Jul 302016
 
 July 30, 2016  Posted by at 7:59 am Finance Tagged with: , , , , , , , , ,  


Jack Delano Street scene on a rainy day in Norwich, Connecticut 1940

US GDP Grew a Disappointing 1.2% in Q2 As Q1 Revised Down to 0.8% (WSJ)
Rescue Package In Place For Europe’s Oldest Bank, Weakest In Stress Tests (G.)
ECB Bond Buying Risks Blocking Debt Restructurings (R.)
Chinese Capital Outflows May Still Be Happening – But In Disguise (BBG)
Bank of Japan’s Quest for 2% Inflation (BBG)
The Bank of Japan Is At A Crossroads (BBG)
US Authorities Subpoena Goldman In 1MDB Probe (R.)
Australia Headed For Recession As Early As Next Year – Steve Keen (ABC.au)
‘Sell The House, Sell The Car, Sell The Kids’ – Gundlach (R.)
British Columbia Violates NAFTA With Its Foreign Property Tax (FP)
Another “Smoking Gun” Looms As Hillary Campaign Admits Server Hacked (ZH)
Greek Islands Appeal For Measures To Deal With Influx Of Refugees (Kath.)
England’s Plastic Bag Usage Drops 85% Since 5p Charge Introduced (G.)

 

 

Only positive is consumer spending. But without knowing how much of that is borrowed (let alone manipulated), it’s a meaningless number.

US GDP Grew a Disappointing 1.2% in Q2 As Q1 Revised Down to 0.8% (WSJ)

Declining business investment is hobbling an already sluggish U.S. expansion, raising concerns about the economy’s durability as the presidential campaign heads into its final stretch. GDP, the broadest measure of goods and services produced across the U.S., grew at a seasonally and inflation adjusted annual rate of just 1.2% in the second quarter, the Commerce Department said Friday, well below the pace economists expected. Economic growth is now tracking at a 1% rate in 2016—the weakest start to a year since 2011—when combined with a downwardly revised reading for the first quarter. That makes for an annual average rate of 2.1% growth since the end of the recession, the weakest pace of any expansion since at least 1949.

The output figures are in some ways discordant with other gauges of the economy. The unemployment rate stands at 4.9% after a streak of strong job gains, wages have begun to pick up, and home sales hit a post-recession high last month. Consumer spending also remains strong. Personal consumption, which accounts for more than two-thirds of economic output, expanded at a 4.2% rate in the second quarter, the best gain since late 2014. On the downside, the third straight quarter of reduced business investment, a large paring back of inventories and declining government spending cut into those gains. “Consumer spending growth was the sole element of good news” in the latest GDP figures, said Gregory Daco at Oxford Economics. “Weakness in business investment is an important and lingering growth constraint.”

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“This is a market operation that will reinforce the capital position of the bank and free it completely of bad loans…” If it’s that easy, do it all over the place, I’d think. Who do they think they’re fooling?

Rescue Package In Place For Europe’s Oldest Bank, Weakest In Stress Tests (G.)

A rescue package of the world’s oldest bank has been announced after a health check of the biggest banks across the EU showed that Banca Monte dei Paschi di Siena’s financial position would be wiped out if the global economy and financial markets came under strain. The much-anticipated result of the stress tests – for which there was no pass or fail mark – of 51 banks showed that Italy’s third largest bank emerged weakest from the assessment. But the test – which exposed banks to headwinds in the global economy and dramatic movements in currency markets – also underlined the drop in the capital position of bailed-out Royal Bank of Scotland and the hit taken by Barclays observed under the imaginary scenarios. Banks from Italy, Ireland, Spain and Austria fared worst.

Regulators said that the tests showed that the bank sector was much stronger than it had been at the time of the 2008 financial crisis, which led to the introduction of the stress tests. Even so, the European Banking Authority (EBA), which conducted the tests on lenders, acknowledged that more needed to done.Under the latest stress test scenario, some €269bn (£227bn) would be wiped off the capital bases of the banks. “The EBA’s 2016 stress test shows the benefits of capital strengthening done so far are reflected in the resilience of the EU banking sector to a severe shock,” said Andrea Enria, EBA chair. “This stress test is a vital tool to assist supervisors in accelerating the process of repair of banks’ balance sheets, which is so important for restoring lending to households and businesses.

“The EBA’s stress test is not a pass [or] fail exercise. While we recognise the extensive capital raising done so far, this is not a clean bill of health. There remains work to do which supervisors will undertake.” The bank that fared the worst was MPS, which suffered a dramatic 14 percentage point fall in its capital position. It had been expected to perform badly and talks had already been underway before the results of the stress tests were published to try to find a way to bolster its capital. New EU regulations prevented the Italian government from pumping any taxpayer money into MPS so efforts were needed to try to stop of tens of thousands of ordinary Italians – who had bought its bonds – losing their savings. Italy’s banks are in the spotlight as they are weighed down by €360bn of bad debts.

Italy’s finance minister, Pier Carlo Padoan – who as recently as Sunday said there was no crisis in Italy – endorsed the deal put together to raise €5bn from private investors and sell €9.2bn of bad debts. “The government is greatly satisfied with the operation [the deal] launched … by Monte dei Paschi of Siena,” he said. “This is a market operation that will reinforce the capital position of the bank and free it completely of bad loans. The operation will allow the bank to develop a solid industrial plan, thanks to which it will boost its support for the real economy through lending to families and businesses.”

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Unintended consequences. Hilarious, really.

ECB Bond Buying Risks Blocking Debt Restructurings (R.)

The European Central Bank could scupper future eurozone debt restructurings if it increases the amount of a country’s bonds it can buy under its economic stimulus program, a top debt lawyer warned. The problem, on the radar of European authorities suffering a hangover from the 2012 crisis, has been pushed to the fore by expectations the ECB will need to raise limits on its bond purchases to keep its quantitative easing scheme on track.

Kai Schaffelhuber, a partner at law firm Allen & Overy, said that if the ECB permitted itself to buy more than a third of a country’s debt it would make a restructuring of privately-held bonds more difficult, a move that could increase the likelihood of taxpayer rescues. In a debt restructuring, a quorum of investors has to agree the terms of a deal. The ECB cannot participate because it is forbidden from directly financing governments. “They (the ECB) should avoid a situation where they are holding so much (of a) debt that a restructuring becomes virtually impossible,” said Schaffelhuber, whose firm worked on Greece’s 2012 debt restructuring.

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Samoa….

Chinese Capital Outflows May Still Be Happening – But In Disguise (BBG)

When there’s a will to get money out of China, there’s a way: overpay. Authorities in the world’s second-largest economy have been able to pursue a policy of managed depreciation for the Chinese yuan without spooking markets and eliciting expectations of major foreign-exchange volatility, the way the one-off devaluation did last August. One big reason is that Beijing seems to have had success in cracking down on the flood of money leaving the country, which had been prompting sizable drawdowns in the central bank’s foreign currency reserves, to prop up the value of the yuan. But a report from a Nomura team led by Chief China Economist Yang Zhao says these capital outflows have merely taken another form: the over-invoicing of imports from select locales.

And this time, it’s not just a Hong Kong story. “A detailed breakdown by region shows imports from some tax haven islands or offshore financial centres surged” in the first half of the year, he writes, “against the backdrop of a large decline in overall imports.” Now, it may be the China’s appetite for copra and coconut oil, two key Samoan exports, has indeed surged. But Zhao has a different explanation. “This suggests to us that capital outflows may have been disguised as imports in China’s trade with these tax-haven or offshore financial centres, though the precise volumes are unknown,” according to the economist. “With stronger capital controls in place we believe continued capital outflows via the current account are likely.”

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Exposing the uselessness of the whole idea.

Bank of Japan’s Quest for 2% Inflation (BBG)

The U.S. Federal Reserve, the Bank of England and the ECB are among the world’s monetary authorities that have set an inflation target right around 2%. Nowhere, though, does the quest for this special number carry drama like it does in Japan, where Bank of Japan Governor Haruhiko Kuroda has vowed to do whatever it takes to stimulate prices. On Friday in Tokyo, the BOJ indicated there were risks to achieving this target anytime soon.

1. What’s so special about 2%? The BOJ set its current inflation target in January 2013, less than a month after Prime Minister Shinzo Abe came to power with a plan to pull the economy out of two decades of stagnation. In Japan and many other developed economies, prices rising by 2% a year is seen as optimal for encouraging companies to invest and consumers to spend. It’s also thought to be low enough to avoid sparking the runaway inflation that crippled Germany’s Weimar Republic in the 1920s and Zimbabwe in more recent times.

2. How close has Japan gotten to 2% inflation? Not very. What Japan has had, on-and-off since the late 1990s, is deflation – inflation below 0% – with prices dropping across a wide range of goods.

3. What caused deflation? It began with the bursting of a real estate and asset-price bubble. Wounded banks curbed lending, companies focused on cutting debt, wages stagnated and consumers reined in spending. Households became accustomed to falling prices and put off purchases. The global financial crisis of 2008, and the devastating earthquake, tsunami and nuclear meltdown at the Fukushima Daiichi plant in 2011, entrenched what Kuroda describes as a “deflationary mindset” among consumers and companies in Japan. The nation’s aging and shrinking population is now making matters worse.

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I think they passed that crossroads long ago. Just didn’t recognize it for what it was.

The Bank of Japan Is At A Crossroads (BBG)

After more than three years of pumping out wave after wave of cheap money that’s failed to secure its inflation target, the Bank of Japan has signaled a rethink. Instead of buying yet more government bonds, cutting interest rates or pushing further into uncharted territory, the BOJ disappointed some Friday when its policy meeting concluded with only a modest adjustment. Governor Haruhiko Kuroda, 71, and his colleagues declared it was time to assess the impact of their policies, which have variously spurred strong criticism from bankers, bond dealers and some lawmakers and former BOJ executives. The next gathering, on Sept. 20-21, offers a chance to either provide greater evidence that the current framework should continue, head further into uncharted territory, or scale back.

Regardless of the decision, this isn’t where one of the world’s most aggressive central bankers wanted to be in his fourth year in office. In early 2013, he expressed confidence the BOJ had the power to ensure its 2% inflation target could be reached within about two years. This year, with the shock adoption of a negative interest rate policy backfiring through a welter of warnings from commercial banks, there’s a growing perception monetary policy is losing effectiveness. “We are at a turning point” for the BOJ, because “it can no longer assume that stepping harder on the gas pedal would make this car go faster,” said Stephen Jen, co-founder of hedge fund SLJ Macro Partners and a former IMF economist. “Arrow 2 will take the lead now,” he said, in a reference to the three arrows of Abenomics – monetary, fiscal and structural-reform policies.

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Yeah, that’ll result in some jail time….

US Authorities Subpoena Goldman In 1MDB Probe (R.)

U.S. authorities have issued subpoenas to Goldman Sachs for documents related to the bank’s dealings with scandal-hit Malaysian state fund 1MDB, the Wall Street Journal reported late on Friday. Goldman received the subpoenas earlier this year from the U.S. Department of Justice and the Securities and Exchange Commission , the Journal reported, citing a person familiar with the matter. The authorities also want to interview current and former Goldman employees in connection with the inquiries, but none of those meetings had occurred by Friday, WSJ said.

1MDB, which was founded by Malaysian Prime Minister Najib Razak in 2009 shortly after he came to office, is being investigated for money-laundering in at least six countries including the United States, Singapore and Switzerland. Najib has consistently denied any wrongdoing. U.S. law enforcement officials are attempting to identify whether Goldman violated federal law after failing to flag a transaction in Malaysia, the Journal reported in June. New York state regulators have also asked the Wall Street bank for details about probes into billions of dollars it raised in a bond offering for 1MDB, Reuters reported in June, citing a person familiar with the matter.

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Note – Steve says: “I’ve said “as early as” 2017 and “between 20% & 70% fall” but all people hear is 2017 & 70%..”

Australia Headed For Recession As Early As Next Year – Steve Keen (ABC.au)

Australia’s credit binge will lead to a bust as soon as next year, with house prices to fall between 40 and 70% and unemployment to rise sharply, Professor Steve Keen says. The professor famously lost a bet when he predicted a catastrophic crash in Australian house prices following the GFC and had to walk from Canberra to Mount Kosciusko as a result. But he says, this time, he is right and does not have his hiking boots at the ready. “We have borrowed ourselves so much to the hilt that we are now dependent on that continuing to rise over time and it simply won’t,” he told the ABC’s The Business.

Many believe the Reserve Bank has been a steady guiding hand to the Australian economy in the years since the GFC, but Professor Keen believes it has guided the economy “straight toward the shoals” by encouraging households to borrow with low rates which has led to asset bubbles. “They don’t know what they’re doing,” he said. “Our debt level according to the Bank of International Settlements, private debt level, has gone from 150% of GDP to 210% of GDP.” He argued that means a large part of the growth that Australia has enjoyed since the GFC, while many other countries plunged into recession, has been fuelled by a 60% rise in household debt. “Ireland did the same thing when they called themselves the Celtic Tiger and they don’t call themselves that anymore,” he said.

“Spain was doing the same thing during its housing bubble and we’ve replicated the same mistakes. He believes the Reserve Bank will be forced to take rates down to zero from their current level of 1.75% as the economy continues to slow, but that will not stop the collapse of the credit binge that has kept the country afloat until now. “[Lower rates] will suck more people in, it will suck more people in for a while and the [Reserve Bank] can delay this for a while by cutting the rates,” he said. He said the catalysts for the recession were the declining terms of trade, the continued fall in investment into the economy and the Federal Government’s “stupid” pursuit of a budget surplus. “The Government is frankly stupid about the economy and is obsessed about running surpluses when it is bad economics.”

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“The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”

‘Sell The House, Sell The Car, Sell The Kids’ – Gundlach (R.)

Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Friday that many asset classes look frothy and his firm continues to hold gold, a traditional safe-haven, along with gold miner stocks. Noting the recent run-up in the benchmark Standard & Poor’s 500 index while economic growth remains weak and corporate earnings are stagnant, Gundlach said stock investors have entered a “world of uber complacency.” The S&P 500 on Friday touched an all-time high of 2,177.09, while the government reported that U.S. GDP in the second quarter grew at a meager 1.2% rate. “The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview.

“The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.” Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said the firm went “maximum negative” on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32%. “We never short in our mainline strategies. We also never go to zero Treasuries. We went to lower weightings and change the duration,” Gundlach said. Currently, the yield on the 10-year Treasury note is 1.45%, which has translated into some profits so far for DoubleLine. “The yield on the 10-year yield may reverse and go lower again but I am not interested. You don’t make any money. The risk-reward is horrific,” Gundlach said. “There is no upside” in Treasury prices.

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The perks of trade agreements.

British Columbia Violates NAFTA With Its Foreign Property Tax (FP)

The British Columbia government has suddenly introduced a penalty tax forcing non-Canadian purchasers of residential real estate in the Greater Vancouver Regional District to pay a 15% tax on all purchases registered from Aug. 2, 2016. This penalty tax discriminates by definition against foreign investors buying residential real estate in the Greater Vancouver Area: Canadian citizens buying residential real estate are exempt; foreign buyers must pay the tax. That discrimination is a glaring violation of our trade treaties. The North American Free Trade Agreement (NAFTA) and other Canadian trade agreements prohibit governments from imposing discriminatory policies that punish foreigners while exempting locals.

NAFTA’s national treatment obligation requires that citizens from other NAFTA partners investing in B.C. receive the same treatment from the government as the very best treatment received by Canadian investors. Americans and Mexicans forced to pay the 15% penalty tax would be able to pursue direct compensation for B.C.’s discriminatory tax from an independent international tribunal. [..] While the vast majority of Vancouver’s foreign property buyers might be Chinese, who were apparently the provincial government’s main target, enough investors from our dozens of treaty partners, comprising of hundreds of affected foreigners with trade rights, could be caught up in this tax, leading to mass claims. Those claims would be against the Canadian government, the signatory to NAFTA and the other international trade treaties, not B.C. Canadian taxpayers could be on the hook for hundreds of millions, or even billions, of dollars.

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Big kahuna remains: the classified mails on Hillay’s server(s).

Another “Smoking Gun” Looms As Hillary Campaign Admits Server Hacked (ZH)

In the third cyberattack on Democratic Party-related servers, Reuters reports that the computer network used by Democratic presidential candidate Hillary Clinton’s campaign was hacked. This follows hacks of the DNC and the DCCC (the party’s fund-raising committee) in the past week. Who to blame this time? Well with US intelligence head Jim Clapper having exclaimed that he was “somewhat taken aback by the hyperventilation [blaming Russia]” by Democratic surrogates, we suspect another scapegoat will need to be found. The latest attack, which was disclosed to Reuters on Friday, follows reports of two other hacks on the Democratic National Committee and the party’s fundraising committee for candidates for the U.S. House of Representatives.

“The U.S. Department of Justice national security division is investigating whether cyber hacking attacks on Democratic political organizations threatened U.S. security, sources familiar with the matter said on Friday. The involvement of the Justice Department’s national security division is a sign that the Obama administration has concluded that the hacking was state sponsored, individuals with knowledge of the investigation said. The Clinton campaign, based in Brooklyn, had no immediate comment and referred Reuters to a comment from earlier this week by campaign senior policy adviser Jake Sullivan criticizing Republican presidential candidate Donald Trump and calling the hacking “a national security issue.”

It was not immediately clear what information on the Clinton campaign’s computer system hackers would have been able to access, but the possibility of more ‘smoking guns’ only rises with each hack. Of course the finger will inevitably be pointed at Vladimir Putin (and his media-designated puppet Trump) but even The Director of Nation Intelligence has urged that an end be put to the “reactionary mode” blaming it all on Russia…

“We don’t know enough to ascribe motivation regardless of who it might have been,” Director of National Intelligence James Clapper said speaking at Aspen’s Security Forum in Colorado, when asked if the media was getting ahead of themselves in fingering the perpetrator of the hack. Speaking on Thursday, Clapper said that Americans need to stop blaming Russia for the hack, telling the crowd that the US has been running in “reactionary mode” when it comes to the numerous cyber-attacks the nation is continuously facing. “I’m somewhat taken aback by the hyperventilation on this,” Clapper said, as cited by the Washington Examiner. “I’m shocked someone did some hacking,” he added sarcastically, “[as if] that’s never happened before.”

Of course that won’t stop the endless distraction and guilt-mongering to avoid any accountability for actual content of anything that is released. Finally, does it not seem a little “reckless” that so many Democratic servers have been hacked so easily?

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It’s starting to increase again.

Greek Islands Appeal For Measures To Deal With Influx Of Refugees (Kath.)

As the influx of migrants from neighboring Turkey continues – with a slight but noticable increase – regional authorities and tourism professionals are calling for measures to support communities on the Aegean islands. Over the past two weeks, following a failed coup in Turkey on July 15, the influx of migrants has increased, according to government figures. Overall, more than 1,000 migrants landed on the five so-called hot spots: Lesvos, Chios, Kos, Samos and Leros since the failed coup. Those islands are now accommodating 9,313 migrants in camps, many of whom have been there for several months awaiting the outcome of asylum applications or deportation.

In a letter to Migration Policy Minister Yiannis Mouzalas and Alternate Defense Minister Dimitris Vitsas, the governor of the northern Aegean region, Christiana Kalogirou, asked for immediate steps to decongest the islands. “We are seeing a constant and apparently increasing flow of migrants and refugees toward the islands of the northern Aegean,” she wrote, noting that the maximum capacity of state reception centers has been exceeded on all the islands. A representative of an aid agency working on Lesvos said that the increase in migrant arrivals on the island has not yet fuelled tensions in the camps. “But if they keep arriving at the same rate, we’ll have a problem soon,” according to the worker who asked not to be identified.

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That’s how hard that is. 5p.

England’s Plastic Bag Usage Drops 85% Since 5p Charge Introduced (G.)

The number of single-use plastic bags used by shoppers in England has plummeted by more than 85% after the introduction of a 5p charge last October, early figures suggest. More than 7bn bags were handed out by seven main supermarkets in the year before the charge, but this figure plummeted to slightly more than 500m in the first six months after the charge was introduced, the Department for Environment, Food and Rural Affairs (Defra) said. The data is the government’s first official assessment of the impact of the charge, which was introduced to help reduce litter and protect wildlife – and the expected full-year drop of 6bn bags was hailed by ministers as a sign that it is working.

The charge has also triggered donations of more than £29m from retailers towards good causes including charities and community groups, according to Defra. England was the last part of the UK to adopt the 5p levy, after successful schemes in Scotland, Wales and Northern Ireland. Retailers with 250 or more full-time equivalent employees have to charge a minimum of 5p for the bags they provide for shopping in stores and for deliveries, but smaller shops and paper bags are not included. There are also exemptions for some goods, such as raw meat and fish, prescription medicines, seeds and flowers and live fish. Around 8m tonnes of plastic makes its way into the world’s oceans each year, posing a serious threat to the marine environment. Experts estimate that plastic is eaten by 31 species of marine mammals and more than 100 species of sea birds.

Read more …

Sep 112015
 
 September 11, 2015  Posted by at 9:57 am Finance Tagged with: , , , , , , , , , ,  


John Collier Japanese restaurant, Monday after Pearl Harbor, San Francisco Dec 8 1941

It Is In Warsaw Not Athens That The March Of The Euro Will Be Halted (Telegraph)
The German Counter-Attack On Juncker’s Euro Plans (FT)
Brussels Plans Radical New Eurozone Treasury And Euro Parliament (Telegraph)
Oil Could Drop as Low as $20, Goldman Says (Bloomberg)
Shale Drillers Turn to Asset Sales as Early Swagger Wanes (Bloomberg)
Emerging-Market Currencies: Things Look to Get Worse (WSJ)
Brazil Reduced To Junk As BRICS Facade Crumbles (AEP)
China’s ‘New Normal’ Growth Model Is Starting to Get Expensive (Bloomberg)
Is Today’s Volatility an Echo of 1987? (A. Gary Shilling)
UN Votes For New Debt Rules But UK, US Try To Block (Jubilee Debt Campaign)
The ECB Could Kick-Start The Economy With A Limited Basic Income (BI.org)
Rajoy’s Trump-Like Candidate Poses Trump-Like Risks in Catalonia (Bloomberg)
Bribes, Debt, $100 Billion Lost: Nigeria Can’t Keep the Power On (Bloomberg)
Auckland House Prices Rising $345 A Day (NZ Herald)
Sue Your Bank, Keep Your Home, Repeat (Bloomberg)
The Civil War In Syria – Part 2 (Beppe Grillo)

“It is about as keen on the euro as Nigel Farage.”

It Is In Warsaw Not Athens That The March Of The Euro Will Be Halted (Telegraph)

Another week, and another Greek crisis looms. It might seem only yesterday that the markets were on tenterhooks over whether the country would finally bring its miserable experiment in sharing a currency with Germany and France to an end, or whether there would be a last-minute compromise that would keep the show on the road for a few more months. Now, with elections due on September 20, and no clear victor likely, the whole circus is about to start up again. Investors could be forgiven for tuning out of the whole saga, and going back to worrying about whether anyone will actually pay £60 for an Apple Pencil, or what dramas lie in store for the Crawley family in the new series of Downton Abbey instead.

There is, however, an election coming up that genuinely matters to the future of the single currency – only it is taking place not in Greece, but in Poland. When that country elects a new government next month, the likely victor, the Law & Justice Party, will effectively close off the option of joining the euro one day. In reality, Greece was always too small and chaotic an economy to matter one way or another to the eurozone. But if Poland, along with the other rising economic powers of eastern Europe, turns its back on the euro, then that is far more serious. [..] When the big new countries of eastern Europe joined the EU, all of them were technically committed to joining the single currency as well. A few of the smaller ones have done so. Slovakia, Slovenia, Latvia and Lithuania have all joined since the currency was launched.

But with a combined population of less than 12m people, none of them has the weight to make much of an impact. The big countries are a different matter. With a combined population of 60m, Poland, Hungary and the Czech Republic are of a similar size, taken together, to Britain or France. Whether they ultimately join or not can have a big impact. From next month, that is going to be increasingly unlikely. Parliamentary elections are likely to result in the Right-wing Law & Justice party taking power. The party’s Andrzej Duda already overturned the odds to win the presidency earlier this year. It is about as keen on the euro as Nigel Farage. Only this week, Duda insisted that if Poland was to ever join the euro there would have to be a referendum: there is more chance of Nicola Sturgeon getting elected MP for Tunbridge Wells than of any country voting to join the euro – it usually gets pushed through without consultation.

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Translation: France vs Germany.

The German Counter-Attack On Juncker’s Euro Plans (FT)

When Jean-Claude Juncker this week told a packed European Parliament he intends to forge a eurozone system for guaranteeing bank deposits, the European Commission president’s intention was to send a firm message of determination to strengthen the single currency’s foundations. But just days after Juncker’s “state of the union” address, his attempt to sow hopeful seeds has hit stony ground in Berlin, where the plan was taken more as a declaration of war. Germany’s fightback begins when finance ministers gather in Luxembourg on Friday, and is set out in a “non paper” obtained by the FT. Unlike the series of emergency gatherings on Greece this summer, the weekend “informal” meeting of eurozone finance ministers was intended to be a calmer, and above all shorter, stocktaking of the health of the common currency.

Now, however, Germany has decided to use it as an opportunity to put down clear red lines in an attempt to redirect the eurozone reform discussion, which gained momentum following the mess of the July Greek bailout deal on what Berlin believes is an unacceptable course. Several other eurozone governments – notably France – were urging a speeding up of the eurozone reforms as a way to build confidence in the single currency after the tremors caused by a near “Grexit”, but the German paper, by so openly breaking with the EC, may instead highlight the deep differences that still exist. For Germany, Juncker’s announcement that he intends to “move swiftly on all fronts – economic, financial, fiscal and political Union,” seems to be viewed as a classic case of Europe seeking to put German taxpayers’ money where the EU’s mouth is. Or, alternatively, of putting the cart of shared financial risks, before the cart of tough creditor discipline.

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Europe had better stop this nonsense.

Brussels Plans Radical New Eurozone Treasury And Euro Parliament (Telegraph)

The survival of economic and monetary union will require the creation of new supra-national institutions, including a joint eurozone treasury and a separate euro parliament, according to the single currency’s bail-out chief. Klaus Regling, head of the European Stability Mechanism (ESM), joined a clamour of voices in Brussels who are pushing for member states to cede sovereignty in bid to establish a full-blown fiscal union on the Continent. The first step will be the creation of a eurozone finance ministry, backed by a separate chamber for the currency’s 19 member states in the European parliament, said Mr Regling, who oversees the euro’s €500bn rescue fund. The move is necessary to “increase the robustness and minimise the vulnerabilities of the currency union”, said Mr Regling.

He added it would “imply a significant transfer of sovereignty, requiring democratic legitimacy”, which could be provided by a “special chamber of the European Parliament composed of deputies solely from euro area Member States”. His comments follow on from Jean-Claude Juncker, president of the European Commission, who is pushing for the creation of a euro treasury, along with a system of common deposit insurance and beefed-up tax and spending powers for the European parliament. Details of the new treasury – which would act as a finance ministry, pooling funds from euro member states – remain sketchy. But the notion has long been championed by France who want to steer EMU away from simply an enforcer of fiscal discipline, into a true economic government of Europe. Paris has also called for the eurozone to have a permanent finance minister.

Benoit Couere, France’s executive board member on the ECB, has called for the new treasury to be founded on the principles of the ESM – which currently pools contributions guaranteed by all members states for use in times of emergency financial stress. The ESM will be providing up to €60bn of Greece’s latest rescue deal, and has been deployed to bail-out Spanish and Cypriot banks over the last three years. But plans to forge ahead with a political and fiscal union are likely to meet fierce resistance in Berlin. Germany, Europe’s largest creditor state and biggest contributor to eurozone rescue schemes, has rejected surrendering tax and budget powers to Brussels before tougher rules are put in place to limit spending and punish errant governments – including the French. “It’s much more of a French idea rather than something according to Germany’s vision for the euro,” said Michael Wohlgemuth, director of the Open Europe think-tank in Berlin. “Germans don’t even have a word for ‘treasury'”.

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Everyone must and will drill drill drill for cash flow.

Oil Could Drop as Low as $20, Goldman Says (Bloomberg)

The global surplus of oil is even bigger than Goldman Sachs thought and that could drive prices as low as $20 a barrel. While it’s not the base-case scenario, a failure to reduce production fast enough may require prices near that level to clear the oversupply, Goldman said in a report e-mailed Friday. The bank cut its forecast for Brent and WTI crude through 2016 on the expectation that the glut will persist on OPEC production growth, resilient non-OPEC supply and slowing demand expansion. “The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” Goldman analysts including Damien Courvalin wrote in the report. “We continue to view U.S. shale as the likely near-term source of supply adjustment.”

Goldman trimmed its 2016 estimate for West Texas Intermediate to $45 a barrel from a May projection of $57. The bank also reduced its 2016 Brent crude prediction to $49.50 a barrel from $62. WTI for October delivery fell as much as 45 cents, or 1%, to $45.47 a barrel on the New York Mercantile Exchange and is heading for a weekly decline. Prices are down 14% this year. Brent for October settlement is 1.7% lower this week. Oil in New York has slumped more than 25% from its June closing peak amid signs the glut will persist. Leading members of OPECs are sustaining output, while Iran seeks to boost supply once international sanctions are lifted. U.S. stockpiles remain about 100 million barrels above the five-year seasonal average.

“We now believe the market requires non-OPEC production to shift from our prior expectation of modest growth to large declines in 2016,” Goldman said. “The uncertainty on how and where that adjustment will take place has increased.” The U.S. pumped 9.14 million barrels a day of oil last week, almost 3 million barrels above the five-year seasonal average, according to data from the Energy Information Administration. While the EIA this week cut its 2015 output forecast for the nation by 1.5% to 9.22 million barrels a day, production this year is still projected to be the highest since 1972. OPEC, the supplier of 40% of the world’s crude, has produced above its 30-million-barrel-a-day quota for the past 15 months. Iranian Oil Minister Bijan Namdar Zanganeh has vowed to increase output by 1 million barrels a day once sanctions are removed as the nation seeks to regain market share.

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What’s a company worth that is forced to sell its assets?

Shale Drillers Turn to Asset Sales as Early Swagger Wanes (Bloomberg)

A renewed plunge in oil prices and the winding down of other financial lifelines is forcing shale drillers to auction off once-prized assets and settle for less in potential deals. This week, companies such as Chesapeake Energy Corp. said they are embracing the strategy as they confront the reality of a prolonged, painful crash. While executives have assured investors that it won’t be a fire sale, recent deals suggest that prices have fallen significantly from even a few months ago, according to data compiled by Bloomberg. With one-sixth of major independent oil and gas producers facing debt payments that are more than 20% of their revenue, austerity has replaced the swagger that characterized the earliest days of the oil bust.

Contracts that locked in higher prices are expiring, leading banks to reduce credit lines in coming months. Drillers caught in the squeeze may be forced to auction off some of their best holdings to raise cash or accept more expensive financing to avoid bankruptcy, according to more than a dozen bankers, lawyers and company officials who specialize in energy deals. “These companies are starting to be a little more realistic about their situation and to face up to the fact that they will probably have to do something they don’t want to do,” said Omar Samji, a partner in law firm Jones Day in Houston. “There’s not going to be an easy lifeline.” The first wave of deals is already looming: sales of land holdings in prolific oil regions. Oil market gyrations since July have made valuations hard to pin down, dimming the outlook for sales of whole companies.

Instead, executives are looking to shore up their balance sheets by selling land or wooing deep-pocketed private equity groups or hedge funds to invest in their operations in exchange for a share of revenue, Samji said. Cobalt sold off discoveries in Angola last month and EOG has begun an auction for acreage in Colorado and Wyoming. Anadarko said it will continue to weigh offers, and Chesapeake said Tuesday it’s still pursuing asset sales. The Oklahoma City-based producer is said to be seeking buyers for dry gas acreage in the Utica shale formation, according to people with knowledge of the matter. “Chesapeake is not desperate,” Chief Executive Officer Doug Lawler told investors Tuesday. “We are not going to have a fire sale on any asset.”

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And more worserer after that.

Emerging-Market Currencies: Things Look to Get Worse (WSJ)

Investor bets that Brazil and South Africa will default on their debt hit their highest level since the financial crisis, underscoring the stress mounting on emerging-market economies heading into the most anticipated Federal Reserve meeting in years. The cost to buy credit-default swaps—insurance-like contracts that compensate users for debt defaults—is far from the only sign that investor anxiety is building ahead of the Fed’s two-day meeting concluding Sept. 17. Currencies in Turkey, South Africa and Malaysia have plunged to the weakest levels in many years against the dollar. The average 10-year government debt yield in emerging countries has increased significantly, even as U.S. yields have slipped this summer. Bond yields move inversely to prices.

Many investors believe the Fed will raise short-term interest rates this year for the first time since 2006, intensifying the strain on developing nations that in many cases already are struggling with slowing growth, substantial debt and crumbling demand for the commodities that are at the heart of many of their domestic economies. Turkey and Brazil are considered especially vulnerable by many investors, thanks to economic imbalances that will likely be exacerbated by the declines of their currencies. Turkey’s external debt, or debt borrowed from foreigners, as a%age of its GDP is among the highest of all emerging countries, while Brazil is facing problems including weaker commodity prices, sluggish Chinese demand for its goods and the government’s struggles to cut spending without hitting revenue.

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“Signatures were accumulating at 30,000 an hour on the pro-impeachment website on Thursday.”

Brazil Reduced To Junk As BRICS Facade Crumbles (AEP)

Brazil’s currency has plummeted to an all-time low and borrowing costs have tightened viciously after Standard & Poor’s slashed the country’s debt to junk status, warning that the budget deficit has reached danger levels. The downgrade is a painful blow to a nation that thought it had finally escaped the Latin American curse of boom-bust cycles and joined the top league of rich economies. It is the second of the big emerging market (EM) economies to be stripped of its investment grade rating this year after Russia crashed out of the club in January. Little remains of the BRICS allure that captivated the world seven years ago, and now looks like a marketing gimmick. The Brazilian real tumbled to 3.90 against the US dollar as markets braced for parallel moves by Fitch or Moody’s.

The currency has lost 31pc of its value this year and more than 60pc since early 2011, when slums in the favelas of Rio were selling for the price of four-bedroom houses in the US. “The numbers are going to get much worse before they get better. We see nothing on the horizon that could be perceived as ‘good’ news,” said Win Thin from Brown Brothers Harriman. Mr Thin expects the real to reach 4.50 over the next three to six months in a cathartic overshoot, with the Bovespa index of equities likely to fall by another two-fifths, testing its post-Lehman low of 29,435 as the excesses of the credit bubble come home to roost. Investors have begun to shed holdings of Brazilian debt, afraid that some funds may be forced to eject Brazil from their indexes and liquidate holdings if a second agency joins S&P.

Yields on 10-year domestic bonds spiked almost one%age point to 15.6pc in panic trading in Sao Paolo on Thursday. S&P said Brazil’s government has failed to get a grip on rampant over-spending as tensions erupt between President Dilma Rousseff’s Workers Party (PT) and her coalition partners, and the economy slides into deep recession, leaving it badly exposed as the US Federal Reserve starts to drain liquidity from the global economy. “We now expect the general government deficit to rise to an average of 8pc of GDP in 2015 and 2016,” it said. Mrs Rousseff said Brazil would “pay all its bills and meet all its obligations”. Yet it is unclear how long she can last as momentum builds for impeachment over her role in the Petrobras corruption scandal.

Signatures were accumulating at 30,000 an hour on the pro-impeachment website on Thursday. “People are sick of this government, which has yet to offer any way out of the crisis. It is utterly incapable of governing,” said opposition leader Mendoca Filho. The country is now in a classic stagflation trap. S&P expects the economy to contract by 2.5pc this year and 0.5pc next year, causing the debt ratio to ratchet up quickly. Mrs Rousseff is being forced to tighten policy into the recession in a belated bid to salvage credibility, just as the commodity slump eats into export revenues from iron ore and other raw materials. The current account deficit is 4pc of GDP.

Gabriel Gersztein, from BNP Paribas, said nothing short of a 400 to 500 point rise in rates would stabilize the currency, but the central bank cannot plausibly do this because it would deepen the downturn, playing havoc with debt dynamics. Bhanu Baweja, from UBS, said public debt is likely to reach 72.5pc of GDP by 2018 and could rise relentlessly after that as the country passes its demographic sweet spot and starts to age rapidly. “The clock slowly ticks on, asking ever louder questions about public debt sustainability,” he said.

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Command P.

China’s ‘New Normal’ Growth Model Is Starting to Get Expensive (Bloomberg)

When Premier Li Keqiang took the stage Thursday at the World Economic Forum s Summer Davos meeting in Dalian, he told business leaders that although China faces challenges, growth is on track and fundamentals remain sound. The upbeat message is all part of a New Normal narrative from China s leadership as the economy transitions from relying on heavy industry and debt to one driven by consumption and services. What Li didn t mention was the spiraling bill associated with keeping the economy on course to hit the Communist Party s growth target of about 7% for this year.

From building bridges and highways to shoring up the nation’s currency and stock markets, China is rolling out hundreds of billions of dollars in its biggest stimulus since the package that followed the 2008 global financial crisis. More spending is coming, with the finance ministry this week urging an acceleration of projects and promising to cut fees and taxes for companies, while provinces are taking their own steps to support growth. Beijing has turned on the taps, lifting spending on everything from infrastru cture to public services, said Frederic Neumann at HSBC in Hong Kong. The nation’s authorities cannot be accused of sitting idly by as growth decelerates, with measures announced year-to-date amounting to substantial policy support, he said.

The world’s second-largest economy is growing at its slowest pace in 25 years, forcing the central bank to cut interest rates five times since November and funnel credit to local governments to finance new construction. Estimates vary on the overall size of spending given the difficulty in netting out new expenditure and money that would have been spent anyway. Shen Jianguang at Mizuho Securities expects the stimulus package to be as large as the one rolled out in 2009 and 2010, with fixed asset investment of up to 10 trillion yuan ($1.57 trillion) over the next two to three years.

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No, Gary. Today’s markets are their own echo.

Is Today’s Volatility an Echo of 1987? (A. Gary Shilling)

Volatility – the rate at which prices move up or down – has leaped in many security markets recently. The St. Louis Fed’s Financial Stress Index, whose 18 components include yields on junk and corporate bonds, an index of bond market volatility, and the Standard & Poor’s 500 index, is almost at a four-year high. I believe the restrictions on bank trading imposed by the 2010 Dodd-Frank Act, including the ban on banks’ proprietary trading and increased capital requirements, are a key reason, at least in the U.S. Large banks and other financial institutions simply aren’t carrying the big trading positions they once did, and therefore, liquidity in many markets has atrophied.

Then there’s China’s stock-market nosedive and currency devaluation. They provided a wake-up call about China’s slowing growth and the global effects on commodity prices, emerging markets and money flows. Volatility in U.S. markets may also be due in part to the delayed effects of the ending of quantitative easing by the U.S. Federal Reserve late last year. Since stocks began to revive in March 2009, equities have been floating on a sea of Fed money with little connection to the slowly growing economy beneath – something I dubbed “the Grand Disconnect.” Then there’s the shaky base of corporate earnings growth. With slower economic growth, sales gains have been slight. And business pricing power has been almost nonexistent, with minimal inflation and a strong dollar.

So top-line revenue growth – the foundation for profit gains – has been largely missing. Resourceful American businesses have cut costs ruthlessly to make up for the lack of revenue growth. As a result, profits’ share of national income leaped from the lows of the 2007-2009 recession. But profits’ share has stalled over the last several years, reflecting the slowing of productivity growth. Also, stocks aren’t cheap relative to earnings. The price-to-earnings ratio on the S&P 500 index over the last year is 18.2, compared with the norm of 19.4 over the last 20 years. But the better measure is the cyclically adjusted ratio, developed by Robert Shiller, which uses real earnings over the preceding 10 years to iron out cyclical fluctuations. On that basis, the current price-to-earnings ratio of 25.84 is 55% above the long-run norm of 16.6. And since the norm has been about 16.6 almost since 1992, price-to-earnings should run below trend for years to come, assuming the 16.6 remains valid.

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Now you know where bankers rule.

UN Votes For New Debt Rules But UK, US Try To Block (Jubilee Debt Campaign)

The United Nations General Assembly has voted to accept new rules to guide sovereign debt restructurings. At a vote in New York on Thursday evening, the set of nine principles were adopted with 136 votes in favour, just 6 against and 41 abstentions. However, implementation of the principles is in doubt as the majority of international debt is governed by US or UK law. Both the US and UK were amongst the just six countries which voted against. The other four countries which voted against were Canada, Germany, Israel and Japan.

Commenting on the vote, Tim Jones, policy officer, Jubilee Debt Campaign, said: “This could prove to be a historic breakthrough. The vast majority of nations have spoken out for a change to the broken debt system. From the Greek debt debacle, to Argentina being held to ransom by vulture funds, to decades-old debt crises in Jamaica and El Salvador the need for change has never been clearer. It is outrageous that the UK has chosen to put reckless lenders ahead of people around the world by voting against these principles.”

The vote adopted nine principles that should be respected when restructuring sovereign debt: sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability and majority restructuring. The principles come from negotiations over the last year, which most EU countries refused to take part in.

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But will do QEn instead.

The ECB Could Kick-Start The Economy With A Limited Basic Income (BI.org)

QE thus does not appear to be the best way forward for Europe. This is why there are economists who propagate a more efficient alternative, the so-called “helicopter money” approach. For as long as the economy fails to recover, newly printed money is simply distributed directly to the general population, as if it were dropped from a helicopter. Research shows that the money would be spent pretty much straight after it’s received, which would restore confidence to invest among businesses. It would also restore business confidence to take on new employees, who in turn respond by consuming more. And so the result becomes a virtuous circle. But there are drawbacks. Sharing out helicopter money is a temporary measure that can only be adopted in exceptional circumstances.

If at some point it transpires that the ECB has gone too far and created a threat of runaway inflation, it is very difficult to remove the newly created money from the economy. This is why there is a clear need for a structural and flexible policy measure which the central bank is able to use to kick-start the economy as and when it is necessary. A variation on the helicopter theme, a monetary basic income, provides a way forward. Under this scenario, the ECB would distribute an amount of money to each citizen on a monthly basis, calculated as a%age of average income (the amount therefore varies between countries). Let’s assume for the sake of simplicity that the amount is €400 a month throughout the Eurozone. It’s important that the individual Eurozone countries remain responsible for raising the €400 – for example by reducing benefit payments or tax allowance levels – whereupon they pay it back to the ECB.

So far, this is a neutral measure that shuffles money around without creating a stimulus. This remains the case except in times of crisis when the central bank increases the monthly payment to, say, €600, until the economy recovers. Meanwhile, each national authority keeps its repayment levels fixed at €400. The ECB thereby ends up printing an additional €200 per person per month, and this money is relatively quickly spent. As the economy recovers and growth and inflation figures rise, the basic income can be returned to the neutral level of €400. In cases where the ECB had been too generous, the basic income level could even be lowered temporarily to €300 until inflation stabilizes. This would essentially remove money from the economy.

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Bring on the crazies.

Rajoy’s Trump-Like Candidate Poses Trump-Like Risks in Catalonia (Bloomberg)

Prime Minister Mariano Rajoy’s decision to pick a Donald Trump-style candidate to fire up his base in Catalonia is exposing Spain’s governing party to risks that Republican leaders in the U.S. may recognize. Xavier Garcia Albiol, a 47-year-old former basketballer who stands six foot eight inches (2 meters) tall, defied the People’s Party’s declines across most of Catalonia in 2011 to become mayor of the region’s third-biggest city with a campaign that demonized immigrants. While Rajoy may have calculated Albiol’s track record was worth the risk, he probably didn’t bank on the kind of off-message comments that have seen the would-be Republican presidential candidate rile his party’s establishment in the U.S. – in an interview last week, Albiol attacked the PP’s strategy for containing Catalonia’s efforts to break away from Spain and said the prime minister had made mistakes.

Rajoy is trying to revive his party’s fortunes in Catalonia’s Sept. 27 regional election to create a firebreak against Ciudadanos, a rival for the anti-independence, pro-business vote that is set to deny the prime minister an outright majority in December’s general election. The election campaign proper kicks off on Friday when the separatist parties aim to bring hundreds of thousands of supporters onto the streets of Barcelona. Spain’s 10-year bonds fell yesterday with yields rising 2 basis points to 2.102% after a survey by the state pollster, CIS, showed separatist parties might win a majority with 68 or 69 deputies in the 135-strong chamber.

The PP is set to win as few as 12 seats, with barely half the votes of Ciudadanos, the poll showed. Outflanked by Ciudadanos’s early opposition to Catalonia’s separatist president, Artur Mas, Rajoy is betting that Albiol’s ability to attract blue-collar voters by playing on their concerns about immigrants can limit the damage for his party. “It shows that the PP is fully aware of its marginal role in Catalonia,” Lluis Orriols, a political scientist at Madrid’s Carlos III University, said in a phone interview. “Like Donald Trump, the PP candidate can mobilize a group of voters you can’t reach otherwise, but you can hardly aspire to win like that.”

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A sign of things to come.

Bribes, Debt, $100 Billion Lost: Nigeria Can’t Keep the Power On (Bloomberg)

Five minutes into Frank Edozie’s presentation on the challenges facing Nigeria’s power industry, the electricity cut out in the Jasmine Hall at the upmarket Eko Hotel in Lagos. “Very timely,” Edozie, a former power ministry adviser and a senior consultant to the U.K.-funded Nigerian Infrastructure Advisory Facility, said over the low muttering and laughter of an audience of more than 100 people. “We probably ran out of gas.” There’s no end in sight to the daily blackouts that the government says are costing Africa’s largest economy about $100 billion a year in missed potential and that President Muhammadu Buhari calls a “national shame.”

Gas shortages, pipeline vandalism, inadequate funding, unprofitable prices and corruption mean fixing the electricity cuts two years after a partial sale of state power companies to private investors won’t be easy. Generated output has never risen above 5,000 megawatts, which is about a third of peak demand, and if it did the state-owned transmission system can’t deliver any more than that before it starts breaking down. South Africa, with a less than a third of Nigeria’s population of about 180 million, has nine times more installed capacity and it too is grappling with blackouts. Nigeria, Africa’s biggest oil producer, ranked the worst of 189 countries after Bangladesh and Madagascar on the ease of getting electricity connected to businesses, costing almost 7% of lost sales each month, according to a 2015 World Bank Doing Business report.

The power bottleneck comes on top of slump in oil prices and currency that are threatening Nigeria’s role as a destination for investors. Economic growth slowed to 2.4% on an annual basis in the second quarter from 6.5% a year earlier. About two-thirds of Nigeria’s people have no access to electricity, and at the current plant commissioning rate, supply will barely meet 9,500 megawatts by 2020, according to a 2014 World Bank project document. Demand is expected to increase 10% each year. Buhari’s party promised before he won power in March’s election to generate 40,000 megawatts within four to eight years.

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Blindly stumbling towards the cliff.

Auckland House Prices Rising $345 A Day (NZ Herald)

Auckland house prices were up $125,950 on last year – or $345 a day – according to sales data out from the Real Estate Institute. The city’s median sale price rose from $614,050 last August to $740,000 last month and prices were up $5000 since July. Colleen Milne, REINZ chief executive, said the presence of Auckland buyers in other regions was becoming more noticeable with a surge in Auckland investors buying in Dunedin and continued strong demand for properties in the Waikato and Bay of Plenty from Auckland buyers.

Nationally, 7766 homes were sold last month, up 41.7% annually but down 4.4% on the previous month of July. The national median price rose $45,000 annually to $465,000. The figures from REINZ come as the Reserve Bank cut official interest rates to 2.75%, and banks followed suit, cutting their floating mortgage rates. Most economists expect the Reserve to now retain an easing bias, with some tipping the rate to drop to 2% by early next year.

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Almost funny.

Sue Your Bank, Keep Your Home, Repeat (Bloomberg)

Four years ago, Robert and Joan Potter were facing a crisis. The monthly payments on their two-bedroom home in the coastal suburb of Laguna Niguel, Calif., had ballooned from $2,000 to $5,000 in the decade since they bought it for about $360,000. Now the retirees were rapidly falling behind. “It was my parents’ dream home,” said their son, Derrick, 43. Derrick, who works as a mortgage consultant, said Robert and Joan got suckered into the kind of inflationary deal known as a negative amortization loan, since outlawed by state legislators. “They had some sleazy mortgage broker who said my mom, who hasn’t worked in 25 years, made $10,000 a month.” Still, there was hope. The Potters heard about a firm called Brookstone Law, which was pioneering a novel strategy for challenging allegedly predatory banks.

The best part: As long as Brookstone was representing Robert and Joan, the bank would hold off on collecting mortgage payments or foreclosing. In 2011, Robert and Joan paid Brookstone $6,000 to become the lead plaintiffs in a “mass joinder” lawsuit against their lender, JPMorgan Chase Bank. Similar to class actions, mass joinders allow large numbers of people to collectively sue one defendant, except that in a mass joinder the plaintiffs do not have identical claims. Settlements, if there are any, get sorted out individually, depending on each plaintiff’s circumstances. Brookstone’s case against Chase alleged mortgage-related misconduct such as wrongful foreclosure and breach of contract. It demanded that the bank pay for lost home equity, lowered credit scores, and further damages.

It claimed that when the Potters refinanced in 2006, the bank manipulated them into taking a loan they couldn’t afford and hid its true interest rate. The suit was filed in Los Angeles County Superior Court on April 15, 2011. Eventually, Brookstone signed up more than 250 clients to join it. Casting itself as defending the little guys caught up in the subprime crisis, Brookstone, founded by a 41-year old attorney named Vito Torchia Jr., has represented at least 4,000 clients in a dozen mass joinder lawsuits against big banks, including Wells Fargo and Bank of America. Court documents indicate Brookstone’s earnings during 2011 and 2012 could be in the tens of millions of dollars. Yet the firm has yet to win a single one of these cases on the merits.

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“For the Washington-Ankara-Riyadh axis, the objective of getting rid of ISIL implies the real objective which is to get rid of Assad.”

The Civil War In Syria – Part 2 (Beppe Grillo)

Foreign Fighters. The proliferation of Islamic militias in the region has been helping to create a jihadist “melting pot” in the last few months. In Iraq and in Syria this is channeling the ambitions of hundreds of foreign fighters who have set off to get to the front to join up with the rebel militias who are fighting against Assad’s government troops. This is a crucial element in the Syrian civil war. Today it’s estimated that the two most important jihadist groups, the al-Nusra Front, and the Islamic State in Iraq and the Levant have recruited to their ranks at least 9,000 non-Syrian fighters which is about 20% of the total. Including the other islamic groupings and the Free Syrian Army, this brings the overall figure to between 11,000 and 15,000.

According to estimates from our intelligence services, there are more than 60 of our fellow citizens who have gone off to fight side by side with the terrorists and at least 10 of these are Italians or naturalised Italians. Anyway, it’s a tiny number compared to the more than 1,500 who have set off from France, and the 800-1000 from Britain, or the 650 Germans and the 400 from the Netherlands and from Belgium. In this process, even the women have had leading roles: the Italian woman Maria Giulia Sergio is one of the young people that has recently chosen to convert to Islam to then join up in Syria. Since al-Baghdadi’s proclamation of the Caliphate, the Centre for the Study of Radicalisation and Political Violence in London has estimated that at least 4,000 western citizens have joined the conflicts in Iraq and Syria. Of these, about 550 are thought to be women who have set off from Europe and are now in the territory controlled by ISIL.

The controversial role of Ankara and the weapons going to the Peshmerga. In this coming and going of presumed and potential jihadists, Turkey is playing a crucial role. According to some people, even though Turkey is a member of NATO and a close ally of the West, it is in fact thought to be one of the leading supporters of ISIL. And anyway, it’s not by chance that the main strongholds of the terrorist group are situated along the border with Turkey. Meanwhile, the United States is arming and training the “moderate“ rebels and now ISIS fighters have rifles bearing the inscription: “Property of US Govt“. This was discovered by a governmental organisation: Conflict Armament Research.

The international coalition and the Washington-Riyadh axis . Having understood, with a certain delay, the danger of the expansion of the jihadist militias in the region, in August 2014, Obama made an agreement with a few partners in Europe, including ltaly, to establish an international coalition to fight ISIS. To support this, our government has so far sent 2.5 million dollars-worth of weapons, including machine guns, grenades, fighter planes and more than a million rounds of ammunition, as well as humanitarian assistance. The mission has given many people to believe that all of a sudden, Washington has changed tack and has decided to support the Syrian regime. That’s just not true. For the Washington-Ankara-Riyadh axis, the objective of getting rid of ISIL implies the real objective which is to get rid of Assad.

This can be seen in the words spoken by Obama who recently when he said that he was even ready to hit Syrian government positions if attacks on the ciilian population were found to be coming from such positions. However, the humanitarian factor carries very little weight on the political stage. The crucial point today is exclusively the future of Assad: Moscow and Teheran are asking for him to stay in power, the West is continuing to exert pressure to have him resign. Anyway, history teaches us that up until now, outside interference has never had the outcomes that were hoped for. In fact, it has always contributed to increasing sectarian clashes. Dividing up power into ethnic and religious quotas on the basis of one’s own interests is thought to be a deterrent for any sort of peaceful transition in preparation for national unity. Iraq, Lebanon, Afghanistan and Libya should tell us something.

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May 032015
 


Harris&Ewing Hancock’s, the Old Curiosity Shop, 1234 Pennsylvania Avenue 1914

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)
Canada has the Most Overvalued Housing Market in the World (VC)
No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)
Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)
Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)
Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)
Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)
German President Says Berlin Should Be Open To Greek War Reparations (Reuters)
What Does Putin Want? (Rostislav Ishchenko)
Insanity Grips The Western World (Paul Craig Roberts)
China Teaches Top Cadres Western Ideas Despite Backlash (AP)
Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)
Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)
Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)
Italian Army Growing Cannabis To Slash End User Prices (RT)
From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)
Wildlife Decline To Lead To ‘Empty Landscape’ (BBC)

Europe’s bond markets are so distorted everything carries out-of-whack risks.

Gundlach’s Bet-Against-German-Debt Plan Has One Very Big Problem (Bloomberg)

So it turns out that Jeffrey Gundlach was really thinking out loud when he said he was looking to short negative-yielding German debt. Yes, it’s true he’d really like to. But, as he would subsequently acknowledge, it’s a very difficult trade to execute in today’s European markets. “The mechanics are challenging,” Gundlach wrote in an e-mail on April 29. Earlier this week, the chief executive officer of DoubleLine Capital said in an interview on Bloomberg TV that he’s thinking of amplifying a wager against 2-year German notes using leverage. “It seems to me there’s almost no way to lose,” he said in that interview. “I wonder why people don’t leverage up negative bonds.” There are legitimate reasons why everyone isn’t. For one, there appear to be no negative-yielding derivatives contracts tied to this debt.

And Europe closely regulates short-selling of government bonds. Then, even if you could do it, you may have to park cash at some point in European bank accounts, which make you pay to hold your money because the region’s deposit rates are negative. “You can actually lose money being short negative yielding debt,” said Ashish Shah at AllianceBernstein. “People charge you even more in the short term to hold cash.” Of course, this is an opportunity that seems too good to pass up, and traders are almost certainly trying to figure out the best way to make it happen.

The trade should be – again, in theory – very lucrative. While bonds are normally cushioned from losses due to their regular interest payments, it’s the opposite in this bizarro world of negative-yielding debt. Traders betting against bonds wouldn’t lose money if prices stayed about where they were, because there’s essentially no coupon payment. Yes, prices on this upside-down-inside-out debt could keep rising and yields could get even more negative, leading to some losses. But the chances of that happening appear to be getting smaller as economic data shows inflation and growth starting to pick up in the euro zone.

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Auckland wants that title.

Canada has the Most Overvalued Housing Market in the World (VC)

In every inflating bubble, there’s usually two camps. The first group points out various metrics suggesting something is inherently unsustainable, while the second reiterates that this time, it is different. After all, if everyone always agreed on these things, then no one would do the buying to perpetuate the bubble’s expansion. The Canadian housing bubble has been no exception to this, and the war of words is starting to heat up. On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%).

They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list. Of course, The Economist is not the only fighter on this side of the ring. Just over a month ago, the IMF sounded a fresh alarm on Canada’s housing market by saying that household debt is well above that of other countries. Meanwhile, seven in ten mortgage lenders in Canada have expressed “concerns” that the real estate sector is in a bubble that could burst at any time. Deutsch Bank estimates the market is 67% overvalued and readily offers seven reasons why Canada is in trouble. Even hedge funds are starting to find ways to short the market in anticipation of an upcoming collapse. Canada’s housing situation could give rise to the world’s next Steve Eisman, Eugene Xu, or Greg Lippmann.

On the opposing side of the ring, who will contend that the Canadian housing market is just different this time? Hint: look to the banks and government. Stephen Harper, Canada’s Prime Minister, has tried to dispel fears. He recently told a business audience in New York that he didn’t anticipate any housing crisis in Canada. Just this week, the Bank of Canada also tried its best to deflate housing bubble fears. “We don’t believe we’re in a bubble,” says Stephen Poloz, the Bank’s Governor. “Our housing construction has stayed very much in line with our estimates of demographic demand.” Poloz suggested that housing costs do not necessarily have to contract to match the incomes of Canadians. Instead, he expects growth in the economy to raise wages and make housing more affordable.

Courtesy of: Visual Capitalist

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“..one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave..”

No New Bailout Needed If Greek Debt Restructured, Says Varoufakis (AFP)

Greek Finance Minister Yanis Varoufakis insisted Saturday that Greece would not require a new bailout from its international creditors if they would simply restructure its debt. Athens last week resumed talks with its creditors in a bid to unblock €7.2 billion from its EU-IMF bailout before state coffers run dry. But analysts believe that even if it manages to secure the last tranche of aid, Athens may have to obtain a new rescue package to stay afloat. Varoufakis said however that Greece could do without a new bailout. “One of the conditions for this to happen though, is an important restructuring of the debt,” he told the Efimerida ton Sindakton daily in an interview published Saturday.

The radical-left SYRIZA government came into power in January on a campaign promise that it would seek to get part of its debt written off. However, its creditors have reiterated that that is impossible. Varoufakis, whose negotiating style has grated his EU counterparts, also took a swipe at the eurozone in the interview, warning that if it “doesn’t change it will die.” He added that “no country, not only Greece, should have joined such a shaky common monetary system.” Nevertheless, Varoufakis said it was “one thing to say we shouldn’t have joined the euro and it is another to say that we have to leave” because backtracking now would lead to “an unforeseen negative situation.” Asked about reported insults from fellow Eurogroup finance ministers during a tense meeting in Riga on April 24, Varoufakis was also dismissive.

Media reports said he had been branded a “gambler,” an “amateur” and an “adventurist” by his peers. “Those would have surely been heavy offenses if they had been expressed. But they were not,” said Varoufakis. Prime Minister Alexis Tsipras had reshuffled the team handling negotiations with its creditors after relations between Varoufakis and the EU hit a new low during a stormy Eurogroup meeting in Riga last week. Athens is struggling to pay salaries and pensions without the promised loans. Almost a billion euros in debt and interest is also due for repayment to the IMF by May 12. Unless an agreement is reached to unlock the remaining EU-IMF bailout money, the debt-ridden country faces default and a possible exit from the euro. Technical experts from the Eurogroup and the Greek delegation are due to be in contact all weekend, trying to resolve differences concerning sweeping reforms required by Brussels and the IMF to secure the package.

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Who cares if markets waver?

Markets Waver As Greece Teeters On Edge Of Financial Tragedy (AFR)

In an attempt to address its liquidity crunch, Athens has directed 1500 state entities – including local authorities, hospitals and universities – to hand over surplus cash reserves to the central bank. But some entities are resisting this directed, fearing that their funds may not be returned. Meanwhile, the lack of progress in negotiations with Greece’s creditors is unnerving Greece’s households and businesses, who withdrew a further €2 billion from the country’s banks in March, according to the Bank of Greece. This follows withdrawals of more than €7.5 billion in February, just under €13 billion in January, and around €4 billion last December. As a result, household and business deposits fell to €138.55 billion in March, their lowest level in 10 years. Even more worrying, early figures for April suggest that deposit outflows are again accelerating.

To compensate for their dwindling deposit base, Greek banks have stepped up their use of emergency funding provided by the country’s central bank. Last week the ECB, which now reviews the amount which Greek banks can borrow on a weekly basis, raised the ceiling on emergency liquidity assistance by a further €1.4 billion, bringing it to €76.9 billion. This emergency liquidity is playing a crucial role in keeping the country’s banking system afloat. But financial markets – along with top officials in Paris, Berlin and Brussels – are all to well aware that Athens is moving ever closer to a position where it is no longer able to pay its debts, and is forced to “default”, potentially triggering an uncontrollable bank run and a collapse of the Greek banking system.

At that point, either European politicians resolutely adopt special emergency measures to rescue the country, or the situation spirals out of control, leaving Greece with no option but to introduce capital controls and quit the euro zone. Although some European politicians are in favour of allowing Greece to default, Paris and Berlin are fearful that “Grexit” risks destabilising the euro zone and encouraging speculators to target vulnerable countries such as Italy, Portugal or Belgium. For his part, Tsipras is betting that worries about the potential disruption from a “Grexit” will eventually cause the Europeans to back away from their demands for further reforms. Still, it’s a dangerous strategy, because in Greece’s precarious position, a financial accident could occur at any time.

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The benefits of plastic.

Use Your Credit Card To Fight Tax Evasion, Greece Urges Visitors (Observer)

Greece’s tourism chief has appealed to the millions of Britons planning to visit the crisis-hit country this year to use credit cards as much as possible. The move comes as the government in Athens has signalled that it plans to raise VAT rates on some holiday islands. Andreas Andreadis made the plea to what are expected to be record numbers of holidaymakers, saying plastic could play a key role in hindering tax evasion, a perennial drain on the Greek economy. “What we are saying is that on cash transactions above a certain level please use your credit cards,” he told the Observer. “That way it forces services and shops to declare it on the cash register and issue receipts.”

Greece is bracing itself for around 25 million foreign arrivals – more than twice its population – with the vast majority heading for resorts where tax collection is notoriously lax. An estimated 2.4 million Britons will be among them. “In a country where the tax collection system is so inefficient, credit cards are the easiest way of clamping down on evasion,” said Andreadis, who heads the Confederation of Greek Tourism (Sete). “We calculate that around 40% of receipts are not issued in tourist areas to avoid VAT.” The confederation, which represents more than 50,000 enterprises in the sector, was pressing for consumers to be given incentives to use cards. Greece is in a race against the clock to clinch a cash-for-reform deal with international creditors to keep bankruptcy at bay.

Fraught negotiations with the EU and International Monetary Fund have brought the nation close to insolvency with Athens’ radical left Syriza government, voted in on a pledge to end austerity, struggling last week to pay pensions. With Greece shut out of international markets and unable to issue short-term debt, a desperate lack of liquidity has exacerbated the problem. Over the next 10 days, the country must pay two loan instalments to the IMF – including €780m on 12 May – or face the spectre of potentially devastating default. The appeal came days after prime minister Alexis Tsipras suggested credit card use being made mandatory for transactions of more than €70. In his first wide-ranging interview since assuming power in January, he said payment cards made eminently more sense than the proposal of Yanis Varoufakis, his finance minister, to use tourists as undercover tax agents.

“It’s simpler than that other idea involving people with [hidden] cameras, etc,” he told Star TV on Monday. Greece loses up to €20bn in tax evasion every year, according to finance ministry officials. The new government has made cracking down on it a top priority. Taxpayers owe in excess of €70bn to the state – nearly a quarter of its debt. Under pressure to provide reforms to unlock an intermediate €7.2bn in bailout funds held up since August, the government has also signalled it will increase VAT on popular Aegean islands. Isles such as Mykonos and Santorini would see a surcharge on hotel rooms, services and goods. The measure would bring in an estimated €350m. But it has been strongly opposed by the tourist industry, which provides one in five jobs and is by far Greece’s biggest foreign earner.

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“..there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next?”

Greek Exit ‘Would Leave Western Alliance In Chaos’ (Telegraph)

A Greek exit from the eurozone would throw the bloc into chaos and put the “whole cohesion of the western alliance in doubt”, a key figure in the country’s private sector debt restructuring has warned. While banks had reduced their exposure to Greece, which represents less than 2pc of eurozone GDP, investors are being too complacent about the implications of a Greek exit, which could have far-reaching political ramifications and amplify the polarisation between the eurozone’s core and periphery, Hung Tran, executive managing director of the Institute of International Finance (IIF), said. Mr Tran, who helped represent private sector bondholders during Greece’s debt haircut in 2012, said he remained optimistic that there was “room for compromise” and that Greece would reach a “last minute deal” to remain in the 19 nation bloc.

However, he stressed that if the country was forced out of the euro, the consequences would be complex and were “not fully understood”. “In the short term, it probably is the case that financial contagion in terms of spreading to borrowing costs of peripheral countries like Spain and Portugal would be more limited this time compared with 2010 or 2012,” he said. “However, there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next? “If Greece exiting the euro area severely strains its relationship with the EU and the West, questions will arise about the alignment of Greece in terms of foreign policy, security policy and so on, and the whole cohesion of the western alliance would be put in doubt.”

Mr Tran said the European Central Bank’s €60bn a month quantitative easing programme had helped to create a false sense of security by “overwhelming” any sense of potential spillover from the Greek crisis and pushing down borrowing costs across Europe. However, he said a Greek exit would only serve to amplify the polarisation that we have already seen in Europe. “There has been a sharp polarisation both on the right and left of the mainstream arguing that the current austerity driven approach of economic policy hasn’t worked … so the failure of reaching an agreement in Greece leading to a exit from the eurozone would make this debate and this polarisation sharper and more problematic.”

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Telegraph wishful thinking?

Greece Braced For Weekend Of Unrest As Cash Crunch Nears (Telegraph)

Greece was braced for the biggest weekend of civil unrest since its radical Left government assumed power, as tensions over the country’s future in the eurozone are set to reach breaking point in May. Athens was gripped by a throng of anti-austerity protests on Friday, to mark the Labour Day holiday across the continent. Several members of the ruling Syriza party, including embattled finance minister Yanis Varoufakis, took part in rallies, repeating they would not forsake their people and cower to the demands of creditors. In a veiled barb aimed at his paymasters, a defiant Prime Minister Alexis Tsipras tweeted: “We will prevail in our struggles to bolster and protect our rights, our democracy and our dignity”.

Labour market reforms have emerged as one of the main stumbling blocks in Greece’s three-month bail-out impasse, as European powers have pushed the Leftist regime to reverse its promises to raise the minimum wage. But Greece’s Labour minister Panos Skourletis said the policy would go ahead, calling it a “deep and immovable red line” for the government. In a taste of the domestic turmoil that could ensue should the state withold funds from its citizens, hundreds of pensioners in Athens were forced to queue outside banks on Thursday, as pensions payments were temporarily delayed. The government is scrambling to find the funds it needs to avoid defaulting on the IMF on May 6, when it is due to repay a €200m loan. Panic over the pensions payment “suggests that this comparably small IMF payment will be a headache to scrape together and underlines that Greece might well struggle to stay financially afloat much beyond May,” said Robert Kuenzel of Daiwa Capital Markets.

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What do you say to that, Schäuble?

German President Says Berlin Should Be Open To Greek War Reparations (Reuters)

German President Joachim Gauck expressed support on Friday for Athens’ demands for reparations for the Nazi occupation of Greece in World War Two, even though the government in Berlin has repeatedly rejected the claims. Gauck, who has little real power in Germany but a penchant for defying convention, said in an interview to be published in Saturday’s Sueddeutsche Zeitung newspaper that Germany should consider its historical responsibility to Greece. “We are not only people who are living in this day and age but we’re also the descendants of those who left behind a trail of destruction in Europe during World War Two – in Greece, among other places, where we shamefully knew little about it for so long,” Gauck said.

“It’s the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations.” Greece’s demand for €278.7 billion in reparations for the brutal Nazi occupation have mostly fallen on deaf ears, but some legal experts say it may have a case. Many in Greece blame Germany, their biggest creditor, for the tough austerity measures and record unemployment that have followed from two international bailouts totaling €240 billion. Last month, economy minister and vice-chancellor Sigmar Gabriel called the demand “stupid”.

Gabriel said Greece wanted to squeeze some leeway out of its euro zone partners as they set conditions for further financial aid to help Greece avoid bankruptcy. “And this leeway has absolutely nothing to do with World War Two or reparation payments,” he said. German officials have previously argued that Germany has already honored its obligations, not least with a 115 million deutsche mark payment to Greece in 1960. Gauck, a former East German pastor, recently caused a stir by condemning the massacre of 1.5 million Armenians by Ottoman Turkish forces a century ago as “genocide”, a term that the Berlin government had long rejected. Turkey denies the charge.

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Good analysis of US-EU-Russia relations.

What Does Putin Want? (Rostislav Ishchenko)

To understand how, when and on what conditions military activity can end, we need to know what the politicians want and how they see the conditions of the postwar compromise. Then it will become clear why military action turned into a low-intensity civil war with occasional truces, not only in the Ukraine but also in Syria. Obviously, the views of Kiev politicians are of no interest to us because they don’t decide anything. The fact that outsiders govern the Ukraine is no longer concealed. It doesn’t matter whether the cabinet ministers are Estonian or Georgian; they are Americans just the same. It would also be a big mistake to take an interest in how the leaders of the Donetsk People’s Republic (DPR) and the Lugansk People’s Republic (LNR) see the future.

The republics exist only with Russian support, and as long as Russia supports them, Russia’s interests have to be protected, even from independent decisions and initiatives. There is too much at stake to allow [Alexander] Zakharchenko or [Igor] Plotnitzky, or anyone else for that matter, to make independent decisions. Nor are we interested in the European Union’s position. Much depended on the EU until the summer of last year, when the war could have been prevented or stopped at the outset. A tough, principled antiwar stance by the EU was needed. It could have blocked U.S. initiatives to start the war and would have turned the EU into a significant independent geopolitical player. The EU passed on that opportunity and instead behaved like a faithful vassal of the United States. As a result, Europe stands on the brink of frightful internal upheaval.

In the coming years, it has every chance of suffering the same fate as the Ukraine, only with a great roar, great bloodshed and less chance that in the near future things will settle down – in other words, that someone will show up and put things in order. In fact, today the EU can choose whether to remain a tool of the United States or to move closer to Russia. Depending on its choice, Europe can get off with a slight scare, such as a breakup of parts of its periphery and possible fragmentation of some countries, or it could collapse completely. Judging by the European elites’ reluctance to break openly with the United States, collapse is almost inevitable. What should interest us is the opinions of the two main players that determine the configuration of the geopolitical front and in fact are fighting for victory in the new generation of war – the network-centric Third World War. These players are the United States and Russia.

The U.S. position is clear and transparent. In the second half of the 1990s, Washington missed its only opportunity to reform the Cold War economy without any obstacles and thereby avoid the looming crisis in a system whose development is limited by the finite nature of planet Earth and its resources, including human ones, which conflicts with the need to endlessly print dollars. After that, the United States could prolong the death throes of the system only by plundering the rest of the world. At first, it went after Third World countries. Then it went for potential competitors. Then for allies and even close friends. Such plundering could continue only as long as the United States remained the world’s undisputed hegemon. Thus when Russia asserted its right to make independent political decisions – decisions of not global but regional import –, a clash with the United States became inevitable. This clash cannot end in a compromise peace.

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“Clearly, the European Parliament is a great danger to life on the planet.”

Insanity Grips The Western World (Paul Craig Roberts)

The White Media claims, and has claimed since February 2014, that there are Russian tanks and troops in Ukraine. Putin has pointed out that if this indeed was the case, Kiev and Western Ukraine would have fallen to the Russian invasion early last year. Kiev has been unable to defeat the small breakaway republics in eastern and southern Ukraine and would stand no chance against the Russian military. Recently a brave news organization made fun of the White Media’s claim that Russian tanks have been pouring into Ukraine for 14 months. The parody pictured Ukraine at a standstill. All traffic on all roads and residential streets is blocked by Russian tanks. All parking places, including sidewalks and people’s front and rear gardens have tanks piled upon tanks. The entire country is immobilized in gridlock.

Although a few have fun making fun of the gullible people who believe the White Media, the situation is nevertheless serious as it concerns life on planet Earth. There is little sign that Washington and its vassals care about life on Earth. Recently, the largest political group in the European Parliament–the European People’s Party–expressed a cavalier opinion about life on Earth. We know this, because, if we can trust Euractiv, an online EU news source, the majority EU party believes that declaring the EU’s readiness for nuclear war is one of the best steps to deter Russia from further aggression. The aggression to be stopped by Europe’s declaration of its readiness for armageddon is the alleged Russian invasion of Ukraine, and the “further aggression” is Putin’s alleged intention of reestablishing the Soviet Empire.

It must be disappointing to the Russian government to see that leaders of the European Union prefer to endorse nuclear war than to challenge Washington’s propaganda. When I read that the governing party in the European Parliament thought non-existent aggression had to be stopped by a declaration of readiness for nuclear war, I realized that money could buy any and every thing, even the life of the planet. The European People’s Party was speaking in behalf of Washington’s propaganda, not in behalf of Europe. Europe’s nuclear war with Russia would end instantly with the destruction of every European capital. The crazed vice-president of the European People’s Party, Jacek Saryusz-Wolski revealed who the real aggressor is when he declared: “Time of talk and persuasion with Russia is over. Now it’s time for a tough policy.” Clearly, the European Parliament is a great danger to life on the planet.

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Breeding Chinese Goldmanites.

China Teaches Top Cadres Western Ideas Despite Backlash (AP)

In the still, early hours, cadres make their way down tree-lined paths. They walk through a polished lobby, down dim hallways and settle themselves in rows in plain, wood-paneled classrooms. Here, they sit at the vanguard of the Communist Party of China. These rising Communist Party members from across the country have come to the China Executive Leadership Academy Pudong (CELAP) in Shanghai as part of the party’s decade-long effort to introduce its own elite to foreign ideas. Outside these walls, President Xi Jinping’s government is campaigning to scrub Western influence from classrooms, but here some 10,000 party loyalists each year hear from top Western scholars and executives about management techniques, media relations, urban development and innovation.

“It does no harm for top leaders to get to know different ideas in the world,” said Zhang Xuezhong, who was barred from teaching at East China University of Political Science and Law in 2013, after publishing an article critical of the government. “The Communist Party expects the people it rules to be ignorant, but they would not expect themselves to be like this.” As China seeks to play a more decisive role on the global stage, such exposure is becoming more important — at least for those at the forefront of transforming China’s economy and international role. For everyone else, education has become an ideological battleground, where destabilizing Western values must be vanquished lest they weaken the party’s grip on power.

“Young teachers and students are key targets of infiltration by enemy forces,” Education Minister Yuan Guiren wrote in a January essay. Around the same time, he told university officials to bar “teaching materials that disseminate Western values,” state-run news agency Xinhua reported. His remarks came shortly after Beijing issued new guidelines ordering universities to promote loyalty to the party, core socialist values, and the teachings of Xi himself. Meanwhile, Westerners continue to march through CELAP, bringing with them an uncontrollable parade of ideas. [..] “It’s a very unusual institution in China,” said Oxford University’s Nicholas Morris, who has taught at CELAP for a decade. “This institution’s job is to help Chinese leaders understand Western practice.”

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In one day. Where was Europe?

Italy Rescues More Than 3,400 Europe-Bound Migrants At Sea (AFP)

More than 3,400 migrants were rescued at sea Saturday, mainly off Libya, as Europe seeks ways to deal with the flood of people trying to reach its shores following a series of deadly shipwrecks. A total of 3,427 people were picked up during the operation coordinated by the Italian coast guard. While they said it was a “very busy day”, it was not a record for the coast guard, which coordinated the rescue of 3,791 migrants on April 12 and another 2,850 the following day. French patrol boat Commandant Birot, which was sent to boost EU patrols to deal with the influx of migrant boats in the Mediterranean, picked up 217 people off the coast of Libya.

The migrants – all men – had been on board three boats, the authorities said, adding that two suspected people smugglers were also caught and would be handed over to Italian police. In Italy, the coast guard announced late at night that 16 vessels had rescued a total of 3,427 people on Saturday alone in an operation coordinated from their headquarters in Rome.

In addition to the French patrol boat, the rescue operation mobilised four Italian coast guard ships, two Italian navy vessels, two cargo ships, two Italian customs ships and two tugs. Most notably, the navy said on Twitter that the frigate Bersagliere had rescued 778 migrants while the patrol boat Vega had picked up another 675. Some of the rescued migrants were expected to arrive overnight on the Italian island of Lampedusa, the closest to the African coast, while most of the others are expected to arrive in Sicily or southern Italy on Sunday night. According to the Italian coast guard, the French patrol vessel should land its migrants at a port in Calabria.

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Should have been taken care of a long time ago.

Greece To Ask EU For Extra Funding For Migrant Influx (Kathimerini)

Greece is to ask the European Union for €30 million of emergency funds to deal with the growing number of undocumented migrants arriving in the country, sources have told Kathimerini. The EU is already due to give Greece €470 million by 2020 for immigration-related matters, such as covering the cost of an asylum service and reception centers. However, this money covers existing operations and cannot be used to tackle problems caused by the spike in migrants reaching Greece over the last few months.

One of the things the government wants to use the emergency funds for is to hire a ferry to transport migrants from islands to reception centers or other facilities on the mainland. The coalition submitted an amendment to Parliament last week allowing authorities to bypass until the end of the year the tender process for immigration-related projects. The government says this will speed up the implementation of schemes aimed at helping migrants.

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Oooh, in-depth reporting from the NYT…

Many Displaced African Migrants Had No Plan to Land in Italy (NY Times)

By now, the unceasing tides of migrants arriving at the ports of Sicily fall into loose national categories. The Syrians usually arrive with money, bearing broken lives in canvas bags, and are able to slip out of Italy, bound for affluent northern Europe. The Eritreans may be far less wealthy but they too are well organized, with networks that move them north as well. Then there are men like Agyemin Boateng and Prince Adawiah, who were scooped out of the Mediterranean this month by an Italian rescue ship. Both are from Ghana, and neither has a plan for a new life in Europe — nor, they say, did either of them ever plan to come to Italy. They were working as laborers in Libya, until life there became untenable and returning to Ghana became unfeasible.

“There are guns and bombs,” said Mr. Adawiah, 25, who worked in Tripoli for nearly three years. “Every day, there is shooting. I’m afraid. That is why I traveled to Italy.” Europe’s migration crisis escalated sharply in April, with the coming of warmer weather to the Mediterranean. Many more smugglers’ boats took to the sea, and a record number of migrants died attempting the crossing — more than 1,700 people so far in 2015, by some estimates. Conflicts in Africa, the Middle East and Central Asia have shaped and reshaped Europe’s migrant flows in recent years, with none more transformative to the Mediterranean smuggling trade than the civil war in Syria. And the tumult in Libya is changing the migration equation once again.

Libyan lawlessness has allowed a haven for smugglers to operate along the country’s coastline, but it has also unmoored many African laborers who were working there as migrants. Many of these men now languish in Italian detention centers without contacts or plans for the future, and their growing numbers are frustrating some Italian mayors and other officials. “We don’t know anything,” said one migrant, Shamsudeen Sawud, 18, who arrived in Italy more than a week ago. “No one is telling us anything.”

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Yes, this is funny.

Italian Army Growing Cannabis To Slash End User Prices (RT)

Italy’s first medical marijuana crop – grown by the country’s military – is “coming along nicely,” according to officials at a government-funded greenhouse outside Florence. “The aim of the operation is to provide users with a product that is not always easily available on the market, at a more competitive price,” Colonel Antonio Medica, the director of the facility, told Italian daily Corriere della Sera. Medical marijuana has been legal in the country since 2013 as pain relief for conditions such as multiple sclerosis and cancer, and as treatment for others, such as glaucoma. However, as there have been no licensed producers, and the state would not pay for the treatment, those with prescriptions have had to purchase it abroad, from the Netherlands and Germany, at prices that reach up to €40 per gram.

This means many patients have simply been buying their drugs off the street, financing drug dealers, who do not pay taxes, and may be engaged in other illegal activities. By producing 100 kg of its own weed, the government hopes to undercut the street dealers. “We’re aiming to lower the price to under €15 euros ($17), maybe even around €5 euros per gram,’ said Medica, who noted that this would be similar to the black market price of the drug. The government chose a military lab, due to existing security and surveillance arrangements. While the innovations will help medicinal users, they are unlikely to undermine the illegal marijuana market in a country where one in five admitted to being smokers of the drug in a survey conducted in 2012.

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And not a word on an investigation.

From Ukraine To Australia, Tributes Pour Out For Odessa Massacre Victims (RT)

Thousands of people in Ukraine, Russia and around the world took to the streets to mark the first anniversary of the Odessa massacre. Last year, 48 activists were killed and over 200 injured as radicals set the local trade unions house on fire. The commemoration ceremonies for those who died in the fire on May 2, 2014 proceeded without serious incident in the Ukrainian port city of Odessa. A huge crowd, including the relatives of the victims, gathered in front of the Trade Unions building and released black balloons and doves in air. According to local media, the rally in Odessa was attended by around 5,000 people. The people held banners reading “fascism won’t pass” and “no to political repressions,” with some carrying photos of journalist Oles Buzina and politician Oleg Kalashnikov, who were assassinated in Kiev last month.

In the Ukrainian capital, Kiev, some 2,000 people marched to honor the victims of the tragedy in an action entitled ‘Kiev Remembers Odessa.’ The people were carrying photos of those who died in the fire, as well as pictures of Buzina and Kalashnikov. Several arrests were made during the demonstration, with the Kiev police saying that they “invited the men to a local police station”. They were later released. March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015.March to honor the victims of the Odessa massacre in Ukrainian capital Kiev on May 2, 2015. Earlier, reports emerged on social media that it was the organizers of the rally, who had been detained by the security officials. “The organizers of a peaceful rally have been arrested in Kiev! What for? Show me a single slogan, for which you can be arrested in a democratic ‘European’ country?” Yuri Kot, Ukrainian public figure and journalist, wrote on Facebook.

In Moscow, around 1,000 people gathered in front of the Ukrainian Embassy to Russia to commemorate the Odessa massacre victims. An outdoor photo exhibition, showcasing pictures of the burning Odessa Trade Union House, was organized together with the rally. “It was very hard to not to cry. I didn’t expect so many people to care and feel for the sorrow,” an eastern Ukrainian resident, who attended the event, told RIA-Novosti. At the end, the bell tolled 48 times to commemorate each victim of the last year’s tragedy. Remembrance events were also held in Australia, Poland, the Republic of Ireland, Switzerland, Morocco and other countries. In Italy, a monument to the Odessa tragedy was opened in the northern town of Ceriano Laghetto.

Ukraine authorities deployed over 3,000 law enforcers in Odessa ahead of the anniversary of mass killings on May 2. Odessa’s Kulikovo Field, the square where the bloodiest scenes in the last year’s confrontation unfolded, was cordoned off on Friday. People wishing to lay flowers in front of the Trade Unions building, where dozens of activists met their deaths, have had to pass through metal detectors. The streets are being patrolled by some 2,600 police officers, while 600 special service fighters are on alert, the Interior Ministry reported. Unarmed volunteer activists were also called to Odessa. “There cannot be too much police presence. It’s a demonstration of our presence and strength to those who want to shake the situation in Odessa. There will be a policeman in every square meter,” Ivan Katerhinchuk, the chief of Odessa region’s police force, told the media.

Earlier on Friday, police troops brought in from other regions and their local colleagues gathered in front of the building. CCTV footage showed dozens of trucks and patrol cars parked in rows and columns of security forces marching in the streets.

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“It’s no use having habitat if there’s nothing left to eat in it.”

Wildlife Decline May Lead To ‘Empty Landscape’ (BBC)

Populations of some of the world’s largest wild animals are dwindling, raising the threat of an “empty landscape”, say scientists. About 60% of giant herbivores – plant-eaters – including rhinos, elephants and gorillas, are at risk of extinction, according to research. Analysis of 74 herbivore species, published in Science Advances, blamed poaching and habitat loss. A previous study of large carnivores showed similar declines. Prof William Ripple, of Oregon State University, led the research looking at herbivores weighing over 100kg, from the reindeer up to the African elephant. “This is the first time anyone has analysed all of these species as a whole,” he said. “The process of declining animals is causing an empty landscape in the forest, savannah, grasslands and desert.”

Prof David Macdonald, of Oxford University’s Wildlife Conservation Research Unit, was among the team of 15 international scientists. “The big carnivores, like the charismatic big cats or wolves, face horrendous problems from direct persecution, over-hunting and habitat loss, but our new study adds another nail to their coffin – the empty larder,” he said. “It’s no use having habitat if there’s nothing left to eat in it.” According to the research, the decline is being driven by a number of factors including habitat loss, hunting for meat or body parts, and competition for food and resources with livestock. With rhinoceros horn worth more than gold, diamonds or cocaine on illegal markets, rhinos could be extinct in the wild within 20 years in Africa, said the researchers.

The consequences of large wild herbivore decline include: • Loss of habitat: for example, elephants maintain forest clearings by trampling vegetation. • Effects on the food chain: large predators such as lions, leopards, and hyena rely on large herbivores for food. • Seed dispersal: large herbivores eat seeds which are carried over long distances. • Impact on humans: an estimated one billion people rely on wild meat for subsistence while the loss of iconic herbivores will have a negative impact on tourism. The biggest losses are in South East Asia, India and Africa. Europe and North America have already lost most of their large herbivores in a previous wave of extinctions.

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