Dec 012017
 
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Edward S. Curtis Mosa Mohave girl c. 1903

 

The Mean Reverting History Of Profit Growth (Roberts)
US Household Debt Is Rising 60% Faster Than Wages (ZH)
We Give Up! Government Spending And Deficits Soar Everywhere (Rubino)
Lemmings In Full Stampede Toward The Fiscal Cliff (Stockman)
Brexit Risks Leaving Banks on the Hook for Impossible Contracts (BBG)
I’m Glad Morgan Stanley Has Warned Us About Jeremy Corbyn (Ind.)
US Senate Suspends Tax Bill Votes to Friday Morning (BBG)
Australian Banks Face Public Inquiry Amid String of Scandals
Gold Trader Implicates Erdogan In US Sanctions Breaking Case (BBC)
From The Caucasus To The Balkans, China’s Silk Roads Are Rising (Escobar)
Paris – The Financial Capital Of West And Central Africa (Gefira)
Chinese Satellite Closes In On Dark Matter Mystery (AFP)

 

 

Another great set of graphs from Lance Roberts, who just keep churning them out. I picked these two to show how dependent economies have become on suppressing wages. Problem is, that threatens economies. You need money rolling at the ground level to keep your economy going.

The Mean Reverting History Of Profit Growth (Roberts)

Since 2000, each dollar of gross sales has been increased to more than $1 in operating and reported profits through financial engineering and cost suppression. The next chart shows that the surge in corporate profitability in recent years is a result of a consistent reduction of both employment and wage growth. This has been achieved by increases in productivity, technology, and off-shoring of labor. However, it is important to note that benefits from such actions are finite. (Note the acceleration in profits starting with the Reagan Tax Cuts in the 1989’s. There is no evidence that cutting taxes for corporations leads to higher wages for employees.)

Given the economic landscape of recent years, large offsetting sectoral deficits and surpluses are not surprising, but they should not be taken as evidence that the long-term profitability of the corporate sector has permanently shifted higher. Stocks are not a claim to a few years of cash flows, but decades and decades of them. By pricing stocks as if current profits are representative of the indefinite future, investors have ensured themselves a rude awakening over time. Equity valuations are decidedly a long-term proposition, and from present levels, the implied long-term returns are quite dim.

Read more …

And then you get this…

US Household Debt Is Rising 60% Faster Than Wages (ZH)

The good news: total mortgage debt has decreased since 2008, to $8.743 trillion from $9.29 trillion, but as of the third quarter of 2017, still accounts for 67.5% of overall consumer debt. The bad news: since 2008, the growth in total debt has been attributable to the auto loan and student loan sectors. Auto loan debt has increased by 50% since 2008, to slightly over $1.2 trillion from approximately $800 billion. The most dramatic growth rate, as Zero Hedge readers know well, has been in student loan debt which has grown by 122% since 2008, to $1.357 trillion from $611 billion. But a bigger concern flagged by DBRS is that the growth in consumer debt is raising concerns when viewed in the context of the existing wage stagnation hampering the current economic environment.

The rating agency cites a paper published in October 2017 by the Harvard Business Review which stated that the inflation-adjusted hourly wage has grown by only 0.2% per year since the mid-1970s and labor’s share of income has decreased to its current level of 57% from 65%. Meanwhile, in the second quarter of 2017, wages were only 5.7% higher than they were a decade earlier. In comparison, the Federal Reserve Bank of New York/Equifax data shows that consumer debt growth over the same period was 9.3%. In other words, the purchasing power of US households has been largely a function of rapidly rising debt, which over the past decade has risen 60% faster than wages. There is another concern: while overall delinquency rates have stabilized in recent years, the one stubborn outlier remains student debt, where 90+ day delinquencies have risen to more than 10%.

Read more …

“Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.”

We Give Up! Government Spending And Deficits Soar Everywhere (Rubino)

A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep rising. This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not. In Japan, for instance, government debt is now 250% of GDP, a figure which economists from, say, the 1990s, would have thought impossible. Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016. But now they seem to have given up, and are looking for excuses to keep spending.

[..] To put the above in visual terms, here’s an infographic from Howmuch.com that shows per-capita government debt for the world’s major countries. Note that a Japanese family of five’s share of its government’s debt is close to $450,000 while in the US a similar family owes $300,000. That’s in addition to their mortgages, car loans, credit cards, etc. Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.

Read more …

More of that same story.

Lemmings In Full Stampede Toward The Fiscal Cliff (Stockman)

The lemmings are now in full stampede toward the cliffs. You can literally hear the cold waters churning, foaming and crashing on the boulders far below. From bitcoin to Amazon, the financials, the Russell 2000 and most everything else in between, the casinos are digesting no information except the price action and are relentlessly rising on nothing more than pure momentum. The mania has gone full retard. Certainly earnings have nothing to do with it. As of this morning, the Russell 2000, for instance, was trading at 112X reported LTM earnings. Likewise, Q3 reporting is all over except for the shouting and reported LTM earnings for the S&P 500 came in $107 per share. That’s of signal importance because fully 36 months ago, S&P earnings for the September 2014 LTM period posted at $106 per share.

That’s right. Three years and $1 of gain. They talking heads blather about “strong earnings” only because they think we were born yesterday. What happened in-between, of course, was the proverbial pig passing through the python. First, the global oil, commodities and industrial deflation after July 2014 took earnings to a low of $86.44 per share in the March 2016 LTM period. After that came the opposite—the massive 2016-2017 Xi Coronation Stimulus in China. The new Red Emperor and his minions pumped out an incredible $6 trillion wave of new credit, thereby artificially stimulating a global rebound and a profits recovery back to where it started three years ago.

The difference of course is that $106 of earnings back then were priced at an already heady (by historical standards) 18.6X, whereas $107 of earnings today are being priced at a truly lunatic 24.6X. After all, nothing says earnings bust ahead better than an aging business cycle, a cooling Red Ponzi, an epochal shift toward central bank QT (quantitative tightening) and a massive Washington Fiscal Cliff. Yet every one of those headwinds are self-evident and have made their presence known with a loud clang in the last few days.

Read more …

For good measure, let’s throw in some Catch 22.

Brexit Risks Leaving Banks on the Hook for Impossible Contracts (BBG)

As far as Brexit headaches go, John McFarlane, who chairs Barclays and London’s bank lobby, says that while his firm is on top of job moves, he’s more concerned about rewriting “hundreds of thousands” of contracts. He’s not alone. Andrew Bailey, head of the U.K. Financial Conduct Authority, said “contract continuity” was among the biggest potential disruptions from a no-deal, no-transition Brexit. Both men were testifying to lawmakers Wednesday. Bank of England Governor Mark Carney and ECB President Mario Draghi have also expressed concern about the issue and the dearth of time left for a fix. A week ago, data from the European Banking Authority showed the scope of the issue, and that money is already on the move for precisely this reason: European banks have slashed their U.K. assets by $425 billion, driven by a 35% drop in derivatives exposures.

Insurance policies are affected too: Carney estimates about 20 billion pounds of insurance liabilities in Britain could be affected without swift action. The issue arises because one side or the other of a contract can meet its obligations only thanks to an authorization that’s set to disappear once the U.K. leaves the European Union in 2019. This might result in a firm being obliged by contract law to do something that regulation prohibits it from carrying out, and impossibility generally isn’t a defense against non-performance of a contract, said Simon Gleeson at Clifford Chance in London. “A bank which enters into a contract which becomes illegal to perform by reason of Brexit may well be liable in damages for its non-performance to the counterparty,” said Gleeson. “Dealing with this is so much in everyone’s interest that I’m amazed it hasn’t been addressed.”

[..] Cross-border revolving credits – credit lines that can be drawn down, repaid, then drawn down again – are among such contracts. Many of these are issued to EU companies by syndicates with members based in the U.K. For example, lenders to Volkswagen Financial Services’s €2.5 billion ($3 billion) line include London-based entities for Bank of America and Citigroup, as well as the U.K. units of the major British banks, data compiled by Bloomberg show. A lender that lost its authorization but made an advance to the company under the revolver might find itself in breach of local law in jurisdictions including Germany and France, according to Clifford Chance. On the other hand, it might be in breach of contract if it failed to make the loan.

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Because Morgan Stanley exposes itself this way. As Corbyn himself said: Yes, we’re a threat. To you.

I’m Glad Morgan Stanley Has Warned Us About Jeremy Corbyn (Ind.)

This week, Morgan Stanley claimed that “Corbyn would be more of a danger to markets than hard Brexit”, something which I saw as supremely ironic. Because the actions of Morgan Stanley, and others like it, laid the foundations for Leave because of their role in the financial crisis: a crisis of capitalism, which ushered in seven years of austerity, falling wages and insecure work. Precisely the conditions that would encourage the majority of British people to vote against the status quo and opt for Leave. Morgan Stanley’s role in the financial crisis cannot be understated; and, given describing things as a “danger to markets” appears to be in fashion right now, let’s remind ourselves what they got up to just over a decade ago.

Essentially, they packaged up sub-prime mortgages as something called Collateralised Debt Obligations (CDOs), got credit ratings agencies – who were entirely conflicted as their clients were the investment banks – to rate these absolute garbage CDOs triple-A investments. Morgan Stanley then misled investors who bought them. Because they knew what those investments were actually worth, Morgan Stanley’s traders bought what are known as “credit default swaps” on those CDOs – effectively amounting to a bet on it defaulting. You can buy or sell a credit default swap even if you don’t own the investment. They did this thousands of times.

[..] the right-wing press, which gleefully reported on this Corbyn/Brexit warning, clearly has a short memory about what really happened. After all, the lie that Labour caused the financial crisis, and not investment banks like Morgan Stanley, was a convenient pretext for maintaining the economic status quo while cutting to public spending. This forced ordinary working people to pay for a financial crisis they did not cause. It’s little wonder that people voted Leave having been totally shafted by the system. But the opportunity to do so only arose because the narrative that “Labour crashed the economy” helped secure David Cameron a majority in 2015 on a manifesto that promised a referendum.

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Make it 2018.

US Senate Suspends Tax Bill Votes to Friday Morning (BBG)

Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation. Debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin. After seeming to gain momentum during the day, the GOP’s tax cut plan smacked into a decision from the Senate’s rule-making office that said a so-called trigger proposed by GOP holdouts didn’t pass procedural muster. At least three Republicans – Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma – had tied their votes to the mechanism, which would have increased taxes if revenue targets weren’t met.

The trio is now demanding that leaders agree to other changes in the bill to avoid a huge deficit increase. Republicans have a slim majority in the Senate and can only afford to lose two members if they want to pass the tax bill without Democratic support. Adding to the difficulty was a ruling by a key fiscal referee that the tax plan would blow a $1 trillion hole in the nation’s debt – even after accounting for economic growth. The day’s events left GOP leaders contemplating a variety of potentially unpalatable measures — including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026.

Read more …

Wait till home priced start to plummet. That’s when the scandals will break.

Australian Banks Face Public Inquiry Amid String of Scandals

Australia’s banks will be subject to a wide-ranging public inquiry after Prime Minister Malcolm Turnbull bowed to pressure to address scandals besetting the industry. The yearlong royal commission will examine the conduct of the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct, Turnbull said Thursday. He pledged the inquiry would not put “capitalism on trial.” The announcement came just minutes after Commonwealth Bank of Australia, Australia & New Zealand Banking, Westpac and National Australia Bank dropped their opposition to an inquiry, saying in an open letter to the government that months of political squabbling over the issue risked undermining offshore investor confidence.

More than A$8 billion ($6 billion) was wiped off the market value of the big four lenders in early Sydney trading, with Commonwealth Bank declining as much as 2.7%. “Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system,” Turnbull said. The inquiry will “further ensure our financial system is working efficiently and effectively.” The main opposition Labor party has for months been demanding a royal commission into the finance industry, amid a string of scandals ranging from misleading financial advice, attempted rate-rigging and alleged breaches of anti-money laundering laws. Pressure was growing on Turnbull to hold an inquiry, with some lawmakers in his Liberal-National coalition threatening to force a vote in parliament next week.

Read more …

A big problem for Erdogan. The US takes its sanctions seriously.

Gold Trader Implicates Erdogan In US Sanctions Breaking Case (BBC)

A controversial Turkish-Iranian gold trader has told a US court that Turkish President Recep Tayyip Erdogan personally approved his sanction-breaking deals with Iran. Reza Zarrab, 34, is a key witness in the criminal trial of a Turkish banker whom he allegedly worked with to help Iran launder money. Mr Erdogan has denied that Turkey breached US sanctions on Iran. The case has strained relations between Ankara and Washington. In his testimony, Mr Zarrab implicated Mr Erdogan in an international money laundering scheme that he and the banker, Mehmet Hakan Atilla, ran between 2010 and 2015 that allegedly allowed Iran to access international markets despite US sanctions.

He said that he was told in 2012 by the then economy minister that Mr Erdogan, who was prime minister at the time, had instructed Turkish banks to participate in the multi-million dollar scheme. Mr Erdogan said earlier on Thursday that Turkey did not breach US sanctions on Iran, Turkish media report. His government has described the case as “a plot against Turkey”. The Turkish president is yet to respond to the new allegations about him made in court. Mr Atilla has pleaded not guilty. Nine people have been charged in total. Mr Zarrab was arrested by US officials in 2016 and accused of engaging in hundreds of millions of dollars’ worth of transactions on behalf of the Iranian government, money laundering and bank fraud. But he decided to cooperate with prosecutors and is now their star witness in the New York trial.

On Wednesday, he told the court he paid Zafer Caglayan, then Turkey’s economy minister, bribes amounting to more than €50m to facilitate deals with Iran. Turkey’s Deputy Prime Minister, Bekir Bozdag, responded to the allegations, saying that Mr Zarrab had been “pressured into committing slander”. Speaking to state-run news agency Anadolu, Mr Bozdag called the trial a “theatre”. The Turkish government had previously said that Mr Caglayan acted within Turkish and international law.

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Overcapacity export.

From The Caucasus To The Balkans, China’s Silk Roads Are Rising (Escobar)

The 19th Chinese Communist Party Congress made it clear that the New Silk Roads – aka, the Belt and Road Initiative (BRI) – launched by President Xi Jinping just four years ago, provides the concept around which all Chinese foreign policy is to revolve for the foreseeable future. Up until the symbolic 100th anniversary of the People’s Republic of China, in 2049, in fact. Virtually every nook and cranny of the Chinese administration is invested in making the BRI Grand Strategy a success: economic actors, financial players, state-owned enterprises (SOEs), the private sector, the diplomatic machine, think tanks, and – of course – the media, are all on board. It’s under this long-term framework that sundry BRI projects should be examined. And their reach, let’s be clear, involves most of Eurasia – including everything from the Central Asian steppes to the Caucasus and the Western Balkans.

Representatives of no fewer than 50 nations are currently gathered in Tbilisi, Georgia, for yet another BRI-related summit. The BRI masterplan details six major economic “corridors,” and one of these is the Central Asia-West Asia Economic Corridor. That’s where Georgia fits in, alongside neighboring Azerbaijan: both are vying to position themselves as the key Caucasus transit hub between Western China and the European Union. [..] The action in the Caucasus was mirrored in Europe earlier in the week as Chinese Premier Li Keqiang and Hungary’s Prime Minister Viktor Orban opened the sixth “16+1” summit, involving China and 16 Central and Eastern European nations, in Budapest. “16+1” is yet another of those trademark Chinese diplomatic “away wins.”

Some of these nations are part of the EU, some part of NATO, some neither. From Beijing’s point of view, what matters is the relentless BRI infrastructure and connectivity drive. Beijing may have invested as much as US$8 billion so far in Central and Eastern Europe. China is having a ball in the Western Balkans – especially in Serbia, in Montenegro, and in Bosnia and Herzegovina, where EU financial muscle is absent. China has invested in multiple connectivity and energy projects in Serbia – including the much-debated Belgrade-Budapest high-speed rail link. Construction of the Serbian stretch started this week, with 85% of the total cost (roughly €2.4 billion) coming from the Export-Import Bank of China.

Read more …

Dream of power are always costly.

Paris – The Financial Capital Of West And Central Africa (Gefira)

France’s current zone of influence in Africa is the result of the policies of President Charles de Gaulle, who was unable to come to terms with his defeats in Indochina (1954) and Algeria (1962) and therefore sought to achieve the dominance of France in his former colonies. After de Gaulle, however, other presidents did not refrain from using military force and violence in Africa to defend their interests, on the pretext of protecting human rights and democracy. The French often achieved the opposite, because they made the same mistakes in their military actions as Americans made elsewhere in the world: they supported people who later became their enemies or violated human rights.

For example, it was the regime of Juvenal Habyariman in Rwanda that was supported by Paris: the French supplied Hutu combat groups with weapons, thus contributing to the Tutsi massacre. Hollande, who in Paris and Europe was perceived as a weakling, showed the face of a warrior and sent heavy units and fighter planes to Mali in 2013. This would not have been necessary if French President Sarkozy and the USA had not overthrown Qaddafi. It was Sarkozy that initiated the NATO led airstrikes against Libya. The removal of Colonel Qaddafi gave rise to the creation of the Caliphate with the help of Tuaregs in the north of Niger and Mali. After a few years since the start of the mission in Mali one wonders: has it made Europe safer?

Has the flow of migrants been stopped through Sahel countries? Are the Jihadists of African descent a lesser threat in Europe? The cost of the military action in Mali in 2013 amounted to €650 million. Operation Barkhane (as it is called) continues to this day and costs the French budget €500 million per year. Of course, democracy in Mali is a top priority for most Europeans, right? A total of 9,000 French soldiers are currently stationed in Chad, Niger, Mali, Burkina Faso, Senegal, Gabon, the Central African Republic and Djibouti. The growing military presence is intended to support the fight against terrorism and crime, in fact it is about the French elites extending their power to the south, reaching for cheap raw materials and outlet markets.

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“..if we can identify it is dark matter for sure then that is very significant. And if not, it is even more significant because they would be fresh new particles that no one had predicted before..”

Chinese Satellite Closes In On Dark Matter Mystery (AFP)

Scientists have detected cosmic ray energy readings that could bring them closer to proving the existence of dark matter, a mysterious substance believed to comprise a quarter of our universe, a study revealed on Thursday. Likely made up of unknown sub-atomic material, dark matter is invisible to telescopes and can be perceived only through its gravitational pull on other objects in the universe. Beijing’s first astronomical satellite launched two years ago detected 1.5 million cosmic ray electrons and protons, the study said, and unprecedented measurements found curiously low-energy rays. The team of researchers from China, Switzerland and Italy, who published their first results in the journal Nature, said the data may cast light on “the annihilation or decay of particle dark matter”.

“This new unseen phenomena can bring breakthroughs,” Bai Chunli, president of the Chinese Academy of Sciences, said at a briefing. “After collecting more data, if we can identify it is dark matter for sure then that is very significant. And if not, it is even more significant because they would be fresh new particles that no one had predicted before,” Bai added, to applause from fellow scientists. The Dark Matter Particle Explorer (DAMPE) is now collecting more data from space to help researchers figure out what it could be. DAMPE was launched from the Jiuquan Satellite Launch Centre in the Gobi desert in December 2015, after nearly 20 years in development. Its designers boast that DAMPE is superior to its US counterpart, the AMS-02 (Alpha Magnetic Spectrometer) that NASA installed on the International Space Station in 2011.

“Our cosmic ray detection range is 10 times that of AMS-02 and three times as accurate,” said DAMPE chief scientist Chang Jin. “Proving the existence of dark matter takes a lot of time. Now we have worked out the most precise spectrum, but we are not 100% sure that this can lead us to the location of dark matter,” he said.

Read more …

Apr 052015
 
 April 5, 2015  Posted by at 9:17 am Finance Tagged with: , , , , , ,  1 Response »
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Alfred Palmer New B-25 bomber at Kansas City plant of North American Aviation 1942

Greek Parliament Committee to Investigate Who’s Responsible for Crisis (DPA)
Proposal For Creating A Parallel Currency In Greece (Andresen And Parenteau)
Greece Has Cash to Make IMF Payment Next Week, Minister Says (Bloomberg)
Germany Generously Offers To Freeze Bank Accounts Of Wealthy Greeks (Zero Hedge)
The Mischief Behind Big Unemployment ‘Reveal’ (John Crudele)
Cyprus Lifts Capital Controls Two Years After Deposits Bail-In (Bloomberg)
Every TV News Report On The Economy In One (Weekly Wipe)
Europe’s Currency Manipulation (Kawalec)
Bernanke’s Latest Target Is Germany (MarketWatch)
Ukraine Seeks $15.3 Billion From Debt Restructuring (Bloomberg)
New Zealand Exports Down 27% From Year Ago (RNZ)
Dairy Slump Hits New Zealand Exports To China (Stufff.co.nz)
World ‘Awash With Milk’ (RNZ)
New Zealand’s Economic Winds Of Change (Hickey)
Monsanto’s “Discredit Bureau” Really Does Exist (DK)
After the Higgs Boson, Physicists Chase Dark Matter (Bloomberg)

“The opposition opposed the establishment of the committee.” No kidding.

Greek Parliament Committee to Investigate Who’s Responsible for Crisis (DPA)

Greek Finance Minister Yanis Varoufakis will be in Washington on Sunday to discuss the country‘s reform programme with IMF chief Christine Lagarde, his office said Saturday. The visit takes place ahead of an April 9 deadline for Greece to pay back a €450 million loan tranche to the IMF. Amid ongoing concerns of a possible default, the Greek government on Friday said it would have no problem meeting the deadline. Greek officials say they are confident that they can soon reach a deal with international creditors such as the IMF over a bailout reform plan that foresees an additional €3.7 billion in state revenues this year. A key component of the plan is a clampdown on tax evasion. The government anticipates raising a further €1.5 billion from the sale of the state-owned Pireaus Port Authority and of 14 regional airports.

Also Saturday, a committee of investigation held a ceremonial session to mark the beginning of its mandate to find out who was responsible for Greece‘s debt crisis. President Prokopis Pavlopoulos and Prime Minister Alexis Tsipras took part in the session. Pavlopoulos said as a member of the eurozone Greece has international obligations, but the country also has a right to national sovereignty. The opposition opposed the establishment of the committee. The investigation is to look into the term of socialist prime minister George Papandreou, who was in office from 2009-11; interim prime minister Lucas Papademos, who was in office from 2011-12; and the coalition government of conservatives and socialists that served from 2012-15 under prime minister Antonis Samaras.

Read more …

Great ideas. Practicality may need to be discussed, but still.

Proposal For Creating A Parallel Currency In Greece (Andresen And Parenteau)

The premise for the proposal to be presented in the following is that the government has a breathing space of a couple of months. At the end of that period a parallel electronic currency shall be put into circulation. But first, how does a parallel currency (to the euro) work? Proposals resembling the following have been put forth earlier by Andresen and recently by Hillinger. The additional (“parallel”) circulating medium of exchange to be proposed may be designated a Tax Anticipation Note (TAN), a term introduced by Parenteau. The TANs are used by the government to partly pay wages, pensions and for domestic purchases. The TAN enjoys confidence since anyone can use it to pay taxes with one TAN counting as one euro (more on this below).

Transactions are done via mobile phone/SMS, and automatically received and accounted for on a server with ample capacity at the country’s Central Bank or perhaps preferably, for political reasons, at a bank-like facility established for this purpose at the Treasury – from now on just called the TB: “Treasury Bank”. Such a mobile-based transaction system may be implemented through one of the technically proven schemes already in successful operation in some developing countries, also recently put in operation by the central bank of Ecuador. The system may be implemented to work also with older models of mobile phones, since it may be SMS-based (but there will be apps for smartphones).

There are no physical/paper TANs in circulation. The government has a TAN account at the TB with no limit. TANs are thus created out of thin air, but they are later destroyed when paid back as taxes. The government account is debited whenever it pays wages or pensions, or buys goods or services. All citizens and domestic firms are automatically assigned cost-free TAN accounts at the TB. Interested foreign entities are offered to have accounts (but we will expect TANs to be used only by domestic agents in an initial phase). The deposit interest rate is zero. At the start this is a pure medium of exchange, in that sense resembling physical cash. Lending is not considered as an organised option in the pioneer period of this system. (But spontaneous peer-to-peer TAN lending will emerge and grow.)

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But will they use it?

Greece Has Cash to Make IMF Payment Next Week, Minister Says (Bloomberg)

Greece won’t default on payments to the IMF next week even as a lack of bailout disbursements has left government coffers nearly empty, according to the minister responsible for meeting the obligations. Greece has an IMF payment of about €450 million due on April 9. With euro-area officials withholding aid payments until an agreement is reached on economic overhauls, the government also has to get through a short-term debt auction a day before, to refinance €1.4 billion of six-month notes due April 14. “The country will pay the IMF on April 9,” Alternate Finance Minister Dimitris Mardas said in an interview on Mega TV on Saturday. “There’s money there for payment of salaries, pensions and whatever else is needed for all of next week. That doesn’t mean that there isn’t for the week after. This is a political decision that will be taken, and we will follow whichever political decision.”

Greece and euro-area authorities are in negotiations about a package of measures proposed by the government to repair its economy, a condition for the release of bailout funds. The standoff has left the nation’s banks dependent on European Central Bank loans, with Greece facing the risk of a possible default within weeks and a potential exit from the euro area. Finance Minister Yanis Varoufakis will meet IMF Managing Director Christine Lagarde in Washington on Sunday for an informal discussion on the Greek government’s reform package, according to an e-mailed statement from the Finance Ministry. Prime Minister Alexis Tsipras will visit Moscow next week, with Russia ready to discuss easing restrictions on Greek food products, according to Russian government officials. Russia isn’t considering financial assistance to Greece, they said.

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“.. since in Greece virtually nobody pays the amount of tax they should, this is essentially a carte blanche to freeze and raid the funds of the wealthiest Greeks who have bank accounts in Germany..”

Germany Generously Offers To Freeze Bank Accounts Of Wealthy Greeks (Zero Hedge)

Greece is on the verge of complete monetary collapse and is now scrambling to “borrow” funds from local pensions and other public sources of scarce capital just to remain in compliance with IMF debt repayments and avoid a hard default. In fact, according to some, Greece may not have the funds to make its next mandatory payment due on April 9 to the IMF with the long overdue Greek exit from the Eurozone to follow in due course. Well, maybe not, because Germany has been kind enough to provide an idea where the foundering Greek “radical leftist” government can find some additional funds: by freezing and raiding the bank accounts of wealthy Greeks.

Of course, the legal loophole provision is that only those suspected (not convicted) of tax fraud would be eligible for such an asset freeze, however since in Greece virtually nobody pays the amount of tax they should, this is essentially a carte blanche to freeze and raid the funds of the wealthiest Greeks who have bank accounts in Germany (and soon in all other European nations) no questions asked. Dow Jones reports:

Germany would be willing to freeze the bank accounts of wealthy Greeks suspected of tax fraud, Economics Minister Sigmar Gabriel said in a newspaper interview on Saturday. “We have offered to freeze the bank accounts of wealthy Greek citizens that owe taxes to their homeland. The offer stands, but for that [to happen] the Greek financial authorities need to get active,” Mr. Gabriel told the German daily Rheinische Post. Europe is willing to help Greece, but the Greek government’s acceptance of previously agreed upon reforms is a prerequisite, he reiterated. Greece’s problems aren’t a result of Troika initiatives, he added. “Greece is a victim of its own economic and political elite,” Mr. Gabriel said.

But wait, we thought it was “austerity” that was to blame for everything. Does Mr. Gabriel, gasp, suggest that “austerity” is the name that crony, corrupt, incompetent European politicians have been giving to their actions to enable the unprecedented theft and transfer of wealth that has taken place in Europe in the past five years?

In this case Gabriel is spot on with this assessment – one which we said was precisely the case two years ago – and as such Germany has a solution: a one-time, sovereign bail-in, funded by the wealthiest Greeks. And here it gets interesting, because suddenly the options becomes very clear for said wealthy, tax-avoiding Greeks: align with Russia, or suffer deposit confiscation at the hands of Germany, or Switzerland, or France, or any other nation that has been alienated by the Syriza government. To be sure Germany tried to smooth out this contingency. Turning to Russia, Mr. Gabriel said he doubts Greece would seek to replace European partners with an allegiance to Russia.

“Even if I try, I can’t imagine that anyone in Athens is seriously considering turning their backs on Europe to throw themselves into the arms of Russia. And I also doubt that Moscow feels any pressing need to gladly fulfill some of Greece’s financial pipedreams, given the economic and financial situation there,” he said.

Perhaps, but keep in mind that it was the threat of the world’s wealthiest losing all their accumulated wealth that forced the Fed and its central bank peers to launch the biggest ever bail out of capitalism in 2008, at the cost of destroying the livelihood for hundreds of millions of middle-class Americans and Europeans. Because when there is nothing but desperation left, the rich do silly, self-serving things. The question is will Greece’s wealthiest make it clear to Tsipras that their money is off limits, and unless he can find a Eurofacing resolution that preserves their wealth, then he should promptly turn to Putin. With Greek money about to run out in the coming days, we should have the answer very soon.

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“But wait, there’s more.”

The Mischief Behind Big Unemployment ‘Reveal’ (John Crudele)

The Census Bureau had trouble compiling the nation’s jobless rate in March and, because of this, I’m told, questionable shortcuts were taken. So when the Labor Department announces the new unemployment rate on Friday at 8:30 a.m. — and experts are predicting the figure will remain at 5.5% — take it with a giant grain of salt. Here’s why. Census, which is part of the Commerce Department, tallies the unemployment rate after conducting thousands of household surveys. It then projects what it gets from those surveys into a nationwide result. As you probably already know, the Fed is among the many organizations and companies that carefully monitor the unemployment rate and make important decisions based on that number.

So it’s a big nuisance if this figure is unreliable. But that’s exactly what it is — unreliable to the point of being nearly useless at best and fraudulent at worst. Just so you have it straight, let me go over the list of players I am mentioning in this column: Labor hires Census, which is part of Commerce, to conduct interviews that lead to the figure we know as the official unemployment rate. If you’re the type who can’t get enough government gibberish, you should know that this figure is also called the U-3 unemployment rate, which is the “total unemployed as a%age of the civilian labor force.” Here’s how the U-3 survey works. Census randomly picks the homes that are to be surveyed. Labor requires that 90% of those surveys be successfully completed.

Most of the homes are getting repeat surveys, so not everyone is a first timer. Before I started reporting on the method and lack of honesty in taking these surveys back in 2013, Census was easily able to reach that 90% goal. After The Post investigation, Census started coming up short. That led to a congressional inquiry and a probe by Commerce’s inspector general. Unable to cheat once a light was shown on its shady methods, all six Census regions showed declining survey success rates. March’s numbers were way down. Census was only able to complete 85.59% of March unemployment surveys nationwide, sources tell me. And that below-the-threshold number was only reached after Census extended its survey two extra days.

The survey should have ended on Tuesday, March 24, but was extended until Thursday, March 26, because the success rate was only 80.38% as of that Monday night. I’m not an expert on statistics, but this awful performance would seem to invalidate the results of a survey that relies on consistency to measure the ebb and flow of employment. When the survey finally ended on March 26, not one of the six Census regions had hit the 90% goal. The Atlanta region came closest at 89.19%, sources said. New York, which has always been a laggard, had a miserable 81.27%. So how much faith will you have in Friday’s unemployment number? But wait, there’s more.

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“The lifting of the restrictions confirms the full restoration of confidence in the banking system..” Oh, boy!

Cyprus Lifts Capital Controls Two Years After Deposits Bail-In (Bloomberg)

Cyprus will lift next week the last of the capital controls that were imposed two years ago as part of a €10 billion European bailout. The last restrictions on international transfers will be lifted on April 6, Cyprus government spokesman Nikos Christodoulides said in an e-mailed statement to Bloomberg. Domestic capital controls ended in May 2014. “The lifting of the restrictions confirms the full restoration of confidence in the banking system, the significantly improved business climate and essentially marks the return of the economy to normal conditions,” he said. Cyprus is emerging from the crisis that forced it to seek a bailout and impose a levy on depositors two years ago while Greece, which in 2010 became the first country to be rescued by its euro-area partners, continues its tug-of-war with creditors.

The end of the last capital transfer restrictions is the result “of all our hard work and consistency in the implementation of the obligations we undertook,” Cyprus President Nicos Anastasiades said in Nicosia today. Deposits have shrunk since the crisis, standing at €46.5 billion at the end of February compared with €67.5 billion in the same month of 2013, and Standard & Poor’s says lifting the controls may put the stability of deposit levels at risk. “We see uncertainty regarding the impact of the elimination of the remaining controls on international transactions on the stability of private-sector deposits,” S&P analysts led by Marko Mrsnik said on March 27.

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Brilliant.

Every TV News Report On The Economy In One (Weekly Wipe)

Charlie Brooker’s Weekly Wipe: Every TV news report on the economy in one.

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“.. at more than $300 billion, the eurozone’s current-account surplus for 2014 was about 50% larger than China’s. ”

Europe’s Currency Manipulation (Kawalec)

The Transatlantic Trade and Investment Partnership (TTIP), which the European Union and the United States currently are negotiating, would, studies say, boost welfare and reduce unemployment in both economies, as well as in other countries. At the same time, the TTIP could help to restore confidence in Europe and the transatlantic community. But there is one major barrier to realizing these benefits: the euro. The problem stems from currency manipulation. Over the past three decades, the US has de facto tolerated currency manipulation by its major Asian trading partners, which built up large trade and current-account surpluses by suppressing the value of their currencies. But the US is unlikely to accept such behavior within free-trade zones.

Indeed, a bipartisan majority in the US Congress is already demanding that the Trans-Pacific Partnership (TPP) – a mega-regional free-trade deal involving 12 Pacific Rim countries – should include provisions barring currency manipulation. Discussions about currency manipulation have long focused on China, which is not part of the TPP, but could join it, or a similar arrangement, in the future. But the economy with the biggest current-account surplus today is not China; it is the eurozone. In fact, at more than $300 billion, the eurozone’s current-account surplus for 2014 was about 50% larger than China’s.

The reason for this is simple: monetary expansion, which leads to currency depreciation, is the only macroeconomic tool available to the ECB to boost the competitiveness of struggling economies like Greece, Spain, Italy, Portugal, and France. As a result, current-account deficits in the southern countries have diminished or disappeared, while surpluses in countries like Germany have increased, causing the eurozone’s overall surplus to swell. An unsolvable problem for the ECB is that the euro remains too strong for the depressed southern countries and too weak for Germany. While allowing it to appreciate would help to reduce the current-account surplus, it would also exacerbate the economic distress in the depressed southern countries.

This, in turn, would further strengthen the populist and anti-European political movements that have capitalized on social hardship to win support. Some observers believe that the eurozone’s internal imbalances can be reduced if Germany increases infrastructure spending and allows wages to rise faster. But for many Germans, who withstood difficult social-security and labor-market reforms in 2003-2005, a deliberate effort to diminish hard-won competitiveness gains is not an option. The fact that 63% of German exports go to countries outside the eurozone – meaning that German companies must be able to compete with their counterparts all over the world, not just in the monetary union – makes the issue even more sensitive.

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Shouldn’t someone shut him up?

Bernanke’s Latest Target Is Germany (MarketWatch)

First, former Federal Reserve Chairman Ben Bernanke targeted critics of the central bank in Congress. Then he took a swipe at the economic theories of former Treasury Secretary Larry Summers. Now, Bernanke is taking a shot at the eurozone’s largest economy, Germany. In his third blog post of the week, the Brookings Institution fellow took aim at Germany for its large trade surplus. He notes that at international gatherings, like the coming International Monetary Fund meeting, China gets criticized for its large and persistent trade surplus. But he points out China has worked to reduce its surplus—and Germany really has not.

True, Bernanke admits, Germany makes products that foreigners want to buy. “But other countries make good products without running such large surpluses,” Bernanke says. He says the euro is too weak to be consistent with balanced German trade. While that’s not Germany’s fault, he concedes, it nonetheless helps German exports. But what is the country’s fault is its tight fiscal policy that suppresses domestic spending. He gives three things that Germany could do—invest in public infrastructure, raise the wages of German workers, and use targeted reforms like tax incentives for private domestic investment. Bernanke also scolds Germany for not supporting the ECB’s quantitative easing program.

“It’s true that easier monetary policy will weaken the euro, which by itself would tend to increase rather than reduce Germany’s trade surplus,” he writes. “But more accommodative monetary policy has two offsetting advantages: First, higher inflation throughout the eurozone makes the adjustment in relative wages needed to restore competitiveness easier to achieve, since the adjustment can occur through slower growth rather than actual declines in nominal wages; and, second, supportive monetary policies should increase economic activity throughout the eurozone, including in Germany.”

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Ok, want to restructure? Let’s talk Greece then. At least they won’t buy guns with the difference.

Ukraine Seeks $15.3 Billion From Debt Restructuring (Bloomberg)

Ukraine’s government approved a list of debt that should be restructured under an IMF program to save the nation $15.3 billion, including $3 billion in Eurobonds sold to Russia. Ukraine’s sovereign and corporate debt incurred before Feb. 28, 2014 is included, the Finance Ministry said Saturday on its website. The last category covers state banks, the railways operator and the city of Kiev, according to the statement. Ukraine is trying to reach an agreement with creditors including Franklin Templeton, which holds about $7 billion in the debt, to save $15.3 billion through the restructuring. Russia says it bought the Eurobonds in 2013 to support the government of then-Ukrainian President Viktor Yanukovych and is already contributing by not demanding early repayment.

“Up to now, we’ve been repeatedly saying that Russia doesn’t plan to restructure the Ukrainian debt and isn’t in talks on the issue,” Svetlana Nikitina, an aide to Russian Finance Minister Anton Siluanov, said on Saturday by phone. The ministry hasn’t seen the Ukrainian decision yet, she said. The list of debts included may be published as soon as Monday, the Ukrainian Finance Ministry said in response to questions from Bloomberg. The decision on debt comes amid a relative lull in the one-year military conflict in two eastern Ukrainian regions that led the government in Kiev to seek assistance from the IMF. While casualties have waned following a cease-fire agreed on Feb. 12, Ukraine still has to complete negotiations on losses for international bondholders by May to keep funds flowing from the IMF.

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That’s not kids’ stuff.

New Zealand Exports Down 27% From Year Ago (RNZ)

Confidence among manufacturers and exporters has taken a hit with export sales in February down 27% compared with a year ago. A survey found net confidence – which includes measures of cash flow, profitability, investment, staff and sales – fell into negative territory for the first time since April 2013. Net confidence was minus 13, down from 21 in January. The sample of Manufacturers and Exporters Association members covered companies with combined annual sales of $178 million, with 68% of those from exports. Association president Tom Thomson said currency volality was the biggest issue for exporters, with the big jump in the US dollar forcing up the price of some raw materials.

“We’ve been caught a little bit like a possum in the headlights,” said Mr Thomson. “We’ve not only got weakening against the US dollar but we’re also seeing a huge strengthening against the Australian dollar. “We’ve definitely got a double whammy effect going on at the moment.” Mr Thomson said exporters to Europe and Asia were experiencing similar problems. Demand from China had yet to bounce back after the Chinese New Year. Mr Thomson said big swings in exchange rates were challenging, but manufacturers were “resilient” and he was confident they would adapt.

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And 36% is an even bigger drop.

Dairy Slump Hits New Zealand Exports To China (Stufff.co.nz)

New Zealand posted a small trade surplus of just $50 million in February with dairy exports down heavily, especially to China, New Zealand’s top export market. Some economists had expected a monthly surplus of about $350m. The trade shortfall for the year ended February 2015 was a deficit of $2.2 billion. Exports to China have boomed in the past few years, but melted down last year as dairy product prices plunged. Total exports to China in February were worth $740m, down more than 36% on the same month last year. However, Statistics NZ figures showed an 11% lift in seasonally adjusted exports to China between January and February, a gain of $64m.

China remains New Zealand’s biggest export market, worth almost $9b in the past year, just slightly ahead of Australia. But the trend for exports to China has been falling for the past year, and is down 45% from the peak in late 2013. In fact, it has returned to levels seen in 2012. Beef exports, on the other hand, are up from a year ago, with strong sales to the United States. Total exports were worth $3.9b for the month, just barely ahead of monthly imports which were also about $3.9b. Seasonally adjusted exports fell 3.2% between January and February, while imports rose 5.8%.

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Even before the EU lifted the quota’s.

World ‘Awash With Milk’ (RNZ)

The Government is blaming a slump in milk prices on the world market being awash with milk. But New Zealand First leader Winston Peters said National’s economic policies and the high value of the New Zealand dollar were not helping dairy farmers. In the Global Dairy Trade auction prices dropped 10.8% overnight to $US2746 a tonne, the second fall in a fortnight. Mr Peters said he predicted the fall and it was a sign of rural areas lagging behind. “I’ve been saying it for a long long time – what you’ve got is a fixation with Auckland, hollowing out the provincial economies and sucking all the attention and money to Auckland and that is not going to go on any longer.” But Minister for Primary Industries Nathan Guy has told Parliament the dairy market fluctuated.

“The world is basically awash with milk. We’ve got milk currently that is displaced from the Russia ban from the EU looking for a new home, and of course we’ve got some stockpiling in China. So all of those things mean that right now we are in a very volatile dairy market.” Mr Peters said New Zealand had a free market system that no other country followed and he would legislate to control the exchange rate, similar to Singapore’s system. “The one country that’s not devaluing at the moment is New Zealand – every other economy has. And consequently we are leaving our people terribly exposed and the consequences are being seen in the Gisborne’s, the Whanganui’s, all round the country.” Economic Development Minister Steven Joyce firmly rejected that idea.

“Well, with the greatest respect to Winston I am old enough, and so is he, to remember the last time we tried to set the exchange rate in this country and it wasn’t that successful… “What he is basically saying is that he would legislate, presumably, to put the exchange rate at a level it won’t naturally go and that means effectively increasing costs for the consumer and decreasing costs for exporters.” Mr Joyce remained pragmatic about the fall in dairy prices. “It is challenging obviously for farmers and that makes it a bit challenging generally, but we fortunately are in a position where we have a lot of industries doing very well at the moment so it is probably less challenging than it would have been three or four years ago.”
Meanwhile, the Fonterra Shareholders Council said some frustrated farmers were considering leaving the co-operative due to the price slump.

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“One of the flappiest at the moment is the global iron ore price. It’s barely noticed here but it’s an indicator of growing trouble..”

New Zealand’s Economic Winds Of Change (Hickey)

Chaos theory calls it the butterfly effect. It’s the idea that a butterfly flapping its wings in the Amazon could cause a tornado in Texas. The New Zealand economy has plenty of its own butterflies changing the weather for GDP growth, jobs, interest rates, inflation and house prices. Not all cause tornadoes, but there are plenty of head and tailwinds for different parts of the country. One of the flappiest at the moment is the global iron ore price. It’s barely noticed here but it’s an indicator of growing trouble inside our largest trading partner, China, and it is knocking our second-largest partner, Australia, for six. It fell to a 10-year low of almost US$50 a tonne this week and is down from a peak of more than US$170 a tonne in early 2011. Australia and Brazil are the biggest suppliers of iron ore to China.

China embarked on an infrastructure spree after the global financial crisis. Over the three years to 2013, China poured 6.4 gigatonnes of concrete, which was more than was poured in the US in the entire 20th century. All that concrete needed reinforcing with steel and China didn’t have enough iron ore and coking coal to make it. That building boom created a glut of apartments and debt, which China now needs to digest. The elevation of President Xi Jingping to China’s top leadership post in late 2012 was a key moment in the flapping of those iron ore wings. He realised China needed to move to a more consumer-friendly economy with cleaner air, water and food. Dirty steel plants have closed and projects mothballed. Apartment prices have fallen sharply over the past six months and demand from steel foundries has slowed.

At the same time, iron ore production in Australia has only now ramped up to its peak levels. Weak demand met high supply to produce a price slump. This all may seem irrelevant to New Zealand, but it’s not. The Australian dollar has fallen in response to the iron ore crash, while New Zealand’s dollar has remained strong because our economy is humming along, thanks to building surges in Christchurch and Auckland and plenty of spending and investment. That divergence between the Australasian economies drove the New Zealand dollar to a record high of well over A.98 this week. Westpac has started offering $1 for every A$1 sent by telegraphic transfer.

Dollar parity would make all those winter holidays on the Gold Coast and trips to shows in Sydney and Melbourne cheaper and generate a fierce headwind for manufacturing exporters and tourism businesses here that sell to Australians. President Xi has reinforced the contrasting effects of the changes in China on Australia and New Zealand by encouraging consumers and investors to spend more of China’s big trade surpluses overseas. Tourism from China was up 40% in the first two months of this year from a year ago, and there remains plenty of demand from investors in China for New Zealand assets.

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“Dr. Moar, perhaps forgetting that this was a public event, then revealed that Monsanto indeed had “an entire department” (waving his arm for emphasis) dedicated to “debunking” science which disagreed with theirs.”

Monsanto’s “Discredit Bureau” Really Does Exist (DK)

Reuters is reporting that Monsanto is demanding a sit-down with members of the World Health Organization (WHO) and the International Agency for Research on Cancer (IARC). This international scientific body is being called on the carpet for reporting that Monsanto’s most widely sold herbicide, which is inextricably linked to the majority of their genetically engineered products, is probably carcinogenic to humans. In a DO-YOU-KNOW-WHO-WE-ARE moment, Monsanto’s vice president of global regulatory affairs Philip Miller said the following in interview: “We question the quality of the assessment. The WHO has something to explain.” Evidence for the carcinogenicity of Glyphosate comes from a peer-reviewed study published in March of 2015 in the respected journal The Lancet Oncology:

“Carcinogenicity of tetrachlorvinphos, parathion, malathion, diazinon, and glyphosate”. “Glyphosate is a broad-spectrum herbicide, currently with the highest production volumes of all herbicides. It is used in more than 750 different products for agriculture, forestry, urban, and home applications. Its use has increased sharply with the development of genetically modified glyphosate-resistant crop varieties. Glyphosate has been detected in air during spraying, in water, and in food. There WAS limited evidence in humans for the carcinogenicity of glyphosate. “Glyphosate has been detected in the blood and urine of agricultural workers, indicating absorption. Soil microbes degrade glyphosate to aminomethylphosphoric acid (AMPA). Blood AMPA detection after poisonings suggests intestinal microbial metabolism in humans. Glyphosate and glyphosate formulations induced DNA and chromosomal damage in mammals, and in human and animal cells in vitro. One study reported increases in blood markers of chromosomal damage (micronuclei) in residents of several communities after spraying of glyphosate formulations.”

Recently, I attended a talk by Monsanto’s Dr. William “Bill” Moar who presented the latest project in their product pipeline dealing with RNA. Most notably, he also spoke about Monsanto’s efforts to educate citizens about the scientific certainty of the safety of their genetically engineered products. The audience was mostly agricultural students many of whom were perhaps hoping for the only well-paid internships and jobs in their field. One student asked what Monsanto was doing to counter the “bad science” around their work. Dr. Moar, perhaps forgetting that this was a public event, then revealed that Monsanto indeed had “an entire department” (waving his arm for emphasis) dedicated to “debunking” science which disagreed with theirs.

As far as I know this is the first time that a Monsanto functionary has publicly admitted that they have such an entity which brings their immense political and financial weight to bear on scientists who dare to publish against them. The Discredit Bureau will not be found on their official website. The challenge for Monsanto’s Discredit Bureau is steep in attacking the unimpeachably respected Lancet and the international scientific bodies of WHO and IARC. However, they have no choice but to attack since the stakes are so very high for them. Glyphosate is their hallmark product upon which the majority of their profits are based.

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Smart cookies.

After the Higgs Boson, Physicists Chase Dark Matter (Bloomberg)

The world’s most epic physics experiment will flip back on as early as Saturday. After a two-year tuneup, the Large Hadron Collider (LHC) will run at twice the power it needed in 2012 to find the Higgs boson, the long-theorized particle that confers mass onto matter. As monumental as the Higgs discovery was — its theorists won the Nobel Prize in Physics the next year — physicists still have very little idea what’s going on in the universe, beyond the stuff we can see, touch, and smell. A big question concerns “dark matter,” what scientists call the stuff that makes up 80% of galaxies but that doesn’t interact with light, atoms, and molecules. They know it’s there, but it’s hiding from us. With the Higgs in hand, finding traces of dark matter is the next big hunt in high-energy physics.

The Standard Model of physics is what scientists consider their working picture of how fundamental particles behave and interact. But it “has some holes in it,” says Verena Martinez Outschoorn, an assistant professor of physics at the University of Illinois at Urbana-Champaign. “We know that our worldview, our model, our understanding of particles and their interactions is kind of a subset of a bigger picture,” she says. “We have reason to believe there are other particles out there.” The LHC is located at CERN, the scientific research juggernaut in Meyrin, Switzerland. It’s a network of superpowered, supercold, super empty magnet-driven beam pipes that zip protons around a 17-mile loop.

Some circle the ring in one direction; some trace the opposite path. How high-powered? Ultimately, 14 tera-electron volts, or 14 trillion electron volts (eVs). That’s a lot of anything. Neutrons popping out of a radioactive nucleus — nuclear fission — have about a million electron volts. Medical X-rays have about 200,000 eVs. Electrons hit old-fashioned cathode-ray television screens with about 20,000 eVs. How cold? At 1.9 kelvins (-456F), the LHC magnets are colder than outer space. How empty? The vacuum beam pipes that carry the particles around in circles are so empty they make the moon’s atmosphere look like a choking smog.

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Dec 132014
 
 December 13, 2014  Posted by at 11:42 am Finance Tagged with: , , , , , , ,  1 Response »
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Marjory Collins “Italian girls watching US Army parade on Mott Street, New York” Aug 1942

The Federal Reserve’s Language Lessons (Reuters)
After Years Of Doubts, Americans Turn More Bullish On Economy (Reuters)
Oil Seen Dropping to $55 ($45?) Next Week as Price Rout Deepens (Bloomberg)
US Stocks Tumble to Cap Dow’s Worst Week Since 2011 (Bloomberg)
Oil Rot Spreading in Credit (Bloomberg)
We Have Just Escaped The Earth’s Gravity And Are Now In Space Orbit (Zero Hedge)
U.S. Oil Rigs Drop Most in Two Years, Baker Hughes Says (Bloomberg)
Don’t Vote ‘Wrong’ Way, EU’s Juncker Urges Greeks (Reuters)
Albert Edwards: China Deflation Risks Sparking A Eurozone Break-Up (CNBC)
Would Global Deflation Really Be That Bad? (CNBC)
Falling Oil Threatens Canada’s Bulletproof Banking System (MarketWatch)
How Elizabeth Warren Led The Great Swaps Rebellion of 2014 (Bloomberg)
$303 Trillion In Derivatives US Taxpayers Are Now On The Hook For (Zero Hedge)
Venezuela’s Got $21 Billion. And Owes $21 Billion (Bloomberg)
Japan’s Lemmings March Toward The Cliff Chanting “Abenomics” (David Stockman)
Putin 2000 – 2014, Midterm Interim Economic Results (Awara)
Only ‘Minimal’ Risk Of Default: Ukrainian Official (CNBC)
Ukraine’s Chocolate King President Not Sweet On Keeping Promise (Reuters)
Australia’s Once-Vibrant Auto Industry Crashes in Slow Motion (NY Times)
Did A European Spacecraft Detect Dark Matter? (Christian Science Monitor)
The Chinese Mystery Of Vanishing Foreign Brides (FT)

The financial world caught behind the oil curve: they listen only to Yellen.

The Federal Reserve’s Language Lessons (Reuters)

“Will they or won’t they?” is the question on investors’ minds as the Federal Reserve policy-setting committee meets next week for the last time this year. Markets have followed Fed speakers closely in recent weeks for clues on whether the U.S. central bank will change key language in its post-meeting statement regarding how long it will keep benchmark interest rates near zero. Some expect the Fed to remove the reference to “considerable time” when setting a time frame for near-zero rates and maybe replace it, as it did ahead of the 2004-2005 monetary policy tightening cycle, with a nod to being “patient”. But that belief has been complicated somewhat by the slump in oil prices that has pulled inflation expectations lower and caused the S&P stock index to post its first negative week in eight on Friday.

The expectation of lower inflation could prevent the Fed from changing its current stance. Client notes from Goldman Sachs, Citi and Bank of America/Merrill Lynch this week deal with expectations for the removal of the wording, roughly agreeing that however close the call is, it is more likely than not that the phrase will go away. “They are going to remove it; I don’t think (Fed Chair Janet Yellen) is going to keep it in there just because of what we are seeing with the energy sector,” said Sean McCarthy, regional chief investment officer for Wells Fargo Private Bank in Scottsdale, Arizona. “All the other data has been strong, whether you are looking at construction, at the ISM numbers, and especially the jobs data that she cares about most.”

Indeed, recent statements from Fed officials suggest the language could be changed. Goldman Sachs, in a note, pointed to “widespread use of the word ‘patient'” as a signal that “some participants would prefer to revise the current language.” The lack of consensus on the Fed’s move all but guarantees that whatever the Federal Open Market Committee’s statement says on Wednesday the stock market will be volatile, as it usually is on Fed decision days. “The goal,” said the BofA/Merrill note, “will be to smooth the market’s reaction. The Fed does not intend to signal a fundamental shift in policy, and we expect chair Yellen’s press conference remarks to reinforce this point.”

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While Americans are not just behind the curve, they positively confirm a top has been reached. If ever you needed a sign, this is it: “Their expectations run quite counter to recent price data.”

After Years Of Doubts, Americans Turn More Bullish On Economy (Reuters)

Pessimism and doubt have dominated how Americans see the economy for many years. Now, in a hopeful sign for the economic outlook, confidence is suddenly perking up. Expectations for a better job market helped power the Thomson Reuters/University of Michigan index of consumer sentiment to a near eight-year high in December, according to data released on Friday. U.S. consumers also saw sharp drops in gasoline prices as a shot in the arm, and the survey added heft to strong November retail sales data that has showed Americans getting into the holiday shopping season with gusto. “Surging expectations signal very strong consumption over the next few months,” said Ian Shepherdson, an economist at Pantheon Macroeconomics.

While improvements in sentiment haven’t always translated into similar spending growth, consumers at the very least are feeling the warmth of several months of robust hiring, including 321,000 new jobs created in November. When asked in the survey about recent economic developments, more consumers volunteered good news than bad news than in any month since 1984, said the poll’s director, Richard Curtin. Moreover, half of all consumers expected the economy to avoid a recession over the next five years, the most favorable reading in a decade, Curtin said. The data bolsters the view that the U.S. economy is turning a corner and that worker wages could begin to rise more quickly, laying the groundwork for the Federal Reserve to begin hiking its benchmark interest rate to keep inflation from eventually rising above the Fed’s 2% target.

Overall, the sentiment index rose to a higher-than-expected 93.8, mirroring levels seen in boom years like 1996 and 2004. Many investors see the Fed raising rates in mid-2015, and policymakers will likely debate at a meeting next week whether to keep a pledge that borrowing costs will stay at rock bottom for a “considerable time.” Consumers see faster inflation ahead. Over the next year, they expect a 2.9% increase in prices, up from 2.8% in November, according to the sentiment survey. Their expectations run quite counter to recent price data. The Labor Department said separately its producer price index dropped 0.2% last month, brought lower by falling gasoline prices. Prices were soft even excluding the drag from gasoline.

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“The market hasn’t seen the response they’re looking for on the supply side yet ..”

Oil Seen Dropping to $55 ($45?) Next Week as Price Rout Deepens (Bloomberg)

Benchmark U.S. oil prices are poised to test $55 a barrel after a six-month rout pushed crude to the lowest in five years. West Texas Intermediate crude ended below $58 today for the first time since May 2009 after the International Energy Agency cut its global demand forecast for the fourth time in five months. Prices are down 46% from this year’s highest close of $107.26 on June 20. “By taking out $58, oil is moving towards the next target $55,” said Phil Flynn, senior market analyst at Price Futures. “It’s such an emotional selloff, and the even numbers are going to be the magic numbers.” WTI for January delivery dropped $2.14, or 3.6%, to $57.81 a barrel today on the New York Mercantile Exchange. Brent slid $1.83 to $61.85 on the London-based ICE Futures Europe exchange, the lowest since July 2009.

Both benchmarks have collapsed about 20% since Nov. 26, the day before OPEC agreed to leave its production limit unchanged at 30 million barrels a day. U.S. output, already at a three-decade high, will continue to rise in 2015, according to the IEA, which reduced its estimate for oil demand growth in 2015 by 230,000 barrels a day. “We could definitely see $55 next week,” said Tariq Zahir, commodity fund manager at Tyche Capital. “We are probably going to see some violent trading.” Skip York, vice president of energy research at Wood Mackenzie, said the next price target is $45. “The market hasn’t seen the response they’re looking for on the supply side yet,” York said. “We’re now in this environment where I think prices are going to keep drifting down until the market is convinced, until the signal that production growth needs to slow has been received and acted on by operators.”

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“At first it was just oversupply of oil. But now it’s that, plus fear of a world economy that’s growing too slow.”

US Stocks Tumble to Cap Dow’s Worst Week Since 2011 (Bloomberg)

U.S. stocks sank, with the Dow Jones Industrial Average capping its biggest weekly drop in three years, as oil continued to slide and Chinese industrial data raised concern over a global economic slowdown. Materials stocks declined the most in the Standard & Poor’s 500 Index, losing 2.9% as a group, while energy shares dropped 2.2%. IBM, DuPont and Exxon Mobil sank at least 2.9% to lead declines in all 30 Dow stocks. The S&P 500 lost 1.6% to 2,002.33 at 4 p.m. in New York, extending losses in the final hour to cap a weekly drop of 3.5%. The Dow sank 315.51 points, or 1.8%, to 17,280.83. The Dow slid 3.8% for the week, its biggest decline since November 2011. “Clearly the oil situation is driving things,” Randy Warren at Warren Financial said. “At first it was just oversupply of oil. But now it’s that, plus fear of a world economy that’s growing too slow. Those fears are definitely outweighing the positive signs we’re seeing domestically.”

The selloff picked up speed in the final hour as the Dow average plunged more than 100 points and the S&P 500 ended about 2 points above its average price for the last 50 days, a level monitored by technical analysts. At about 2:50 p.m., March futures on the benchmark gauge for U.S. equities slipped below 2,000 for the first time since Nov. 4. More than $1 trillion was erased from the value of global equities this week as oil prices tumbled, raising concern over the strength of the global economy. Oil extended losses today amid speculation that OPEC’s biggest members will defend market share against U.S. shale producers. The IEA cut its forecast for global oil demand for the fourth time in five months.

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“Everyone is trying to squeeze through a very small door.”

Oil Rot Spreading in Credit (Bloomberg)

Credit investors are preparing for the worst. They’re cleaning up their portfolios, selling riskier debt that’s harder to trade in bad times and hoarding longer-term government bonds that do best in souring markets. While investors have pruned energy-related holdings in particular as oil prices plunge, they’re also getting rid of other types of corporate bonds, causing yields to surge to the highest in more than a year. “We believe the pervasive nature of the sell-off is more reflective of overall liquidity concerns in the cash market than of fundamental deterioration,” Barclays analysts Jeffrey Meli and Bradley Rogoff wrote in a report today. “The weakness, while certainly most pronounced in the energy sector, has been broad based.”

Rather than waiting around for a trigger to escalate this month’s selloff, investors are pulling out of dollar-denominated corporate debt now, causing a 0.8% decline in the notes this month, according to a Bank of America Merrill Lynch index that includes investment-grade and junk-rated securities. This would be the first month of losses since September. Yields on the debt have surged to 2.21 percentage points more than benchmark rates, the highest premium in 14 months. While the biggest driver of the selling is plummeting oil prices, the selling extends beyond just energy. Bonds of wireless provider Verizon have fallen 1% this month and debt of HCA, a hospital operator, has dropped 1.2%, Bank of America Merrill Lynch index data show.

Even though the global speculative-grade default rate is less than half its historical average at 2.2%, investors are getting ready for sentiment to turn. When that happens, it may be all the more difficult to get out as hoards of other investors try to sell in a market where trading hasn’t kept pace with the growth of outstanding debt. There’s “very little liquidity” in corporate bonds, especially in lower-rated debt, Bill Gross, who joined Janus Capital in September, said today in a Bloomberg Surveillance interview with Tom Keene. “Everyone is trying to squeeze through a very small door.”

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Just take one look at that energy junk bond chart.

We Have Just Escaped The Earth’s Gravity And Are Now In Space Orbit (Zero Hedge)

Houston, we have a serious problem… With only 20% of US Shale regions remaining economic at these oil price levels, it should not be surprising that the credit risk of the US Energy sector is exploding to near 1000bps… and contagiously infecting the broad HY market… Credit risk in the energy sector is starting to infect the broad HY market – HYG at 2-year yield highs and HYCDX near 15-month wides…

Which signals considerable pain to come for US Energy stocks..

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“It’s starting ..”

U.S. Oil Rigs Drop Most in Two Years, Baker Hughes Says (Bloomberg)

U.S. oil drillers idled the most rigs in almost two years as they face oil trading below $60 a barrel and escalating competition from suppliers abroad. Rigs targeting oil dropped by 29 this week to 1,546, the lowest level since June and the biggest decline since December 2012, services company Baker Hughes said on its website yesterday. As OPEC resists calls to cut output, U.S. producers including ConocoPhillips and Oasis Petroleum have curbed spending. Chevron put its annual capital spending plan on hold until next year. Rigs targeting U.S. oil are sliding from a record 1,609 after a $50-a-barrel drop in global prices, threatening to slow the shale-drilling boom that has propelled domestic production to the highest level in three decades.

“It’s starting,” Robert Mackenzie, oilfield services analyst at Iberia Capital, said. “We knew this day was going to come. It was only a matter of time before the rig count was going to respond. The holiday is upon us and oil prices are falling through the floor.” ConocoPhillips said Dec. 8 that would cut spending next year by about 20%. The Houston-based company is deferring investment in North American plays including the Permian Basin of Texas and New Mexico and the Niobrara formation in Colorado. Oasis, an exploration and production company based in Houston, said Dec. 10 that it’s cutting 2015 spending 44%.

“Our capex will be lower,” Roger Jenkins, chief executive officer of Murphy Oil, an Arkansas-based exploration company, said during a presentation Dec. 10. “I think this idea of lowering capex around 20% is going to be pretty common in the industry.” Even as producers cut budgets and lay down rigs, domestic production is surging, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show. Oil output climbed to 9.12 million barrels a day in the week ended Dec. 5, the highest in EIA data going back to 1983, and is projected to increase to 9.3 million barrels a day next year.

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“I won’t express my own opinion…”

Don’t Vote ‘Wrong’ Way, EU’s Juncker Urges Greeks (Reuters)

The European Union’s chief executive has given Greeks a stark and unusual warning of major problems if they vote the “wrong” way and radicals win an early parliamentary election. Jean-Claude Juncker, the president of the European Commission, stressed in remarks carried late on Thursday by Austrian broadcaster ORF that he was not trying to insert himself into the Greek political process. In general, EU officials take pains to avoid accusations of interference and Juncker’s remarks went beyond the normal reticence. As the government in Athens faces a possible election and defeat by an untried left-wing party that opposes the terms the EU has set on Greece’s financial bailout, Juncker said he was not averse to seeing “familiar faces” remaining in charge. Prime Minister Antonis Samaras said on Thursday that Greece risked a “catastrophic” return to financial crisis if his government fell as a result of a parliamentary vote he has called for this month to elect a head of state.

Juncker, who was closely involved in managing the euro zone debt crisis when he was prime minister of Luxembourg, said he was sure Greek voters understood the risks of an election that polls show could bring to power the left-wing Syriza party. “I assume that the Greeks – who don’t have an easy life, above all the many poor people – know very well what a wrong election result would mean for Greece and the euro zone,” he said. “I won’t express my own opinion. I just wouldn’t like extremist forces to take the wheel. “I would like Greece to be governed by people with an eye on and a heart for the many little people in Greece – and there are many – and also understand the necessity of European processes.” He said he did not view market ructions in Greece of late as a sign that a new Greek crisis was breaking out.

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“.. the euro zone cannot withstand another full scale recession and will ultimately fracture despite the best efforts of the ECB.”

Albert Edwards: China Deflation Risks Sparking A Eurozone Break-Up (CNBC)

Societe Generale’s uber-bearish strategist Albert Edwards believes that investors are slowly waking up to the idea that the Chinese have a “major deflation problem” and its transition into a more consumer-led economy won’t be a smooth one. Traditionally the country is known for its cheap exports that compete strongly with domestically produced goods around the world. That model is unlikely to change soon, according to Edwards. “The realization that China will be exporting more deflation helps to explain why U.S. inflation expectations continue to plunge despite recent stronger than expected real economy data,” he said in a note on Thursday.

He continues to warn that weakness in emerging markets could seriously impact Germany, the traditional powerhouse for the euro bloc. Germany sees China as one of the biggest buyers of its goods. Edwards said that Germany will eventually have to “walk the walk” and aggressively cut spending as it falls into recession next year. “My own view is that the euro zone cannot withstand another full scale recession and will ultimately fracture despite the best efforts of the ECB,” he said.

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“I am just not perceiving the global economy on the verge of a boom…the risks look to the downside – especially as the effects of lower oil are factored in.”

Would Global Deflation Really Be That Bad? (CNBC)

The collapse in oil process may only be a few months old, but economists are already debating its long-term effects: will the world be gripped in growth-sapping Japanese-style deflation or will the world economy benefit from a period of lower prices? Deflation is classed as when consumer prices turn negative with the theory being that buyers would hold off from making purchases in the hope of further falls. This raises the fear of a prolonged deflationary spiral with the slump becoming so entrenched that it impacts growth and does little for the potential of wage increases. The price of oil has seen a dramatic 40% fall since June and has weighed on headline inflation figures and is likely to continue to do so next year. Consultancy Capital Economics estimate that the energy component of inflation in advanced economies will fall temporarily to around minus 10% next year. Some consumers see little price reductions at the pump as their governments subsidize the commodity, but in the U.S. many have been cheering the drop in oil which has put more money in their pocket.

Bill Blain, a fixed income strategist at Mint Partners argues that lower oil prices does not necessarily translate into growth, however. “Oil price declines are initially hailed as positive growth drivers – but in an already recessionary environment, perhaps they have become a soporific too far?,” he said in a morning note on Friday. “I am just not perceiving the global economy on the verge of a boom…the risks look to the downside – especially as the effects of lower oil are factored in.” Consumer prices in November rose 0.3% for the euro zone, compared to the year before, and the European Central Bank has regularly downgraded its prospects for the next year as 2015 approaches. In the U.S., annual inflation still remains below the 2% goal given by the Federal Reserve. The Bank of England is expecting the U.K.’s inflation rate to fall below 1% next year and China’s number currently sits at a five-year low.

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“In this context, the risk to Canadian banks doesn’t stem necessarily from a narrow view of loans to oil companies, but more from a broad macro risk perspective.”

Falling Oil Threatens Canada’s Bulletproof Banking System (MarketWatch)

While the U.S. financial system – as well as many international banks – has gotten hopped up on a wide assortment of financial opiates and stumbled through more than a dozen bank-fueled crises through the decades, Canada boasts a stellar track record of banking sobriety. However, a spectacular death spiral in crude-oil futures – West Texas Intermediate settled Thursday at $59.95, a more than five-year low – threatens to deliver a serious shock to the banking system of the U.S.’s northern neighbor, according a research note published Thursday by Pavilion Global Markets. Canada ranks as one the world’s five largest energy producers and a net exporter of oil, according to the U.S. Energy Information Administration. So, a big drop in oil would pose several risks to Canada’s oil-dependent economy.

“The drop in oil prices, as mentioned above, will have wide-ranging implications on the Canadian economy,” Pavilion strategists Pierre Lapointe and Alex Bellefleur said in the note. It’s not just that Canada’s banks will find themselves saddled with souring loans from underwater energy producers. The problem, Pavilion argues, is that Canada’s employment rate could suffer as oil-related businesses are forced to close. Here’s how they put it: “In this context, the risk to Canadian banks doesn’t stem necessarily from a narrow view of loans to oil companies, but more from a broad macro risk perspective. As employment in the oil industry declines, a negative income and wealth shock to many households will take place, impacting a variety of loans (credit card, mortgage) on Canadian bank balance sheets.”

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It’s insane what goes on here. Banks get to write laws, and now out in the open.

How Elizabeth Warren Led The Great Swaps Rebellion of 2014 (Bloomberg)

John Carney couldn’t understand why the vote was so close. The Delaware congressman, a Democratic member of the House Financial Services Committee, had been there when a reform to the Dodd-Frank “swaps push-out” passed—in a 55-6 landslide. He’d joined a veto-proof majority, 292-122, to back the reform in a House bill that was throttled by the Democratic Senate. The bank-friendly Democrat had not expected the reform’s quiet return, as a rider in the must-pass “Cromnibus” spending package, to kick off a revolt. “This passed with nearly 300 votes,” said Carney on Thursday night, after the House had voted on the Cromnibus, and as legislators of both parties congratulated him or wished him Merry Christmas. “It would have been more than 300, like some of the other bills we’ve done, if there wasn’t this toxic description of what it might do. Unfortunately, the world we live in, the political world, is one of perception. I try to deal with the facts.”

“Sometimes that’s at odds with the way we do work here, where you get these political narratives that take on a larger than life part of the discussion.” Put it this way: Carney was not Ready for Warren. For the better part of two days, most of his fellow Democrats approached the Cromnibus—which did not de-fund the president’s immigration order, or the bulk of the Affordable Care Act—as a sell-out of cosmic proportion. This started when Massachusetts Senator Elizabeth Warren gave a Wednesday floor speech challenging her colleagues to restore swaps push-out, which prohibited banks from booking derivatives in their own subsidiaries. “The financial industry spent more than $1 million a day lobbying Congress on financial reform, and a lot of that money went to former elected officials and government employees,” said Warren. “And now we see the fruits of those investments. This provision is all about goosing the profits of the big banks.”

The backlash should have been predictable. As Carney recalled, the original bill to change the swaps rule lost some votes after critical media coverage. More specifically, the New York Times reporters Eric Lipton and Ben Protess noticed that Citigroup had practically written the swaps language; its “recommendations were reflected in more than 70 lines of the House committee’s 85-line bill.” Yet it didn’t become “toxic” until the fight over the “Cromnibus.” Warren made the swaps language infamous. In the House, she found an impromptu whip team led by Illinois Representative Jan Schakowsky and the party’s ranking member on the Financial Services Committee, California Representative Maxine Waters. She found an ally in the Minority Leader, California Representative Nancy Pelosi, who took the floor on Thursday to warn that the swaps rule was exactly the sort of time-bomb that could create another financial crisis in the pattern of 2008.

This rattled the Democrats’ appropriators, some of whom were heading for the exits. Virginia Representative Jim Moran spent a good part of Thursday telling reporters that Warren was “running for president” and drowning Democrats in her ambition. “She obviously has a lot of influence,” said Moran after the votes. “The media listens to everything she says.”

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Here’s what Warren doesn’t like.

$303 Trillion In Derivatives US Taxpayers Are Now On The Hook For (Zero Hedge)

Courtesy of the Cronybus(sic) last minute passage, government was provided a quid-pro-quo $1.1 trillion spending allowance with Wall Street’s blessing in exchange for assuring banks that taxpayers would be on the hook for yet another bailout, as a result of the swaps push-out provision, after incorporating explicit Citigroup language that allows financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp, explicitly putting taxpayers on the hook for losses caused by these contracts. Recall:

Five years after the Wall Street coup of 2008, it appears the U.S. House of Representatives is as bought and paid for as ever. We heard about the Citigroup crafted legislation currently being pushed through Congress back in May when Mother Jones reported on it. Fortunately, they included the following image in their article:

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And the CIA once again thinks it’s in control of toppling a government.

Venezuela’s Got $21 Billion. And Owes $21 Billion (Bloomberg)

Of all the financial barometers highlighting the crisis in Venezuela, this may be the one that unnerves investors the most as oil sinks: The country’s foreign reserves only cover two years of bond payments. The government and state-run oil company owe $21 billion on overseas bonds by the end of 2016, an amount equal to about 100% of reserves. Those figures explain why derivatives traders aren’t only betting that a default is almost certain but that it will most likely happen within a year. The 48% collapse in crude in the past six months stripped President Nicolas Maduro of the one thing – windfall profits for the country’s No. 1 export – that was preventing a full-blown crisis.

Even before oil started sinking, the OPEC member had depleted 30% of its international reserves in the past six years, the result of billions of dollars of capital flight triggered by the socialist push implemented by Maduro’s mentor and predecessor, the late Hugo Chavez. “These are panic capitulation levels,” Kathryn Rooney Vera, an economist at Bulltick Capital Markets, said in an e-mailed response to questions. “Oil’s continued price decline is ratcheting up risk aversion to exporters, and even more so for an economy already as distorted as that of Venezuela.” The cost to insure Venezuelan debt against non-payment over the next 12 months surged to about 6,928 basis points yesterday in New York, according to CMA data, widening the price gap over five-year protection to a record.

The upfront cost of one-year contracts implies a 65% probability of default by December 2015. Swaps prices show a 94% chance of non-payment by 2019. Venezuela’s benchmark bonds due 2027 have fallen for seven straight days, reaching 41.22 cents on the dollar as of 12:02 p.m. in New York today, the lowest in 16 years. Maduro said Dec. 10 that the government is doing everything it can to boost the price of oil, which he says should be about $100 a barrel. The country advocated unsuccessfully for production cuts at November’s meeting of members OPEC. Yesterday, Maduro said the country could export cement to bring more dollars into the country.

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” .. there is no evidence or honest economic logic to support the proposition that – over any reasonable period of time – a nation can become richer by making its people poorer ..”

Japan’s Lemmings March Toward The Cliff Chanting “Abenomics” (David Stockman)

According to Takahiro Mitani, trashing your currency, destroying your bond market and gutting the real wages of domestic citizens is a sure fire ticket to economic success. Yes, that’s what the man says, “I have no doubt that the economy is in a recovery trend if you look at the long run….” After two years of hoopla and running the BOJ’s printing presses red hot, however, there is not a shred of evidence that Abenomics will lead to any such thing. In fact, after the recent markdown of Q3 GDP even deeper into negative territory, Japan’s real GDP is no higher now than it was the day Abenomics was launched in early 2013; and, in fact, is no higher than it was on the eve of the global financial crisis way back in 2007.

In the meanwhile, the Yen has lost 40% of its value and teeters on the brink of an uncontrolled free fall. Currency depreciation, of course, is supposedly the heart of the primitive Keynesian cure on which Abenomics is predicated, but there is no evidence or honest economic logic to support the proposition that – over any reasonable period of time – a nation can become richer by making its people poorer. That’s especially true in the case at hand, which is to say, a Pacific archipelago of barren rocks. Japan imports virtually 100% of every BTU and every ton of metals and other raw materials consumed by its advanced $5 trillion industrial economy.

Yet thanks to the mad money printer who Prime Minister Abe seconded to the BOJ, Hiroki Kuroda, import prices are up by a staggering 30% since 2012. Even with oil prices now collapsing, the yen price of crude oil imports is still higher than it was two years back. Not surprisingly, input costs for Japan’s legions of small businesses have soared, and the cost of living faced by its legendary salary men has risen far faster than wages. Accordingly, domestic businesses that supply the home market—and that is the overwhelming share of Japan’s output—are being driven to the wall, bankruptcies are at record highs and the real incomes of Japan’s households have now shrunk for 16 consecutive months and are down by 6% compared to 2 years ago.

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A view of Russia we don’t often see here in the west.

Putin 2000 – 2014, Midterm Interim Economic Results (Awara)

A study released today by Awara Group, a Russia-based consulting firm, shows that Russia’s economy is not as dependent on oil and gas as is commonly claimed. Having researched the development of key indicators of the economy from 2000 to 2013, the authors of the study want to debunk the media story that Russia’s governments under Putin have been supposedly exclusively relying on an economic model based on oil and gas rents while neglecting the need to modernize and diversify the economy. It turns out that quite the opposite is true.

The crisis-torn economy battered by years of robber capitalism and anarchy of the 1990’s, which Putin inherited in 2000, has now reached sufficient maturity to justify a belief that Russia can make the industrial breakthrough that the President has announced. “The Russian economy is much more diversified and modernized than critics claim. The contention that it is only about oil and gas is total nonsense”, says Jon Hellevig, chief researcher for the study. “This is why Russia will not only stay afloat under the conditions of sanctions, but actually will make the industrial breakthrough that President Putin has announced”, Hellevig continues. The study reveals a range of impressive indicators on the development of the economy between 2000 and 2013 and the health of the Russian economy:

  1. The share of natural resources rents in GDP (oil, gas, coal, mineral, and forest rents) more than halved between 2000 to 2012 from 44.5% to 18.7%. The actual share of oil and gas was 16%.
  2. Russian industrial production has grown more than 50% while having undergone a total modernization at the same time.
  3. Production of food has grown by 100% in 2000 – 2013.
  4. Production of cars has more than doubled at the same time that all the production has been totally remodeled.
  5. Russian exports have grown by almost 400%, outdoing all major Western countries.
  6. Growth of exports of non-oil & gas goods has been 250%.
  7. Russia’s export growth has more than doubled compared with the competing Western powers.
  8. Oil & gas does not count for over 50% of state revenues as has been claimed, but only 27.4%. Top revenue source is instead payroll taxes.
  9. Russia’s total tax rate at 29.5% is among lowest of developed countries, non-oil & gas total tax rate is half that of the Western countries.
  10. Russia’s GDP has grown more than tenfold from 1999 to 2012.
  11. Public sector share of employment in Russia is not high in comparison with developed economies. State officials make up 17.7% of Russia’s total work force, which situates it in the middle of the pack with global economies.
  12. Russia’s labor productivity is not 40% of the Western standards as is frequently claimed, but rather about 80%.

Far from “relying” on oil & gas, the Russian government is engaged in massive investments in all sectors of the economy, biggest investments going to aviation, shipbuilding, and manufacturing of high-value machinery and technological equipment. Totally contrary to these facts, the Western media, financial analysts, and even leaders such as U.S. President Obama keep parroting the refrain that “Russia only relies on oil and gas” and “Russia does not produce anything”. Clearly, Barack Obama has not been analyzing the Russian economy, so this must mean that those whose job it is to do so are misleading the President.

We strongly believe that everyone benefits from knowing the true state of Russia’s economy, its real track record over the past decade, and its true potential. Having knowledge of the actual state of affairs is equally useful for the friends and foes of Russia, for investors, for the Russian population – and indeed for its government, which has not been very vocal in telling about the real progress. I think there is a great need for accurate data on Russia, especially among the leaders of its geopolitical foes. Correct data will help investors to make a profit. And correct data will help political leaders to maintain peace. Knowing that Russia is not the economic basket case that it is portrayed to be would help to steer the foes from the collision course with Russia they have embarked on.

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Translation: we’re about to go broke.

Only ‘Minimal’ Risk Of Default: Ukrainian Official (CNBC)

Ukraine is at “minimal” risk of defaulting on its debt repayments, according to an official in the country’s recently-appointed government, despite a currency in freefall and an apparent $15-billion black hole in its bailout from the IMF. “We do have economic difficulties, but that is something that is going into the debate with the IMF,” Dmytro Shymkiv, deputy head of presidential administration, told CNBC. “The risk of default is minimal,” he added, arguing that 95% of the country was not suffering as a result of the military conflict in the east of Ukraine. A further $15 billion may be needed to bailout the struggling country, on top of the $17-billion loan package the IMF worked out for the troubled country, and Prime Minister Arseny Yatseniuk appealed for Western help to stop a default on Thursday.

Ukraine’s currency, the hryvnia, has lost over 90% of its value against the U.S. dollar to date this year, as conflict raged on its borders. Inflation is spiralling, and the country is facing a future without cheap gas supplies from neighbor Russia, after their fallout over the deposition of former Ukrainian President Viktor Yanukovych and subsequent emergence of a more pro-European government in Ukraine. The economies of Donetsk and Luhansk, the areas where fighting between the Ukrainian army and pro-Russian separatists is worst, have ground to a halt – but these account for close-to a fifth of the country’s economy, according to Yatseniuk.

There is some hope that negotiations to resolve the conflict may re-open soon, with President Petro Poroshenko saying Friday morning that the country had experienced its first 24 hours of proper ceasefire in seven months. Shymkiv, the former head of Microsoft Ukraine who is now tasked with implementing much-needed administrative, social and economic reforms in the country, said: “We’re trying to bring our knowledge and experience to the development of the country. That’s the only way we can bring it out of the mis-development of the economy.” Asked about potential conflict between Yatseniuk and Poroshenko, he said: “There aren’t conflicts between President and Prime Minister. We have no time to have disputes.”

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He didn’t say he was willing to take any losses …

Ukraine’s Chocolate King President Not Sweet On Keeping Promise (Reuters)

The Chocolate King is finding it difficult to relinquish his throne. Petro Poroshenko, one of Ukraine’s richest men and owner of a sweets empire, made an unusual promise last spring while campaigning to be president – if elected, he would sell most of his business assets. “As president of Ukraine, I only want to concern myself with the good of the country and that is what I will do,” he told an interviewer. Poroshenko won the election, but he hasn’t succeeded yet at keeping his campaign promise. With his country at war with Russian-backed separatists in the east, the economy faltering and its currency weakening, Ukraine’s 49-year-old president hasn’t sold any of his assets, including his most valuable one: a majority stake in Roshen Confectionery Corp, Ukraine’s biggest sweets maker. His promise appears to be a victim of the very problems that face him as president.

Executives at the two financial firms that Poroshenko has hired to help sell his assets caution that deals, particularly in former Soviet republics and eastern Europe, can often take a year or more. But they also concede that their client’s timing is terrible. “It’s clearly not a good time to sell,” said Giovanni Salvetti, managing director of Rothschild CIS, which is trying to sell Roshen. “I hope the situation will improve in the first or second quarter” of 2015. Makar Paseniuk, a managing director at ICU in Kiev, which acts as Poroshenko’s financial adviser, said there is an agreement to sell one of his other assets. He declined to identify it but said the deal has not closed and it’s not clear when or if it will. Besides Roshen, Poroshenko’s portfolio includes numerous other assets, including real estate and investments in a bank, an insurance company and a shipyard in Crimea. He also owns a Ukrainian television station that he has said he will keep.

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Nice little history lesson. Must read, certainly if you don’t know what a ute is.

Australia’s Once-Vibrant Auto Industry Crashes in Slow Motion (NY Times)

There has been a car industry in Australia for about as long as there have been cars. But within two or three years, the last of the continent’s auto plants will go dark. At the turn of the 20th century, while visionaries in the United States and Europe labored on horseless carriages, Australians were also creating them. In 1896 in Melbourne, Herbert Thomson built a steam car for sale using Dunlop pneumatic tires made in Australia. In 1901, Harley Tarrant began selling cars made mostly from Australian parts. Over the next century, American automakers including General Motors, Ford and Chrysler came to dominate the market, turning out cars from factories set up in nearly every Australian state. Toyota, Nissan and Mitsubishi later joined them.

But the end is nigh. Auto plants have been closing, one by one, over five decades. The three remaining carmakers here — Toyota, Ford and the Holden subsidiary of G.M. — are shutting their manufacturing operations over the next few years. Government policy has played a large role in the contraction; the Australian market has gone from one of the world’s most protected to possibly the least-protected among auto-manufacturing nations. The Australian car industry had always benefited from barriers to imported vehicles. Those who bought early Thomson steam cars and gasoline-powered Tarrants were industrialists, wealthy ranchers, bankers and politicians who saw merit in protecting the home industry.

So early adopters in the 1900s who wanted foreign-made cars, and there were plenty of them, could only import the chassis complete with engine, transmission, axles and wheels — and the hood and the grille. The rest of the car had to be manufactured, mostly by hand, by body builders who generally evolved from outfits that had made coaches and buggies for the horse trade. Holden started in the leatherwork and saddlery business in 1856, but by the early 20th century was making motorcycle sidecars and car bodies for chassis from G.M. In 1931, G.M. bought Holden Motor Builders and plans were laid for a distinctly Australian car, which finally arrived after World War II, in 1948.

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If confirmed, this is the biggest discovery in eons.

Did A European Spacecraft Detect Dark Matter? (Christian Science Monitor)

Astronomers may finally have detected a signal of dark matter, the mysterious and elusive stuff thought to make up most of the material universe. While poring over data collected by the European Space Agency’s XMM-Newton spacecraft, a team of researchers spotted an odd spike in X-ray emissions coming from two different celestial objects – the Andromeda galaxy and the Perseus galaxy cluster. The signal corresponds to no known particle or atom and thus may have been produced by dark matter, researchers said. “The signal’s distribution within the galaxy corresponds exactly to what we were expecting with dark matter – that is, concentrated and intense in the center of objects and weaker and diffuse on the edges,” study co-author Oleg Ruchayskiy, of the École Polytechnique Fédérale de Lausanne (EPFL) in Switzerland, said in a statement.

“With the goal of verifying our findings, we then looked at data from our own galaxy, the Milky Way, and made the same observations,” added lead author Alexey Boyarsky, of EPFL and Leiden University in the Netherlands. Dark matter is so named because it neither absorbs nor emits light and therefore cannot be directly observed. But astronomers know dark matter exists because it interacts gravitationally with the “normal” matter we can see and touch. And there is apparently a lot of dark matter out there: Observations of star motion and galaxy dynamics suggest that about 80% of all matter in the universe is “dark,” exerting a gravitational force but not interacting with light.

Researchers have proposed a number of different exotic particles as the constituents of dark matter, including weakly interacting massive particles (WIMPs), axions and sterile neutrinos, hypothetical cousins of “ordinary” neutrinos (confirmed particles that resemble electrons but lack an electrical charge). The decay of sterile neutrinos is thought to produce X-rays, so the research team suspects these may be the dark matter particles responsible for the mysterious signal coming from Andromeda and the Perseus cluster. If the results — which will be published next week in the journal Physical Review Letters — hold up, they could usher in a new era in astronomy, study team members said. “Confirmation of this discovery may lead to construction of new telescopes specially designed for studying the signals from dark matter particles,” Boyarsky said. “We will know where to look in order to trace dark structures in space and will be able to reconstruct how the universe has formed.”

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Weird. Just plain weird.

The Chinese Mystery Of Vanishing Foreign Brides (FT)

Police in central China have launched an investigation into the disappearance of more than 100 Vietnamese women who married local bachelors and had been living in villages around the city of Handan. The women all disappeared at the same time in late November, along with a Vietnamese woman who married a local villager 20 years ago and had introduced most of the brides to local men in recent months in exchange for a fee. Faced with severe gender imbalances as a result of China’s decades-old one-child policy and a traditional preference for male children, many Chinese men are unable to find suitable brides and resort to paying for wives from poorer Asian countries such as Vietnam.

Particularly in more traditional rural parts of China, marriage is highly transactional and men are increasingly expected to provide a house, car, electrical appliances and a steady income before a woman or their family will consider him eligible for marriage. For those who cannot afford the expensive requirements of Chinese brides, paying for a bride from Vietnam or elsewhere in the region can be a much cheaper option. As a consequence of the demand for cheap foreign brides, China has an enormous problem with human trafficking. “My brother worked outside the village and was too poor to afford a local wife so my family paid Rmb100,000 to get a wife from Vietnam through that old Vietnamese woman who came here 20 years ago,” said the brother of Bai Baoxing, a local man whose Vietnamese wife disappeared with the others barely a month after they were married.

Mr Bai’s brother said the new bride spoke decent Mandarin Chinese and he and his family were now wondering whether she was even Vietnamese. Chinese media reports identified the absconded Vietnamese marriage broker as Wu Meiyu. After living in a village on the outskirts of Handan for 20 years, she started offering introductions to Vietnamese brides for a fee at the start of this year. An officer in the local Handan city police office told the Financial Times that provincial police were now handling the case and they could not comment on the ongoing investigation. Chinese media are filled with cases of women from poor rural areas who are abducted and sold into marriage, as well as cases involving foreign brides.

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