Dec 202020
 
 December 20, 2020  Posted by at 2:48 pm Finance Tagged with: , , , , , , , , , , , , , , , ,  35 Responses »


Paulus Potter De stier 1625

 

 

Dr. D today from an entirely unexpected angle: cattle farming from a engineer’s point of view. His interest here stems from the increasing numbers of people wanting to move “back to the land” in COVID time, who have very little idea what that entails. Well, here it is, here’s your manual:

 

 

Dr. D: Since the idea of 1840 has come up, let’s do something useful and work out math on 1840’s factory-food system. That is to say, cows.

In 1840 the Victorian age had started, and the world was moving away from the post-medieval 18th century in important ways. Far from the millennia-long tradition of shepherds and commons punctuated by manor houses, life was moving towards distributed farmsteads integrated with modest small businesses in the nearest town. From centuries-old regional breeds, active breeding had developed powerful new plants and animals with new niche purposes overnight. And likewise, active management of pastures led to a revolution in hay and fodder unimagined a few years previously.

Although railroads and canals radically transformed nations overnight, permitting that specialization of labor and radically reduced costs that expertise and infrastructure bring – that is to say, “Capital” – nevertheless, life remained solidly local by our standards. A farm might have been cleared last year or 200 years previous. It might be attached to a railroad or be in the Alps. It might be under the eye of the Feudal Lord or might be a colony of Anabaptists. But the general structure was now one of single family ownership, large or small, with a central house and barn, with fields moving back from the house and road into ever-wilder, less human territory, eventually becoming impassible forest in the great beyond.

While there was a human transformation happening, daily items were more historic than we might credit: a farm might have few iron nails and hinges, few window panes, with turf cellars and wood box granaries that a Viking would recognize. Spinning and weaving existed on site or in the cots nearby. Although an explosion in factory goods was beginning, there was still little to buy, and few stores to buy things from. At the same time, the new availability of iron, of steel for blacksmiths, but also for saws and new wood mills made materials unimaginably cheap, as material science opened the world to new inventions. The revolution of Jethro Wood’s steel plow opened up soil to production unimaginable a few years before, and Jethro Tull’s grain drill was finally becoming common instead of simply tossing seeds by the handful for the birds on ox-harrowed ground.

 

American corn, maize, was transforming from Indian-flint grown in hills and hung on poles to endless fields of food, cattle feed even for cities and feedlots far away. And with it, the opening of the north, of feeding chickens, pigs, and horses in a newly-sawn Dutch barns all winter. And cows. Cows have a different place in human life. Unlike sheep, who need little and can stay faraway much of the year, or chickens which require daily tending, cows live in the middle place. They can stay in the field, but essentially must be fenced. They may not need humans, but when used for milk they require human attention twice daily all year.

They can be an expensive breakeven, but with the right support and infrastructure, they are highly profitable in diverse ways: Milk, butter, cheese, which may be too much for one farm without a nearby market. Meat, leather, bones, which again tie into the butchers, markets, prices, tanners and railroads. And oxen, the slow tractor of the small, as well as calves for sale, and the milk they cause, starting the year over again. So a cow is not a cow: it’s a system. The system has parts, and the parts are not only breeds, traditions, methods, but expensive standing infrastructure – barns, fences, wells, dairies, markets — Capital — or else they are put afield, Roman-style, and wild, near-subsistence living returns again.

Of course all methods, all areas, all answers are local, but let’s take your British/French/U.S. areas as an example. In these wet, temperate areas, land requirements are ~1 acre/cow. In addition, in the north, but also in the new scientific methods of Victorian Britain, they were no longer leaving cows to destroy winter pasture in the cold and rain, but haying and sheltering them in barns at the expense of a building, the fields…and the enormous time of mucking and haying. But still it was a well-paying improvement.

 

A 1,200lb cow eats 10,000lbs a year. At this time, the high-tech cow would be left to field 9 months of the year. So let’s say 3 months or 3,300lbs of hay per cow. You need more rare and expensive Capital of troughs, sheds, and stanchions to feed carefully at this time, so much is wasted. Estimate 5,000lbs dry hay per cow. Cows are not “cows”; they live in herds. To milk, you need calves. To calve you need bulls. Bulls are generally overhead as they are quickly too tough for the butcher, and too tough for the farmer without a very strong fence and strong britches.

You can’t have a herd of 500 cows either: they are too many and will trample the soil to powder anywhere within walk of the house and barn. So you’re set with 5, 10, 20 cows for a family stead, and not many more on a manor, when for the same reasons they will break off and sublet to a new barn and pasture. 10 cows x 5,000lbs = 50,000lbs of hay. 25 tons. They used the new haystacks, cranes, hay elevators, but let’s visualize in hay bales, a technology common 70 years later. At 50lbs/bale, it’s 1,000 bales. 10 high, 10 deep, 10 wide. That’s 30ft x 16 feet x 14 feet.

A modest 1-story house. Picture 2 semis packed tight, +4 semis loose hay. For only three months. Weather and yield vary wildly by area and year but let’s say hay fields produce 3 tons per acre, so10 acres guarded hay in addition to 10 acres fenced summer pasture. What do we get for it? Hard to figure exactly but +2 gal/day/cow for these hardier breeds which varies wildly with shelter, season, and diet. 2 gallons milk = 2 pounds of cheese. It takes 1 year to raise beef, so 7,500lbs of hay = 1,200lb cow = 750lb beef.

While you need 20 acres for the feed alone, you’ll also need crop rotation, a barn, a springhouse, a dairy, an implement shed, a repair garage, a human house and cellar, and because of humans on site to support the cows: a chicken coop, pigs to eat the leftover dairy, a smokehouse, a garden and orchard, as well as wood for heat. That’s 1 acre / face cord, so let’s say 20 acres for cows, 10 acres for crop rotation, 10 acres for wood, and 10 acres for the homestead, garden, and buildings. What is the common size of American farms from Cape Cod to Iowa? 50 acres. 20 hectares. How many people? 4-10/farm. 1-2 humans/acre.

Why do I bring this up? It gives you a rough sense of transforming a suburban housing development back into the farm it came from. First: there’s no longer any forest. That means no boards, no firewood. We have new materials and oil too, so let’s not dwell on this. There is an enormous surplus of existing buildings. How many acres per house? Presently, it’s 1/5 acre. How many people per house? There are unimaginable difficulties answering this, but let’s say 2 people/house. That’s 10 people per acre.

 


Pablo Picasso Bull – Plate 4 1945

 

Starting to see the problem? At merely the cow-size, even ignoring the existing buildings, using McMansions for hay, ignoring firewood, even using solar or (insert fantasy here) you have to displace 20 acres, or 200 people. But you only have 10 cows feeding those 200 people, or 1/20th of 20 gallons = 1 gal, or 1 quart of milk + 12 oz of cheese per day. No grains, no veg. You could halve the population density and it’s not much better. This is your 1840s reality.

They might say this explains why we must have no cows and become vegetarians. But aside from land that cannot be gardened – the entire U.S. cattle plains, for instance, or the Swiss Alps – this is just more false science. Howso? There are 30 calories per cup of kale, 200 calories/pound. There are 1,500 calories per beef pound – 1,900cal/lb dry (jerky). So you need to eat 7x more kale than meat. All you’re doing is concentrating vegetables into meat with a small efficiency loss. So you can EAT more as a vegetarian, but you also HAVE to eat much more to break even. So when they say they can create more food by outlawing meat, be careful of what they’re saying. They’re not creating more calories, more life stuff. They will also calculate the maintenance of a cow from birth on corn feed, which is foolhardy. High-cost, high-input corn or grain feed is only used – or should be – in the last weeks if at all.

Comparing your 1840 yields (i.e. without petroleum fertilizer), that’s 800lbs field corn/acre – a very productive crop. But we just said we have 750lbs/acre in grass-fed beef. The calories are 1,600cal dry corn vs 1,900cal dry beef. Where’s the savings? Where’s the rennet, the suet, the soap, the fertilizer, the leather that could greatly increase the use, the “profit”, the value? Where’s the diversity? Where’s the life?

 

Here’s the engineering reality: only 442BTUs of sunlight fall per square foot. It may fall evenly or more in summer and less in winter. It may fall on trees, grass, or houses. You can eat it as beef, sugar or kale. You can burn it in the stove. But that’s the energy input of a non-carbon world. And since photovoltaic is at 12% efficiency, solar may be the single least efficient way to capture and store these BTUs – and that’s beyond the rare-earths, glass smelting, world-wide transportation, back-end space-age infrastructure, transmission loss, and replacement problems. Trees, grass, and cows may be the best way. It depends on your goal.

Now can I increase yields from 1840 levels? Yes. A lot. And they did too – I’m describing only one food stream of many overlapping. And although the soil is ruined and the present structures are practically useless in what Kunstler calls “the largest misallocation of resources in world history,” we can still leverage perfect roads, electric, ditches, water lines and structures. But to do so we would need to un-misallocate them, completely convert them out of centralization and suburbia, out of consumption and back into production, and all that takes time, energy, and materials.

And to think I started this discussion calculating how many people and how many scythes to take in those 10 acres of hay. 2 acres per man per day x 5 men, 2 pounds of steel per scythe per man. 10 pounds of finest steel per hay barn. 9 million barns, 90 million pounds of fine scythe steel for this one tool alone. 35 million blades, 1 blade smithed per man per day, 35 million days…on and on and on.

So if you plan to adjust to a new rural world, might want to start early and beat the rush.

 


Albert Cuyp Cows in a river 1650

 

 

 

 

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Jul 122017
 
 July 12, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »


Paul Cézanne The Card Players 1895

 

The Media’s Mass Hysteria Over ‘Collusion’ Is Out Of Control (WaPo)
Donald Trump’s Very Own Big, Fat, Ugly Bubble (Stockman)
Canada’s Housing Boom Expected to Spark Rate Rise (WSJ)
The Return Of The “Minsky Moment” (Rosso)
Martin Luther King’s Economic Dream Changed The Federal Reserve Forever (BI)
Russia Will Retaliate If US Does Not Release Property – Lavrov (R.)
Qatar’s First Shipment of Air-Lifted Cows Lands in Doha (BBG)
Greece’s Market Return May Be Imminent (R.)
NGOs Fearful Of Handing Island Refugee Camps To Greek State (K.)
EU Migrant Rescue Mission ‘Led To Increase In Deaths’ (Ind.)

 

 

The echo chamber smells trouble and starts eating its own tail. The WaPo turns on its co-conspirators.

The Media’s Mass Hysteria Over ‘Collusion’ Is Out Of Control (WaPo)

Hysteria among the media and Trump opponents over the prospect of “collusion” between the Trump campaign and the Kremlin may have hit its crescendo this week. That’s right: The wailing from the media and their allies about Donald Trump Jr.’s meeting with some “Kremlin-connected Russian lawyer” (whatever that means) may be the last gasp of this faux scandal. Good riddance. Predictably, the New York Times started the ball rolling with front-page coverage, going so far as to argue, “The accounts of the meeting represent the first public indication that at least some in the campaign were willing to accept Russian help.” As if this were some breakthrough moment. The Times followed up with a headline yesterday that the meeting request and subject matter discussed in the prior story were transmitted to Trump Jr. via an email.

Holy cow. The Times is so desperate to move the story that the meeting’s arrangement over email is being made into Page 1 news. You would have thought it had come through a dead drop under a bridge somewhere. And, of course, CNN has been apoplectic in its breathless coverage, running one story after another about this “development” on the air and online. But Politico takes the prize for the most over-the-top, made-up news, claiming that Donald Trump Jr.’s meeting could amount to a crime. As I have written before, there are always people hovering around campaigns trying to peddle information and traffic in supposed silver bullets. There should be nothing to report on when a private citizen who works at a campaign takes a meeting with a friend of a friend offering information about an opponent. And yet, the media wants to make it a smoking gun.

[..] Regarding the delusion that a crime actually occurred in any of this, my favorite allegation is that by having this meeting and listening to what was said, Donald Trump Jr. somehow could have violated the law. According to Politico, Trump Jr.’s “statements put him potentially in legal cross hairs for violating federal criminal statutes prohibiting solicitation or acceptance of anything of value from a foreign national, as well as a conspiracy to defraud the United States.” I’m just barely a lawyer, but I know over-lawyering when I see it. I mean, by that standard, what if someone walked into a campaign and suggested an idea that led to that candidate’s victory? Would it have been a crime to accept “a thing of value” in the form of an idea? Of course not. This whole thing is getting weird.

For many in the media and elsewhere, the collective grievances that they have against Trump personally, the White House as a whole and Trump’s policies somehow justify their zealous promotion of the “collusion scandal.” But not because the story is valid. Rather, the media know that they are not getting to Trump with anything else. Today, much of the “news coverage” of Trump and Co. is about payback. The media thinks they aren’t getting the truth and so they don’t have to deliver it either. It is a bad cycle that is not working for the White House or the media. With this much intensity, it is hard to see how this ends well..

Read more …

Rumor has it Gary Cohn will take over from Yellen.

Donald Trump’s Very Own Big, Fat, Ugly Bubble (Stockman)

The overwhelming source of what ails America economically is found in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street. Bubble Finance policies have fueled an egregious financial engineering by the C-suites of corporate America. This bubble has skyrocketed to the tune of $15 trillion of stock buybacks, debt-fueled mergers deals and buyouts of the last decade. The Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and $15 trillion in debilitating debts on the homes, cars, incomes and futures of what used to be middle class America. It also led politicians down the path of free lunch fiscal policy.

By monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed numbed the US economy from effects of crowding out and rising interest rates that would have come from soaring government deficits. This left the public sector impaled on Peak Debt. Ever since Alan Greenspan launched Bubble Finance in the fall of 1987, public debt outstanding has increased by nearly 9 times. Measured against national output, the Federal debt ratio has risen from 47% to 106% of GDP. These actions have stripped-mined balance sheets and cash flow from main street businesses. The Fed has stifled economic growth while delivering multi-trillion windfalls into the hands of a few thousand speculators on Wall Street.

These rippling waves of financial mutation are why the US economy is visibly failing and why vast numbers of citizens in Flyover America voted for Donald Trump for president. Ironically, even as he stumbled to his victory on November 8, Trump barely recognized that the force behind all the economic failure that he railed against was the nation’s rogue central bank. Only when it occurred to him that Janet Yellen was doing everything possible to insure Clinton’s victory did he let loose an attack on the Fed. In his famous warning, he leveled that America was threatened by a big, fat, ugly bubble. [..] When Wall Street launched a phony Trump Reflation trade during the wee hours of election night, the Donald forgot all about the great bubble. In fact, he quickly embraced it as a sign that investors were enthusiastically embracing Trump-O-Nomics.

No new arrival in the Oval Office was ever more mistaken.

Read more …

Create the bubble with ZIRP, milk it for all you can, then walk out and leave millions with grossly overvalued assets as the economy sinks.

Canada’s Housing Boom Expected to Spark Rate Rise (WSJ)

The Bank of Canada is widely expected on Wednesday to raise its benchmark policy rate for the first time in seven years, signaling the Canadian economy is on the path to recovery after years of tepid growth following the global slump in commodities. Canada’s central bank, led by Gov. Stephen Poloz, is joining peers at the Federal Reserve, the Bank of England and the European Central Bank as they dial back on the extraordinary run of ultralow interest rates aimed at jump-starting the global economy in the aftermath of the recession of 2008-09. In Canada, which was hit with an income shock after the downturn in prices of oil and other commodities, low rates have resulted in an extended period of loose money that has fueled a housing boom in pockets of the country.

Some analysts say soaring real-estate prices, which have stretched affordability and forced official measures to curb investing, could be a factor driving Wednesday’s expected increase. Canadian housing starts rose 9.1% to a seasonally adjusted annual rate of 212,695 units in June, Canada Mortgage and Housing Corp. said on Tuesday. Amid recent growth in gross domestic product and robust job creation, Mr. Poloz has signaled he will remove stimulus this week, monetary-policy analysts said. That is even though inflation—at an annualized 1.3% rate in May—remains well below the central bank’s 2% target, and wage growth remains stubbornly low.

Read more …

See, I don’t know who Rosso means when he talks about people having forgotten Minsky. Are those the people whose investments he advises on?

The Return Of The “Minsky Moment” (Rosso)

As he was a proponent of a pliable system of reform which could be altered based on the innovative risk humans create, Minsky would have been disappointed to know that the interconnected global shadow banking web continues to expand, Federal Reserve policies have created a great misallocation of financial resources, price discovery of risk assets is basically non-existent and the segment of the population or Main Street that was a concern for him, suffers great wealth inequality and wage disparity. Several catalysts exist today that may remind investors of Minsky. Readers should remain vigilant and keep the following concerns in mind as they invest and manage their personal wealth. The Federal Reserve has appeared to gravitate from data dependent to data ignorant.

Economic data remains sub-par. Inflation has fallen below the Fed’s target of two percent, yet they appear in their statements, determined to continue hiking short-term rates. In theory, a rate-tightening cycle is designed to take the edge off, tap the brake on accelerating economic growth. So, with GDP running below the long-term average of three percent and the personal consumption expenditures or PCE Index, the Fed’s preferred measure of inflation slipping to 1.4% year-over-year in May, the lowest in six months, a question begs asking. Yellen, what are you putting a brake on? Based on the analysis below, the Fed has no reason to continue rate hikes this year. However, they seem hell-bent to ignore the data. Why?

The Fed may be on an unofficial mission to curb stock market speculation. Several Fed officials including Vice-Chairman Stanley Fischer and San Francisco Fed President John Williams have voiced their concerns over lofty stock market valuations. Regardless, of the Fed’s agenda to forge ahead with rate hikes, it’s crucial to remember that low interest rates have been the primary accelerant for stock market appreciation, not earnings growth; rising rates along the yield curve eventually puts a damper on the economy and sets up a prime catalyst for market correction. If the Fed moves too quickly or inflation heats up to warrant swifter action, then a Minsky Moment may be closer than pundits believe.

Read more …

Undoubtedly well meant, but it turned the Fed into a political instrument. Not a good thing.

Martin Luther King’s Economic Dream Changed The Federal Reserve Forever (BI)

Most Americans have watched or heard Martin Luther King’s famous “I Have a Dream” speech, delivered before the Lincoln Memorial in Washington in 1963. Few know his rousing call for racial equality was the culmination of an event called the March for Jobs and Freedom. This is crucial because it reveals the central, and largely unrecognized, role of the American civil rights movement of the 1960s on the US approach to economic policy. That included a more prominent role for government in economic stimulus policies and, importantly, a broader, jobs-focused mandate for the Federal Reserve. That role is the focus of a new report by a group of Fed policy activists known as Fed Up, a coalition of community and pro-poor groups that have been pushing the Fed to adopt a more consciously pro-full employment stance.

“From the 1930’s and through the rise of the civil rights movement, racial justice activists including Coretta Scott King, called for a coordinated federal effort to attain full employment,” says the report, published in conjunction with the liberal Center for Economic and Policy Research, referring to Martin Luther King’s wife, who continued his fight after his assassination in 1968. “They envisioned an economy where every person who seeks employment can secure a job. King joined Congressional leaders Augustus Hawkins and Hubert Humphrey in eventually passing the landmark 1978 Full Employment and Balanced Growth Act (Humphrey-Hawkins) which legally required the Fed to pursue maximum employment.” Before the act, the mandate had been limited to low, stable inflation. To this day, Fed Chair Yellen’s semi-annual address to Congress on monetary policy, which is taking place on Wednesday, is known as the Humphrey-Hawkins testimony.

Fed Up and CEPR argue that the employment mandate, while not fully realized, has already generated millions of additional jobs over time, particularly in poor communities, which are most affected by steep levels of persistent unemployment. “There can be no question that the Fed would never have allowed the late 1990s boom and the consequential sharp reduction in the unemployment rate if it did not have a full employment mandate,” the study argues after reviewing data from that period and the rationale used by then-chairman Alan Greenspan for keeping interest rates low despite falling unemployment. The debate remains highly relevant today given that some Fed officials, despite their duty to maintain maximum employment, have recently expressed curious worries about the unemployment rate falling too quickly.

Read more …

Expectation is Russia will expel 30 US diplomats.

Russia Will Retaliate If US Does Not Release Property – Lavrov (R.)

Russia will retaliate in a reciprocal manner if the United States does not heed its demands for a return of diplomatic assets, Foreign Minister Sergei Lavrov said on Tuesday. “We hope that the United States, as a country which promotes the rule of law, will respect its international obligations,” Lavrov told reporters after a meeting in Brussels with EU foreign policy chief Federica Mogherini. “If this does not happen, if we see that this step is not seen as essential in Washington, then of course we will take retaliatory measures. This is the law of diplomacy, the law of international affairs, that reciprocity is the basis of all relations.” He declined to answer when asked if that meant that Russia would expel U.S. diplomats and seize diplomatic property.

Read more …

Qatar flying in cows from Australia and fruit from Peru says a lot about what’s wrong with the world.

Qatar’s First Shipment of Air-Lifted Cows Lands in Doha (BBG)

The first batch of an anticipated 4,000 dairy cows was flown into Qatar Tuesday, five weeks after the start of a Saudi Arabia-led boycott of the Gulf country. A shipment of 165 cows, sourced from Germany and flying via Budapest, are ready to produce milk immediately and the product should reach local markets this week, according to a spokesman for Power International Holding, which is importing the animals. Other shipments will include cows from Australia and the U.S., and should arrive every three days, the company spokesman said Tuesday. In total, the bovine airlift is expected to bring in the 4,000 cows within about a month. Led by Saudi Arabia, Qatar has been accused of supporting Islamic militants, charges the sheikdom has repeatedly denied.

The boycott that started on June 5 has disrupted trade, split families and threatened to alter long-standing geopolitical alliances. The showdown has forced the world’s richest country per capita to open new trade routes to bring in food, building materials and equipment for its natural gas industry. As part of its response, Qatar has imported Turkish dairy goods along with Peruvian and Moroccan fruit. Until last month, most of the fresh milk and dairy products for Qatar’s population of 2.7 million was imported from Saudi Arabia. When all the cows purchased by Power International Chairman Moutaz Al Khayyat are flown in, his brand of milk will supply about 30 percent of the country’s needs

Read more …

What’s Schäuble up to now?

Greece’s Market Return May Be Imminent (R.)

Greece could return to financial markets in the next few weeks, investors and bankers close to the discussions told Reuters, raising private cash that would mark an important step towards ending its dependence on official funding next year. Athens’ largest creditor, the European Stability Mechanism, said on Monday that Greece should develop a strategy to end a three-year exile from markets before its current bailout program expires in mid-2018. Greek finance minister Euclid Tsakalotos met with investors in London last month and one of those funds, BlueBay Asset Management, said the volume of calls they are receiving from bankers about a potential deal suggest it’s very close. “Over the last few months we would get one call on this every couple of weeks (from bankers), but over the last 10 days it seems to be every day I’m getting a call asking about this particular topic,” BlueBay’s Mark Dowding told Reuters.

“One senses we are getting to a point where this feels more imminent. We could well expect to see a deal in the next couple of weeks before investors depart for their summer holidays.” Dowding said BlueBay holds Greek bonds and would buy a new bond issue if the price was attractive. Tsakalotos also met investors including the world’s biggest bond fund PIMCO and US-based asset manager Standish, sources close to those meetings told Reuters. [..] A senior Greek government official told Reuters last week that no decision had yet been made on the timing of a deal. A banker advising Greece on its market return told Reuters on condition of anonymity: “They (Greece) are monitoring the market and they are trying to do something right now, so I wouldn’t rule out a deal within the next week or two.”

Read more …

FIghts in the Lesbos Moria camp yesterday.

NGOs Fearful Of Handing Island Refugee Camps To Greek State (K.)

Seven top NGOs aiding refugees in Greece have issued a joint statement expressing their concerns over the handover of responsibilities at migrant camps on the Greek islands to the government as of August 1. The NGOs say the Greek government has released few details about how it plans to continue providing existing assistance to residents at the camps. A deterioration of living conditions and diminished access to essential services are the main concerns cited if the Greek government does not communicate a plan to the NGOs before the handover. Since the start of the year, more than 9,500 refugees and migrants have arrived on the Greek islands, where nearly 14,000 are currently stranded. “Without a transitional plan, vulnerable men, women and children will be put at greater risk,” the statement said.

Read more …

The EU: where people go to drown.

EU Migrant Rescue Mission ‘Led To Increase In Deaths’ (Ind.)

A major naval mission spearheaded by the EU has failed to tackle people smuggling in the Mediterranean and may even be leading to higher death tolls, a new report has found. Operation Sophia, launched in 2015, has had little effect in deterring migration and its mandate should not be renewed, according to findings by the House of Lords EU External Affairs Sub-Committee. But the report concludes that the operation’s search and rescue work which has saved the lives of many people should continue. The initiative, involving 25 EU member states including the UK, was set up in the wake of disasters in which hundreds of migrants drowned attempting to reach Europe.

Yet detection of irregular migrants on the central Mediterranean route was at its highest level in 2016, when 181,436 people arrived in Europe by this route — an increase of 18 per cent on 2015, when the figure was 153,842. A naval mission is the “wrong tool” to tackle irregular migration, which begins onshore, the assessment found. It claimed an unintended consequence of Operation Sophia’s destruction of vessels had been that the smugglers have managed to adapt, sending migrants to sea in unseaworthy vessels. This led to a tragic increase in deaths, with 2,150 in 2017 to date, the report added. But it also noted that Operation Sophia vessels have rescued more than 33,000 people since the start of the mission.

The report comes just days after Amnesty International said “reckless” EU operations were destroying smugglers’ safest boats in the Mediterranean and causing more refugee deaths. It claimed the EU had “turned its back” on the search and rescue strategy. A report by the human rights group argued that the search-and-rescue measures implemented in 2015 dramatically decreased the numbers of deaths at sea, but that EU governments had now shifted their focus to disrupting smugglers and preventing boats departing from Libya. It said the EU strategy was “exposing refugees and migrants to even greater risks at sea”, destroying so many of the wooden boats used by smugglers that huge numbers of people had now started making the crossing on less safe rubber dinghies.

Read more …

Jun 132017
 
 June 13, 2017  Posted by at 9:55 am Finance Tagged with: , , , , , , , , ,  1 Response »


Pablo Picasso Les femmes d’Alger Version 0 1955

 

The Average Stock Is Enormously, Tremendously Overvalued (Katsenelson)
72% Of US Businesses Are Not Profitable (Simon Black)
UBS Has Some Very Bad News For The Global Economy (ZH)
Fed To Raise Interest Rates, Give More Detail On Balance Sheet Winddown (R.)
EU Plans to Force Relocation of Euro Clearing After Brexit (BBG)
Norway Central Bank Explains How Money Is Created (Norges Bank)
Qatar Spends $8 Million To Airlift 4,000 Cows (BBG)
Things To Come (Jim Kunstler)
Multi-Million Dollar Upgrade Planned To ‘Failsafe’ Arctic Seed Vault (G.)
EU To Open Case Against Poland, Hungary, Czech Republic Over Refugees (R.)
ECB Unlikely to Include Greece in QE in Coming Months (BBG)
Greek Debt Deal ‘Not Far’ Says New French Finance Minister (AFP)
One Dead As 6.3-Magnitude Earthquake Rocks Greek Islands Lesbos, Chios (AFP)

 

 

No markets, no discovery, just smoke.

The Average Stock Is Enormously, Tremendously Overvalued (Katsenelson)

We are constantly looking for new stocks by running stock screens, endlessly reading (blogs, research, magazines, newspapers), looking at holdings of investors we respect, talking to our large network of professional investors, attending conferences, scouring through ideas published on value investor networks, and finally, looking with frustration at our large (and growing) watch list of companies we’d like to buy at a significant margin of safety. The median stock on our watch list has to decline by about 35–40% to be an attractive buy. But maybe we’re too subjective. Instead of just asking you to take our word for it, in this letter, we’ll show you a few charts that not only demonstrate our point, but also show the magnitude of the stock market’s overvaluation and, more importantly, put it into historical context.

Each chart examines stock market valuation from a slightly differently perspective, but each arrives at the same conclusion: the average stock is overvalued somewhere between tremendously and enormously. If you don’t know whether “enormously” is greater than “tremendously” or vice versa, don’t worry, we don’t know either. But this is our point exactly: When an asset class is significantly overvalued and continues to get overvalued, quantifying its overvaluation brings little value. Let’s demonstrate this point by looking at a few charts. The first chart shows price-to-earnings of the S&P 500 in relation to its historical average. The average stock today is trading at 73% above its historical average valuation. There are only two other times in history that stocks were more expensive than they are today: just before the Great Depression hit and in the 1999 run-up to the dot-com bubble burst.

We know how the history played in both cases—consequently stocks declined, a lot. Based on over a century of history, we are fairly sure that, this time too, stock valuations will at some point mean revert and stock markets will decline. After all, price-to-earnings behaves like a pendulum that swings around the mean, and today that pendulum has swung far above the mean. What we don’t know is how this journey will look in the interim. Before the inevitable decline, will price-to-earnings revisit the pre-Great Depression level of 95% above average, or will it maybe say hello to the pre-dot-com crash level of 164% above average? Or will another injection of QE steroids send stocks valuations to new, never-before-seen highs? Nobody knows. One chart is not enough. Let’s take a look at another one called the Buffett Indicator. Think of this chart as a price-to-sales ratio for the whole economy, that is, the market value of all equities divided by GDP. The higher the price-to-sales ratio, the more expensive stocks are.

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What does this say about where the S&P is?

72% Of US Businesses Are Not Profitable (Simon Black)

Total Household Wealth is exactly what it sounds like– the total net worth of every person in the United States, from Bill Gates down to the youngest newborn baby. So when you add up all the 330+ million folks in the Land of the Free and tally up their combined net worth, the total is $94 trillion. The thing is that the VAST majority of that wealth, especially the incredible growth over the last 8 years, has been from increases in just two asset classes: real estate and the stock market. In fact, stocks and real estate alone account for roughly 2/3 of the wealth increase since 2009. I’ll come back to that in a moment. Now, simultaneously, we see plenty of other interesting data, also published by the Federal Reserve and US federal government. Both the Fed and Census Bureau, for example, tell us that over 80% of businesses in the US are “nonemployer” companies, i.e. businesses which only employ one person (the owner), and often provide his/her primary source of income.

Yet according to the Federal Reserve, only 35% of these small businesses are profitable. Most are operating at a loss. In other words, only 35% of the companies which make up 80% of American businesses are profitable. You’re probably already doing the arithmetic– this means that a whopping 72% of all US businesses are NOT profitable. That hardly sounds like record wealth to me. Shifting gears, there’s the little factoid that an astounding 40% of young Americans are living with their parents– the highest%age in the last 75 years. And who can blame them considering student debt in the Land of the Free also hit a record $1.4 trillion three months ago, more than double the amount since the Great Recession. Speaking of record debt, US credit card debt passed a record $1 trillion, and total US consumer credit hit a record $3.8 trillion last month. Again, all of this hardly seems like ‘wealth’ to me.

Then there’s the issue of wages, which have remained essentially flat since the 2009 Great Recession if you adjust for inflation. According to the US Department of Labor, inflation-adjusted wages, aka “real hourly compensation” in the US fell an annualized 0.9% last quarter, and fell a dismal 5.6% in the previous quarter. Adjusted for inflation, the average American isn’t making any more money. Once again, this is a pitiful excuse for ‘wealth.’ American businesses aren’t more productive either. The same Labor Department report shows that productivity in the Land of the Free was flat in the first quarter of this year. And productivity actually declined in 2016– something that hasn’t happened in at least the last 50 years. Not to mention total economic growth in the Land of the Free has been pretty pitiful, logging a pathetic 1.6% last year. And GDP growth in the first quarter of 2017 was just 1.2% on an annualized basis. The US economy has exceed hasn’t surpassed 3% growth in more than 10-years.

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Oversaturated with debt.

UBS Has Some Very Bad News For The Global Economy (ZH)

[..] fast forwarding just over three months later, where are we now? To answer that question, overnight UBS released its much anticipated update on the current state of the global credit impulse, and it’s nothing short of a disaster. As Kapteyn writes in what may have been the most eagerly awaited report in recent UBS history, “we have been inundated with questions about the chart below, first published in March. Yes, the global credit impulse is still falling. And yes, it matters because the correlation of this global credit impulse with global domestic demand is 0.61.” But it’s what follows next that should send shivers down the spine of anyone still clutching to the failed “recovery” narrative:

From peak to trough the deceleration in global credit growth is now approaching that during the global financial crisis (-6% of global GDP), even if the dispersion of the decline is much narrower. Currently 55% of the countries in our sample have experienced a -0.3 standard deviation deterioration in their credit impulse (median over 12 months) compared to 77% of countries in Dec ’09 when the median decline was -1.4 stdev.” Here is what the stunning collapse in the credit impulse looks like as of today:

While we urge all readers to get in touch with their friendly UBS sales coverage for the full report, here is a quick primer from UBS on what the current data is telling us, not so much about China where the credit impulse slowdown was discussed previously, but about the world’s biggest economy. From UBS: The credit impulse in the US has also turned down, seemingly on the back of a sharp drop in demand for C&I loans. The slowdown is more visible in the bank loan data than the Flow of Funds data we are using to calculate the credit impulse (the FoF is 3x as broad and includes non-bank credit as well). But the slowdown is nonetheless at odds with confidence being expressed about investment and future borrowing plans.

The US credit impulse was running at 0.7% GDP back in September 2016 and by March had fallen to -0.53% GDP (recovering somewhat in April based on bank loan data). Why does this matter? Because as UBS shows in the chart below, in the US the correlation between activity and the impulse is very strong, and the lack of credit growth could constrain an acceleration in GDP from weak Q1 levels (the credit impulse suggests domestic demand growth should be close to 1% rather than the 2+% which consensus is currently tracking).

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Yawn.

Fed To Raise Interest Rates, Give More Detail On Balance Sheet Winddown (R.)

The U.S. Federal Reserve is widely expected to raise its benchmark interest rate this week due to a tightening labor market and may also provide more detail on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery. The central bank is scheduled to release its decision at 2 p.m EDT on Wednesday at the conclusion of its two-day policy meeting. Fed Chair Janet Yellen is due to hold a press conference at 2:30 pm EDT. “The expectation of a rate hike…is widely held, and has been reinforced by the most recent round of Fed communications,” said Michael Feroli, an economist with J.P. Morgan. Economists polled by Reuters overwhelmingly see the Fed raising its benchmark rate to a target range of 1.00 to 1.25% this week.

The Fed embarked on its first tightening cycle in more than a decade in December 2015. A quarter%age point interest rate rise on Wednesday would be the second nudge upwards this year following a similar move in March. Since then, the unemployment rate has fallen to a 16-year low of 4.3% and economic growth appears to have reaccelerated following a lackluster first quarter. However, other indicators of the economy’s health have been more mixed. The Fed’s preferred measure of underlying inflation has retreated to 1.5% from 1.8% earlier in 2017 and investors are growing increasingly doubtful policymakers will be able to stick to their anticipated pace of tightening of three interest rate rises this year and next.

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There’s money in derivatives yet.

EU Plans to Force Relocation of Euro Clearing After Brexit (BBG)

Firms that clear euro-denominated derivatives may be forced to relocate to the European Union from London after Brexit under EU proposals to be rolled out on Tuesday, according to a person with knowledge of the matter. Under the European Commission’s plans for overhauling supervision of clearinghouses that are based outside the bloc, firms deemed systemically important to the EU financial system could be required to accept direct oversight by the bloc’s authorities, the person said, asking not to be named because the proposals aren’t yet public. Firms could also be forced to move their euro clearing operations to a location inside the EU, the person said.

This so-called location requirement has spurred warnings from the industry of skyrocketing costs, and has helped to turn clearing into a political football as the EU and U.K. prepare for divorce negotiations. In a June 8 letter to Valdis Dombrovskis, the EU’s financial-services policy chief, the International Swaps and Derivatives Association said a survey of data from 11 banks showed that requiring euro-denominated interest-rate derivatives to be cleared by an EU-based clearinghouse would boost initial margin by as much as 20%. The proposals to be published on Tuesday are largely in line with initial plans floated last month by the commission, the EU’s executive arm.

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Central banks and shunned economists seem to be the only ones who understand this.

Norway Central Bank Explains How Money Is Created (Norges Bank)

Today, there are two forms of central bank money. One of the forms is common knowledge – banknotes and coins. The other, bank reserves at Norges Bank, is less well known. The sum total of banknotes and coins and bank reserves at Norges Bank is about NOK 85 billion.[5] But the total money supply is much larger than this. Customer deposits in banks are also money. These deposits, referred to as deposit money, total more than NOK 2 trillion in Norway. This money is created by banks, not by Norges Bank. Chart 1 shows the money supply and the supply of banknotes and coins in Norway since 1960. In Norway, the money supply mainly comprises deposit money in banks.[6] In the early 1960s, banknotes and coins accounted for a fifth of the money supply. Current accounts and cheques were already becoming commonplace.

Since then, banks’ deposit money has increased dramatically, and today, banknotes and coins make up less than 2.5% of the money supply. In other words, virtually all the money we use has been created by banks. So how do banks create money? The answer to that question comes as quite a surprise to most people. When you borrow from a bank, the bank credits your bank account. The deposit – the money – is created by the bank the moment it issues the loan. The bank does not transfer the money from someone else’s bank account or from a vault full of money. The money lent to you by the bank has been created by the bank itself – out of nothing: fiat – let it become. The money created by the bank does not disappear when it leaves your account. If you use it to make a payment, it is just transferred to the recipient’s account.

The money is only removed from circulation when someone uses their deposits to repay a bank, as when we make a loan repayment.[7] The money supply is therefore only reduced when banks’ claims on the rest of the economy decrease. Banks also fund lending by raising loans themselves instead of creating money in the form of deposits. In order to reduce risk, banks also use other forms of investment in addition to lending.[8] Nevertheless, the money supply is growing at almost at the same pace as total bank credit. To sum up: banks create money out of nothing and withdraw it when loans are repaid. Growth in total bank credit is normally matched by growth in the money supply.[9] This does not sound encouraging. Is money an illusion? Why is today’s privately issued deposit money often perceived to be as safe as money issued by the central bank?

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Flying pigs would have been even nicer.

Qatar Spends $8 Million To Airlift 4,000 Cows (BBG)

Call it the biggest bovine airlift in history. The showdown between Qatar and its neighbors has disrupted trade, split families and threatened to alter long-standing geopolitical alliances. It’s also prompted one Qatari businessman to fly 4,000 cows to the Gulf desert in an act of resistance and opportunity to fill the void left by a collapse in the supply of fresh milk. It will take as many as 60 flights for Qatar Airways to deliver the 590-kilogram beasts that Moutaz Al Khayyat, chairman of Power International Holding, bought in Australia and the U.S. “This is the time to work for Qatar,” he said. Led by Saudi Arabia, Qatar stands accused of supporting Islamic militants, charges the sheikhdom has repeatedly denied.

The isolation that started on June 5 has forced the world’s richest country by capita to open new trade routes to import food, building materials and equipment for its natural gas industry. The central bank said domestic and international transactions were running normally. Turkish dairy goods have been flown in, and Iranian fruit and vegetables are on the way. There’s also a campaign to buy home-grown produce. Signs with colors of the Qatari flag have been placed next to dairy products in stores. One sign dangling from the ceiling said: “Together for the support of local products.” “It’s a message of defiance, that we don’t need others,” said Umm Issa, 40, a government employee perusing the shelves of a supermarket before taking a carton of Turkish milk to try. “Our government has made sure we have no shortages and we are grateful for that. We have no fear. No one will die of hunger.”

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“..they had no idea what to do about it, except maybe try to escape the moment-by-moment pain of their ruined lives with powerful drugs. And then, a champion presented himself..”

Things To Come (Jim Kunstler)

As our politicos creep deeper into a legalistic wilderness hunting for phantoms of Russian collusion, nobody pays attention to the most dangerous force in American life: the unraveling financialization of the economy. Financialization is what happens when the people-in-charge “create” colossal sums of “money” out of nothing — by issuing loans, a.k.a. debt — and then cream off stupendous profits from the asset bubbles, interest rate arbitrages, and other opportunities for swindling that the artificial wealth presents. It was a kind of magic trick that produced monuments of concentrated personal wealth for a few and left the rest of the population drowning in obligations from a stolen future. The future is now upon us. Financialization expressed itself in other interesting ways, for instance the amazing renovation of New York City (Brooklyn especially).

It didn’t happen just because Generation X was repulsed by the boring suburbs it grew up in and longed for a life of artisanal cocktails. It happened because financialization concentrated immense wealth geographically in the very few places where its activities took place — not just New York but San Francisco, Washington, and Boston — and could support luxuries like craft food and brews. Quite a bit of that wealth was extracted from asset-stripping the rest of America where financialization was absent, kind of a national distress sale of the fly-over places and the people in them. That dynamic, of course, produced the phenomenon of President Donald Trump, the distilled essence of all the economic distress “out there” and the rage it entailed.

The people of Ohio, Indiana, and Wisconsin were left holding a big bag of nothing and they certainly noticed what had been done to them, though they had no idea what to do about it, except maybe try to escape the moment-by-moment pain of their ruined lives with powerful drugs. And then, a champion presented himself, and promised to bring back the dimly remembered wonder years of post-war well-being — even though the world had changed utterly — and the poor suckers fell for it. Not to mention the fact that his opponent — the avaricious Hillary, with her hundreds of millions in ill-gotten wealth — was a very avatar of the financialization that had turned their lives to shit. And then the woman called them “a basket of deplorables” for noticing what had happened to them.

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The permafrost is not all that perma.

Multi-Million Dollar Upgrade Planned To ‘Failsafe’ Arctic Seed Vault (G.)

The Global Seed Vault, built in the Arctic as an impregnable deep freeze for the world’s most precious food seeds, is to undergo a multi-million dollar upgrade after water from melting permafrost flooded its access tunnel. No seeds were damaged but the incident undermined the original belief that the vault would be a “failsafe” facility, securing the world’s food supply forever. Now the Norwegian government, which owns the vault, has committed $4.4m (NOK37m) to improvements. The vault is buried 130m inside a mountain in the Svalbard archipelago and contains almost a million packets of seeds, each a variety of an important food crop. The vault was opened in 2008, sunk deep into the permafrost, and was expected to provide protection against “the challenge of natural or man-made disasters” and “to stand the test of time”.

But the vault’s planners had not anticipated the extreme warm weather seen recently at the end of the world’s hottest ever recorded year. “The background to the technical improvements is that the permafrost has not established itself as planned,” said a government statement. “A group will investigate potential solutions to counter the increased water volumes resulting from a wetter and warmer climate on Svalbard.” One option could be to replace the access tunnel, which slopes down towards the vault’s main door, carrying water towards the seeds. A new upward sloping tunnel would take water away from the vault.

A former Svalbard coal miner, Arne Kristoffersen, told the Guardian most coal mines on the islands had upward sloping entrance tunnels: “For me it is obvious to build an entrance tunnel upwards, so the water can run out. I am really surprised they made such a stupid construction.” Hege Njaa Aschim, the Norwegian government’s spokeswoman for the vault, said: “The construction was planned like that because it was practical as a way to go inside and it should not be a problem because of the permafrost keeping it safe. But we see now, when the permafrost is not established, maybe we should do something else with the tunnel, so that is why we have this project now.”

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Hollow threats.

EU To Open Case Against Poland, Hungary, Czech Republic Over Refugees (R.)

The European Union’s executive will decide on Tuesday to open legal cases against three eastern members for failing to take in asylum-seekers to relieve states on the front lines of the bloc’s migration crisis, sources said. The European Commission would agree at a regular meeting to send so-called letters of formal notice to Poland and Hungary, three diplomats and EU officials told Reuters. Two others said the Czech Republic was also on the list. This would mark a sharp escalation of the internal EU disputes over migration. Such letters are the first step in the so-called infringement procedures the Commission can open against EU states for failing to meet their legal obligations. The eastern allies Poland and Hungary have vowed not to budge. Their staunch opposition to accepting asylum-seekers, and criticism of Brussels for trying to enforce the scheme, are popular among their nationalist-minded, eurosceptic voters.

Speaking in Hungary’s parliament earlier on Monday, Prime Minister Viktor Orban said: “We will not give in to blackmail from Brussels and we reject the mandatory relocation quota.” A spokeswoman in Brussels did not confirm or deny the executive would go ahead with the legal cases, but referred to an interview that Commission head Jean-Claude Juncker gave to the German weekly Der Spiegel last week. “Those that do not take part have to assume that they will be faced with infringement procedures,” he was quoted as saying. Poland and Hungary have refused to take in a single person under a plan agreed in 2015 to relocate 160,000 asylum-seekers from Italy and Greece, which had been overwhelmed by mass influx of people from the Middle East and Africa. Poland’s Interior Minister Mariusz Blaszczak was quoted as saying on Monday by the state news agency PAP: “We believe that the relocation methods attract more waves of immigration to Europe, they are ineffective.”

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Not going to happen, it would solve many of Greece’s problems, and Germany is not done with it yet.

ECB Unlikely to Include Greece in QE in Coming Months (BBG)

The ECB is unlikely to include Greek bonds in its asset-purchase program for the foreseeable future, a person familiar with the matter said, as European creditors aren’t prepared to offer substantially easier repayment terms on bailout loans to improve the nation’s debt outlook. Euro-area finance ministers will meet in Luxembourg on June 15 to discuss debt-relief measures that the ECB has said are needed before it will consider purchasing Greek bonds. The so-called Eurogroup is expected to complete a review of Athens’s rescue program that would allow for the disbursement of at least €7.4 billion in aid needed for a similar amount of bond repayments in July. An agreement among the ministers will likely allow the IMF – whose participation in the rescue program is a requirement for many nations – to commit in principle to a conditional loan, said the person.

But the extent and wording of debt-relief commitments probably won’t convince the Governing Council of the ECB to buy Greek bonds. And while the government of Prime Minister Alexis Tsipras is relying on quantitative easing to aid Greece’s return to the public debt market, the ECB won’t factor fiscal consequences into its policy-making decisions and excessive emphasis on QE inclusion would be misguided, according to the person. [..] The ECB’s quantitative easing is scheduled to continue until December 2017, with economists saying purchases will be gradually tapered throughout 2018. This would leave little time for purchases of Greek bonds before the program’s end.

Meanwhile, France, which is trying to bridge differences on the debt issue, has proposed automatically reducing loan repayments when Greece misses growth targets, according to two people with knowledge of the talks. European officials see the proposal as a step in the right direction but doubt it will be enough to convince the ECB to include Greece in its bond purchase program if the IMF maintains its position that the country’s debt is unsustainable. Other euro-area member states so far have opposed France’s proposal, the people said.

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Is Macron going to stand up to Merkel and Schäuble? I’m not convinced.

Greek Debt Deal ‘Not Far’ Says New French Finance Minister (AFP)

A deal on debt relief for Greece is “not far,” France’s new finance minister Bruno Le Maire said Monday ahead of crunch eurozone talks on the issue on Thursday. “I am optimistic that we will have a good solution. We are not far from agreement,” Le Maire said ahead of a meeting with Greek PM Alexis Tsipras. “We are really doing our best to find an agreement,” he had said earlier after seeing his Greek counterpart Euclid Tsakalotos. “It’s difficult. It’s complicated,” he said. At the June 15 meeting, Le Maire said he planned to propose a “mechanism” of “flexibility” to lessen Greek debt repayment based on its economic growth. “It’s a mechanism which should allow us to revise certain (debt) parameters based on Greek growth,” he told reporters.

The issue of debt relief for Greece has sharply divided its international creditors, the EU and the IMF, for months in the latest round of talks. The impasse has held up a tranche of bailout cash which Greece needs to repay loans in July, and Athens says its fragile recovery has also been impaired. Tsipras has said he will ask EU leaders to resolve the issue at the end of June if no solution is forthcoming on Thursday. “Piling drama on the problem helps no one,” he said on Monday. The Europeans expect Greece’s economy to grow strongly and its government to bring in large surpluses in revenue in the coming years, allowing it to pay down its debts. But the IMF is less optimistic, arguing there must be further relief for Athens before it can label its debt sustainable and justify loaning Greece any more cash.

New French President Emmanuel Macron last month called Tsipras after his election, saying he was in favour of “finding a deal soon to alleviate the weight of Greece’s debt over time.” Macron’s position puts him at odds with Germany where Greek debt relief – following three different bailouts with public money for the country since 2010 – is seen as a vote loser ahead of general elections in September. Macron explained his thinking about Greece in an interview to the Mediapart website two days before his election. “I am in principle in favour of a concerted restructuring of Greek debt and in keeping Greece in the eurozone. Why? Because the current system is unsustainable,” he said.

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Wonder what the older, religious people on Lesbos must be thinking by now. It once was a quiet place.

One Dead As 6.3-Magnitude Earthquake Rocks Greek Islands Lesbos, Chios (AFP)

A woman died and 10 people were hurt on Monday when a 6.3-magnitude earthquake struck the Greek islands of Lesbos and Chios and the Aegean coast of western Turkey, officials said. The middle-aged victim had been trapped for around seven hours in the ruins of her home in the Lesbos village of Vrisa, the area that bore the brunt of the strong quake and where several homes collapsed. “Our fellow citizen who was trapped in the house that collapsed in Vrisa was pulled out dead,” Lesbos mayor Spyros Galinos said in a tweet. The earthquake also struck the Aegean coast of western Turkey after 1200 GMT.

Video footage shot by a Vrisa resident on a cellphone showed masonry from several single and two-level homes clogging the streets. “It’s a difficult situation, we are facing a disaster,” Christiana Kalogirou, governor of the north Aegean region, told Greek state TV station ERT, adding: “Some 10 people are injured.” “The army is bringing in tents so people can spend the night,” she said, adding that the south of Lesbos had taken the brunt of the quake. The tremor, felt as far as Athens and Izmir in Turkey, damaged at least three churches and shops in south Lesbos, local owners said, while rock slides blocked some roads.

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