crazy Archives - The Automatic Earth

The mayor of Ukraine's Dnipro, and Zelensky's "friend" bought a house in Italy for €4 million.

His salary is €600 a month.

Where do you think the €90 Billion "loan" will end up? Time to wake up to the Ukroscam. https://t.co/cuDuXcZOdu pic.twitter.com/VAGjUjAvQK
— Chay Bowes (@BowesChay) April 10, 2026

This chart makes me laugh every time I see it.

The UK, France and Italy are poorer than the poorest US state, Mississippi. Canada and Germany are poorer than the second-poorest US state.

The gap will widen. And don’t come with “free healthcare.” You pay for it with absurd taxes pic.twitter.com/IgDdXufqpO
— Michael A. Arouet (@MichaelAArouet) April 10, 2026

No other species on Earth has a teamwork system quite like ants.
This tiny creature pulls off missions far bigger than its size could ever suggest. pic.twitter.com/GVP799bGry
— The Figen (@TheFigen_) April 10, 2026

We didn’t expect a deal in 24 hours. It must look difficult. The US needs to hand Iran the words that say whoever’s in charge there didn’t really lose. They must save face.

• Vance Says Iranian Regime Won’t Make a Deal (Salgado)

In the least surprising international news this week, Vice President JD Vance provided an update Saturday night on his negotiations with the Iranian regime that included confirmation of that regime‘s refusal to make any reasonable deal. “The bad news is we have not reached an agreement,” he told the press.

“We just could not get to a situation where the Iranians were willing to accept our terms. I think that we were quite flexible. We were quite accommodating,” the vice president stated. But unfortunately, when you deal with genocidal terrorists, flexibility is not likely to end with peace. There is only one language jihadis understand. And now the whole world can see how absolutely determined the Iranian regime is to have war and how totally opposed they are to peace. Vance said that the failure to strike a deal will be much worse for the Iranian regime than for us.
Within two hours of the ceasefire announcement, the Iranian regime was already bombing multiple countries in the Middle East, especially Israel. It also refused to track down and disable the mines it scattered in the Strait of Hormuz, while simultaneously demanding massive tolls from countries that send ships through the strait. Throughout every step of the process this week, the Iranian regime has been arrogant, demanding, defiant, and irrational.
Vance, who went to Pakistan with Steve Witkoff and Donald Trump’s son-in-law Jared Kushner to talk with the representatives of the murderous mullahs, said April 11 U.S. time, “We leave here with a very simple proposal, a method of understanding that is our final and best offer. I won’t go into all the details, because I don’t want to negotiate in public after we negotiated for 21 hours in private, but the simple fact is that we need to see an affirmative commitment that they will not seek a nuclear weapon, and they will not seek the tools that would enable them to quickly achieve a nuclear weapon.”
He emphasized, “That is the core goal of the President of the United States, and that’s what we’ve tried to achieve through these negotiations.” The Iranian regime has spent almost half a century not only enforcing domestic tyranny but building up a global terrorist network. They are fanatical fundamentalist Muslims, who believe Allah has given them a mission to destroy Judeo-Christian civilization. As tragic as it is, the Iranian regime will never want peace with America and Israel. Of course that is what we want, but we have been waiting for 47 years for the Iranian regime to aim for it as well, and they never have.
The vice president confirmed that he will be returning to the United States after the failed negotiations. “We’ve made very clear what our red lines are, what things we’re willing to accommodate them on and what things we’re not willing to accommodate them on. And we’ve made clear as we possibly could. And they have chosen not to accept our terms,” he stated. President Trump told the press previously, “Let’s see what happens — maybe they make a deal, maybe they don’t. It doesn’t matter. From the standpoint of America, we win.” It is not clear what the Trump administration plans to do next, however.

“.. they are LOSING, and LOSING BIG! Their Navy is gone, their Air Force is gone, their Anti Aircraft apparatus is nonexistent, Radar is dead, their Missile and Drone Factories have been largely obliterated along with the Missiles and Drones themselves and, most importantly, their longtime “Leaders” are no longer with us..”

• VP Vance Departs Pakistan After Failing To Read Deal With Iran (ZH)

Iranian media are striking a cautiously optimistic tone on the progress of the talks. They say there was progress on implementation of the ceasefire in Lebanon, technical negotiations that went beyond generalities and now an exchange of texts that would put any progress in writing. To be sure, the US side has been much quieter, and sticking points may come into focus once they’re in black and white. Teams of experts joined the main negotiators after about an hour, Iran’s semi-official Tasnim news agency reported. Those technical discussions in Islamabad focused on the Strait of Hormuz, a potential ceasefire extension and phased sanctions relief. Iran’s semi-official Tasnim news agency says, citing its reporter at the venue.

“The issue of the Strait of Hormuz is one of the points facing serious disagreement”, adding that the US delegation “hindered progress” during the text-exchange stage with “its usual excessive demands” Talks have reportedly mostly avoided the core issues that the Trump administration said drove it to war, according to a US official and a Pakistani official familiar with the matter. Those issues include Iran’s support for armed proxies, and the nuclear and missile programs that were at the heart of Trump’s stated reasons for attacking Iran beginning Feb. 28. “We have goodwill, but we do not have trust,” Ghalibaf told reporters after arriving in Islamabad, according to Iran’s semi-official Fars news agency.
“In the upcoming negotiations, if the American side is prepared for a genuine agreement and to grant the rights of the Iranian nation, they will see readiness for an agreement from us as well.” Tasnim said that Tehran’s 71-member delegation also included the Islamic Republic’s central bank governor Abdolnaser Hemmati. Also on the agenda will be the fate of Iran’s uranium stockpile and missile production, as well as US sanctions against the Islamic Republic and broader military presence in the Middle East. Many of those issues were the same ones the two sides failed to resolve in February negotiations before the war began.
Iran’s deputy Foreign Minister Kazem Gharibabadi says Tehran has entered negotiations from a position of strength, arguing that the war on Iran had failed to deliver decisive strategic gains for the US. Trump – as we detailed below – made it clear he sees Iran ‘holding no cards’.
US Starts Clearing Mines In Strait of Hormuz
Seemingly confirming President Trump’s earlier comments on “clearing out the Strait”, U.S. Central Command (CENTCOM) confirmed that two U.S. missile destroyers started clearing mines in the Strait of Hormuz on April 11 as peace talks kicked off between Washington and the Iranian regime “Today, we began the process of establishing a new passage and we will share this safe pathway with the maritime industry soon to encourage the free flow of commerce,” CENTCOM Commander Adm. Brad Cooper said in a statement Saturday. The American ships included the USS Frank E. Peterson (DDG 121) and USS Michael Murphy (DDG 112).
CENTCOM revealed that the mission on Saturday is part of a broader goal to make the crucial waterway, located on the southwest coast of Iran, clear of sea mines laid by Iran’s Islamic Revolutionary Guard Corps. Saturday’s confirmation about the mine clearing came hours after a United States government vessel was spotted entering the Strait of Hormuz, according to the ship-tracking intelligence platform Marinetraffic.com. It’s not clear if this was related to CENTCOM’s mine-clearing mission.
Trump Announces Start Of “Clearing Out” The Strait As A “Favor” To RoW
Earlier reports appears to have been confirmed as three US officials have stated to The Wall Street Journal that two U.S. Navy guided-missile destroyers passed through the Strait of Hormuz on Saturday, marking the first transit of American warships through the waterway since the war began six weeks ago. President Trump took to social media to explain what was going on. But first, he clarified a few things to the ‘fake news media’…
“The Fake News Media has lost total credibility, not that they had any to begin with. Because of their massive Trump Derangement Syndrome (Sometimes referred to as TDS!), they love saying that Iran is “winning” when, in fact, everyone knows that they are LOSING, and LOSING BIG! Their Navy is gone, their Air Force is gone, their Anti Aircraft apparatus is nonexistent, Radar is dead, their Missile and Drone Factories have been largely obliterated along with the Missiles and Drones themselves and, most importantly, their longtime “Leaders” are no longer with us, praise be to Allah!
The only thing they have going is the threat that a ship may “bunk” into one of their sea mines which, by the way, all 28 of their mine dropper boats are also lying at the bottom of the sea. Having got all that off his chest, he then confirmed the operation to open the Strait:We’re now starting the process of clearing out the Strait of Hormuz as a favor to Countries all over the World, including China, Japan, South Korea, France, Germany, and many others. Incredibly, they don’t have the Courage or Will to do this work themselves. Very interestingly, however, empty Oil carrying ships from many Nations are all heading to the United States of America to LOAD UP with Oil. Thank you for your attention to this matter! President DONALD J. TRUMP
But he wasn’t done with that. A few minutes later he followed with a shorter pithier version of the same narrative: The Fake News Media is CRAZY, or just plain CORRUPT! The United States has completely destroyed Iran’s Military, including their entire Navy and Air Force, and everything else. Their Leadership is DEAD. The Strait of Hormuz will soon be open, and the empty ships are rushing to the United States to “load up.” But, if you listen to the Fake News, we’re losing! Iran explicitly informed the Pakistani mediator during talks that if the vessel continued its movement it would be targeted within 30 minutes and the Iran-US negotiations would be damaged.

Trump “Proclaims Iran Has ‘No Cards’ As Delegates Arrive In Islamabad”

• Trump ‘Preparing’ US Military If Talks Fail (ZH)

A delegation of top Iranian officials has arrived in Islamabad ahead of ceasefire talks with the United States in the Pakistani capital, Iranian state television reported on Friday. The delegation was led by Iran parliamentary speaker Mohammad Bagher Ghalibaf, along with Foreign Minister Abbas Araghchi and other security and economic officials, state broadcaster IRIB said on its website. It reiterated Iran’s position, however, that talks would only begin if Washington accepts Iran’s preconditions.

Vice President Vance left Friday for Pakistan and the biggest challenge of his career: negotiating a deal with Iran to solve the nuclear dispute and end the war.”This is a big deal for JD. He is going to the Super Bowl,” one U.S. official told Axios. Mr Vance will lead the American delegation in Pakistan on Saturday, alongside special envoy Steve Witkoff and Jared Kushner, Donald Trump’s son-in-law.They will attempt to solidify a temporary ceasefire agreed this week. Before boarding Air Force Two to fly to Islamabad, Mr Vance said Mr Trump would not be at the talks but had set “pretty clear guidelines” for his team. He said: “As the president of the United States said, if the Iranians are willing to negotiate in good faith, we’re certainly willing to extend an open hand. If they’re going to try to play us, then they’re going to find that the negotiating team is not that receptive.”
Trump Claims Iran has ‘No Cards’ …but does the White House actually believe this? He suggested that if the Iranians hadn’t agreed to negotiate, they would be dead (cue wiping out entire “civilization” threat from earlier).

Trump Warns Attack on Iran Will Continue if Tehran Doesn’t Comply
President Trump has confirmed to the NY Post that he’s preparing the US military for what would likely be a bigger Iran operation should Tehran not comply, and should Pakistan talks fail. “We’re going to find out in about 24 hours. We’re going to know soon,” Trump told the Post when asked if he thinks the talks will be successful. Already there’s a lot of back and forth over the 10-point plan on the eve of the summit, and with both sides now in Islamabad. A main point of contention remains whether Lebanon is part of the two-week ceasefire agreement. There’s also been much speculation that all of this is just ‘cover’ for a bigger build-up of Pentagon forces in the region. Also, Iranian forces are no doubt using the opportunity to regroup.
Ghalibaf Demands Attacks on Lebanon Cease Or Else…
Iran Parliament spokesman Mohammad Baqer Ghalibaf, considered the official who is likely running the country day-to-day, says there will be no negotiations before the following:
1) ceasefire in Lebanon
2) release of Iran’s blocked assets: “release of Iran’s blocked assets prior to the commencement of negotiations.”
Oil jumped on the news. This as some sporadic Israeli bombings of Lebanese territory have persisted into Friday, despite talk of an Israel-Lebanon ceasefire, with talks expected in Washington next week. It’s unclear whether Tehran and its negotiating team which just touched down in Pakistan will hold to this or not.

De-mining has started.

• Several US Warships Reportedly Transit Strait of Hormuz (ZH)

Just as indirect talks kick off in Islamabad, a shocking and surprise development is being reported by Axios’ Barak Ravid, though this is not confirmed: https://twitter.com/BarakRavid/status/2042946011400753294

If accurate, are we witnessing Trump suddenly pile on more leverage before negotiations even get off the ground? It seems like the Iranians would have noticed several US Navy warships passing. Either they held off attack for the sake of pursuing peace, or this was truly done ‘stealthily’ and Iranian capabilities are degraded to the point they may have ‘missed’ it. Or is this an attempt to muddy the negotiations? Sabotage? Ravid after all has long stood accused of pushing an Israeli agenda in his reporting.
Talks Begin with Indirect Format Mediated by Pakistanis
By Saturday afternoon (local), the highest-level US-Iran-related talks since the 1979 Islamic Revolution have kicked off in Islamabad. Vice President JD Vance met Pakistan’s Shehbaz Sharif just ahead of the negotiations, and also senior Iranian officials were greeted by Sharif and other Pakistani leaders. Iran’s delegation is led by Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi. The engagement by each side has begun indirectly.
Pakistan has made clear it is working to facilitate direct negotiations between the US and Iran to fully bring to an end the six-week war in the Middle East. Sharif hailed both sides’ commitment to engaging constructively, and “expressed the hope that these talks would serve as a stepping stone toward durable peace in the region,” his office stated in a news release.
“Vance was joined for the bilateral meeting by special envoy Steve Witkoff and President Donald Trump’s son-in-law, Jared Kushner,” CNN reviews. “Sharif was joined by Deputy Prime Minister and Foreign Minister Sen. Mohammad Ishaq Dar, along with Interior Minister Sen. Syed Mohsin Raza Naqvi, according to a news release from the Pakistani prime minister’s office. There was no press coverage of the meeting.”

“If people are not careful, their stability will be personally defined by Candace Owens, Tucker Carlson, Megyn Kelly, Alex Jones and a lot more. We become what we consume, both physically and mentally.”

• For Entertainment Only – The Firehose of Crazy (CTH)

Several months ago, I was asked to assist with what was called a “firehose of crazy.” I don’t ordinarily pay attention to the goofy stuff, and I didn’t look at most of the citations being referenced. That said and with recent events in view, I have a new appreciation for what that meant.

When President Trump responded to the goofball diatribe of Alex Jones, what he apparently was referencing was a segment Jones put out on his podcast when he first requested the administration to intervene and use the 25th amendment to remove Trump. Mr. Jones followed that call for the 25th amendment, by saying he wanted administration officials to conduct a soft-coup against the President of the United States, because Trump wasn’t following his advice.
https://twitter.com/JayTC53/status/2041314899574305162?s=20
President Trump rightly responded to the quackery of the podcast world, and collectively they have lost their mind over it. In response, Jones is now saying Melania Trump is planning to divorce Donald Trump {CITATION}, and then, if President Trump says one more bad thing, Jones’ is going to unleash his podcast audience to destroy the President of the United States. Folks, these characters are not psychologically stable people. This is a level of weird only evident now because Trump decided to address it. I mean think about it. Stop for a moment, pull back from social media, and think about the stability of mindset here:
Tucker Carlson decides it’s a value to his position to attack Reverend Franklin Graham?Megyn Kelly decides it’s a value to her position to support attacks on Charlie Kirk’s wife? Alex Jones decides it’s a reasonable discussion to talk about organizing JD Vance to take control of the government using the military. Laura Loomer decides it’s a value to her position to attack anyone who she defines as not supporting the government of Israel. One of her targets is Tulsi Gabbard. Mark Levin decides it’s a value to his position to convince the President of the United States to undermine and remove the sitting Director of National Intelligence because his priority aligns with Loomer. All because they disagree with decisions President Donald Trump has made about dealing with foreign policy issues.
I don’t usually watch any of these podcast groups or their internecine battles du jour. But c’mon, these are not stable people. It might be entertainment for many people, but algorithms pushed “for you” are not real life. This stuff, all of it, is just plain goofy.
If this is representative of the minds that have been trying to push “information” into the Trump administration, well, yeah, that would be a ‘firehose of crazy‘. These are not serious people. They are not alone, not by a long shot; there’s a whole infrastructure of crazy voices chasing money that’s provided by a big tech algorithm intentionally designed to promote it. The professional UniParty in DC is watching this unfold with a very big smile on their face. It is very clear where this algorithmic identity tracking and micro-targeting is going. If people are not careful, their stability will be personally defined by Candace Owens, Tucker Carlson, Megyn Kelly, Alex Jones and a lot more. We become what we consume, both physically and mentally.

Do boomers remember Khomeini as well as Khameini? Trump does. Trump doesn’t want to leave the world with -the legacy of – Khomeini.

• Since the Iran War Began, Trump’s Popularity With Boomers Has Climbed (Pinsker)

It’s eye-opening, because 50 was the magic number in a Pew Research poll on Israel from earlier in the week: Overall, 58% of Republicans have a positive view of Israel — but for Republicans aged 18 to 49, 57% have an unfavorable view. So something age-related is going on, splitting popular opinion. From Newsweek: Donald Trump Scores Approval Rating Boost With Boomers President Donald Trump is narrowing his approval gap with older voters, as new polling shows a steady improvement among Americans age 65 and over. […]

Older voters are among the most reliable participants in U.S. elections, and even small shifts can carry outsized political weight. Changes in this group come as foreign policy dominates headlines and economic pressures hit generations unevenly. Trump’s approval rating among Americans age 65 and over has risen steadily over the past three months, according to a series of Economist/YouGov polls. My theory? Boomers and Gen Xers rely on social media as a primary news source significantly less than Millennials and Zoomers. We’re the last two generations that watched cable TV, read newspapers, and listened to talk radio. We’re political omnivores. All that content we absorbed shaped our worldview. How could it not?
For Millennials and Zoomers, if their favorite YouTuber didn’t talk about it — and it never appeared in their TikTok/Reddit feed — then it didn’t really happen. As such, it makes them uniquely susceptible to digital psyops campaigns. And that’s something Iran does extremely well. It’s led to a profound cultural shift: Thirty years ago, all the good-hearted liberals were protesting for Tibet. Nobody was cooler than the Dalai Lama! At every award show, Hollywood’s biggest celebrities virtue-signaled by shouting, “Free Tibet!” Today, nobody cares.
Between Tibet-related content being shadow-banned (or outright banned) from social media and/or entertainment companies submitting to Chinese censorship, Tibet is an afterthought. All those good-hearted liberals went from “Free Tibet!” to “Free Palestine!” So perhaps Newsweek’s reporting indicates that Americans who are actually knowledgeable about Iran’s anti-American history are most appreciative of Trump’s efforts. Remember, Operation Epic Fury didn’t begin until Feb. 28:
In the earliest of the three surveys, conducted February 6 to 9, Trump posted a net approval rating (those who approve of his job performance minus those who disapprove) of minus 12 among adults 65 and older. In that poll, which surveyed 1,730 U.S. adult citizens and carried a margin of error of plus or minus 3.1 percentage points, 43 percent of respondents in the age group approved of his job performance, while 55 percent disapproved. Which means, pre-war, Boomers were 43% positive, 55% negative.
A month later, the March 6 to 9 Economist/YouGov poll showed improvement. Among voters age 65 and over, 45 percent said they approved of Trump’s performance and 53 percent disapproved, narrowing his net rating to minus eight. That survey included 1,563 U.S. adult citizens and had a margin of error of plus or minus 3.4 percentage points.After the first few days of the war, Trump’s popularity ticked up by two points. Instead of deeming it “disgusting and evil,” Boomers nodded in cautious approval.
The trend continued into early April, with the most recent poll, conducted April 3 to 6, showing Trump’s approval rating among those 65 and older on the rise again, reaching 47 percent approval and 52 percent disapproval. The net rating of minus five marks his strongest showing with the age group this year. That survey was based on a sample of 1,750 U.S. adult citizens and carried a margin of error of plus or minus 3.2 percentage points. [emphasis added] And by April 6 — a full month into the war — Trump’s popularity ticked up yet again. The longer the war goes on, the more Boomers seem to support it.
It’s eye-opening because D.C.’s conventional wisdom was always the opposite: Time isn’t on the president’s side. A long war will be a political nightmare. If Trump doesn’t find an offramp post-haste, the GOP will get slaughtered in the midterms. The public is paranoid that Iran will be another “Forever War.”For Boomers, at least, that’s simply not true. They want a solution to the Iran problem — because they recognize that it’s a real problem. You can’t let Islamic nutjobs divide the atom.If those maniacs ever gain a nuclear weapon, the world is in deep trouble.
It also suggests the next PR move for the Trump administration: It needs to invest in an information campaign that’s tailored to the sensibilities of Millennials and Zoomers. That means penetrating the YouTube, TikTok, and Reddit echo-chambers. MAGA messaging must meet voters where they are — and Zoomers are spending 6.6 hours a day consuming digital content. A Truth Social post, a Fox News TV interview, and a primetime speech aren’t enough to win their hearts and minds. Because the more the audiences know about Iran, the more they’ll support the president.

Europe’s weak leaders made Europe weak.

• Who’s Afraid of Emmanuel Macron? (J.B. Shurk)

French President Emmanuel Macron is doing that peculiar French thing again…acting tough while looking weak. He gave a speech last Friday at Yonsei University in Seoul during which he demanded that nations not become “vassals” of China or the United States. Macron wants South Korea to join Canada, Australia, and the European Union in forming what he calls a “coalition of independence” (because “coalition of the willing” was taken) united by shared love for “international order,” “democracy,” and wasting money on “climate change.”

What a tool. I understand that “the powers that be” have so successfully co-opted the West’s political systems that they regularly install absolute nincompoops as nominal leaders (Biden, Starmer, Carney, Merz, and European Queen Ursula, just to name a few) and call it “democracy,” but Macron is such a doofus that his “leadership” is laughable.
Remember when the little Rothschild banker came to power a few months after President Trump had taken office and he couldn’t stop talking about standing up to “bullies”? After putting on some high-heeled loafers and taking some lessons on masculinity from his former-schoolteacher-turned-much-older-wife, Macron insisted on turning a handshake with Trump into a death grip meant to showcase French power. In that effete style of speech that Gaulish-Roman aristocrats enjoy — in which words sound as if they’re dropping from lips suckling grapes and licking honey — le petit fromage told the world that his fierce handshake and determined stare were the perfect weapons for countering President Trump. Trump just laughed and patted the little French boy on the shoulder as one does to help the weak feel strong.
Fast-forward a decade, and Macron hasn’t learned a thing about being tough. He still prances around the world like a eunuch looking for long-lost cojones. He says he wants countries to resist the “hegemonic powers” of China and the United States by clinging to the rules-based “international order.” Okay. Good luck, tiny dancer.
What’s left of the international order without the two most powerful nations on the planet? The United States has assumed the responsibilities of the globe’s police chief since WWII. Through its naval fleet, it ensures the security of maritime trade. Through its economic clout, it ensures the stability of the international financial system. Through its military might, it decides which dictators get black-bagged in the middle of the night. As China continues its geopolitical ascent, its tentacles have stretched further into international organizations such as the United Nations’ World Health Organization and across continents with its Belt and Road Initiative. Mark Carney has spent his time as Canada’s prime minister practically groveling at the feet of China’s Xi Jinping and begging the communist dictator to save his wintry vassal state from the bad orange man down south.
France, on the other hand, continues to be ejected from former African colonies whose peoples have grown tired of French meddling. The French military excels only at surrendering. And France remains distinct from Germany only because of the United States. When little Macron insists on restoring a French-led “international order,” he sounds a lot like little Napoleon, who insisted on being called “emperor” while imprisoned on Saint Helena.
As for urging all who hear his grating voice to unite in defense of “democracy,” that’s a lark! Europe is where “democracy” goes to die. Every time non-Establishment political parties win the most votes in former nations (now just multicultural zones of Islamic conquest within the federation of European nothingness) such as France, Germany, and the Netherlands, “the powers that be” proudly block the winners from exercising any power.
Europe’s political class shamelessly calls this the “firewall” against “far-right” political parties. Of course, if you believe that nations should have borders and that government powers should be limited, you are designated “far-right.” Just as Democrats bastardize language in the United States by calling everyone who cares about the Bill of Rights a “fascist,” the European Establishment labels anyone who believes in self-determination and personal liberty a “Nazi sympathizer.” Then they prosecute the members of those fake “far-right” parties for expressing opinions out loud.
That’s right! Europe’s little gang of dimwitted yet dangerous dictators — Macron, Starmer, Merz, and the ruling queen — insist on locking up the “fascists” for their speech in the name of “democracy”! When the “firewall” fails — as it did in Romania a little over a year ago — the European oligarchy simply cancels the election and insists on a rigged do-over (or outright overthrows the government as it did, with the help of the U.S. State Department and CIA, in Ukraine in 2014).
When little European tyrants such as Macron stand on footstools, puff out their chests, and shriek about “democracy,” they have no intention of supporting the decisions of the people. What they mean is, let’s form a European Commission of aristocrats, have them choose a ruling monarch, and call that a “democratic” election. That’s how the nations of Europe lost their sovereignty and why the people of Europe must now bow down to unelected Queen Ursula von der Leyen.

They expect America to lead NATO into WWIII.

• The US Separation From Europe And NATO Is Long Overdue (Alt-M)

As much as many centrists and libertarians are opposed to Donald Trump’s ongoing strikes against Iran, I have to say, the downstream result might end up becoming one of the most libertarian results I have ever seen. For decades, small government activists like those in the Ron Paul movement have been calling for a comprehensive US divorce from NATO and the shutdown of America’s military bases overseas. Trump has, either deliberately or inadvertently, set this very process in motion.

The refusal of most of Europe (and Australia) to provide support in the reopening of the Strait of Hormuz might seem like geopolitical orbiting – In other words, getting involved could hurt them more than it would help them. Of course, these nations are far more exposed to the Hormuz closure and the slowdown in energy exports than the US. You would think their interests would demand a securing of the strait. Europe is already struggling for energy resources due to the Ukraine war (a war they are deeply involved in), and this is where we stumble upon the ideological disconnect.
Europe’s Goal Is WWIII And They Expect America To Maintain The Status Quo
Europeans are perfectly willing to engage in war tensions with Russia while risking energy inflation and WWIII, all over a country that had minimal strategic or economic importance to them before the conflict. They have consistently called on the US to provide weapons and funding and intel to the Ukrainians, which we have obliged. And, they have called for American troops to stand at the forefront should a wider war erupt. NATO and European governments love America…but only as a shield that benefits them. To be clear, it’s true that years ago NATO allies invested troops and equipment into the wars in Afghanistan and Iraq, but one could also argue that, at that time, the establishment was in sync on both sides of the Atlantic.
There was no large scale movement to cut foreign aid scams (like Trump shutting down USAID). There was no movement to secure borders and prevent mass immigration. There was no movement against globalism beyond a handful of us in the alternative media working diligently to expose the truth. In the era of the early 2000s, the status quo was in full effect and Europe was happy to help in the Middle East. Today? Not so much. The status quo has been disrupted.
Once The Cash Stopped Flowing Our “Friends” Became Scarce
It’s not surprising that once the cash stopped flowing so easily from American pockets, suddenly all of our “allies” went sour. Cuts to USAID and various foreign subsidy programs have created a shockwave in the global order. Even I have been stunned by the level of dependency of foreign nations on US monetary injections. Once these programs started shutting down, the panic was palpable. And, once Trump demanded NATO countries start paying their fair share (5% of GDP), the breakdown in relations began. Many European social welfare programs exist exactly because they don’t have to pay for their own military defense.
The tariffs are another point of hypocrisy. Nearly ALL major European countries and economies have enforced tariffs and duties on US products for the past 60 years. When those same countries face tariffs imposed by the US, suddenly tariffs are an “act of aggression” and a line in the sand. Trump is called an economic “bull in a china shop”, but he’s only doing to them what they’ve been doing to us for generations. Once again, the moment the status quo changes even a little and other nations are held to a similar standard, our friends no longer want to be our friends.

ICE=government.

• “Create a Crisis”: Sponsor an Anti-ICE Campaign (Turley)

“Create a crisis.” That call is made in a new campaign sponsored by the American Association of University Professors to force “colleges to drop their contracts with ICE’s key corporate enablers.” Despite years of criticism over the purging of faculty ranks of conservatives and libertarians, university professors continue to double down on far-left ideology that is now an orthodoxy in higher education. I previously wrote about the AAUP’s ideological shift in my book, The Indispensable Right: Free Speech in an Age of Rage. After that book, the AAUP then selected Todd Wolfson, a far-left activist, as its new president.

Wolfson ran on the pledge to make AAUP a “fighting organization” for social change. After his selection, Wolfson has called Trump supporters “fascists” and demanded boycotts of Israel. Given that history, it was little surprise to see the AAUP’s sponsorship of this campaign, as reported by the College Fix. The campaign is also funded by Coefficient Giving, associated with liberal billionaire Dustin Moskovitz and his wife Cari Tuna. They have been criticized for reportedly funding groups pushing defund police and other radical agendas.
AAUP joined this campaign with Young Democratic Socialists of America, Sunrise Movement, and the Workplace Justice Lab at Rutgers University. It includes a toolkit instructing students to “create a crisis for university admin through an escalating campaign.” The campaign seeks to organize to combat the “Trump regime” and its “terrorism”: “When students and workers join together in action, we can force our schools to stop funding and normalizing ICE collaborators and take down the whole regime.” They are targeting companies such as Enterprise, Flock, ICE Air Carriers, Hilton, and Target.
The campaign states further that “ICE, and the Trump regime generally, cannot function without the consent and collaboration of the business world. Breaking companies from ICE is the central axis for generating enough leverage to stop the regime’s terrorization campaign.”= So university professors are funding a campaign that actively seeks to create a crisis on campuses. It takes a position as an organization that immigration enforcement is a form of terrorism. The silence among faculty is deafening. Rather than objecting that the AAUP should focus on issues related to academic freedom and protections for its members, there have been virtually no objections to the organization’s ideological agenda.
It is evidence of the new orthodoxy in higher education and the refusal of administrators and faculty to make any meaningful change in their intolerance for opposing views. Many departments no longer have a single Republican faculty member in this academic echo chamber. A Georgetown study found that only 9% of law school professors at the top 50 law schools identify as conservative — almost identical to the percentage of Trump voters in the new poll. There is little evidence that faculty members are interested in changing this culture or creating greater diversity at schools. In places like North Carolina State University, a study found that Democrats outnumbered Republicans 20 to 1.
Yale University has finally achieved the academic version of Nirvana, a state of perfect peace and enlightenment. A recent study found that the faculty had finally purged every Republican donor from its ranks.According to a recent report from the Buckley Institute, there is now not a single Republican found across 27 of 43 departments at Yale University. In a nation roughly evenly divided between Republicans and Democrats (with a slight advantage to the GOP), only 3 percent are Republicans across all Yale departments.
The hostility to opposing views is impacting our students. A new study offers additional data on this problem, showing that almost 90% of students misrepresent their views in class and on assignments to satisfy faculty by adopting more liberal views. In the meantime, the small number of dissenting faculty have no real voice, particularly among legal academics. I have previously written about the similar liberal agenda of the American Bar Association despite plunging membership among lawyers. The ABA now represents just 17 percent of the bar.

Elections today, April 12.

• How the Russiagate Blueprint Has Been Unleashed Against Orban (RT)

The shadow campaign to swing the Hungarian election against Viktor Orban escalated with the scandal over the wiretapping of Hungarian Foreign Minister Peter Szijjarto. The case offers a rare look into how bureaucrats, journalists, and spies run a regime-change operation in real time. Three weeks out from the April 12 elections, the political opposition to Orban scored what seemed to be a win, when Politico and the Washington Post ran articles alleging that Szijjarto had phoned Russian Foreign Minister Sergey Lavrov with “live reports on what had been discussed” at multiple EU meetings. The reports cited anonymous “European security officials.”

Neither Orban nor Szijjarto make any secret of their desire to maintain cordial relations with Moscow, particularly on matters of energy security and the peace process in Ukraine. However, when bundled with more outlandish claims – that Russian “election fixers” are already embedded in Budapest, for example – the reports paint a picture of a government compromised by the Kremlin.Orban’s leading opponent, Peter Magyar, has repeated these claims in his speeches. After the Szijjarto story broke, he accused the foreign minister of “betraying Hungarian and European interests,” and threatened him with “life imprisonment” for treason, should his Tisza party win the election. All it took was one leaked audio file for the scheme to unravel.
The Szijjarto wiretapping plot
In an audio file released by Hungarian conservative outlet Mandiner, opposition journalist Szabolcs Panyi can be heard telling a source how he passed Szijjarto’s phone number to “a state organ of an EU country.” Once they had this number, he explained, agents of this country were able to extract “information about who that number spoke to, and they see who is calling that number or who that number is calling.” In a Facebook post, Panyi confirmed that he was the person on the recording. He said that he was asking his source whether she knew of any alternate numbers used by Szijjarto or Lavrov, “so that I could compare them with information received from the national security service of a European country.”
Panyi’s confession explained how the “European security officials” were able to track Szijjarto’s phone conversations before feeding the information to Politico and the Washington Post. Orban immediately announced an investigation into the wiretapping. We are dealing with two serious issues, the PM stated the same day as Panyi’s post. There is evidence that Hungary’s foreign minister was wiretapped, and we alsohave indications of who may be behind it. Szijjarto explained that as the EU’s longest-serving foreign minister, he regularly speaks to Lavrov with messages from his colleagues in the EU. The real scandal, he said is that a Hungarian journalist is colluding with foreign secret services in order to wiretap a member of the Hungarian government.

No leaders, no democracy. And soon no fuel.

• What Is Fueling Unrest Across The EU? (RT)

The EU is sliding into a fuel crisis driven by a global supply shock caused by the US-Israeli attack on Iran. It has already triggered protests, early signs of shortages, and warnings of the wider economic impact. This has resulted from the disruption of the Strait of Hormuz, a critical route for global energy shipments. Oil prices surged above $120 per barrel during the escalation, and while crude fell below the $100 mark after a two-week US-Iran ceasefire was announced on April 7, it remains well above the $70 level before the war. Prices have remained volatile amid uncertainty over the truce and continued disruption to shipping through the strait.

Diesel and kerosene have emerged as the central pressure points in the crisis. Europe’s benchmark diesel and jet fuel prices have risen above $200 per barrel equivalent from below $100 in January, according to Bloomberg. Jet fuel prices have also surged since the start of the conflict in late February, according to industry data cited by multiple outlets. Why has diesel become more expensive than gasoline? The European market has shifted toward higher diesel consumption following decades of tax policies that lowered diesel taxes compared to gasoline.
The EU’s refining system produces a different mix of fuels than the market consumes. A barrel of crude oil typically yields about 40-50% gasoline, but only around 30–40% diesel and jet fuel combined, with the rest made up of heavier products. This mismatch has left the bloc structurally short of diesel. The region is a major net exporter of gasoline but relies on imports for a significant share of its diesel and jet fuel. Diesel has traded above gasoline prices at the pump in several EU countries.
Rising wholesale costs have fed through to consumers. Diesel prices at the pump have exceeded €2 per liter in multiple countries, according to national data and media reports — equivalent to roughly $8.80–$10.50 per US gallon, compared with about $5.60 per gallon in the US. Governments in Italy, Portugal, Slovenia, Hungary, Spain, Poland, and Ireland have introduced tax cuts and other measures to limit the impact of rising fuel costs.
Why are farmers and truckers protesting?
Rising diesel prices are hitting sectors most dependent on the fuel, particularly agriculture and road freight. The EU’s transport sector is facing a “fast-moving diesel shock,” according to logistics platform Logifie. Ireland has become the most visible flashpoint of the crisis. Fuel protests have spread nationwide since this past Tuesday, led by farmers, truckers and transport workers, disrupting supply chains and transport networks, according to local media.
Blockades have strained fuel distribution, with queues forming at petrol stations with some running dry amid panic buying. On Thursday, the government called in the army to clear the blockades. During a protest march in Dublin on Friday, demonstrators carried a coffin with “RIP Ireland” written on it. Airports across Europe could face “systemic” jet fuel shortages within three weeks if the Strait of Hormuz remains closed, according to a letter sent by an airport industry group to the European Commission, as cited by the Independent.
According to Corriere della Sera, “some airports on the continent have been experiencing shortages in jet fuel quantities for days without officially reporting it.” The outlet cited its sources on Friday as saying that “it’s such a sensitive issue that official talk remains tight-lipped,” adding that Brussels is hoping the truce between the US and Iran will hold. Ryanair, Europe’s largest airline by passenger numbers, has started reducing flights to popular destinations, with chief executive, Michael O’Leary warning that the airline will not be able to run its full summer schedule if the Strait of Hormuz remains closed.

Bye!

• Women Step Forward to Outline Swalwell’s Sexual Assault History (CTH)

It was building in the background for several weeks; the stories of multiple women who had been raped and sexually assaulted by congressman Eric Swalwell. Today, the San Francisco Chronicle began outlining their stories [SEE HERE], and now an exit of people from his campaign begins.

WASHINGTON DC – Rep. Eric Swalwell’s campaign for governor was reeling Friday after an ex-staffer accused him of sexual assault, with multiple staffers resigning and both a prominent ally and rival candidates calling on the California Democrat to exit the race.
The exodus, which began just before the San Francisco Chronicle published a report detailing a former staffer’s claims, jolted California’s marquee race just weeks before ballots start landing in voters’ mailboxes. The former staffer told the newspaper that Swalwell had sexual encounters with her while working for him, and that he sexually assaulted her twice when she was too drunk to consent.
In September 2019, the woman said, Swalwell invited her out for drinks and she became so severely intoxicated that she does not remember the rest of the night. She said she woke up naked in Swalwell’s hotel bed and could feel the effect of vaginal intercourse. {source}
Top staffers departed the campaign shortly before the story published. Soon after, Rep. Jimmy Gomez said in a statement that he was stepping down from the campaign and urged Swalwell to leave the race — a stunning rebuke from a key surrogate who had helped introduce Swalwell to power players in Sacramento, where Gomez served in the state Assembly.
“Today I learned shocking information about Eric Swalwell containing the ugliest and most serious accusations imaginable,” Gomez said in a statement. “My involvement in any campaign begins and ends with trust. I cannot in good conscience remain in any role with this campaign, and I am stepping down from it effective immediately.”
The fallout extended to prominent interest groups that had backed Swalwell. The California Medical Association, which has dropped more than $1 million into a pro-Swalwell committee, said it was convening an emergency board meeting. The California Teachers Association suspended its endorsement. (read more)

“Swalwell has denied the allegations, but that has done absolutely nothing to stop the bleeding. And the bleeding has been catastrophic.”

• Eric Swalwell’s Political Future is Collapsing Fast (Matt Margolis)

On Friday, a former staffer to Rep. Eric Swalwell (D-Calif.) came forward with allegations of sexual assault against the longtime congressman. By the end of the day, the dam had broken wide open — and Eric Swalwell’s political future was crumbling right along with it. The San Francisco Chronicle reported that a former congressional aide accused Swalwell of two non-consensual sexual encounters, including one where she claims she woke up in his hotel room after becoming intoxicated. CNN then dropped its own bombshell, reporting that four women total allege sexual misconduct by Swalwell — one of whom accuses him outright of rape. “I was pushing him off of me, saying no,” the woman said.

Swalwell has denied the allegations, but that has done absolutely nothing to stop the bleeding. And the bleeding has been catastrophic. First, his campaign experienced an exodus. His campaign co-chairs bailed immediately. Rep. Jimmy Gomez called the accusations “the ugliest and most serious accusations imaginable,” and resigned on the spot. Rep. Adam Gray was equally blunt: “Today’s reports about Eric Swalwell’s conduct while in office are deeply disturbing. Harassment, abuse, and violence of any sort are unacceptable. Given these serious allegations, I am withdrawing my support, and Eric Swalwell should end his campaign immediately.”
Top Democrat Rep. Ted Lieu (D-Calif.) also pulled his endorsement. Then came a wave of others. Even the institutional pillars cracked. The California Teachers Association suspended its endorsement. So did SEIU California. Sen. Adam Schiff called on Swalwell to exit the race. But the real problem for Swalwell isn’t the loss of staff or endorsements; it’s that his fellow Democrats are also calling on him to drop out of the race. Now, obviously, his Democrat opponents, former Rep. Katie Porter and billionaire Tom Steyer, have called on him to drop out, but so has Nancy Pelosi. And that’s a political death sentence.
“This extremely sensitive matter must be appropriately investigated with full transparency and accountability,” Pelosi said in a statement. “As I discussed with Congressman Swalwell, it is clear that is best done outside of a gubernatorial campaign.” And she wasn’t alone. Minority Leader Hakeem Jeffries, Minority Whip Katherine Clark, and Democratic Caucus Chair Pete Aguilar piled on in a joint statement, calling for a “swift investigation,” and demanding an end to Swalwell’s campaign. “This is unacceptable of anyone — certainly not an elected official — and must be taken seriously,” they said. “No one in a position of power should be allowed to act above the law or with impunity,” Rep. Ro Khanna said. “The same rules must apply to Eric Swalwell.”
Over on the Republican side, Rep. Anna Paulina Luna said she was weighing censure and other action “if there is evidence brought forward,” and three sources told reporters that House Republicans were already discussing just that by Friday evening. The response of Democrats to the allegations is quite unusual. They’re not issuing statements saying Swalwell is innocent until proven guilty; they’re telling him to bail. That raises some interesting questions on its own. Do they believe the allegations? I’ve long believed Swalwell’s gubernatorial campaign was never really about Sacramento. It was a launching pad for a presidential run. That ambition is finished now. Democrats are abandoning him, which means his political future is over. And frankly, his career might be finished, too.

There’ll be a lot of huffing and puffing. But 100+ years of car industry as we knew it is over.

• Tesla Gets FSD Supervised Approved in the Netherlands (Electrek)

The Dutch vehicle authority RDW has granted Tesla a type approval for its “Full Self-Driving” Supervised system in the Netherlands, marking the first European country to officially approve the driver-assist technology. The approval, which falls under the UN R-171 regulation for Driver Control Assistance Systems, comes after more than 18 months of testing and is currently valid only in the Netherlands. Other EU member states can choose to recognize it nationally, but that process is not automatic.

The approval
Tesla Europe announced the news on X, stating that “FSD Supervised has been approved in the Netherlands & will begin rolling out in the country shortly.” The company described the system as “trained on billions of kilometers of real-world driving data” and claimed that “no other vehicle can do this.” The RDW confirmed the approval in its own statement, describing it as a “European type approval with provisional validity in the Netherlands.” The Dutch authority stressed that FSD Supervised is a driver assistance system — not an autonomous or self-driving system. The driver remains legally responsible and must be able to take over immediately at all times.
The testing program involved over 1.6 million kilometers of driving on EU roads, more than 13,000 customer ride-alongs, and over 4,500 track test scenarios. Tesla submitted documentation covering more than 400 compliance requirements under UN R-171 and Article 39 exemptions. This approval was originally expected by March 20 but was delayed by about three weeks. Back in late March, the RDW actually pushed back on Tesla’s earlier announcements, saying it had not yet completed its review — a pattern that highlights the disconnect between Tesla’s marketing timeline and the regulator’s actual process.
What it means for Europe
The Netherlands approval does not automatically extend to the rest of Europe. Under EU regulations, other member states can recognize the Dutch type approval nationally, but each country must decide individually. Germany (KBA), France, and Italy are expected to be among the first to act, potentially within 4-8 weeks. Full EU-wide harmonization would require additional regulatory steps beyond national recognition. Tesla has targeted a broader European rollout over the summer of 2026, but that timeline depends entirely on how quickly individual countries process their own approvals.
For context, this is a very different model from how Waymo is approaching Europe. Alphabet’s autonomous driving subsidiary is preparing to launch fully driverless robotaxis in London — an actual Level 4 autonomous system where no human driver is needed. Tesla’s approval is for a Level 2 driver-assist system that requires constant human supervision.
What FSD Supervised actually is
The RDW’s statement is explicit: FSD Supervised “can take over many driving tasks” but the vehicles “are NOT autonomous or self-driving.” The driver’s hands don’t need to rest on the steering wheel, but the driver must be able to intervene immediately. Sensors monitor driver attentiveness and eye focus, and if the system detects inattention, it issues warnings and can temporarily disable itself. Under UN R-171, the system is classified as a Driver Control Assistance System (DCAS) — the regulatory term for Level 2 automation. The driver retains full legal responsibility at all times. The regulation specifically mandates measures to prevent driver overreliance, including a mix of visual, audio, and haptic feedback.
Tesla must also report safety-critical incidents and submit regular performance reports to the RDW — no less than annually. Critically, the RDW notes that the European FSD software “differs substantially” from the US version. European regulation requires type approval before any system can be used on public roads — unlike the US self-certification model where Tesla can deploy software updates without prior regulatory approval. The RDW also points out that other manufacturers already hold similar approvals in Europe: BMW for motorway hands-off driving with lane changes, and Ford for BlueCruise via Article 39. Tesla’s claim that “no other vehicle can do this” is misleading at best.
[..] Tesla’s own tweet claims “no other vehicle can do this.” The RDW’s own statement contradicts that — it explicitly notes that BMW and Ford already hold similar driver-assist approvals in Europe. And if we’re talking about actual self-driving, Waymo vehicles in the US (and soon London) drive themselves with no human supervision required. Tesla’s system requires a fully attentive driver at all times. Framing a supervised driver-assist system as a unique achievement is misleading.
This matters because advanced Level 2 systems create a well-documented complacency problem. As we’ve covered extensively, even experts who understand the risks intellectually get conditioned into overtrusting the system. Research from the Insurance Institute for Highway Safety found that after just one month of using adaptive cruise control, drivers were more than six times as likely to look at their phones. FSD Supervised is far more capable than adaptive cruise control — the complacency risk is correspondingly higher.
Tesla has already been found guilty of false advertising over the “Full Self-Driving” name in California and has been forced to change its marketing language. Elon Musk keeps making the same safety claims about every new version, and Tesla will not take responsibility when the system makes mistakes — and it still makes mistakes. New European users encountering this technology for the first time should take the “Supervised” part of the name very seriously. Your hands may not need to be on the wheel, but your eyes absolutely need to be on the road.

RDW was extremely rigorous in their review https://t.co/H08x1qS9Y5
— Elon Musk (@elonmusk) April 10, 2026

First (supervised) FSD approval in Europe!

Congratulations to the Tesla team and thank you to the regulatory authorities in the Netherlands for all the hard work required to make this happen. https://t.co/8hidEOPSxm
— Elon Musk (@elonmusk) April 10, 2026

Tesla Semi https://t.co/U8yQUYHVJS
— Elon Musk (@elonmusk) April 10, 2026

Elon Musk: For the next few years, I think America is likely to win the artificial intelligence race. But that early lead is fragile and short-lived. Ultimately, the global victor will be decided by a single factor: it will be a function of who controls the AI chip fabrication.… pic.twitter.com/w5Nbztnj7z
— Ian Miles Cheong (@ianmiles) April 10, 2026

Elon shares insights on the transformative potential of harnessing solar energy beyond our planet.

Even a millionth of the sun's output would deliver roughly a million times more energy than civilization currently consumes.

"The only way to access that energy, the energy of… pic.twitter.com/kuHhrHFymV
— XCorpHub (@XCorpHub) April 10, 2026

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Of Course The Fed Is Crazy

Oct 112018

October 11, 2018 Posted by Raúl Ilargi Meijer at 1:22 pm Finance Tagged with: AAA, crazy, Fed, GOP, Growth, House, income tax, inequality, millionaires, naked, rates, Senate, Trump 6 Responses »

Pieter Bruegel the Elder The Triumph of Death 1562

Finally financial ‘markets’ go through a substantial dip, which Steve Mnuchin claims is just temporary and Donald Trump says is caused by the fact that the Fed is ‘loco’. Mnuchin may well be right, but it won’t be because he knows something you don’t.

And Trump is certainly right, but in reality the Fed has been loco for many years, so why be surprised if it acts crazy now? The reason Mnuchin and a million other ‘experts’ may be right without realizing it is that the Fed has been crazy enough to kill the financial markets.

Or at least killed what made the markets functional, and beneficial to society. And that may well be exactly what Jay Powell is trying to repair, but he may well not be aware of that either. Looked at from a ‘benign’ angle, Powell is perhaps raising rates so people can regain insight into what they’re buying.

The pre-Powell Fed pushed up asset prices (don’t let’s say ‘values’) to such heights nobody has any insight anymore into what anything is truly worth. And in what was formerly known as the financial markets that was not important, because what were formerly known as investors were making heaps of money regardless.

Surely they must all have known that this wouldn’t continue?! That it’s just a matter of timing, of knowing when it would end? Oh, but that’s not really possible, is it, without the very price discovery process the Fed successfully strangulated?

Still, there must also be tons of people left thinking the Fed can kick that can six times to the moon and back, or sixty. If only because they’ve never bothered to think about price discovery, and what role it plays in the very ‘markets’ they volunteer to spend their money in.

And along those same lines, many acknowledge housing bubbles in Sydney and Vancouver but think the US has learned its lesson a decade ago. And the loco Fed plays its role there too: mortgage rates have been ultra-low, enticing the last left batch of greater fools not mortally wounded by the last fire to jump in this time. Wolf Richter’s Case-Shiller graph says plenty in that regard:

But of course things tend back to normalcy, and it doesn’t take all the overleveraged stock- and home buyers longing for price discovery; it takes just a few to get the engine started. And then everyone will be along for the ride. So from that angle Jay Powell looks anything but crazy raising rates, we just can’t be sure if he knows what the consequences will be.

Not that it matters all that much what he does or does not know. What was formerly the market is like a pendulum swung so far out of balance that it costs ever more effort and money to keep it from moving towards equilibrium, and that process has only one possible outcome.

For mortgage rates, it looks something like this, and to make anyone able to buy any home at all higher rates will of necessity mean lower prices. You can’t, nobody can, not the Fed or the government can, keep that pendulum away from its tendency towards equilibrium forever.

For stocks it looks much the same. So why try, you’d think?! To prevent incumbents and ruling classes from being exposed as swimming naked, that’s why. They invented a way to make the entire nation swim naked, thinking they’d never be found out because the water levels were so high.

Whether yesterday’s 831-point Dow dip is temporary or not is of little interest. Much more important is that the entire asset prices situation is temporary. It doesn’t matter if the Fed pumps $1, $10, or $100 trillion into what once were markets, in the end it all comes down to how many people can pay how much money for the assets.

And since there is never an unending supply of greater fools, we know where this is going. The easy money and low rates and asset purchases at central banks and stock buybacks by companies can and will result only in more profits and more wealth for a few, and sheer endlessly less for the many.

Inequality in the US has now reached such extremities that the country’s AAA rating threatens to be taken away –as Moody’s indicated-; the government has so many people it must support financially (or let perish) that its financial position comes under pressure. Which is, again, negative for the many, for the few; they don’t care about that rating.

Yes, too many people are on some form of welfare in America. And Washington would love to throw many of them off of it. The many have no representation on Capitol Hill anymore. Just about any senator and congress(wo)man is a millionaire or certainly well-off.

How can the country get its rating back, or at least not lose it due to its increasing inequality? There seem to be two ways: let the 80 million now on welfare die by the side of the road, or provide them with jobs that allow them a fruitful life. That may sound like socialism or something, but it’s really the exact opposite.

It’s not the government’s role to give people jobs, but it is its role to make sure conditions are in place for the private sector to provide them. Trump’s ‘trade wars’ look crazy to many, but the intent is to get jobs back to the US. But there is much more.

America was once prosperous. What changed?

Here’s one thing: In what was -arguably?- America’s wealthiest time as a nation, the post-World War II period, income taxes for the richest were as high as 90% (1952: 92%); they were slowly brought down towards 70%. Only when Ronald Reagan took over in 1980 did they really fall (1982: 50%). This was ‘justified’ by lowering the highest income bracket (1982: $85,600, it had been between $200,000 and $400,000 for years).

In 1988, the top rate plunged to 28%, and the highest bracket to $29,750. Today, the top rate is 39.6% and the high bracket $400,000. In a graph, the consequences look like this:

The corporate tax rate, meanwhile, pulled this one, and don’t get started on tax havens etc.:

And that situation has led to a huge financial crisis, to the Fed going crazy and handing out trillions to the exact wrong part of society, those who already have a lot of money, and the result has been an absolute disaster, at least for the country; not so much for its elites.

But as even Moody’s now recognizes, you can’t run an AAA-rated country on elites alone. Despite the crazy Fed trillions, the US has achieved negative growth (imagine where it would be without):

Something must be done. Problem is, with only those millionaires in charge in the House and Senate, the likelihood of boosting income tax levels up to where they were when America was most prosperous is extremely low. And Trump’s tariffs are not on their own going to bring back the jobs; they can’t rebuild the lost infrastructure, for one thing.

Something must be done, and it’s entirely unclear what, or rather, who’s going to do it. The Democrats have nothing, or nothing but frustrated millionaires and Bernie Sanders. The GOP has only Trump. None of these people are going to vote to double their income taxes.

Much of what needs to be done will be classified as socialism, ridiculed and thrown out the window, even if the country was anything but socialist under Eisenhower and Kennedy, during its -at least economic- Golden Age.

It’s a nice puzzle, isn’t it? Well, maybe not so nice after all.

Debt Rattle October 11 2018

Oct 112018

October 11, 2018 Posted by Raúl Ilargi Meijer at 9:19 am Finance Tagged with: AAA, Acropolis, algorithm, antibiotics, Brexit, crazy, Dow, Fed, inequality, Italy, Monsanto, mortgage rates, Trump 3 Responses »

Pablo Picasso Bather 1908

• Dow Tumbles 830 Points In One Day, Trump Says The Fed Has ‘Gone Crazy’ (MW)

• World Stock Markets Dive As Trump Attacks ‘Crazy’ US Rate Hikes (G.)

• Tech Stocks Have Their Worst Day Since August 2011 (CNBC)

• “Rising Inequality” Could Impact America’s AAA Credit Rating (SH)

• How Will 6% Mortgage Rates Deal with Housing Bubble 2? (WS)

• Brexit Deal Within Reach If May Agrees On Customs Union, Says Barnier (G.)

• Hysteria Over the Italian Budget Is Wrong-Headed (Costantini)

• Trump Campaign Claims Wikileaks Not Liable For Releasing Hacked Emails (G.)

• Acropolis To Close In One-Day Strike Over Privatisation Fears (G.)

• Trump Will Be The Last ‘Pure Human’ Leader – Scott Adams (Y!)

• Judge Moves To Allow Monsanto New Trial After $289m Cancer Verdict (G.)

• HSBC Issues Dire Warning On Antibiotics Resistance (BI)

• Historic Climate Litigation Result Stands After Dutch Court Victory (CE)

Low volatility anyone?

• Dow Tumbles 830 Points In One Day, Trump Says The Fed Has ‘Gone Crazy’ (MW)

‘I think the Fed is making a mistake. It’s so tight, I think the Fed has gone crazy’. That is the view that President Donald Trump shared of the Federal Reserve on Wednesday in the wake of a virtual bloodbath on Wall Street that resulted in the worst daily decline for the Dow Jones Industrial Average and the S&P 500 since both U.S. equity benchmarks tumbled into correction territory back in early February. The Nasdaq, meanwhile, suffered its ugliest day since U.K. voters coalesced around a market-disrupting plan to exit from the European Union’s trade bloc back in June 2016.

In all, it was a withering session for an administration that has closely watched stock-market performance and views it, at least partly, as a gauge of the success of its economic policies, including corporate tax cuts and deregulation. However, those efforts, Trump says, are imperiled by the policies of the Fed, which has raised interest rates three times this year and has signaled its intention to do so a fourth time before year-end. IMF managing director Christine Lagarde dismissed Trump’s comments Thursday. “I would not associate Jay Powell with craziness,” she told CNBC at the IMF and World Bank annual meetings in Bali, Indonesia.

Everything’s going down. ‘Investors’ are jittery.

• World Stock Markets Dive As Trump Attacks ‘Crazy’ US Rate Hikes (G.)

A jittery, volatile week on global financial markets has burst into a frenzy of selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing US interest rate hikes as “crazy”. The Nikkei index in Tokyo was down by 4.25% on Thursday afternoon, while in Hong Kong the index was down 3.9% and Shanghai was at its lowest mark for four years after a plunge of 4.15%. In Sydney the benchmark S&P/ASX200 index closed down 2.74%, slipping below the 6,000-point mark for the first time since early June. European markets were braced for more losses with the FTSE100 in London poised to fall almost 2% and close to dropping down below 7,000 points for the first time since March.

The rout was triggered by a fall of more than 800 points in the Dow Jones industrial average on Wall Street on Wednesday. It was the worst drop in eight months and was led by sharp declines in technology stocks. Despite a booming US economy, low inflation and low unemployment, investors are concerned about rising bond yields that have been drawing money out of the stock market, and rising US interest rates. “It’s a bit of a bloodbath,” said Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial in New York. “It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies.”

[..] The Chinese yuan slipped against the dollar again on Thursday as Beijing tries to mitigate the impact of US tariffs. But it was the only currency across the region that was feeling the pressure from higher bond yields as the Australian dollar slipped under US71c. “The yuan has already weakened significantly, to offset the tariffs announced so far,” said Alan Ruskin, Deutsche’s global head of G10 FX strategy in Sydney. “Further weakness could exacerbate concerns of a self-fulfilling flight of capital, and a loss of control.”

Most overvalued sinks fastest.

• Tech Stocks Have Their Worst Day Since August 2011 (CNBC)

Technology stocks got clobbered on Wednesday, suffering their worst day in more than seven years, as concerns over rising interest rates punished the overall market, particularly shares of companies that have been the best performers. The S&P 500 Information Technology Index closed at $1,220.62, down 4.8 percent, marking the biggest decline since August 18, 2011, when the index dropped 5.3 percent. All 65 members of the index fell. The broader S&P 500 dropped by 3.3 percent and the Dow Jones Industrial Average tumbled 3.2 percent. The tech sector includes the largest companies by market cap in the U.S. and those that have been the biggest contributors to the extended rally. Shares of Apple, Microsoft and Amazon are up sharply for the year as investors bet they will continue to deliver strong earnings growth and take market share.

“The wider the income gap becomes, the more the government will have to spend in order to support lower-income households.”

• “Rising Inequality” Could Impact America’s AAA Credit Rating (SH)

“Since 1995, the top 10% of US income earners have experienced an overall median net worth increase of close to 200%, while the bottom 40% of income earners have seen a decline. There has been a particularly sharp increase in wealth and income inequality ratios since the global financial crisis,” Moody’s noted in a report released on Monday. “The global financial crisis exacerbated the effects of these trends by disproportionately affecting poorer overleveraged households and by reducing the mobility of households with negative home equity and, oftentimes, negative net wealth as a result,” says Moody’s Vice President William Foster. “Wealthier households with a higher concentration of equity market holdings in retirement savings plans and personal portfolio investments have disproportionately benefited from the significant gains in the US and global stock markets since the global financial crisis.”

In turn, that rising inequality “will exacerbate already material fiscal challenges on the horizon,” Moody’s continued. “Should inequality go unaddressed, social tensions will continue to rise, leading to a more fractious political landscape that increases political risk, and with it a less predictable policy environment.” But it’s not just about taxes, either. Everything from globalization, automation, technological advancements requiring advanced job skills, elevated premium on education and the increasing costs associated with education have played a role in widening inequality. So what does it mean for the U.S.’ AAA rating? According to Moody’s Vice President William Foster, the widening gap between rich and poor is a threat, but the U.S. government, of course, has other aspects supporting the rating—at least in the medium term (2-5 years). Chief among them is the debt denominated in dollars.

Still, Moody’s cites rising inequality as the U.S.’ weakest rating factor. Why? It’s simple math: The wider the income gap becomes, the more the government will have to spend in order to support lower-income households. These costs, Moody’s notes, “are unlikely to be offset by revenue raising measures following recent tax cuts”. At the end of the day, even though the economy is chugging along nicely—nicely enough, in fact, for everyone to ignore rising inequality that will contribute to widening fiscal deficits and a growing debt burden.

Timebomb.

• How Will 6% Mortgage Rates Deal with Housing Bubble 2? (WS)

What many in 2016 thought would never happen again is now reality. It finally happened – a line in the sand has been breached. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment did what people had thought in 2016 we’d never see again: It breached 5%. It hit 5.05%, to be precise, for the week ending October 5, according to the Mortgage Bankers Association (MBA) this morning. This is the highest average rate since January 5, 2010 (chart via Investing.com):

This is likely not the pain-threshold for the housing market, though it is already putting pressure on it at the margin, with some potential buyers being scared off and other potential buyers finding the inflated home prices of today with the current mortgage rates outside their range of affordability. As interest rates have risen, some potential buyers have fallen by the wayside – though not a huge number just yet. But 6% will likely be the pain threshold, in my estimates. It will block a considerable number of potential buyers from buying at current prices. Home prices would have to fall first.

If the maximum a household can afford is a mortgage payment of $1,720 a month, they can finance $320,000 over 30 years with a 5% fixed rate mortgage. But if the mortgage rate rises to 6%, they’re maxed out at $287,000. In other words, the price they can afford would drop by about 10% if the rate rises by 1 percentage point. This principle goes for all budget-constrained buyers. And 6% has moved into view. This is still historically low. It would take rates back to December 2008, when the Fed was kicking off its first round of QE to repress long-term rates and inflate asset prices. Beyond that are the now unimaginably high rates of 7% and 8%:

Mortgage rates move more or less in tandem with the 10-year Treasury yield, but are higher. The spread between the MBA’s average 30-year fixed mortgage rate and the 10-year yield runs around 1.5 to 2.0 percentage points over time. With today’s 10-year yield at 3.22%, the spread is 1.83 percentage points.

[..] This new mortgage rate environment is meeting home prices across the US that have surged over the past years. Affordability issues, already tough to deal with at 4% and 4.5% and even tougher to deal with at 5%, are going to be much tougher at 6%.

Barnier knows that the DUP and hardliners won’t accept.

• Brexit Deal Within Reach If May Agrees On Customs Union, Says Barnier (G.)

Michel Barnier has claimed a Brexit deal could be within reach by next Wednesday but warned the prime minister that only by abandoning a key red line and agreeing to a customs union can impediments on trade between Northern Ireland and the rest of the UK be avoided. The British government would have to give up on its plans for free-trade deals with China and the US under such an agreement, the EU’s chief negotiator insisted, but otherwise a customs and regulatory border within the territory of the UK will have to be erected.

The EU’s contentious proposal for avoiding a hard border on the island of Ireland after Brexit is for Northern Ireland to, in effect, stay in the customs union and remain under single market regulations, while the rest of the UK withdraws. In a speech in Brussels, Barnier reiterated his rejection of the counter-proposals hammered out by the cabinet at Chequers, which Theresa May insists is the only deal that respects both the referendum result and the constitutional integrity of the UK by ensuring “frictionless” trade and no hard border.

The prime minister’s plan for a common rulebook on goods and a customs arrangement that meant the UK could avoid border checks, while allowing the country to sign its own bespoke trade deals, would give British companies “a huge competitive edge” and be “counter to our very foundations”, Barnier said. He instead encouraged Britain to make a final push in the talks, offering to launch “around 10 negotiations running in parallel” from April 2019 on an EU-UK trade deal, if agreement can be found now on the Irish border issue and the principles of a Canada-style free trade deal.

Why the EU-Italy feud will be fierce.

• Hysteria Over the Italian Budget Is Wrong-Headed (Costantini)

Even the moderate face of the coalition, the Italian Premier Giuseppe Conte, stepped up to question the priorities of the European Commission, the Bank of Italy, and the IMF: He assured that his government remains committed to containing the public debt and maintaining fiscal stability, but claimed that goal is impossible to achieve without economic development. The minister for European affairs, economist Paolo Savona, said that, in fact, a higher deficit-to-GDP ratio than 2.4% would be helpful. The heated reactions to the new fiscal plan are unjustified. In fact, the estimated targets that the new fiscal plan would (minimally) breach are unreliable and based on wrong macroeconomic principles.

Moreover, despite accusations of profligacy, Italy has in fact been running large primary surpluses (the budget balance minus interest payments), and will keep doing so even if the government confirms its plans. If anything should be of “serious concern,” it is the fact that the country continues down the road of austerity, which has proven to be contractionary; it has locked the country into stagnation and exposed its banking system to still more stress. With public investments at historically low levels, unemployment still above the 2008 rate in all regions, and a youth unemployment rate above 30%, it is hard not to see a strong case for fiscal stimulus.

It’s all about Russiagate and Mueller’s indictment of ‘Russian hackers’. All nonsense. Free Assange and let him provide the evidence.

• Trump Campaign Claims Wikileaks Not Liable For Releasing Hacked Emails (G.)

The Trump campaign argued in a legal filing that Wikileaks could not be held liable for publishing emails that were stolen by Russian hackers ahead of the 2016 US election because the website was simply serving as a passive publishing platform on behalf of a third party, in the same way as Google or Facebook. Questions about Wikileaks’ publication of thousands of hacked emails, which it allegedly obtained following a plot by Russian military intelligence to steal the emails from Hillary Clinton’s presidential campaign and the Democratic party, are at the heart of Robert Mueller’s criminal investigation into possible collusion between the Trump campaign and the Kremlin.

The campaign also said in a legal filing that any alleged agreement between the Trump campaign and Wikileaks to publish the emails could not have been a “conspiracy” because Wikileaks’ decision to release the stolen emails was not an illegal act. The court filing was written in response to a civil lawsuit brought against the Trump campaign by two of Hillary Clinton’s donors and a former employee of the Democratic party. The Trump campaign’s surprising defence of Wikileaks marks a stark departure from official US policy, which has condemned the website for frequently targeting the US government and for publishing thousands of classified documents about covert policies.

[..] Analysts say the legal filing is also significant because it hints at how officials in the Trump White House or individuals who served on the campaign may eventually seek to defend themselves against any criminal charges alleging that they conspired with Wikileaks to release the emails. The legal arguments suggest the Trump White House would argue Wikileaks was not criminally liable for the release of the emails and that it therefore would not be a criminal conspiracy to work with the website on their release. The filing also makes the case that, under the campaign’s first amendment right to free speech, it had the right to publish information – even if it was stolen – as long as it did not participate in the theft of the emails. The hacked materials were a matter of “significant public concern”, the filing said.

They need to move well beyond one day to get attention. And whoever signed those secret deals (Tsipras, Troika!) needs their day in court.

• Acropolis To Close In One-Day Strike Over Privatisation Fears (G.)

Striking trade unionists in Greece are forcing the shutdown of the country’s prime ancient sites, including the Acropolis, in a one-day protest over privatisation fears. The 24-hour walkout on Thursday is expected to close the majority of Greece’s 275 archaeological sites, monuments and museums, which generate about €100m in revenue, mostly from ticket sales, every year. “We are doing this to protest the prospect of any of these sites being exploited by foreign funds,” said Grigoris Vafiadis, the head of the association of culture ministry employees. “Every day we are discovering that monuments have been transferred to the privatisation fund set up at the request of [bailout] lenders. No country in the world, for whatever reason, has mortgaged its cultural heritage.”

The sites, which protestors say include Knossos on Crete, are believed to have been placed on a list of properties overseen by a superfund established in 2016 with the express purpose of managing state assets for the next 99 years. The body, which also handles state asset sales, was part of the price the debt-burdened country had to pay to keep default at bay and remain in the eurozone. Vafiadis, whose union represents more than 3,000 cultural ministry officials, mostly in the Greater Attica region surrounding Athens and central Greece, said sites were listed in the superfund by code. “It’s a long process to work out what the codes refer to on the land registry. For all we know, they might even include the Acropolis which is not just Greek but a world heritage site and should never be put in the hands of any foreign fund,” he said.

Interesting assessment.

• Trump Will Be The Last ‘Pure Human’ Leader – Scott Adams (Y!)

Scott Adams, the creator of the office-themed comic strip “Dilbert,” isn’t laughing about the future of American democracy. Having expressed his admiration for Donald Trump over the past few years, Adams believes the tech industry poses a threat to the president as well as to the country as a whole. “I think President Trump will be the last pure human leader,” Adams told Grant Burningham, host of the Yahoo News podcast “Bots & Ballots.” “Everything after this will be a human and he will be elected, he or she, but the decisions will really come from the algorithm after that.”

The algorithm, Adams said, was the one unleashed on the world by Silicon Valley tech companies that has the power to shape popular opinion that, in turn, will determine how politicians express themselves. “There are people making decisions at the tech companies — the Googles and Twitters and Facebooks. Those decisions get turned into algorithms, and once they’re turned into algorithms, the humans no longer really understand them,” Adams said. Adams has likened Trump’s off-the-cuff communications approach in the 2016 presidential election to a form of hypnosis that helped insulate him from the powers of the algorithm.

“President Trump is unique in that his persuasion skills are greater than the tech companies’. It’s probably the only reason he got elected,” Adams said. “I can imagine no one else who would have beat Hillary Clinton. So, after him, I think if you get in an ordinary politician, and it doesn’t matter which party they’re in, the algorithm will push the voters and the voters will push the politicians and everybody will think they have free will, they will think they made up their own minds. They will think they did their own research, they came up with independent decisions, but we’re no longer in that world.”

Monsanto will appeal until the next century.

• Judge Moves To Allow Monsanto New Trial After $289m Cancer Verdict (G.)

A California judge has moved to grant the agrochemical company Monsanto a new trial after a landmark jury verdict found its herbicide had caused a man’s terminal cancer. Dewayne “Lee” Johnson, a 46-year-old former groundskeeper, won a $289m award in August in a trial alleging that the popular Roundup weedkiller had made him sick and that Monsanto had failed to warn him of the risks. Monsanto, now owned by Bayer, the German pharmaceutical company, immediately appealed the verdict, which included punitive damages and economic losses and also found that Monsanto had “acted with malice or oppression”.

The San Francisco superior court judge Suzanne Bolanos cited the “insufficiency of the evidence to justify the award for punitive damages” in a tentative written ruling issued before a hearing on Wednesday. She is expected to make a final decision after attorneys submit additional arguments. Monsanto sought to overturn the verdict and has continued to argue that it is safe to use glyphosate, the world’s most widely used herbicide. Glyphosate-based products, including the Roundup and Ranger Pro brands, are now worth billions of dollars in revenues, approved for use on more than 100 crops, and registered in 130 countries. Timothy Litzenburg, one of the attorneys who represented Johnson in the trial, told the Guardian that regardless of the outcome, the original ruling would still have a long-term impact: “There’s been a loud and clear message.”

Precautionary principle? Not for Monsanto, not for Big Pharma.

• HSBC Issues Dire Warning On Antibiotics Resistance (BI)

According to the global research team at HSBC, the use of antibiotics in meat production could have “devastating” consequences for humanity. When farmers feed antibiotics to their animals, they create antibiotic-resistant bacteria, which can lead to antibiotic-resistant “superbugs” in humans. Over time, this could make it difficult to treat even common infections like strep throat. The report’s authors liken the impact of antibiotic resistance to climate change: The causation may not be immediately clear, but the evidence suggests a catastrophic future. Scientific experts now predict that antibiotic resistance could lead to 10 million deaths annually by 2050, exceeding cancer as one of the most common forms of death worldwide.

While some of this is related to the overprescribing of antibiotics by doctors, it also has to do with the antibiotics that are fed to key sources of produce, such as chickens, cows, and pigs. According to the report, more than half of global antibiotics are used in agriculture rather than medicine. Although China accounts for 60% of the world’s agricultural antibiotics, the US also uses antibiotics in around 70% of its agricultural products. Most of these antibiotics are used in meat production, which has risen by 90% per capita globally since the 1960s. In June, an analysis of more than 47,000 US government lab tests found an increase in the number of pork chops and ground beef that were contaminated with antibiotic-resistant bacteria.

Court decides because of “a violation of the European Convention on Human Rights”. If that is true in Holland, it will also be in 26 other countries. Moreover, as Elliot Sherber said in his article in yesterday’s Debt Rattle:

“According to the legal maxim that “the health of the people should be the supreme law” (another type of emergency brake – one cited by jurists, and those contesting coercive power, since antiquity), there is a legal duty to pursue this as well (for, among other things, human health is contingent on the health of its general environment – and freedom from oppression). Indeed, if we are to take this maxim seriously, we must recognize that it implies that conditions that are inimical to health (harmful to the health of the people) must be corrected in order to comply with the “supreme law.”

• Historic Climate Litigation Result Stands After Dutch Court Victory (CE)

Climate litigators are celebrating after a second landmark court victory that will hold the Netherlands government to account for greater action on climate change. The Hague Court of Appeal has upheld a historic win for the Urgenda Foundation on behalf of 886 Dutch citizens in their climate case, rejecting the Dutch government’s arguments. A day after the UN IPCC report outlined the urgent climate action needed to restrict global warming to 1.5 degrees, the Dutch court today affirmed that any less than a 25% reduction in carbon emissions by the Netherlands government before 2020 would be a violation of the European Convention on Human Rights. Dutch emissions are currently only 13% lower compared to 1990 levels and have stagnated during the last six years.

The original legal victory by Urgenda inspired a wave of climate lawsuits worldwide, brought by people determined to hold their governments accountable for a lack of climate action. ClientEarth CEO James Thornton said: “Today’s news shows just what a powerful tool climate litigation has become in holding decision-makers to account for their climate inaction. “For a second time now, a Dutch court has ruled that the country’s government has a constitutional duty to protect its citizens from the impacts of climate change and that anything less is a violation of their human rights. “This second victory shows that Dutch judges have been clear about what the government must do now: accept both decisions and refocus its efforts on reducing its carbon emissions by 25% by 2020.

“This is the climate case that started it all, inspiring similar lawsuits worldwide. It has completely changed the debate on climate policy and will inspire people everywhere to use the power of the courts to hold their leaders to account for greater action on climate change.”

Debt Rattle October 2 2017

Oct 022017

October 2, 2017 Posted by Raúl Ilargi Meijer at 8:56 am Finance Tagged with: Catalonia, CDO, climate change, crazy, dam, Egypt, referendum, Trump, Vanuatu, volcano 6 Responses »

Claude Monet Boulevard des Capucines 1873

• Catalans Signal They May Declare Independence Within a Week (BBG)

• Catalan Referendum Results Show 90% In Favour Of Independence (G.)

• Catalan Independence Referendum Is A Smokescreen For Other Issues (Ind.)

• Global Retirement Reality: A $400 Trillion Shortfall (Mauldin)

• Hedge Funds Are ‘Dancing On The Rim Of A Volcano’ (BI)

• CDO Redux: Credit Spreads & Financial Fraud (Whalen)

• No, Trump Didn’t Botch the Puerto Rico Crisis (BBG)

• Trump Urges Staff To Portray Him As “Crazy Guy” (Axios)

• Egypt Fears Disaster From Largest Hydroelectric Dam In Africa (AP)

• Planes, Ships, Barges: The DIY Evacuation Of Vanuatu’s Volcano Island (G.)

• Climate Change Will Make Some Countries Richer – IMF (BBG)

An appeal from Puerto Rico via Nicole:

Hurricane Maria destroyed many of Puerto Rico’s local seed and organic food-producing farm crops. Please, if you can, send me seeds. Even fruit seed for the tropics – I can plant them quickly. I will hand them out to those in need – as well as start flats in order to jumpstart their crops. Thank you!

Mara Nieves
PO BOX 9020931
Old San Juan, PR
00901-0931

Ready for more confrontation.

• Catalans Signal They May Declare Independence Within a Week (BBG)

Catalan separatist leaders signaled they may be moving toward a unilateral declaration of independence as early as this week after hundreds of activists were injured on Sunday as they sought to stop Spanish police from shutting down an illegal referendum. Catalan President Carles Puigdemont appealed to the European Union for support as he pledged to inform the regional parliament of the result of the vote in the coming days. The assembly will then act in line with the referendum law, Puigdemont said — and that could lead to a unilateral declaration of independence within 48 hours of the notification. “The citizens of Catalonia have won the right to have an independent state,” Puigdemont said in a televised statement, flanked by members of his regional administration.

Two million Catalans backed independence out of 2.3 million votes cast in total, government spokesman Jordi Turull said at a press conference in the early hours of Monday. Just over 5 million people were eligible to vote. Before the government crackdown began, separatist leaders said they would be comfortable declaring independence with about 1.8 million votes. Puigdemont’s time frame could see him announce the formation of a Catalan republic on Oct. 6, exactly 83 years since his predecessor as regional president, Lluis Companys, also declared independence. Companys was executed by the dictatorship of Francisco Franco. [..] Prime Minister Mariano Rajoy is wrestling with his country’s biggest constitutional crisis since Franco’s death in 1975 as Puigdemont looks to harness decades of frustration to force Catalonia out of Spain.

Heading a minority government, Rajoy is fighting to maintain his authority as allies peel off in the national parliament and his officials struggle to enforce the law in the rebel region. While a declaration of independence would have no legal force, and would most likely not be recognized by the international community, it would nevertheless constitute a historic challenge to the authority of the Spanish government and state institutions. On Sunday night, Rajoy praised police for their “calmness” in defending the constitutional order after they raided polling stations and seized ballot boxes in their efforts to shut down the vote. As forces deployed, camera phones beamed the confrontations to the world. In one video, broadcast by a local newspaper, a woman is seen being thrown down a flight of stairs.

In another, police rip ballot boxes from the hands of would-be electoral officials. “We’ve proved that our rule of law has the resources to repel an attack on democracy of this magnitude,” Rajoy said in a televised statement. “Look for no culprits other than those who organized an illegal act and have broken our common bonds. We’ve witnessed the type of behavior that would be repugnant for any democrat: the indoctrination of children, persecution of judges and journalists.”

Just weeks ago there wasn’t even a majority in the polls.

• Catalan Referendum Results Show 90% In Favour Of Independence (G.)

Catalan officials have claimed that preliminary results of its referendum have shown 90% in favour of independence in the vote vehemently opposed by Spain. Jordi Turull, the Catalan regional government spokesman, told reporters early on Monday morning that 90% of the 2.26 million Catalans who voted Sunday chose yes. He said nearly 8% of voters rejected independence and the rest of the ballots were blank or void. He said 15,000 votes were still being counted.The region has 5.3 million registered voters. Turull said the number of ballots did not include those confiscated by Spanish police during violent raids which resulted in hundreds of people being injured. At least 844 people and 33 police were reported to have been hurt, including at least two people who were thought to have been seriously injured.

Catalonia’s regional leader, Carles Puigdemont, spoke out against the violence with a pointed address: “On this day of hope and suffering, Catalonia’s citizens have earned the right to have an independent state in the form of a republic. “My government, in the next few days, will send the results of [the] vote to the Catalan parliament, where the sovereignty of our people lies, so that it can act in accordance with the law of the referendum.” Puigdemont had pressed ahead with the referendum despite opposition from the Spanish state, which declared the poll to be illegal, and the region’s own high court. He told crowds earlier in the day that the “police brutality will shame the Spanish state for ever”. The Spanish government defended its response after hundreds of people were hurt when riot police stormed polling stations in a last-minute effort to stop the vote on Sunday.

Background.

• Catalan Independence Referendum Is A Smokescreen For Other Issues (Ind.)

Tensions are running high in Catalonia, with riot police out in force and protesters advocating their right to vote being shot with rubber bullets. At the time of writing, more than 300 people have been injured and at least one person is currently undergoing surgery as a result of clashes between police and protesters. Police repression, the arresting of politicians and the intransigence of the Spanish government (“there will be no referendum” has been Prime Minister Mariano Rajoy’s favourite refrain over the last few weeks) make the temptation to simplify this into a simple left-right or good-bad discourse tantalising. But this issue is far from simple. Both sides in this debate are using the referendum to further their own political agendas.

Spain’s governing party, the Partido Popular (PP), is a right-wing party housing a spectrum of thought from neoliberalists to the hard-line right. The ruling party in Catalonia, PDeCAT, is a centre right party of the Catalan bourgeois which has historically been the natural ally of PP and not a traditional supporter of independence. Interestingly, their move to advocate a referendum has stopped their support from dropping in recent months. Alongside this, neither the national government nor the Catalan parliament are strangers to corruption in politics. PDeCAT has been plagued with allegations of corruption, debate around which has receded significantly as demands for independence have increased. PP, for its part, has often sought conflict as a means of garnering public support.

Positioning this referendum and the spectre of independence as a threat to Spanish citizens and their economic future – as well as tugging on the strings of nationalist patriotism in demanding the continued unity of Spain – PP has engaged widespread support. In recent days, Spanish flags have poured from windows and balconies, and in towns throughout Spain people have cheered the Civil Guard – Spain’s law enforcement agency which operates on military lines – with football chants advocating the defeat of the opposition. Against this political background, Spain is beginning to emerge from the crisis of which it has been in the grasp of since 2008. However, unemployment, particularly among young people, is still extremely high, with poverty and homelessness rates continuing to rise. Both Catalan and Spanish politicians have invoked nationalism as the banner beneath which popular support can be raised, allowing the referendum and its surrounding debates to create a vacuum in which these pressing social issues are demoted.

John Mauldin is a scary man.

• Global Retirement Reality: A $400 Trillion Shortfall (Mauldin)

I wrote a letter last June titled “Can You Afford to Reach 100?” Your answer may well be “Yes;” but, if so, you are one of the few. The World Economic Forum study I cited in that letter looked at six developed countries (the US, UK, Netherlands, Japan, Australia, and Canada) and two emerging markets (China and India) and found that by 2050 these countries will face a total savings shortfall of $400 trillion. That’s how much more is needed to ensure that future retirees will receive 70% of their working income. This staggering figure doesn’t even include most of Europe.

[..] The chart below shows the percentage of GDP needed to cover government pension payments in 2015 and 2050. But consider that the percentage of tax revenues required will be much higher. For instance, in Belgium the percentage of GDP going to pensions will be 18% in about 30 years, but that’s 40–50% of total tax revenues. That hunk doesn’t leave much for other budgetary items. Greece, Italy, Spain? Not far behind. And there is other research that makes the above numbers seem optimistic by comparison. The problem that the European economies have is that for the most part they are already massively in debt and have high tax rates. And they can’t print their own currencies. Many of Europe’s private pension companies and corporations are also in seriously deep kimchee. Low and negative interest rates have devastated the ability of pension funds to grow their assets.

Combined with public pension liabilities, the total cost of meeting the income and healthcare needs of retirees is going to increase dramatically all across Europe. Macron, the new French president, really is trying to shake up the old order, to his credit; and this week he came out and began to lay the foundation for the mutualization of all European debt, which I assume would end up on the balance sheet of the ECB. However, that plan still doesn’t deal with the unfunded liabilities. Do countries just run up more debt? It seems like the plan is to kick the can down the road just a little further, something Europe is becoming really good at. In this next chart, note the line running through each of the countries, showing their debt as a percentage of GDP. Italy’s is already over 150%. And this is a chart based mostly on 2006 and earlier data. A newer chart would be much uglier.

I could go on reviewing the retirement problems in other countries, but I hope you begin to see the big picture. This crisis isn’t purely a result of faulty politics – though that’s a big contributor – it’s a problem that is far bigger than even the most disciplined, future-focused governments and businesses can easily handle. Look what we’re trying to do. We think people can spend 35–40 years working and saving, then stop working and go on for another 20–30–40 years at the same comfort level – but with a growing percentage of retirees and a shrinking number of workers paying into the system. I’m sorry, but that’s magical thinking. And it’s not what the original retirement schemes envisioned at all. Their goal was to provide for a relatively small number of elderly people who were unable to work. Life expectancies were such that most workers would not reach that point, or would at least live just a few years beyond retirement.

As I have pointed out in past letters, when Franklin Roosevelt created Social Security for people over 65 years old, US life expectancy was about 56 years. If the retirement age had kept up with the increase in life expectancy, the retirement age in the US would now be 82. Try and sell that to voters. Worse, generations of politicians have convinced the public that not only is a magical outcome possible, it is guaranteed. Many politicians actually believe it themselves. They aren’t lying so much as just ignoring reality. They’ve made promises they aren’t able to keep and are letting others arrange their lives based on the assumption that the impossible will happen. It won’t.

“..betting on the VIX is a ‘quick way to lose money.'”

• Hedge Funds Are ‘Dancing On The Rim Of A Volcano’ (BI)

The market is calm. Perhaps too calm. The lack of price swings has investors mired in a sea of complacency, which has them ignoring potential risks, says Societe Generale. The firm specifically cites the CBOE Volatility Index – or VIX – which is used to track nervousness in the US stock market. Not only is the so-called fear gauge locked near the lowest levels on record, but hedge funds are betting it’ll decline even further. Their VIX positioning is the most bearish on record, according to data compiled by the US Commodity Futures Trading Commission. “Compare that with dancing on the rim of a volcano,” a group of SocGen strategists led by Alain Bokobza, the firm’s head of global asset allocation, wrote in a client note. “If there is a sudden eruption (of volatility) you get badly burned.”

This isn’t the first time SocGen has issued a warning about low volatility. Two weeks ago, the firm drew parallels to conditions leading up to the 2007 financial crisis. Describing the current situation as a “dangerous volatility regime,” the firm cited the strong mean-reverting tendency of price swings as a big reason why investors should be bracing themselves. Other heavyweights in the investment field have also spoken out about the low-price-swing situation that they see as untenable. In late July, JPMorgan global head of quantitative and derivatives strategy Marko Kolanovic compared rock-bottom volatility to the conditions leading up to the 1987 stock market crash. [..] Laszlo Birinyi, the investment guru who predicted the bull market and has been repeatedly correct over its 8 1/2-year run, said that betting on the VIX is a “quick way to lose money.”

“..the large banks cannot survive without cheating customers, creditors and shareholders..”

• CDO Redux: Credit Spreads & Financial Fraud (Whalen)

The moral of the story with Citi and other large banks is that there is no free lunch, but sadly no one on the FOMC seems to appreciate this subtlety. When the Fed pushes down interest rates and then manipulates credit spreads to achieve some illusory goal in terms of monetary policy, the result is a change in the behavior of investors and lenders that is profound. The fact that Citi, JPM and GS are now pushing back into the dangerous world of off-balance sheet (OBS) derivatives just illustrates the fact that the large banks cannot survive without cheating customers, creditors and shareholders. And just as retailers cannot compete with AMZN, Citi and GS certainly cannot compete against the monopoly power of the House of Morgan. In the case both of Citi and JPM, just half of the banks’ operating business comes from lending, while the remainder comes from risk bearing investments and trading.

With some $50 trillion in off-balance sheet (OBS) derivatives, which is almost six standard deviations above the $1.8 trillion peer average for large banks, Citi and JPM are now the outliers on Wall Street in terms of derivatives exposure. A move of 30bp in the OBS derivatives book of either bank would wipe out their capital. Chart One below shows the OBS derivatives exposure of Citi, JPM, GS and the other major banks. Notice that all three of the leading derivatives dealers have been increasing exposures since last year. Note too that the relatively small GS has a notional OBS derivatives book of more than $41 trillion, almost as large as that of Citi and JPM. More alarming, a move of just 7bp in the smaller bank’s OBS derivatives exposures would wipe out the capital of Goldman’s subsidiary bank. This gives GS an effective leverage ratio vs its notional OBS derivatives exposures of 8,800 to 1.

Yesterday it was the HuffPo, now Bloomberg. Blaming Trump unfairly is a bad approach. Exit echo chamber.

• No, Trump Didn’t Botch the Puerto Rico Crisis (BBG)

[..] to look at the larger context of the entire relief operation, I decided to talk to someone whose experience rivals that of General Honore: retired Navy Captain Jerry Hendrix. Now a senior fellow with the Center for a New American Security, Hendrix served for decades both on the high seas and in high-level staff jobs, including with the Chief of Naval Operations’ Executive Panel and the Office of the Undersecretary of Defense for Policy’s Irregular Warfare Quadrennial Defense Review. Few people know more about military history than Hendrix, who has degrees from Purdue, Harvard, the Naval Postgraduate School and a Ph.D. from Kings College in London. Little wonder that in 2012 was named the service’s director of naval history.

TH: So, it seems like everybody has blasted Trump administration’s response to the Puerto Rico crisis. Has that criticism been fair?

JH: No, I don’t think so. First of all, there was a fair amount of anticipatory action that is not being recognized. Amphibious ships including the light amphibious carriers Kearsarge and Wasp and the amphibious landing ship dock Oak Hill were at sea and dispatched to Puerto Rico ahead of the hurricane’s impact. These are large ships that have large flight decks to land and dispatch heavy-lift CH-53 helicopters to and from disaster sites. They also have big well-decks – exposed surfaces that are lower than the fore and aft of the ship – from which large landing craft can be dispatched to shore carrying over 150 tons of water, food and other supplies on each trip. These are actually the ideal platforms for relief operations owing to their range of assets. The ships, due to their designs to support Marine amphibious landings in war zones, also have hospitals onboard to provide medical treatment on a large scale. That these ships were in the area should be viewed as a huge positive for the administration and the Department of Defense.

TH: Your plaudits toward the White House on all this are surprising to say the least. But where does the response still need to improve?

JH: One area in which the Trump administration could possibly lend additional assistance would be looking at a more robust activation of its assets in the Defense Department’s Transportation Command to include more heavy-lift and cargo aircraft, as well as Maritime Administration shipping to move the logistics-heavy large infrastructure items on the ocean. Everything from bulldozers to transformers needs to come by ships, and it’s been decades since it was really flexed to its full capacity. This would have the dual purpose of revealing any significant weaknesses in the Transportation Command assets and readiness should we need it in a military emergency down the road.

Does this mean everybody gets what they want?

• Trump Urges Staff To Portray Him As “Crazy Guy” (Axios)

In an Oval Office meeting earlier this month, President Trump gave his top trade negotiator, Robert Lighthizer, an Art of the Deal-style coaching session on how to negotiate with the South Koreans. Trump’s impromptu coaching came in the middle of a pivotal conversation with top officials about whether or not to withdraw from the U.S.-Korean trade deal. Sources familiar with the conversation recounted the exchange for Axios, and the White House did not dispute this account. A number of senior officials and cabinet secretaries were present for the conversation, including Defense Secretary Mattis, Agriculture Secretary Perdue, and Secretary of State Tillerson. At issue was whether the U.S. would withdraw from the Korean trade deal — an action Trump threatened but still hasn’t done.

“You’ve got 30 days, and if you don’t get concessions then I’m pulling out,” Trump told Lighthizer. “Ok, well I’ll tell the Koreans they’ve got 30 days,” Lighthizer replied. “No, no, no,” Trump interjected. “That’s not how you negotiate. You don’t tell them they’ve got 30 days. You tell them, ‘This guy’s so crazy he could pull out any minute.'” “That’s what you tell them: Any minute,” Trump continued. “And by the way, I might. You guys all need to know I might. You don’t tell them 30 days. If they take 30 days they’ll stretch this out.” Why this matters: Plenty of world leaders think the president is crazy — and he seems to view that madman reputation as an asset. The downsides are obvious: the rhetoric can unnerve allies and has the potential to provoke enemies into needless, unintended war. But Trump keeps using the tactic, with varying degrees of success:

Just today, the president undercut his secretary of state by suggesting diplomacy with “Little Rocket Man” in North Korea was a waste of time — implying that only military action would resolve the conflict. “Save your energy Rex,” Trump tweeted, “we’ll do what has to be done!” We’ve never seen anything like this before. Trump’s tweet, undercutting Tillerson’s diplomatic efforts, comes a day after Tillerson acknowledged for the first time that the administration was in direct communication with North Korea. Trump’s tweet also undercuts a statement made Tuesday by Joint Chiefs Chairman General Dunford: “The military dimension today is in full support of the economic and diplomatic pressure campaign the secretary of state is leading in North Korea.”

The kind of thing that can lead to war.

• Egypt Fears Disaster From Largest Hydroelectric Dam In Africa (AP)

The only reason Egypt has even existed from ancient times until today is because of the Nile River, which provides a thin, richly fertile stretch of green through the desert. For the first time, the country fears a potential threat to that lifeline, and it seems to have no idea what to do about it. Ethiopia is finalizing construction of the Grand Ethiopian Renaissance Dam, its first major dam on the Blue Nile, and then will eventually start filling the giant reservoir behind it to power the largest hydroelectric dam in Africa. Egypt fears that will cut into its water supply, destroying parts of its precious farmland, hampering its large desert reclamation projects and squeezing its bourgeoning population of 93 million people, who already face water shortages. Dam construction on international rivers often causes disputes over the downstream impact.

But the Nile is different: few nations rely so completely on a single river as much as Egypt does. The Nile provides over 90% of Egypt’s water supply. Almost the entire population lives cramped in the sliver of the Nile Valley. Around 60% of Egypt’s Nile water originates in Ethiopia from the Blue Nile, one of two main tributaries. Egypt barely gets by with the water it does have. Because of its population, it has one of the lowest per capita shares of water in the world, some 660 cubic meters a person. The strain is further worsened by widespread inefficiency and waste. With the population on a path to double in 50 years, shortages are predicted to become severe even sooner, by 2025. That is despite the fact that Egypt already receives the lion’s share of Nile waters: more than 55 billion of the around 88 billion cubic meters of water that flow down the river each year.

It is promised that amount under agreements from 1929 and 1959 that other Nile nations say are unfair and ignore the needs of their own large populations. Complicating the issue, no one has a clear idea what impact Ethiopia’s dam will actually have. Addis Ababa says it will not cause significant harm to Egypt or Sudan downstream. Much depends on management of the flow and how fast Ethiopia fills its reservoir, which can hold 74 billion cubic meters of water. A faster fill means blocking more water at once, while doing it slowly would mean less reduction downstream.[..] One study by a Cairo University agriculture professor estimated Egypt would lose a staggering 51% of its farmland if the fill is done in three years. A somewhat slower fill over six years would cost Egypt 17% of its cultivated land, the study claimed

“..its 83 islands are stuck right in the middle of hurricane alley and they dot the border of the “ring of fire”..”

• Planes, Ships, Barges: The DIY Evacuation Of Vanuatu’s Volcano Island (G.)

Vanuatu is no stranger to the rumblings, shakings, flood waters and wrecking winds of natural disaster. The south Pacific island nation was rated the most at-risk country in the world in a 2016 United Nations study. Its 83 islands are stuck right in the middle of hurricane alley and they dot the border of the “ring of fire” – a belt around the Pacific prone to earthquakes and volcanic eruptions. Despite their precarious situation being a day-to-day reality, the country has been galvanised by the prime minister Charlot Salwai’s order to evacuate the entire island of Ambae because of the threat that the volcano at its centre will blow. “People’s lives must be our first priority,” Salwai said. “Everybody has to go.” What followed has been Vanuatu’s own version of the Dunkirk evacuation. Folk began organising even before Salwai gave the order.

The Ni-Vanuatu – the people of this archipelago – are defined by two things: land and family. From the moment a state of emergency was announced, members of the Ambae community in Port Vila, the capital, began to mobilise. They knew better than to wait for the cash-strapped, resource-starved government and instead jury-rigged a disaster response centre at a church. Local companies began donating goods immediately. Before long they had stockpiles of water, food, bedding and other essentials ready to send. Then they chartered a ship. The MV Makila was one of the first of Vanuatu’s ragtag fleet of inter-island barges and coasters to reach Ambae with supplies. It unloaded those goods then took more than 100 passengers to safety on the nearby island of Espiritu Santo. Then it went back and did it again.

There was no hesitation, no reflection. The ships had to run. So the community members dug deep and shifted for themselves. [..] Nadia Kanegai has been a personal assistant to a prime minister, and a former political candidate herself. A past master at getting things done by Vanuatu’s often shambolic bureaucracy, she didn’t flinch at the difficulties presented by moving hundreds of her home island’s most vulnerable inhabitants to safety. She just hired a plane and told the pilot to keep flying until everyone was out. Kanegai won’t discuss how much this airlift is costing her, but whistle-stop charter flights to the outer islands typically cost the equivalent of £1,000 for a return hop. Her plane made 18 flights on the first day alone.

Bloomberg headline “Why Russia Should Love Climate Change Deniers”. Because that sells better than Mongolia?

• Climate Change Will Make Some Countries Richer – IMF (BBG)

President Donald Trump and other climate-change deniers probably don’t think of themselves as contributing to Russia’s future prosperity. But judging from a new International Monetary Fund report, that’s what they might be doing. In its latest World Economic Outlook, the IMF offers a sobering analysis of global warming’s potential repercussions. Looking at the historical relationship between climate and economic output, it finds that poor countries in hot regions – home to a majority of the world’s population – are likely to suffer the most as average temperatures rise. Here’s a map showing the effect of a one-degree-Celsius temperature increase on per-capita GDP, with countries scaled to reflect their populations:

Gazing at the map, though, I couldn’t help but ask: What about the winners? Those green areas in the north certainly suggest that somebody stands to gain. So I downloaded the data to see which countries would get a per-capita GDP boost. Mongolia, Iceland, Finland and Russia topped the IMF’s list. Here’s the whole thing:

To be sure, this doesn’t mean that the countries will turn into a tropical paradises. For one, the researchers derived their estimates from the relatively small weather fluctuations of the past – nobody can really know what will happen if temperatures go beyond what humans have experienced. Also, don’t forget bigger natural disasters, forced migrations and all the other ills that climate change is expected to bring. That said, the data do suggest that Russia could, at least initially, be an unintended beneficiary of what amounts to a global injustice of epic proportions. Look again at that map: The poor countries in the south stand to bear the brunt of a catastrophe created largely by the wealthy countries in the middle, while the countries in the north get a windfall. That’s an outcome to which Trump, by downplaying the dangers of global warming and withdrawing from the Paris climate accord, has already made a significant contribution.

Debt Rattle August 16 2017

Aug 162017

August 16, 2017 Posted by Raúl Ilargi Meijer at 8:57 am Finance Tagged with: American Dream, China, crazy, crisis, debt, fish, leverage, plastic, property, Syria, war 2 Responses »

Fred Stein Hydrant, New York 1947

• The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

• After 100 Months of Buying The Dips – Peak Crazy (Stockman)

• China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

• China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

• UK Risks ‘Losing Its Place As Property-Owning Democracy’

• The New American Dream: Rent Your Home From A Hedge Fund (Black)

• Trump Signs Order to Speed Up Public-Works Permits (BBG)

• German Challenge To ECB QE Asset Buys Sent To European Court (R.)

• Washington’s Long War on Syria (Ren.)

• Fish Confusing Plastic Debris In Ocean For Food (G.)

Debt leads to war.

• The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

Totally irresponsible policies by governments and central banks have created the most dangerous crisis that the world has ever experienced. Risk doesn’t arise quickly as the result of a single action or event. No, risk of the magnitude that the world is experiencing today is the result of many years or decades of economic mismanagement. Cycles are normal in nature and in the world economy. And cycles that are the result of the laws of nature normally play out in an orderly fashion without extreme tops or bottoms. “Just take the seasons. They go from summer to autumn, winter and spring, with soft transitions that seldom involve drama or catastrophe. Economic cycles would be the same if they were allowed to happen naturally without the interference of governments.

But power corrupts and throughout history leaders have always hung on to power by interfering with the normal business cycle. This involves anything from reducing the precious metals content of money from 100% to nothing, printing money, leveraging credit, manipulating interest rates, taking total taxes from at least 50% + today from nothing 100 years ago etc, etc. Governments will always fail when they believe that they are gods. But not only governments believe they perform godly tasks but also hubristic investment bankers like the ex-CEO of Goldman Sachs who proclaimed that the bank was doing God’s work. It must be remembered that Goldman, like most other banks, would have gone under if they and JP Morgan hadn’t instructed the Fed to save them by printing and guaranteeing $25 trillion. Or maybe that was God’s hand too?

We now have unmanageable risks at many levels – politically, geopolitically, economically and financially. This is a RISK ON situation that is extremely dangerous and will have very grave consequences. There are numerous risks that can all cause the collapse of the world economy and they all have equal relevance. However, the political situation in the USA is very dangerous for the world. This the biggest economy in the world, albeit bankrupt with debt growing exponentially and real deficits every year since 1960. Before the dollar has collapsed, the US will still be seen as a powerful nation, although a massive economic decline will soon weaken the country burdened by debt at all levels, government, state, and private.

“There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day.”

• After 100 Months of Buying The Dips – Peak Crazy (Stockman)

Just call it Peak Crazy and move on. There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day. The fact that this is happening is a measure of how impaired capital markets have become as a result of massive central bank intrusion. The robo-machines and day traders keep buying the dips because that has “worked” for the last 100 months. There is nothing more to it than residual momentum. Under a regime of honest money and price discovery, the stock market discounts the future. There is no plausible future from here that’s worth 24 times S&P 500 value or 96 times the Russell 2000. Surely the year-ahead earnings boom that Wall Street’s artists have penciled in is not in the slightest bit plausible. With 84% of the S&P 500 reporting Q2 results, LTM earnings are still 1.3% below where they were in September 2014.

Nothing has happened to corporate earnings in the last three years except deflation in the energy, materials and industrial sectors. After hitting $106 per share in September 2014, the global deflation cycle brought them to a low point of $86.44 per share in March 2016 in response to low $30s oil prices. The latter has since recovered to the $50 dollar zone – bringing S&P 500 earnings back to $104.61 during the current quarter. The question remains: How does an aging business cycle and immense global headwinds justify the expectation of a red hot earnings breakout during the next 18 months? Yet that’s what’s happening on Wall Street. We’ve hit nearly $133 per share of GAAP earnings (and $145 of the ex-items variety) for the LTM period ending in December 2018, meaning a prospective surge of 27%.

[..] In this machine driven market, any of these indices could resume their mad momentum based climb. But negative divergences are breaking out everywhere, and that’s usually a sign that the end is near. Margins on debt has again reached an all-time high of $550 billion. The chart below leaves little doubt as to what comes next. After the 2000 peak, margin debt collapsed by 50% as stocks were violently liquidated to meet margin calls. All this while in 2008 the shrinkage of margin debt was even larger – nearly 60%. This time, however, a similar shrinkage would cause a $325 billion decline in margin balances. That’s a lot of stocks on a fire sale.

“..outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year..”

• China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

China’s economy is looking good enough that the IMF is raising its outlook, but the organization is doing so with a strong warning over growing debt in the world’s second-largest economy. The IMF issued its annual review of China on Tuesday, and has revised its growth forecast to 6.7% for 2017, which was up from 6.2%. The organization also said it expects China to average 6.4% growth between now and 2021, versus its previous estimate of 6%. Still, the organization warned that things were far from peachy. “The growth outlook has been revised up reflecting strong momentum, a commitment to growth targets, and a recovering global economy,” the IMF said. “But this comes at the cost of further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term.”

What Beijing needs to do is to seize its current strong growth momentum “to accelerate needed reforms and focus more on the quality and sustainability of growth,” said the report. At the top of that list is working to tackle the debt issue: Going forward, the IMF sees China’s non-financial sector debt to hit nearly 300% of GDP by 2022, up from around 240% last year. Debt-fueled growth, the IMF warned, is a short-term solution that isn’t sustainable in the long run unless China tackles deeper structural issues. Experts have been sounding the alarm bell over this issue for years, urging China to rein in its old model of opening credit lines to fuel investment and spending and to find a better balance between supporting growth and controlling risks to the economy.

Chinese banks extended 825.5 billion yuan (about $123.44 billion) in new loans in July, down from 1.54 trillion yuan in June. Outstanding total social financing — a broad measure of credit and liquidity — came in at 1.22 trillion yuan last month versus 1.78 trillion yuan in June. Part of the drop is seasonal, and it’s “masking an uptick in underlying credit growth,” wrote China economist Julian Evans-Pritchard at Capital Economics. A better way to look at credit creation is to gauge growth in outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year.

As long as things look good for the Party Congress, who cares?

• China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

Growth in China’s broad money supply slipped to a fresh record low, signaling authorities aren’t letting up in their drive to curb excess borrowing and safeguard the financial system. Aggregate financing stood at 1.22 trillion yuan ($182.7 billion) in July, the People’s Bank of China said on Tuesday, compared with an estimated 1 trillion yuan in a Bloomberg survey. New yuan loans stood at 825.5 billion yuan, versus an projected 800 billion yuan. Broad M2 money supply increased 9.2%, while economists forecast a 9.5% increase . Authorities pushing to cut excess leverage have squeezed the massive shadow bank sector, which shrank for the first time in nine months. Yet with aggregate financing remaining robust and bond issuance rebounding, the central bank is still providing ample support for businesses to avoid derailing growth ahead of a key Communist Party congress this fall.

Slower M2 growth will become a “new normal,” the PBOC said Friday in its quarterly monetary policy report. “The relevance of M2 growth to the economy and its predictability has reduced, and its changes should not be over-interpreted.” “The deleveraging campaign is still focused on the financial sector, which leads to the slowdown in M2 growth,” said Yao Shaohua at ABCI Securities in Hong Kong. “Bank support for the real economy remains solid.” “The easing in credit conditions in July was probably part of the concerted stability play ahead of the Party Congress, thus more likely to be temporary,” said Yao Wei, chief China economist at Societe Generale in Paris. “We’re still looking for more deleveraging measures and tougher regulations afterwards.”

“The divergence between M2 growth and aggregate financing reflects that the PBOC is trying to balance cutting leverage while ensuring enough funds to support the real economy,” said Wen Bin at China Minsheng Banking in Beijing. “Single-digit M2 growth is likely to stretch until year-end. And with ample support from the central bank’s credit supply, the drag effect of financial deleveraging on the economic expansion will be limited.” “Banks are still creating credit, and this credit is important to support economic growth,” said Iris Pang, an analyst at ING in Hong Kong. “If liquidity is too tight, or credit growth shrinks, the whole deleveraging reform will run into the risk that there will be too many defaults and the whole banking system will be shaken up.”

“..first-time buyer registrations drop by almost 20% on the year..”

• UK Risks ‘Losing Its Place As Property-Owning Democracy’

The UK risks losing its place as a property-owning democracy if house prices continue to rise, according to the boss of the UK’s largest independent estate agent. Paul Smith, chief executive of haart, said that “unaffordability is reaching crisis point” and urged the Government to stop “excessive profiteering” at the expense of aspiring home owners. The call comes as official figures showed that the price of the average house in the UK increased by £10,000 last year to £223,000. Property values increased by 0.8% between May and June according to joint figures from the Office for National Statistics, Land Registry and other bodies. In the year to June average prices were up 4.9%, down marginally from 5% growth in the year to May.

The report released on Tuesday said the annual growth rate had slowed since mid-2016 but has remained steady at about 5% this year so far. “House prices continued to rally with unflinching determination once again in June despite the ongoing economic uncertainty,” Mr Smith said. “However this means that the average UK buyer now has to fork out an extra £10,000 more to own a home than the same time last year. “Along with consumer price hikes and falling wage growth, unaffordability is reaching a crisis point. This is creating real impact on the ground as we see first-time buyer registrations drop by almost 20% on the year across our branches.”

“..if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.”

• The New American Dream: Rent Your Home From A Hedge Fund (Black)

About a month ago I joined the Board of Directors of a publicly-traded company that invests in US real estate. The position brings a lot of insight into what’s happening in the US housing market. And from what I’m seeing, the transformation that’s taking place today is extraordinary. Buying and renting out single-family homes has long been the mainstay investment of small, independent, individual investors. The big banks and hedge funds pretty much monopolize everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland. Single-family homes were one of the last bastions of investment freedom for the little guy. (Real estate is how I got my own start in business and investing so many years ago; I was a 21-year-old Army lieutenant fresh out of the academy when I bought my first rental property.)

But all that’s changing now. Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital). If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion. And this is only the latest merger in an ongoing trend. Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes. And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.

[..] medium-sized funds are buying up all the little guys. And mega-funds like Blackstone are buying up all the medium-sized funds. This means there’s essentially an ‘arms race’ building among the world’s biggest funds to control the market, squeezing small, individual investors out of the housing market. [..] the average guy isn’t making any more money, or able to save anything… all while home prices soar to record levels as major funds gobble up the supply. This means that the new reality in America, especially for young people, is that if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.

Prolonging the emergency with America’s own bridges to nowhere.

• Trump Signs Order to Speed Up Public-Works Permits (BBG)

President Donald Trump signed an executive order Tuesday that’s designed to streamline the approval process for building roads, bridges and other infrastructure by establishing “one federal decision’’ for major projects and setting an average two-year goal for permitting. “This over-regulated permitting process is a massive self-inflicted wound on our country,” Trump said in a press conference at Trump Tower in New York. “It’s disgraceful.” Among other things, the president’s order will rescind a previous decree signed by former President Barack Obama that required federal agencies to account for flood risk and climate change when paying for roads, bridges or other structures.

It also allows the Office of Management and Budget to establish goals for environmental reviews and permitting of infrastructure projects and then track their progress – with automatic elevation to senior agency officials when deadlines are missed or extended, according to the order. The order calls for tracking the time and costs of conducting environmental reviews and making permitting decisions, and it allows the budget office to consider penalties for agencies that fail to meet established milestones. Critics say there’s danger in streamlining the reviews. “This is yet another outrageous example of Trump’s insistence on putting corporate interests ahead of people’s health and safety,” said Alex Taurel, deputy legislative director with the League of Conservation Voters, a political advocacy group.

Way too late.

• German Challenge To ECB QE Asset Buys Sent To European Court (R.)

The European Central Bank may be violating laws on monetary financing in its €2.3 trillion ($2.7 trillion) asset purchase programme, Germany’s constitutional court said on Tuesday, and it asked Europe’s top court to make a ruling. In the biggest challenge yet to the ECB’s unprecedented effort to revive growth, the court said bond buys under the scheme may go beyond the bank’s mandate and inhibit euro zone members’ activities. “Significant reasons indicate that the ECB decisions governing the asset purchase programme violate the prohibition of monetary financing and exceed the monetary policy mandate of the European Central Bank, thus encroaching upon the competences of the Member States,” the court said. It said it would ask the European Court of Justice to review the programme.

The ECB acted swiftly to defend the scheme. “The extended asset purchase programme is in our opinion fully within our mandate,” it said in a statement. “That is ultimately for the European Court of Justice to assess.” It said the €60 billion per month asset buys would continue as normal. The European court has already backed the ECB’s more contentious emergency bond purchase scheme known as Outright Monetary Transactions or OMT with only relatively minor limitations, suggesting that the challenge – lodged by several academics and politicians – may face an uphill battle. The decision to pass the issue over to the ECJ means any final ruling will come either after the bond purchases end or near the end of the scheme, which has already been running for over two years and is expected to be wound down next year.

“The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.”

• Washington’s Long War on Syria (Ren.)

From Syria, to Iraq, Iran to Libya, our understandings of the long-wars in the Middle-East as moral, humanitarian interventions designed to democratise and civilise are the result of a carefully crafted propaganda campaign waged by the US and its allies. Each of these uprisings were launched by US proxies, designed to destabilize the regions, justifying regime change that suit the economic interests of its investors, banks and corporations, captured comprehensively in a new book by Canadian author and analyst, Stephen Gowans, Washington’s Long War on Syria. You might be surprised to know that both the Libyan, Syrian and Iraqi government, led by Muammar Gaddafi, Hafez Al Assad, (succeeded by Bashaar Al Assaad) and Sadaam Hussein respectively, were socialist governments. Or Ba’ath Arab Socialist governments, to be precise.

Ba’ath Arab Socialism can be summed up in their constitutions supporting the values of: ‘freedom of the Arab world, freedom from foreign powers and freedom of socialism’. Its doctrine was supported in Libya, as it was in Iraq and Syria. Of course, particularly in Hussein’s case, we cannot claim that these governments were without their problems. Ethnic cleansing is not to be overlooked, but condemned on the strongest grounds. But of course these were not the reasons the US and its allies decided to get into it. In the case of Iraq, it had combined its oil wealth with public ownership of the economy, leading to what is known as ‘The Golden Age’, where, according to a State Department Official: “Schools, universities, hospitals, factories, museums and theatres proliferated employment so universal, a labour shortage developed.”

When the Ba’ath Arab Socialists were driven from power in Iraq, the US installed military dictator, Paul El Briener who set about a ‘de-Ba’athification’ of the government, expelling every member of the Ba’ath Arab Socialist party and imposed a constitution forbidding any secular Arab leader from ever holding office in Iraq again. The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.” Gadaffi would soon be removed by Islamists, backed by NATO forces after Western oil companies agitated for his removal because he was “driving a hard bargain”. Canadian paramilitary forces even quipped that they were “al-Qaeda’s air-force”.

And then we eat it. Carbon will kill us yet.

• Fish Confusing Plastic Debris In Ocean For Food (G.)

Fish may be actively seeking out plastic debris in the oceans as the tiny pieces appear to smell similar to their natural prey, new research suggests. The fish confuse plastic for an edible substance because microplastics in the oceans pick up a covering of biological material, such as algae, that mimics the smell of food, according to the study published on Wednesday in the journal Proceedings of the Royal Society B. Scientists presented schools of wild-caught anchovies with plastic debris taken from the oceans, and with clean pieces of plastic that had never been in the ocean. The anchovies responded to the odours of the ocean debris in the same way as they do to the odours of the food they seek. The scientists said this was the first behavioural evidence that the chemical signature of plastic debris was attractive to a marine organism, and reinforces other work suggesting the odour could be significant.

The finding demonstrates an additional danger of plastic in the oceans, as it suggests that fish are not just ingesting the tiny pieces by accident, but actively seeking them out. Matthew Savoca, of the National Oceanic and Atmospheric Administration and lead author of the study, told the Guardian: “When plastic floats at sea its surface gets colonised by algae within days or weeks, a process known as biofouling. Previous research has shown that this algae produces and emits DMS, an algal based compound that certain marine animals use to find food. [The research shows] plastic may be more deceptive to fish than previously thought. If plastic both looks and smells like food, it is more difficult for animals like fish to distinguish it as not food.”

Debt Rattle April 14 2017

Apr 142017

April 14, 2017 Posted by Raúl Ilargi Meijer at 8:23 am Finance Tagged with: crazy, debt, Easter, energy, Frontex, Greece, hubris, IMF, lovebird, recession, refugees, Russia, Wikileaks 5 Responses »

American Soldiers Observing Eruption of Mount Vesuvius 1944

• ‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)

• We’re Heading Straight Into a Recession – Jim Rickards (MWS)

• How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)

• Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)

• The Ethical Case For Taxing Foreign Home Buyers (Gordon)

• UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)

• CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)

• ‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)

• American Energy Use, In One Diagram (Vox)

• Macroscale Modeling Linking Energy and Debt (King)

• Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)

• At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)

• The Ultimate Lovebird (DM)

As Cohen indicates, Tillerson signed multi-billion contracts with Putin. That required a lot of trust. That trust is now being put at risk.

• ‘Russia Thinks We’re Crazy, Completely Crazy’ (ZH)

Lastly, Stephen Cohen, Professor of Russian studies at Princeton and NYU, an actual expert on China, weighed in, saying ‘Russia thinks we’re crazy, completely crazy.’ He even took some time to express his ‘disgust’ with Al Mattour, saying ‘your previous guest, I don’t mean to be rude to him. First of all, he doesn’t know what he’s talking about. And, secondly, he excludes the reality that Russia has a politics. And the politics in Russia today as we talk is […] the concern that America is preparing war against Russia. If not on Syria, then on the other two cold war fronts […] where NATO is building up in an unprecedented way. This is not good because they have nuclear weapons and because accidents happen.’

He then theorized what the conversation between Putin and Tillerson was like, pointing to the two having a history of trust together from the time Tillerson led Exxon Mobile. ‘Rex, says Putin, what in the world is going on in Washington?’ Professor Cohen, ominously, summed it up, ‘I’m not young. I’ve been doing this 40 years, sometimes as a Professor, sometimes inside. I have never been as worried as I am today about the possibility of war with Russia.’

Any day now.

• We’re Heading Straight Into a Recession – Jim Rickards (MWS)

Before the holiday weekend begins, best-selling author James Rickards joins Olivia Bono-Voznenko outside the NYSE to talk all about the markets and his latest book, “The Road to Ruin.” Jim discusses the currency wars, Trump’s turnaround on China & the Fed and an inevitable crisis amid a weak system.

Though he defines it poorly, Edwards is right that deflation is still here.

• How’s This For Grade 1 Central Bank Hubris? (Albert Edwards)

Peter Praet, the ECB’s chief economist said in a recent interview that, “Since the crisis, we have had serious concerns about deflationary risks on several occasions in the euro area, but now we can say they have disappeared.” Really? Has he seen the chart below, which shows core CPI in the Eurozone heading sharply lower and now approaching its all-time low seen at the start of 2015! Not only that, but Eurozone inflation expectations are also declining again, after surging in the aftermath of Donald Trump’s election. To be fair, Praet was focusing on the rise in headline inflation in the Eurozone, which touched 2% in February before dropping back in March to 1.5%.

After some 18 months bobbing around the zero mark, I can understand why central bankers might be heaving a sigh of relief, but for them to take credit for a recovery in headline inflation is totally disingenuous given it has been entirely driven by a recovery in the oil price. Similarly, Janet Yellen was quoted saying the Fed is “doing pretty well” in meeting its congressionally mandated goals of low and stable inflation and a full-strength labor market. It’s this sort of comment that has led Marc Faber to want to short central bankers, the only way being to buy gold. The increasing volume of central bank hubris may even explain the recent breakout of gold to the upside! It is not just eurozone inflation expectations that seem to be in retreat. The same thing is happening in the US too (see chart below).

I am always surprised how dominated 10y inflation expectations are by short-term movements in the oil price and headline inflation, but it was noticeable just how rapidly inflation expectations ran up in the wake of Trump’s election – way in advance of what might have been expected by the bounce in the oil price. One might have thought the surge in the oil price from its trough some 12-18 months ago might have had more impact on wage inflation, but so far that does not seem to be the case. Despite the euphoria in the markets about the “reflation trade”, survey inflation expectations have continued to drift downwards. One thing is certain: for central banks to call victory over deflation may prove very premature indeed. Nemesis awaits.

Easter jitters.

• Wall Street Fear Gauge Hits Fresh High For The Year (CNBC)

Stocks may be in for a deeper pullback, now that the so-called fear index is finally breaking out higher. The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, closed above its 200-day moving average for the first time since the election this week. The indicator jumped more than 2% Thursday afternoon at one point to a fresh high for the year. U.S. markets are closed for trading Friday for the Easter holiday. The recent spike in fear comes just as geopolitical risk heats up. The Pentagon said Thursday U.S. military forces dropped the largest non-nuclear bomb in Afghanistan, the first time the so-called mother of all bombs has ever been used in combat. U.S. stocks fell, with the S&P 500 and DJIA closed at two-month lows Thursday. “I’d say it’s probably more of a Trump trade [reversing] than the geopolitics, but going forward I think the geopolitics is the topic the market is focusing on,” said Andres Jaime at Barclays.

Good argument: A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes..

• The Ethical Case For Taxing Foreign Home Buyers (Gordon)

Foreign capital is playing an important role in the real estate markets of Toronto and Vancouver, and has for some time. As political leaders debate its impact and possible policy measures to alleviate its attendant issues, it is important to think clearly about the ethics of foreign ownership. Predictably, those who want to stymie or avoid policy action in this area have alluded to “xenophobia” to deter critics. Even some well-intentioned people have given credence to these claims. Yet curtailing or taxing foreign ownership is not xenophobic, especially if policy is properly designed. Xenophobia is the irrational or unjustified fear of foreigners. Concerns about the impact of foreign ownership are about flows of money, not people, and they are certainly justified in Toronto and Vancouver.

Foreign ownership raises two main ethical problems. First, those who buy based on foreign income or wealth often have access to money in ways that are unavailable to local residents. This means that locals are potentially put into disadvantageous, or unfair, competition for real estate where they live. Second, people who buy property based on foreign income or wealth may not have contributed much in Canadian taxes, which is largely what makes the property so valuable in the first place. Canadian real estate has become an attractive place to stash international money for a variety of reasons – we don’t effectively enforce money laundering regulations, we have relatively low property-tax rates and the enforcement of capital gains taxes has been lax. But real estate in Canada is ultimately attractive because of the country’s stable institutions, its public infrastructure and its social cohesion.

These latter things are paid for, or fostered by, taxes collected from Canadians – income taxes in particular. At a minimum, then, Canadians should have preferential access to property ownership, since they are paying for what makes it so valuable. It is precisely for these reasons that we see nothing ethically problematic about charging foreign students more in tuition at Canadian universities. Residential property is no different. Concerns around foreign ownership are especially potent when money is arriving from societies where corruption is widespread, and when foreign money is playing a significant role in driving up prices. Both apply in the cases of Toronto and Vancouver.

[..] We can then better design a foreign-buyer’s tax, which is needed to calm Toronto’s frenzied market. A foreign-buyer’s tax can be refunded to individuals to the extent they pay income taxes – the amount they pay in the three years following a purchase, for instance. This makes it clear that the tax need not discourage entrepreneurial talent from abroad, as claimed by Toronto Mayor John Tory. This understanding of the issue also leads straightforwardly into the proposal by many economists in British Columbia, including my colleague Rhys Kesselman. Provincial governments should introduce an annual property surtax on expensive homes that can be offset by income taxes paid, while exempting seniors with sustained CPP contribution records. This continuous surtax would powerfully target foreign ownership, and would thereby reconnect the local housing market to the local labour market.

I’ll believe it when I see it. Nobody wants to see the economy crash, they’ll stick with loose lending standards to prevent it.

• UK Banks Crack Down On Credit Card Lending After Borrowing Binge (Tel.)

Britain’s credit card binge could be at an end as banks tighten up controls on consumer debt. Borrowing growth hit rates of more than 10pc over the past year, a pace not seen since the boom years before the financial crisis, but now banks are touching the brakes. The Bank of England has warned that a consumer debt could be more of a risk to banks than mortgage lending, should there be an economic downturn. Fierce competition to win new customers has led banks to offer more credit to customers with increasingly long interest-free periods.But banks have started tightening lending criteria for credit card applicants in a move of an intensity not seen since the depths of the financial crisis in 2008 and 2009.

A net balance of 33pc of lenders expect to tighten standards in the coming three-month period, according to Bank of England data. When unsecured loans are also included, a net balance of 27pc plan to scrutinise applications more closely. There was also a fall in the number of credit card applications approved in the first quarter of the year, and banks expect the number to remain roughly steady in the coming quarter. By contrast credit scoring criteria for secured loans, such as mortgages, is holding broadly steady. “The recent rapid growth in consumer credit could principally represent a risk to lenders if accompanied by weaker underwriting standards,” warned the Bank of England’s Financial Policy Committee this month.

After first praising it.

• CIA Director Brands Wikileaks A ‘Hostile Intelligence Service’ (G.)

Mike Pompeo, the director of the CIA, has branded WikiLeaks a “hostile intelligence service,” saying it threatens democratic nations and joins hands with dictators. In his first public remarks since becoming chief of the US spy agency in February, Pompeo focused on the group and other leakers of classified information like Edward Snowden as one of the key threats facing the United States. “WikiLeaks walks like a hostile intelligence service and talks like a hostile intelligence service. It has encouraged its followers to find jobs at CIA in order to obtain intelligence… And it overwhelmingly focuses on the United States, while seeking support from anti-democratic countries and organisations,” said Pompeo. “It is time to call out WikiLeaks for what it really is – a non-state hostile intelligence service often abetted by state actors like Russia.”

[..] Last month, WikiLeaks embarrassed the CIA and damaged its operations by releasing a large number of files and computer code from the agency’s top secret hacking operations. The data showed how the CIA exploits vulnerabilities in popular computer and networking hardware and software to gather intelligence. Counterintelligence investigators continue to try to find out who stole the files and handed them to WikiLeaks. Assange meanwhile criticized the US agency for not telling the tech industry and authorities about those vulnerabilities so they can be fixed. Pompeo said Assange portrays himself as a crusader but in fact helps enemies of the United States, including aiding Russia’s interference in last year’s presidential election.

“Assange and his ilk make common cause with dictators today. Yes, they try unsuccessfully to cloak themselves and their actions in the language of liberty and privacy; in reality, however, they champion nothing but their own celebrity. Their currency is clickbait; their moral compass, nonexistent.” However, Pompeo did not comment on how Trump has previously lavished praise on Assange for the information he has made public. Nor did Pompeo mention that he himself had cited and linked to WikiLeaks in a tweet attacking the Democratic Party. Pompeo at the time was a Republican congressman and member of the House Intelligence Committee. The CIA declined to comment on that.

Translation: get it done.

• ‘US Will Keep ‘Open Mind’ On Any IMF Aid To Greece’ (AFP)

The US government will keep an “open mind” on any new loan package from the IMF for debt-burdened Greece, a senior US Treasury official said Thursday. Despite criticism of international organizations by the Trump administration, the comments allay concerns that US Treasury Secretary Steven Mnuchin could veto any large new aid package for Athens. “We’re looking for the Europeans to help Greece to resolve its economic problems, and we think the IMF can play a supportive role,” the official told reporters. “And we’ll look at any potential future agreement with an open mind.” IMF chief Christine Lagarde on Wednesday said Greece and its eurozone creditors have made progress towards a new loan package that includes debt relief, but that is something the fund has been saying for months without a final deal.

Greece last week accepted a tough set of reforms demanded by its eurozone creditors in hopes of securing a new loan in time to avert a looming debt default in July, although it still must finalize the details. Athens has been deadlocked for months over reforms, and budget targets, which has put the IMF and EU at loggerheads over the need for debt relief in order to ensure an economic recovery, and the government’s ability to repay its loans. The eurozone is under heavy pressure to end the feud in order to avert a chaotic default and inflicting damage on an already stalled Greek recovery. Greece has about €7 billion in debt repayments due in July. All the key officials involved in the talks are expected to be in Washington next week to attend the IMF and World Bank annual meetings.

We waste. That’s what we’re good at.

• American Energy Use, In One Diagram (Vox)

Every year, Lawrence Livermore National Laboratory LLNL produces a new energy flow chart showing the sources of US energy, what it’s used for, and how much of it is wasted. If you’ve never seen it before, it’s a bit of a mind-blower. Behold US energy in 2016: So much information in so little space! (It’s worth zooming in on a larger version.)

[..] a British thermal unit (BTU) is a standard unit of energy — the heat required to raise the temperature of a pound of water by 1 degree Fahrenheit. If you prefer the metric system, a BTU is about 1055 joules of energy. A “quad” is one quadrillion (a thousand trillion) BTUs. [..] a few things equivalent to a quad: 8,007,000,000 gallons (US) of gasoline, 293,071,000,000 kilowatt-hours (kWh), 36,000,000 metric tons of coal The US consumed 97.3 quads in 2016, an amount that has stayed roughly steady (within a quad or so) since 2000.

Perhaps the most striking feature of the spaghetti diagram — what everyone notices the first time they see it — is the enormous amount of “rejected” energy. Not just some, but almost two-thirds of the potential energy embedded in our energy sources ended up wasted in 2016. (And note that some scholars think LLNL is being too optimistic, and that the US is not even 31% efficient but more like 13%.) What’s more, the US economy is trending less and less efficient over time. Here’s the spaghetti diagram from 1970 (LLNL has been at this a long time):

Back then, we only wasted half our energy! It’s important to put this waste in context. It is not mainly about personal behavior or inefficient energy end use — keeping cars idling or leaving the lights on, that kind of thing. That’s a part of it, but at a deeper level, waste is all about system design. The decline in overall efficiency in the US economy mainly has to do with the increasing role of inefficient energy systems. Specifically, the years since 1970 have seen a substantial increase in electricity consumption and private vehicles for transportation, two energy services that are particularly inefficient. (Electricity wastes two-thirds of its primary energy; transportation wastes about three-quarters.)

There is loss inherent in any system that converts raw materials to usable energy, or transports or uses energy, of course. That follows from the second law of thermodynamics. And it’s true both narrowly (a car is an energy system) and broadly (a city is an energy system). It’s not possible to achieve perfect efficiency, or anything close to it. But surely we can do better than 31%! Sixty-six quads is a truly mind-boggling amount of energy to vent into the atmosphere for no good purpose. It really highlights the enormous potential of better-designed systems — especially better electricity and transport systems, along with better urban systems (i.e., cities) — to contribute to the country’s carbon reduction goals. We could double our energy use, with no increase in carbon emissions, just by halving our energy waste.

I like this, and it’s high time energy became a part of economic modeling; Steve Keen is working on it too. BUT: to understand today’s predicaments, you have to look -seperately- at what has happened in financial markets. The debt binge was not a result of what went on with energy; it stood -and stands- on and by itself.

• Macroscale Modeling Linking Energy and Debt (King)

What if you realized that the fundamental economic framework of macroeconomics is insufficient to inform our most pressing concerns? The world is dynamic, in constant change, yet most economic models (even the most widely used “dynamic” model) lack fundamental feedbacks that govern long-term trends (e.g., regarding role of energy) and make assumptions that prevent the ability to describe important real-world phenomena (e.g., financial-induced recessions). Monetary models of finance and debt often assume that natural resources (energy, food, materials) and technology are not constraints on the economy. Energy scenario models often assume that economic growth, finance and debt will not be constraints on energy investment.

Energy and food costs have declined since industrialization, but no longer

These assumptions must be eliminated, and the modeling concepts must be integrated if we are to properly interpret the post-2008 macroeconomic situation: unprecedented low interest rates, high consumer and private debt, high asset valuations, and energy and food costs that are no longer declining. As we attempt to understand newer and more numerous options (e.g., electric cars, renewables, information) regarding energy system evolution, it is paramount to have internally consistent macro-scale models that take a systems approach that tracks flows and interdependencies among debt, employment, profits, wages, and biophysical quantities (e.g., natural resources and population). There is a tremendous research need to develop a framework to describe our contemporary and future macroeconomic situation that is consistent with both biophysical and economic principles. Unfortunately, this fundamental integration does not underpin our current thinking.

U.S. consumer costs of fundamental needs (energy, food, housing, transport) are no longer declining

• Debt is money.

• Money is created when commercial banks lend money to businesses, not when the U.S. Treasury prints money or when Federal Reserve Bank lowers interest rates. Those government and Fed actions are reactions to the creation or destruction of money (e.g., paying back loans) within the real economy.

• Businesses seek new loans when economic opportunities are present. Thus, a growing economy can support more debt.

• Economic opportunities are present when consumers have disposable income to spend (and when innovative technologies supplant old technologies, thus lowering prices, and enabling growth).

• Consumers have more money to spend when core needs (e.g., food, energy, housing) are getting cheaper relative to incomes. Thus, if these core needs are no longer getting cheaper, this is an indication of the lack of income growth to support business investment. In turn banks stop lending because there are fewer viable business opportunities.

• The conclusion is that without decreasing food and energy costs to consumers, real incomes do not rise.

• This is a viable explanation of the post-2008 economy, but one ignored by practically all policy makers, economists, and advisors!

Frontex is a disaster.

• Refugee Rescue Group Accuses EU Border Agency Of Plotting Against Them (AFP)

A Spanish group which has been rescuing migrants in the Mediterranean since 2016 accused the EU’s border control agency Frontex on Wednesday of plotting to discredit private aid organisations in order to put off donors. Allegations by Frontex that donor-funded rescue vessels may have colluded with traffickers at the end of last year prompted Italian prosecutors to begin an informal investigation into their funding sources. “The declarations by Frontex and political authorities are intended to discredit our actions and erode our donors’ trust,” said Proactiva Open Arms head Riccardo Gatti. “They are trying to say that we support the smuggling or the traffickers themselves,” he said. In a report cited in December by the Financial Times daily, Frontex raised the possibility that traffickers were putting migrants out to sea in collusion with the private ships that recover them and bring them to Italy “like taxis”.

Prosecutors then publicly wondered at the amount of money being spent, though they stopped short of opening a formal probe. “We feel there’s someone who wants to put a spoke in our wheels, though we do not really know who is behind it,” Gatti said. The organization said it had nothing to hide. “We have 35,000 donors. Some are well known – like Pep Guardiola, the current manager of Manchester City – others are anonymous,” said Oscar Camps, Proactiva Open Arms director. He said the group had so far received €2.2 million euros in donations for an op in the Med that costs between €5,000 and €6,000 a day. Pro-Activa Open Arms also heavily criticized a deal signed in February between Italy and Libya which purportedly hopes to stem the flow of migrants from the coast of North Africa to Italy.

Gatti said the deal was made with only part of the 1,700 militias he said control Libya and would therefore be ineffective. Human rights watchers have also warned the accord would put the lives of those fleeing persecution and war in greater danger. “Everything is controlled by the militias in Libya, even the coast guard, and 30 percent of the financial flows in the country come from human trafficking,” he said. The deal is in doubt after it was suspended in March by Tripoli’s Court of Appeal. Nearly 25,000 migrants have been pulled to safety and brought to Italy since the beginning of the year in a sharp increase in arrivals.

Happy Easter.

• At Least 97 Migrants Missing As Boat Sinks Off Libya (AFP)

At least 97 migrants were missing after their boat sank on Thursday off the Libyan coast, a navy spokesman said. Survivors said the missing include 15 women and five children, General Ayoub Qassem told AFP. He said the Libyan coastguard had rescued a further 23 migrants of various African nationalities just under 10 kilometres (6 miles) off the coast of Tripoli. The boat’s hull was completely destroyed and the survivors, all men, were found clinging to a flotation device, he said. Those who had disappeared were “probably dead”, but bad weather had so far prevented the recovery of their bodies, Qassem added. An AFP photographer said survivors had been given food and medical care at Tripoli port before being transferred to a migrant centre east of the capital.

Six years since the revolution that toppled dictator Moamer Kadhafi, Libya has become a key departure point for migrants risking their lives to cross the Mediterranean to Europe. Hailing mainly from sub-Saharan countries, most of the migrants board boats operated by people traffickers in western Libya, and make for the Italian island of Lampedusa 300 km away. Since the beginning of this year, at least 590 migrants have died or gone missing along the Libyan coast, the International Organization for Migration said in late March. In the absence of an army or regular police force in Libya, several militias act as coastguards but are often themselves accused of complicity or even involvement in the lucrative people-smuggling business. More than 24,000 migrants arrived in Italy from Libya during the first three months of the year, up from 18,000 during the same period last year, according to the UN High Commissioner for Refugees.

Easter feel good.

• The Ultimate Lovebird (DM)

A stork has melted hearts in Croatia by flying to the same rooftop every year for 14 years – to be reunited with its crippled partner. The faithful bird, called Klepetan, has returned once again to the village of Slavonski Brod in east Croatia after a 5,000 mile migration. He spends his winters alone in South Africa because his disabled partner Malena cannot fly properly after being shot by a hunter in 1993. Malena had been found lying by the side the road by schoolteacher Stjepan Vokic, who fixed her wing and kept her in his home for years before helping her to build a nest on his roof. After placing her there, she was spotted by Klepetan 14 years ago. And now every year they are reunited in the spring. Klepetan keeps a very strict timetable, usually arriving back at the same time on the same day in March to be welcomed by locals.

But this year he was running six days late, causing panic among local media and fans of the stork couple. Such is the popularity of the pair that there is even a live feed on the main square in the capital Zagreb showing the two storks. There was huge excitement when stork-watchers saw what they thought was Klepetan circling over the nest, and then coming in to land. But the new arrival turned out to be a different stork that was attempting to woo Malena. She quickly attacked him and drove him off and continued to wait for Klepetan. Stjepan Vokic, whose roof the couple nest on, said: ‘She was pretty clear about the message, I doubt he will be back again.’ Vokic has taken care of Malena since she was first injured by hunters and says that she – like her partner – is now part of the family.

During the winter, Vokic keeps her inside the house, and then lets her go to the roof each spring where she patiently waits for her partner. This year, Malena made a rare flight and the couple were reportedly inseparable for hours. She does have the ability to make very short flights but her wing has not healed well enough for her to make the trip to Africa, or even to properly feed herself. Every summer, the pair bring up chicks, with Klepetan leading their flying lessons in preparation for the trip south in summer. The oldest recorded living stork was 39. Locals are hopeful the couple’s long relationship will continue for years to come.