosecutors allege that, of the total $1.3bn fee paid by Shell and Eni for the oil field, $1.1bn went not into the coffers of the Nigerian state but the accounts of former oil minister Dan Etete who then distributed hundreds of millions to well-connected individuals, including former president Goodluck Jonathan. The amount distributed as bribes is more than the entire Nigerian healthcare budget for 2018, in a country where 87 million people live in extreme poverty – more than any other country on earth.

Read more …

She’s stuck. Dangerous position.

Only Alternative To Chequers Is No Brexit Deal, Says Theresa May (G.)

May said: “I believe we will get a good deal. We will bring that back from the EU negotiations and put that to parliament. I think that the alternative to that will be not having a deal.” The Chequers plan prompted the resignations of David Davis and Boris Johnson. May tried again to remake the case for it by claiming the other options put forward by the EU were unacceptable. “The European Union had basically put two offers on the table. Either the UK stays in the single market and the customs union – effectively in the EU – that would have betrayed the vote of the British people,” she said.

“Or, on the other side, a basic free trade agreement but carving Northern Ireland out and effectively keeping Northern Ireland in the European Union and Great Britain out. That would have broken up the United Kingdom, or could have broken up the United Kingdom. Both of those were unacceptable to the UK. “We said ‘no’ … we’re going to put our own proposal forward and that’s what Chequers is about … It unblocked the negotiations.”

Read more …

Preparing to blame the EU for failing.

Brussels Nearing Impasse With May Over Irish Border Proposal (G.)

The EU is proving unable to convince Theresa May that by using “trusted trader schemes” and technology its proposal to in effect keep Northern Ireland in the customs union and single market will not draw a border in the Irish sea. The Brexit negotiations have reached an impasse over the failure to find an acceptable solution to avoiding a hard border on the island of Ireland after the UK leaves the EU. The solution proposed by Brussels in which Northern Ireland has a different status from the rest of the UK has been rejected by the prime minister as involving the economic and constitutional “dislocation” of the country. The EU’s chief negotiator, Michel Barnier, has nevertheless repeatedly insisted that the issue can be “de-dramatised”.

Barnier has sought to show that the level of trade between Belfast and the rest of the UK is minimal, and that the checks that would be required do not pose a constitutional threat to the British government. But according to what is described as a diplomatic note seen by the Times, the EU is struggling to convince the UK that it is significant that checks at a border could be avoided entirely for many companies through trusted trade schemes. The diplomatic note, said to have been drafted following a meeting of EU ambassadors last Wednesday with Barnier’s deputy, Sabine Weyand, reports that the UK has not been “helpful” over the issue. The note says: “The biggest unsolved problem is Northern Ireland. There is a political mobilisation in the UK in this regard. Therefore, we are trying to clarify the EU position. The controls or checks only have to be organised in a way that would not endanger the EU single market.”

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How about you start by picking your own strawberries?

Four In 10 Think British Culture Is Undermined By Multiculturalism (G.)

A large minority of people in the UK believe multiculturalism has undermined British culture and that migrants do not properly integrate, according to some of the broadest research into the population’s attitudes to immigration. The study, conducted over the last two years, also reflects widespread frustration at the government’s handling of immigration, with only 15% of respondents feeling ministers have managed it competently and fairly. On balance, the UK population appears to be slightly more positive than negative about the impact of immigration; however, 40% of respondents agreed that having a wide variety of backgrounds has undermined British culture. More than a quarter of people believe MPs never tell the truth about immigration and half the population wants to see a reduction in the numbers of low-skilled workers coming into Britain from the EU.

The study was based on a survey of 3,667 adults carried out in June by ICM, as well as 60 citizens’ panels carried out on behalf of the thinktank British Future and the anti-racism group Hope Not Hate. “The lack of trust we found in the government to manage immigration is quite shocking,” said Jill Rutter, the director of strategy for British Future. “People want to have their voices heard on the choices we make, and to hold their leaders to account on their promises. While people do want the UK government to have more control over who can come to the UK, most of them are ‘balancers’ – they recognise the benefits of migration to Britain, both economically and culturally, but also voice concerns about pressures on public services and housing.”

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“Should be solved shortly..”

Musk Says Tesla Now In ‘Delivery Logistics Hell’ (R.)

Tesla Inc’s Chief Executive Officer Elon Musk on Sunday acknowledged that the electric carmaker’s problems have now shifted to delivery logistics from production delays, the latest speed bump in its efforts to achieve profitability. “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly,” Musk said in a tweet here in response to a customer complaint on delivery delay. The 47-year-old billionaire who earlier this month faced investor ire over smoking marijuana on a live web show, has indicated in the past that Tesla’s customers may face a longer response time because of a significant increase in vehicle delivery volume in North America.

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238 academics signed. But it’s not the conversation we’ll have.

The EU Needs A Stability And Wellbeing Pact, Not More Growth (G.)

This week, scientists, politicians, and policymakers are gathering in Brussels for a landmark conference. The aim of this event, organised by members of the European parliament from five different political groups, alongside trade unions and NGOs, is to explore possibilities for a “post-growth economy” in Europe. For the past seven decades, GDP growth has stood as the primary economic objective of European nations. But as our economies have grown, so has our negative impact on the environment. We are now exceeding the safe operating space for humanity on this planet, and there is no sign that economic activity is being decoupled from resource use or pollution at anything like the scale required. Today, solving social problems within European nations does not require more growth. It requires a fairer distribution of the income and wealth that we already have.

Growth is also becoming harder to achieve due to declining productivity gains, market saturation, and ecological degradation. If current trends continue, there may be no growth at all in Europe within a decade. Right now the response is to try to fuel growth by issuing more debt, shredding environmental regulations, extending working hours, and cutting social protections. This aggressive pursuit of growth at all costs divides society, creates economic instability, and undermines democracy. Those in power have not been willing to engage with these issues, at least not until now. The European commission’s Beyond GDP project became GDP and Beyond. The official mantra remains growth — redressed as “sustainable”, “green”, or “inclusive” – but first and foremost, growth. Even the new UN sustainable development goals include the pursuit of economic growth as a policy goal for all countries, despite the fundamental contradiction between growth and sustainability.

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Another way to put it. You could easily do this for 70 species, or 700, 7000.

7 Endangered Species That Could (Almost) Fit In A Single Train Carriage (G.)

Some species are so close to extinction, that every remaining member can fit on a New York subway carriage (if they squeeze). All estimates come from the IUCN Red List, 2018.

 

 

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Jun 012018
 


Edward Hopper Rooms by the sea 1951

 

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)
ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)
Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)
Why Turkey And Argentina Are Doomed (ZH)
US On Brink Of Trade War With EU, Canada and Mexico (G.)
China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)
Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)
Italians Back Euro But Rail Against EU’s Rules (G.)
Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)
Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)
UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)
Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

 

 

Deutsche is enormous. Its derivatives portfolio is gigantic. This is a big story.

Deutsche Bank Downgraded By S&P Over Restructuring Plans (MW)

Deutsche Bank was downgraded Friday by S&P Global Ratings, which cited concerns over the German lender’s restructuring plans. The ratings agency cut the long-term issuer credit rating to ‘BBB+’ from ‘A-‘on the bank and its core operating subsidiaries. The troubled bank last week announced plans to cut thousands of jobs in a bid to overhaul its operations and cut costs, but S&P said they see “significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” in a statement. Investors also demanded the resignation of the bank’s chairman, Paul Achleitner, at the Annual General Meeting last week.

Shares have tumbled 42% so far this year. The agency kept a stable rating on the bank’s outlook, saying that management will execute the plan over time and achieve longer-term objectives. Meanwhile, Australia’s consumer watchdog on Friday announced that it would be bringing criminal cartel charges against Deutsche Bank, Citigroup and Australia & New Zealand Banking. Shares of Deutsche Bank opened up 1.5%, bouncing off a 7% drop Thursday, which came after the Federal Reserve designated the German lender’s U.S. business in “troubled condition,” people familiar with the matter told The Wall Street Journal.

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Deutsche again. Insult and injury.

ANZ, Deutsche Bank and Citigroup Face ‘Criminal Cartel’ Charges (BBC)

Financial institutions ANZ, Deutsche Bank and Citigroup will be prosecuted on criminal cartel charges, Australia’s consumer watchdog says. The allegations concern arrangements for the sale of A$2.5bn (£1.4bn; $1.9bn) worth of ANZ shares in 2015. The three banks said they would fight the charges. ANZ said it would also defend allegations against an employee. Australia’s scandal-plagued financial sector is at the centre of a national inquiry into misconduct. Several “other individuals” are also expected to be charged by prosecutors, the Australian Competition and Consumer Commission (ACCC) said.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” chairman Rod Sims said in a statement. “It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.” ANZ, one of Australia’s so-called “big four” banks, said the charges related to a placement of 80.8 million shares. The deal was underwritten by global giants Deutsche Bank, Citigroup and JP Morgan, as part of a bid by ANZ to raise capital to meet regulatory requirements. ANZ said regulators were now investigating whether it should have stated that 25.5 million shares of the placement had been taken up by “joint lead managers”.

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And it’s OK to keep that from -potential- shareholders, bondholders for over a year?!

Deutsche Bank’s US Ops Deemed “Troubled” By Fed A Year Ago (R.)

The United States Federal Reserve last year designated Deutsche Bank U.S. operations to be in “troubled condition”, The Wall Street Journal reported on Thursday, citing people familiar with the matter. The Fed’s assessment has not previously been made public, it said, sending shares in the German lender down 7.2% to 9.16 euros, their lowest level in more than a year and a half. The “troubled condition” status is one of the lowest designations employed by the Fed, The WSJ said. The report comes a month after Deutsche Bank’s new Chief Executive Christian Sewing announced plans to cut back bond and equities trading, where it has been unable to compete with U.S. powerhouses such as Goldman Sachs and JP Morgan.

Deutsche Bank’s attempts to break into the U.S. markets, which are seen as an essential plank for delivering a global investment banking platform, proved to be costly as it ended up paying out billions of dollars to settle regulatory breaches, prompting speculation at one point of a bailout by Berlin. The WSJ said that the Fed downgrade of Deutsche Bank’s U.S. operations caused the U.S. Federal Deposit Insurance Corporation (FDIC) to put Deutsche Bank Trust Company Americas on its list of “Problem Banks”.

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Clear enough.

Why Turkey And Argentina Are Doomed (ZH)

It was all the rage in 2017. Not long after contrarians like Jeff Gundlach and Russell Clark said to go long Emerging Markets, suddenly everyone was doing it, either as a standalone trade or as part of a pair trade shorting one or more DMs. Of course, maybe all they were doing was indirectly shorting the USD, which was arguably the biggest driver behind EM outperformance. But, in no small part due to the recent surge in the dollar, after outperforming developed equity markets by 20% in 2016-2017, EM is underperforming by 2.5% so far this year. Of course, it’s not just the dollar, but also interest rates, which until the recent Italian fiasco, were at 4 year, or greater, highs.

And, as JPM’s Michael Cembalest writes in his latest “Eye on the market” note, investor fears are predictably focused on the impact of rising US interest rates and the rising US dollar on EM external debt, and on rising oil prices. And yet, despite the occasional scream of terror from EM longs who refuse to throw in the towel, a closer look shows that the market reaction has been orderly so far, with two exceptions: Argentina and Turkey, which are leading the way down. However, as the JPM Asset Management CIO shows below, the collapse in these two countries has been largely a function of state-specific/idiosyncratic reasons.

The chart below, courtesy of Cembalest, shows each country’s current account (x-axis), the recent change in its external borrowing (y-axis) and the return on a blended portfolio of its equity and fixed income markets (the larger the red bubble, the worse the returns have been). This outcome looks sensible given weaker Argentine and Turkish fundamentals. And while Cembalest admits that the rising dollar and rising US rates will be a challenge for the broader EM space, most will probably not face balance of payments crises similar to what is taking place in Turkey and Argentina, of which the latter is already getting an IMF bailout and the former, well… it’s only a matter of time.

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1: look if present conditions are fair. 2: adapt them.

US On Brink Of Trade War With EU, Canada and Mexico (G.)

The United States and its traditional allies are on the brink of a full-scale trade war after European and Canadian leaders reacted swiftly and angrily to Donald Trump’s decision to impose tariffs on steel and aluminium producers. The president of the European commission, Jean-Claude Juncker, promised immediate retaliation after the US commerce secretary, Wilbur Ross, said EU companies would face a 25% duty on steel and a 10% duty on aluminium from midnight on Thursday. Europe, along with Canada and Mexico, had been granted a temporary reprieve from the tariffs after they were unveiled by Donald Trump two months ago.

However, Ross sent shudders through global financial markets when he said insufficient progress had been made in talks with three of the US’s traditional allies to reduce America’s trade deficit and that the waiver was being lifted. Wall Street slumped as the Dow Jones Industrial Average closed down more than 250 points as investors sold off shares in manufacturers and corporations with global reach. Shares across Europe also declined. The move from Washington – which comes at a time when Trump is also threatening protectionist action against China – triggered an immediate and angry response from Canada, Brussels and from individual European capitals.

Juncker called the US move “unjustified” and said the EU had no choice but to hit back with tariffs on US goods and a case at the World Trade Organisation in Geneva. “We will defend the Union’s interests, in full compliance with international trade law,” he added. Brussels has already announced that it would target Levi’s jeans, Harley-Davidson motorbikes and bourbon whiskey.

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Something’s working.

China To Slash Import Tariffs On Many Consumer Products By 60% From July 1 (R.)

China will cut import tariffs on nearly 1,500 consumer products ranging from cosmetics to home appliances from July 1, in a bid to boost imports as part of efforts to open up the economy. The move would be in step with Beijing’s pledge to its trade partners – including the United States – that China will take steps to increase imports, and offers a boon to global brands looking to deepen their presence in China. The finance ministry published a detailed list of products affected and their new reduced tax rates on Thursday, following early announcements of the broader plan. Starting next month, the average tariff rate on 1,449 products imported from most favored nations will be reduced to 6.9% from 15.7%, which is equivalent to a cut of about 60%, the finance ministry said in a statement on its website.

That followed an announcement from the State Council, or the country’s Cabinet, on Wednesday that China will cut import tariffs on consumer items including apparel, cosmetics, home appliances, and drugs. The tariff cuts this time are more broad-ranging than previous reductions. Import tariffs for apparel, footwear and headgear, kitchen supplies and fitness products will be more than halved to an average of 7.1% from 15.9%, with those on washing machines and refrigerators slashed to just 8%, from 20.5%. Tariffs will also be cut on processed foods such as aquaculture and fishing products and mineral water, from 15.2% to 6.9%.

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Savona comes out strong. His replacement as finance minister is no fan of the euro, and he himself is EU minister.

Populist Government To Be Sworn In As Italy’s Political Deadlock Ends (G.)

A populist government will be sworn into power in Italy on Friday after president Sergio Mattarella agreed to a revised slate of ministers – just days after a bitter row over the incoming leaders’ stance on the euro ended their initial bid to assume power. A joint statement by the anti-establishment Five Star Movement (M5S) and the far-right League announced that political newcomer Giuseppe Conte, who had been seen as a controversial choice, would serve as prime minister. The relatively unknown law professor met Mattarella late on Thursday night to put forward a list of ministers, which the president has accepted.

“All the conditions have been fulfilled for a political, Five Star and League government,” said Luigi Di Maio, the Five Star chief, and Matteo Salvini, the League leader, in a joint statement after a day of talks in Rome. The deal will bring at least temporary calm to a political crisis that has embroiled Italy for weeks. The tumult raised questions – in Brussels and among investors around the world – about whether the rise in Italian populism and the collapse of traditional parties posed a fundamental threat to the country’s future in the eurozone.

The formation of the new government will at least temporarily allay those concerns, because it will remove for now the threat that snap elections will be called later this summer, a prospect which worried investors because it could have bolstered support for anti-EU parties. The populist leaders stepped back from their insistence that Paolo Savona, an 81-year-old Eurosceptic, should serve as finance minister. The choice had been vetoed by Mattarella, prompting the M5S and the League to call off their deal. Savona will now serve as EU minister instead. But there are still many unknowns about how the new administration – an uneasy alliance between two former political opponents, both jockeying for power – will govern Italy.

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If the EU doesn’t adapt to its new reality, it’s doomed.

Italians Back Euro But Rail Against EU’s Rules (G.)

Ever since the inception of the EU, Italians have been among the staunchest defenders of the European project. But the political crisis that engulfed the bloc’s third largest economy this week, centring on a debate over Italy’s commitment to the eurozone, has spooked investors and worried Brussels. It has raised a question that just a few years ago would have seemed unfathomable: are Italians ready to ditch the euro? The answer, like most aspects of Italian politics, is complicated. Opinion polls show that a majority of Italians – 59%, according to Eurobarometer – support the country’s continued inclusion in the eurozone. But that does not mean they want to continue to abide by the rules set by Brussels, which Italy agreed to when it adopted the currency.

Instead, more Italians are seeking a tougher and more antagonistic approach towards Brussels, after years of frustration over fiscal constraints set by the EU coupled with a feeling that Europe has abandoned Italy to cope on its own with the migration crisis. The latest Eurobarometer survey found that only 3 in 10 Italians believed their voices counted within the EU. While a full break from the EU – an “Italexit” – is not a matter of public debate (such a move is considered implausible even among the most hardline Eurosceptics), surveys show Italians generally have a dim view of the bloc. Eurobarometer found that 39% believed Italy’s inclusion in the EU was a “good thing” and 44% believed Italy benefited from being in the EU.

In March, stagnant economic growth and concerns about immigration drove voters across Italy to vote in large numbers for two populist parties – the Five Star Movement and the League, formerly the Northern League – while the most pro-EU party, the Democratic party (PD), suffered a humiliating defeat. Josef Janning, a senior policy fellow at the European Council on Foreign Relations, said: “There is no desire to exit. But there is a willingness to follow the League and the Five Star Movement and to say ‘we don’t want to follow the rules’. That seems to be the new consensus.”

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It’s like he’s talking about himself.

Juncker: Italians Need To Work Harder And Be Less Corrupt (G.)

Jean-Claude Juncker has said Italians need to work harder, be less corrupt and stop looking to the EU to rescue the country’s poor regions, in comments unlikely to ease the fraught political battle over Italy’s future relationship with Brussels. Days after the Italian president, Sergio Mattarella, defended Italy’s place in the eurozone against the country’s populist leaders, the president of the European commission said he was in “deep love” with “bella Italia”, but could not accept that all the country’s problems should be blamed on the EU or the commission. “Italians have to take care of the poor regions of Italy. That means more work; less corruption; seriousness,” Juncker said.

“We will help them as we always did. But don’t play this game of loading with responsibility the EU. A country is a country, a nation is a nation. Countries first, Europe second.” Officials in Brussels and markets around the world are awaiting the outcome of ongoing talks between Italy’s two populist leaders, Luigi Di Maio of the Five Star Movement (M5S) and Matteo Salvini of the far-right League, on forming a new government. After making the remarks during a question and answer session in Brussels, Juncker added it would be best to be “silent and prudent and cautious” this week, whenever he was asked about Italy. “I have full confidence in the genius of the Italian people,” he said.

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“..the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering..”

Spain’s Government Poised To Fall As Socialists Prepare For Power (Ind.)

Mariano Rajoy’s chances of remaining Spanish Premier evaporated almost completely after the moderate Basque Nationalist Party (PNV) confirmed that its MPs would vote in favour of a parliamentary no-confidence motion against him if he did not resign. Despite its tiny number of MPs – five deputies in a 350 seater parliament – it is widely believed that the PNV’s decision will tip the balance against Mr Rajoy in a no-confidence motion, by a mere four votes. If successful, the Socialist party leader Pedro Sánchez, who tabled the no-confidence motion last week, would be automatically elected as Spanish PM, ending seven years of centre-right rule by the Partido Popular (PP) in Spain.

However, given that those voting in favour of the motion – ranging from Catalan Republican Nationalists, currently at daggers drawn with almost all Spain’s mainstream political parties, through to the left-wing Podemos coalition – have little in common beyond a desire to depose Mr Rajoy so a new government could prove highly unstable. Should Mr Rajoy lose the vote, he will be Spain’s first PM to leave office as a result of a no-confidence motion since democracy was restored to the country more than four decades ago.

[..] the impact of a court verdict last week in the so called Gurtel case, a cash-for-kickback scandal that saw the PP’s former treasurer, as well as 28 others previously linked to the party, sentenced to jail for 33 years for fraud and money-laundering, coupled with a €240,000 (£210,000) fine for the PP itself, left Mr Rajoy looking unexpectedly vulnerable.

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“Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends..” “It’s like a giant Ponzi scheme but where the victims are your children.”

UK’s “Bank of Mum & Dad” is Running Out of Liquidity (DQ)

Mortgages for 100% (or above) of the purchase price not only help fuel high-octane housing bubbles, they also make them a lot riskier when home prices decline, and when more and more borrowers end up with negative equity – where someone’s home is worth less than their debt. That, in turn, significantly raises the likelihood of borrowers defaulting on their loans. And that’s why these 100% mortgages are risky for banks. Today’s new breed of 100% mortgages has a twist in its tail: to provide the banks extra security, they are insisting on family members acting as guarantors for parts of the loans. In other words, if a borrower falls behind on repayments, a parent’s home can also be put at risk.

This kind of deal is becoming increasingly common in the UK, where property prices still remain close to their all-time high despite fears prompted by Brexit and the recent cooling of London’s property market. Underpaid and over-indebted, many young people cannot afford to put down even a 5% deposit on houses whose prices, after they’re adjusted for inflation, have almost doubled in the last 20 years. And a 10% or 15% down-payment is totally out of reach. Their only hope of getting onto the “property ladder” is to get a financial leg up from their parents.

So widespread is this phenomenon that in 2017 the so-called “Bank of Mum and Dad” became the ninth biggest mortgage lender in the UK shelling out some £6.5 billion in loans. Parents helped provide deposits for more than 298,000 mortgages last year — the equivalent of 26% of all transactions. “The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder,” said Nigel Wilson, chief executive of the financial service company Legal & General.

It is not driven purely by altruism. The UK’s multi-decade property boom, propelled by artificially low interest rates and supportive government policies, has provided a huge source of wealth for baby boomers. If the Bank of Mum and Dad didn’t lend this money to the new generation, demand for new mortgages would dry up and the UK’s multi-decade housing bubble would have begun to deflate some time ago. As a result, the houses that mum and dad own would lose much of their “value” and their respective net worth would plummet. “Mum & dad are lending money to their kids so their kids can afford to pay the prices demanded by mum & dad & their friends,” explained buyers agent Henry Pryor. “It’s like a giant Ponzi scheme but where the victims are your children.”

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A glimmer of hope.

Ecuador’s President Says Assange Can Stay In Embassy ‘With Conditions’ (G.)

Lenín Moreno, the president of Ecuador, has said Julian Assange’s asylum status in the country’s London embassy is not under threat – provided he complies with the conditions of his stay and avoids voicing his political opinions on Twitter. However, in an interview with Deutsche Welle on Wednesday, Moreno said his government would “take a decision” if Assange didn’t comply with the restrictions. “Let’s not forget the conditions of his asylum prevent him from speaking about politics or intervening in the politics of other countries. That’s why we cut his communication,” he said. Ecuador suspended Assange’s communication’s system in March.

Moreno’s statements come two weeks after an investigation by the Guardian and Focus Ecuador revealed the country had bankrolled a multimillion-dollar spy operation to protect and support Assange, employing an international security company and undercover agents to monitor his visitors, embassy staff and even the British police. Over more than five years, Ecuador put at least $5m (£3.7m) into a secret intelligence budget that protected him while he had visits from Nigel Farage, members of European nationalist groups and individuals linked to the Kremlin. Earlier this month, Moreno withdrew additional security assigned to the Ecuadorian embassy in London, where the WikiLeaks founder has remained for almost six years.

Moreno has previously described Assange’s situation as “a stone in his shoe” and repeatedly hinted that he wants to remove the Australian from the country’s London embassy. In an interview in Quito, the president said granting Assange Ecuadorian citizenship in December last year had not been his idea but that of the foreign minister, María Fernanda Espinosa. He had delegated all decisions related to the case to her, Moreno told Deutsche Welle.

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Nov 162017
 
 November 16, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , , ,  8 Responses »


Leonardo da Vinci Salvator Mundi 1513

 

Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)
Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)
Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)
No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)
China’s Outbound Investment Plunged 41% On Year In January To October (BBG)
Senior China Minister Says Some Officials Practice Sorcery (R.)
Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)
The Complete Idiot’s Guide To The Biggest Risks In China (ZH)
Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)
Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)
Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)
Why Japan Knocks Down Its Houses After 30 Years (G.)
Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)
Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)
Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)
Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

 

 

It doesn’t get much more damning than this. Nothing Monty Python about it.

Landmark Study Links Tory Austerity To 120,000 Deaths (Ind.)

The Conservatives have been accused of “economic murder” for austerity policies which a new study suggests have caused 120,000 deaths. The paper found that there were 45,000 more deaths in the first four years of Tory-led efficiencies than would have been expected if funding had stayed at pre-election levels. On this trajectory that could rise to nearly 200,000 excess deaths by the end of 2020, even with the extra funding that has been earmarked for public sector services this year. Real terms funding for health and social care fell under the Conservative-led Coalition Government in 2010, and the researchers conclude this “may have produced” the substantial increase in deaths.

The paper identified that mortality rates in the UK had declined steadily from 2001 to 2010, but this reversed sharply with the death rate growing again after austerity came in. From this reversal the authors identified that 45,368 extra deaths occurred between 2010 and 2014, than would have been expected, although it stops short of calling them “avoidable”. Based on those trends it predicted the next five years – from 2015 to 2020 – would account for 152,141 deaths – 100 a day – findings which one of the authors likened to “economic murder”. The Government began relaxing austerity measures this year announcing the end of its cap on public sector pay rises and announcing an extra £1.3bn for social care in the Spring Budget. Over three years the additional funding for social care is expected to reach £2bn, which Labour leader Jeremy Corbyn said was “patching up a small part of the damage” wrought by £4.6bn cuts.

[..] The papers’ senior author and a researcher at UCL, Dr Ben Maruthappu, said that while the paper “can’t prove cause and effect” it shows an association. And he added this trend is seen elsewhere. “When you look at Portugal and other countries that have gone through austerity measures, they have found that health care provision gets worse and health care outcomes get worse,” he told The Independent. One of his co-author’s, Professor Lawrence King of the Applied Health Research Unit at Cambridge University, said it showed the damage caused by austerity “It is now very clear that austerity does not promote growth or reduce deficits – it is bad economics, but good class politics,” he said. “This study shows it is also a public health disaster. It is not an exaggeration to call it economic murder.”

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After a report like that, yes. The Tories have taken things too far.

Jeremy Corbyn Will Inevitably Become UK Prime Minister – Varoufakis (BI)

Yanis Varoufakis, former finance minister of Greece and author of “Adults in the Room: My Battle with the European and American Deep Establishment,” explains that Jeremy Corbyn as Prime Minister may be a likely scenario and that this would be beneficial for the UK economy. The following is a transcript of the video. Isn’t it astonishing that after Jeremy Corbyn was being described as “the longest suicide note by the Labour Party” about a year ago, today there is an air of inevitability in a Corbyn-led government. I think it’s a delicious irony and I’m very excited by this transition from impossibility to inevitability. In the interests of full disclosure, I’m a friend of Jeremy Corbyn, a supporter, I’ve worked with his team and will continue to do so.

I believe that the re-orientation of British politics under Corbyn and in particular of the Labour Party is highly beneficial, not only to the large strata within British society that have been discarded in the last 20 to 30 years, but interestingly also for British business that produces real stuff as opposed to the City of London and various other service sectors that produce precarious jobs and nothing much of substance. British manufacturing has been left in the margins for far too long and the dearth of investment in fixed capital is something that this Conservative government has absolutely no interest in, or no concept of. A Labour, Corbyn-led government, might be what is necessary in order to create better circumstances both for labour and manufacturing capital in the United Kingdom.

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“Quite simply, people get hurt when the rich don’t pay their taxes.”

Why Care More About Benefit Scroungers Than Billions Lost To The Rich? (G.)

Will the Paradise Papers shift the public’s focus? The leaks alone are seemingly not enough. The 2016 British Social Attitudes survey was conducted just four months after the release of the Panama Papers. Even then, the British public remained more concerned about benefit claimants than tax avoiders. Fundamentally, the Paradise Papers are about numbers – vast sums of money disappearing offshore that could be spent on public services here in the UK. However, as the former chair of the UK Statistics Authority, Andrew Dilnot, has often pointed out, people are bad at dealing with numbers on this scale. Unless you are an economist or a statistician, numbers in the millions and billions are just not particularly meaningful.

The key is to link these numbers to their consequences. The money we lose because people like Lewis Hamilton don’t pay some VAT on their private jet means thousands more visits to food banks. The budget cuts leading to rising homelessness might not have been necessary if Apple had paid more tax. Fewer people might have killed themselves after a work-capability assessment if companies like Alphabet (Google) had not registered their offices in Bermuda, and the downward pressure on benefits payments was not so intense. The causal chains connecting these events are complex and often opaque, but that does not make their consequences any less real, especially for those who have felt the hard edge of austerity.

The Paradise Papers have dragged the murky world of offshore finance into the spotlight. However, calls for change may founder against the British public’s persistent focus on the perceived crimes of the poor. That is, unless we – as academics, politicians, journalists and others – can articulate how the decisions of the very rich contribute to the expulsion of the vulnerable from the protection of state-funded public services. Quite simply, people get hurt when the rich don’t pay their taxes.

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Oh, cut it out.

No Evidence Of Russian Interference In Brexit, PM May Admits In Parliament (RT)

Theresa May has rejected allegations that Russia interfered in the Brexit referendum. Speaking during Prime Minister’s Questions, she stated: “If they care to look at the speech on Monday, they will see that the examples I gave were not in the UK.” During a speech May gave at the Lord Mayor’s banquet, the British leader accused Russia of meddling in European elections, hacking attacks on western government institutions, and spreading fake news. During the customarily confrontational Prime Minister’s Questions, May said that, in her speech, she had indeed cited “Russian interference” occurring “in a number of countries in Europe.” However, she denied that this applied in any way to her own country.

Following the session, a spokesperson for Labour leader Jeremy Corbyn said that “I think we need to see more evidence about what’s being talked about. “In relation to Russia and tensions between NATO and Russia and western powers and Russia more generally, Jeremy has made clear on a number of occasions that we need to see an attempt through dialogue to ratchet down tensions with Russia.” May was responding to a question from Labour MP Mary Creagh, who referred to an assertion by Foreign Secretary Boris Johnson that he had seen no evidence of Russia interfering in the Brexit referendum. Johnson made the comment during an appearance before a Commons committee hearing on November 1. Upon prompting by a senior civil servant, Johnson replied “nyet,” and added in English that there was “not a sausage” of evidence.

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Once again: China needs its foreign reserves.

China’s Outbound Investment Plunged 41% On Year In January To October (BBG)

China’s non-financial outbound investment slumped to $86.3 billion in January to October, plunging 41% from a year earlier, as projects in some industries dried up. There were no new real estate, sports or entertainment deals for the period, the Commerce Ministry said in a statement Thursday. Most outbound investment was in leasing and business services, manufacturing, wholesale and retail sales and information technology services. “Irrational” outbound investment has been curbed further, the ministry said, repeating the language it has used this year as authorities push to halt capital outflows.

That’s reversing an unbroken streak of acceleration since at least 2010: Outbound investment soared 44.1% last year to $170.1 billion, about four times the 2009 level, Mofcom data show. “The combination of hardened capital controls and a crackdown on outbound M&A has dented China’s overseas investment,” said Tom Orlik, chief Asia economist at Bloomberg Economics in Beijing. “A short-term downturn was necessitated by the pressing need to stabilize the yuan. Sustained for too long, falling overseas investment would be tough to square with ambitions for greater international influence through the Belt and Road program.”

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In which sorcery is somehow the opposite of socialism.

Senior China Minister Says Some Officials Practice Sorcery (R.)

Some top Chinese officials are guilty of practicing sorcery and would rather believe in gurus and Western concepts of democracy than the Communist Party, a senior minister wrote on Thursday, warning of the danger they presented to its survival. China guarantees freedom of religion for major belief systems such as Buddhism, Christianity and Islam, but party members are meant to be atheists and are barred from what it calls superstitious practices, such as visits to soothsayers. Recent years have seen several cases of officials jailed as part of President Xi Jinping’s crackdown on corruption being accused of superstition, part of the party’s efforts to blacken their names.

Some senior officials in leadership positions had “fallen morally”, their beliefs straying from the correct path, wrote Chen Xi, the recently appointed head of the party’s powerful Organisation Department that oversees personnel decisions. “Some don’t believe in Marx and Lenin but believe in ghosts and gods; they don’t believe in ideals but believe in sorcery; they don’t respect the people but do respect masters,” he wrote in the official People’s Daily, referring to spiritual leaders or gurus. People in China, especially its leaders, have a long tradition of turning to soothsaying and geomancy to find answers to their problems in times of doubt, need and chaos. The practice has grown more risky amid Xi’s war on graft, in which dozens of senior officials have been imprisoned.

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Large scale arrests in the future?

Corruption in China Could Lead To Soviet-Style Collapse – Graft Buster (ToI)

China must step up its battle against corruption in order to safeguard against a Soviet-style collapse, the country’s second most senior graft buster said in an editorial on Wednesday. Yang Xiaodu, the deputy secretary of the Central Commission for Discipline Inspection, who was promoted to the ruling Communist Party’s 25-strong Politburo last month, said failure would risk the “red country changing colour”. In unusually direct and strongly worded criticism of previous administrations, Yang said “in a previous period”, corruption had been allowed to fester to such an extent that the party’s leadership had weakened, with supervision soft, and ideology apathetic. “It had developed to the point where if not rectified, the country could change colour,” Yang wrote in the official People’s Daily.

“The future fate of the party and the country’s people could follow the same old road to ruin as the Soviet Union and the Eastern Bloc.” President Xi Jinping, like many officials before him, is steeped in the party’s long-held belief that loosening control too quickly or even at all could lead to chaos and the break up of the country. The party regularly implores cadres to study the collapse of the Soviet Union in the early 1990s. Yang’s editorial is the latest salvo signalling that the intensity of Xi’s signature war on corruption would not wane despite the departure of Xi’s right-hand man, Wang Qishan, who was widely seen as China’s second most powerful politician before being replaced as anti-corruption chief in a leadership reshuffle last month. Wang’s replacement, Zhao Leji, wrote a similarly strongly worded editorial in the People’s Daily on Saturday.

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Not doing well. At all.

The Complete Idiot’s Guide To The Biggest Risks In China (ZH)

With both commodities and Chinese stocks suffering sharp overnight drops, it is hardly surprising that today trading desks have quietly been sending out boxes full of xanax their best under-25 clients (those veterans who have seen one, maybe even two 1% market crashes), along with reports explaining just what China is and why it matters to the new generation of, well, traders. One such analysis, clearly geared to the Ritalin generation complete with 3 second attention spans, comes from Deutsche Bank which in a few hundred words seeks to explain the key risks threatening the world’s most complex centrally-planned economy, and ground zero of the next financial crash. Which, one day after our summary take on why the Chinese commodity, economic and financial crash is only just starting (as those who traded overnight may have noticed), is probably a good place to reiterate some of the more salient points.

As Deutsche Bank’s Zhiwei Zhang writes in “Risks to watch in the next six months”, the key thing to keep in mind about China now that the 19th Party Congress is in the rear-view mirror, is that the government is likely to tolerate slower growth in 2018. Han Wenxiu, the deputy head of the Research Office of the State Council, said that GDP growth at 6.3% in 2018-2020 would be sufficient to achieve the Party’s 2020 growth target. And while this is a positive message for the long term, it indicates growth will likely slow in 2018. And, as DB warns, recent economic data suggest the economic cycle has indeed cooled down. For all those seeking key Chinese inflection points, here are the three big red flags involving China’s economy:

For the first time since Q4 2004, fixed asset investment (FAI) growth turned negative in real terms in Q3 this year.

Growth of property sales for the nation turned negative as well in October, the first time since 2015.

The property market boom in Tier 3 cities is also losing momentum.

We hope not to have lost by now all the Millennial traders who started reading this post. To those who persevered, here – in addition to the risks facing the economy – are the other two main risks facing China’s investors: (rising) inflation and (rising) interest rates.

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The most corrupt are the most powerful. Cue China.

Why the Anti-Corruption Drive in Saudi Arabia is Doomed to Fail (CP)

The problem in resource-rich states is that corruption is not marginal to political power, but central to acquiring it and keeping it. Corruption at the top is a form of patronage manipulated by those in charge, to create and reward a network of self-interested loyalists. It is the ruling family and its friends and allies who cherrypick what is profitable: this is as true of Saudi Arabia as it was true of Libya under Gaddafi, Iraq under Saddam Hussein and his successors, or Iraqi Kurdistan that was supposedly different from the rest of the country. Corruption is a nebulous concept when it comes to states with arbitrary rulers, who can decide – unrestrained by law or democratic process – what is legal and what is illegal. What typifies the politics of oil states is that everybody is trying to plug into the oil revenues in order to get their share of the cake.

This is true at the top, but the same is the case of the rest of the population, or at least a large and favoured section of it. The Iraqi government pays $4bn a month to about seven million state employees and pensioners. These may or may not do productive work, but it would be politically risky to fire them because they are the base support of the regime in power. Anti-corruption drives don’t work, because if they are at all serious, they soon begin to cut into the very roots of political power by touching the “untouchables”. At this point principled anti-corruption campaigners will find themselves in serious trouble and may have to flee the country, while the less-principled ones will become a feared weapon to be used against anybody whom the government wants to target.

A further consequence of the traditional anti-corruption drive is that it can paralyse government activities in general. This is because all officials, corrupt and incorrupt alike, know that they are vulnerable to investigation. “The safest course for them is to take no decision and sign no document which might be used or misused against them,” a frustrated American businessman told me in Baghdad some years ago. He added that it was only those so politically powerful that they did not have to fear legal sanctions who would take decisions – and such people were often the most corrupt of all.

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Wishful thinking?

Saudi Walks Back Escalation As Dramatic Moves Backfire (AP)

Saudi Arabia’s dramatic moves to counter Iran in the region appear to have backfired, significantly ratcheting up regional tensions and setting off a spiral of reactions and anger that seem to have caught the kingdom off guard. Now it’s trying to walk back its escalations in Lebanon and Yemen. On Monday, the kingdom announced that the Saudi-led coalition fighting Shiite rebels in Yemen would begin reopening airports and seaports in the Arab world’s poorest country, days after closing them over a rebel ballistic missile attack on Riyadh. The move came just hours after Lebanese Prime Minister Saad Hariri, who shocked the nation by announcing his resignation from the Saudi capital on Nov. 4, gave an interview in which he backed off his strident condemnation of the Lebanese militant Hezbollah, saying he would return to the country within days to seek a settlement with the Shiite militants, his rivals in his coalition government.

The two developments suggest that Saudi Arabia’s bullish young crown prince, Mohammed bin Salman, may be trying to pedal back from the abyss of a severe regional escalation. “This represents de-escalation by the Saudis,” said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center in Beirut. “The general trend is that the Saudis are going to back off and this is largely because of the unexpected extent of international pressure, and not least of all U.S. pressure.” Mohammed bin Salman, widely known by his initials, MBS, has garnered a reputation for being decisive, as well as impulsive. At just 32 years old and with little experience in government, he has risen to power in just three years to oversee all major aspects of politics, security and the economy in Saudi Arabia. As defense minister, he is in charge of the Saudi-led war in Yemen.

He also appears to have the support of President Donald Trump and his son-in-law, senior adviser Jared Kushner, who visited the Saudi capital earlier this month. Saudi partners in the Gulf and the Trump administration rushed to defend the kingdom publicly after a rebel Houthi missile was fired at the Saudi capital, Riyadh, from Yemen last week. A top U.S. military official also backed Saudi claims that the missile was manufactured by Iran. However, Saudi Arabia’s move to tighten an already devastating blockade on Yemen in response to the missile was roundly criticized by aid groups, humanitarian workers and the United Nations, which warned that the blockade could bring millions of people closer to “starvation and death.” Saudi Arabia’s decision to ease the blockade after just a week suggests it bowed to the international criticism, and did not want the bad publicity of even more images of emaciated Yemeni children and elderly people circulating online and in the media.

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“WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.”

Friendly Reminder That Jeff Bezos Is Trying To Take Over The Universe (CJ)

Jeff Bezos, currently the wealthiest human being on planet Earth, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a lucrative resurgence. This self-evident fact doesn’t receive enough attention. I will say it again for emphasis: Jeff Bezos, who has used his business prowess to become the wealthiest person in the world, did not purchase the Washington Post in 2013 because he was expecting newspapers to make a profitable comeback. That did not happen. What did happen is the world’s richest plutocrat realizing that he needed a mouthpiece to manufacture public support for the neoliberal corporatist establishment that he is building his empire upon. This is why WaPo ran sixteen smear pieces on Bernie Sanders in the span of sixteen hours at the hottest point in the Democratic presidential primary battle.

[..] Last year Silicon Valley venture capitalist Chamath Palihapitiya said that Amazon is “a multi-trillion-dollar monopoly hiding in plain sight.” In June Stacy Mitchell, co-director of the Institute for Local Self-Reliance, wrote that Amazon is trying to “control the underlying infrastructure of the economy.”\ Bezos continues to get cozier and cozier with the US power establishment as his empire metastasizes across human civilization. He kicked WikiLeaks off Amazon servers in 2010, he scored a 600 million dollar contract with the CIA in 2013, he joined a Pentagon advisory board in 2016, he hung out with Defense Secretary James Mattis in August, and he’s spent nearly ten million dollars this year lobbying the federal government, which is likely what led to an NDAA amendment gifting Amazon a $54 billion market it’s expected to dominate as a supplier to the Pentagon. Billion. With a ‘b’.

[..] I gave this story a jokey headline, but seriously, watch Jeff Bezos very closely. Your future is increasingly more likely to be imperiled by new money tech plutocrats like him than by old money plutocrats like Soros and the Rothschilds.

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Interesting. Earthquakes are no. 1 incentive.

Why Japan Knocks Down Its Houses After 30 Years (G.)

In the suburban neighbourhood of Midorigaoka, about an hour by train outside Kobe, Japan, all the houses were built by the same company in the same factory. Steel frames fitted out with panel walls and ceilings, these homes were clustered by the hundreds into what was once a brand new commuter town. But they weren’t built to last. Daiwa House, one of the biggest prefabricated housing manufacturers in Japan, built this town in the 60s during a postwar housing boom. It’s not unlike the suburban subdivisions of the western world, with porches, balconies and rooflines that shift and repeat up and down blocks of gently curving roads. Most of those houses built in the 60s are no longer standing, having long since been replaced by newer models, finished with fake brick ceramic siding in beiges, pinks and browns.

In the end, most of these prefabricated houses – and indeed most houses in Japan – have a lifespan of only about 30 years. Unlike in other countries, Japanese homes gradually depreciate over time, becoming completely valueless within 20 or 30 years. When someone moves out of a home or dies, the house, unlike the land it sits on, has no resale value and is typically demolished. This scrap-and-build approach is a quirk of the Japanese housing market that can be explained variously by low-quality construction to quickly meet demand after the second world war, repeated building code revisions to improve earthquake resilience and a cycle of poor maintenance due to the lack of any incentive to make homes marketable for resale. In Midorigaoka, even the newer homes built in the 80s and 90s are nearing the end of their expected lifespan.

Under normal circumstances, their days might be numbered. But down at the end of one block, there’s a sign things are changing. Scaffolding surrounds a vacant house on a corner and workers from Daiwa House are clanging away inside. They’re not demolishing the house but refurbishing it – reorganising the floor plan, knocking down walls, opening up the kitchen and enhancing the insulation. Rather than tear down the house so the next buyer can build something new, they’re rebuilding it from the inside and putting it back on the market. It’s a relatively rare commodity, but something that is increasingly common across Japan: a secondhand home.

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I’ve long predicted that Greece will be much less peaceful once Syriza loses power. But yeah, the whole country’s put up for sale, so foreigners are certain to take over.

Kyle Bass: Investors to Pour Billions into Greece after Political Change (GR)

Hedge fund manager, Kyle Bass, believes that Greece will come out of the crisis and investors will pour billions into its economy once the government changes, according to a CNBC report. The founder and chief investment officer of Hayman Capital Management; which manages an estimated $815 million in assets, is closely following the course of the Greek economy and political situation, and has invested in Greek bank stocks. Bass says that foreign investors are waiting on the sidelines for a political shift to take place in 2018. “My best guess is a snap election for prime minister will be called between April and September of next year and Prime Minister Alexis Tsipras will lose power. When that happens, there will be a massive move into the Greek stock market. Big money will flow in as investors feel more confident with a more moderate administration,” Bass said.

“It’s going to take Kyriakos Mitsotakis; president of New Democracy, the Greek conservative party, to be voted in as prime minister to reform the culture and rekindle investor confidence,” the investor said. “I have no doubt 15 billion euros in bank deposits will come back to Greek banks if he’s elected. The stock and bond markets will also jump following the election.” Bass says that global investors are waiting for the political change in order to invest in real estate, energy and tourism. So far, the hedge fund manager noted, Greece has proceeded with privatizations of its main port; regional airports; its railway system; the largest insurance company, and there are more important ones to be completed within the next two years. “There is so much potential in Greece,” Bass said, noting that investors are waiting for the right moment to enter, the CNBC report concludes.

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Europe just lets it get worse.

Lesvos Reaches Breaking Point, Mayor Declares General Strike (G.)

With reception centers on Lesvos bursting at the seams and dozens more migrants arriving daily, the island’s mayor, Spyros Galinos, on Tuesday declared a general strike for Monday in protest. Currently, some 1,500 people – including hundreds of small children – are stranded on the island living in tents, and fears are growing that winter may bring a new humanitarian crisis. In total, there are more than 8,000 migrants and refugees on Lesvos, a favored destination of traffickers bringing people over from neighboring Turkey. “Lesvos has a population of 32,000 residents and there are at the moment 8,300 migrants and refugees,” Galinos told Kathimerini. Moreover, local police union members held a protest over deteriorating working conditions.

“The situation on Lesvos has fueled insecurity among citizens. The police force is dealing exclusively with the migrant issue,” the union chief Dimitris Alexiou said. “We are not expendables,” he added. And with flows to the eastern Aegean islands from Turkey showing no signs of letting up, locals and migrants have reached the end of their tether. Since the beginning of November, 1,603 people have arrived on the islands. In September, 6,000 people arrived from Turkey, the same number as in October. On Monday, another 101 migrants landed on eastern Aegean islands, while more than 400 arrived over the weekend. The situation in the Moria camp on Lesvos is a case in point.

“Conditions at Moria have reached breaking point as the facility is three times over capacity,” said Michael Bakas, coordinator of the northern Aegean branch of the Ecologist Greens, who escorted visiting Group of the Greens MEP and vice chairwoman of the European Parliament’s Subcommittee on Human Rights Barbara Lochbihler. Bakas said about 1,000 children are currently stranded at the camp. The issue will be discussed at the EU assembly on Wednesday.

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Monsanto must now have as many lawyers as scientists on its payroll. Time to say enough is enough.

Monsanto, US Farm Groups Sue California Over Glyphosate Cancer Warnings (R.)

Monsanto and U.S. farm groups sued California on Wednesday to stop the state from requiring cancer warnings on products containing the widely used weed killer glyphosate, which the company sells to farmers to apply to its genetically engineered crops. The government of the most populous U.S. state added glyphosate, the main ingredient in Monsanto’s herbicide Roundup, to its list of cancer-causing chemicals in July and will require that products containing glyphosate carry warnings by July 2018. California acted after the World Health Organization’s International Agency for Research on Cancer (IARC) concluded in 2015 that glyphosate was “probably carcinogenic”. For more than 40 years, farmers have applied glyphosate to crops, most recently as they have cultivated genetically modified corn and soybeans.

Roundup and Monsanto’s glyphosate-resistant seeds would be less attractive to customers if California requires warnings on products containing the chemical. In the lawsuit, filed in federal court in California, Monsanto and groups representing corn, soy and wheat farmers reject that glyphosate causes cancer. They say the state’s requirement for warnings would force sellers of products containing the chemical to spread false information.“Such warnings would equate to compelled false speech, directly violate the First Amendment, and generate unwarranted public concern and confusion,” Scott Partridge, Monsanto’s vice president of global strategy, said in a statement.

The controversy is an additional headache for Monsanto as it faces a crisis around a new version of an herbicide based on another chemical known as dicamba that was linked to widespread U.S. crop damage this summer. The company, which is being acquired by Bayer AG for $63.5 billion, developed the product as a replacement for glyphosate following an increase of weeds resistant to the chemical. Monsanto has already suffered damage to its investment of hundreds of millions of dollars in glyphosate products since California added the chemical to its list of products known to cause cancer, according to the lawsuit.

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Weep.

Plastics Found In Stomachs Of Deepest Sea Creatures (G.)

Animals from the deepest places on Earth have been found with plastic in their stomachs, confirming fears that manmade fibres have contaminated the most remote places on the planet. The study, led by academics at Newcastle University, found animals from trenches across the Pacific Ocean were contaminated with fibres that probably originated from plastic bottles, packaging and synthetic clothes. Dr Alan Jamieson, who led the study, said the findings were startling and proved that nowhere on the planet was free from plastics pollution. “There is now no doubt that plastics pollution is so pervasive that nowhere – no matter how remote – is immune,” he said. Evidence of the scale of plastic pollution has been growing in recent months. Earlier this year scientists found plastic in 83% of global tapwater samples, while other studies have found plastic in rock salt and fish.

Humans have produced an estimated 8.3bn tonnes of plastic since the 1950s and scientists said it risked near permanent contamination of the planet. Jamieson said underlined the need for swift and meaningful action. “These observations are the deepest possible record of microplastic occurrence and ingestion, indicating it is highly likely there are no marine ecosystems left that are not impacted by anthropogenic debris.” He said it was “a very worrying find.” “Isolating plastic fibres from inside animals from nearly 11 kilometres deep (seven miles) just shows the extent of the problem. Also, the number of areas we found this in, and the thousands of kilometre distances involved shows it is not just an isolated case, this is global.”

[..] The team examined 90 individual animals and found ingestion of plastic ranged from 50% in the New Hebrides Trench to 100% at the bottom of the Mariana Trench. The fragments identified include semi-synthetic cellulosic fibres, such as Rayon, Lyocell and Ramie, which are all microfibres used in products such as textiles, to plastic fibres that are likely to come from plastic bottles, fishing equipment or everyday packaging. Jamieson said deep-sea organisms are dependent on food “raining down from the surface which in turn brings any adverse components, such as plastic and pollutants with it.” “The deep sea is not only the ultimate sink for any material that descends from the surface, but it is also inhabited by organisms well adapted to a low food environment and these will often eat just about anything.”


This microscopic arrow worm has eaten a blue plastic fibre that is blocking the passage of food along its gut. Photograph: Richard Kirby/Courtesy of Orb Media

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Nov 112017
 
 November 11, 2017  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »


Henri Cartier Bresson Greenfield, Indiana 1960

 

How Economics Failed the Economy (Haque)
How Did The News Go ‘Fake’? When The Media Went Social (G.)
Global Economy: Communication Breakdown? (R.)
Financial Markets Are Still Blowing Off the Fed (WS)
Is There Any Way Out Of The ECB’s Trap? (Lacalle)
How to Break Out of Our Long National Tax Nightmare (BW)
Tesla’s Junk Bonds Trading Under Water, Could Spell Trouble For Elon Musk (MW)
China Faces Historic Corruption Battle, New Graft Buster Says (R.)
Putin, Trump Agree To Fighting ISIS In Syria, Kremlin Says (R.)
Uber Loses Appeal In UK Employment Rights Case (G.)
Greece Prepares Online Platform for ‘Airbnb Tax’ (GR)
Dijsselbloem: We Saved the Greek Banks but Overlooked Taxpayers (GR)
FOIA Litigation Is Shedding Light On The Case Of Julian Assange (Maurizi)

 

 

Absolute must read.

“Economics failed the economy by telling us that everything that could be traded should be traded, since trade is always beneficial to humankind.”

“..the economic growth that the US has chased so desperately, so furiously, never actually existed at all.”

How Economics Failed the Economy (Haque)

When, in the 1930s, the great economist Simon Kuznets created GDP, he deliberately left two industries out of this then novel, revolutionary idea of a national income : finance and advertising. Don’t worry, this essay isn t going to be a jeremiad against them, that would be too easy, and too shallow, but that is where the story of how modern economics failed the economy and how to understand how to undo it should begin. Kuznets logic was simple, and it was not mere opinion, but analytical fact: finance and advertising don t create new value, they only allocate, or distribute existing value in the same way that a loan to buy a television isn’t the television, or an ad for healthcare isn’t healthcare. They are only means to goods, not goods themselves. Now we come to two tragedies of history.

What happened next is that Congress laughed, as Congresses do, ignored Kuznets, and included advertising and finance anyways for political reasons -after all, bigger, to the politicians mind, has always been better, and therefore, a bigger national income must have been better. Right? Let’s think about it. Today, something very curious has taken place. If we do what Kuznets originally suggested, and subtract finance and advertising from GDP, what does that picture -a picture of the economy as it actually is reveal? Well, since the lion’s share of growth, more than 50% every year, comes from finance and advertising -whether via Facebook or Google or Wall St and hedge funds and so on- we would immediately see that the economic growth that the US has chased so desperately, so furiously, never actually existed at all.

Growth itself has only been an illusion, a trick of numbers, generated by including what should have been left out in the first place. If we subtracted allocative industries from GDP, we’d see that economic growth is in fact below population growth, and has been for a very long time now, probably since the 1980s and in that way, the US economy has been stagnant, which is (surprise) what everyday life feels like. Feels like. Economic indicators do not anymore tell us a realistic, worthwhile, and accurate story about the truth of the economy, and they never did -only, for a while, the trick convinced us that reality wasn’t. Today, that trick is over, and economies grow , but people’s lives, their well-being, incomes, and wealth, do not, and that, of course, is why extremism is sweeping the globe. Perhaps now you begin to see why the two have grown divorced from one another: economics failed the economy.

Now let us go one step, then two steps, further. Finance and advertising are no longer merely allocative industries today. They are now extractive industries. That is, they internalize value from society, and shift costs onto society, all the while, creating no value themselves. The story is easiest to understand via Facebook’s example: it makes its users sadder, lonelier, and unhappier, and also corrodes democracy in spectacular and catastrophic ways. There is not a single upside of any kind that is discernible -and yet, all the above is counted as a benefit, not a cost, in national income, so the economy can thus grow, even while a society of miserable people are being manipulated by foreign actors into destroying their own democracy. Pretty neat, huh?

It was *because* finance and advertising were counted as creative, productive, when they were only allocative, distributive that they soon became extractive. After all, if we had said from the beginning that these industries do not count, perhaps they would not have needed to maximize profits (or for VCs to pour money into them, and so on) endlessly to count more. But we didn’t. And so soon, they had no choice but to become extractive: chasing more and more profits, to juice up the illusion of growth, and soon enough, these industries began to eat the economy whole, because of course, as Kuznets observed, they allocate everything else in the economy, and therefore, they control it.

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Discuss. Do social media make you depressed?

How Did The News Go ‘Fake’? When The Media Went Social (G.)

The Collins Dictionary word of the year for 2017 is, disappointingly, “fake news”. We say disappointingly, because the ubiquity of that phrase among journalists, academics and policymakers is partly why the debate around this issue is so simplistic. The phrase is grossly inadequate to explain the nature and scale of the problem. (Were those Russian ads displayed at the congressional hearings last week news, for example?) But what’s more troubling, and the reason that we simply cannot use the phrase any more, is that it is being used by politicians around the world as a weapon against the fourth estate and an excuse to censor free speech. Definitions matter. Take, for example, the question of why this type of content is created in the first place.

There are four distinct motivations for why people do this: political, financial, psychological (for personal satisfaction) and social (to reinforce our belonging to communities or “tribes”). If we’re serious about tackling mis- and disinformation, we need to address these motivations separately. And we think it’s time to give much more serious consideration to the social element. Social media force us to live our lives in public, positioned centre-stage in our very own daily performances. Erving Goffman, the American sociologist, articulated the idea of “life as theatre” in his 1956 book The Presentation of Self in Everyday Life, and while the book was published more than half a century ago, the concept is even more relevant today. It is increasingly difficult to live a private life, in terms not just of keeping our personal data away from governments or corporations, but also of keeping our movements, interests and, most worryingly, information consumption habits from the wider world.

The social networks are engineered so that we are constantly assessing others – and being assessed ourselves. In fact our “selves” are scattered across different platforms, and our decisions, which are public or semi-public performances, are driven by our desire to make a good impression on our audiences, imagined and actual. We grudgingly accept these public performances when it comes to our travels, shopping, dating, and dining. We know the deal. The online tools that we use are free in return for us giving up our data, and we understand that they need us to publicly share our lifestyle decisions to encourage people in our network to join, connect and purchase.

But, critically, the same forces have impacted the way we consume news and information. Before our media became “social”, only our closest family or friends knew what we read or watched, and if we wanted to keep our guilty pleasures secret, we could. Now, for those of us who consume news via the social networks, what we “like” and what we follow is visible to many – or, in Twitter’s case, to all, unless we are in that small minority of users who protect their tweets. Consumption of the news has become a performance that can’t be solely about seeking information or even entertainment. What we choose to “like” or follow is part of our identity, an indication of our social class and status, and most frequently our political persuasion.

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The Fed is not the biggest player anymore.

Global Economy: Communication Breakdown? (R.)

A flattening of government bond yield curves that may presage an economic downturn could prompt verbal interventions in the coming week by central bankers still struggling to hit this cycle’s inflation targets. ECB chief Mario Draghi, U.S. Fed Chair Janet Yellen, BOJ Governor Haruhiko Kuroda and BOE head Mark Carney will form an all-star panel on Tuesday at an ECB-hosted conference in Frankfurt. The subject? “Challenges and opportunities of central bank communication.” Curve-flattening on both sides of the Atlantic, but more markedly in the United States, suggests investors have doubts over the future path of inflation and may be starting to price in a downturn just as the global economy picks up speed.

Since the Fed began raising rates in 2015, the difference between long- and short-term U.S. yields has shrunk to levels not seen since before the 2008 financial crisis, reaching 67 basis points – its flattest in a decade – in the past week. That partly reflects uncertainty about the passage of a Republican-sponsored bill to cut U.S. taxes, which has hauled down longer-term projections of inflation while expectations for upcoming rate increases push short-term yields higher. With curve-flattening typically signaling a muted outlook for both growth and inflation, the trend suggests investors see a risk that the Fed’s current monetary tightening cycle will start to slow the world’s biggest economy. A flatter curve, which makes lending less profitable, also poses a risk to the banking sector, nursed back to fragile health by central banks after it nearly collapsed a decade ago. But with crisis-era policies still largely in place, how would central banks cushion the impact of a downturn?

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Because of Draghi and Kuroda.

Financial Markets Are Still Blowing Off the Fed (WS)

There has been a lot of hand-wringing about junk bonds this week, that they have gotten clobbered, that losses have been taken, that this is a predictor of where stocks are headed, etc., etc., because after a steamy rally in junk-bond prices from the February 2016 low, there has now been a sell-off. When bond prices fall, bond yields rise by definition. And the average yield of BB-rated junk bonds – the upper end of the junk-bond spectrum – did this:

No one likes to lose money, and junk bonds did lose money this week, an astounding event, after all the easy money that had been made since early February 2016. But how far have yields really spiked? The chart below shows the same BofA Merrill Lynch US High Yield BB Effective Yield index, but it puts that “spike” into a three-year context:

For further context, the BB yield spiked – a true spike – to over 16% during the Financial Crisis, as bond prices crashed and as credit froze up. Currently, at 4.36%, the average BB yield is off record lows, but it’s still low, and junk bond prices are still enormously inflated, given the inherent credit risks, and have a lot further to fall before any hand-wringing is appropriate. The low BB yield means that risky companies with a junk credit rating can still borrow money at near record low costs in a world awash in global liquidity that is trying to find a place to go. This shows that “financial conditions” are very easy. The market has now four Fed rate hikes under its belt and the QE unwind has commenced. Another rake hike is likely in December. Tightening is under way. By “tightening” its monetary policy, the Fed attempts to tighten financial conditions in the markets. That’s its goal.

But that hasn’t happened yet. While short-term yields have responded to the rate hikes, longer-term yields are now lower than they’d been at the time of the rate hike in December 2016. Stocks have rocketed higher. Volatility indices are near record lows. And various yield spreads have narrowed sharply – for example, the difference between the 10-year Treasury yield and the 2-year Treasury yield is currently just 0.73 percentage points. In other words, raising money is easy and cheap. And “financial stress” in the markets, as measured by the St. Louis Fed’s Financial Stress Index, has just hit a record low. In the chart below, the red line (= zero) represents “normal financial market conditions.” Values below the red line indicate below-average financial market stress. Values above the red line indicate higher than average financial stress. The latest reading of the index dropped to -1.60, by a hair below the prior record low in 2014:

In other words, financial conditions have never been easier despite the current series of rate hikes, the Fed’s “balance-sheet normalization, and the hand-wringing about junk bonds this week. The chart below shows the Financial Stress Index going back to 2014. In that time frame, all values are below zero. Financial stress in the markets was heading back to normal in late 2015 and early 2016, as a small sector of the total markets – energy junk-bonds – were getting crushed and as the S&P 500 index experienced a downdraft. But in early February 2016, everything turned around:

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Europe’s problem is huge: “..the ECB repurchase program exceeds net sovereign bond issuances in the eurozone by more than seven times. Throughout the US QE (quantitative expansion) of the Federal Reserve, it never reached 100% of net issuances.” Thing is, it’s Draghi who keeps the global economy going.

Is There Any Way Out Of The ECB’s Trap? (Lacalle)

The ECB faces the Devil’s Alternative that Frederick Forsyth mentioned in one of his books. All options are potentially risky. Mario Draghi knows that maintaining the so-called stimuli involves more risks than benefits, but also knows that eliminating them could make the eurozone deck of cards collapse. Despite the massive injection of liquidity, he knows that he can not disguise political risks such as the secessionist coup in Catalonia. The Ibex reflects this, making it clear that the European Central Bank does not print prosperity, it only puts a floor to valuations. The ECB wants a weak euro. But it is a game of juggling to pretend a weak euro and at the same time a strong economy. The EU countries export mostly to themselves. Member countries sell more than two-thirds of their goods and services to other countries in the eurozone.

Therefore, the more they export and their economies recover, the stronger the euro, and with it, the risk of losing competitiveness. The ECB has tried to break the euro strength with dovish messages, but it has not worked until political risk reappeared. With the German elections and the prospect of a weak coalition, the results of the Austrian elections and the situation in Spain, market operators have realized – at last – that the mirage of “this time is different “in the European Union was simply that, a mirage. A weak euro has not helped the EU to export more abroad. Non-EU exports from the member countries have been stagnant since the monetary stimulus program was launched, even though the euro is much weaker than its basket of currencies compared to when the stimulus program began. The Central Bank Trap. This shows that export growth is not achieved by artificial subsidies such as a devaluation, but from added value, something that the EU has stopped looking for.

Escape From The Central Bank Trap explains that the ECB has got itself in a problem that is not easy to solve. The first evidence is that it should have finished its stimuli months ago according to its own plan, but is unable to do it. The second is that, with more than a trillion euros of excessive liquidity, the ECB keeps a figure of repurchases that were clearly unnecessary and that have resulted in the figure of excess liquidity being multiplied by more than ten. The third is that perverse incentives have taken over the European economic policy. Risks are relevant. This week I had the opportunity to speak at the Federal Reserve Bank of Houston and I explained that the ECB repurchase program exceeds net sovereign bond issuances in the eurozone by more than seven times. Throughout the US QE (quantitative expansion) of the Federal Reserve, it never reached 100% of net issuances.

Now that the ECB “reduces” these repurchases to 30 billion euros per month, it will continue to be more than 100% of net issuances. What does that mean? That the US always maintained a healthy secondary market alive, which guaranteed that there would not be huge risks of collapse when tapering started, because the Federal Reserve bought less than what was issued, paying attention to the market accepting the valuations of bonds and financial assets. By extending the repurchase program, the ECB admits that it does not know if there is a secondary market that would buy European government bonds at current yields. Ask yourself a question. Would you buy bonds from a heavily indebted state that has stopped its reform impulse with a 10-year yield of less than 2%, if the ECB did not buy them back? Exactly. No.

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What’s needed is a whole overthrow of taxation as we know it. The Paradise Papers point to where the changes should be.

How to Break Out of Our Long National Tax Nightmare (BW)

President Donald Trump wanted to call it the Cut Cut Cut Act. Congressional Republicans settled on the less catchy and no more descriptive Tax Cuts and Jobs Act. What the legislation that began making its way through the U.S. House of Representatives in early November actually would do is sharply reduce taxes for business while rearranging the personal income tax with a mix of cuts and increases. House Speaker Paul Ryan called the bill “a game changer for our country.” The president said it was “the rocket fuel our economy needs to soar higher than ever before.” That’s a lot to expect from some changes in the tax code. But then, here in the U.S. we’ve come to expect big things of our income taxes. On the right, cutting them has been portrayed for decades as a near-magical growth elixir. On the left, raising or rearranging them is seen as essential to making society fairer.

And across the political spectrum, economic and social policies have come to rely on carving credits, deductions, and other exceptions out of the tax code to favor this or that behavior. It can sometimes feel, in fact, as if “we have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government.” That was the lament of President George W. Bush’s Advisory Panel on Federal Tax Reform in November 2005. But this bipartisan group of worthies couldn’t agree on how to raise those revenues either, instead offering two plans with differing priorities. Both were mostly ignored by Congress at the time, though some of the recommendations—such as shrinking the tax deductions for mortgage interest and state and local taxes—have found their way into this year’s bill. Overall, though, it appears that the legislation will only make it harder to raise revenue to fund government.

The House and Senate have passed budget resolutions clearing the way for $1.5 trillion in revenue losses over the next decade from the tax changes. That’s $150 billion a year to add to a federal deficit that totaled a sinister-sounding $666 billion, 3.5% of GDP, in the just-ended fiscal year. All of which is a longer way of saying that we’ll almost certainly be back at this once again in the all-too-foreseeable future, trying to figure out a better way to fund the government. Since 1981, the year of President Ronald Reagan’s big tax cut, Congress has passed and presidents have signed 55 bills that the Urban-Brookings Tax Policy Center counts as “major” tax legislation. During the prior 36 years there had been just 18. [..] Ominously, most previous U.S. tax eras ended with major wars that required big increases in government revenue. Let’s hope it doesn’t take that to break us out of the cut-reform-increase-repeat loop we’re currently trapped in.

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This will make the next debt round a lot harder, and more expensive.

Tesla’s Junk Bonds Trading Under Water, Could Spell Trouble For Elon Musk (MW)

Tesla’s first-ever pure corporate bonds are trading under water, boding ill for the Silicon Valley car maker’s next attempt to tap capital markets. Tesla sold $1.8 billion in the senior notes in August at a yield of 5.300%, at the height of excitement about the Model 3 and expectations the sedan’s production ramp would run as smoothly as Chief Executive Elon Musk had predicted. That same month, Tesla shares rose 10% to mark their last monthly gain this year so far. The stock lost 4.2% in September and 2.8% in October. The stock is down 9% so far in November, on the heels of a quarterly miss earlier in the month and news that the company has further pushed out its Model 3 production targets. “Third-quarter results put some pressure on the cash flow needs,” said Efraim Levy, an analyst with CFRA Research.

The wider-than-expected quarterly loss and production delays “makes it harder for them to get a sweeter deal than they had in the past,” on capital raising, be it when selling bonds or equity, he said. The 5.300% notes, which mature in 2025, were trading at 94 cents on the dollar on Friday to yield 6.287%, according to trading platform MarketAxess. On a spread basis, they were trading at 393 basis points above comparable Treasurys. The bonds fell under par within a week of issuance, but were holding above 97 cents for much of October. Wall Street has long seemed to accept that Tesla’s high capital expenses and negative free cash flow will be the reality for the company at least in the short term.

But the weak performance of the bonds may be a sign that bond investors, at least, are starting to disbelieve Tesla’s growth story and will be looking for higher premiums to take on higher risk, said Trip Miller, a managing partner at hedge fund, Gullane Capital LLC. That higher cost of borrowing will have its own negative implications, he said. “Maybe the dam is starting to break for Tesla,” Miller said. Gullane does not have a position in Tesla because “their balance sheet is very, very troublesome for us,” he said.

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Everyone’s fighting corruption these days. Time for us to start doing the same?

China Faces Historic Corruption Battle, New Graft Buster Says (R.)

China must win its battle against corruption or face being erased by history, its new top graft buster said in an editorial on Saturday, underscoring the ruling Communist party’s focus on eliminating corrupt behaviour. Zhao Leji, appointed to the new seven-member politburo standing committee last month and tasked to lead president Xi Jinping’s signature war on corruption, wrote in the state-run People’s Daily that failure would lead to the party’s downfall. “If our control of the party is not strong and party governance is not strict, then the party won’t be able to avoid being erased by history and the historic task the party carries will not be able to be fulfilled,” Zhao wrote. Xi, like others before him, has warned corruption is so serious it could lead to the end of the party’s grip on power.

The president’s corruption fight has ensnared more than 1.3 million officials. At last month’s five-yearly party congress he said it would continue to target both “tigers” and “flies“, a reference to elite officials and ordinary bureaucrats. Zhao, formerly a low-profile official, replaced Wang Qishan, whose sweeping anti-graft campaign had made him China’s second most-powerful politician. “The facts tell us and warn us that the party’s position as the top political leader and power is the foundation of our political stability, economic development, national unity and social stability,” Zhao wrote. Zhao leads the central commission for discipline inspection, having previously been in charge of the party’s powerful organisation department, which is in charge of personnel decisions. He added that there would be no tolerance of people who “just do what they want to do” and ignore orders or carry on with banned behaviours such as trying to get around policy decisions.

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It’s crazy these people are kept from talking.

Putin, Trump Agree To Fighting ISIS In Syria, Kremlin Says (R.)

Russian President Vladimir Putin and U.S. President Donald Trump agreed a joint statement on Syria on Saturday that said they would continue joint efforts in fighting Islamic State until it is defeated, the Kremlin said. The White House did not immediately respond to questions about the Kremlin announcement or the conversation the Kremlin said took place on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in the Vietnamese resort of Danang. The Kremlin said the statement on Syria was coordinated by Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State Rex Tillerson especially for the meeting in Danang. Putin and Trump confirmed their commitment to Syria’s sovereignty, independence and territorial integrity and called on all parties to the Syrian conflict to take an active part in the Geneva political process, it said.

Moscow and Washington agree there is no military solution to the Syrian conflict, according to the text of the joint statement published on the Kremlin’s website. Television pictures from Danang showed Putin and Trump chatting – apparently amicably – as they walked to the position where the traditional APEC summit photo was being taken at a viewpoint looking over the South China Sea. Earlier pictures from the meeting show Trump walking up to Putin as he sits at the summit table and patting him on the back. The two lean in to speak to each other and clasp each other briefly as they exchange a few words. Although the White House had said no official meeting was planned, the two also shook hands at a dinner on Friday evening. Trump has shown little appetite for holding talks with Putin unless there is some sense that progress could be made on festering issues such as Syria, Ukraine and North Korea.

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“Companies are hiding behind technology, bogusly classifying people as self-employed so they can get away from paying minimum wage.”

Uber Loses Appeal In UK Employment Rights Case (G.)

The ride-hailing firm Uber has lost its appeal against a ruling that its drivers should be classed as workers with minimum-wage rights, in a case that could have major ramifications for labour rights in the growing gig economy. The US company, which claims that drivers are self-employed, said it would launch a further appeal against the Employment Appeal Tribunal decision, meaning the case could end up in thesupreme court next year. Drivers James Farrar and Yaseen Aslam won an employment tribunal case last year after arguing they should be classified as workers, citing Uber’s control over their working conditions. Uber challenged the ruling at the tribunal in central London, warning that it could deprive riders of the “personal flexibility they value”. It claims that the majority of its drivers prefer their existing employment status.

The Independent Workers’ Union of Great Britain (IWGB), which backed the appeal, said drivers will still be able to enjoy the freedoms of self-employment – such as flexibility in choosing shifts – even if they have worker status. The union said the decision showed companies in the gig economy – which involves people on flexible working patterns with irregular shifts and minimal employment rights – have been choosing to “deprive workers of their rights”. Farrar said: “It is time for the mayor of London, Transport for London and the transport secretary to step up and use their leverage to defend worker rights rather than turn a blind eye to sweatshop conditions.” “If Uber are successful in having this business model, obliterating industrial relations as we know them in the UK, then I can guarantee you on every high street, in retail, fast food, any industry you like, the same thing will go on.”

Farrar said he was willing to fight the case all the way to the supreme court if necessary but called on Uber’s new chief executive, Dara Khosrowshahi, to intervene instead. “We’ve asked to meet him when he came to London and Uber declined to do that, which tells you everything.” Aslam said: “Today is a good day for workers, we made history. The judge confirmed that Uber is unlawfully denying our rights.” “It’s about making sure workers across the UK are protected. Companies are hiding behind technology, bogusly classifying people as self-employed so they can get away from paying minimum wage. That can’t be allowed to happen.”

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Good.

Greece Prepares Online Platform for ‘Airbnb Tax’ (GR)

Greece is cracking down on undeclared income of owners leasing residential lodgings on a short-term basis. Tax authorities are creating an online platform where Airbnb lodged properties should be declared, or face a hefty fine. According to a report in Naftemporiki, registration will be mandatory and it will provide property owners with a certification number, which should be declared on any digital platform, website and social media where it is advertised – including the Airbnb website. The platform will demand the declaration of the property, the names of the renters and the duration of the lease, or otherwise face a fine of up to €5,000. Naftemporiki says that income from short-term residential leasing will be taxed based on income.

Specifically, for a taxpayer with a yearly income of up to 12,000 euros, the tax rate for income derived from short-term residential leasing will reach 15%; 35% for a taxpayer with between 12,000 to 35,000 euros in annual income. Above an annual income of 45,000 euros, a taxpayer’s income from short-term residential leasing will reach the astronomical rate of 45%, i.e. nearly one in two euros goes to the state. Tax authorities aim to collect revenue from people who put their property for lease on Airbnb, as many crisis-hit Greeks try to make ends meet by renting their homes to foreign visitors. It is estimated that three million tourists will be hosted in Greek homes in 2017.

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He’s lying. They didn’t act to save the Greek banks, but the German and French ones. And he knows it.

Dijsselbloem: We Saved the Greek Banks but Overlooked Taxpayers (GR)

Outgoing Eurogroup chief Jeroen Dijsselbloem acknowledged on Thursday that Greece’s creditors put too much emphasis on saving the banks at the expense of ordinary taxpayers. In an exchange of views on Greece in the European Parliament’s Employment and Social Affairs Committee, Dijsselbloem was asked if he agrees with the view that Greece’s first bailout programme was designed to support the banks. Dijsselbloem noted that “banks were the biggest problem in all countries,” at the start of the crisis. “We had a banking crisis, a fiscal crisis and we spent a lot of the tax-payers’ money – in the wrong way, in my opinion – to save the banks so that the people criticizing us and saying that everything was being done for the benefit of the banks were to some extent right,” he said.

“This was the reason why we introduced the banking union and the introduction of higher standards, better supervision and a reform and rescue framework when banks have losses…Precisely so that we don’t find ourselves in that situation again,” Dijsselbloem added. Dijsselbloem also claimed that the labour market reforms adopted by Greece had brought “clear improvements” that were reflected in the latest unemployment figures in the country. Referring to the programme as a whole, the outgoing Eurogroup president said the economic situation in Greece had improved as a result of the reforms and stressed the need to conclude the third review on time.

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This story gets darker fast. The UK deleted a lot of documents relvant to the Assange accusations AND told the Swedes not to talk to him in London.

FOIA Litigation Is Shedding Light On The Case Of Julian Assange (Maurizi)

The siege by Scotland Yard agents around the red brick building in Knightsbridge has been gone for two years now. And with Sweden dropping the rape investigation last May, even the European arrest warrant hanging over Julian Assange’s head like the sword of Damocles has gone. Many expected the founder of WikiLeaks to leave the Ecuadorian Embassy in London, where he has been confined for over five years, after spending one and a half years under house arrest. But Assange hasn’t dared leave the Embassy due to concern he would be arrested, extradited to the US and charged for publishing WikiLeaks’ secret documents.

Julian Assange’s situation is unique. Like him and his work or not, he is the only western publisher confined to a tiny embassy, without access to even the one hour a day outdoors maximum security prisoners usually receive. He is being arbitrarily detained, according to a decision by the UN Working Group on Arbitrary Detentions in February 2016, a decision which has completely faded into oblivion. December 7th will mark seven years since he lost his freedom, yet as far as we know, in the course of these last 7 years no media has tried to access the full file on Julian Assange.

That is why next Monday, La Repubblica will appear before a London Tribunal to defend the press’ right to access the documents regarding his case, after spending the last two years attempting Freedom of Information requests (FOI) without success. It is entirely possible, however, that we will never be able to access many of these documents, as last week London authorities informed us that “all the data associated with Paul Close’s account was deleted when he retired and cannot be recovered”. A questionable choice indeed: Close is the lawyer who supported the Swedish prosecutors in the Swedish investigation on Julian Assange from the beginning. What was the rationale for deleting historical records pertaining to a controversial and still ongoing case?

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Nov 082017
 
 November 8, 2017  Posted by at 1:47 pm Finance Tagged with: , , , , , , , , , , ,  12 Responses »


Salvador Dalí The oecumenial council 1960

 

Trying to figure out what on earth is happening in the Middle East appears to have gotten a lot harder. Perhaps (because) it’s become more dangerous too. There are so many players, and connections between players, involved now that even making one of those schematic representations would never get it right. Too many unknown unknowns.

A short and incomplete list of the actors: Sunni, Shiite, Saudi Arabia, US, Russia, Turkey, ISIS, Syria, Iran, Iraq, Libya, Kurds, Lebanon, Hezbollah, Hamas, Qatar, Israel, United Arab Emirates (UAE), Houthis, perhaps even Chechnya, Afghanistan, Pakistan. I know I know, add your favorites. So what have we got, or what do we know we’ve got? We seem to have the US lining up with Israel, the UAE and Saudi Arabia against Russia, Iran, Syria, Hezbollah. Broadly. But that’s just a -pun intended- crude start.

Putin has been getting closer to the Saudis because of the OPEC production cuts, trying to jack up the price of oil. Which ironically has now been achieved on the heels of the arrests of 11 princes and scores of other wealthy and powerful in the kingdom. But Putin also recently signed a $30 billion oil -infrastructure- deal with Iran. And he’s been cuddling up to Israel as well.

In fact, Putin may well be the most powerful force in the Middle East today. Well played?! He prevented the demise of Assad in Syria, which however you look at it at least saved the country from becoming another Iraq and Libya style failed state. If there’s one thing you can say about the Middle East/North Africa it’s that the US succeeded in creating chaos there to such an extent that it has zero control left over any of it. Well played?!

 

One thing seems obvious: the House of Saud needs money. The cash flowing out to the princes is simply not available anymore. The oil price is a major factor in that. Miraculously, the weekend crackdown on dozens of princes et al, managed to do what all the OPEC meetings could not for the price of oil: push it up. But the shrinkage of foreign reserves shows a long term problem, not some momentary blip:

 

 

Another sign that money has become a real problem in Riyadh is the ever-postponed IPO of Saudi Aramco, the flagship oil company supposedly worth $2 trillion. Trump this week called on the Saudi’s to list it in New York, but despite the upsurge in oil prices you still have to wonder which part of that $2 trillion is real, and which is just fantasy.

But yeah, I know, there’s a million different stocks you can ask the same question about. Then again, seeing the wealth of some of the kingdom’s richest parties confiscated overnight can’t be a buy buy buy signal, can it? Looks like the IPO delay tells us something.

And then you have the 15,000 princes and princesses who all live off of the Kingdom’s supposed riches (‘only 2,000’ profit directly). All of them live in -relative- wealth. Some more than others, but there’s no hunger in the royal family. Thing is, overall population growth outdoes even that in the royal family. Which means, since the country produces nothing except for oil, that there are 1000s upon 1000s of young people with nothing to do but spend money that’s no longer there. Cue mayhem.

 

 

And things are not getting better, Saudi Arabia loses money on every barrel it produces. There are stories about them lowering their break-even price, but let’s take that with a few spoonfuls of salt. A 25% drop in break-even prices in just one year sounds a bit too good. Moreover, main competitors like Iran would still have a much lower break-even price. So even if prices would rise further, the Saudi’s might only break even while Iran gets much richer. Running vs standing still.

 

Saudi Arabia Leads Gulf Nations in Cutting Break-Even Oil Price

Saudi Arabia, OPEC’s biggest oil producer, is also a leader when it comes to slashing the crude price the country needs to balance its budget. The kingdom will need oil to trade at $70 a barrel next year to break even, the IMF said Tuesday in its Regional Economic Outlook for the Middle East and Central Asia. That’s down from a break-even of $96.60 a barrel in 2016, the biggest drop of eight crude producers in the Persian Gulf. The break-even is a measure of the crude price needed to meet spending plans and balance the budget.

 

 

Gulf oil producers are cutting spending and eliminating subsidies after crude plunged from more than $100 a barrel in 2014 to average just over half that this year. The need to curb spending is more urgent with the Organization of Petroleum Exporting Countries cutting output to reduce a global glut. Oil will trade at $50 to $60 a barrel for the “medium term,” the IMF said.

 

 

So a thorough cleansing job of the royal family is perhaps inevitable, albeit very risky. King Salman and crown prince Mohammed bin Salman are up against a very large group of rich people. But there’s no way back now.

 

Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge

Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis…

Much more will have to follow that. Doing a half way job is far too risky once the job has started. Not even $800 billion sounds like all that much. Separate families and factions within the royal family have had decades to accumulate wealth.

 

Saudi Crackdown Targets Up to $800 Billion in Assets

The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The most visible – and perhaps richest- of all those arrested -in western eyes- is Al-Waleed. The Bloomberg estimate of his wealth that came out this week is $19 billion. But their own article seems to indicate a much higher number. He owns 5% of Apple -says Bloomberg-, and that share alone would be worth $45 billion.

 

Alwaleed, Caught in Saudi Purge, Has Assets Across the World

Apple – Alwaleed bought 6.23 million shares, or 5 percent, of the computer and mobile-device maker for $115.4 million in 1997. He made these purchases between mid-March and April of that year while the company was still struggling to turn itself around. He has since continued to hold the stake while Apple’s valuation has soared to as high as $900 billion.

 

Going through all these numbers, you can imagine why the ruling family, or rather the rulers within that family, are getting nervous. And that’s where we get to an interesting piece by Ryan Grim at the Intercept, who says it’s not even 32-year-old crown prince Mohammed bin Salman, known as MBS, or King Salman, 81, who control the kingdom these days, it’s the United Arab Emirates (UAE) -and maybe Washington-.

The coup has already been perpetrated.

 

Saudi Arabia’s Government Purge – And How Washington Corruption Enabled It

The move marks a moment of reckoning for Washington’s foreign policy establishment, which struck a bargain of sorts with Mohammed bin Salman, known as MBS, and Yousef Al Otaiba, the United Arab Emirates ambassador to the U.S. who has been MBS’s leading advocate in Washington. The unspoken arrangement was clear: The UAE and Saudi Arabia would pump millions into Washington’s political ecosystem while mouthing a belief in “reform,” and Washington would pretend to believe that they meant it.

MBS has won praise for some policies, like an openness to reconsidering Saudi Arabia’s ban on women drivers. Meanwhile, however, the 32-year-old MBS has been pursuing a dangerously impulsive and aggressive regional policy, which has included a heightening of tensions with Iran, a catastrophic war on Yemen, and a blockade of ostensible ally Qatar. Those regional policies have been disasters for the millions who have suffered the consequences, including the starving people of Yemen, as well as for Saudi Arabia, but MBS has dug in harder and harder. And his supporters in Washington have not blinked.

The platitudes about reform were also challenged by recent mass arrests of religious figures and repression of anything that has remotely approached less than full support of MBS. The latest purge comes just days after White House adviser Jared Kushner, a close ally of Otaiba, visited Riyadh, and just hours after a bizarre-even-for-Trump tweet. Whatever legitimate debate there was about MBS ended Saturday — his drive to consolidate power is now too obvious to ignore. And that puts denizens of Washington’s think tank world in a difficult spot, as they have come to rely heavily on the Saudi and UAE end of the bargain.

As The Intercept reported earlier, one think tank alone, the Middle East Institute, got a massive $20 million commitment from the UAE. And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries. “Our relationship with them is based on strategic depth, shared interests, and most importantly the hope that we could influence them. Not the other way around,” Otaiba has said privately.

The kingdom’s broke. Not today, or tomorrow morning, but crown prince MBS is able to look at the numbers and go: Oh Shit! And if he doesn’t see it, he has Kushner (re: Israel) and Al-Otaiba to fill him in. All three relative youngsters -MBS is 32, Kushner is 36, Otaiba is 43- are exceedingly nervous by now.

And then you get war, or the threat of war. War in Yemen, a blockade of Qatar, and now ‘mingling’ in Lebanon with the somewhat mysterious removal of billionaire PM Hariri -allegedly on an Iran/Hezbollah assassination plot-, and outright threats against Iran and Hezbollah:

 

Lebanon’s Hariri Visits UAE As Home Crisis Escalates

Lebanon’s outgoing prime minister, Saad al-Hariri, made a brief visit to the United Arab Emirates from Saudi Arabia on Tuesday despite a deepening crisis back home and a rise in regional tensions triggered by his surprise resignation. Hariri announced his resignation on Saturday during a visit to his ally Saudi Arabia and has not yet returned to Lebanon. He said he believed there was an assassination plot against him and accused Iran, Saudi Arabia’s arch-rival, and its Lebanese ally Hezbollah of sowing strife in the Arab world.

His resignation has thrust Lebanon back into the frontline of the regional rivalry that pits a mostly Sunni bloc led by Saudi Arabia and allied Gulf monarchies against Shi‘ite Iran and its allies. Hariri’s office said he had flown to Abu Dhabi on Tuesday and then returned to Riyadh, but it gave no reason for the trip. It also did not say when he would return home. Hariri’s Future TV channel said he would also visit Bahrain but gave no reason.

In short: billionaire PM Hariri is a puppet. Just perhaps not of Saudi Arabia, but of Abu Dhabi. Whether he’s under house arrest in Riyadh, as has been suggested, is still unclear. But it’s a safe bet that he didn’t fly to Abu Dhabi -and back- alone, or of his own accord. He went to receive instructions.

 

Saudi Arabia Accuses Iran Of ‘Direct Military Aggression’ Over Yemen Missile

Saudi Arabia’s crown prince has accused Iran of “direct military aggression” by supplying missiles to Houthi rebels in Yemen, raising the stakes in an already tense standoff between the two regional rivals. Mohammed bin Salman linked Tehran to the launch of a ballistic missile fired from Yemen towards the international airport in the Saudi capital of Riyadh on Saturday. The missile was intercepted and destroyed.

“The involvement of the Iranian regime in supplying its Houthi militias with missiles is considered a direct military aggression by the Iranian regime,” the prince said on Tuesday during a phone conversation with the UK foreign secretary, Boris Johnson, according to the state-run Saudi Press Agency. He added that the move “may be considered an act of war against the kingdom”. Iran has called Riyadh’s accusations as baseless and provocative.

We have way of knowing what is true or not about this. We do know that Saudi Arabia have been executing a barbaric war in Yemen. With weapons from the US, UK, et al. So someone firing back wouldn’t be that far-fetched.

 

Regardless, Pepe Escobar, a journalist who knows much more than his peers, or at least doesn’t hold back as much as them, doesn’t see this end well for MBS, UAE, Israel, US, and whoever else is in their corner. Another losing war for the US in the Middle East? We’re losing count.

 

The Inside Story Of The Saudi Night Of Long Knives

A top Middle East business/investment source who has been doing deals for decades with the opaque House of Saud offers much-needed perspective: “This is more serious than it appears. The arrest of the two sons of previous King Abdullah, Princes Miteb and Turki, was a fatal mistake. This now endangers the King himself. It was only the regard for the King that protected MBS. There are many left in the army against MBS and they are enraged at the arrest of their commanders.” To say the Saudi Arabian Army is in uproar is an understatement. “He’d have to arrest the whole army before he could feel secure.”

[..] The story starts with secret deliberations in 2014 about a possible “removal” of then King Abdullah. But “the dissolution of the royal family would lead to the breaking apart of tribal loyalties and the country splitting into three parts. It would be more difficult to secure the oil, and the broken institutions whatever they were should be maintained to avoid chaos.” Instead, a decision was reached to get rid of Prince Bandar bin Sultan – then actively coddling Salafi-jihadis in Syria – and replace the control of the security apparatus with Mohammed bin Nayef. The succession of Abdullah proceeded smoothly.

Power was shared between three main clans: King Salman (and his beloved son Prince Mohammed); the son of Prince Nayef (the other Prince Mohammed), and finally the son of the dead king (Prince Miteb, commander of the National Guard). In practice, Salman let MBS run the show. And, in practice, blunders also followed. The House of Saud lost its lethal regime-change drive in Syria and is bogged down in an unwinnable war on Yemen, which on top of it prevents MBS from exploiting the Empty Quarter – the desert straddling both nations. The Saudi Treasury was forced to borrow on the international markets. Austerity ruled …

[..] aversion to MBS never ceased to grow; “There are three major royal family groups aligning against the present rulers: the family of former King Abdullah, the family of former King Fahd, and the family of former Crown Prince Nayef.” Nayef – who replaced Bandar – is close to Washington and extremely popular in Langley due to his counter-terrorism activities. His arrest earlier this year angered the CIA and quite a few factions of the House of Saud – as it was interpreted as MBS forcing his hand in the power struggle. According to the source, “he might have gotten away with the arrest of CIA favorite Mohammed bin Nayef if he smoothed it over but MBS has now crossed the Rubicon though he is no Caesar. The CIA regards him as totally worthless.”

[..] The source, though, is adamant; “There will be regime change in the near future, and the only reason that it has not happened already is because the old King is liked among his family. It is possible that there may be a struggle emanating from the military as during the days of King Farouk, and we may have a ruler arise that is not friendly to the United States.”

In the end, it all comes down to a familiar theme: follow the money. And we need to seriously question the economic reality of Saudi Arabia. That graph above of their foreign reserves looks downright grim.

With money comes power. Who loses money loses power. Saudi Arabia is bleeding money. The population surge is uncanny, and there are no jobs for all these young people. Perhaps the best they can do is be a US/Israel puppet in an attempt to ‘redo’ the map of the Middle East, but that has not been a very successful project off late -like the past 100 years-.

Then again, when you’re desperate you do desperate things. And when you’re a 32-year-old crown prince with more enemies than you can keep track of, you use what money is left to 1) keep up appearances, 2) steal what others have gathered, 3) buy weapons up the wazoo, and 4) go to war.

It all paints a very dark picture for the world. Russia won’t stand for attacks on Iran. And Iran won’t let attacks on Lebanon/Hezbollah go unanswered. All that is set to push up oil prices further, and all parties involved are just fine with that. Because they can buy more weapons with the additional profits.

I’ll leave you with Nassim Taleb’s comments on the situation. After all, Nassim’s from Lebanon, and knows that part of the world like the back of his hand:

 

 

 

Nov 082017
 
 November 8, 2017  Posted by at 9:56 am Finance Tagged with: , , , , , , , , ,  4 Responses »


Henri Cartier Bresson Nehru Announces Gandhi’s Death, Birla House, Delhi, India Jan 30, 1948

 

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)
Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)
Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)
Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)
Lebanon – The Next Front In The Great Gas War (Golem XIV)
UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)
May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)
Those Who Broke The Economy Cannot Fix It (Ann Pettifor)
German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)
Bean Counters: Lost in Paradise (Ren.)
British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)
Brick-and-Mortar Meltdown Sinks Property Prices (WS)
Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)
1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

 

 

Long term is always better.

700 Years of Data Forewarn of Rapid Reversal From Low Interest Rates (BBG)

Forget secular stagnation. One historian says the world is actually in its ninth “real rate depression” and 700 years of data show that – when it comes – the turnaround could be sudden. In research published on the Bank of England’s staff blog, Harvard University’s Paul Schmelzing says most work pointing to a period of permanently lower equilibrium real interest rates is too short term. Instead, he tracked the risk-free rate since 1311 by identifying the dominant asset of each period – starting with sovereign rates in the Italian city states in the 14th and 15th centuries and moving to long-term rates in Spain, then the Province of Holland, the U.K., Germany, and finally the U.S. Real rates, or the benchmark interest rates minus inflation, have averaged 4.78% while the 200-year real-rate average is 2.6%.

That makes the current market environment “severely depressed,” Schmelzing wrote. However, it’s simply following a five-century downward trend, in which there have been nine periods of secular decline followed by reversals. The current period – since the 1980s – is the second-longest recorded and its closest historical analogy is the global “Long Depression” of the 1880s and 1890s which saw low productivity growth, deflationary price dynamics, and the rise of global populism and protectionism. This spell seems to have ended without a push from policy makers. That could be good news for those struggling to find a fix for the current low-rate environment. “There is strong evidence suggesting that the last ‘secular stagnation cycle’ started fading relatively autonomously after just over two decades following the key financial shock, not requiring the aid of decisive fiscal or monetary stimulus.”

Read more …

There’ll be more.

Saudi Banks Freeze More Than 1,200 Bank Accounts in Anti-Corruption Purge (R.)

Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis, one regional banker said, declining to be named because he was not authorised to speak to media.

The banker did not name the companies affected but said they included listed and unlisted firms across many sectors. He added that if the freezes stayed in place for long, they could start to hurt day-to-day business activities such as paying staff and creditors or making other transactions. A second banker said, however, that most of the frozen accounts belonged to individuals rather than companies, and that banks were being allowed by the regulator to continue to fund existing commitments. Among top business executives detained in the probe are billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Nasser bin Aqeel al-Tayyar, founder of Al Tayyar Travel; and Amr al-Dabbagh, chairman of builder Red Sea International.

The stocks of all three companies, which have issued statements saying they continue to operate as normal, plunged between 9 and 10% on Tuesday. One of the bankers speaking to Reuters said the central bank had met with some foreign banks this week to reassure them that the freezing of accounts targeted individuals, and that firms linked to those people would not be damaged.

Read more …

WSJ has gone full paywall.

Saudi Crackdown to Confiscate Up to $800 Billion in Assets (WSJ)

The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The purge is the most extensive of the kingdom’s elite in recent history. Crown Prince Mohammed bin Salman, the son of King Salman, was named heir to the throne in June and has moved to consolidate power. He has said that tackling corruption at the highest level is necessary to overhaul what has long been an oil-dependent economy. The crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.

Read more …

Strange bedfellows.

Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination In Lebanon (ZH)

Early this morning, Israeli Channel 10 news published a leaked diplomatic cable which had been sent to all Israeli ambassadors throughout the world concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia, which began with Lebanese Prime Minister Saad Hariri’s unexpected resignation after he was summoned to Riyadh by his Saudi-backers, and led to the Saudis announcing that Lebanon had “declared war” against the kingdom. The classified embassy cable, written in Hebrew, constitutes the first formal evidence proving that the Saudis and Israelis are deliberately coordinating to escalate the situation in the Middle East. The explosive classified Israeli cable reveals the following:

• On Sunday, just after Lebanese PM Hariri’s shocking resignation, Israel sent a cable to all of its embassies with the request that its diplomats do everything possible to ramp up diplomatic pressure against Hezbollah and Iran.
• The cable urged support for Saudi Arabia’s war against Iran-backed Houthis in Yemen.
• The cable stressed that Iran was engaged in “regional subversion”.
• Israeli diplomats were urged to appeal to the “highest officials” within their host countries to attempt to expel Hezbollah from Lebanese government and politics.

As is already well-known, the Saudi and Israeli common cause against perceived Iranian influence and expansion in places like Syria, Lebanon and Iraq of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. For Israel, Hezbollah has long been its greatest foe, which Israeli leaders see as an extension of Iran’s territorial presence right up against the Jewish state’s northern border.

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“Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government.”

Lebanon – The Next Front In The Great Gas War (Golem XIV)

The Great Gas War has already two distinct fronts: The now relatively quiet Northern Front in Ukraine and the Southern Front in Syria in which the Western empire has been losing. It looks to me that Lebanon is being targeted as the next front, where the West hopes its loses might be recouped. Yesterday, November 6th, Reuters reported, “Saudi Arabia said on Monday that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah.” This comes after Israel, Saudi’s long time though largely un-offical best friend in the region, has been very publicly preparing to renew its own war with Lebanon – or more accurately with Hezbollah. As the American news journal Newsweek put it recently, “ISRAEL PREPARES FOR ANOTHER WAR WITH HEZBOLLAH AS IDF PRACTICES LEBANON INVASION.”

Why now and why Lebanon? Well the rulers of Saudi, a Sunni dominated country, will tell us that it is because Hezbollah is a Shia terrorist organisation. “Hezbollah” literally means the “Party of Allah” or “Party of God”. Saudi Gulf affairs minister Thamer al-Sabhan yesterday pointedly referred to Hezbollah as, “the Lebanese Party of the Devil”. Saudi is not alone of course, Hezbollah has also been listed as a terrorist organisation by America, Israel, the Arab League, the UK and the EU. It is also, however, part of the popular government of Lebanon having seats in its parliament. I suggest, however, a powerful reason that a new war with Hezbollah may be in the offing is because Lebanon is the next link in any gas pipeline that could potentially bring Iranian Gas to Europe.

That was the reason the West decided to “liberate” the Syrian people and it will be why they decide to enforce the same salvation upon the people of Lebanon. Having failed to liberate the Syrians, Saudi, the West, its Sunni Gulf allies and Israel will now see if they can succeed in blocking any Iranian gas ambitions by liberating the Lebanese from their own government. I would not be surprised to hear quite soon from opposition groups vocally denouncing the government or at least Hezbollah. I expect spokes people from those groups to suddenly get a global platform along-side American and regional supporters such as Saudi.

Read more …

How to spell insanity.

UK Sales Of Bombs And Missiles To Saudi Arabia Increase By Almost 500% (Ind.)

The number of British-made bombs and missiles sold to Saudi Arabia since the start of its bloody campaign in Yemen has risen by almost 500%, The Independent can reveal. More than £4.6bn of arms were sold in the first two years of bombings, with the Government grant increasing numbers of export licences despite mounting evidence of war crimes and massacres at hospitals, schools and weddings. The United Nations says air strikes by the Saudi-led coalition are the main cause of almost 5,295 civilian deaths and 8,873 casualties confirmed so far, warning that the real figure is “likely to be far higher”. It has condemned the “entirely man-made catastrophe” leaving millions more on the brink of famine and sparking the world’s worst cholera epidemic, while blacklisting Saudi Arabia for killing and maiming children.

There is also fresh concern over the Kingdom’s attempt to shut all air, land and sea ports into Yemen, which it said was to stop the flow of weapons but will also halt aid imports. British-made bombs have been found at the scene of bombings deemed to violate international law but the UK has continued its political and material support for Riyadh’s campaign. Figures from the Department for International Trade (DIT) show that in the two years leading up to the Yemen war, £33m of ML4 licences covering bombs, missiles and countermeasures were approved. But in the two years since the start of Saudi bombing in March 2015, the figure increased by 457% to £1.9bn, according to calculations by Campaign Against the Arms Trade (CAAT). Licences covering aircraft including Eurofighter jets have also risen by 70% to £2.6bn in the same period.

Read more …

Secret meetings as the Middle East is imploding. And arms sales are exploding.

May to Lose Second Top Minister in One Week Over Secret Israel Meetings (BBG)

Prime Minister Theresa May is weighing whether to fire a member of her cabinet only seven days after her defense secretary quit in a sexual harassment scandal, as the U.K. government faces fresh turmoil in the midst of Brexit talks. May is likely to dismiss her International Development Secretary Priti Patel in a row over a succession of unauthorized meetings she held with Israeli officials behind the prime minister’s back, according to reports from the BBC and The Sun Tuesday, which the U.K. government declined to deny. The premier has not yet had the chance to speak to Patel – who is on an official trip to Africa – about the latest revelations. A conversation would be expected before a decision is made about the minister’s future. If she is forced out, Patel will be the second minister to depart May’s cabinet in one week, after Michael Fallon resigned from the defense ministry amid allegations over his past behavior toward women.

For some, May’s latest headache is yet another demonstration of her weakness, which draws repeated questions over how her government can last long enough to see Brexit to the finish line. If more dominoes drop – in the shape of senior ministers – the last one to fall could ultimately be the prime minister herself. “The destabilizing effect on an already weak administration has prompted another burst of speculation that May could soon be forced to resign,” Mujtaba Rahman of Eurasia Group said in a note to clients. He thought one likely scenario is for May to be toppled if she fails to get a grip on the latest crisis and is ousted because her MPs judge that the government cannot go on like this – and is incapable of recovering the authority a prime minister needs.

Read more …

The British economy is being bled dry….

Those Who Broke The Economy Cannot Fix It (Ann Pettifor)

Make no mistake, last week’s increase in interest rates was a big deal. Painful as it might be for a good share of the population, the real point is that the Bank is signalling the end of a particular phase of monetary policy. Since 2010 the counterpart to self-defeating austerity policies has been expansionary monetary policies. These have inflated assets – enriching the already-rich, while failing to stimulate wider economic recovery. Yesterday the Bank of England’s Monetary Policy Committee signalled an end of this dangerous game. But this technocratic realignment makes no difference to the fact that ‘the Guardians of the nation’s finances’ – Bank and Treasury economists – have failed absolutely to revive the economy.

You need look no further than the (ongoing) decline in real wages, to continuing low levels of private investment, and to the dangers of rising household debt. A small interest rate rise is hardly likely to improve these conditions. Bank and Treasury economists (aided and abetted by the OBR) are guilty of defeatism. They argue that despite their powers, THERE IS NOTHING TO BE DONE. It is assumed that somehow ‘the invisible hand’ or ‘the markets’ will, without intervention by the authorities, correct the weakness, insecurity and failures of the British economy. The prolonged and painfully weak recovery is regularly blamed on something defined as “productivity”. By shifting responsibility for economic failure on to productivity, the Bank, Treasury and OBR economists are saying that somehow economic failure is inherent to the economy – to businesses and especially to workers.

“Nothing to do with us, guv” they mutter. They add that the situation has been exacerbated by the vote to leave the EU. This is a handy way of denying that the ongoing economic failure of the British economy (and the Brexit vote) can be explained by austerity policies, and the failures of the financial system. By taking this approach, economists at the Bank have – conveniently – set the scene for endorsing further inaction by the Chancellor later this month. Yesterday the Governor of the Bank was flanked by Ben Broadbent and Dave Ramsden. Ben Broadbent, as a Goldman Sachs economist, was among the earliest to call for austerity policies. Dave Ramsden (who did not vote for the rate rise) implemented these policies as top economist at the Treasury.

But both Broadbent and Ramsden were senior figures in economic policy-making throughout the debt inflation that preceded the crisis, and (we presume) supporters of financial globalisation. It is obvious to anyone with an ounce of common sense that austerity policies have hurt the most vulnerable, and damaged Britain’s economic potential, by forcing a brutal adjustment to lower quality and lower paid work. Labour has been forced to bear the brunt of the Global Financial Crisis. The weakness in productivity is just the outcome of these policies, not the cause.

Read more …

… while Germany’s needs diverge ever more from those of southern Europe.

German ‘Wise Men’ Sound Alarm Over ‘Overheating’ Economy (R.)

The German economy is at risk of overheating, according to a leaked advisory council report that follows pressure from the Bundesbank for a swifter end to the ECB’s expansive monetary policy. In their annual report, seen by Handelsblatt newspaper, the five “wise men” who advise the German government on economic policy said the economy, which they expected to expand strongly this year and next, was moving gradually into a “boom phase”. “There are clear signs that economic capacity is over-utilised,” read the report, which is due to be published on Wednesday. Germans have been among the foremost critics of the ECB’s bond-buying program, which was introduced three years ago to depress borrowing costs and reignite growth in the euro zone’s heavily indebted southern periphery.

The wise men expected Germany’s economy to expand by 2% this year and by 2.2% in 2018, Handelsblatt said. With unemployment at its lowest level since the early 1990s, Germany’s circumstances are very different from Italy’s or Spain‘s, straining the ECB’s ‘one-size-fits-all’ monetary policy. ECB President Mario Draghi last month announced a halving n the size of its 2 trillion euro bond-buying program, but this is far from the return to conventional monetary policy many Germans, including Bundesbank president Jens Weidmann, demand. Without an intervention to cool the economy, Germany’s hawks fear the buoyant economy could tip over into an inflationary cycle. Last week, a senior official from Chancellor Angela Merkel’s conservatives warned that German savers would not tolerate continued low interest rates for much longer.

Read more …

Accountants and auditors are not doing their jobs.

Bean Counters: Lost in Paradise (Ren.)

“The phrase ‘Set a thief to catch a thief’ is common parlance,” says Professor Atul K. Shah. “‘Set a global brand of professional accountants to rob society and pilfer its taxes, bleeding governments’, is not, but it should be.’ Professor Bill Black says internal controls are absolutely critical in reducing fraud by insiders in particular, but not just insiders, as the Paradise Papers have repeatedly demonstrated. Emile Woolf says there is no way to remove control fraud and dodgy accounting practices from the economy without first prosecuting the culprits. “The devils that committed this criminal negligence – with the exception of the Royal Bank of Scotland (RBS) – have never been fined or prosecuted” he said. “What you can then do is create a ring fenced fund inside those institutions, earmarked to save them from going under. But the company has to recognise it has to be paid back.

“RBS is incapable of paying back the billions of fines it still owes for misconduct,” he says. “Where does that money come from and where does it go? Without the fines RBS would have made £100 million profit this year, but because of the reserve for fines in the USA and UK, all those fines are far too great to allow for payment of a dividend.” Of course calculating a true profit figure is difficult when a significant portion of that profit is fraudulent, because it doesn’t take into account the result of the inequities of ten years ago. “The worrying thing for all of us is if it happens again,” he says. “My hope is that three years from now, banks will be forced to recognise their loans that will never be repaid. But my worry is that this is going to be after the next financial crisis, because it’s happening again. There is no redeeming features in the present. The only difference is the next crisis is going to be bigger.”

Joel Benjamin told Renegade Inc that accounting is as much about *what* you count or don’t count as it is *how* you count it. “This is evidenced through the practice of ‘base erosion and profit shifting’ – shifting profits to offshore low or no tax jurisdictions, ” he said. In the space of 50 years, Britain’s economy has transformed from an industrial power house, to that of a finance-led extractive parasite, where the cash starved productive economy receives less than 10% of bank credit. “Until the Big Four accountancy firms are accurately viewed as enablers of corporate offshore dealing, regulatory arbitrage and ardent defenders of the neoliberal order, not the ‘reputable’ objective independent arbiters of the public interest as they claim, society will continue to be taken for a ride, and public services and social cohesion will continue their long decline,” he said.

Read more …

Bill Mitchell in a long talk with his alter ego.

British Mainstream Media Spreading Dangerous MMT Ideas (Bilbo)

Mitchell tried to tell me that governments do not spend by ‘printing money’ but rather just adjust bank accounts with numbers. But I know as anyone in the street knows that they just want to print more and more. That is at the core of MMT – they want the government to go on a spending spree and just ignore the inflationary consequences. They hide that by saying that “public spending cannot be unlimited and must be commensurate to the capacity of the economy” which is just a smokescreen that I can see through. And everybody will see through it. It is code for spend like a drunken’ sailor – throw money at lazy people who cannot be bothered finding a job. Throw money at public schools that teach socialist doctrines – you know about inequality and stuff like that.

Throw money at public hospitals so that people can receive unlimited health care without having to pay for it – that is the quickest way to encourage waste and bad behaviour. People know that they can just get sick and no matter what their income is they will get some care. Where is the incentive to stay healthy in that sort of system. The article also shows how stupid Mitchell is when it says he: “… debunks the idea that governments borrow money from international markets and with it the notion that they are hostage to the market.” Well where the hell else do they get the cash from? Does he really think we are that stupid? How come China has all those US government debt bonds or whatever they are called and the US government is spending the Chinese cash? How does he explain that obvious point?

Well he tried to claim the Chinese doesn’t issue US dollars and that only the US government issues US dollars so that it cannot possibly be funded by the Chinese. I don’t buy that, not that I understood anything he said about this – all this talk about trade surpluses accumulating financial claims in the currency that the deficit country issues, and then allowing the surplus nation to use those claims (say, US dollars in the first instance) to purchase US dollar financial assets etc ad nauseum. As if that tells us anything. How come the Chinese can loan the US government money that is what I want to know? Mitchell told the journalist that Jeremy Corbyn should not worry about international capital markets because Britain could impose capital controls if it wanted to. That gets to the nub of my worries – socialist governments stealing hard-earned cash from investors who actually have some get up and go.

Read more …

Malls don’t look like good investments.

Brick-and-Mortar Meltdown Sinks Property Prices (WS)

Commercial real estate prices soared relentlessly for years after the Financial Crisis, to such a degree that the Fed has been publicly fretting about them. Why? Because US financial institutions hold nearly $4 trillion of commercial real estate loans. But the boom in most CRE sectors is over. The Green Street Property Price Index – which measures values across five major property sectors – had soared 107% from May 2009 to the plateau that began late last year, and 27% from the peak of the totally crazy prior bubble that ended with such spectacular fireworks. But it has now turned around, dragged down by a plunge in prices for retail space. The CPPI by Green Street Advisors dropped 1.1% in October from September. In terms of points, the 1.4-point decline was the largest monthly decline since March 2009. The index is now below where it had been in June 2016:

This phenomenal bubble, as depicted by the chart above, has even worried the Fed because US financial institutions hold nearly $4 trillion of CRE loans, according to Boston Fed governor Eric Rosengren earlier this year. Of them, $1.2 trillion are held by smaller banks (less than $50 billion in assets). These smaller banks tends to have a loan book that is heavily concentrated on CRE loans, and these banks are less able to withstand shocks to collateral values. Rosengren found that among the root causes of the Financial Crisis “was a significant decline in collateral values of residential and commercial real estate.” But the CRE bubble isn’t unraveling as gently as the chart suggests. Some sectors are still surging, while others are plunging. According to the report, the index, which captures the prices at which CRE transactions are currently being negotiated and contracted, “was pushed down by falling mall valuations.”

Read more …

Puidgemont predicted to get 14-15 out of 135 seats. He won’t be the leader.

Catalan Secessionist Parties Fail To Agree On Unity Ticket For Vote (R.)

Catalan secessionist parties on Tuesday failed to agree on a united ticket to contest a December snap regional election, making it more difficult to rule the region after the vote and press ahead with their collective bid to split from Spain. Catalonia’s secessionist push has plunged Spain into its worst political crisis in four decades, triggered a business exodus, forced Madrid to cut its economic forecast and reopened old wounds from Spain’s civil war in the 1930s. Pro-independence groups have called for a general strike in the restive region on Wednesday. Catalan political parties had until midnight on Tuesday to register coalitions ahead of the Dec. 21 vote, but the two main forces which formed an alliance to rule the region for the last two years did not manage to agree on a new pact in time.

While they could still find an agreement after the vote, political analysts say the lack of a deal on a joint campaign may also trigger a leadership fight at the top of the movement. This is because center-right PdeCat (Catalan Democratic Party) of sacked Catalan president Carles Puigdemont is expected to be overtaken by leftist Esquerra Republicana de Catalunya (ERC) of former regional vice president Oriol Junqueras. Puigdemont and Junqueras are the two main leaders behind the current secession bid that last month led to a unilateral declaration of independence which Spain thwarted by imposing direct rule on the region. Junqueras is currently in custody pending a potential trial on charges of sedition, rebellion and misuse of public funds. Puigdemont, who faces the same charges, is currently in self-imposed exile in Belgium and has said he would oppose extradition.

An opinion poll released on Sunday by Barcelona-based newspaper La Vanguardia showed Junqueras’ ERC could garner between 45 and 46 seats in the 135-strong regional assembly while Puigdemont’s PdeCat would win between 14 and 15 seats. In order to reach the 68-seat threshold for a majority, they would then have to form a parliamentary alliance with anti-capitalist CUP, which is expected to get seven or eight seats. Such an alliance previously existed between 2015 and 2017.

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Down the drain.

1 in 200 British, 1 in 60 Londoners Are Homeless (G.)

More than 300,000 people in Britain – equivalent to one in every 200 – are officially recorded as homeless or living in inadequate homes, according to figures released by the charity Shelter. Using official government data and freedom of information returns from local authorities, it estimates that 307,000 people are sleeping rough, or accommodated in temporary housing, bed and breakfast rooms, or hostels – an increase of 13,000 over the past year. Shelter said the figures were an underestimate as they did not include people trapped in so-called “hidden homelessness”, who have nowhere to live but are not recorded as needing housing assistance, and end up “sofa surfing”. London, where one in every 59 people are homeless, remains Britain’s homelessness centre. Of the top 50 local authority homelessness “hotspots”, 18 were in Greater London, with Newham, where one in 27 residents are homeless, worst hit.

However, while London’s homeless rates have remained largely stable over the past year, the figures show the problem is becoming worse in leafier commuter areas bordering the capital, such as Broxbourne, Luton, and Chelmsford. Big regional cities have also seen substantial year-on-year increases in the rate of homelessness. In Manchester, one in 154 people are homeless (compared with one in 266 in 2016); in Birmingham one in 88 are homeless (119); in Bristol one in 170 are affected (199). Polly Neate, chief executive of Shelter, said: “It’s shocking to think that today, more than 300,000 people in Britain are waking up homeless. Some will have spent the night shivering on a cold pavement, others crammed into a dingy hostel room with their children. And what is worse, many are simply unaccounted for.

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Nov 052017
 
 November 5, 2017  Posted by at 9:37 am Finance Tagged with: , , , , , , , , , ,  4 Responses »


Edward S. Curtis Navajo weaver c. 1907

 

Senior Princes, One Of World’s Richest Men Arrested In Saudi Crackdown (BBG)
Saudi Arabia Detains Princes, Ex-Ministers After Cabinet Reshuffle (MEE)
Shakeup Stuns Analysts Who Say It Shows Saudis Mean Business (BBG)
Lebanon PM Resigns, Bringing Saudi-Iran Proxy Conflict to the Fore (BBG)
Trump Urges Saudi Aramco to List on New York Stock Exchange (BBG)
China’s Zhou Warns on Rising Financial Risk in Blunt Article (BBG)
China To Expand Corruption Supervision Pilot Scheme Nationwide (R.)
Donna Brazile Considered Replacing Hillary Clinton With Joe Biden (G.)
The Great College Loan Swindle (Taibbi)
Santa Claus May Be Coming To Town, But Will The Shoppers Go Too? (G.)
In the World’s Most Livable Cities, Hardly Anyone Can Afford a Home (BBG)
Australia -Again- Snubs New Zealand Offer To Take Refugees (AFP)

 

 

Was there a coup? If so, who against who? Jared Kushner just came back from one of his secretive trips to Saudi a few days ago. He’s allegedly close with MBS. Osama Bin Laden’s older brother also arrested. Too much money floating around. And too many princes.

Senior Princes, One Of World’s Richest Men Arrested In Saudi Crackdown (BBG)

Saudi Arabia’s King Salman removed one of the royal family’s most prominent princes from his ministerial role and arrested other royals and top officials in an anti-corruption drive that clears any remaining obstacles to his son’s potential ascension to the throne. Acting on orders from a newly established anti-corruption committee, headed by Crown Prince Mohammed bin Salman, police arrested 11 princes, four ministers and dozens of former ministers, the Saudi-owned Al Arabiya television said. Prince Miteb, son of the late King Abdullah, was removed from his post as head of the powerful National Guards. Prince Alwaleed bin Talal, one of the world’s richest men and a shareholder of Citigroup and Twitter, was among those detained, according to a senior Saudi official who spoke on condition of anonymity.

“Laws will be applied firmly on everyone who touched public money and didn’t protect it or embezzled it, or abused their power and influence,” King Salman said in comments shown on state TV. “This will be applied on those big and small, and we will fear no one.” Prince Miteb was replaced by Prince Khaled Ayyaf, according to a royal decree. Before his ouster, Prince Miteb was one of the few remaining senior royals to have survived a series of cabinet shuffles that promoted allies of the crown prince, who is the direct heir to the throne. King Salman had already sidelined other senior members of the royal family to prevent any opposition to the crown prince, 32-year-old Prince Mohammed, known as MBS among diplomats and journalists, who replaced his elder cousin, Muhammed bin Nayef, in June.

That maneuver removed any doubt of how succession plans will unfold following the reign of King Salman, now 81. “The hardline approach is risky because it will solidify the dislike many powerful Saudis have for the crown prince, but it is likely that MBS succeeds, and emerges from this episode more empowered,” Hani Sabra, founder of Alef Advisory, a Middle East political risk practice, wrote in a note. “We can’t confidently project when a leadership transition will take place, but today’s developments are a signpost that MBS is moving toward the role of king.”

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From Middle East Eye.

Saudi Arabia Detains Princes, Ex-Ministers After Cabinet Reshuffle (MEE)

Saudi Arabia has detained 11 princes and dozens of former ministers through its newly formed anti-corruption committee, including erstwhile national guard minister Mutaib bin Abdullah. According to an MEE source in Riyadh, Mutaib was arrested along with his brother Turki. Famous multi-billionaire prince Al-Waleed bin Talal bin Abdulaziz and a number of former ministers and businessmen were also arrested. Both Mutaib bin Abdullah and Al-Waleed bin Talal are senior members of Saudi’s royal family. Also among the arrested were Waleed al-Ibrahim, founder of the MBC broadcasting group, and billionaire businessman Saleh Kamel. The arrests came hours after Saudi appointed new ministers. Economy minister Adel Fakieh was replaced by Mohammed al-Tuwaijri while Khaled bin Ayyaf replaced Mutaib, son of the late King Abdullah, as national guard minister.

The new anti-corruption committee, headed by Crown Prince Mohammed bin Salman, was formed by royal decree earlier on Saturday. The arrests and dismissals came just two months after King Salman replaced his nephew Mohammed bin Nayef with his son Mohammed as the country’s crown prince. The move consolidates Mohammed’s control of the kingdom’s security institutions, which had long been headed by separate powerful branches of the ruling family. “Since Mohammed bin Salman became the crown prince in June, we’ve seen a lot of upheaval,” Ian Black, of the London School of Economics, told Al Jazeera. “We’ve seen the announcement of this very ambitious Saudi plan to transform the Saudi economy, Vision 2030.” “The breadth and scale of the arrests appears to be unprecedented in modern Saudi history,” said Kristian Ulrichsen at Rice University.

In September the authorities arrested about two dozen people, including influential clerics, in what activists denounced as a coordinated crackdown. Analysts said many of those detained were resistant to Prince Mohammed’s aggressive foreign policy that includes the boycott of Gulf neighbour Qatar as well as some of his bold policy reforms, including privatising state assets and cutting subsidies.

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“Everybody will be worried now. Some of these names have been there for 30 years.”

Shakeup Stuns Analysts Who Say It Shows Saudis Mean Business (BBG)

Saudi Arabia’s unprecedented decision to arrest senior princes and billionaires shocked analysts across the region, but to some it’s a sign the kingdom is serious about change. The nation’s stocks declined. A newly formed anti-corruption committee, headed by Crown Prince Mohammed bin Salman, instructed police to arrest 11 princes, four ministers and dozens of former ministers, the Saudi-owned Al Arabiya television said. The decision comes about two weeks after the kingdom announced a series of projects, including a $500 billion city, as part of a plan to overhaul an economy that has been almost entirely dependent on oil revenue for decades. The Tadawul All Share Index fell 1.8% as of 10:04 a.m. in Riyadh.

Purges haven’t “been done at this scale or in this public manner before,” said Mohammed Ali Yasin, CEO of Abu Dhabi-based NBAD Securities. “Accountability has been introduced, no one is immune. Everybody will be worried now. Some of these names have been there for 30 years. This affects Kingdom Holding, Saudi Airlines and the Finance Ministry.” A plunge in crude prices has forced Saudi Arabia to face the shortcomings of its $650 billion economy. Part of its plan to prepare for life after oil is to sell shares in oil giant Aramco in 2018 and transform its stock market to a gateway into Saudi Arabia. “There should be some initial speculation in general as people are just concerned about what happened, this will be priced in,” said Mazen Al-Sudairi, the head of research at Al Rajhi Capital in Riyadh. “But if you look on the long term, this should be seen as a positive measure that is good for the country and the market.”

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More Saudi.

Lebanon PM Resigns, Bringing Saudi-Iran Proxy Conflict to the Fore (BBG)

Lebanese Prime Minister Saad al-Hariri unexpectedly resigned on Saturday in a televised speech from Saudi Arabia, saying he feared for his life and accusing Iran and its proxies of destabilizing his country and the region. Hariri, a pro-Saudi Sunni politician, said Lebanon has suffered enough because of the Iranian-backed Hezbollah and its grip on domestic politics. “I want to say to Iran and its followers that they are losing in their interference in the affairs of Arab nations, and our nation will rise as it did before – and the hands that are extended to it with evil will be cut off,” he said. The resignation raises the prospect of a renewed political confrontation between Iran and Saudi Arabia in Lebanon at a time when the Islamic Republic and its allies are widely seen to have won the proxy war against Sunni powers in neighboring Syria.

Saudi Arabia and Iran are on opposite ends of other regional conflicts such as Yemen and Iraq. The Lebanese government includes Hezbollah members, and Hariri’s decision aims to weaken the group’s legitimate representation, said Sami Nader, head of the Beirut-based Levant Institute for Strategic Affairs. “It’s part of an all-out Saudi confrontation with Iran,” he said. As the war against Islamic State in Syria and Iraq winds down, analysts are warning against a surge in other conflicts as regional and global powers seek to divide spheres of influence. And while Saudi Arabia failed in its pursuit to remove Syrian President Bashar al-Assad, an ally of Iran, from power, the kingdom has found a backer in U.S. President Donald Trump in his focus on containing Iran’s clout in the Middle East.

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And yet more Saudi.

Trump Urges Saudi Aramco to List on New York Stock Exchange (BBG)

President Donald Trump, raising the political stakes in what would be the largest initial public offering, said the U.S. would “very much appreciate” if Saudi Arabia’s government lists the Saudi Arabian Oil Co. on the New York Stock Exchange. “Important to the United States!” Trump said in a Twitter post from Honolulu early Saturday. Trump’s tweet, sent hours before he was set to depart for an 11-day tour of Asia, came out of the blue for Aramco, according to a person familiar with the company, who asked not to be named. But the move is consistent with a growing push by American regulators to lure companies to U.S. stock exchanges. Trump told reporters later Saturday aboard Air Force One that he was motivated to send the tweet because the Aramco IPO “will be just about the biggest ever” and the U.S. wants “to have all the big listings.”

The Saudis were not currently looking at listing on a U.S. exchange “because of litigation risk, and other risk, which is sad,” he said. “I want them to very strongly consider the New York Stock Exchange or NASDAQ or frankly anybody else located in this country,” Trump said. He added that he had recently spoken to King Salman. The tweet was “energy geopolitics in action,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former senior oil official in the Obama administration. “At a time when the Saudis are looking for the U.S. to get tougher on Iran, the Saudi-Russian relationship is warming, the Saudis are trying to attract international private capital, and the Chinese are rumored to be considering taking a piece of Aramco, Trump’s personal plea to list in N.Y. raises the diplomatic stakes of Aramco’s decision.”

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“Latent risks are accumulating, including some that are “hidden, complex, sudden, contagious and hazardous..”

China’s Zhou Warns on Rising Financial Risk in Blunt Article (BBG)

China’s financial system is getting significantly more vulnerable due to high leverage, according to central bank governor Zhou Xiaochuan, who also flagged the need for deeper reforms in the world’s second-biggest economy. Latent risks are accumulating, including some that are “hidden, complex, sudden, contagious and hazardous,” even as the overall health of the financial system remains good, Zhou wrote in a lengthy article published on the People’s Bank of China’s website late Saturday. The nation should toughen regulation and let markets serve the real economy better, according to Zhou. The government should also open up financial markets by relaxing capital controls and reducing restrictions on non-Chinese financial institutions that want to operate on the mainland, he wrote.

“High leverage is the ultimate origin of macro financial vulnerability,” wrote Zhou, 69, who is widely expected to retire soon after a record 15-year tenure. “In sectors of the real economy, this is reflected as excessive debt, and in the financial system, this is reflected as credit that has been expanding too quickly.” Zhou’s comments signal that policy makers remain committed to a campaign to reduce borrowing levels across the economy. Concern that regulators may intensify the deleveraging drive after the twice-a-decade Communist Party Congress has helped push yields on 10-year government bonds to a three-year high. Still, measures of credit continue to show expansion, with aggregate financing surging to a six-month high of 1.82 trillion yuan ($274 billion) in September. China’s corporate debt surged to 159% of the economy in 2016, compared with 104% 10 years ago, while overall borrowing climbed to 260%.

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Hard not to see Saudi and China doing the same thing.

China To Expand Corruption Supervision Pilot Scheme Nationwide (R.)

China will expand a pilot project for anti-graft supervision reforms nationwide next year that will consolidate existing corruption agencies, state-run news agency Xinhua reported, as President Xi Jinping expands his signature policy drive. Xinhua said in a report published late on Saturday China’s top legislature adopted a decision calling for new supervisory commissions to be set up by the People’s Congresses at provincial, city and county-levels to “supervise those exercising public power”. Xi’s signature anti-graft drive has jailed or otherwise punished nearly 1.4 million Communist Party members since 2012. The leader, who began his second five-year term in October, has vowed to maintain the “irreversible” momentum of the campaign to root out corruption.

China aims to pass a national supervision law and set up a new commission at the annual parliament meetings early next year. The new National Supervision Commission will work with the Communist Party’s anti-graft body, the Central Commission for Discipline Inspection, expanding the purview of Xi’s anti-graft campaign to include employees at state-backed institutions. Xinhua said the commissions to be set up nationwide under the China legislature’s new directive will have the power to investigate illegal activities such as graft, misuse of authority, neglect of duty, and wasting public funds.

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if you didn’t get yet what a catastrophe the Democratic party has become.

Donna Brazile Considered Replacing Hillary Clinton With Joe Biden (G.)

The former head of the Democratic National Committee says she considered initiating effort to replace Hillary Clinton as the party’s presidential nominee with then vice-president Joe Biden. Donna Brazile makes the revelation in a memoir being released on Tuesday entitled Hacks: The Inside Story of the Break-ins and Breakdowns that Put Donald Trump in the White House. Brazile writes that she considered initiating Clinton’s removal after she collapsed while leaving a 9/11 memorial service in New York City. Clinton later acknowledged she was suffering from pneumonia. But Brazile says the larger issue was that her campaign was “anemic” and had taken on “the odor of failure”.

After considering a dozen combinations to replace Clinton and her running mate, Tim Kaine from Virginia, Brazile writes that she settled on Biden and Cory Booker of New Jersey as those with the best chance of defeating Trump. Ultimately, the former DNC head says, “I thought of Hillary, and all the women in the country who were so proud of and excited about her. I could not do this to them.”

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“In higher education, every party you meet, from the moment you first set foot on campus, is in on the game.”

The Great College Loan Swindle (Taibbi)

Horror stories about student debt are nothing new. But this school year marks a considerable worsening of a tale that ought to have been a national emergency years ago. The government in charge of regulating this mess is now filled with predatory monsters who have extensive ties to the exploitative for-profit education industry – from Donald Trump himself to Education Secretary Betsy DeVos, who sets much of the federal loan policy, to Julian Schmoke, onetime dean of the infamous DeVry University, whom Trump appointed to police fraud in education. Americans don’t understand the student-loan crisis because they’ve been trained to view the issue in terms of a series of separate, unrelated problems. They will read in one place that as of the summer of 2017, a record 8.5 million Americans are in default on their student debt, with about $1.3 trillion in loans still outstanding.

In another place, voters will read that the cost of higher education is skyrocketing, soaring in a seemingly market-defying arc that for nearly a decade now has run almost double the rate of inflation. Tuition for a halfway decent school now frequently surpasses $50,000 a year. How, the average newsreader wonders, can any child not born in a yacht afford to go to school these days? In a third place, that same reader will see some heartless monster, usually a Republican, threatening to cut federal student lending. The current bogeyman is Trump, who is threatening to slash the Pell Grant program by $3.9 billion, which would seem to put higher education even further out of reach for poor and middle-income families. This too seems appalling, and triggers a different kind of response, encouraging progressive voters to lobby for increased availability for educational lending.

But the separateness of these stories clouds the unifying issue underneath: The education industry as a whole is a con. In fact, since the mortgage business blew up in 2008, education and student debt is probably our reigning unexposed nation-wide scam. It’s a multiparty affair, what shakedown artists call a “big store scheme,” like in the movie The Sting: a complex deception requiring a big cast to string the mark along every step of the way. In higher education, every party you meet, from the moment you first set foot on campus, is in on the game.

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Fear of Christmas.

Santa Claus May Be Coming To Town, But Will The Shoppers Go Too? (G.)

Christmas is still seven weeks away, but, unsurprisingly, that does not stop retailers getting into the festive spirit early in the hope to attract crowds to the tills. On Tuesday, singer Rita Ora will turn on the Christmas lights on Oxford Street to mark the beginning of the festivities, close to Marks & Spencer’s Marble Arch branch. But will it be a merry Christmas for retailers? This week both M&S and Sainsbury’s will announce half-year results at an uncertain time for the high street. A recent survey from the CBI showed high street sales falling at their fastest rate since the height of the recession in 2009 as inflation causes households to put the brakes on spending. The cost of groceries, clothes and electronics has been rising since the Brexit vote last year, piling pressure on shoppers.

Recently, Asda’s income tracker found that there has been a slump on the spending power of the average household, while research from Lloyds Bank found that families are feeling the strain of the rising costs of living compared with a year ago. All of which could add up to a grim Christmas for retailers as shoppers struggle to deal with the post-Brexit economy. A further warning was sounded last week when Next reported a fall in October high street sales. Retailers will be hoping that Rita Ora will be able to instil some festive cheer to start off the shopping season.

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Same story all over the world.

In the World’s Most Livable Cities, Hardly Anyone Can Afford a Home (BBG)

Home ownership among young Australians has fallen to the lowest level on record, as an explosive property boom squeezes out all but the wealthiest. Supercharged by record low interest rates, a lack of supply and a tax system that favors property investors, home prices have surged more than 140% in the past 15 years, propelling Sydney past London and New York to rank as the world’s second-most expensive housing market. Melbourne, ranked the world’s most livable city the past seven years by the Economist Intelligence Unit, is now the planet’s sixth-most expensive place to buy a house. In response, home ownership among the young has plunged: only 45% of 25-to-34 year-olds own their own home, down 16%age points from the 1980s, with almost half the decline coming in the past decade.

At the same time, hefty mortgages have pushed household debt to a record, acting as a drag on the economy’s 26 years of unbroken growth. As more people retire still owing a mortgage, or renting, they are more likely to qualify for government welfare, undermining the A$2.3 trillion ($1.8 trillion) pension savings system. “The great Australian dream of home ownership is becoming a nightmare,’’ said Brendan Coates, a housing policy expert at the Grattan Institute. “It’s down to a collective failure of government policy that will take at least two decades to fix.” Voter angst over housing affordability is mounting: almost 90% of Australians fear future generations won’t be able to buy a home, according to an Australian National University survey.

Failure to address the issue is heaping pressure on a government already under fire for the botched rollout of a A$49 billion national high-speed internet network, and energy-policy bungling that’s sent power bills soaring and triggered fears of blackouts this summer. One of the biggest flashpoints are tax incentives that have turned housing into a speculative financial asset. First-home buyers complain they can’t compete against investors, who through a perk known as negative gearing can claim the costs of owning a property-for-rent – including mortgage interest – as a tax deduction against other income. The allure of property investment was turbocharged in 1999, when capital gains tax was halved. With housing prices seen as a one-way bet, investors piled in.

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People deserve to go to jail for what Australia has done to these people.

Australia -Again- Snubs New Zealand Offer To Take Refugees (AFP)

Australia Sunday snubbed New Zealand’s renewed offer to resettle 150 refugees held at remote Pacific camps, despite the closure of one detention centre in Papua New Guinea which has triggered a stand-off between detainees and the authorities. Canberra has been forced on the defensive by the move from Wellington’s new government, with Prime Minister Malcolm Turnbull saying Australia would instead prioritise a similar deal with the US to resettle refugees in America, despite slow progress. The issue re-emerged when the conservative Australian prime minister met his centre-left New Zealand counterpart Jacinda Ardern for the first time Sunday in Sydney. Pressure to resettle refugees increased after the Australian centre on PNG’s Manus Island was shut Tuesday after the nation’s Supreme Court ruled it unconstitutional.

About 600 detainees are refusing to leave citing safety fears if they move to transition centres where locals are reportedly hostile. But conditions in the camp are deteriorating with limited food and water and electricity cut off, with the United Nations warning of a humanitarian emergency. Under its tough immigration policy, Canberra sends asylum seekers who try to reach Australia by boat to two camps, in Manus and Nauru, and they are barred from resettling in Australia. Australia has struggled to move the refugees to third countries such as Cambodia or PNG. “The offer is very genuine and remains on the table,” Ardern told reporters after meeting Turnbull. But the Australian leader replied that while he appreciated the offer – first made by Wellington in 2013 – “we are not taking it up at this time”.

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Aug 182017
 
 August 18, 2017  Posted by at 8:53 am Finance Tagged with: , , , , , , , , ,  6 Responses »


Edward S. Curtis Slow Bull Dakota Sioux Medicine Man In Prayer 1907

 

Never Doubt Regression To The Mean (Rosso)
The Stock Market Bubble is So Big Even the Fed’s Talking About It (Phoenix)
Ice-Nine: The Plan To Freeze The Financial System (Rickards)
Neoliberalism: The Idea That Changed The World (G.)
So When Will China’s Debt Bubble Finally Blow Up? (WS)
Charlene Chu Lays Out China’s “Doomsday” Scenario (ZH)
China’s New Problem: Frenzy Of Consumer Lending Creates Debt Explosion (CNBC)
‘Simply Doesn’t Cut It’: Elizabeth Warren Slams Wells Fargo Board Changes (BI)
Deutsche Bank, Bank of America Settle Agency Bond Rigging Lawsuits (R.)
Who Is Lobbying Mike Pence And Why? (IBT)
Mr. President: Close Down More “Advisory Councils” (Rossini)
Spain Lacks Capacity To Handle Migration Surge – UNHCR (G.)

 

 

After a week of senseless violence and rhetoric, we could sure do with a medicine man praying for peace. I know, they say this is what the Fourth Turning looks like. But I don’t have to like it. Seeing some of the pictures of traumatized people in Barcelona I couldn’t help thinking how much they looked like those I’ve seen from Syria and Libya. Senseless violence.

 

 

Part of a longer piece on retirement distributions. Very strong graph.

Never Doubt Regression To The Mean (Rosso)

Since 1877, secular bull years have totaled 80 vs. 52 for bears, which is a 60/40 ratio. Surprised? Bear markets happen more often than investors are led to believe. They usually occur at times of overvaluation which makes recent retirees or those close to retirement at greater risk of experiencing negative or poor future returns. Bad luck or rotten timing. Either way, it’s going to be important to remain cognizant of portfolio distribution rates, place renewed priority on risk management, and adjust spending accordingly perhaps over the next ten years. Those who were proactive to minimize stock and high-yield bond portfolio risk (like several of the writers for Real Investment Advice), and redeployed capital into stocks at 13x earnings in the summer of 2009, helped new retirees at that time meet their retirement objectives. In addition, they have experienced a cyclical tailwind in stocks that has allowed greater distribution rates. Great luck!

Stock market cycles are vast and span decades. Don’t stumble into a Recency Bias trap where you believe current complacent market conditions lay the path to a smooth, high-return future. Markets are mean reverting mechanisms. Cycles indeed change. Usually, markets are more volatile with periods of 5% pullbacks occurring every 3-4 months. As investors, this year we’ve witnessed shallow retracements followed up by buys on the dips. An environment like this fosters overconfidence. Volatility may excite traders and be helpful to those who are seeking lower prices to purchase risk assets. For those in retirement distribution mode, volatility and corrections have potential to place portfolio longevity in jeopardy.

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“Remember, we’re talking about the Fed here… a group of people who go above and beyond to ignore risks in order to maintain the status quo…”

The Stock Market Bubble is So Big Even the Fed’s Talking About It (Phoenix)

The Fed confirmed yesterday that stocks are in a bubble. Lost amidst the usual Fed-speak about inflation and other items were the following nuggets. 1) “Equities” (read: stocks) were the primary reason the Fed discussed financial stability risks. 2) The Fed raised its assessment of financial stability from “notable” to “elevated.” 3) The Fed discussed “stock valuations.” This is simply incredible. Remember, we’re talking about the Fed here… a group of people who go above and beyond to ignore risks in order to maintain the status quo. Put another way, the stock market bubble is now so massive that even THE FED is talking about it. Indeed, the Fed is even openly states that the bubble might cause financial instability (read: a CRASH). It’s not difficult to see what the Fed is talking about. Based on their cyclical adjusted price to earnings ratio (CAPE) stocks are in CLEAR bubble territory.

As you can see, stocks are currently as overpriced as they were at the 1929 peak. Indeed, the only time stocks were MORE expensive was the Tech Bubble: the single largest stock market bubble in history. They say you don’t ring a bell at the top. But what the Fed did yesterday is DARN close. So what happens when the markets wake up to the fact that yet another massive bubble is beginning to burst?

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Freeze it before the collapse.

Ice-Nine: The Plan To Freeze The Financial System (Rickards)

In my book The Road to Ruin, I discuss a phenomenon called “ice-nine.” The name is taken from a novel, Cat’s Cradle, by Kurt Vonnegut. In the novel, a scientist invents a molecule he calls ice-nine, which is like water but with two differences. The melting temperature is 114.4 degrees Fahrenheit (meaning it’s frozen at room temperature), and whenever ice-nine comes in contact with water, the water turns to ice-nine and freezes. The ice-nine is kept in three vials. The plot revolves around the potential release of ice-nine into water, which would eventually freeze the rivers and oceans and end all life on Earth. Cat’s Cradle is darkly comedic, and I highly recommend it. I used ice-nine in my book as a metaphor for financial contagion.

If regulators freeze money market funds in a crisis, depositors will take money from banks. The regulators will then close the banks, but investors will sell stocks and force the exchanges to close and so on. Eventually, the entire financial system will be frozen solid and investors will have no access to their money. Some of my readers were skeptical of this scenario. But I researched it carefully and provided solid evidence that this plan is already in place — it’s just not well understood. But the ice-nine plan is now being put into practice. Consider a recent Reuters article that admitted elites would likely shut down the entire system when the next financial crisis strikes. The article claimed that the EU is considering actions that would temporarily prevent people from withdrawing money from banks to prevent bank runs.

“The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” said one source. Very few people are aware of these developments. They get a brief mention in the media, if they get mentioned at all. But people could be in for a shock when they try to get their money out of the bank during the next financial crisis. Think of it as a war on currency or a war on money. Even the skeptics can see how the entire financial system will be frozen solid in the next crisis. The only solution is to have physical gold, silver and bank notes in private storage. The sooner you put your personal ice-nine protection plan in place, the safer you’ll be.

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“..the ideal of society as a kind of universal market (and not, for example, a polis, a civil sphere or a kind of family) and of human beings as profit-and-loss calculators (and not bearers of grace, or of inalienable rights and duties)..”

Neoliberalism: The Idea That Changed The World (G.)

Last summer, researchers at the IMF settled a long and bitter debate over “neoliberalism”: they admitted it exists. Three senior economists at the IMF, an organisation not known for its incaution, published a paper questioning the benefits of neoliberalism. In so doing, they helped put to rest the idea that the word is nothing more than a political slur, or a term without any analytic power. The paper gently called out a “neoliberal agenda” for pushing deregulation on economies around the world, for forcing open national markets to trade and capital, and for demanding that governments shrink themselves via austerity or privatisation. The authors cited statistical evidence for the spread of neoliberal policies since 1980, and their correlation with anaemic growth, boom-and-bust cycles and inequality.

Neoliberalism is an old term, dating back to the 1930s, but it has been revived as a way of describing our current politics – or more precisely, the range of thought allowed by our politics. In the aftermath of the 2008 financial crisis, it was a way of assigning responsibility for the debacle, not to a political party per se, but to an establishment that had conceded its authority to the market. For the Democrats in the US and Labour in the UK, this concession was depicted as a grotesque betrayal of principle. Bill Clinton and Tony Blair, it was said, had abandoned the left’s traditional commitments, especially to workers, in favour of a global financial elite and the self-serving policies that enriched them; and in doing so, had enabled a sickening rise in inequality. Over the past few years, as debates have turned uglier, the word has become a rhetorical weapon, a way for anyone left of centre to incriminate those even an inch to their right. (No wonder centrists say it’s a meaningless insult: they’re the ones most meaningfully insulted by it.)

But “neoliberalism” is more than a gratifyingly righteous jibe. It is also, in its way, a pair of eyeglasses. Peer through the lens of neoliberalism and you see more clearly how the political thinkers most admired by Thatcher and Reagan helped shape the ideal of society as a kind of universal market (and not, for example, a polis, a civil sphere or a kind of family) and of human beings as profit-and-loss calculators (and not bearers of grace, or of inalienable rights and duties). Of course the goal was to weaken the welfare state and any commitment to full employment, and – always – to cut taxes and deregulate. But “neoliberalism” indicates something more than a standard rightwing wish list. It was a way of reordering social reality, and of rethinking our status as individuals.

Still peering through the lens, you see how, no less than the welfare state, the free market is a human invention. You see how pervasively we are now urged to think of ourselves as proprietors of our own talents and initiative, how glibly we are told to compete and adapt. You see the extent to which a language formerly confined to chalkboard simplifications describing commodity markets (competition, perfect information, rational behaviour) has been applied to all of society, until it has invaded the grit of our personal lives, and how the attitude of the salesman has become enmeshed in all modes of self-expression. In short, “neoliberalism” is not simply a name for pro-market policies, or for the compromises with finance capitalism made by failing social democratic parties. It is a name for a premise that, quietly, has come to regulate all we practise and believe: that competition is the only legitimate organising principle for human activity.

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I’m still convinced that people will react shocked if China is the first domino. But though Charlene Chu is right that China controls most of its system, its control over Chinese obligations abroad isn’t nearly that strong. Xi knows this, and that’s why Chinese purchases abroad are shrinking. China has become part of the global financial system with monopoly money. And sure, it has dollars and Treasuries, but they’re neither limitless nor limitlessly fungible. Weakest point? Local governments who have borrowed from foreign sources. Or from domestic ones that get their credit from foreigners. Shadow banks.

So When Will China’s Debt Bubble Finally Blow Up? (WS)

Corporate debt in China has soared to $18 trillion, or 169% of GDP, the largest pile of corporate debt in the world, according to the worried BIS. The OECD has warned about it earlier this year. The New York Fed warned about this debt boom in February and that it could lead to a “financial crisis,” but that authorities have many tools to control it. The IMF regularly warns about China’s corporate debt, broken-record-like, and did so again a few days ago, lambasting the authorities for their reluctance to tamp down on the growth of debt. The “current trajectory,” it said, “could eventually lead to a sharp adjustment.” The Chinese authorities – the government and the central bank, supported by the state-owned megabanks – have allowed some bonds to default, rather than bail them out, to make some kind of theoretical point, and they have been working furiously on a balancing act, tamping down on the credit growth that fuels the economy and simultaneously stimulating the economy with more credit to keep the debt bubble from imploding.

A misstep could create a global mess. “Everyone knows there’s a credit problem in China, but I find that people often forget about the scale; it’s important in global terms,” Charlene Chu told the FT. Back in 2011, when she was still a China banking analyst at Fitch Ratings, she went out on a limb with her radical estimates that there was much more debt than disclosed by the central bank, particularly in the shadow banking system, that banks were concealing risky loans in off-balance-sheet vehicles, and that this soaring opaque debt could have nasty consequences. Her outlandish views at the time have since then become the consensus. And this pile of debt is in much worse shape than officially acknowledged, she says in her latest report, cited by the FT. She’s now with Autonomous Research.

She figured that by the end of 2017, bad debt in China could hit 51 trillion yuan, or $7.6 trillion. Or about 68% of GDP! It would take the bad-debt ratio to an astronomical 34% of all loans, and way above the 5.3% that the authorities are proffering. And the authorities – the government, the central bank, supported by the state-owned banks – are now pulling all levers to keep this under control. “What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.”

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More Chu. Remarkable how she says “.. the ability to avoid recognizing losses only delays the inevitable day of reckoning as problems fester for longer, and grow larger than in an economy where actors respond purely to market incentives.” Remarkable because that describes America as much as it does China.

Charlene Chu Lays Out China’s “Doomsday” Scenario (ZH)

The first time we laid out the dire calculations about what is perhaps the biggest mystery inside China’s financial system, namely the total amount of its non-performing loans, by former Fitch analyst Charlene Chu we called it a “neutron bomb” scenario, because unlike virtually every other rosy forecast the most dire of which topped out at around 8%, Chu argued that the amount of bad debt in China was no less than a whopping 21% of total loans. While traditional bank loans are not Chu’s prime focus – she looks at the wider picture, including shadow banking – she says her work suggests that nonperforming loans may be at 20% to 21%, or even higher. The chart below shows just how much of an outlier Chu’s stark forecast was in comparison to her peers, and especially the grotesquely low and completely fabricated official number released by the banks and the government.

Recall that one of the biggest scandals in China in 2014 was the realization (as many had warned previously) that millions of tons of commodities were rehypothecated countless times, and thus “pledged” as collateral to numerous counterparties, and that as a result these same counterparties were unable to make sense of who owns what at one of China’s largest ports, Qingdao. In this context, it is safe to assume that loss given default rates in China are if not 100% (or more, which is impossible in theoretical terms but in practice is quite possible, as another curious side effect of unlimited collateral rehypothecation), then as close to it as possible.

Fast forward to today, when Charlene Chu, described by the FT as “one of the most influential analysts of China’s financial system” is back with a revised estimate that the bad debt in China has now reached a stunning $6.8 trillion above official figures and warns that the government’s ability to enforce stability has allowed underlying problems to go unchecked. [..] So if Chu held the wildly outlier view nearly two years ago that China’s NPLs amount to 21% of total, what is her latest estimate? The number is a doozy: in her latest report, Chu estimates that bad debt in China’s financial system will reach as much as Rmb51 trillion , or $7.6 trillion, by the end of this year, more than five times the value of bank loans officially classified as either non-performing or one notch above.” That estimate implies a bad-debt ratio of 34%, orders of magnitude above the official 5.3% ratio for those two categories at the end of June.

One factor that has foiled countless shorts over the years is that Beijing can simply order state-owned banks to keep lending to a lossmaking zombie company or to a smaller lender that relies on short-term interbank funding to stay liquid, and that’s precisely what has been happening, when looking at the various non-conventional credit pathways in China in recent years, which include Wealth Management Products, Bank Loans to Non-Bank Institutions, Shadow Banking, Repos and Certificates of Deposit.

But Chu said the ability to avoid recognizing losses only delays the inevitable day of reckoning as problems fester for longer, and grow larger than in an economy where actors respond purely to market incentives. That said, the recent spike in corporate bankruptcies indicates that even Beijing is slowly shifting to a more “market” driven stance. “What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.” Finally, putting it all in context is the following chart showing the total size of China’s financial sector, which as of the latest quarter has grown to $35 trillion, double the size of the US.

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Subtle tactics from Xi. Shift the debt but keep it high. What do you think the odds are that after the Party Congress China will withdraw into itself?

China’s New Problem: Frenzy Of Consumer Lending Creates Debt Explosion (CNBC)

The Chinese government is moving to tackle high debt levels, but the country is still borrowing more, Deutsche Bank said in a report released Thursday. That’s because short-term consumer debt in China has begun to surge as authorities try to alleviate the high levels of corporate indebtedness. The redistribution comes as Beijing is trying to strike a balance between stability and strength in its economy. Household debt in China is growing “very fast” and has accelerated in the last three to four months, according to Deutsche Bank: “If we focus purely on the consumer lending … then China has been undergoing something akin to a consumer lending frenzy.” According to Deutsche Bank, corporate credit has fallen to 45% of net new credit, down from 65% in the last 10 years. Instead, Beijing is allowing households and governments to borrow more to fund growth, which is targeted for around 6.5% in 2017, said the analysts.

Now, short-term consumer credit is growing 35% year-over-year, and may hit about 40% year-over-year by the end of December at the current trend, Deutsche Bank said. The bank said it isn’t yet clear where exactly the short-term consumer credit is being deployed, although 70 to 80% of that debt has historically been credit card-related. Overall household credit growth in China, the analysts noted, is growing around 24% year-over-year. At the end of the first half of 2017, corporate the debt-to-GDP ratio fell to 165% from the peak of 169% in the first quarter of 2016. That was “more of a ‘stabilization’ than a significant reduction,” Deutsche Bank said, calling it an “explosion” of growth. Meanwhile, household and government debt however rose by 8 to 9% of GDP. “So when viewed in aggregate China is still leveraging up apace,” the Deutsche Bank report concluded.

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Maybe somoneone should explain to Warren what the Fed is and does. Or Washington for that matter.

‘Simply Doesn’t Cut It’: Elizabeth Warren Slams Wells Fargo Board Changes (BI)

Wells Fargo’s effort to turn the page on consumer fraud scandals is falling short. That’s according to Massachusetts senator Elizabeth Warren, who has requested the Federal Reserve remove the bank’s board members who served between May 2011 and July 2015 in response to a series of vast consumer fraud scandals. The bank, already in hot water for creating millions of unauthorized accounts, recently admitted to also selling auto insurance without customers’ knowledge. Wells Fargo’s response? It has promoted an ex-Fed board governor, Elizabeth Duke, to chairwoman of the board. Duke, a champion of community banks while at the Fed, became a Wells Fargo director in 2015 and was named vice chair last year after the first round of scandals broke and led to the resignation of then-CEO John Stumpf.

Business Insider contacted Senator Warren to get her reaction. “Letting a few board members retire early and shuffling around current board members simply doesn’t cut it,” Warren said in an email. “The Fed should remove all remaining board members who served during the fake-accounts scandal.” Warren also renewed her call for board members’ removal with a new letter to Fed chairman Janet Yellen dated August 16, and voicing her dissatisfaction at what she sees as central bank inaction. “Instead of taking steps to remove the responsible Wells Fargo Board members, the Federal Reserve has actually sought to reduce their obligations and the obligations of other directors at the country’s biggest banks,” the letter said. In July, Warren repeatedly pressed Fed Chair Janet Yellen on the issue during recent Congressional testimony but Yellen would only say the central bank had the power to remove the directors — not that it had any inclination to do so.

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More free rides for bankers. Warren! Oh wait, your own party takes their contributions.

Deutsche Bank, Bank of America Settle Agency Bond Rigging Lawsuits (R.)

Deutsche Bank and Bank of America agreed to pay a combined $65.5 million to settle investor litigation accusing large banks of rigging the roughly $9 trillion government agency bond market over a decade. Preliminary settlements totaling $48.5 million for Deutsche Bank and $17 million for Bank of America were filed on Thursday with the U.S. District Court in Manhattan, and require a judge’s approval. Both banks denied wrongdoing. The settlements were the first in litigation accusing 10 banks of engaging in a “brazen conspiracy” to rig the market for U.S. dollar-denominated supranational, sub-sovereign and agency (SSA) bonds, court papers show. The investors are led by the Iron Workers Pension Plan of Western Pennsylvania, KBC Asset Management, and the Sheet Metal Workers Pension Plan of Northern California.

They accused banks of communicating by phone, chatrooms and instant messaging to share pricing data and function as a collective “super-desk,” while letting traders coordinate their strategies, to boost profit. This collusion allegedly ran from 2005 to 2015, and forced customers to accept unfair prices on bonds they bought and sold, court papers show. BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, HSBC, Nomura, Royal Bank of Canada and Toronto-Dominion Bank were also sued, and all sought dismissals. U.S. regulators have also examined possible manipulation in the SSA bond market. The Manhattan court is home to a slew of private litigation accusing big banks of conspiring to rig various financial markets, interest rate benchmarks and commodities. Late Wednesday night, another group of investors sued six banks, claiming they rigged the more than $1 trillion stock lending market.

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Simply how all of Washington works.

Who Is Lobbying Mike Pence And Why? (IBT)

Mike Pence has been among the Trump administration’s most prominent voices pressing to replace the Affordable Care Act, repeal post-crisis financial regulations, privatize American infrastructure and promote fossil fuels. Those positions would benefit the industries that have been directly lobbying Pence since he was elected vice president, according to federal documents reviewed by International Business Times. Amid speculation that Pence could mount his own presidential bid — or replace Trump if he leaves office early — the former Indiana governor and U.S. congressman has been directly lobbied by major health care and drug companies, Wall Street firms, oil and gas interests and industry groups interested in shaping a federal infrastructure privatization initiative.

Pence’s office has also been lobbied by his former congressional chief of staff on behalf of insurance, defense contracting and telecommunications companies — and that lobbying revolved around health care policy, defense spending and net neutrality. Pence has enthusiastically backed the policies by the lobbying firms. While other vice presidents have been the target of lobbying in the past, Pence has been viewed as one of the most powerful vice presidents in recent history. He is a longtime politician serving a president with no experience in elected office, and during his vice-presidential selection process, Trump was reportedly offering potential running mates a vast policy portfolio to oversee. Pence also oversaw Trump’s White House transition, which shaped the administration’s personnel decisions and many of its policy proposals.

Companies that have lobbied the vice president have spent tens of millions of dollars in total federal lobbying so far this year. Here is a deeper look at the major industries lobbying him — and what exactly they have been pushing for in their efforts to influence the vice president. Despite his onetime support for expanding Obamacare subsidies in his home state, Pence has reversed course and led the Trump administration’s legislative bid to repeal the Affordable Care Act — just as health insurers have been lobbying him in 2017.

“If you’re one of those Americans who want to see Obamacare repealed and replaced, we literally are days, or maybe just weeks, away from being able to accomplish that historic objective,” he told conservative talk radio host Rush Limbaugh last month. “We believe if they can’t pass this carefully crafted repeal and replace bill — we do those two things simultaneously — we ought to just repeal only and then have enough time built into that legislation to craft replacement legislation.” The Pence-led repeal effort could be a financial boon to health insurers like Blue Cross and Blue Shield, as well as UnitedHealthcare Group — both which have been in direct contact with Pence, according to records reviewed by IBT.

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Libertarian view.

Mr. President: Close Down More “Advisory Councils” (Rossini)

So President Trump closed down his “Manufacturing Council” and no one cheered? What a shame. Why was there a “Manufacturing Council” to begin with? It’s not the job of the president to meddle with our economy. His job description says nothing about benefitting “manufactures” or “scientists” or “Silicon Valley” or anyone else. These “Councils” are breeding grounds for the cronyism that has virtually destroyed the American Dream. If a CEO has the ear of the president, do you think he’s going to “advise” the president to do anything that will hurt his own business? On the other hand, would the CEO be tempted to advise the president to hurt his competitors, both foreign and domestic? Would the CEO advise the president to make it hard for start-ups and entrepreneurs to compete?

Would he advise for subsidies? Strict licensing laws? The president doesn’t need Advisory Councils, Czars, or any other destroyer of our economic liberties. Let the CEO’s be “counciled” themselves by free market prices. Let them deal with economic reality as it is, not massage the president for unconstitutional interventions. Let them stand on their own. Either satisfy consumers profitably, or fold up so that other people can. The president, at the same time, should stop pretending that he can push buttons and pull levers to make the economy run. Nothing could be further from the truth. Government intervention only stifles the economy.

The economy continues to function despite the political intrusions that exist. Fortunately, entrepreneurs are creative enough to always find ways around so-called government “regulations”. There’s always a loophole somewhere. But why make it hard on entrepreneurs to begin with? Just get the heck out of the way! But alas, the government and multi-national corporations are attached at the hip. One scratches the back of the other. Mr. President, close down all the “Advisory Councils,” and keep your hands off the economy.

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Spain’s views on this may have changed last night.

Spain Lacks Capacity To Handle Migration Surge – UNHCR (G.)

Spain lacks the resources and capacity to protect the rising number of refugees and migrants reaching it by sea, the UN refugee agency has said. The warning from UNHCR comes as the Spanish coastguard said it rescued 593 people in a day from 15 small paddle boats, including 35 children and a baby, after they attempted to cross the seven-mile Strait of Gibraltar. The number of refugees and migrants risking the sea journey between Morocco and Spain has been rising sharply, with the one-day figure the largest since August 2014, when about 1,300 people landed on the Spanish coast in a 24-hour period. About 9,300 migrants have arrived in Spain by sea so far this year, while a further 3,500 have made it to two Spanish enclaves in north Africa, Ceuta and Melilla, the EU’s only land borders with Africa.

María Jesús Vega, a spokeswoman for UNHCR Spain, said police were badly under-resourced and there was a lack of interpreters and a shortage of accommodation for the new arrivals. “The state isn’t prepared and there aren’t even the resources and the means to deal with the usual flow of people arriving by sea,” she said. “Given the current rise, we’re seeing an overflow situation when it comes to local authorities trying to cope at arrival points.” Vega said the agency was seeing a very high number of vulnerable people including women, victims of people-trafficking, and children. “What we’re asking is for there to be the right mechanisms in place to ensure people are treated with dignity when they come,” she said.

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