Jul 152017
 
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Hieronymus Bosch The Conjurer 1502

 

Big Banks Continue Winning Streak, With Street at Least (BBG)
‘It’s Almost An Embarrassment Being An American’ – Jamie Dimon (G.)
US House Backs Massive Increase In Defense Spending (R.)
US Deficits To Jump $248 Billion Over Next Two Years Due To Tax Shortfall (R.)
We Do These Things Because They’re Easy (CHS)
The New Silk Road Will Go Through Syria (Escobar)
One Of Worst Droughts In Decades Devastates South Europe Crops (R.)
People Not Amused by EU Efforts to “De-Cash” their Lives (DQ)
Just 13% of Greeks Trust Their Government (K.)
World’s Large Carnivores Being Pushed Off The Map (BBC)

 

 

What happens when markets don’t function. Manipulation is the name of the game.

Big Banks Continue Winning Streak, With Street at Least (BBG)

U.S. bank earnings have kicked off without any tumult. Investors should be grateful for that increasing sense of dependability, though they appear to be looking for more. JPMorgan Chase, Wells Fargo, Citigroup and PNC Financial Services each delivered second-quarter results on Friday that topped Wall Street’s expectations. On a measure of earnings per share, each bank has improved its respective streaks of beating or meeting analysts’ estimates:Reliability Factor The U.S. banks that reported earnings on Friday lengthened their streak of surpassing or matching expectations which, to be fair, are managed by bank executives:

The business of fixed-income trading, which has been a bright spot over the past year, has received outsize attention as it has fallen from grace after a long stretch of low volatility and tepid volumes, as expected. Instead, its quarterly gyrations should be accepted by shareholders just as they withstand changes in the weather, according to JPMorgan’s chairman and CEO Jamie Dimon. He has a point – the diversity of JPMorgan combined with the size of its overall corporate and investment bank, which houses the fixed-income trading business, gives the bank a level of flexibility. That defense might not stick if JPMorgan’s other businesses weren’t performing, but they are. The bank posted quarterly net income of $7 billion in the three months ended June 30.

That was its biggest haul ever, driven in part by a significant jump in net interest income, a direct result of the Federal Reserve’s rate increases. Its efforts to bulk up asset and wealth management, where revenues have roughly doubled since 2006, have borne fruit. Net income for the business climbed 20% compared with results in the same period last year to a record $624 million. And for now, despite broad concerns about auto and credit card loans, there’s no need to worry about widespread cracks. The bank’s so-called net charge-off rate, which measures delinquencies, remains minimal. [..] Bank stocks have rallied in part because the expected growth in their respective earnings per share, or EPS, in 2018 far exceeds that of the benchmark index:

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Because you get to make record profits while others only get deeper into debt? Is that what Dimon is talking about?

‘It’s Almost An Embarrassment Being An American’ – Jamie Dimon (G.)

JP Morgan just had the most profitable 12 months ever for a US bank – but it wasn’t enough for Jamie Dimon, the bank’s boss. “It’s almost an embarrassment being an American traveling around the world and listening to the stupid shit Americans have to deal with in this country,” Dimon told journalists after the bank released its latest quarterly results on Friday. The world’s largest bank reported a profit of $7.03bn for the second quarter, 13% higher than last year. It has made $26.5bn over the past 12 months, a record profit for a US bank. But Dimon, who last year turned down Donald Trump’s offer to become treasury secretary, seemed more concerned about low rates of growth in the US and the health of the American body politic.

He blamed bad policy for “holding back and hurting the average American” and financial journalists for concentrating on the bank’s trading results when they should be focusing on policy. “Who cares about fixed-income trading in the last two weeks of June? I mean, seriously,” Dimon said after a reporter asked about the health of the bonds markets. “That is the weather,” he said of changes in the markets. “It goes up and down, this and that, and that’s 80% of what you guys focus on.” Dimon said financial journalists would be better off concentrating on the “bad policies” that are hurting average Americans. “It’s almost an embarrassment being an American traveling around the world and listening to the stupid shit Americans have to deal with,” he said. “At one point, we would have to get our act together, do what we’re supposed to do to the average American.”

[..] “We need infrastructure reform,” he said. “We need corporate tax reform. We need better skills and education. If we don’t focus on these things, we are hurting average Americans every day. “The USA has to start to focus on policy which is good for all Americans, and that is regulation, tax, education, we have to get those things done. You guys [journalists] should be writing a lot more about that stuff. That is holding it back and hurting the average American citizen if we don’t do it.

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Or is Dimon embarrassed over this?

US House Backs Massive Increase In Defense Spending (R.)

The U.S. House of Representatives passed its version of a massive annual defense bill on Friday, leaving out controversial amendments on transgender troops and climate policy but backing President Donald Trump’s desire for a bigger, stronger military. The vote was 344-81 to pass the National Defense Authorization Act (NDAA), which sets military policy and authorizes up to $696 billion in spending for the Department of Defense. Underscoring bipartisan support for higher defense spending in Congress, 117 Democrats joined 227 Republicans in backing the measure. Only eight Republicans and 73 Democrats voted no. But the measure faces more hurdles before it can become law, notably because it would increase military spending beyond last year’s $619 billion bill, defying “sequestration” caps on government spending set in the 2011 Budget Control Act.

Trump wants to pay for a military spending increase by slashing nondefense spending. His fellow Republicans control majorities in both the House and Senate, but they will need support from Senate Democrats, who want to increase military spending, for Trump’s plans to go into effect. The House NDAA also increases spending on missile defense by 25%, adds thousands more active-duty troops to the Army, provides five new ships for the Navy and provides a 2.4% salary increase for U.S. troops, their largest pay raise in eight years. And it creates a new Space Corps military service, pushed by lawmakers worried about China and Russia’s activities in space, but opposed by Defense Secretary Jim Mattis.

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Oh well, money’s cheap after all.

US Deficits To Jump $248 Billion Over Next Two Years Due To Tax Shortfall (R.)

The budget deficit for President Donald Trump’s first two years in office will be nearly $250 billion higher than initially estimated due to a shortfall in tax collections and a mistake in projecting military healthcare costs, budget chief Mick Mulvaney reported on Friday. In a mid-year update to Congress, Mulvaney, director of the Office of Management and Budget, revised the estimates supplied in late May when the Trump administration submitted its first spending plan. Since then, Mulvaney said, the deficit projected for the current fiscal year has increased by $99 billion, or 16.4%, to $702 billion. For 2018, the deficit will be $149 billion more than first expected, increasing by 33% to $589 billion.

The figures come as the administration is facing widespread doubts among economists and analysts that it can erase government deficits largely by boosting economic growth and changing laws like the Affordable Care Act. ACA reform is facing a difficult path in Congress, and the Congressional Budget Office on Thursday said the administration’s growth and deficit reduction plans were optimistic. The letter from Mulvaney said the bulk of the problem this year and next stems from lower-than-expected tax collections. Individual and corporate income taxes and other collections for this year are expected to be $116 billion less than the administration anticipated in May. Tax receipts in 2018 are expected to be $140 billion less than initially estimated.

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A reference to JFK. Our next discovery will be that debt is a harsh mistress.

We Do These Things Because They’re Easy (CHS)

We are now totally, completely dependent on expanding debt for the maintenance of our society and economy. Every sector of the economy–households, businesses and government–all borrow vast sums just to maintain the status quo for another year. Compare buying a new car with easy, low-interest credit and saving up to buy the car with cash. How easy is it to borrow $23,000 for a new $24,000 car? You go to the dealership, announce all you have to put down is a trade-in vehicle worth $1,000. The salesperson puts a mirror under your nose to make sure you’re alive, makes sure you haven’t just declared bankruptcy to stiff previous lenders, and if you pass those two tests, you qualify for a 1% rate auto loan. You sign some papers and drive off in your new car. Easy-peasy!

Scrimping and saving to pay for the new car with cash is hard. You have to save $1,000 each and every month for two years to save up the $24,000, and the only way to do that is make some extra income by working longer hours, and sacrificing numerous pleasures–being a shopaholic, going out to eat frequently, $5 coffee drinks, jetting somewhere for a long weekend, etc. The sacrifice and discipline required are hard. What’s the pay-off in avoiding debt? Not much–after all, the new auto loan payment is modest. If we take a 5-year or 7-year loan, it’s even less. By borrowing $23,000, we get to keep all our fun treats and spending pleasures, and we get the new car, too. At the corporate level, it’s the same story: borrow a billion dollars and use it to buy back shares.

Increasing the value of the corporation’s shares by increasing profit margins and actual value is hard; boosting the share price with borrowed money is easy. It’s also the same story with politicians and the government: cutting anything is politically painful, so let’s just float a bond, i.e. borrow money to pay for what was once paid out of tax revenues: maintaining parks, repaving streets, funding pensions, etc. This dependence on expanding debt for maintaining the status quo is a global trend. Debt is exploding in China in every sector, and the same is true in other nations, developed and developing alike. Borrowing more money from the future is easy, painless and requires no trade-offs, sacrifices or accountability–until the debt-addicted economy collapses under its own weight of debt service and insolvency.

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“..all those elaborate plans depend on no more war. And there’s the rub.”

The New Silk Road Will Go Through Syria (Escobar)

Amid the proverbial doom and gloom pervading all things Syria, the slings and arrows of outrageous fortune sometimes yield, well, good fortune. Take what happened this past Sunday in Beijing. The China-Arab Exchange Association and the Syrian Embassy organized a Syria Day Expo crammed with hundreds of Chinese specialists in infrastructure investment. It was a sort of mini-gathering of the Asia Infrastructure Investment Bank (AIIB), billed as “The First Project Matchmaking Fair for Syria Reconstruction”. And there will be serious follow-ups: a Syria Reconstruction Expo; the 59th Damascus International Fair next month, where around 30 Arab and foreign nations will be represented; and the China-Arab States Expo in Yinchuan, Ningxia Hui province, in September.

Qin Yong, deputy chairman of the China-Arab Exchange Association, announced that Beijing plans to invest $2 billion in an industrial park in Syria for 150 Chinese companies. Nothing would make more sense. Before the tragic Syrian proxy war, Syrian merchants were already incredibly active in the small-goods Silk Road between Yiwu and the Levant. The Chinese don’t forget that Syria controlled overland access to both Europe and Africa in ancient Silk Road times when, after the desert crossing via Palmyra, goods reached the Mediterranean on their way to Rome. After the demise of Palmyra, a secondary road followed the Euphrates upstream and then through Aleppo and Antioch. Beijing always plans years ahead. And the government in Damascus is implicated at the highest levels.

So, it’s not an accident that Syrian Ambassador to China Imad Moustapha had to come up with the clincher: China, Russia and Iran will have priority over anyone else for all infrastructure investment and reconstruction projects when the war is over. The New Silk Roads, or One Belt, One Road Initiative (Obor), will inevitably feature a Syrian hub – complete with the requisite legal support for Chinese companies involved in investment, construction and banking via a special commission created by the Syrian embassy, the China-Arab Exchange Association and the Beijing-based Shijing law firm. Few remember that before the war China had already invested tens of billions of US dollars in Syria’s oil and gas industry. Naturally the priority for Damascus, once the war is over, will be massive reconstruction of widely destroyed infrastructure.

China could be part of that via the AIIB. Then comes investment in agriculture, industry and connectivity – transportation corridors in the Levant and connecting Syria to Iraq and Iran (other two Obor hubs). What matters most of all is that Beijing has already taken the crucial step of being directly involved in the final settlement of the Syrian war – geopolitically and geo-economically. Beijing has had a special representative for Syria since last year – and has already been providing humanitarian aid. Needless to add, all those elaborate plans depend on no more war. And there’s the rub.

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Southern Europe: getting poorer and hotter.

One Of Worst Droughts In Decades Devastates South Europe Crops (R.)

Italian durum wheat and dairy farmer Attilio Tocchi saw warning signs during the winter of the dramatic drought to come at his holding a mile away from the Tuscan coast. “When it still hadn’t rained at the beginning of spring we realized it was already irreparable,” he said, adding that he had installed fans to try and cool his cows that were suffering in the heat. Drought in southern Europe threatens to reduce cereal production in Italy and parts of Spain to its lowest level in at least 20 years, and hit other regional crops including olives and almonds. Castile and Leon, the largest cereal growing region in Spain, has been particularly badly affected, with crop losses estimated at around 60 to 70%.

“This year was not bad, it was catastrophic. I can’t remember a year like this since 1992 when I was a little child,” said Joaquin Antonio Pino, a cereal farmer in Sinlabajos, Avila. Pino said many of his fields had not even been harvested, because crop revenues would not cover the wages of laborers who gathered them. While the EU is collectively a major wheat exporter, Spain and Italy both rely on imports from countries including France, Britain and Ukraine. Spanish soft wheat imports are expected to rise by more than 40% to 5.6 million tonnes in the 2017-2018 marketing year, according to Agroinfomarket. The drought has helped support EU wheat futures, which have risen around 6% since the beginning of June, although the prospect of a larger harvest in France this year should ensure adequate overall supplies in the trading bloc.

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Germans love cash.

People Not Amused by EU Efforts to “De-Cash” their Lives (DQ)

In January 2017 the European Commission announced it was exploring the option of imposing upper limits on cash payments, with a view to implementing cross-regional measures as soon as 2018. To give the proposal a veneer of respectability and accountability the Commission launched a public consultation on the issue. Now, the answers are in, but they are not what the Commission was expecting. A staggering 95% of the respondents said they were opposed to a cash ceiling at EU level. Even more emphatic was the answer to the following question: “How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?” In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.”

In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits. Granted, 37% of respondents were from Germany and 19% from Austria (56% in total), two countries that have a die-hard love for physical lucre. Even among millennials in Germany, two-thirds say they prefer paying in cash to electronic means, a much higher level than in almost any other advanced economy with the exception of Japan. Another 35% of the survey respondents were from France, a country that is not quite so enamored with cash and whose government has already imposed a maximum cash limit of €1,000. By its very nature the survey almost certainly attracted a disproportionate number of arch-defenders of physical cash.

As such, the responses it elicited are unlikely to be a perfect representation of how all Europeans would feel about the EU’s plans to introduce maximum cash limits. Nonetheless, the sheer strength of opposition should (but probably won’t) give the apparatchiks in Brussels pause for thought. The biggest cited concern for respondents was the threat the cash restrictions would pose to privacy and personal anonymity. A total of 87% of respondents viewed paying with cash as an essential personal freedom. The European Commission would beg to differ. In the small print accompanying the draft legislation it launched in January, it pointed out that privacy and anonymity do not constitute “fundamental” human rights.

Be that as it may, many Europeans still clearly have a soft spot for physical money. If the EU authorities push too hard, too fast in their war on cash, they could provoke a popular backlash. In Germany, trust in Europe’s financial institutions is already at a historic low, with only one in three Germans saying they have confidence in the ECB. The longer QE lasts, the more the number shrinks.

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When they were elected in January 2015, Syriza’s approval rating was some 75%. But when you turn your back on your promises, and then unleash more austerity….

Just 13% of Greeks Trust Their Government (K.)

Just 13% of Greeks trusted the government in 2016, according to the Organization for Economic Cooperation and Development’s (OECD) biennial Government at a Glance report, placing Greece among the four member states with the sharpest decline in confidence in their administrations. According to the report, which was published by the Paris-based organization on Thursday and shows 2016 data, Greece joins Chile, Finland and Slovenia in recording a significant loss of trust between citizens and the government, slipping to 13% in 2016 from 19% in 2014. Confidence has also declined over the past decade across the OECD’s member states, though at a rate of 3%, coming to 42% in 2016 from 45% in 2007.

In terms of specific sectors, Greeks have lost faith across the board, with the Greek health system having the trust of just 31% of citizens from 35% in the 2015 study for 2014, public education of 44% from 45% and the judicial system of 42% from 44%. A new area added in this year’s survey is the police, where confidence was high last year at 69%. Across the OECD, average confidence in the health system came to 70%, education to 67% and justice to 55%.

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You’d almost wish they would fight back.

World’s Large Carnivores Being Pushed Off The Map (BBC)

Six of the world’s large carnivores have lost more than 90% of their historic range, according to a study. The Ethiopian wolf, red wolf, tiger, lion, African wild dog and cheetah have all been squeezed out as land is lost to human settlements and farming. Reintroduction of carnivores into areas where they once roamed is vital in conservation, say scientists. This relies on human willingness to share the landscape with the likes of the wolf. The research, published in Royal Society Open Science, was carried out by Christopher Wolf and William Ripple of Oregon State University. They mapped the current range of 25 large carnivores using International Union for Conservation of Nature (IUCN) Red List data. This was compared with historic maps from 500 years ago.

The work shows that large carnivore range contractions are a global issue, said Christopher Wolf. “Of the 25 large carnivores that we studied, 60% (15 species) have lost more than half of their historic ranges,” he explained. “This means that scientifically sound reintroductions of large carnivores into areas where they have been lost is vital both to conserve the large carnivores and to promote their important ecological effects. “This is very dependent on increasing human tolerance of large carnivores – a key predictor of reintroduction success.” The researchers say re-wilding programmes will be most successful in regions with low human population density, little livestock, and limited agriculture. Additionally, regions with large networks of protected areas and favourable human attitudes toward carnivores are better suited for such schemes.

“Increasing human tolerance of large carnivores may be the best way to save these species from extinction,” said co-researcher William Ripple. “Also, more large protected areas are urgently needed for large carnivore conservation.” When policy is favourable, carnivores may naturally return to parts of their historic ranges. This has begun to happen in parts of Europe with brown bears, lynx, and grey wolves. The Eurasian lynx and grey wolf are among the carnivores that have the smallest range contractions. The dingo and several types of hyena are also doing relatively well, compared with the lion and tiger.

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Jul 132017
 
 July 13, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Vineyards with a View of Auvers 1890

 

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)
Unwinding QE will be “More Disruptive than People Think” (WS)
I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)
The US Stock Market Is 66% Higher Than It Should Be (Kee jr)
Valuation Measures & Forward Returns (Lance Roberts)
Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)
VISA takes its War on Cash to US Retailers (WS)
Greece To Exit EU’s Excessive Deficit Procedure (K.)
Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad
Germany Profits From Greek Debt Crisis (HB)
Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

 

 

What Yellen says is not so interesting. What lies beyond those carefully crafted speeches is.

BTW, no Trump today, but maybe we can start a separate gossip page.

“The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all..”

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)

Patrick Armstrong, the CIO at Plurimi Investment Managers, believes that very high valuations, an expected tightening in monetary policy and too much optimism over tax cuts and new fiscal spending should leave investors cautious on the United States. “Valuation doesn’t matter in the short term but at current CAPE (cyclically adjusted price to earnings, which gives a more clear indication of a stock price in comparison to average earnings over the last 10 years) of 29 times, U.S. equities have historically delivered negative real returns over periods of two to five years,” he said in an investment outlook published earlier this month. The U.S. Federal Reserve has begun normalizing its policy in the wake of improved economic growth and low unemployment levels.

According to Armstrong, the easy monetary policy of the past had boosted equities but this might change with the Fed’s plans to hike rates and reduce its balance sheet. “I think there was a clear warning in the last (meeting) minutes talking about risk premium, price earnings and investors haven’t acknowledged it, but when the Fed starts worrying about equity markets, as an equity investor they’ve given you that warning,” he told CNBC on Tuesday. The third reason to be “short” – where a trader takes a bet that prices will fall – on U.S. equities is the government’s plans on fiscal policy. President Donald Trump promised tax cuts and big infrastructure spending, which made U.S. equities rally since he took office last November. However, such policies are yet to reach the consultation stage and doubts have emerged over the president’s ability to deliver.

[..] Speaking to CNBC Tuesday, Armstrong suggested that investors aren’t listening to the U.S. Federal Reserve. “What investors are completely underestimating is how low the bar is for the United States Federal Reserve. They have told us what they intend to do, the markets don’t believe any of it,” Armstrong said. “The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all,” he added.

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Central banks are trying to get out before the blast. But in doing so they bring it forward. Were given far too much power.

Unwinding QE will be “More Disruptive than People Think” (WS)

“We’ve never had QE like this before, and we’ve never had unwinding like this before,” said JPMorgan CEO Jamie Dimon at the Europlace finance conference in Paris. “Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.” He was referring to the Fed’s plan to unwind QE, shedding Treasury securities and mortgage-backed securities on its balance sheet. The Fed will likely announce the kick-off this year, possibly at its September meeting. According to its plan, there will be a phase-in period. It will unload $10 billion the first month and raise that to $50 billion over the next 12 months. Then it will continue at that pace to achieve its “balance sheet normalization.” Just like the Fed “created” this money during QE to buy these assets, it will “destroy” this money at a rate of $50 billion a month, or $600 billion a year.

It’s the reverse of QE, with reverse effects. Other central banks are in a similar boat. The Fed, the Bank of Japan, and the ECB together have loaded up their balance sheets with $14 trillion in assets. Unwinding this is going to have some impact – likely reversing some of the asset price inflation in stocks, bonds, real estate, and other markets that these gigantic bouts of asset buying have caused. The Bank of Japan has been quietly tapering its asset purchases for a while to where it buys only enough to keep the 10-year yield barely above zero. And the ECB has tapered its monthly purchases by €20 billion earlier this year and is preparing the markets for more tapering. Once central banks stop buying assets, the phase starts when central banks try to unload some of those assets. The Fed is at the threshold of this phase.

Dimon was less concerned about the Fed’s rate hikes. People are too focused on rate hikes, he said, according to a Bloomberg recording of the conference. If the economy is strong, economic growth itself overcomes the issues posed by higher rates, he said. The economy has been through rate hikes many times before. They’re a known quantity. But “when selling securities in the market place starts,” that’s when it gets serious. “When that happens of size or substance, it could be a little more disruptive than people think,” he said. Whatever it will do, no one knows what it will do – because “it never happened before.”

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Don’t woryy, they serve the same lords.

I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)

The IMF’s Managing Director, Christine Lagarde, has said that she would not rule out another financial crisis in her lifetime, indicating that comments made recently by Federal Reserve Chair Janet Yellen may have been premature. “There may, one day, be another crisis,” Lagarde told CNBC Tuesday on the sidelines of a joint conference with the IMF and the Croatian National Bank in Dubrovnik. Lagarde’s comments responded to a statement made by Yellen a fortnight earlier in which she said she does not expect to see another financial crisis in her lifetime. “I plan on having a long life and I hope she (Yellen) does, too, so I wouldn’t absolutely bet on that because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde said.

She, however, noted the unpredictability of financial crises and said that finance ministers and policymakers should act with caution to prepare for such eventualities. “Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” she added. “Our duty, and certainly the message that we give to the finance ministers, to the policymakers, is ‘be prepared’. Make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis.”

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And we will see undershoot on the way down. The Fed killing off price discovery will be a scourge on society.

The US Stock Market Is 66% Higher Than It Should Be (Kee jr)

I have, in previous articles here on MarketWatch, pointed out the fundamental risks in the U.S. stock market. I have identified the liquidity risks created by the ECB and the Federal Reserve in the tightening of monetary policy, in the reduction of the Fed’s balance sheet, and the likelihood that these risks will prick the asset bubble that the market is in today. Most people I speak and email with agree. The risks are high, as the price-to-earnings multiple of the S&P 500 (about 25, depending on the indicator) is far greater than its historical norm (14.5). The truth, however, is that no one knows for sure. But, still, people are apathetic. In fact, my experience over the past 20 years and through each of the past two major asset bubbles (the internet bubble in 2000 and the credit crisis in 2008-2009), is that the unanimous identification of an asset bubble did not take place until after the asset bubble had burst.

By that time, all of the major indices — the Dow Jones Industrial Average S&P 500, Nasdaq 100 and Russell 2000 — had already fallen. The result largely handcuffed investors to investments that were severely underwater. As luck would have it, though, after the credit crisis, the Fed’s policy-making body printed $2 trillion and, with that money, bought assets to prop up the economy and save investors from destruction. Largely, this perceived savior is probably why investors are so lethargic when it comes to the asset bubble that we are probably in right now. This bubble even seems to include real estate and bonds in addition to stocks, and it has been driven by fabricated central bank liquidity.

Admittedly, I cannot be sure what will happen. I do not know if this bubble will burst, and I do not know if central banks will come running to the rescue again, as they did after the credit crisis. Unfortunately, I do know a great deal of people who believe that the central banks of the world will simply print more money if the going gets tough again, but that is a seriously risky bet. With major indices coming off all-time highs and technical trading patterns (dojis) surfacing in long-term chart patterns last week, potential reversal signals are coming on a technical basis. As much as it is appealing to opt for relaxation and vacationing during the summer months, some time must be spent evaluating the conditions the market is facing right now.

In previous articles, I have offered alternatives to the traditional buy-and-hold methodology, and I think everyone should consider heading that way because strategies like “lock and walk” can work no matter what happens. The risks in the market today are extremely high for buy-and-hold investors because the liquidity picture is changing for the worse, and that is fundamental in nature. But longer-term technical observations point toward serious risks as well. My longer-term macroeconomic analysis, The Investment Rate, is offering warnings that this market is 66% higher than it should be. Given the changes in liquidity and technical observations happening now, those risk warnings should be heard with an acute ear.

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A whole bunch of Lance graphs again. Hard to choose. But pretty as the graphs are, they do not paint a pretty picture. They say BUBBLE.

Valuation Measures & Forward Returns (Lance Roberts)

[..] if the market can reverse the current course of weakness and rally above recent highs, it will confirm the bull market is alive and well, and we will continue to look for a push to our next target of 2500. With portfolios currently fully allocated, we are simply monitoring risk and looking for opportunities to invest “new capital” into markets with a measured risk/reward ratio. However, this is a very short-term outlook which is why “price is the only thing that matters.” “Price measures the current “psychology” of the “herd” and is the clearest representation of the behavioral dynamics of the living organism we call “the market.” But in the long-term, fundamentals are the only thing that matters. I have shown you the following chart many times before. Which is simply a comparison of 20-year forward total real returns from every previous P/E ratio.

I know, I know. “P/E’s don’t matter anymore because of Central Bank interventions, accounting gimmicks, share buybacks, etc.” Okay, let’s play. In the following series of charts, I am using forward 10-year returns just for consistency as some of the data sets utilized don’t yet have enough history to show 20-years of forward returns. The purpose here is simple. Based on a variety of measures, is the valuation/return ratio still valid, OR, is this time really different? Let’s see. Tobin’s Q-ratio measures the market value of a company’s assets divided by its replacement costs. The higher the ratio, the higher the cost resulting in lower returns going forward. Just as a comparison, I have added Shiller’s CAPE-10. Not surprisingly the two measures not only have an extremely high correlation, but the return outcome remains the same.

One of the arguments has been that higher valuations are okay because interest rates are so low. Okay, let’s take the smoothed P/E ratio (CAPE-10 above) and compare it to the 10-year average of interest rates going back to 1900. The analysis that low rates justify higher valuations clearly does not withstand the test of history.

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Substitute nonprime for subprime and you open a whole new can of suckers again. “No, these are fine and upstanding citizens. They just don’t have access to normal bank loans.” Gee, why is that?

Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)

The appetite for riskier mortgages is rising, and a small cadre of investment firms is ready to feed it. Angel Oak Capital Advisors just announced its second rated securitization of nonprime residential mortgages this year, a deal worth just more than $210 million and its largest ever. Its first deal was slightly less, but demand from borrowers and investors alike is growing, and the securitizations are growing with it. Angel Oak is one of very few firms offering these private-label mortgage-backed securities — the ones that were so very popular during the last housing boom and which were later blamed for the financial crisis. Today’s nonprime loans, however, are nothing like the ones of the past. The government cracked down on faulty loan products, those with low teaser rates, negative amortization and no documentation.

Still, for the past decade investors wouldn’t touch anything that wasn’t government-backed. Only now are they seeing value and dipping their toes in again. The number of nonprime mortgage-backed securities “skyrocketed” in the second quarter of this year, according to Inside Mortgage Finance — a total of $1.08 billion of MBS backed by nonprime home loans. That was the strongest quarter for the sector since the financial crisis. It is still, however, nothing compared with the volume that caused the housing crash. “At one point during the housing boom, we had a third of all mortgage originations that were nonprime [subprime or Alt-A, the latter having low or no documentation]. We’re not going to be even 5% of the market if we have a record year this year. It still has a long, long way to go,” said Guy Cecala, CEO of Inside Mortgage Finance.

That is because while investors are hungry for yield, they are still very skeptical. The ratings agencies are as well. That makes it difficult for companies like Angel Oak, and its competitors — Lone Star and Deephaven Mortgage — to issue large quantities of nonprime MBS. Nonprime securitizations today are far less risky, consisting of loans that were underwritten far more stringently. Angel Oaks’ securitization does consist of both fixed- and floating-rate loans. “In addition to borrowers that had prior credit events, our loans are also for borrowers who are self-employed,” said Lauren Hedvat, capital markets director at Angel Oak. “They are of high credit quality, but they are not able to access mortgage products by the more traditional bank routes.”

Read more …

Start paying cash everywhere.

VISA takes its War on Cash to US Retailers (WS)

“We’re focused on putting cash out of business,” Visa’s new CEO Al Kelly said on June 22 at Visa Investor Day. Pushing consumers into digital and electronic payments is the company’s “number-one growth lever.” Visa has been dogged by the stubborn survival of cash and checks, despite widespread government and corporate efforts to kill them off. Globally, check and cash transactions totaled $17 trillion in 2016, Visa President Ryan McInerney said. Confusingly, that’s up 2% from a year earlier. So today, Visa rolled out a new initiative on its war on cash. It’s designed “for small business restaurants, cafés, or food truck owners,” and the like. In this trial, it will award up to $10,000 each to 50 eligible businesses (online businesses are excluded) when they commit to refusing cash payments.

Going “100% cashless,” as Visa calls it, means that consumers can only pay with debit or credit cards or with their smartphones. That’ll be the day. You go to your favorite taco truck, and when it comes time to pay, you pull out a wad of legal tender, only to be treated to an embarrassed nod toward a sign that says, “No Cash.” I’d walk. But Visa hopes that other folks will pull out their Visa-branded card or a smartphone with a payment app that uses the Visa system. This would help Visa extract its fees from the transaction. “We have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless,” Jack Forestell, Visa’s head of global merchant solutions, said in the press release, which touted a “study” that Visa recently “conducted” that “found that if businesses in 100 cities transitioned from cash to digital, their cities stand to experience net benefits of $312 billion per year.”

However dubious these “net benefits” may be, one thing is not dubious: Visa gets a cut from every transaction made via Visa-branded cards or digital payment systems that use Visa. The merchant pays the cut and then tries to pass it on to customers via higher prices. The total card fees normally range between 1% and 3%. Among the entities that get to divvy this moolah up are the bank that issued the visa card and the credit card network – such as Visa, MasterCard, and the like. Visa gets just a small piece of the pie, but if it is on every transaction, it adds up. And payments by cash and check seriously get in the way of a lot of money. In 2016, Visa extracted $15 billion from processing transactions globally without even carrying any credit risk (the banks have to deal with that).

Read more …

Purely symbolic. Everyone loves to present a meme of recovery, but it’s not there. Ironically, the move from deficit to -forced- surplus guarantees it. Greece should run a deficit now to boost its economy.

Greece To Exit EU’s Excessive Deficit Procedure (K.)

After eight years, Greece emerged on Wednesday from the European Commission’s process for countries with excessive deficit. The Commission proposed Greece’s exit from the process as its general government debt has dropped below the threshold of 3% of GDP. This is a largely symbolic move, but it does have some significance given that the government is planning to return to the bond markets for the first time since 2014. Economic Affairs Commissioner Pierre Moscovici gave a wink to the markets on Wednesday, saying that the disbursement of the tranche of 7.7 billion euros on Monday and the decision on the deficit is “good news that the markets ought to read,” even though he explained that what the investors do is not up to him.

Commission Vice President Valdis Dombrovskis called on Greece to capitalize on its achievements and continue to strengthen confidence in its economy, which is crucial as the country prepares its return to the credit markets. The Commission’s proposal for Greece’s emergence from the deficit procedure has to be ratified by the EU’s finance ministers, but has little practical use. Ultimately, Greece’s fiscal targets are dictated by the bailout agreement and not by the rules that apply to other eurozone members. As one European official told Kathimerini, “nothing changes essentially, the fiscal targets Greece must hit remain high and [yesterday’s] decision is only of a symbolic dimension.”

Read more …

Greece can only get worse, for many years into the future.

Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad

A new study highlights the problem in the Greek labor market as more than 30% of Greek unemployed say that they are actively seeking a job abroad. According to the annual survey by the firm Adecco titled “Employability in Greece,” the brain drain phenomenon has been increasing over the last three years. In 2015 only about 11% of unemployed respondents said that they were actively looking for a job abroad. This figure increased to 28% in 2016 and reached 33% this year. The responses show that the unemployed have different reasons to seek work abroad. Whereas in 2005, the main reason was the prospect of a better wage, in 2016 and 2017 the main reason given were better career opportunities.

The study conducted for the third year running, in collaboration with polling company LMG, was based on a sample of 903 people from the age of 18 to 67. According to other findings, 37% of respondents say that they have been out of the labor market for at least 12 months. Despite the slight improvement in official unemployment rates, the Adecco survey finds that there is an increasing number of people who state that they have been at least once without a job – 58% this year compared to 54% in 2016. According to the data, more than 1 out of 4 (28%) are out of the labor market, a higher rate compared with the previous two years.

Read more …

Money that could have helped Greece escape the claws of Schäuble et al. The pattern is not coincidental.

Germany Profits From Greek Debt Crisis (HB)

The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry, which confirmed the number in response to a parliamentary query from the Green Party, according to a report by German daily Süddeutsche Zeitung. The profits come from a range of programs, running into the hundreds of billions, that Germany and other euro-zone countries have backed to keep Greece’s government and economy afloat since its massive debt crisis emerged in 2009. It includes, for example, a €393-million profit generated from a 2010 loan by the development bank KfW, which is owned by the German government.

The report also shows that Germany’s central bank, the Bundesbank, has received profits from the Securities Market Program (SMP), a now-defunct government bond-buying plan initiated by the ECB and run from 2010 to 2012. The ECB collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it bought through the SMP, according to the report. This year, the figure will be €901 million, which will again be redistributed to the euro zone’s 19 member states. Since 2015, Germany has collected a total of €952 million in SMP profits. The new revelations drew strong criticism from the Greens Party, in opposition. “The profits from collecting interest must be paid out to Greece. [Finance Minister] Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget,” Manuel Sarrazin, EU expert for the Green Party in the parliament, told the Süddeutsche newspaper.

Mr. Schäuble, a member of Chancellor Angela Merkel’s conservative Christian Democrats, has been cannily keeping Germany’s federal budget balanced over the past four years, taking on no new debt. Berlin’s surplus amounted to €6.2 billion in 2016 alone. Critics complain that Greece’s crisis has helped it achieve that goal. “It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right,” Sven-Christian Kindler, budget policy spokesperson for the Green Party, also told the paper. Mr. Schäuble has said he is open to reducing Greece’s interest burden but has resisted calls to end them completely. His finance ministry has argued that, with inflation, deferring interest payments would eventually end up costing Greece’s creditors.

Read more …

There are many parties not too keen on such an investigation, and Varoufakis is not one of them.

Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

Undeterred over the controversy surrounding the new disclosures over the system of a parallel currency that was apparently considered by the government of Alexis Tsipras in 2015, Yanis Varoufakis said that he is ready to face any court to respond to the charges. Speaking in a radio show, Varoufakis, the finance minister at the time and the instigator of the parallel payments system or Plan B, said that Tsipras had a copy of the proposals from as early as 2012 when he was still in opposition. “I have handed the plan to Tsipras in 2012,” so it could become the government’s plan B if negotiations with Greece’s creditors collapsed.

Mr. Varoufakis said he was willing to accept any kind of judicial investigation into Plan B and his role in drafting it. “Let’s have a special court of inquiry, or even a martial court, or any other court, so all the facts can be revealed,” he said responding to calls from the opposition for a judicial inquiry. He also attacked the SYRIZA-led government for refusing to proceed with an investigation. The Varoufakis Plan B for the Greek economy in the event that the country clashed with creditors and went bankrupt was to partially pay civil servants with coupons. Parts of the plan were revealed last week by his financial advisor Glenn Kim.

Read more …

Apr 232017
 
 April 23, 2017  Posted by at 2:31 pm Finance Tagged with: , , , , , , , , , ,  11 Responses »
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René Magritte Le Cri du Coeur 1960

 

Austerity is over, proclaimed the IMF this week. And no doubt attributed that to the ‘successful’ period of ‘five years of belt tightening’ a.k.a. ‘gradual fiscal consolidation’ it has, along with its econo-religious ilk, imposed on many of the world’s people. Only, it’s not true of course. Austerity is not over. You can ask many of those same people about that. It’s certainly not true in Greece.

IMF Says Austerity Is Over

Austerity is over as governments across the rich world increased spending last year and plan to keep their wallets open for the foreseeable future. After five years of belt tightening, the IMF says the era of spending cuts that followed the financial crisis is now at an end. “Advanced economies eased their fiscal stance by one-fifth of 1pc of GDP in 2016, breaking a five-year trend of gradual fiscal consolidation,” said the IMF in its fiscal monitor.

In Greece, the government did not increase spending in 2016. Nor is the country’s era of spending cuts at an end. So did the IMF ‘forget’ about Greece? Or does it not count it as part of the rich world? Greece is a member of the EU, and the EU is absolutely part of the rich world, so that can’t be it. Something Freudian, wishful thinking perhaps?

However this may be, it’s obvious the IMF are not done with Greece yet. And neither are the rest of the Troika. They are still demanding measures that are dead certain to plunge the Greeks much further into their abyss in the future. As my friend Steve Keen put it to me recently: “Dreadful. It will become Europe’s Somalia.”

An excellent example of this is the Greek primary budget surplus. The Troika has been demanding that it reach 3.5% of GDP for the next number of years (the number changes all the time, 3, 5, 10?). Which is the worst thing it could do, at least for the Greek people and the Greek economy. Not for those who seek to buy Greek assets on the cheap.

 

But sure enough, the Hellenic Statistical Authority (ELSTAT) jubilantly announced on Friday that the 2016 primary surplus was 4.19% (8 times more than the 0.5% expected). This is bad news for Greeks, though they don’t know it. It is also a condition for receiving the next phase of the current bailout. Here’s what that comes down to: in order to save itself from default/bankruptcy, the country is required to destroy its economy.

And that’s not all: the surplus is a requirement to get a next bailout tranche, and debt relief, but as a reward for achieving that surplus, Greece can now expect to get less … debt relief. Because obviously they’re doing great, right?! They managed to squeeze another €7.3 billion out of their poor. So they should always be able to do that in every subsequent year.

The government in Athens sees the surplus as a ‘weapon’ that can be used in the never-ending bailout negotiations, but the Troika will simply move the goalposts again; that’s its MO.

A country in a shape as bad as Greece’s needs stimulus, not a budget surplus; a deficit would be much more helpful. You could perhaps demand that the country goes for a 0% deficit, though even that is far from ideal. But never a surplus. Every penny of the surplus should have been spent to make sure the economy doesn’t get even worse.

Greek news outlet Kathimerini gets it sort of right, though its headline should have read “Greek Primary Surplus Chokes Economy“.

Greek Primary Surplus Chokes Market

The state’s fiscal performance last year has exceeded even the most ambitious targets, as the primary budget surplus as defined by the Greek bailout program, came to 4.19% of GDP, government spokesman Dimitris Tzanakopoulos announced on Friday. It came to €7.369 billion against a target for €879 million, or just 0.5% of GDP. A little earlier, the president of the Hellenic Statistical Authority (ELSTAT), Thanos Thanopoulos, announced the primary surplus according to Eurostat rules, saying that it came to 3.9% of GDP or €6.937 billion.

The two calculations differ in methodology, but it is the surplus attained according to the bailout rules that matters for assessing the course of the program. This was also the first time since 1995 that Greece achieved a general government surplus – equal to 0.7% of GDP – which includes the cost of paying interest to the country’s creditors. There is a downside to the news, however, as the figures point to overtaxation imposed last year combined with excessive containment of expenditure.

The amount of €6-6.5 billion collected in excess of the budgeted surplus has put a chokehold on the economy, contributing to a great extent to the stagnation recorded on the GDP level in 2016. On the one hand, the impressive result could be a valuable weapon for the government in its negotiations with creditors to argue that it is on the right track to fiscal streamlining and can achieve or even exceed the agreed targets. On the other hand, however, the overperformance of the budget may weaken the argument in favor of lightening the country’s debt load.

Eurogroup head Dijsselbloem sees no shame in admitting this last point :

Dijsselbloem Sees ‘Tough’ Greek Debt Relief Talks With IMF

“That will be a tough discussion with the IMF,” said Dijsselbloem, who is also the Dutch Finance Minister in a caretaker cabinet, “There are some political constraints where we can go and where we can’t go.” The level of Greece’s primary budget surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed.

That’s just plain insane, malicious even. Greek PM Tsipras should never have accepted any such thing, neither the surplus demands nor the fact that they affect debt relief, since both assure a further demise of the economy.

Because: where does the surplus come from? Easy: from Troika-mandated pension cuts and rising tax levels. That means the Greek government is taking money OUT of the economy. And not a little bit, but a full 4% of GDP, over €7 billion. An economy from which so much has already vanished.

The €7.369 billion primary surplus, in a country of somewhere between 10 and 11 million people, means some €700 per capita has been taken out of the economy in 2016. Money that could have been used to spend inside that economy, saving jobs, and keeping people fed and sheltered. For a family of 3.5 people that means €200 per month less to spend on necessities (the only thing most Greeks can spend any money on).

I’ve listed some of the things a number of times before that have happened to Greece since the EU and IMF declared de facto financial war on the country. Here are a few (there are many more where these came from):

25-30% of working age Greeks are unemployed (and that’s just official numbers), well over 1 million people; over 50% of young people are unemployed. Only one in ten unemployed Greeks receive an unemployment benefit (€360 per month), and only for one year. 9 out of 10 get nothing.

Which means 52% of Greek households are forced to live off the pension of an elderly family member. 60% of Greek pensioners receive pensions below €700. 45% of pensioners live below the poverty line with pensions below €665. Pensions have been cut some 12 times already. More cuts are in the pipeline.

40% of -small- businesses have said they expect to close in 2017. Even if it’s just half that, imagine the number of additional jobs that will disappear.

 

But the Troika demands don’t stop there; they are manifold. On top of the pension cuts and the primary surplus requirement, there are the tax hikes. So the vast majority of Greeks have ever less money to spend, the government takes money out of the economy to achieve a surplus, and on top of that everything gets more expensive because of rising taxes. Did I ever mention businesses must pay their taxes up front for a full year?

The Troika is not “rebalancing Greece’s public finances in a growth-friendly manner”, as Dijsselbloem put it, it is strangling the economy. And then strangling it some more.

There may have been all sorts of things wrong in Greece, including financially. But that is true to some degree for every country. And there’s no doubt there was, and still is, a lot of corruption. But that would seem to mean the EU must help fight that corruption, not suffocate the poor.

 


Yes, that’s about a 30% decline in GDP since 2007

 

The ECB effectively closed down the Greek banking system in 2015, in a move that’s likely illegal. It asked for a legal opinion on the move but refuses to publish that opinion. As if Europeans have no right to know what the legal status is of what their central bank does.

The ECB also keeps on refusing to include Greece in its QE program. It buys bonds and securities from Germany, which doesn’t need the stimulus, and not those of Greece, which does have that need. Maybe someone should ask for a legal opinion on that too.

The surplus requirements will be the nail in the coffin that do Greece in. Our economies depend for their GDP numbers on consumer spending, to the tune of 60-70%. Since Greek ‘consumers’ can only spend on basic necessities, that number may be even higher there. And that is the number the country is required to cut even more. Where do you think GDP is headed in that scenario? And unemployment, and the economy at large?

The question must be: don’t the Troika people understand what they’re doing? It’s real basic economics. Or do they have an alternative agenda, one that is diametrically opposed to the “rebalancing Greece’s public finances in a growth-friendly manner” line? It has to be one of the two; those are all the flavors we have.

You can perhaps have an idea that a country can spend money on wrong, wasteful things. But that risk is close to zilch in Greece, where many if not most people already can’t afford the necessities. Necessities and waste are mutually exclusive. A lot more money is wasted in Dijsselbloem’s Holland than in Greece.

In a situation like the one Greece is in, deflation is a certainty, and it’s a deadly kind of deflation. What makes it worse is that this remains hidden because barely a soul knows what deflation is.

Greece’s deflation hides behind rising taxes. Which is why taxes should never be counted towards inflation; it would mean all a government has to do to raise inflation is to raise taxes; a truly dumb idea. Which is nevertheless used everywhere on a daily basis.

In reality, inflation/deflation is money/credit supply multiplied by the velocity of money. And in Greece both are falling rapidly. The primary surplus requirements make it that much worse. It really is the worst thing one could invent for the country.

For the Greek economy, for its businesses, for its people, to survive and at some point perhaps even claw back some of the 30% of GDP it lost since 2007, what is needed is a way to make sure money can flow. Not in wasteful ways, but in ways that allow for people to buy food and clothing and pay for rent and power.

If you want to do that, taking 4% of GDP out of an economy, and 3.5% annually for years to come, is the very worst thing. That can only make things worse. And if the Greek economy deteriorates further, how can the country ever repay the debts it supposedly has? Isn’t that a lesson learned from the 1919 Versailles treaty?

The economists at the IMF and the EU/ECB, and the politicians they serve, either don’t understand basic economics, or they have their eyes on some other prize.

 

Mar 082017
 
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Dorothea Lange A Family Of Mexican Migrants, On The Road In California 1936

 

Wikileaks ‘Vault 7’, Largest Ever Publication Of Confidential CIA Docs (ZH)
Snowden: What The Wikileaks Revelations Show Is “Reckless Beyond Words” (ZH)
WikiLeaks Releases Trove of Alleged CIA Hacking Documents (NYT)
Wikileaks: CIA Capable Of Cyber “False Flag” Attack To Blame Russia (TAM)
CIA Contractor on #VAULT7 Leak: ‘There is Heavy Shit Coming Down’ (RF)
US Trade Deficit Jumps To Five-Year High On Imports (R.)
China Posts Rare Trade Deficit As February Imports Surge in Yuan Terms (R.)
Why Are Europe’s Small Central Banks Stocking Up Foreign Money? (WSJ)
Dispel The Economic Myths That Hold Women Back (Ann Pettifor)
Austerity Is A Feminist Issue (G.)
The Women’s Protest That Sparked The Russian Revolution (G.)
Vacant Homes Are A Global Epidemic (BD)
There’s No Housing Bubble in Australia, Heads of Big Banks Say (BBG)
Australian Lenders Are Handing Out Mortgages Like Confetti (LF)
Greece’s Still-Falling GDP Dispels Creditors’ “Recovery” Myth (Prime)
Tax Weary Greek Employers Pay In Kind As Creditor Demands Rise (BBG)
America’s Forgotten History of Illegal Deportations (Atlantic)

 

 

It’s obvious there is only one story today, which ironically(?!) blows the whole Trump-Russia accusation narrative to bits, even though of course Russia gets the blame for this too in all sorts of corners. But the files are reported to have been ‘out there’ for a while, in the hands of hackers and possible foreign agencies. The CIA spent a huge wad of taxpayer money on this, and then lost it all. It’s early days to say what this will mean for the agency’s abilities, and the nation’s safety, as well as that of American citizens, but it’s not good. Question is: who’s going to investigate how this could have happened? (Snowden and Kim Dotcom could)… And who’s going to repair the damage done? Anyone could be spying on your phone and your TV by now, not just the CIA -as if that wouldn’t be bad enough.

And this is just the first part. Wikileaks has announced more from where this came from.

Wikileaks ‘Vault 7’, Largest Ever Publication Of Confidential CIA Docs (ZH)

A total of 8,761 documents have been published as part of ‘Year Zero’, the first in a series of leaks the whistleblower organization has dubbed ‘Vault 7.’ WikiLeaks said that ‘Year Zero’ revealed details of the CIA’s “global covert hacking program,” including “weaponized exploits” used against company products including “Apple’s iPhone, Google’s Android and Microsoft’s Windows and even Samsung TVs, which are turned into covert microphones.”

WikiLeaks tweeted the leak, which it claims came from a network inside the CIA’s Center for Cyber Intelligence in Langley, Virginia.

Among the more notable disclosures which, if confirmed, “would rock the technology world“, the CIA had managed to bypass encryption on popular phone and messaging services such as Signal, WhatsApp and Telegram. According to the statement from WikiLeaks, government hackers can penetrate Android phones and collect “audio and message traffic before encryption is applied.”

Another profound revelation is that the CIA can engage in “false flag” cyberattacks which portray Russia as the assailant. Discussing the CIA’s Remote Devices Branch’s UMBRAGE group, Wikileaks’ source notes that it “collects and maintains a substantial library of attack techniques ‘stolen’ from malware produced in other states including the Russian Federation.

“With UMBRAGE and related projects the CIA cannot only increase its total number of attack types but also misdirect attribution by leaving behind the “fingerprints” of the groups that the attack techniques were stolen from. UMBRAGE components cover keyloggers, password collection, webcam capture, data destruction, persistence, privilege escalation, stealth, anti-virus (PSP) avoidance and survey techniques.”

As Kim Dotcom summarizes this finding, “CIA uses techniques to make cyber attacks look like they originated from enemy state. It turns DNC/Russia hack allegation by CIA into a JOKE

But perhaps what is most notable is the purported emergence of another Snowden-type whistleblower: the source of the information told WikiLeaks in a statement that they wish to initiate a public debate about the “security, creation, use, proliferation and democratic control of cyberweapons.”  Policy questions that should be debated in public include “whether the CIA’s hacking capabilities exceed its mandated powers and the problem of public oversight of the agency,” WikiLeaks claims the source said.

The FAQ section of the release, shown below, provides further details on the extent of the leak, which was “obtained recently and covers through 2016”. The time period covered in the latest leak is between the years 2013 and 2016, according to the CIA timestamps on the documents themselves. Secondly, WikiLeaks has asserted that it has not mined the entire leak and has only verified it, asking that journalists and activists do the leg work.

Among the various techniques profiled by WikiLeaks is “Weeping Angel”, developed by the CIA’s Embedded Devices Branch (EDB), which infests smart TVs, transforming them into covert microphones. After infestation, Weeping Angel places the target TV in a ‘Fake-Off’ mode, so that the owner falsely believes the TV is off when it is on. In ‘Fake-Off’ mode the TV operates as a bug, recording conversations in the room and sending them over the Internet to a covert CIA server.

As Kim Dotcom chimed in on Twitter, “CIA turns Smart TVs, iPhones, gaming consoles and many other consumer gadgets into open microphones” and added ” CIA turned every Microsoft Windows PC in the world into spyware. Can activate backdoors on demand, including via Windows update”

Dotcom also added that “Obama accused Russia of cyberattacks while his CIA turned all internet enabled consumer electronics in Russia into listening devices. Wow!”

Julian Assange, WikiLeaks editor stated that “There is an extreme proliferation risk in the development of cyber ‘weapons’. Comparisons can be drawn between the uncontrolled proliferation of such ‘weapons’, which results from the inability to contain them combined with their high market value, and the global arms trade. But the significance of “Year Zero” goes well beyond the choice between cyberwar and cyberpeace. The disclosure is also exceptional from a political, legal and forensic perspective.”

Read more …

“…first public evidence US [Government] secretly paying to keep US software unsafe”

Snowden: What The Wikileaks Revelations Show Is “Reckless Beyond Words” (ZH)

While it has been superficially covered by much of the press – and one can make the argument that what Julian Assange has revealed is more relevant to the US population, than constant and so far unconfirmed speculation that Trump is a puppet of Putin – the fallout from the Wikileaks’ “Vault 7” release this morning of thousands of documents demonstrating the extent to which the CIA uses backdoors to hack smartphones, computer operating systems, messenger applications and internet-connected televisions, will be profound. As evidence of this, the WSJ cites an intelligence source who said that “the revelations were far more significant than the leaks of Edward Snowden.”

Mr. Snowden’s leaks revealed names of programs, companies that assist the NSA in surveillance and in some cases the targets of American spying. But the recent leak purports to contain highly technical details about how surveillance is carried out. That would make them far more revealing and useful to an adversary, this person said. In one sense, Mr. Snowden provided a briefing book on U.S. surveillance, but the CIA leaks could provide the blueprints. Speaking of Snowden, the former NSA contractor-turned-whistleblower, who now appears to have a “parallel whisteblower” deep inside the “Deep State”, i.e., the source of the Wikileaks data – also had some thoughts on today’s CIA dump.

In a series of tweets, Snowden notes that “what @Wikileaks has here is genuinely a big deal”, and makes the following key observations “If you’re writing about the [email protected] story, here’s the big deal: first public evidence USG secretly paying to keep US software unsafe” and adds that “the CIA reports show the USG developing vulnerabilities in US products, then intentionally keeping the holes open. Reckless beyond words.” He then asks rhetorically “Why is this dangerous?” and explains “Because until closed, any hacker can use the security hole the CIA left open to break into any iPhone in the world.” His conclusion, one which many of the so-called conspiratorial bent would say was well-known long ago: “Evidence mounts showing CIA & FBI knew about catastrophic weaknesses in the most-used smartphones in America, but kept them open – to spy.”

Read more …

“..WikiLeaks, which has sometimes been accused of recklessly leaking information that could do harm, said it had redacted names and other identifying information from the collection. It said it was not releasing the computer code for actual, usable weapons “until a consensus emerges on the technical and political nature of the C.I.A.’s program and how such ‘weapons’ should be analyzed, disarmed and published.”

WikiLeaks Releases Trove of Alleged CIA Hacking Documents (NYT)

In what appears to be the largest leak of C.I.A documents in history, WikiLeaks released on Tuesday thousands of pages describing sophisticated software tools and techniques used by the agency to break into smartphones, computers and even Internet-connected televisions. The documents amount to a detailed, highly technical catalog of tools. They include instructions for compromising a wide range of common computer tools for use in spying: the online calling service Skype; Wi-Fi networks; documents in PDF format; and even commercial antivirus programs of the kind used by millions of people to protect their computers. A program called Wrecking Crew explains how to crash a targeted computer, and another tells how to steal passwords using the autocomplete function on Internet Explorer. Other programs were called CrunchyLimeSkies, ElderPiggy, AngerQuake and McNugget.

The document dump was the latest coup for the antisecrecy organization and a serious blow to the C.I.A., which uses its hacking abilities to carry out espionage against foreign targets. The initial release, which WikiLeaks said was only the first installment in a larger collection of secret C.I.A. material, included 7,818 web pages with 943 attachments, many of them partly redacted by WikiLeaks editors to avoid disclosing the actual code for cyberweapons. The entire archive of C.I.A. material consists of several hundred million lines of computer code, the group claimed. In one revelation that may especially trouble the tech world if confirmed, WikiLeaks said that the C.I.A. and allied intelligence services have managed to compromise both Apple and Android smartphones, allowing their officers to bypass the encryption on popular services such as Signal, WhatsApp and Telegram. According to WikiLeaks, government hackers can penetrate smartphones and collect “audio and message traffic before encryption is applied.”

Unlike the National Security Agency documents Edward J. Snowden gave to journalists in 2013, they do not include examples of how the tools have been used against actual foreign targets. That could limit the damage of the leak to national security. But the breach was highly embarrassing for an agency that depends on secrecy. Robert M. Chesney, a specialist in national security law at the University of Texas at Austin, likened the C.I.A. trove to National Security Agency hacking tools disclosed last year by a group calling itself the Shadow Brokers. “If this is true, it says that N.S.A. isn’t the only one with an advanced, persistent problem with operational security for these tools,” Mr. Chesney said. “We’re getting bit time and again.”

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No ‘evidence’ (and remember none was provided to date) of Russian spying is the least bit credible anymore after today.

Wikileaks: CIA Capable Of Cyber “False Flag” Attack To Blame Russia (TAM)

According to a Wikileaks press release, the 8,761 newly published files came from the CIA’s Center for Cyber Intelligence (CCI) in Langley, Virginia. The release says that the UMBRAGE group, a subdivision of the center’s Remote Development Branch (RDB), has been collecting and maintaining a “substantial library of attack techniques ‘stolen’ from malware produced in other states, including the Russian Federation.” As Wikileaks notes, the UMBRAGE group and its related projects allow the CIA to misdirect the attribution of cyber attacks by “leaving behind the ‘fingerprints’ of the very groups that the attack techniques were stolen from.”

In other words, the CIA’s sophisticated hacking tools all have a “signature” marking them as originating from the agency. In order to avoid arousing suspicion as to the true extent of its covert cyber operations, the CIA has employed UMBRAGE’s techniques in order to create signatures that allow multiple attacks to be attributed to various entities – instead of the real point of origin at the CIA – while also increasing its total number of attack types. Other parts of the release similarly focus on avoiding the attribution of cyberattacks or malware infestations to the CIA during forensic reviews of such attacks. In a document titled “Development Tradecraft DOs and DON’Ts,” hackers and code writers are warned “DO NOT leave data in a binary file that demonstrates CIA, U.S. [government] or its witting partner companies’ involvement in the creation or use of the binary/tool.” It then states that “attribution of binary/tool/etc. by an adversary can cause irreversible impacts to past, present and future U.S. [government] operations and equities.”

While a major motivating factor in the CIA’s use of UMBRAGE is to cover it tracks, events over the past few months suggest that UMBRAGE may have been used for other, more nefarious purposes. After the outcome of the 2016 U.S. presidential election shocked many within the U.S. political establishment and corporate-owned media, the CIA emerged claiming that Russia mounted a “covert intelligence operation” to help Donald Trump edge out his rival Hillary Clinton.[..] the U.S. intelligence community’s assertions that Russia used cyber-attacks to interfere with the election overshadowed reports that the U.S. government had actually been responsible for several hacking attempts that targeted state election systems.

For instance, the state of Georgia reported numerous hacking attempts on its election agencies’ networks, nearly all of which were traced back to the U.S. Department of Homeland Security. Now that the CIA has been shown to not only have the capability but also the express intention of replacing the “fingerprint” of cyber-attacks it conducts with those of another state actor, the CIA’s alleged evidence that Russia hacked the U.S. election – or anything else for that matter – is immediately suspect. There is no longer any way to determine if the CIA’s proof of Russian hacks on U.S. infrastructure is legitimate, as it could very well be a “false flag” attack.

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“..we come to find out the same people who told us the Russians were our enemy, revealing corruption and depravity on a monumental scale via the Podesta emails, they were, in fact, the ones spying on us all along – both lying and mocking us like Lords in a fiefdom.”

CIA Contractor on #VAULT7 Leak: ‘There is Heavy Shit Coming Down’ (RF)

Everything that Wikileaks has revealed over the past year has hurt both the integrity and honor of the United States. The question you have to grapple with, is it well deserved? After all, living inside of a vast and powerful empire has its benefits. As the empire expands, so does the wealth of its citizens. But it hasn’t worked out that way, has it? The CIA deep staters have turned their guns on the people they serve – using third world banana republic tactics to silence opposition, take down regimes not beholden to their world view, using advanced technology to both spy and monitor on American citizens – infringing on our civil rights like nothing we’ve ever seen before. The reason for the populist uprising and the lack of equanimity amongst those traditionally supportive of the CIA lies in the improper distribution of the spoils of war. There aren’t any.

All the average American has received from $10 trillion in Obama inspired deficit spending is American casualties of war, jobs lost to cheaper labor overseas, expensive oil prices, expensive healthcare, and run away education costs – along with a sundry of social disturbances that have people fed up. While the elite flaunt hedonistic lifestyles, eschewing basic decency for the perverse, normies get more of the same old bullshit. After electing a true agent of change in Donald Trump, the people are laughed at and impugned by the elitist media. Their President is set upon by ‘permanent government’ officials in the intelligence agencies – whose only goal is to derail and destroy his term before it even begins.

Then we come to find out the same people who told us the Russians were our enemy, revealing corruption and depravity on a monumental scale via the Podesta emails, they were, in fact, the ones spying on us all along – both lying and mocking us like Lords in a fiefdom. Here’s Fox News reporting on the latest scandal to hit the wires, #VAULT7 Fox New sources inside the CIA said the agency was running around like headless chickens, saying ‘there is heavy shit coming down.’

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US exports are plunging. 10.7% to Germany, 13.4% to China.

US Trade Deficit Jumps To Five-Year High On Imports (R.)

The U.S. trade deficit jumped to a near five-year high in January as cell phones and rising oil prices helped to push up the import bill, suggesting trade would again weigh on economic growth in the first quarter. The Commerce Department said on Tuesday the trade gap increased 9.6% to $48.5 billion, the highest level since March 2012. The deficit was in line with economists forecasts. December’s trade shortfall was unrevised at $44.3 billion. When adjusted for inflation, the trade deficit rose to $65.3 billion from $62.0 billion in December. Both the inflation-adjusted exports and imports were the highest on record in January.

The wider trade gap added to weak data such as housing starts, consumer and construction spending in suggesting the economy struggled to regain momentum early in the first quarter after growth slowed to a 1.9% annualized rate in the final three months of 2016. The economy grew at a 3.5% pace in the third quarter. Trade cut 1.7 percentage points from GDP in the fourth quarter. The Atlanta Fed is forecasting GDP rising at a 1.8% rate in the first quarter. The dollar was trading marginally higher, while prices for U.S. government bonds were little changed. U.S. stock index futures were slightly lower. The Trump administration is eyeing trade as it seeks 4% annual GDP growth. President Donald Trump has vowed sweeping changes to U.S. trade policy, starting with pulling out of the 12-nation TPP.

[..] The bulk of the increase in the trade-weighted value of the greenback occurred in the final months of 2016 and will probably take a while to reflect in the trade data. Exports to Germany tumbled 10.7%. A Trump trade adviser has accused Germany of unfairly benefiting from a weak euro. Shipments of goods to China, also singled out by the Trump administration, dropped 13.4%. The politically sensitive U.S.-China trade deficit increased 12.8% to $31.3 billion in January, while the trade gap with Germany fell 8.0% to $4.9 billion. The United States also saw its trade deficit with Mexico shrink 10.1% to its lowest level since July 2015.

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We need to see: 1) dollar terms and 2) Lunar New Year distortions.

China Posts Rare Trade Deficit As February Imports Surge in Yuan Terms (R.)

China unexpectedly posted a rare trade deficit in February as imports surged far more than expected to feed a months-long construction boom, driven by commodities from iron ore and copper to crude oil and coal. Imports in yuan-denominated terms surged 44.7 percent from a year earlier, while exports rose 4.2 percent, official data showed on Wednesday. That left the country with a trade deficit of 60.63 billion yuan ($8.79 billion) for the month, the General Administration of Customs said. Customs has not yet published dollar-denominated trade figures, on which most economists and investors base their forecasts and analysis. Apart from currency fluctuations, higher commodity prices and the timing of the long Lunar New year holidays early in the year also may have distorted the data.

Most of China’s commodity imports grew strongly in volume terms from a year earlier, but dipped from January. Still, economists say the upbeat readings reinforced a growing view that economic activity in China and globally picked up in the first two months of the year. That could give China’s policymakers more confidence to press ahead with oft-delayed and painful structural reforms such as tackling a mountain of debt. Containing the risks from years of debt-fueled stimulus and heavy spending has been a major focus at the annual meeting of China’s parliament which began on Sunday.

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They know something?!

Why Are Europe’s Small Central Banks Stocking Up Foreign Money? (WSJ)

Europe’s smaller central banks are loading up on foreign currencies at rates usually associated with periods of intense global stress, highlighting the fragile underpinnings of the global economic recovery despite the recent upbeat mood in financial markets. Switzerland’s holdings of foreign assets jumped last month at their fastest pace in over two years as its central bank fought the strong franc, which weakens exports and inflation. The Czech central bank intervened in January on a massive scale to maintain its currency target against the euro. Denmark has also stepped up its foreign-currency purchases to keep the krone from strengthening too much. These central banks are showing crisis-like behavior to protect their currencies even in the absence of obvious trouble. This exposes them to losses if their currencies fail to weaken on their own.

It also raises doubts as to how long they can keep this up in an era when economic and political uncertainties appear to be a lasting feature of the world economy. “There is a little bit of survivor behavior,” said Peter Rosenstreich, head of market strategy at Swissquote Bank. “They’ve been protecting their currencies so long and it’s hard to give up that defensive position.” The Swiss National Bank said Tuesday its foreign exchange reserves swelled nearly 25 billion Swiss francs ($24.63 billion) last month to 668 billion francs, the biggest rise since December 2014, the month before the Swiss abandoned a cap on the franc’s value. The pile of foreign reserves is greater than Switzerland’s entire gross domestic product. “It’s quite bizarre. You’d think at some time you’d run out of surprises,” said Stefan Gerlach, chief economist at BSI Bank in Zurich and a former deputy governor at Ireland’s central bank.

[..] Central banks accumulate foreign reserves when they purchase assets denominated in other currencies, using freshly created money. They do this to weaken their currencies, protecting exports and giving a boost to inflation. Foreign reserves can waver slightly due to changes in currency values, but big increases like Switzerland’s signal aggressive intervention. This tool has gained traction in recent years as official rates have turned negative in Denmark and Switzerland and are near zero in the Czech Republic.

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A few good articles for International Women’s Day. Pettifor’s insistence that households are not like governments is important.

Dispel The Economic Myths That Hold Women Back (Ann Pettifor)

There are two economic myths that fail the interests of women. The first is the fallacy that government budgets conform to “the household analogy”: that, as with family budgets, a state’s outgoings cannot exceed its income. The second is that “there is no money” for the services women use and need. On the first, the public are told that cuts in spending and in some benefits, combined with rises in income from taxes will – just as with a household – balance the budget. Even though a single household’s budget is a) minuscule compared to that of a government; b) does not, like the government’s, impact on the wider economy; c) does not benefit from tax revenues (now, or in the foreseeable future); and d) is not backed by a powerful central bank. Despite all these obvious differences, government budgets are deemed analogous (by economists and politicians) to a household budget.

To understand why the government/household analogy is false it is important to understand that the balance of the government budget, unlike that of a household, is entirely a function of the wider economy. If the economy slumps (as in 2008-9) and the private sector weakens, then like a see-saw the public sector deficit, and then the debt, rises. When private economic activity revives (thanks to increased investment, employment, sales etc) tax revenues rise, unemployment benefits fall, and the government deficit and debt follow the same downward trajectory. So, to balance the government’s budget, efforts must be made to revive Britain’s economy, including the indebted private sector.

Because government spending (unlike a household’s spending) has a big impact on the economy, governments can use loan-financed investment to expand tax-generating employment – both public (for example, nurses and teachers) and private sector employment (construction workers). Both nurses and construction workers will return a large part of their incomes into the economy through spending, benefitting the private sector. Thanks to the multiplier effect, that spending will generate VAT and corporation tax revenues – for repaying government debt. George Osborne believed that government spending cuts would be offset by a rise in private sector confidence, inspired by a government “getting its house in order”. But that did not happen.

As many of us predicted, government spending cuts contracted the economy further. Economic activity (investment, sales, employment) was weaker than expected. Even when employment revived, lower wages and insecure, part-time work meant that income and corporate taxes were lower than expected. So government borrowing did not fall. As a result, public debt as a share of GDP was higher than expected. In the meantime, massive harm had been done to public sector services and those employed in the sector – while the economy endured the slowest post-crisis recovery in history. And it was women who largely paid the price.

One woman can be said to have given the phrase “there is no money” much credibility. In her 1983 speech to the Conservative party conference, Margaret Thatcher declared that: “The state has no source of money, other than the money people earn themselves. If the state wishes to spend more it can only do so by borrowing your savings, or by taxing you more … There is no such thing as public money. There is only taxpayers’ money.” Today this framing of the debate is at odds with reality. After the financial crisis, the Bank of England injected £1,000bn into the private finance sector to prevent systemic economic failure. And after the shock of the Brexit vote, the Bank unveiled the “Term Funding Scheme” as part of a £170bn “stimulus package” aimed at the private finance sector. The money was “public money” offered at a historically low interest rate – to bankers. It was not raised by cutting spending, and it was not raised from “your taxes”, even while its issue was backed by Britain’s taxpayers.

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Good points.

Austerity Is A Feminist Issue (G.)

Women are massively more affected by budget cuts than men, says the Labour peer. They are more likely to be single parents, earn less and work part time than their male counterparts. She argues the government must replace ‘gender-neutral’ budgeting with economic policies that put women first.

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100 years ago.

The Women’s Protest That Sparked The Russian Revolution (G.)

The first day of the Russian revolution – 8 March (23 February in the old Russian calendar) – was International Women’s Day, an important day in the socialist calendar. By midday of that day in 1917 there were tens of thousands of mainly women congregating on the Nevsky Propsekt, the principal avenue in the centre of the Russian capital, Petrograd, and banners started to appear. The slogans on the banners were patriotic but also made forceful demands for change: “Feed the children of the defenders of the motherland”, read one; another said: “Supplement the ration of soldiers’ families, defenders of freedom and the people’s peace”. The crowds of demonstrators were varied. The city’s governor, AP Balk, said they consisted of “ladies from society, lots more peasant women, student girls and, compared with earlier demonstrations, not many workers”. The revolution was begun by women, not male workers.

In the afternoon the mood began to change as female textile workers from the Vyborg side of the city came out on strike in protest against shortages of bread. Joined by their menfolk, they swelled the crowds on the Nevsky, where there were calls for “Bread!” and “Down with the tsar!” By the end of the afternoon, 100,000 workers had come out on strike, and there were clashes with police as the workers tried to cross the Liteiny bridge, connecting the Vyborg side with the city centre. Most were dispersed by the police but several thousand crossed the ice-packed river Neva (a risky thing to do at -5C) and some, angered by the fighting, began to loot the shops on their way to the Nevsky. Balk’s Cossacks struggled to clear the crowds on the Nevsky. They would ride up the demonstrators, only to stop short and retreat. Later it emerged that they were mostly young reservists who had no experience of dealing with crowds.

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How to kill a city part 829.

Vacant Homes Are A Global Epidemic (BD)

Runaway real estate speculation has been filling global capitals with vacant homes, creating artificial shortages in the world’s most sought after cities. The “shortage” has made local home owners wealthy overnight, but it comes at the cost of turning lively cities into empty shells. The city of Paris has decided it’s had enough, and implemented a tax in 2015. They didn’t quite get the results they wanted, so they’re now tripling the tax to 60%. Paris has been trying to deal with vacant property owners for some time. Despite warnings that the city will have to take action, the number of vacant homes is growing. There’s now 107,000 vacant homes, representing 7.5% of all residential dwellings in the city according to France’s INSEE. Deputy Mayor Ian Brossat told Le Monde that 40,000 of those vacant homes aren’t even connected to the electrical grid.

Local developers have argued that more new construction is the solution. However Brossat argues “In a city as dense as Paris, where it is very difficult to build, controlling the occupancy of housing is strategic.” It appears the city believes they have 107,000 reasons more construction is not the solution. Paris implemented a tax recently, but it didn’t quite produce the desired outcome. Starting in 2015 the city elected to tax vacant homes the equivalent of 20% of the fair market value of rent. On January 30 this year, they decided to triple that amount to 60%. The idea isn’t to punish those fortunate enough to own a second (or twelfth) home. They’re trying to discourage speculation and promote a healthy rental market.

Paris’ 107,000 empty homes might seem like a lot, but it’s becoming strangely normal around the world. New York City had a whopping 318,831 vacant units in 2015. It’s a hot topic in Sydney, where 118,499 vacant units were counted in 2013. Heck, London considers it a critical issue, and they “only” have 22,000 empty homes. There’s a massive numbers of vacant homes across the globe, but only Paris has decided to take aggressive action to tackle it. Growing populations have barely put a dent in the vacant homes in global real estate capitals. The amount of speculation has been scaling with demand, which is a curious paradox. This signifies an issue that’s more complex than just a basic supply and demand problem.

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And you can’t call it perjury. But look at the article below this one.

There’s No Housing Bubble in Australia, Heads of Big Banks Say (BBG)

Soaring home prices in Australia’s biggest cities don’t necessarily mean the country is in the grip of a housing bubble, according to the heads of the nation’s biggest banks. Testifying before a parliamentary committee, the chief executives of National Australia, Westpac and Commonwealth Bank of Australia all said that while they are worried about elements of the housing market, prices aren’t over-inflated. “I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify,” Westpac’s Brian Hartzer told the committee in Canberra Wednesday. A bubble isn’t occurring in Sydney or Melbourne, where house prices have risen the most, he said.

“There are increasing risks, but I still believe the answer is no,” National Australia Bank’s Andrew Thorburn said when asked if houses in Sydney and Melbourne are overpriced. Commonwealth Bank, the nation’s largest mortgage lender, is “lending at levels we are comfortable with” across Australia, CEO Ian Narev told the committee when he testified Tuesday. The bank chiefs were appearing in front of the committee, which was set up by the government to ward off calls for a more far-reaching inquiry into the financial industry, for the second time within six months. The banks have been under pressure from opposition parties after a series of scandals in their insurance and wealth divisions and concern they failed to pass on the full benefits of central bank interest-rate cuts to borrowers.

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“Boosting leveraged demand to make housing affordable makes no sense.”

Australian Lenders Are Handing Out Mortgages Like Confetti (LF)

In the thrall of irrational exuberance, Australia is experiencing a debt-financed housing bubble. In our two major cities of Sydney and Melbourne, the housing markets are out of control due to the rapid acceleration of debt enabled by lenders issuing remarkable amounts of mortgages. Household debt to income ratios for the states of NSW and VIC suggest this to be the case. Australian lenders are handing out mortgages like confetti – why? It demonstrates banks and non-bank lenders are quite willing to issue risky mortgages to applicants who will not have the long-term financial capability to repay. Lenders are indeed taking on these excessive risks. Throwing everything but the kitchen sink is today the common approach governments take to ensure housing prices continually rise given their fear of the political and economic damage caused by falling prices.

Governments engaged in co-buying and co-owning housing with FHBs stimulates debt accumulation and hence prices. The VIC government, for instance, is attempting to provide a large gift to current residential land owners and lenders at the cost of FHBs acquiring mortgages they cannot afford to service over the long-run. This is done through the proposed shared equity model whereby the government acquires 25% of the home price. To make matters worse, the VIC government is also cutting stamp duty for FHBs and doubling the FHOB (for new properties in regional areas); both in theory have the effect of boosting housing prices. The VIC government cannot allow housing prices in Melbourne and the rest of Victoria decline significantly because it will suffer the same adverse impact that Dublin and Ireland experienced last decade.

The problems are the same and the end result will be the same. Unfortunately, just like the federal government, the VIC government is stuck. Implementing policies on the demand and supply sides to reduce land prices will cause a great deal of pain to all stakeholders: governments, lenders, homeowners, investors, including employees – many may lose their jobs if debt growth craters and removes a considerable portion of demand from the economy. Government has dug itself into a hole but instead of assessing a way out, it simply continues to dig, hoping to kick the can down the road long enough for the next party in power to deal with the problems. Both the LNP and ALP at the federal and state levels have refused to deal with the issues at hand, and prefer to enslave a generation of Aussies to the most profitable and high-risk banking system in the western world.

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As I’ve been saying forever. Recovery is unpossible in Greece.

Greece’s Still-Falling GDP Dispels Creditors’ “Recovery” Myth (Prime)

The latest GDP figures for Greece, relating to Q4 of 2016, are disastrous. For Greece first and foremost, but also for the credibility of the EU and IMF’s failed harsh austerity (but on the EU side no-debt-cancellation) policy. Far from evidencing the long-promised recovery, they show a new decline in GDP – both on the previous quarter (after seasonal adjustment) and year on year. In fact, the economy has been broadly stagnant at a low level since 2013. In constant volume terms, GDP fell by over 27% from (peak) Q2 2007 to Q4 2013, and in Q4 2016 it was 0.3% smaller than in Q4 2013. In Q4 it was only marginally higher than the post-crisis record low to date, Q3 2015. This chart from Elstat (the Greek Statistical Office) shows the development of GDP over the last decade:

What is more extraordinary is that current price (i.e. nominal) GDP has fallen even further than real GDP over the decade – by 28.5% From 2008 to 2016, GDP fell quarter-on-quarter in no fewer than 27 out of 36 quarters, of which two in 2016. [..] there has been some modest improvement, with unemployment in November 2016 about 66,000 lower than a year before, and employment up by about 50,000. But employment is still 200,000 below its 2011 level. The unemployment rate remains a disastrous 23%, which reminds one of chronic European levels in the 1920s and 1930s:

The Financial Times’ Mehreen Khan yesterday (6 March) described the current state of negotiations towards the absurd requirement of a contractionary 3.5% of GDP budget surplus (i.e. after interest): “Progress on the country’s €86bn rescue deal has stuttered this year following a standoff between the EU and IMF over the level of austerity, reforms and debt relief baked into Greece’s three-year programme. Bailout monitors however returned to Athens last week to ensure the left-wing Greek government was making steps towards legislating for around €2bn in tax and pension measures that will help the country meet a surplus target of 3.5 per cent of GDP from 2018. Approval of the second review would unlock around €6bn in rescue cash for the economy.”

And ah yes, as Jeroen Dijsselbloem, Chair of the Eurogroup finance ministers, put it on 20th February, in an interview with CNBC (h/t Professor Helen Thompson ): “…anyone who wants to talk about crisis can talk to someone else because the Greek economy is gradually recovering and what we need to do is to strengthen that and give that more opportunity and that is what I’m trying to do.” Alas, Mr Dijsselbloem comes from the Dutch Labour Party, not the conservatives, and here symbolizes all that is so profoundly wrong with the Eurozone’s economic policy and ideology. It’s high time he looked again at that table of unemployment in the 1930s – and the terrible ordeal imposed on the Dutch working class.

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The creditors force Greek companies into contortionist tricks just to survive. There is such a thing as too much tax.

Tax Weary Greek Employers Pay In Kind As Creditor Demands Rise (BBG)

When Maria’s employer, a large communications company in Athens, gave her additional tasks at one of its new units, it told her she wouldn’t be paid for the work in euros. “I was informed that this extra payment of 150 euros per month would be in coupons that I can use in supermarkets,” said the 45-year-old, declining to provide her last name for fear of losing her job. Payments in kind are among practices companies are using in Greece as they seek to cap payroll costs, undermining efforts to balance the books of the country’s cash-strapped social security system. As creditors push the government to boost its budget surplus, companies avoiding payroll charges and effectively expanding the shadow economy are making the task harder. By some estimates, the so-called black market already accounts for as much as a quarter of Greece’s economy.

“Such practices help companies to avoid social contributions, but the burden for the economy is huge,” said Panos Tsakloglou, a professor at the Athens University of Economics and Business. “Less contributions for pensions means more budget transfers to them which then leads to more austerity measures to meet fiscal targets, measures that will probably hit pensioners.” Greek officials have been meeting in Athens with representatives of the euro area and IMF to set out the policies the country must undertake to unlock more bailout loans. The government foresees an accord in March or early April, but the scale of pending issues raises concerns they may be politically hard to sell at home. Greece has agreed to target for a budget surplus before interest payments equal to 3.5% of GDP for 2018, which could mean more belt-tightening.

Prime Minister Alexis Tsipras’s government finds itself between a rock and a hard place as it tries to appease creditors while avoiding mass protests. After an anemic recovery, the Greek economy shrank again in the fourth quarter, raising the specter of growing tensions at home even as European creditors and the IMF push for more austerity. With an economy that has shrunk by more than a quarter in the last seven years, Greece has an unemployment rate of 23%, close to a historic high. Creditors, meanwhile, are demanding greater labor-market flexibility that would make it easier for companies to hire and fire people. They want the threshold of collective dismissals to be doubled to 10% and demand that Athens not revoke any of the measures legislated during the crisis.

[..] For overtaxed Greek companies, dodging social security contributions through payments in kind has become a way to make ends meet. According to the latest available data from the Organisation for Economic Co-operation and Development, the average single worker in Greece faced a tax wedge of 39.3% compared with an average of 35.9% among developed economies. About half of the burden falls upon employers. “We do not have the exact picture,” said Nasos Iliopoulos, an official in Greece’s Labor Ministry. “But it is clear that it is not legal to replace payments with coupons. It is only permitted to give coupons as an extra bonus. Companies are seeking to gain from lower social contributions and also from not paying for extra working hours.”

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There’s nothing new.

America’s Forgotten History of Illegal Deportations (Atlantic)

It was a time of economic struggle, racial resentment and increasing xenophobia. Installed in the White House was a president who had never before held elected office. A moderately successful businessman, he promised American jobs for Americans—and made good on that promise by slashing immigration by nearly 90 percent. He wore his hair parted down the middle, rather than elaborately piled on top, and his name was Herbert Hoover, not Donald Trump. But in the late 1920s and early 1930s, under the president’s watch, a wave of illegal and unconstitutional raids and deportations would alter the lives of as many as 1.8 million men, women and children—a threat that would seem to loom just as large in 2017 as it did back in 1929.

What became colloquially known as the “Mexican repatriation” efforts of 1929 to 1936 are a shameful and profoundly illustrative chapter in American history, yet they remain largely unknown—despite their broad and devastating impact. So much so that today, a different president is edging towards similar solutions, with none of the hesitation or concern that basic consciousness would seem to require. [..] Back in Hoover’s era, as America hung on the precipice of economic calamity—the Great Depression—the president was under enormous pressure to offer a solution for increasing unemployment, and to devise an emergency plan for the strained social safety net. Though he understood the pressing need to aid a crashing economy, Hoover resisted federal intervention, instead preferring a patchwork of piecemeal solutions, including the targeting of outsiders.

According to former California State Senator Joseph Dunn, who in 2004 began an investigation into the Hoover-era deportations, “the Republicans decided the way they were going to create jobs was by getting rid of anyone with a Mexican-sounding name.” “Getting rid of” America’s Mexican population was a random, brutal effort. “For participating cities and counties, they would go through public employee rolls and look for Mexican-sounding names and then go and arrest and deport those people,” said Dunn. “And then there was a job opening!” “We weren’t rounding up people who were Canadian,” he added. “It was an absolutely racially-motivated program to create jobs by getting rid of people.”

[..] The so-called repatriation effort was, in large part, a misnomer, given the fact that as many as sixty percent of those sent to “home” Mexico were U.S. citizens: American-born children of Mexican-descent who had never before traveled south of the border. (Dunn noted, “I don’t know how you can repatriate someone to a country they’ve not been born or raised in.”) “Individuals who left at 5, 6 and 7 years old found themselves in Mexico dealing with process of socialization, of learning the language, but they maintained an American identity,” said Balderrama. “And still had the dream to come back to ‘my country.’”

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Oct 252016
 
 October 25, 2016  Posted by at 9:26 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 25 2016
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NPC Grief monument, Rock Creek cemetery, Washington DC 1915

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Barclays Warns ‘Politics of Rage’ Will Slow Global Growth (BBG)
China Capital Outflows Highest Since Data Publishing Began In 2010 (BBG)
Credit Card Lending To US Subprime Borrowers Is Starting To Backfire (WSJ)
Bank of England Optimism Evaporates in Long-Term Debt (BBG)
The Deficit Is Too Small, Not Too Big (McCulley)
Welcome to the George Orwell Theme Park of Democracy (Jim Kunstler)
How Democrats Killed Their Populist Soul (Matt Stoller)
Hillary Clinton Is The Republican Party’s Last, Best Hope (Heat St.)
Clinton Ally Aided Campaign of FBI Official’s Wife (WSJ)
M5S Blasts Italian Constitutional Reform Proposed By PM Renzi (Amsa)
100 Million Canadians By 2100? Key Advisers Back Ambitious Goal (CP)
A 1912 News Article Ominously Forecasted Climate Change (Q.)
Refugee Camp On Lesbos Damaged In Riots As Rumors Fly (Kath.)
Ex-US Ambassador To Ukraine Geoffrey Pyatt Now Ambassador To Greece (Kath.)

 

 

Why does this truth have to come from the right wing press?

The Eurozone Is Turning Into A Poverty Machine (Tel.)

There are constant bank runs. The bond markets panic, and governments along its southern perimeter need bail-outs every few years. Unemployment has sky-rocketed and growth remains sluggish, no matter how many hundreds of billions of printed money the ECB throws at the economy. We are all tediously aware of how the euro-zone has been a financial disaster. But it is now starting to become clear that it is a social disaster as well. What often gets lost in the discussion of growth rates, bail-outs and banking harmonisation is that the eurozone is turning into a poverty machine. As its economy stagnates, millions of people are falling into genuine hardship. Whether it is measured on a relative or absolute basis, rates of poverty have soared across Europe, with the worst results found in the area covered by the single currency.

There could not be a more shocking indictment of the currency’s failure, or a more potent reminder that living standards will only improve once the euro is either radically reformed or taken apart. Eurostat, the statistical agency of the European Union, has published its latest findings on the numbers of people “at risk of poverty or social exclusion”, comparing 2008 and 2015. Across the 28 members, five countries saw really significant rises compared with the year of the financial crash. In Greece, 35.7pc of people now fall into that category, compared with 28.1pc back in 2008, a rise of 7.6 percentage points. Cyprus was up by 5.6 points, with 28.7pc of people now categorised as poor. Spain was up 4.8 points, Italy up 3.2 points and even Luxembourg, hardly known for being at risk of deprivation, up three points at 18.5pc.

It was not so bleak everywhere. In Poland, the poverty rate went down from 30.5pc to over 23pc. In Romania, Bulgaria, and Latvia, there were large falls compared to the 2008 figures – in Romania for example the percentage was down by seven points to 37pc. What was the difference between the countries where poverty went up dramatically, and those where it went down? You guessed it. The largest increases were all countries within the single currency. But the decreases were all in countries outside it. It gets worse. “At risk of poverty” is defined as living on less than 60pc of the national median income. But that median income has itself fallen over the last seven years, because most countries inside the eurozone have yet to recover from the crash. In Greece, the median income has dropped from €10,800 a year to €7,500 now.

[..] Why should Greece and Spain be doing so much worse than anywhere in Eastern Europe? Or why Italy should be doing so much worse than Britain, when the two countries were at broadly similar levels of wealth in the Nineties? (Indeed, the Italians actually overtook us for a while in GDP per capita.) Even a traditionally very successful economy such as the Netherlands, which has not been caught up in any kind of financial crisis, has seen big increases in both relative and absolute poverty. In fact, it is not very hard to work out what has happened. First, a dysfunctional currency system has choked off economic growth, driving unemployment up to previously unbelievable levels. After countries went bankrupt and had to be bailed out, the EU, along with the ECB and the IMF, imposed austerity packages that slashed welfare systems and cut pensions. It is not surprising poverty is increasing under those conditions.

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If you ask me, they’ve got it the wrong way around. If growth hadn’t slowed down, there’d be much less rage.

Barclays Warns ‘Politics of Rage’ Will Slow Global Growth (BBG)

Brexit, rising populism across Europe, the ascent of Donald Trump in America, and the backlash against income inequality everywhere. A slew of political and economic forces have nurtured a growing narrative that globalization is now on life support—a potential game-changer for global financial markets, which have staged a rapid expansion since the end of the Cold War thanks to unfettered cross-border flows. No more: Trade volumes have stalled while the “politics of rage” has taken root in advanced economies, driven by a collapse in the perceived legitimacy of political and economic institutions, a new report from Barclays warns.

The result, the bank says, is an oncoming protectionist lurch—restrictions on the free movement of goods, services, labor, and capital—combined with an erosion of support for supranational bodies, from the EU to the WTO. “Even mild de-globalization likely will slow the pace of trend global growth,” Marvin Barth, head of European FX strategy at Barclays, writes in the report. “A sense of economic and political disenfranchisement due to imperfect representation in national governments and delegation of sovereignty to supranational and intergovernmental organisations” has generated the backlash, he said. He cites as a major factor the collapse in support for centrist parties in advanced economies and adds that the role of income inequality may be overstated.

The report echoes Harvard University economist Dani Rodrik’s earlier contention that democracy, sovereignty, and globalization represent a “trilemma.” Expansion of cross-border trade links—and the attendant increase in the power of supranational authorities to adjudicate economic matters—is a direct threat to representative democracy, and vice-versa. The veto Monday of the EU’s free trade deal with Canada by the Belgian region of Wallonia—whose leader said the deadline to secure backing for the deal was “not compatible with the exercise of democratic rights”—is a sharp illustration of this trilemma.

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Breaking the dollar peg is a dangerous game, given the amount of debt denominated in USD. It can get expensive quite fast.

China Capital Outflows Highest Since Data Publishing Began In 2010 (BBG)

The offshore yuan traded near a record low as Chinese policy makers signaled they are willing to allow greater currency flexibility amid a slump in exports and an advance in the dollar. The exchange rate was at 6.7836 a dollar as of 1:01 p.m. in Hong Kong, after dropping to 6.7885, the weakest intraday level in data going back to 2010. In Shanghai, the currency was little changed at 6.7760, close to a six-year low and past the 6.75 year-end median forecast in a Bloomberg survey. The Chinese currency has come under increased pressure on signs that investors are taking more money out of the country. A gauge of the dollar rose to a seven-month high versus major currencies Monday as traders bet that the Federal Reserve may raise borrowing costs soon.

Unlike the yuan selloff earlier this year which sparked a global market rout, there’s no sense of panic yet as policy makers maintain a steady exchange rate against other currencies. “The central bank is tolerating more orderly depreciation of the yuan,” said Gao Qi, a Singapore-based foreign-exchange strategist at Scotiabank. “But it will step in to avoid market panic arising from a sharp yuan depreciation. The 6.8 level is critical in the near term.” [..] The onshore yuan has weakened 4.2% this year, the most in Asia. It has declined in all but two sessions this month as some analysts speculated that the central bank has reduced support following the yuan’s inclusion in the IMF’s basket of reserves on Oct. 1.

A net $44.7 billion worth of payments in the Chinese currency left the nation last month, according to data released by the State Administration of Foreign Exchange. That’s the most since the government started publishing the figures in 2010. [..] Chinese policy makers have downplayed the importance of the yuan-dollar exchange rate, saying they aim to keep the yuan steady against a broad basket of currencies. A Bloomberg gauge mimicking China Foreign Exchange Trade System’s yuan index against 13 major currencies has been little changed around 94 since August after falling more than 6 percent in the previous eight months.

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Imagine my surprise.

Credit Card Lending To US Subprime Borrowers Is Starting To Backfire (WSJ)

Credit-card lending to subprime borrowers is starting to backfire. Missed payments on credit cards that lenders issued recently are higher than on older cards, according to new data from credit bureau TransUnion. Nearly 3% of outstanding balances on credit cards issued in 2015 were at least 90 days behind on payments six months after they were originated. That compares with 2.2% for cards that were given out in 2014 and 1.5% for cards in 2013. The poorer performance on newer cards pushed up the 90-day or more delinquency rate for all credit cards to 1.53% on average nationwide in the third quarter. That’s the highest level since 2012.

The recent increase in subprime lending is one of the big contributors. Lenders ramped up subprime card lending in 2014 and have been doling out more of these cards recently. They issued just over 20 million credit cards to subprime borrowers in 2015, up some 20% from 2014 and up 56% from 2013, according to Equifax. Separately, missed payments in states with large oil or energy sectors continue to worsen. The share of card balances that were at least 90 days past due increased 12% in Oklahoma, 10% in Texas and 20% in Wyoming in the third quarter from a year prior, according to TransUnion.

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Really? They thought Carney could save the day?

Bank of England Optimism Evaporates in Long-Term Debt (BBG)

Long-term sterling bonds suggest investors are quickly losing confidence in the Bank of England’s ability to support debt markets through the U.K.’s departure from the EU. Holders have lost about 10% in as little as seven weeks on long-dated notes issued by Vodafone, British American Tobacco and WPP. The bond sales took place after the central bank announced plans in August to buy corporate debt, sparking investor optimism. The mood has since soured because of concerns about a so-called hard Brexit, sterling’s tumble and the outlook for inflation. “With the benefit of hindsight, August was the best time to issue,” said Srikanth Sankaran, head of European Credit and ABS strategy at Morgan Stanley. “The market was more focused on the Bank of England’s support rather than the longer-term Brexit risk.”

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McCulley used to be something big at PIMCO. He’s right, but it’s doubtful a change of course would be sufficient at this point. Austerity has killed a lot.

The Deficit Is Too Small, Not Too Big (McCulley)

[..] while Clinton gets my vote, her insistence at the final debate that her proposed fiscal program will not “add a penny” to the national debt is fouling my wonk serenity this morning. Every penny of new expenditure, she says, will be “paid for” with a new penny of tax revenue. Her deficit-neutral fiscal proposal is, I readily acknowledge, better than the status quo, as her proposed new spending would add 100 cents on the dollar to the nation’s aggregate demand, while her proposed tax increases would not subtract 100 cents on the dollar. Why? Because she proposes getting the new tax revenue from those with a low marginal propensity to spend, or alternatively, a high marginal propensity to save. To wit, from the not poor, including yes, the rich.

Thus, in simple Keynesian terms, there is some solace in her deficit-neutral fiscal package: It would be net stimulative to the economy, because it would – in technical terms – drive down the private sector’s savings rate. In less technical terms, it would take money from people who don’t live paycheck to paycheck, who would still spend the same, but just have less left over to save. And I have no problem with that. What sends me around the bend is the notion that the only way to boost aggregate demand is to drive down the private-sector savings rate, in the context of holding constant the public sector’s savings rate. But, you retort: The public sector, notably at the federal level, has a negative savings rate; it runs a deficit! Are you nuts?

No, I am not. Unless faced with an incipient inflation threat, born of an overheated economy, there is no reason whatsoever that the public sector should ever have a positive savings rate. What it should have is a positive, a bigly positive, investment rate. And in fact, a higher public investment rate and a lower public savings rate are exactly what our economy presently needs. Yes, a larger fiscal deficit. [..] investment drives aggregate demand, which begets aggregate production and thus, aggregate income, the fountain from which savings flow. Thus, if and when there is insufficient aggregate demand to foster full employment at a just income distribution, the underlying problem is a deficiency of investment, not savings. More investment is the solution, and investment is constrained not by a shortage of savings, but literally a deficiency of investment itself.

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“..the demonization of Russia – a way more idiotic exercise than the McCarthyite Cold War hysteria..”

Welcome to the George Orwell Theme Park of Democracy (Jim Kunstler)

If Trump loses, I will essay to guess that his followers’ next step will be some kind of violence. For the moment, pathetic as it is, Trump was their last best hope. I’m more comfortable about Hillary — though I won’t vote for her — because it will be salutary for the ruling establishment to unravel with her in charge of it. That way, the right people will be blamed for the mismanagement of our national affairs. This gang of elites needs to be circulated out of power the hard way, under the burden of their own obvious perfidy, with no one else to point their fingers at. Her election will sharpen awareness of the criminal conduct in our financial practices and the neglect of regulation that marked the eight years of Obama’s appointees at the Department of Justice and the SEC.

The “tell” in these late stages of the campaign has been the demonization of Russia – a way more idiotic exercise than the McCarthyite Cold War hysteria of the early 1950s, since there is no longer any ideological conflict between us and all the evidence indicates that the current state of bad relations is America’s fault, in particular our sponsorship of the state failure in Ukraine and our avid deployment of NATO forces in war games on Russia’s border. Hillary has had the full force of the foreign affairs establishment behind her in this war-drum-banging effort, yet they have not been able to produce any evidence, for instance, in their claim that Russia is behind the Wikileaks hack of Hillary’s email.

[..] The media has been on-board with all this. The New York Times especially has acted as the hired amplifier for the establishment lies – such a difference from the same newspaper’s role in the Vietnam War ruckus of yesteryear. Today (Monday) they ran an astounding editorial “explaining” the tactical necessity of Hillary’s dishonesty: “In politics, hypocrisy and doublespeak are tools,” The Times editorial board wrote. Oh, well, that’s reassuring. Welcome to the George Orwell Theme Park of Democracy.

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Absolute must read by Stoller, American history you didn’t know.

How Democrats Killed Their Populist Soul (Matt Stoller)

While not a household name today, Wright Patman was a legend in his time. His congressional career spanned 46 years, from 1929 to 1976. In that near-half-century of service, Patman would wage constant war against monopoly power. As a young man, at the height of the Depression, he challenged Herbert Hoover’s refusal to grant impoverished veterans’ accelerated war pensions. He successfully drove the immensely wealthy Treasury Secretary Andrew Mellon from office over the issue. Patman’s legislation to help veterans recoup their bonuses, the Bonus Bill—and the fight with Mellon over it—prompted a massive protest by World War I veterans in Washington, D.C., known as “the Bonus Army,” which helped shape the politics of the Depression.

In 1936, he authored the Robinson-Patman Act, a pricing and antitrust law that prohibited price discrimination and manipulation, and that finally constrained the A&P chain store—the Walmart of its day—from gobbling up the retail industry. He would go on to write the Bank Secrecy Act, which stops money-laundering; defend Glass-Steagall, which separates banks from securities dealers; write the Employment Act of 1946, which created the Council of Economic Advisors; and initiate the first investigation into the Nixon administration over Watergate.

Far from the longwinded octogenarian the Watergate Babies saw, Patman’s career reads as downright passionate, often marked by a vitality you might see today in an Elizabeth Warren—as when, for example, he asked Fed Chairman Arthur Burns, “Can you give me any reason why you should not be in the penitentiary?” Despite his lack of education, Patman had a savvy political and legal mind. In the late 1930s, the Federal Reserve Board refused to admit it was a government institution. So Patman convinced the District of Columbia’s government to threaten foreclosure of all Federal Reserve Board property; the Board quickly produced evidence that it was indeed part of the federal government.

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Kind of like a second chapter to Stoller’s piece above.

Hillary Clinton Is The Republican Party’s Last, Best Hope (Heat St.)

While Trump has pushed a populist, anti-free trade message, Hillary champions the large multinational corporations that create jobs for everyday Americans. As secretary of state, she worked tirelessly to advance the Trans-Pacific Partnership, the “gold standard” of trade agreements. As a candidate, she expertly silenced the gullible radicals supporting Bernie Sanders by pretending she won’t sign TPP into law as president. (She will.) Hillary’s disdain for left-wing agitators does not end there. She has also gone to bat for the heroes in America’s fracking industry, telling environmentalists to “get a life” in emails uncovered by Wikileaks. [..]

One of the greatest sources of frustration for Republicans during the Obama presidency has been his weak-sauce, isolationist foreign policy. In the absence of strong American leadership, the world has plunged into chaos. Trump shares Obama’s ideology of avoiding foreign entanglements, even going so far as to question the need for NATO as Putin runs amok unchecked. It is precisely at this moment that America needs the hawkish leadership of Hillary Clinton to defend American exceptionalism and reassert our hegemony on the world stage. Among her fellow neoconservative war hawks, Hillary is admired for her sterling record on foreign policy — from supporting the invasion of Iraq in 2002 to her valiant efforts as secretary of state to persuade Obama to stop being such a pushover on the world stage.

During the Arab Spring in 2011, Hillary impressed upon Obama the need for a U.S.-led “coalition of the willing” to help mold the future of the Middle East in the name of freedom. Muammar Gaddafi wound up dead in a ditch. Later, when the president sought input on Syria, Hillary recommended force and arming rebel groups. Obama’s failure to follow her advice led to the current migrant crisis and ongoing tragedy in Syria. Bashar al-Assad is still alive and well. Imagine our enemies cowering in the shade as President Hillary’s massive drone armada blocks out the sun en route to visit death upon the enemies of freedom. Slay Queen, indeed. Voters looking for a reliable pro-business, conservative hawk to undo eight years of Obama’s feckless progressivism and combat the cancer of Trumpism need look no further than Hillary Rodham Clinton. She is the GOP’s last, best hope.

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Incredible. Just incredible.

Clinton Ally Aided Campaign of FBI Official’s Wife (WSJ)

The political organization of Virginia Gov. Terry McAuliffe, an influential Democrat with longstanding ties to Bill and Hillary Clinton, gave nearly $500,000 to the election campaign of the wife of an official at the FBI who later helped oversee the investigation into Mrs. Clinton’s email use. Campaign finance records show Mr. McAuliffe’s political-action committee donated $467,500 to the 2015 state Senate campaign of Dr. Jill McCabe, who is married to Andrew McCabe, now the deputy director of the FBI. The Virginia Democratic Party, over which Mr. McAuliffe exerts considerable control, donated an additional $207,788 worth of support to Dr. McCabe’s campaign in the form of mailers, according to the records.

That adds up to slightly more than $675,000 to her candidacy from entities either directly under Mr. McAuliffe’s control or strongly influenced by him. The figure represents more than a third of all the campaign funds Dr. McCabe raised in the effort. Mr. McAuliffe and other state party leaders recruited Dr. McCabe to run, according to party officials. She lost the election to incumbent Republican Dick Black. [..] Dr. McCabe announced her candidacy in March 2015, the same month it was revealed that Mrs. Clinton had used a private server as secretary of state to send and receive government emails, a disclosure that prompted the FBI investigation. At the time the investigation was launched in July 2015, Mr. McCabe was running the FBI’s Washington, D.C., field office, which provided personnel and resources to the Clinton email probe.

That investigation examined whether Mrs. Clinton’s use of private email may have compromised national security by transmitting classified information in an insecure system. [..] At the end of July 2015, Mr. McCabe was promoted to FBI headquarters and assumed the No. 3 position at the agency. In February 2016, he became FBI Director James Comey’s second-in-command. As deputy director, Mr. McCabe was part of the executive leadership team overseeing the Clinton email investigation, though FBI officials say any final decisions on that probe were made by Mr. Comey, who served as a high-ranking Justice Department official in the administration of George W. Bush.

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“Di Maio was also ironic about the endorsement of the reform received by Renzi from President Obama during a recent visit to Washington. “Let’s say it is not the first time Obama has intervened concerning a referendum in another country, he supported ‘Remain’ in England and ‘Brexit’ won. Now he is backing the Yes vote and so the No front should be reassured..”

M5S Blasts Italian Constitutional Reform Proposed By PM Renzi (Amsa)

The anti-establishment Five Star Movement (M5S) will vote No in the December 4 referendum on Constitutional reform because the law “deprives us of democratic rights”, party bigwig and Deputy House Speaker Luigi Di Maio said on Monday. “In our opinion, the title of the law does not in any way reflect its content, in the same way that the title of the Good School law does not in any way reflect the content of that reform,” Di Maio told radio broadcaster Rtl 102.5. The M5S recently lost a legal challenge against the question in the consultative referendum, which echoes the wording of the title of the constitutional law, arguing it amounts to a “deceptive” advertisement for the government’s position in favour of a Yes vote.

On December 4, Italians will be called to answer ‘yes’ or ‘no’ on a question that reads: “Do you approve a constitutional law that concerns the scrapping of the bicameral system (of parliament), reducing the number of MPs, limiting the operating costs of public institutions, abolishing the National Council on Economy and Labour (CNEL), and amending Title V of the Constitution, Part II?”. The reform approved by parliament in April would turn the Senate into a leaner body of indirectly elected regional and local representatives with limited lawmaking powers. Critics of the reform, including M5S and a left-wing faction within Premier Matteo Renzi’s own Democratic Party (PD), say it will actually make procedures more complicated.

Di Maio was also ironic about the endorsement of the reform received by Renzi from US President Barack Obama during a recent visit to Washington. “Let’s say it is not the first time Obama has intervened concerning a referendum in another country, he supported ‘Remain’ in England and ‘Brexit’ won. Now he is backing the Yes vote and so the No front should be reassured,” he said.

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There is a reason why Canada is sparsely populated. Let’s not tell them. Don’t spoil the fun.

100 Million Canadians By 2100? Key Advisers Back Ambitious Goal (CP)

Imagine Canada with a population of 100 million — roughly triple its current size. For two of the most prominent voices inside the Trudeau government’s influential council of economic advisers, it’s much more than a passing fancy. It’s a target. The 14-member council was assembled by Finance Minister Bill Morneau to provide “bold” advice on how best to guide Canada’s struggling economy out of its slow-growth rut. One of their first recommendations, released last week, called for a gradual increase in permanent immigration to 450,000 people a year by 2021 — with a focus on top business talent and international students. That would be a 50% hike from the current level of about 300,000.

The council members — along with many others, including Economic Development Minister Navdeep Bains — argue that opening Canada’s doors to more newcomers is a crucial ingredient for expanding growth in the future. They say it’s particularly important as more and more of the country’s baby boomers enter their golden years, which eats away at the workforce. The conviction to bring in more immigrants is especially significant for at least two of the people around the advisory team’s table. Growth council chair Dominic Barton, the powerful global managing director of consulting firm McKinsey, and Mark Wiseman, a senior managing director for investment management giant BlackRock, are among the founders of a group dedicated to seeing the country responsibly expand its population as a way to help drive its economic potential.

The Century Initiative, a five-year-old effort by well-known Canadians, is focused on seeing the country of 36 million grow to 100 million by 2100. Without significant policy changes on immigration, the current demographic trajectory has Canada’s population on track to reach 53 million people by the end of the century, the group says on its website. That would place it outside the top 45 nations in population size, it says.

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It goes back quite a bit further.

A 1912 News Article Ominously Forecasted Climate Change (Q.)


Published Aug. 14, 1912. (The Rodney and Otamatea Times and Waitemata and Kaipara Gazette)

A short news clip from a New Zealand paper published in 1912 has gone viral as an example of an early news story to make the connection between burning fossil fuels and climate change. It wasn’t, however, the first article to suggest that our love for coal was wreaking destruction on our environment that would lead to climate change. The theory—now widely accepted as scientific reality—was mentioned in the news media as early as 1883, and was discussed in scientific circles much earlier than that. The French physicist Joseph Fourier had made the observation in 1824 that the composition of the atmosphere is likely to affect the climate. But Svante Arrhenius’s 1896 study titled, “On the influence of carbonic acid in the air upon the temperature on the ground” was the first to quantify how carbon dioxide (or anhydrous carbonic acid, by another name) affects global temperature.

Though the study does not explicitly say that the burning of fossil fuels would cause global warming, there were scientists before him who had made such a forecast. The earliest such mention that Quartz could find was in the journal Nature in December of 1882. The author HA Phillips writes: “According to Prof Tyndall’s research, hydrogen, marsh gas, and ethylene have the property to a very high degree of absorbing and radiating heat, and so much that a very small proportion, of say one thousandth part, had very great effect. From this we may conclude that the increasing pollution of the atmosphere will have a marked influence on the climate of the world.” Phillips was relying on the work of John Tyndall, who in the 1860s had shown how various gases in the atmosphere absorb heat from the sun in the form of infrared radiation.

Now we know that Phillips was wrong about a few scientific details: He ignored carbon dioxide from burning coal and focused more on the by-products of mining. Still, he was drawing the right conclusion about what our demand for fossil fuels might do to the climate. Newspapers around the world took those words published in a prestigious scientific journal quite seriously. In January 1883, the New York Times published a lengthy article based on Phillips’ letter to Nature, which said: “The writer who has partially discussed the subject in the columns of Nature has fixed upon 1900 as the date when the earth’s atmosphere will become entirely irrespirable. This is probably a misprint, for unless the consumption of cigarettes increases unlooked-for rapidly the atmosphere ought to remain respirable until 1910, or even 1912. At the latter date all mankind will have perished, and nothing except the hardier plants will be living on the surface of the earth.”

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The EU is a failure of historical proportions economically, politically and above all morally.

Refugee Camp On Lesbos Damaged In Riots As Rumors Fly (Kath.)

Migrants on Monday attacked the premises of the European Asylum Support Office (EASO) inside the Moria hot spot on the eastern Aegean island of Lesvos, completely destroying four container office units and damaging another two during a protest that was contained by riot police. Officials said the protesters, most of them men from Pakistan, threw rocks and burning blankets at the EASO facilities, allegedly frustrated at delays in processing their asylum applications. Riot police were called in to contain the riot. The blaze was put out by the fire service before it could cause further damage. There were no reports of injuries.

The violence at Moria prompted authorities on other migrant-hosting islands, including Chios, Samos, Kos and Leros, to beef up their security measures. Speaking on condition of anonymity, a local government official told Kathimerini that migrant riots were often triggered by rumors. “Refugees and migrants are told that if their facilities are destroyed they will have nowhere to stay and so they will be transferred to the mainland,” the source said.

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Victoria Nuland’s neocon and Kiev coup instigator buddy. Bad news for Greece. Wonder what the pressure on Tsipras has been.

Ex-US Ambassador To Ukraine Geoffrey Pyatt Now Ambassador To Greece (Kath.)

The official welcome ceremony for new US Ambassador to Greece Geoffrey R. Pyatt took place on the US 6th Fleet command and control ship USS Mount Whitney, in the port of Piraeus south of Athens, Monday. Earlier in the day, Pyatt presented Greek President Prokopis Pavlopoulos with his diplomatic credentials at the Presidential Mansion. The ceremony was attended by Foreign Minister Nikos Kotzias. Nominated by President Obama, Pyatt is widely regarded as an experienced diplomat. He previously served as US ambassador in Kiev and had to deal with the fallout of the Ukrainian crisis. His appointment comes at a key time for both Athens and Washington. Recent developments in the wider region have created challenges as well as opportunities for the two NATO allies. Obama is expected to visit Athens in November. Political and military officials have been exchanging visits ahead of the trip.

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Oct 152016
 
 October 15, 2016  Posted by at 10:18 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 15 2016
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Harris&Ewing Motorcycle postman, Washington, DC 1912

US Deficit Up for First Time Since 2009 on Spending Surge (BBG)
Why the Economy Doesn’t Roar Anymore (WSJ)
Jim Rogers: Sterling Is In Serious Decline, Could Go Below Dollar (Ind.)
What The United States Needs (Varoufakis)
German Government Has Ruled Out Taking Stake in Deutsche Bank (WSJ)
Varoufakis, Others Deny Hollande’s Russian Drachma-Printing Claim (Kath.)
A Child Born Today Comes Into the World With More Debt Than You (BBG)
The Press Buries Hillary Clinton’s Sins (WSJ)
Donald Trump Uncensored: This Is America’s “Moment Of Reckoning” (ZH)
The Fury and Failure of Donald Trump (Matt Taibbi)
Hypernormalisation: Adam Curtis’ Path From Syria To Trump, Via Jane Fonda (G.)
Greece, The Hot Corner (Stavridis)

 

 

You don’t say!: “The slowdown in tax collections suggests some cooling in labor market activity..”

US Deficit Up for First Time Since 2009 on Spending Surge (BBG)

The U.S. budget deficit as a share of the economy widened for the first time in seven years, marking a turning point in the nation’s fiscal outlook as an aging population boosts government spending and debt. Spending exceeded revenue by $587.4 billion in the 12 months to Sept. 30, compared with a $439.1 billion deficit in fiscal 2015, the Treasury Department said in a report released Friday. That was in line with a Congressional Budget Office estimate on Oct. 7 for a shortfall of $588 billion. As a share of gross domestic product, the shortfall rose to 3.2% from 2.5% a year earlier, the first such increase since 2009, government figures show. “The slowdown in tax collections suggests some cooling in labor market activity,” said Gennadiy Goldberg at TD Securities in New York. He sees the higher budget deficits implying more borrowing needs by Treasury.

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Accepting that today’s reality is normal, and boom times are not, is at least a first step.

Why the Economy Doesn’t Roar Anymore (WSJ)

The U.S. presidential candidates have made the usual pile of promises, none more predictable than their pledge to make the U.S. economy grow faster. With the economy struggling to expand at 2% a year, they would have us believe that 3%, 4% or even 5% growth is within reach. But of all the promises uttered by Donald Trump and Hillary Clinton over the course of this disheartening campaign, none will be tougher to keep. Whoever sits in the Oval Office next year will swiftly find that faster productivity growth—the key to faster economic growth—isn’t something a president can decree. It might be wiser to accept the truth: The U.S. economy isn’t behaving badly. It is just being ordinary. Historically, boom times are the exception, not the norm.

[..] It is tempting to think that we know how to do better, that there is some secret sauce that governments can ladle out to make economies grow faster than the norm. But despite glib talk about “pro-growth” economic policies, productivity growth is something over which governments have very little control. Rapid productivity growth has occurred in countries with low tax rates but also in nations where tax rates were sky-high. Slashing government regulations has unleashed productivity growth at some times and places but undermined it at others. The claim that freer markets and smaller governments are always better for productivity than a larger, more powerful state is not one that can be verified by the data.

Here is the lesson: What some economists now call “secular stagnation” might better be termed “ordinary performance.” Most of the time, in most economies, incomes increase slowly, and living standards rise bit by bit. The extraordinary experience of the Golden Age left us with the unfortunate legacy of unrealistic expectations about our governments’ ability to deliver jobs, pay raises and steady growth. Ever since the Golden Age vanished amid the gasoline lines of 1973, political leaders in every wealthy country have insisted that the right policies will bring back those heady days. Voters who have been trained to expect that their leaders can deliver something more than ordinary are likely to find reality disappointing.

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Q: “How low could it get?”
A: “If I told you Mark, you’d hang up”.

Jim Rogers: Sterling Is In Serious Decline, Could Go Below Dollar (Ind.)

International investor Jim Rogers has warned that the value of the pound could go under one dollar within three to four years if Scotland was to leave the UK. His comments came on the day that Nicola Sturgeon said declaring independence could help Scotland escape the uncertainty triggered by UK’s vote to leave the EU. Rogers, who co-founded the Quantum Fund with George Soros, said the UK is facing serious problems. Speaking to the BBC, Rogers said: “If Scotland leaves they are going to take their oil with them and the pound could go down a great deal. It would certainly go down under one US dollar.”

“You’ve got a lot of debt, you’ve got a serious balance of trade problem which shows no signs of being corrected. I don’t see anything to make sterling go up.“ Rogers warned that the City of London is now going to be under serious pressure as Europe is hoping to attract as much business leaving London as possible. His warning came as the pound fell below $1.22 against the dollar in early trading on Friday, pushed down by comments from the President of the European Council Donald Tusk and the French finance minister Michel Sapin. Sterling was still below the $1.22 mark at market closing time.

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Not bad as an analysis in itself, but the conclusion that America needs “progressive internationalism” is a goal-seeked illusion, and useless. As is wishing for “massive private sector growth”.

What The United States Needs (Varoufakis)

When the world faced Armageddon in the 1940s, in the form of Hitler’s atom bomb program, Washington responded with the Manhattan Project. In effect, they gathered the best scientists, gave them as much money as they needed in fully-appointed facilities, and said to them: “You have two years to deliver the bomb.” Today, we face similar threats to the planet: climate change, rising seas, water shortages, etc. Our cities are less sustainable than ever. Commuters waste more and more of their lives in stationary cars. America needs a new Manhattan Project, one located on hundreds of campuses around the United States, that helps put to work the idle trillions of dollars, our scientists, and the next generation of youngsters (who must be educated with government subsidies to end the student debt scandal).

The joint effort would produce technologies that could lead to a cost-effective green transition. Who will pay for it? Just as the government-funded Internet spurred massive private sector growth – and taxes – so would the technologies that could spring out of a new Manhattan Project. But first the initial investment must come from government. To do this, the United States needs to collect more taxes. It is scandalous, for instance, that the IRS does not exercise its right to tax the earnings of corporations like Apple, Google and Gilead for intellectual property rights developed on American soil, letting them park billions upon billions of dollars in tax havens, including Ireland.

Overall, US federal taxes must rise from the present ultra-low 17% of GDP to at least 25%, with all of the increase coming from the top 1%. This is what logic and justice demands. What stops America from doing this service to itself? It is the 30-year-old bipartisan class war waged against America’s working class and shrinking middle class. Republicans automatically gravitated to tax cuts for the rich. Democrats served Wall Street and exhausted their talents at finding ways to curtail welfare. Both burdened the young with unbearable student debt. The US has reached a point where sensible policies, that the nation needs, are off the table.

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What’s German for bail-in?

German Government Has Ruled Out Taking Stake in Deutsche Bank (WSJ)

Aides to Angela Merkel have told lawmakers the state wouldn’t take a stake in Deutsche Bank if it were to issue new stock to shore up its thin capital cushion, one person who attended the briefing said. The fact that Berlin appears to have ruled out any aid for the embattled lender as both unnecessary and politically unfeasible could put Deutsche Bank under renewed pressure as it works to stabilize its share price and stay out of the news while negotiating an acceptable settlement in a U.S. misconduct investigation. In a closed-door briefing with a small group of lawmakers last week, Chancellery aides and senior Finance Ministry officials said it was “inconceivable for the state to take a stake in Deutsche Bank,” said one person.

“We have a different bank resolution system than in 2009 and this must apply to us in Germany too,” the government officials said according to this person. This referred to recent legal changes that now force European governments to bail-in creditors—and in some cases depositors—before they shore up a struggling bank with taxpayer money. Deutsche Bank is currently negotiating with the U.S. Justice Department to bring down a settlement in several investigations over the mis-selling of mortgage-backed securities. Last month, The Wall Street Journal reported that U.S. authorities had floated a $14 billion amount as an opening bid, sparking a rout in the bank’s share price. The bank has said it would not pay anywhere near this amount, which would wipe out nearly all of its existing capital.

It is still unclear whether Deutsche Bank will need to increase capital and, if it does, whether it would need the government to pitch in. But the fact that Ms. Merkel’s government has ruled out any aid for the bank will come as a negative surprise to investors, given widespread expectations in the market that the state would offer some form of last-resort assistance given the scale of Deutsche Bank and the shock its failure could inflict on Europe’s financial system.

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That Greece would have made some official request, that they would have asked Putin himself, and that he would have called up Hollande to tell him that, it’s all not very credible.

Varoufakis, Others Deny Hollande’s Russian Drachma-Printing Claim (Kath.)

Former finance minister Yanis Varoufakis on Friday hastened to dismiss claims made by French President Francois Hollande in a new book that Russian President Vladimir Putin had told him he had been approached by Greek officials a day after a referendum on the country’s third bailout agreement on July 5, 2015, and asked whether Athens could print drachmas in Russia. “I can confirm that during my tenure at the Finance Ministry there were no thoughts of printing a new currency, let alone overtures to third parties at home or abroad,” Varoufakis said in a statement on Friday. Parliament Speaker Nikos Voutsis also denied the existence of such a plan on Friday, dismissing the discussion as being irrelevant, while Alternate Defense Minister Dimitris Vitsas brushed off the claims as “nonsense.”

Speaking on Skai TV on the same day, however, ruling SYRIZA MP Sakis Papadopoulos admitted that the leftist-led government had discussed a possible Greek exit from the eurozone in the days building up to the referendum and just after it. “This information did not come out of the blue,” he said. In “A President Shouldn’t Say That,” based on a series of interviews with Hollande by two journalists from daily Le Monde, the French president is quoted as saying he received a call from Putin, who allegedly told him that “Greece asked us to print drachmas in Russia because they no longer have a printing machine to do so.”

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How about forgiving each new born the $66,000 (s)he owes, as a first step toward debt restructuring?!

A Child Born Today Comes Into the World With More Debt Than You (BBG)

Each newborn’s share of the national debt today is more than double what it was in the 1990s. In the past 35 years, the national debt on a per capita basis has increased with each U.S. president. Under President Bill Clinton, the debt grew at the slowest pace — with a net increase of 1.4% over his two terms. After reducing the slope of public debt in his first term, he shrunk it in his second. Under current law, U.S. inflation-adjusted debt per person is expected to reach the $66,000 milestone by April 2026, based on Bloomberg calculations of Congressional Budget Office and Census Bureau data. So what would the debt path look like under either a Hillary Clinton or Donald Trump presidency? It would be pretty bleak in either case, according to a report released by the Committee for a Responsible Federal Budget.

And while the committee is non-partisan, they do have a policy bent on fixing the national debt and improving the way the budget is developed. The committee projects debt held by the public to grow by $9 trillion over the next decade under current law. Economic proposals put forth by both presidential candidates would add to the national debt, and Trump’s would add even more than Clinton’s. The report estimates that Clinton’s policies would increase the national debt by $200 billion over the next decade, while Trump’s proposals would add $5.3 trillion.

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Again, the WSJ diverging from the rest of the mainstream press. “.. the “vast majority” of [FBI] career agents and prosecutors working the case “felt she should be prosecuted” and that giving her a pass was “a top-down decision.”

The Press Buries Hillary Clinton’s Sins (WSJ)

If average voters turned on the TV for five minutes this week, chances are they know that Donald Trump made lewd remarks a decade ago and now stands accused of groping women. But even if average voters had the TV on 24/7, they still probably haven’t heard the news about Hillary Clinton: That the nation now has proof of pretty much everything she has been accused of. It comes from hacked emails dumped by WikiLeaks, documents released under the Freedom of Information Act, and accounts from FBI insiders. The media has almost uniformly ignored the flurry of bombshells, preferring to devote its front pages to the Trump story. So let’s review what amounts to a devastating case against a Clinton presidency.

Start with a June 2015 email to Clinton staffers from Erika Rottenberg, the former general counsel of LinkedIn. Ms. Rottenberg wrote that none of the attorneys in her circle of friends “can understand how it was viewed as ok/secure/appropriate to use a private server for secure documents AND why further Hillary took it upon herself to review them and delete documents.” She added: “It smacks of acting above the law and it smacks of the type of thing I’ve either gotten discovery sanctions for, fired people for, etc.” A few months later, in a September 2015 email, a Clinton confidante fretted that Mrs. Clinton was too bullheaded to acknowledge she’d done wrong. “Everyone wants her to apologize,” wrote Neera Tanden, president of the liberal Center for American Progress.

“And she should. Apologies are like her Achilles’ heel.” Clinton staffers debated how to evade a congressional subpoena of Mrs. Clinton’s emails—three weeks before a technician deleted them. The campaign later employed a focus group to see if it could fool Americans into thinking the email scandal was part of the Benghazi investigation (they are separate) and lay it all off as a Republican plot. A senior FBI official involved with the Clinton investigation told Fox News this week that the “vast majority” of career agents and prosecutors working the case “felt she should be prosecuted” and that giving her a pass was “a top-down decision.”

[..] Voters might not know any of this, because while both presidential candidates have plenty to answer for, the press has focused solely on taking out Mr. Trump. And the press is doing a diligent job of it.

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Not a bad analysis. At all.

Donald Trump Uncensored: This Is America’s “Moment Of Reckoning” (ZH)

Sometimes, you just have to listen…

“There is nothing that the political establishment wil not do; no lie they will not tell, to hold their prestige and power at your expense… and that’s what’s been happening. The Wasshington establishment – and the financial and media corporations that fund it – exists for one thing only… to protect and enrich itself.”

“For those who control the levers of power in Washington and for the global special interests – they partner with these people that don’t have your good in mind – our campaign represents a true existential threat… like they haven’t seen before. This is not simply another four-year election; this is a crossroads in the history of our civilization that will determine whether or not we, the people, reclaim control over our government.”

Turn off MSNBC, CNBC, CNN, and NBC and listen – away from the spectacle – to some uncomfortable deep state realities…

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It’s more the failure of the Republican party than of Trump, if you read Matt well.

The Fury and Failure of Donald Trump (Matt Taibbi)

Trump’s early rampage through the Republican field made literary sense. It was classic farce. He was the lewd, unwelcome guest who horrified priggish, decent society, a theme that has mesmerized audiences for centuries, from Vanity Fair to The Government Inspector to (closer to home) Fear and Loathing in Las Vegas. When you let a hands-y, drunken slob loose at an aristocrats’ ball, the satirical power of the story comes from the aristocrats deserving what comes next. And nothing has ever deserved a comeuppance quite like the American presidential electoral process, which had become as exclusive and cut off from the people as a tsarist shooting party The first symptom of a degraded aristocracy is a lack of capable candidates for the throne.

After years of indulgence, ruling families become frail, inbred and isolated, with no one but mystics, impotents and children to put forward as kings. Think of Nikolai Romanov reading fortunes as his troops starved at the front. Weak princes lead to popular uprisings. Which brings us to this year’s Republican field. There wasn’t one capable or inspiring person in the infamous “Clown Car” lineup. All 16 of the non-Trump entrants were dunces, religious zealots, wimps or tyrants, all equally out of touch with voters. Scott Walker was a lipless sadist who in centuries past would have worn a leather jerkin and thrown dogs off the castle walls for recreation. Marco Rubio was the young rake with debts. Jeb Bush was the last offering in a fast-diminishing hereditary line. Ted Cruz was the Zodiac Killer. And so on.

The party spent 50 years preaching rich people bromides like “trickle-down economics” and “picking yourself up by your bootstraps” as solutions to the growing alienation and financial privation of the ordinary voter. In place of jobs, exported overseas by the millions by their financial backers, Republicans glibly offered the flag, Jesus and Willie Horton. In recent years it all went stale. They started to run out of lines to sell the public. Things got so desperate that during the Tea Party phase, some GOP candidates began dabbling in the truth. They told voters that all Washington politicians, including their own leaders, had abandoned them and become whores for special interests. It was a slapstick routine: Throw us bums out!

[..] How Giuliani isn’t Trump’s running mate, no one will ever understand. Theirs is the most passionate television love story since Beavis and Butthead. Every time Trump says something nuts, Giuliani either co-signs it or outdoes him. They will probably spend the years after the election doing prostate-medicine commercials together.

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Adam Curtis has no peers. Available from Sunday at BBCiPlayer (only in Britain?!) Great video excerpt on -some of- Trump’s Atlantic City losses.

Hypernormalisation: Adam Curtis’ Path From Syria To Trump, Via Jane Fonda (G.)

I struggle to think a more perfect union of medium and message than HyperNormalisation, Adam Curtis’s new film for the BBC iPlayer. Though he’s spent the best part of four decades making television, Curtis’s signature blend of hypnotic archive footage, authoritative voiceover and a seemingly inexhaustible appetite for bizarre historical tangents is better suited to the web, a place just as resistant to the narrative handholding of broadcast TV as he is. Safe in the knowledge that his audience now has the ability to pause and rewind at will, Curtis crafts a mammoth labyrinth of political storytelling in the film, his follow-up to last year’s “war on terror” epic Bitter Lake.

Launching on Sunday, his 165-minute opus makes a feature of its sheer unwieldiness, as Curtis veers from social history to conspiracy theory via the odd rambling bar-room anecdote, like a man who’s two-dozen browser tabs into a major Wikipedia binge. He argues that an army of technocrats, complacent radicals and Faustian internet entrepreneurs have conspired to create an unreal world; one whose familiar and often comforting details blind us to its total inauthenticity. Not wishing to undersell the concept, Curtis begins the film with a shot of a torch shining limply into a thicket, so that viewers find themselves literally unable to see the wood for the trees.

From there, HyperNormalisation tracks a course to the present day, allowing Curtis to weigh in on Trump, Putin and Syria. But those expecting a snappy crash course in our chaotic world (“You won’t believe how this veteran BBC film-maker explains the Islamic State! What happens at 156:34 will shock you!”) clearly aren’t familiar with his methods. The film may address some of today’s most critical global issues, but it also allocates space to Jane Fonda, the fall of the Soviet Union and a supercut of pre-9/11 disaster movies. And unlike Curtis’s earlier work for TV, HyperNormalisation refuses to drop the kind of storytelling breadcrumbs that might anchor a viewer in its overarching narrative.

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Not bad from US general with Greek roots. Who’s also a typical 13 in a dozen Putin basher, unfortunately.

Greece, The Hot Corner (Stavridis)

First and foremost, Greece – perhaps more than any other country – represents the confluence of values in the trans-Atlantic community. These values are fundamental to our societies and cultures: democracy, liberty, freedom of speech, freedom of religion, freedom of education and assembly. They came to us from ancient Greece, passed through the Age of Enlightenment in Western Europe, and washed up on our shores as the principles of the American Revolution. To walk away from a nation that represents the core of those values would be an abiding mistake.

Second, geography continues to matter, and Greece’s position – on the figurative hot corner of Europe – means that without stability there, there will be an open gateway for migrant and refugee populations fleeing the violence in the Levant, the larger Arab world, and northern Africa. As a geographic location, Greece offers the best bases in the NATO Alliance from which to operate in the trouble spots of the Middle East and the Mediterranean. Our military-to-military relations with Greece are exceptionally good and provide us true strategic advantage both unilaterally for the USA and via the NATO Alliance.

A third crucial element that argues for supporting Greece is the excellence and professionalism of the Greek military. It is a relatively large and very technologically advanced force, with fine capabilities at sea, in the air, and via its land army. Greek soldiers, sailors, and airmen have participated in every NATO operation over the past decade: Afghanistan, the Balkans, Libya, and piracy, to name a few. Ensuring Greece’s economic viability will ensure those troops and capabilities are available for future operations as well.

Fourth, Greece has a unique and positive position in the Balkans and elsewhere via its influence in the Orthodox world. Greeks are well established regionally, and have useful connections in most of the Balkan countries (despite some disputes, including, for example over the name of Macedonia). The Greeks also have a relatively good set of relationships with fellow orthodox nation Russia, and are leaders in the broader global Orthodox community, providing a bridge to a variety of nations and communities around the world.

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Jul 082016
 
 July 8, 2016  Posted by at 8:05 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Lewis Wickes Hine Whole family works, Browns Mills, New Jersey 1910

Brexit Opens Up Bank Fault Line From Milan To Lisbon (R.)
Europe Banks Close to Breaching 2011 Crisis Lows on Italy Woes (BBG)
EU Declares Spain, Portugal In Violation Of Deficit Rules (EuA)
UK Property Fund Turmoil Continues As Three More Firms Cut Value (G.)
World Faces Deflation Shock As China Devalues At Accelerating Pace (AEP)
Forget Brexit, Watch China And The Renminbi (VW)
Central Banks Put Squeeze on Sovereign-Debt Market (WSJ)
Bond Market Is In An ‘Epic Bubble Of Colossal Proportions,’ Says Boockvar (CNBC)
Race And Real Estate: How Hot Chinese Money Is Making Vancouver Unlivable (G.)
Why Australia Could Be About To Lose Its AAA Rating (VW)
Chilcot’s Judgment Is Utterly Damning – But It’s Still Not Justice (Monbiot)
More Obscuration From The British Establishment (Paul Craig Roberts)
The United States and NATO Are Preparing for a Major War With Russia (Klare)
Pressure Mounts For Varoufakis’ Secret Plan X To Be Investigated (Kath.)
The Strange Gaps in Hillary Clinton’s Email Traffic (Pol.)
Marine’s Defense For Handling Classified Info Will Cite Hillary Case (WaPo)
Europe Is Full … Of Empty Houses (LifeSeekers)

 

 

Beautiful Brexit bursts bubbles.

Brexit Opens Up Bank Fault Line From Milan To Lisbon (R.)

The ripples from Britain’s decision to leave the EU have spread across Europe to its southwestern edge, where Portugal is quietly struggling to contain a banking crisis. Since Britain’s shock vote on June 23 for a “Brexit”, attention in the banking sector has mainly focused on Italy, where non-performing loans are causing concern, bank shares have tumbled and confidence has sunk. Political tensions in Europe have also deepened, with Rome and Lisbon trying to bend EU rules on helping laggard banks but meeting resistance from economic powerhouse Germany and the executive European Commission. “It’s putting the whole banking system under stress,” said Gunnar Hokmark, a lawmaker in the European Parliament, echoing the nervousness expressed by investors who spoke to Reuters.

“It will be serious for countries in a fragile situation,” said Hokmark, who helped write rules imposing losses on bondholders and large depositors of failing banks which Portugal and Italy want loosened to allow state help. Portugal’s problems have attracted fewer headlines than Italy’s but its predicament is potentially no less painful. Data show Portuguese savings are being spent, unlike in Italy, and private debt is much higher. A euro zone official who asked not be identified said Portugal’s situation was as critical as Italy’s but it was unlikely to be treated with leniency because it was smaller and posed no “systemic” threat to Europe’s financial stability. Portugal sees it differently. “Wherever you look, there is a threat or a risk,” said Filipe Garcia, a financial expert and consultant in Portugal.

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How much did Draghi spend to reach this point?

Europe Banks Close to Breaching 2011 Crisis Lows on Italy Woes (BBG)

European banks have fallen to levels not seen since the worst days of the region’s debt crisis as turmoil surrounding Italy’s lenders intensified. Worries about market contagion dragged the Stoxx Europe 600 Banks Index just 1.4% away from its 2011 low. Most of Europe’s banks lost at least 40% of their value in the last year – Banco Popular Espanol, Banca Monte dei Paschi di Siena, Deutsche Bank and Credit Suisse reached fresh record lows this week.

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If EU sanctions Madrid and Lisbon, it can’t leave others be.

EU Declares Spain, Portugal In Violation Of Deficit Rules (EuA)

The European Commission on Thursday (7 July) officially declared Spain and Portugal in violation of the EU rules on government overspending, the first step towards unprecedented penalties against members of the 28-country bloc. “The Commission confirms that Spain and Portugal will not correct their excessive deficits by the recommended deadline,” the EU’s executive arm said in a statement. If endorsed by the EU’s finance ministers, the Commission is then legally obliged to propose fines against the two neighbouring countries, which were both hit hard by the financial crisis. “Lately, the two countries have veered off track in the correction of their excessive deficits and have not met their budgetary targets,” said Valdis Dombrovskis, the EU Commission’s VP in charge of the euro.

“We stand ready to work together with the Spanish and Portuguese authorities to define the best path ahead,” he said. Many EU powers led by Germany have long hoped for the Commission to finally crack down on public overspenders, but with populist fires burning after the Brexit vote, ministers meeting in Brussels on Tuesday could decide to delay their immediate endorsement. “There is uncertainty creeping in light of the UK vote result,” an EU diplomat told AFP. France and Italy will be the most willing to delay the penalty process, fearing that their own years of EU rule breaking would put them next in line for a sanction by Brussels. Ahead of the Commission announcement, Portuguese Prime Minister Antonio Costa warned that Brussels would foster a rise in Euroscepticism in Portugal if EU sanctions are applied.

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Brexit bursts bubbles. Is that a bad thing?

UK Property Fund Turmoil Continues As Three More Firms Cut Value (G.)

Shopping centres, office blocks and warehouses worth up to £5bn could be put up for sale as the turmoil in the UK commercial property sector prompted by the Brexit vote forces fund managers to revalue their portfolios or temporarily prevent investors withdrawing their savings. With the pound under pressure on the foreign exchange markets, fund managers Legal & General, Foreign & Colonial and Dutch-owned Kames cut the value of their property funds on Thursday. L&G cut the value of its £2.3bn fund by 10% – following a 5% cut last week – while F&C and Kanes both cut by 5%. Aberdeen Fund Management announced on Wednesday it was halting trading in its property fund for 24 hours and devaluing it by 17% – thought to be the biggest adjustment ever made by a property fund.

Aberdeen has since extended the trading ban until Monday. Others have suspended dealings for longer, starting with Standard Life’s decision on Monday to halt trading in its £2.9bn commercial property fund, leading to a cascade effect with Aviva, Prudential’s M&G, Henderson, Columbia Threadneedle and Canada Life following suit – taking the total value of property funds suspended to £18bn. Mike Prew, equity analyst at Jefferies, said buildings could be sold to find the cash to repay investors in the funds: “We estimate that £3bn to £5bn of assets could be put up for sale but it’s a trading vacuum and what sells is likely to get a hefty Brexit discount. “Buildings are now being readied for sale but keys to cash can typically take three to six months.”

One of the factors weighing on sentiment is uncertainty about the role of London as a financial centre outside the EU. George Osborne, the chancellor, met the heads of major international banks including Goldman Sachs and Morgan Stanley on Thursday to discuss ways to keep the City as a major trading centre. “We are determined to work together,” they said in a joint statement.

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Ambrose lags me by a week: Deflation Is Blowing In On An Eastern Trade Wind

World Faces Deflation Shock As China Devalues At Accelerating Pace (AEP)

China has abandoned a solemn pledge to keep its exchange rate stable and is carrying out a systematic devaluation of the yuan, sending a powerful deflationary impulse through a global economy already caught in a 1930s trap. The country’s currency basket has been sliding at an annual pace of 12pc since the start of the year. This has picked up sharply since the Brexit vote, suggesting that the People’s Bank (PBOC) may be taking advantage of the distraction to push through a sharper devaluation. “This makes a mockery of the PBOC’s suggestion that its policy is to keep the currency’s value stable,” said Mark Williams, chief China economist at Capital Economics. “Markets will not take PBOC policy statements at face value in the future.”

Mr Williams said it is unclear whether Beijing intended to deceive investors all along when it gave categorical assurances earlier this year, or whether it is feeding on events. Either way the markets have stopped believing what they are told, storing serious trouble for the authorities should there be another surge in capital flight later this year, as widely expected. “When it comes, the PBOC will find itself sorely lacking in credibility. It may have to intervene on a large scale to maintain control,” he said. Factory gate prices within China are falling at a rate of 2.9pc, further amplifying the deflationary impact. Analysts fear that Beijing is engaged is an undeclared policy of beggar-thy-neighbour mercantilism, trying to avert an industrial crisis at home by exporting its overcapacity in steel, shipbuilding, chemicals, plastics, paper, glass, and even solar panels, to the rest for the world.

“When you have a relatively closed capital account like China, it means that any currency move like this is a policy decision,” said Hans Redeker, currency chief at Morgan Stanley. “They seem to be overriding their own model and letting the remnimbi (yuan) fall to improve competitiveness. They are in the same sort of deflationary syndrome as Japan in the 1990 but on a much bigger scale. The global economy is in no position to absorb this.”

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Again, Deflation Is Blowing In On An Eastern Trade Wind.

Forget Brexit, Watch China And The Renminbi (VW)

As the world’s attention has been fixed on Brexit and meltdown of the European financial system, China has been quietly devaluing its currency without causing too much turbulence in the financial markets as it did the last time policymakers attempted such a strategy. On Wednesday the yuan fell to a fresh five-and-a-half-year low against the dollar extending its slide to a fifth straight session, after China’s central bank sharply weakened its official guidance rate as the dollar surged. The yuan traded as low as 6.6955 against the dollar at one point, closing in on the psychologically important 6.7 level. China’s policymakers have made it clear that they are willing to let the yuan fall as low as 6.8 per dollar in 2016 to support struggling exporters, a depreciation of 4.5% for the full year matching last year’s decline.

This time around China’s central bank is trying to send a message to the markets that it has the depreciation under control. Reuters reports that traders believe state-owned banks across the country are offering dollars to soothe markets while the People’s Bank of China has been intervening in the foreign exchange market to slow down the yuan’s decline. Forex reserves fell by $27.9 billion in May to $3.19 trillion, their lowest since December 2011 although currency movements are almost entirely to blame for the decline. The renminbi depreciated by 1.8% during May. FX reserves increased by $10.3 billion during March and $7.1 billion during April.

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Not enough paper left.

Central Banks Put Squeeze on Sovereign-Debt Market (WSJ)

Christopher Sullivan, a money manager in New York, is worried that when he needs U.S. Treasury bonds one day, he might not be able to get them. On the surface, the concern might seem unwarranted: The U.S. Treasury has $13.4 trillion in debt securities outstanding, making the U.S. bond market the largest in the world and Treasurys among the most easily traded asset classes. But Mr. Sullivan, who oversees $2.3 billion as chief investment officer at the United Nations Federal Credit Union, said he is afraid that he may soon be squeezed out of that market as central banks continue to vacuum up high-quality debt around the world and nervous overseas investors turn to Treasurys for relief.

A buying spree by central banks is reducing the availability of government debt for other buyers and intensifying the bidding wars that break out when investors get jittery, driving prices higher and yields lower. The yield on the benchmark 10-year Treasury note hit a record low Wednesday. “The scarcity factor is there but it really becomes palpable during periods of stress when yields immediately collapse,’’ he said. ”You may be shut out of the bond market just when you need it the most.’’

On Wednesday, the yield on the 20-year Japanese government bond fell below zero for the first time, joining a pool of negative-yielding bonds around the world that has expanded rapidly over the past year. In Switzerland, government bonds through the longest maturity, a bond due in nearly half a century, are now yielding below zero. In Germany, government debt with maturities out as far as January 2031 is trading with negative yields.

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Kuroda and Bernanke are meeting next week.

Bond Market Is In An ‘Epic Bubble Of Colossal Proportions,’ Says Boockvar (CNBC)

One of the most crowded trades on Wall Street is about to implode, says one market watcher. “We’re in an epic bubble of colossal proportions,” Peter Boockvar, at The Lindsey Group, said Tuesday on CNBC’s ” Futures Now “. Global yields have been tumbling to record lows, with many dipping into negative territory. The U.S. 10-year hit its lowest level ever this week as traders continue to seek safety in the bond market. Yields move inversely to prices. However, Boockvar believes that this activity is a ticking time bomb for the global economy. He reasoned that U.S. Treasury yields are being dragged down by negative-yielding debt out of Germany, Japan and Switzerland and misplaced monetary policy, and is therefore skeptical as to how much longer the rally can continue.

“It could be central banks that end this,” said Boockvar in regard to upward momentum for bonds. In his recent coverage, he reacted to the newly released FOMC minutes and further questioned the Fed’s ability to act effectively. “They’ll call it being ‘patient.’ Their forecasts are now irrelevant, their communication is now meaningless and their tools to handle whatever might come our way are toothless,” noted Boockvar when describing the Fed’s ability to address a flattening yield curve. In Europe, concern for Italy’s economy continues to rise as that nation struggles to maintain negative interest rates while simultaneously raising capital for its banking system, which is straddled with mounting debt.

“Maybe Italian banks are telling us that central bankers and their negative interest rate policies are actually destroying the Japanese and European banking system?” asked Boockvar in the CNBC interview. He reasoned that Bank of Japan Governor Haruhiko Kuroda and ECB President Mario Draghi could take a look at what’s happening in Italy and decide that their respective monetary policies are the wrong course of action. Ultimately, Boockvar warned of the fallout that could occur if multiple nations opt to end what he referred to as a “negative deposit rate regime.” “Even if they put it back to zero, imagine the carnage, at least in the short-term bond markets,” concluded Boockvar.

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Once again: how to kill a city.

Race And Real Estate: How Hot Chinese Money Is Making Vancouver Unlivable (G.)

Here’s one,” says Melissa Fong. She’s browsing online real estate listings in a cafe near Vancouver’s City Hall. Behind her, the mountains of the North Shore – the view that launched a thousand bidding wars – rise through mist. “Three-bedroom townhouse, 1,400 sq ft, C$1.5m (£800,000). You could start a family in a place like this. Way, way out of my price range, though.” Fong moves on, scrolling through half a dozen homes, each smaller than the last, until she arrives at a tiny, 500 sq ft condominium on the east side of the city. “Unassuming” would be a generous way to describe how it looks from the photos, which, tellingly, are all exterior shots. “You could live there if you only had one kid, right?” she says with a grim smile.

An urban planning researcher, Fong divides her time between Vancouver, where her elderly parents live, and Toronto, where she’s finishing a doctorate. She grew up in Vancouver, has deep roots in the city, and plans to settle here with her husband, a home renovator. But she has looked on with a mixture of frustration and horror as the cost of housing in Canada’s famously liveable city rise beyond the means of young professionals like her. “When you think it can’t get any worse, it does. So you keep adjusting your expectations, you know?”

Over the past year, the price of a single family house in Vancouver increased by an incredible 30%, to an average of $1.4m. It’s just the latest, most dramatic jump in an already dramatic long-term trend that has turned the beautiful but unassuming Canadian city into one of the world’s least affordable, with a housing price-to-income ratio of 10.8. That’s third after Hong Kong and Sydney, and well ahead of London, which ranks eighth at 8.5. Driving the rise is an unprecedented flood of foreign capital, mainly from China.

“What you have is a huge pool of very wealthy people who want to hedge against uncertainty back home,” says Thomas Davidoff, a real estate economist at the University of British Columbia (UBC). “Combine anxious money – a lot of it – with a beautiful gateway city that has limited space to build, low property taxes, lax regulation on capital flows, and wealth-friendly immigration programmes, and you get a market like this one,” – a market where an ordinary house with a waterfront view can sell for $15m while people earning local wages struggle to buy or rent a home.

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Lemme guess. Because it’s f**king broke?

Why Australia Could Be About To Lose Its AAA Rating (VW)

Australia’s AAA credit rating was under pressure even before the election and is now looking decidedly shaky. Ratings agency Standard & Poors has moved Australia’s rating outlook from “stable” to “negative”, due to debt and a poor chance of budget repair. This follows warnings from the other major credit rating agencies – Moody’s and Fitch Ratings. The problem is budget repair will only become harder over the coming years, whatever the final numbers in the parliament. On the parties’ approach to budget repair, the Coalition and Labor are virtually indistinguishable as far as the credit agencies are concerned. The May budget projected a deficit (in underlying cash terms) of A$37 billion in 2016-17, gradually falling to $6 billion over the four-year forward estimates.

Labor’s plan is to reduce the deficit from $39 billion to $11 billion over that time. Both Coalition and Labor forecast a return to surplus over the subsequent years and indeed quite large surpluses ten years from now. Budget repair on this scale was utterly implausible before the election and is fiction now. The government’s so-called “zombie” budget measures were baked into its projections over the forward estimate period. These were mainly the cuts to university funding, family payments and the Pharmaceutical Benefits Scheme. None of these had any prospect of being legislated with the past Senate, never mind with a larger, more powerful set of crossbench senators.

The Parliamentary Budget Office estimates these “zombie” measures to be worth $8 billion in total over the forward estimates. This accounts for roughly half of the difference between the total projected deficits of Coalition and Labor over the same period. In short, there is little or no prospect of achieving the budget repair that is a pre-requisite for maintaining Australia’s AAA credit rating. Both sides of politics need to spell out to all Australians what this means. The effect of a credit downgrade is like an income cut to households, businesses and government.

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Blair won’t be jailed, neither will Dubya or Cheney. But we could at least try to make sure this can’t happen again. By telling them of consequences before they pull these things.

Chilcot’s Judgment Is Utterly Damning – But It’s Still Not Justice (Monbiot)

Little is more corrosive of democracy than impunity. When politicians do terrible things and suffer no consequences, people lose trust in both politics and justice. They see them, correctly, as instruments deployed by the strong against the weak. Since the first world war, no British prime minister has done anything as terrible as Tony Blair’s invasion of Iraq. This unprovoked war caused the deaths of hundreds of thousands of people and the mutilation of hundreds of thousands more. It flung the whole region into chaos, which has been skillfully exploited by terror groups. Today, three million people in Iraq are internally displaced, and an estimated 10 million need humanitarian assistance.

Yet Blair, the co-author of these crimes, whose lethal combination of appalling judgment and tremendous powers of persuasion made the Iraq war possible, saunters the world, picking up prizes and massive fees, regally granting interviews, cloaked in a forcefield of denial and legal impunity. If this is what politics looks like, is it any wonder that so many people have given up on it? The crucial issue – the legality of the war – was, of course, beyond Sir John Chilcot’s remit. A government whose members were complicit in the matter under investigation (Gordon Brown financed and supported the Iraq war) defined his terms of reference.

This is a fundamental flaw in the way inquiries are established in this country: it’s as if a defendant in a criminal case were able to appoint his own judge, choose the charge on which he is to be tried and have the hearing conducted in his own home. But if Brown imagined Chilcot would give the authors of the war an easy ride, he could not have been more wrong. The Chilcot report, much fiercer than almost anyone anticipated, rips down almost every claim the Labour government made about the invasion and its aftermath. Two weeks before he launched his war of choice, Tony Blair told the Guardian: “Let the day-to-day judgments come and go: be prepared to be judged by history.” Well, that judgment has just been handed down, and it is utterly damning.

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PCR gets mad: Elect Hillary and die.

More Obscuration From The British Establishment (Paul Craig Roberts)

Sir John Chilcot, a member of the British establishment and also a member of the Butler Inquiry, the responsibility of which was to determine if the so-called “intelligence” used as the excuse for the US/UK invasion of Saddam Hussein’s Iraq was “fixed” to justify the invasion, has, after seven years of delay, finally issued its report. Remember, there was a leaked memo from the head of British intelligence that the intelligence justifying the Iraqi Invasion was “fixed” or orchestrated to produce the justification for the invasion, a war crime under the Nuremberg standard established by the United States. Chilcot’s job was to make this fact go away or assume less importance and to protect the Butler Inquiry’s orchestrated verdict that, despite the word of the head of British intelligence, the intelligence was not fixed.

In other words, Sir John’s assigned task under the guise of an “impartial inquiry” was to absolve former UK PM and war criminal Tony Blair not of all responsibility but of all responsibility deserving of prosecution. Sir John’s report is akin to FBI director Comey’s report on Hillary: They did it but they didn’t do it enough to be prosecuted. In the context of democratic politics, if such existed in England, Tony Blair would be in the crosshairs of the ruling UK party, the Tories or Conservatives. Yet, as both parties represent the same private interest groups, the Conservative Prime Minister, David Cameron, who has announced his resignation effective next October, rushed to the opposition party’s defense and gave in Parliament what former British Ambassador Craig Murray calls a “dishonest, apologia for the invasion that bore no relationship to the Chilcot report.”

The UK media, for the most part, also came out in defense of Tony Blair, the war criminal and liar, providing, according to Amb. Murray, “unlimited airtime to Blair and his defender Alastair Campbell” and “almost no airtime to those who campaigned against the war.” Here is the judgement of a British Ambassador, Craig Murray: “Blair is still a creature of absolute self-serving slime.” You could make the same judgment on almost every member of the Bill Clinton, George W. Bush, and Obama regimes. And Hillary’s regime would be even worse. My prediction is that life on earth would not survive Hillary’s first term. Elect Hillary and die.

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Not Klare’s strongest effort, but the risk is there.

The United States and NATO Are Preparing for a Major War With Russia (Klare)

For the first time in a quarter-century, the prospect of war—real war, war between the major powers—will be on the agenda of Western leaders when they meet at the NATO Summit in Warsaw, Poland, on July 8 and 9. Dominating the agenda in Warsaw (aside, of course, from the “Brexit” vote in the UK) will be discussion of plans to reinforce NATO’s “eastern flank”—the arc of former Soviet partners stretching from the Baltic states to the Black Sea that are now allied with the West but fear military assault by Moscow. Until recently, the prospect of such an attack was given little credence in strategic circles, but now many in NATO believe a major war is possible and that robust defensive measures are required.

In what is likely to be its most significant move, the Warsaw summit is expected to give formal approval to a plan to deploy four multinational battalions along the eastern flank—one each in Poland, Lithuania, Latvia, and Estonia. Although not deemed sufficient to stop a determined Russian assault, the four battalions would act as a “tripwire,” thrusting soldiers from numerous NATO countries into the line of fire and so ensuring a full-scale, alliance-wide response. This, it is claimed, will deter Russia from undertaking such a move in the first place or ensure its defeat should it be foolhardy enough to start a war.

The United States, of course, is deeply involved in these initiatives. Not only will it supply many of the troops for the four multinational battalions, but it is also taking many steps of its own to bolster NATO’s eastern flank. Spending on the Pentagon’s “European Reassurance Initiative” will quadruple, climbing from $789 million in 2016 to $3.4 billion in 2017. Much of this additional funding will go to the deployment, on a rotating basis, of an additional armored-brigade combat team in northern Europe.

As a further indication of US and NATO determination to prepare for a possible war with Russia, the alliance recently conducted the largest war games in Eastern Europe since the end of the Cold War. Known as Anakonda 2016, the exercise involved some 31,000 troops (about half of them Americans) and thousands of combat vehicles from 24 nations in simulated battle maneuvers across the breadth of Poland. A parallel naval exercise, BALTOPS 16, simulated “high-end maritime warfighting” in the Baltic Sea, including in waters near Kaliningrad, a heavily defended Russian enclave wedged between Poland and Lithuania.

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Greek politics has degenerated into Class B theater, and that’s if you want to be overly generous.

Pressure Mounts For Varoufakis’ Secret Plan X To Be Investigated (Kath.)

Opposition parties kept up the pressure on the government Wednesday to give a clearer account of its actions over the revelations in US economist James K. Galbraith’s latest book regarding preparations in Greece last year for a possible exit from the euro. The opposition pressed home its views on the matter despite the fact that coalition officials distanced themselves from the academic, who clarified exactly what role he played in 2015 while Yanis Varoufakis was finance minister. Writing on the website belonging to the DiEM25 movement founded by Varoufakis, Galbraith said that he had been asked by the then finance minister in March 2015 to “help with a delicate task.” “This was the preparation of a preliminary plan – requested by the prime minister – for the contingency that Greece might be forced out of the euro,” he wrote.

Galbraith said that he worked on a memorandum, called Plan X, for six weeks with a small group of experts that were sworn to secrecy. The economist insisted that the final note, which touched on issues such as issuing a new currency, setting up a new central bank and ensuring law and order, was not intended as a blueprint for exiting the euro but “an outline of measures that might have to be taken and of problems that could occur.” “It was not our mission to make recommendations, and we made none; we were preparing for a scenario that everyone had hoped to avoid,” wrote Galbraith. Despite the academic’s explanation, Alternate Finance Minister Giorgos Houliarakis launched a strong attack on Galbraith during a session in Parliament Wednesday. “Who is this gentleman?” said the ministry official. “What he is saying is unbelievably frivolous.”

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“Clinton signed documents declaring she had turned over all of her work-related emails. We now know that is not true. But even more importantly, the absence of emails raises troubling questions about the nature of the correspondence that might have been deleted.”

The Strange Gaps in Hillary Clinton’s Email Traffic (Pol.)

The past few weeks have brought a myriad of revelations about the private server Hillary Clinton used while she was secretary of state. First, there was the State Department inspector general’s devastating critique of the former secretary’s email practices. Then came sworn testimony of two key Clinton aides about how the server was set up and how the system worked (or didn’t). Just this weekend, Clinton met with the FBI to discuss her email arrangements. And on Tuesday, FBI Director James Comey announced that the agency would not recommend criminal charges over the handling of these emails, while at the same time offering a brutal assessment of how poorly Team Clinton handled classified information.

But, when it comes to Clinton’s correspondence, the most basic and troubling questions still remain unanswered: Why are there gaps in Clinton’s email history? Did she or her team delete emails that she should have made public? The State Department has released what is said to represent all of the work-related, or “official,” emails Clinton sent during her tenure as secretary—a number totaling about 30,000. According to Clinton and her campaign, when they were choosing what correspondence to turn over to State for public release, they deleted 31,830 other emails deemed “personal and private.” But a numeric analysis of the emails that have been made public, focusing on conspicuous lapses in email activity, raises troubling concerns that Clinton or her team might have deleted a number of work-related emails.

We already know that the trove of Clinton’s work-related emails is incomplete. In his comments on Tuesday, Comey declared, “The FBI … discovered several thousand work-related e-mails that were not in the group of 30,000 that were returned by Secretary Clinton to State in 2014.” We also already know that some of those work-related emails could be permanently deleted. Indeed, according to Comey, “It is also likely that there are other work-related e-mails that [Clinton and her team] did not produce to State and that we did not find elsewhere, and that are now gone because they deleted all emails they did not return to State, and the lawyers cleaned their devices in such a way as to preclude complete forensic recovery.”

Why does this matter? Because Clinton signed documents declaring she had turned over all of her work-related emails. We now know that is not true. But even more importantly, the absence of emails raises troubling questions about the nature of the correspondence that might have been deleted.

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Saw that coming from miles away.

Marine’s Defense For Handling Classified Info Will Cite Hillary Case (WaPo)

A Marine Corps officer who has been locked in a legal battle with his service after self-reporting that he improperly disseminated classified information will use Hillary Clinton’s email case to fight his involuntary separation from the service, his lawyer said. Maj. Jason Brezler’s case has been tied up in federal court since he sued the service in December 2014. He became a cause celebre among some members of Congress, Marine generals and military veterans after he sent a classified message using an unclassified Yahoo email account to warn fellow Marines in southern Afghanistan about a potentially corrupt Afghan police chief. A servant of that police official killed three Marines and severely wounded a fourth 17 days later, on Aug. 10, 2012, opening fire with a Kalashnikov rifle in an insider attack.

An attorney for Brezler, Michael J. Bowe, said that he intends to cite the treatment of Clinton “as one of the many, and most egregious examples” of how severely Brezler was punished. FBI Director James B. Comey announced Tuesday that he would not recommend the U.S. government pursue federal charges against Clinton, but he rebuked her “extremely careless” use of a private, unclassified email server while serving as secretary of state. The FBI found that 110 of her emails contained classified information. Bowe said it is impossible to reconcile President Obama’s statement that Clinton’s intentional act of setting up a secret, unsecured email server did not detract “from her excellent ability to carry out her duties” while Brezler received a “completely opposite finding… involving infinitely less sensitive and limited information.”

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“..there are at least 15.8 million verified empty homes in Europe..”

Europe Is Full … Of Empty Houses (LifeSeekers)

“Our country is full” is a statement you might often hear as a justification for not accepting any more migrants and refugees. According to this opinion, European countries do not have capacity to accept more newcomers, who put pressure on infrastructure – and especially housing. But when we look more closely, can it really be said that Europe is full? According to data from the censuses conducted across Europe in 2011, there are at least 15.8 million verified empty homes in Europe; in other words, there are enough empty homes in Europe to house all the asylum seekers that arrived in Europe last year, and all of Europe’s 4 million homeless people, several times over.

However, many Europeans are struggling with a housing market that makes it even more difficult for them to buy or rent a home. There are many reasons for this, including housing speculation, where investors buy houses to use simply as assets to be sold on when their value increases, as well as the economic situation and unstable employment. But what seems clear is that this market is not working for European people, and migrants and refugees are not the cause of the problem. This unfair housing market is especially serious for young people in Europe. Ever-rising rents mean that living situations for most young Europeans are unstable: it’s no surprise that over 48% of young people (aged 18-34) in the EU still live with their parents, unable to truly realise their independence. And meanwhile, there are millions of homes sitting empty.

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Jun 092016
 
 June 9, 2016  Posted by at 8:33 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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G. G. Bain Temporary footpath, Manhattan Bridge 1908

Everything’s a Buy as Central Banks Keep on Greasing Markets (BBG)
Draghi Starts Buying Junk Bonds, “Means Business” (BBG)
FinMin: Greece In ECB’s QE Program By This Fall (Kath.)
Europe Junk Borrowers Rush to Refinance Before Brexit Vote (BBG)
China’s Factory-Gate Deflation Eases Somewhat (BBG)
Chinese Trade Data Lies Exposed -Again- (ZH)
Cheap Oil Will Weigh On Global Economy, Says World Bank (G.)
Gulf Nations Must Cut Deficits to Keep Currency Pegs, IMF Says (BBG)
Hedge Funds’ Fast Money Not Welcome as Iceland Bolsters Defenses (BBG)
Britain’s Defiant Judges Fight Back Against Europe’s Imperial Court (AEP)
Greek Asylum Service Starts Process Of Recording Applications (Kath.)
Erdogan’s Draconian New Law Demolishes Turkey’s EU Ambitions (G.)

As per the apt title of my article yesterday, ‘the only thing that grows is debt’. Markets need price discovery to function, but right now it’s everyone’s biggest fear. “Oil at 8-month high!”

Everything’s a Buy as Central Banks Keep on Greasing Markets (BBG)

Misery is making strange bedfellows in global markets. At a time when risky assets including stocks, commodities, junk bonds and emerging-market currencies are rallying to multi-month highs, so are the havens, from gold, government bonds to the Swiss franc and the Japanese yen. No matter that the U.S. labor market is deteriorating and the World Bank has just cut its estimates for global economic growth. Investors either don’t believe the news is bad enough to kill a global recovery that’s already long in the tooth, or they’re betting that sluggishness in some of the biggest economies means central banks will stay more accommodative for longer.

“Everything is being driven by high liquidity that ultimately is being provided by central banks,” Simon Quijano-Evans at Commerzbank, Germany’s second-largest lender, said in London. “It’s an unusual situation that’s a spill over from the 2008-09 crisis. Fund managers just have cash to put to work.” For much of the time since the financial meltdown eight years ago, investors have been in the mindset that bad economic data is good news for markets. The near-zero interest-rate policies by major central banks – and negative borrowing costs in Japan and some European nations – have pushed traders to grab anything that offers yield. And every indication that the liquidity punch bowl will stay in place is greeted by markets with a cheer.

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Paraphrasing Springsteen: “Someday we’ll look back on this and it will all seem not one bit funny.”

Draghi Starts Buying Junk Bonds, “Means Business” (BBG)

Since a surprise interest-rate cut at his first meeting as ECB President, Mario Draghi has shown a penchant for pushing the envelope. The bank’s entry into the corporate bond market on Wednesday was no exception: buying bonds with junk ratings. Purchases on the first day included notes from Telecom Italia, according to people familiar with the matter, who aren’t authorized to speak about it and asked not to be identified. Italy’s biggest phone company has speculative-grade ratings at both Moody’s Investors Service and S&P Global Ratings. The company’s bonds only qualifies for the central bank’s purchase program because Fitch Ratings ranks it at investment grade.

By casting his net as wide as the program allows, Draghi ensured that the first day of corporate bond purchases made an impact. While the ECB has said it would buy bonds from companies with a single investment-grade rating, investors expected the central bank to start with the region’s highest-rated securities. “It’s been an aggressive start to the program,” said Jeroen van den Broek at ING Groep in Amsterdam. “The wide-reaching nature of the purchases shows Draghi means business.” [..] Telecom Italia’s bonds are in Bank of America Merrill Lynch’s Euro High Yield Index and credit-default swaps insuring the notes against losses are part of the Markit iTraxx Crossover Index linked to companies with mostly junk ratings.

Moody’s and S&P have ranked Telecom Italia one level below investment grade, at Ba1 and an equivalent BB+ respectively, since 2013. Fitch puts the company at the lowest investment-grade rating and only revised its outlook on that level to stable from negative in November. “This dispels any doubts investors may have had about the commitment of the ECB and the central banks to tackle lower-rated names,” said Alex Eventon at Oddo Meriten Asset Management. “Telecom Italia is firmly at the weak end of the spectrum the ECB can buy.”

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I’ll have to see it to believe it. Draghi buys everything not bolted down, but not Greece.

FinMin: Greece In ECB’s QE Program By This Fall (Kath.)

Greece will enter the ECB’s quantitative easing (QE) program “soon,” Finance Minister Euclid Tsakalotos told Bloomberg in an interview on Wednesday. However, the Greek government’s optimism is not shared by banking sources and analysts, who estimate that Greece’s inclusion in ECB Governor Mario Draghi’s bond-buying program will be tied to the successful completion of the second bailout review in the fall, as well as the progress in talks on settling the problem of the Greek national debt.

In his interview Tsakalotos went as far as to say that Greece will join the QE program by September, stressing that such a development would open the way for the lifting of the capital controls and the gradual restoration of investor trust. He also said that the ECB will start accepting Greek bonds as collateral for loans after Athens completes the July debt repayments to Frankfurt. “I feel confident the Greek bonds will be eligible” by September, he predicted. He also forecast that once Greece enters the QE program, depending also on the decisions on the country’s debt, “you can take Grexit off the table,” referring to the possibility of a Greek exit from the eurozone. “Then you have a straight runway for investors,” he added in the same optimistic spirit.

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Draghi’s got your back, guys.

Europe Junk Borrowers Rush to Refinance Before Brexit Vote (BBG)

Junk-rated companies in Europe are hurrying to refinance debt, locking in borrowing costs at one-year lows amid concerns that a U.K. referendum on EU membership will paralyze markets. Leveraged-loan borrowers are poised to raise more money in euros this week for refinancing than in the whole of May, according to data compiled by Bloomberg. The amount amassed for repaying old debt from selling high-yield bonds is on track to be equal to about two-thirds of comparable sales last month. Companies including Altice and Verisure Holding have entered the market as the start of corporate-bond purchases by the ECB on Wednesday has driven down borrowing costs across the continent.

The window may prove short-lived as banks including Goldman Sachs have said a June 23 vote in favor of a Brexit could roil European markets and endanger economic growth. “It’s possible that uncertainty will rise as we approach the Brexit referendum,” said Colm D’Rosario at Pioneer Investment Management. “Issuers won’t want to wait until then.” Companies may sell about €2.5 billion of leveraged loans and at least €2.6 billion of high-yield bonds for refinancing this week, the Bloomberg data show.

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The new reality: “..raw-material producer prices fell 7.2%, less than the prior month’s 7.7% decline..” And what does BBG call this? Yes, that’s right: “Firmer producer prices..”

China’s Factory-Gate Deflation Eases Somewhat (BBG)

Deflationary pressures in China’s industries eased further in May, while consumer price gains continued to be subdued enough to offer the central bank scope for more easing if needed. Amid a drive by the Communist Party leadership to cut excess capacity, producer prices fell 2.8%, the least since late 2014 and less than the 3.2% decline economists had estimated in a Bloomberg survey. The consumer price index rose 2% from a year earlier, less than the median forecast of 2.2%. Easing factory-gate deflation is the latest signal of stabilization after more than four years of falling producer prices. Tepid consumer price gains may allow the People’s Bank of China, which has kept interest rates at a record low since October, room to add further stimulus in the short term to help prop up growth.

“The deflationary threat has substantially diminished,” said Raymond Yeung at Australia & New Zealand Banking Group in Hong Kong. “Domestic demand has stabilized so we don’t see a strong upward pressure either. We still think the PBOC will remain moderately accommodative.” [..] Mining and raw-materials producer prices slumped less in May than the previous month, though still recorded the biggest declines. Mining producer goods fell 9.6% last month, versus a 13% drop in April, while raw-material producer prices fell 7.2%, less than the prior month’s 7.7% decline, the statistics bureau reported.

“Firmer producer prices reflect a combination of factors,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. “Commodity prices are a big part of the picture, with oil and iron ore both down less sharply than in 2015. So, too, is slightly more resilient domestic demand. Capacity utilization remains extremely low in historical comparison, but has ticked up over the last few months.”

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Different version of the graph I posted yesterday with the comment: “Where would China’s imports be without the fake invoices?”

Chinese Trade Data Lies Exposed -Again- (ZH)

If March’s 116.5% surge in China imports from Hong Kong didn’t raise eyebrows as the veracity of the trade data, then perhaps following last night’s data drop, this month’s 242.6% explosion year-over in China imports from Hong Kong must at minimum deserve a second glance. As Bloomberg’s Tom Orlik previously noted, the implausible 242.6% YoY surge screams that China is clearly disguising capital flows… Trade mis-invoicing as a way to hide capital flows remains a factor. In the past, over-invoicing for exports was used as a way to hide capital inflows. The latest data show the reverse phenomenon, with over-invoicing of imports as a way of hiding capital outflows. Does this look “real”?

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Yes, that’s right. Cheap oil is now bad, all of a sudden. Who could have thought? Oh wait, me.

Cheap Oil Will Weigh On Global Economy, Says World Bank (G.)

Global growth will slow this year as oil exporters in the developing world struggle to cope with lower energy prices, the World Bank has said in its half-yearly economic health check. The benefit of cheaper oil prices for Europe, Japan and other oil importing nations, which has sustained their growth through 2015 and 2016, has failed to offset a slowdown in parts of Africa, Asia and South America that depend on selling energy to sustain their incomes. In one of the gloomiest predictions by an international forecaster, the bank said the effect of the collapse in oil income on developing countries would restrict global growth to 2.4% this year, well down on its January forecast of 2.9%.

In the UK the growth rate will be restricted to 2% this year and 2.1% in 2017 and in 2018. The US will also stabilise at about 2% annually for the next couple of years, while the eurozone will expand at a more modest 1.6% in 2016 and in 2017 before slipping to 1.5% in 2018. The tumbling price of metals and food on world markets last year hit emerging and developing economies without triggering a significant rise in spending by richer countries. The Washington-based bank, which lends more than £25bn a year to developing countries, said weaker global trade, a downturn in private and public investment and a slump in manufacturing added to the woes of economies that have become dependent on high oil prices to bolster growth.

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They all pray for growing demand. There won’t be any.

Gulf Nations Must Cut Deficits to Keep Currency Pegs, IMF Says (BBG)

Gulf oil exporters must cut spending and narrow their budget shortfalls to keep their currencies pegged to the dollar, the IMF said. While substantial foreign assets have allowed the six members of the Gulf Cooperation Council to fix the value of their currencies to the greenback, keeping the status quo comes at a price as lower crude prices strain public finances, the lender said in a report titled “Learning to Live with Cheaper Oil.” “When a country faces prolonged fiscal and external deficits, policy adjustment must come from fiscal consolidation measures,” the IMF said in the report authored by Martin Sommer, deputy chief of its regional studies division. Maintaining the currency pegs “will require sustained fiscal consolidation through direct expenditure cutbacks and non-oil revenue increases,” it said.

As investors increased bets that currency fixes may become too expensive to maintain, the United Arab Emirates and Saudi Arabia renewed their commitment to their pegs – with the latter also said to ban betting against its currency. Gulf oil producers’ budgets swung from surplus to deficit as Brent crude fell by as much as 75% from June 2014 to January this year, before a partial recovery in recent months. Even after cutting spending, the combined budget gap in the GCC region – which also includes Kuwait, Qatar, Bahrain and Oman – as well as Algeria is expected to reach $900 billion for the period 2016-2021, and represent 7% of their gross domestic product in the final year, the IMF said. Their debt-to-GDP ratio is expected to rise to 45% in 2021 from 13% last year as governments issue debt to plug their budget gaps.

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Iceland’s learned a lesson or two.

Hedge Funds’ Fast Money Not Welcome as Iceland Bolsters Defenses (BBG)

Iceland has gone its own way since its three largest lenders collapsed in 2008 under a mountain of debt almost eight times the size of its economy. The steps included capital controls that locked in hedge funds, mortgage writedowns and throwing bankers in jail. With the recovery well under way, the island nation – once a hedge fund paradise – is continuing on its isolated path. Lawmakers have effectively outlawed the kind of trade that inflated the bubble a decade ago, protecting against a repeat. Surrounded by sub-zero interest rates, Iceland’s benchmark gauge of 5.75%, the highest in the developed world, is luring cash from abroad. That’s unlikely to change any time soon.

“The problem is the ability to have an independent monetary policy and an independent monetary policy means the ability to have a different interest rate than the rest of the world,” central bank Governor Mar Gudmundsson said on Monday. “If that’s not possible, then you can’t have an independent monetary policy. And the problem of very significant interest rate differential – interest rates in Iceland are higher than the rest of the world – will not disappear overnight.” Both geographically and financially Iceland is a small island in vast, turbulent waters. Under the law enacted last week, the central bank over the weekend set rules that will force investors in Icelandic bonds to keep 40% of their investments in a 0% account for a year. That will limit the profit to be made from investing in Iceland, where government bonds offer yields of more than 6%.

Those type of returns are tempting in a world of near zero and even negative key rates. As evidence, the Icelandic krona has strengthened this year even as the central bank has been selling the currency to build up foreign holdings as it prepares to lift the capital controls that have been in place since 2008. But the country may have seen nothing yet, according to the governor. The new rules are a “precautionary” measure to stifle any major flows after the controls are lifted, he said. “There have been certain inflows in the last few months,” he said. “We thought there was a possibility of much greater inflows going forward, especially if the auction goes well and we take further steps to liberalize the capital account and the economy is booming and interest rates are high.”

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As I’ve said many times, the EU is made up of sovereign countries, and they’re not going to give up their sovereignty, not a single one of them.

Britain’s Defiant Judges Fight Back Against Europe’s Imperial Court (AEP)

The British judiciary has begun to draw its sword. For the first time since the European Court asserted supremacy and launched its long campaign of teleological conquest, our own judges are fighting back. It is the first stirring of sovereign resistance against an imperial ECJ that acquired sweeping powers under the Lisbon Treaty, and has since levered its gains to claim jurisdiction over almost everything. What has emerged is an EU supreme court that knows no restraint and has been captured by judicial activists – much like the US Supreme Court in the 1970s, but without two centuries of authority and a ratified constitution to back it up. This is what the Brexit referendum ought to be about, for this thrusting ECJ is in elemental conflict with the supremacy of Parliament. The two cannot co-exist. One or the other must give.

It is the core issue that has been allowed to fester and should have been addressed when David Cameron went to Brussels in February to state Britain’s grievances. It was instead brushed under the carpet. The explosive importance of Lisbon is not just that it enlarged the ECJ’s domain from commercial matters (pillar I), to broad areas of defence, foreign affairs, immigration, justice and home affairs, nor that this great leap forward was rammed through without a referenda – after the French and the Dutch had already rejected it in its original guise as the European Constitution. Lisbon also made the Charter of Fundamental Rights legally-binding. As we have since discovered, that puts our entire commercial, social, and criminal system at the mercy of the ECJ.

The Rubicon was crossed in Åklagaren v Fransson, a VAT tax evasion case in non-euro Sweden. The dispute had nothing to do with the EU. The Charter should come into force only when a country is specifically applying EU law. The ECJ muscled into the case on the grounds that since VAT stems from an EU directive, Sweden was therefore operating “within the scope of EU law”. This can mean anything, and that is the point. To general consternation, it ruled that Sweden had violated the double-jeopardy principle of Article 50 of the Charter. Almost nothing is safe when faced with a court like this, neither the City of London, nor our tax policies or labour laws, nor even our fiscal and monetary self-government. The ECJ can strike down almost any law it wants, with no possibility of appeal.

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The EU slowly but surely forces Greece to take in 10s of 1000s of refugees on a -much more- permanent basis. But Erdogan can send a million more.

Greek Asylum Service Starts Process Of Recording Applications (Kath.)

Greece’s asylum service on Wednesday launched a new scheme for processing registrations from migrants who want to apply for asylum in the country, a process that could take up to a year for many of the applicants, according to sources. The “recognition documents” issued to migrants to date will have their validity extended to cover a year. Many of the documents held by migrants in camps across the country have expired as they apply for six months for Syrians and just one month for all other nationalities.

Once the migrants have been registered, they will be issued with a yellow bracelet bearing their name and other personal details. The registration document and bracelet will grant each migrant the right to legal residence in Greece and access to free healthcare but will not give them permission to work in Greece which must be sought separately. The applicants will be informed by SMS about their interview, according to an official of Greece’s asylum service who said the interview could take place several months after their application “due to the large population of refugees in the country.”

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Got the feeling he’s just getting started.

Erdogan’s Draconian New Law Demolishes Turkey’s EU Ambitions (G.)

Any chance Turkey could join the EU by 2020, as Brexit campaigners have asserted, went up in smoke on Wednesday after the country’s president, Recep Tayyip Erdogan, signed a draconian new law that in effect demolishes any notion that his country is a fully functioning, western-style democracy. EU rules dating to 1993, known as the Copenhagen criteria, insist all applicant states must adhere to a system of democratic governance and uphold other basic principles, such as the rule of law, human rights, freedom of speech, and protection of minorities. Turkey is struggling to meet these standards. The new measures make EU membership even more of a chimera.

They are expected to eviscerate parliamentary opposition to Erdog an’s ruling neo-Islamist Justice and Development party (AKP) by allowing politically inspired, criminal prosecutions of anti-government MPs. The main target is the pro-Kurdish Peoples’ Democratic party (HDP), which Erdog an accuses of complicity in terrorism, although other opposition parties are also affected. By signing the new law, Erdog an, who has dubbed the EU a “Christian club”, has signalled the end of any realistic chance of Turkey joining the union for the foreseeable future. Critics say he may also have sounded the death knell for Turkey’s secular democracy and set the stage for intensified armed conflict with Kurdish groups. Erdogan’s move comes against a backdrop of heightened violence between Turkey’s security forces and militants belonging to the outlawed Kurdistan Workers’ party (PKK) and its radical offshoots.

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May 042016
 
 May 4, 2016  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , ,  9 Responses »
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Jack Delano Myrtle Beach, S.C. Air Service Command Technical Sergeant Choken 1943

US Dollar Plunges As World Plays Dangerous Game Of Pass The Parcel (AEP)
90% of Americans Worse Off Today Than in 1970s (VW)
High Anxiety: Markets Get Roiled (WSJ)
China’s Improbable Commodities Frenzy Leaves Stocks in the Dust (BBG)
Commodities Are China’s Hottest New Casino (FT)
China’s $1 Trillion In Bad Debt Makes A Sharp Slowdown Inevitable (BI)
$571 Billion Debt Wall Points to More Defaults in China (BBG)
The Global Economy is at Stall Speed, Rapidly Losing Lift (Stockman)
Fed Expected To Drag Hedge Funds Into Plan To Halt Next Lehman (BBG)
Barclays Launches First 100% Mortgages Since Crisis (FT)
Whistleblowing Is Not Just Leaking, It’s an Act of Resistance (Snowden)
Whistle-Blower Needed a Smoke Before Giving Up LuxLeaks Data (BBG)
The Kleptocrats’ $36 Trillion Heist Keeps Most of the World Impoverished (DB)
France Threatens To Block TTiP Deal (G.)
TTIP Has Been Kicked Into The Long Grass … For A Very Long Time (G.)
After The Leaks Showing What It Is, This Could Be The End For TTIP (Ind.)
Spain, France, Italy, Portugal To Miss EU Deficit, Debt Reduction Targets (R.)
Theft Of Sausage And Cheese By Hungry Homeless Man ‘Not A Crime’ (G.)

“..the Fed is pursuing a “weak dollar policy” [..] “They are forcing currency appreciation onto weaker economies. It is irrational..” No, it’s not irrational, but it certainly is short term only. “.. the soaring euro is in the end self-correcting since the eurozone cannot withstand the pain for long..”

US Dollar Plunges As World Plays Dangerous Game Of Pass The Parcel (AEP)

The US dollar has plunged to a 16-month low in the latest wild move for the global financial system, tightening the currency noose on the eurozone and Japan as they struggle to break out of a debt-deflation trap. The closely-watched dollar index fell below 92 for the first time since January 2015, catapulting gold through $1300 an ounce in early trading and setting off steep falls on stock markets in Asia and Europe. The latest data from the US Commodity Futures Trading Commission shows that speculative traders have switched to a net “short” position on the dollar. This is a massive shift in sentiment since the end of last year when investors were betting heavily that the US Federal Reserve was on track for a series of rate rises, which would draw a flood of capital into dollar assets.

Markets have now largely discounted a rate rise in June, and are pricing in just a 68pc likelihood of any increases this year. The dollar slide has been a lifeline for foreign borrowers with $11 trillion of debt in US currency, notably companies in China, Brazil, Russia, South Africa, and Turkey that feasted on cheap US liquidity when the Fed spigot was open, and were then caught in a horrible squeeze when the Fed turned to tap off again and the dollar surged in 2014 and 2015. But it increases the pain for the eurozone and Japan as their currencies rocket. The world is in effect playing a high-stakes game of pass the parcel, with over-indebted countries desperately trying to export their deflationary problems to others by nudging down exchange rates. The Japanese yen appreciated to 105.60, the strongest since September 2014 and a shock to exporters planning on an average of this 117.50 this year.

The wild moves over recent weeks have blown apart the Japan’s reflation strategy. Analysts from Nomura said Abenomics is now “dead in the water”. The eurozone is also in jeopardy, despite enjoying a sweet spot of better growth in the first quarter. The euro touched $1.16 to the dollar early in the day. It has risen over 7pc in trade-weighted terms since the Europe Central Bank first launched quantitative easing in a disguised bid to drive down the exchange rate. Prices fell by 0.2pc in April and deflation is becoming more deeply-lodged in the eurozone economy, with no safety buffers left against an external shock. The European Commission this week slashed its inflation forecast to 0.2pc this year from 1.0pc as recently as November.

There is little that the Bank of Japan or the ECB can do to arrest this unwelcome appreciation. The Obama Administration warned them at the G20 summit in February that any further use of negative interest rates would be regarded by Washington as covert devaluation, and would not be tolerated. “These central banks have reached the limits of what they can do with monetary policy to influence their exchange rates, and this is putting their entire models at risk,” said Hans Redeker, currency chief at Morgan Stanley. “Europe and Japan are operating in a Keynesian liquidity trap. We are nearing a danger point like 2012 when it could lead to an asset market sell-off. We’re not there yet,” he said.

Stephen Jen from SLJ Macro Partners said the Fed is pursuing a “weak dollar policy”, reacting to global events in a radical new way. “They are forcing currency appreciation onto weaker economies. It is irrational,” he said. Yet it may not last long if the US economy comes roaring back in the second quarter a after a soft patch. “I doubt this is really the end of multi-year run for the dollar,” he said. Neil Mellor from BNY Mellon says the soaring euro is in the end self-correcting since the eurozone cannot withstand the pain for long, and as this becomes evident the currency will start sliding again.

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“Many believe that globalization is largely to blame.”

90% of Americans Worse Off Today Than in 1970s (VW)

A recent study in March from the Levy Economics Institute found that 90% of Americans were worse off financially in 2015 than at any time since the early 1970s. Furthermore, for the vast majority of Americans, the nation’s economy is in a prolonged stagnation, far worse than that of Japan. Worse than Japan? When we think of the Japanese economy, we think of the “Lost Decades.” Japan’s economy was the envy of the world in the 1980s, but starting in 1991, it fell into a prolonged recession and deflation which lasted from then to 2010. Japan’s GDP fell from $5.33 trillion to $4.36 trillion during that period, which saw wages fall by apprx. 5%. So are we really worse off today than Japan? The Levy Economics Institute at Bard College thinks the answer is YES, when it comes to real income – that is, income adjusted for inflation.

According to their findings, 90% of Americans earn roughly the same real income today as the average American earned back in the early 1970s. As a result of this stagnation in incomes and the plunge in housing values during the Great Recession, 99% of American households have seen their net worth fall since 2007 according to the study. Economic stagnation hasn’t reached the remaining 1% of the US population, which has seen a recovery in their real incomes over the same period to near new highs. The chart below has not been updated to include results for 2015, but the trends are clear. The bottom 99% of US income-earning households have seen their net worth decline since the financial crisis of 2007-2009.

Once upon a time, the American economy worked for nearly everybody, and even the middle class got richer. Things were quite different in the decades preceding the 70s, a period that stretches back to the late 1940s, when real incomes rose for both groups. Simply put, for the vast majority of Americans, the dream of a steady increase in income was lost back in the early 1970s. What can explain this big shift in the income distribution in the last four decades? One clue is in the timeframe of the shift, which coincides with the growing openness of the American economy to international trade and investments. Many believe that globalization is largely to blame.

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The game is getting dangerous. But it’s the only game in town.

High Anxiety: Markets Get Roiled (WSJ)

Stocks and oil futures tumbled and Japan’s yen hit its highest intraday level against the dollar since October 2014, as investors struggled to reconcile recent market gains with unease over the pace of global growth. The latest tumult erupted after the Reserve Bank of Australia on Tuesday cut its benchmark rate by one-quarter of a percentage point to 1.75%. The move reflects soft inflation and economic sluggishness driven in part by weak demand from China, the largest buyer of Australian exports. Adding to concerns were a drop in Chinese manufacturing and signals that eurozone growth is slowing more than previously forecast, traders said.

Tuesday’s developments reflect worries that have shadowed a surprising 2016 recovery in the prices of stocks and many commodities. Global growth has slowed this year, prompting major forecasters to cut their outlooks. Yet in recent months the decline of the U.S. dollar and easier policy from global central banks have helped fuel gains in many riskier assets, allowing the Dow industrials to recover from a decline of as much as 10% earlier this year. The action has vexed many portfolio managers and traders, who came into the year expecting the dollar to gain against the yen and euro as the Fed prepared to further tighten its policy and its peers loosened theirs. Instead, both currencies have surged against the dollar.

The dollar fell as low as ¥105.53 during trading Tuesday before retracing to ¥106 later in the session. The dollar traded at ¥120 at the start of the year, according to CQG. The gains threaten to add to economic turmoil in the world’s third-largest economy while deepening investors’ anxiety. “The financial markets are on edge,’’ said Jack McIntyre at Brandywine Global Investment Management. ”Economic growth is still hard to come by.’’

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Hard to imagine that this still has legs..

China’s Improbable Commodities Frenzy Leaves Stocks in the Dust (BBG)

The wild ride in China’s commodity futures is making the nation’s $5.9 trillion stock market look docile. Compared with the stock market, even eggs have been a better investment in China in 2016, with futures climbing 27%. That’s as the cost of a dozen eggs in the U.S. slumped 24% in the first quarter. The epicenter of the commodities boom, however, has been steel reinforcement bars, which have surged 38%. The dizzying increase in speculative activity prompted the head of the world’s largest metals exchange to say that some traders probably don’t even know what they are buying or selling. The Shanghai Composite Index is down 15% this year.

Fluctuations in steel futures have sent a gauge of price swings to the highest level on record. Rebar surged 29% in Shanghai from the end of March through April 22, before dropping about 11%. Bourses in Dalian, Shanghai and Zhengzhou have announced measures to cool the commodities boom including higher fees and a reduction in night hours. Meanwhile, volatility on the Shanghai Composite, which saw gut-wrenching moves over the summer and the start of 2016, has fallen to the lowest level in more than a year as the market turned flat. The intensity of futures trading on Chinese commodities exchanges is making some of the world’s most liquid markets look leisurely. The average iron ore and steel rebar contracts on the Shanghai Futures Exchange are held for less than four hours, compared with almost 40 hours for WTI crude futures on the New York Mercantile Exchange.

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Time to get out. The House wins.

Commodities Are China’s Hottest New Casino (FT)

China’s market regulator may have succeeded in taking much of the froth off the country’s surging commodities markets last week, but the message is not filtering down to many dedicated retail traders. As Chinese markets reopened on Tuesday after the May Day holiday, a few dozen young traders in Shanghai crowded into a small room provided by a local brokerage. The mostly 20-something male traders, dressed in jeans and T-shirts, were looking forward to another week of fevered risk-taking in China’s hottest new casino. “It’s better for futures traders to be young because they can learn faster,” said Zhang Jun, 26, who has been trading commodities on the Shanghai Futures Exchange for three years but has only recently begun to make any money.

“This is not relevant to anything you study before you get here. I don’t know anyone who studied a relevant major,” said Mr Zhang, a mechanical engineer by training. On April 29, the China Securities Regulatory Commission ordered the country’s three commodities futures exchanges to curb speculation. The exchanges had already taken steps in that direction, by increasing margin requirements and transaction fees while reducing trading hours. The measures appeared to be aimed primarily at large institutional traders who have contributed to price surges for commodities ranging from steel to eggs, which have increased 50% and 10% respectively over recent months. Liu Shiyu, the CSRC’s new boss, wants to avoid the fate of his recently sacked predecessor, who last year presided over a boom and bust on the Shanghai and Shenzhen stock exchanges.

Poor economic data helped Mr Liu’s cause on Tuesday, with the price of the Shanghai exchange’s most popular steel rebar contract falling 4.52% to Rmb2,451 a tonne. Futures for iron ore, the key ingredient in steel production, also took a hit. The most actively traded contract on the Dalian Futures Exchange, which largely trades steel industry inputs, dropped 2.96% to Rmb442.5 per tonne. At the peak of last month’s China commodities fever, the number of steel rebar contracts traded in Shanghai exceeded volumes for the world’s two most important crude oil benchmarks, Brent and West Texas Intermediate.

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More dangerous by the day, but nothing to stop it.

China’s $1 Trillion In Bad Debt Makes A Sharp Slowdown Inevitable (BI)

The amount of debt being carried in the Chinese economy – mostly by state-owned “zombie” companies – is now so high that it could lead to a financial crisis, according to Macquarie analyst Viktor Shvets and his team. “Unless this vicious cycle is broken, financial crisis or at least a sharp slowdown is an inevitable ultimate outcome,” he wrote in a note to investors on April 29. The China debt problem is simple, at least in concept. To grow its economy, the Chinese government and its central bank have extended credit generously to all sorts of Chinese companies. Many of those are “state owned enterprises,” which are often old-fashioned, uncompetitive, or kept alive by political will rather than economic necessity.

These “zombie” companies exist largely to pay back those debts, but as time goes by some of them default, or fail to pay back all if their loans. This was not much of a problem until recently, Shvets argues, because China’s economy was growing so robustly that it eclipsed the rate of non-performing loans (NPLs). But as the economy has grown, so has its debt, to roughly $35 trillion, or nearly 350% of GDP. If too many companies fail to repay their debts, private lenders and banks will become fearful of lending more. And when that happens, it would plunge China into a financial crisis as liquidity dries up. The size of the debt at risk is so large – and the Chinese economy is such a global driving force – that such a crisis would cause a contagion into the markets of the rest of the world.

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It can’t be called an accident, but it sure is waiting to happen.

$571 Billion Debt Wall Points to More Defaults in China (BBG)

Chinese debt investors are turning bearish at just the wrong time for the nation’s corporate borrowers, which face a record 3.7 trillion yuan ($571 billion) of local bond maturities through year-end. With this year’s biggest note payments concentrated in some of the country’s most-cash strapped industries, China needs buoyant markets to help its companies refinance. Instead, yields in April rose at the fastest pace in more than a year and issuance tumbled 43% as borrowers canceled 143 billion yuan of planned debt sales. Deteriorating investor sentiment has heightened the risk of defaults in a market that’s already seen at least seven companies renege on obligations this year, matching the total for all of 2015.

While government-run banks may step in to help weaker borrowers, missed debt payments by three state-owned firms in the past three months suggest policy makers are becoming more tolerant of corporate failures as the economy slows. “The biggest risk to the onshore bond market is refinancing risk,” said Qiu Xinhong at First State Cinda Fund. “With such a big amount of bonds maturing, if Chinese issuers can’t sell new bonds to repay the old, more will default.”Repayment pressures are most extreme in China’s “old economy” industries, the biggest losers from the nation’s slowdown. Listed metals and mining companies, which generated enough operating profit to cover just half of their interest expenses in 2015, face principal payments of 389 billion yuan through year-end.

Power generation firms owe 332 billion yuan, while maturities at coal companies have swelled to 292 billion yuan. SDIC Xinji Energy, a state-owned coal producer that canceled a bond sale on March 11, must repay 1 billion yuan of notes on May 15, according to Bloomberg-compiled data. China International Capital highlighted the company as one of the riskiest onshore issuers in the second quarter. Fei Dai, SDIC’s board secretary, said Tuesday that the firm will arrange bank loans and other measures to avoid a default. The shares fell 5% to the lowest level since December 2014 in Shanghai on Wednesday. [..] “If you have a large number of companies in high-risk sectors that lose access to financing, there will be defaults or restructuring,” said Raja Mukherji, head of Asian credit research at PIMCO.

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“China can’t be growing at 6.7% when its export machine has run out of gas..”

The Global Economy is at Stall Speed, Rapidly Losing Lift (Stockman)

South Korea’s exports tumbled to $41 billion in April, marking the 16th consecutive month of declining foreign sales. Last month’s result represented a 11.2% decline from prior year, and an 18% drop from April 2014. Moreover, within that shrinking total, exports to China were down by 18.4% last month, following a 12.2% drop in March. The Korean export slump is no aberration. The same pattern is evident in the entire East Asia export belt. That’s because the Red Ponzi is in its last innings. Beijing is furiously pumping on the credit accelerator, but to no avail. As can’t be emphasized enough, printing GDP by means of wanton credit expansion does not create wealth or growth; it just results in an eventual day of reckoning when the speculative excesses inherent in central bank money printing collapse in upon themselves.

China is surely close to that kind of implosion. During Q1 total credit, or what Beijing is please to call “social financing”, expanded at a $4 trillion annualized rate. This was up 57% over prior year and represented debt growth at a 38% of GDP annual rate. Stated differently, during the first 90 days of 2016 China piled another $1 trillion of debt on its existing $30 trillion debt mountain, while its nominal GDP expanded by less than $175 billion. That’s right. The Red Ponzi is generating barely $1 of GDP for every $6 of new debt. And much of the “GDP” purportedly generated during Q1 reflected new construction of empty apartments and redundant public infrastructure. By now it ought to be evident that the Chinese economy is a brobdingnagian freak of nature that is destined for a collapse, and that its economic statistics are a tissue of fabrications and delusions.

Even its export figures, which are constrained toward minimum honesty because they can be checked against Chinese imports reported by the rest of the world, are padded to some considerable degree by phony export invoicing designed to hide illegal capital flight. Still, the implication of its export trends are unmistakable. When you put aside the statistical razzmatazz of the Chinese New Year’s timing noise in the data, exports were down by 10% in Q1 as a whole. That is the worst quarterly drop since 2009 amidst the global Great Recession, and was nearly twice the rate of decline during Q4 and Q3 2015. Here’s the thing. China can’t be growing at 6.7% when its export machine has run out of gas, as is so starkly evident in the graph below.

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Still festering in the dark.

Fed Expected To Drag Hedge Funds Into Plan To Halt Next Lehman (BBG)

Hedge funds, insurers and other companies that do business with Wall Street megabanks will pay a price for regulators’ efforts to make sure any future collapse of a giant lender doesn’t tank the entire financial system. The Federal Reserve is set to propose so-called stays on derivatives and other contracts that would prevent counterparties from immediately pulling collateral from a failed bank. The plan released Tuesday is meant to give authorities ample time to unwind a firm, hopefully heading off the frantic contagion that spread through markets when Lehman Brothers toppled in 2008. Though the world’s largest banks have already made strides to include such protections in transactions with each other, the Fed’s proposal insists that the shield be expanded to more contracts – including with non-bank firms.

The curbs would apply to any new contract signed by eight of the biggest and most complex U.S. bank holding companies and the U.S. arms of major foreign banks. So, hedge funds and asset managers that want to keep doing business with such lenders would have to comply. Fed Governor Daniel Tarullo said the proposal is “another step forward in our efforts to make financial firms resolvable without either injecting public capital or endangering the overall stability of the financial system.” Industry groups representing firms such as Citadel, BlackRock and MetLife have resisted efforts to rewrite financial contracts, arguing that it abuses investors’ rights and could make things worse by encouraging trading partners to try to pull away from a bank at the first whiff of trouble, even before a failure. But asset managers and insurers would face a tough task in persuading the Fed to change course.

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Party! It’ll be Britain’s last for a while…

Barclays Launches First 100% Mortgages Since Crisis (FT)

Barclays has become the first high street bank since the financial crisis to launch a 100% mortgage in the latest sign of a return to riskier lending. The bank is allowing some buyers to take out a mortgage to 100% of the value of the property, without needing a deposit. Most banks require at least a 5-10% lump sum. Barclays said the mortgage only needed to be supported by a family member or guardian, who must set aside 10% of the purchase price in cash for three years in return for interest. It said the new mortgage was designed to remove the issue of borrowers drawing from the “bank of Mum and Dad” to stump up a deposit. Ray Boulger, of broker John Charcol, said: “It is the first true 100% mortgage since the financial crisis.” The move marks a shift back to higher loan-to-value lending reminiscent of the boom times before the crisis of 2008, when 100% mortgages were widely available.

The defunct bank Northern Rock became renowned for its aggressive lending, with its “Together” mortgages offering 125% of the property value. Regulators have since clamped down on risky lending through regulation in 2014, called the Mortgage Market Review, designed to ensure borrowers can repay — although it does not prohibit 100% loans. The Bank of England would also be likely to take a dim view of any widespread return to deposit-free mortgage lending. So far, no other bank has offered such loans. “We haven’t seen a resurgence of 100% mortgages; I don’t think regulation would allow that,” said Charlotte Nelson, of consumer site Moneyfacts. “I don’t think it’s something many other banks will take on. If they’re seen to be lending at 100%, even with a guarantee, it doesn’t look great. Seeing 100% deals back on the market can come off as negative.”

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The attitude towards whistleblowers still feels medieval.

Whistleblowing Is Not Just Leaking, It’s an Act of Resistance (Snowden)

“I’ve been waiting 40 years for someone like you.” Those were the first words Daniel Ellsberg spoke to me when we met last year. Dan and I felt an immediate kinship; we both knew what it meant to risk so much — and to be irrevocably changed — by revealing secret truths. One of the challenges of being a whistleblower is living with the knowledge that people continue to sit, just as you did, at those desks, in that unit, throughout the agency, who see what you saw and comply in silence, without resistance or complaint. They learn to live not just with untruths but with unnecessary untruths, dangerous untruths, corrosive untruths. It is a double tragedy: What begins as a survival strategy ends with the compromise of the human being it sought to preserve and the diminishing of the democracy meant to justify the sacrifice.

But unlike Dan Ellsberg, I didn’t have to wait 40 years to witness other citizens breaking that silence with documents. Ellsberg gave the Pentagon Papers to the New York Times and other newspapers in 1971; Chelsea Manning provided the Iraq and Afghan War logs and the Cablegate materials to WikiLeaks in 2010. I came forward in 2013. Now here we are in 2016, and another person of courage and conscience has made available the set of extraordinary documents that are published in The Assassination Complex, the new book out today by Jeremy Scahill and the staff of The Intercept. We are witnessing a compression of the working period in which bad policy shelters in the shadows, the time frame in which unconstitutional activities can continue before they are exposed by acts of conscience.

And this temporal compression has a significance beyond the immediate headlines; it permits the people of this country to learn about critical government actions, not as part of the historical record but in a way that allows direct action through voting — in other words, in a way that empowers an informed citizenry to defend the democracy that “state secrets” are nominally intended to support. When I see individuals who are able to bring information forward, it gives me hope that we won’t always be required to curtail the illegal activities of our government as if it were a constant task, to uproot official lawbreaking as routinely as we mow the grass. (Interestingly enough, that is how some have begun to describe remote killing operations, as “cutting the grass.”)

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Case in point.

Whistle-Blower Needed a Smoke Before Giving Up LuxLeaks Data (BBG)

The man who uncovered secret Luxembourg deals that helped companies slash tax rates was actually looking for training documents when he stumbled upon the files on his computer at PricewaterhouseCoopers. On the eve of his departure from the accounting firm in 2010, Antoine Deltour wasn’t fully aware of what he had discovered. He copied the folder and within half an hour had about 45,000 pages detailing confidential tax agreements that became known as the LuxLeaks. Deltour’s discovery triggered the first in a wave of scandals over how thousands of international companies, including Walt Disney, Microsoft’s Skype and PepsiCo, moved money around the globe to avoid taxes. It also landed him in trouble after PwC sued and prosecutors charged him and two other men with theft and violation of business secrets.

“I had discovered gradually the administrative practice of these deals,” Deltour, 30, told a three-judge panel at his trial in Luxembourg Tuesday. “The opportunity to have stumbled over this folder led me to copy it at that moment without a clear goal in mind,” knowing about the “sensitive and highly confidential nature of these files.” Deltour “felt a bit surprised by the volume of the” files and “didn’t immediately do anything with this mass of information,” he told the court. He felt “isolated” and “alone” and unsure of who to turn to. Months later he was contacted by journalist Edouard Perrin, who was working on a documentary about tax practices. The pair met only once, at Deltour’s home in Nancy, France, where Deltour said he needed a moment before handing over the files. “Of course I hesitated,” Deltour told the judge. “I went to smoke a cigarette on the balcony to think a few moments about this.”

The resulting 2012 documentary by Perrin, who is also a defendant in the case, led to interest from the International Consortium of Investigative Journalists. The group put the documents online in 2014, triggering the LuxLeaks scandal. Perrin, 44, another French citizen, was charged in April 2015 with being the accomplice of Raphael Halet, another ex-PwC staffer who is accused of stealing 16 corporate tax returns from the accounting firm and giving them to the journalist. Perrin is also accused of having urged Halet to search for specific documents, a charge both men rejected.

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Grand Theft Auto. Redux.

The Kleptocrats’ $36 Trillion Heist Keeps Most of the World Impoverished (DB)

For the first time we have a reliable estimate of how much money thieving dictators and others have looted from 150 mostly poor nations and hidden offshore: $12.1 trillion. That huge figure equals a nickel on each dollar of global wealth and yet it excludes the wealthiest regions of the planet: America, Canada, Europe, Japan, Australia, and New Zealand. That so much money is missing from these poorer nations explains why vast numbers of people live in abject poverty even in countries where economic activity per capita is above the world average. In Equatorial Guinea, for example, the national economy’s output per person comes to 60 cents for each dollar Americans enjoy, measured using what economists call purchasing power equivalents, yet living standards remain abysmal.

The $12.1 trillion estimate—which amounts to two-thirds of America’s annual GDP being taken out of the economies of much poorer nations—is for flight wealth built up since 1970. Add to that flight wealth from the world’s rich regions, much of it due to tax evasion and criminal activities like drug dealing, and the global figure for hidden offshore wealth totals as much as $36 trillion. In 2014 the net worth of planet Earth was about $240 trillion, which means about 15% of global wealth is in hiding, significantly reducing the capital available to spur world economic growth. That $12.1 trillion figure for money looted from poorer countries has been hiding in plain sight. It comes from numbers in the global economic data—derived by comparing statistics from the IMF and the World Bank, supplemented by some figures from the United Nations and the CIA—that do not match up, but which until now no one had bothered to analyze.

You might think that with their vast staffs of economists and analysts the IMF, the World Bank, and other institutions would have run the numbers long ago, but no. Instead, one determined person combed 45 years of official statistics from around the world to calculate the flight wealth for nearly 200 countries that publish comparable economic data. That’s Jim Henry, who was a rising corporate star until he gave it all up to document illicit flows of money and the damage they do to billions of people. Henry has been the chief economist at McKinsey, arguably the world’s most influential business consultancy, and worked directly under Jack Welch at General Electric. A Harvard-educated economist and lawyer, Henry calls himself an investigative economist. His approach is simple: “Just look at the effing data and solve the puzzle” of mismatches between the various official sources.

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Seems like a bad time to keep on pushing through ever more deals people obviously don’t want.

France Threatens To Block TTiP Deal (G.)

Doubts about the controversial EU-US trade pact are mounting after the French president threatened to block the deal. François Hollande said on Tuesday he would reject the Transatlantic Trade and Investment Partnership “at this stage” because France was opposed to unregulated free trade. Earlier, France’s lead trade negotiator had warned that a halt in TTIP talks “is the most probable option”. Matthias Fekl, the minister responsible for representing France in TTIP talks, blamed Washington for the impasse. He said Europe had offered a lot but had received little in return. He added: “There cannot be an agreement without France and much less against France.” All 28 EU member states and the European parliament will have to ratify TTIP before it comes into force.

But that day seems further away than ever, with talks bogged down after 13 rounds of negotiations spread over nearly three years. The gulf between the two sides was highlighted by a massive leak of documents on Monday, first reported by the Guardian, which revealed “irreconcilable” differences on consumer protection and animal welfare standards. The publication of 248 pages of negotiating texts and internal positions, obtained by Greenpeace and seen by the Guardian, showed that the two sides remain far apart on how to align regulations on environment and consumer protection. Greenpeace said the leak demonstrated that the EU and the US were in a race to the bottom on health and environmental standards, but negotiators on both sides rejected these claims.

The European commission, which leads negotiations on behalf of the EU, dismissed the “alarmist headlines” as “a storm in a teacup”. But Tuesday’s comments from the heart of the French government reveal how difficult TTIP negotiations have become. France has always had the biggest doubts about TTIP. In 2013 the French government secured an exemption for its film industry from TTIP talks to try to shelter French-language productions from Hollywood dominance. Hollande, who is beset by dire poll ratings, indicated on Tuesday that the government has other concerns about TTIP. Speaking at a conference on the history of the left, Hollande said he would never accept “the undermining of the essential principles of our agriculture, our culture, of mutual access to public markets”. Fekl told French radio that the agreement on the table is “a bad deal”. “Europe is offering a lot and we are getting very little in return. That is unacceptable,” he said.

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With growth gone, so is the desire for deals. Too much domestic backlash.

TTIP Has Been Kicked Into The Long Grass … For A Very Long Time (G.)

As talks to broker a global trade deal entered a second tortuous decade, the US and the European Union came up with an idea. Since it was proving impossible to find agreement among the 150 or so members of the World Trade Organisation about how to tear down barriers to freer commerce, they would strike their own agreement. Talks on the Transatlantic Trade and Investment Partnership (TTIP) began in the summer of 2013 with officials in Washington and Brussels confident they could iron out any difficulties by the time American voters decide on who should succeed Barack Obama as president in November this year. This always looked a ridiculously tight timetable and so it has proved. Cutting trade deals is an agonisingly slow process. The last successful global deal – the Uruguay Round – took seven years before being concluding in 1993.

Talks continued on the Doha Round from 2001 until 2015 before terminal boredom and frustration set in. Was it really feasible that TTIP could be pushed through in little more than three years? Not a chance. There are three reasons for that. First, the main barriers to trade between the US and the EU are not traditional tariff barriers, which have been steadily whittled away in the decades since the second world war, but the differing regulatory regimes that operate on either side of the Atlantic. America and Europe have different views on everything from GM food to safety standards on cars so harmonising standards was always going to take a lot of time. Second, the talks have involved controversial issues and have been taking place when trust in politicians and business has rarely been lower. The main driving forces behind TTIP have been multinational corporations and business lobby groups, who stand to gain from harmonised regulations.

With information about the secret negotiations having to be chiselled out by groups hostile to TTIP, voters have drawn the obvious conclusion: the aim of the talks is to enrich big business even if it means playing fast and loose with environmental and health standards. Which leads to the final and most important factor: there are no votes in trade. It would have been no surprise had Angela Merkel voiced strong opposition to the state of the TTIP negotiations, given the level of public antipathy to the trade deal in Germany and her delicate position in the polls ahead of elections next year. Instead, the German chancellor was beaten to it by François Hollande (also facing a showdown with the voters in 2017) who has made it clear he will not sign TTIP in its current form. Years not months of hard slog lie ahead, by which time the US is likely to have a president much less wedded to the idea of striking trade deals. TTIP has just been kicked into the long grass for a very long time, and perhaps for good.

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Can we have no more of this please?! “The European Commission slapped a 30-year ban on public access to the TTIP negotiating texts at the beginning of the talks in 2013..”

After The Leaks Showing What It Is, This Could Be The End For TTIP (Ind.)

Today’s shock leak of the text of the Transatlantic Trade and Investment Partnership (TTIP) marks the beginning of the end for the hated EU-US trade deal, and a key moment in the Brexit debate. The unelected negotiators have kept the talks going until now by means of a fanatical level of secrecy, with threats of criminal prosecution for anyone divulging the treaty’s contents. Now, for the first time, the people of Europe can see for themselves what the European Commission has been doing under cover of darkness – and it is not pretty. The leaked TTIP documents, published by Greenpeace this morning, run to 248 pages and cover 13 of the 17 chapters where the final agreement has begun to take shape.

The texts include highly controversial subjects such as EU food safety standards, already known to be at risk from TTIP, as well as details of specific threats such as the US plan to end Europe’s ban on genetically modified foods. The documents show that US corporations will be granted unprecedented powers over any new public health or safety regulations to be introduced in future. If any European government does dare to bring in laws to raise social or environmental standards, TTIP will grant US investors the right to sue for loss of profits in their own corporate court system that is unavailable to domestic firms, governments or anyone else. For all those who said that we were scaremongering and that the EU would never allow this to happen, we were right and you were wrong.

The leaked texts also reveal how the European Commission is preparing to open up the European economy to unfair competition from giant US corporations, despite acknowledging the disastrous consequences this will bring to European producers, who have to meet far higher standards than pertain in the USA. According to official statistics, at least one million jobs will be lost as a direct result of TTIP – and twice that many if the full deal is allowed to go through. Yet we can now see that EU negotiators are preparing to trade away whole sectors of our economies in TTIP, with no care for the human consequences.

The European Commission slapped a 30-year ban on public access to the TTIP negotiating texts at the beginning of the talks in 2013, in the full knowledge that they would not be able to survive the outcry if people were given sight of the deal. In response, campaigners called for a ‘Dracula strategy’ against the agreement: expose the vampire to sunlight and it will die. Today the door has been flung open and the first rays of sunlight shone on TTIP. The EU negotiators will never be able to crawl back into the shadows again.

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That must be over half the eurozone right there.

Spain, France, Italy, Portugal To Miss EU Deficit, Debt Reduction Targets (R.)

Three of the euro zone’s four biggest economies look set to break European Union deficit and debt reduction targets this year and next unless they take urgent action, European Commission forecasts showed on Tuesday. The Commission forecast that the three – France, Italy and Spain – were likely to miss goals set for them set by EU finance ministers under a disciplinary procedure for those that run excessive budget deficits and have too high public debt. Portugal would also likely be in breach of EU budget rules. The euro zone’s biggest economy Germany, was in rude fiscal health, the forecasts showed. The Commission’s forecasts, together with medium-term fiscal consolidation plans submitted by governments last month will be the basis for a Commission decision, in the second half of May, on whether to step up the disciplinary procedure against those in breach of the rules.

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“..for supreme court judges, the right to survive still trumped property rights, a fact that would be considered blasphemy in America..”

Theft Of Sausage And Cheese By Hungry Homeless Man ‘Not A Crime’ (G.)

Italy’s highest court has ruled that the theft of a sausage and piece of cheese by a homeless man in 2011 did not constitute a crime because he was in desperate need of nourishment. The high court judges in the court of cassation found that Roman Ostriakov, a young homeless man who had bought a bag of breadsticks from a supermarket but had slipped a wurstel – a small sausage – and cheese into his pocket, had acted out of an immediate need by stealing a minimal amount of food, and therefore had not committed a crime. The case, which drew comparisons to the story of Jean Valjean, the hero of Victor Hugo’s Les Misérables, was hailed in some media reports as an act of humanity at a time when hundreds of Italians are being added to the roster of the country’s “hungry” every day, despite improvements in the economy.

One columnist writing in La Stampa said that, for supreme court judges, the right to survive still trumped property rights, a fact that would be considered “blasphemy in America”. But others commented that the case highlighted Italy’s notoriously inefficient legal system, in which the theft of food valued at about €4.70 (£3.70) was the subject of a three-part trial – the first hearing, the appeal, and the final supreme court ruling – to determine whether the defendant had in fact committed a crime. “Yes, you read that right,” an opinion column in Corriere della Sera said, “in a country with a burden of €60bn in corruption per year, it took three degrees of proceedings to determine ‘this was not a crime’.”

Ostriakov, who was described as a homeless 30-year-old from Ukraine, had been sentenced to six months in jail and a €100 fine by a lower court in Genoa, but that punishment was vacated by the supreme court. “The supreme court has established a sacrosanct principle: a small theft because of hunger is in no way comparable to an act of delinquency, because the need to feed justifies the fact,” said Carlo Rienzi, president of Codacons, an environmental and consumer rights group, told Il Mesaggero. “In recent years the economic crisis has increased dramatically the number of citizens, especially the elderly, forced to steal in supermarkets to be able to make ends meet.”

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Apr 012016
 
 April 1, 2016  Posted by at 8:32 am Finance Tagged with: , , , , , , , , ,  16 Responses »
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William Henry Jackson Jupiter & Lake Worth R.R., Florida 1896

Asia Stocks Head for Biggest Drop in 7 Weeks Amid Broad Declines (BBG)
Hong Kong Retail Sales Plunge the Most in 17 Years (BBG)
A Bear Market Is Now Underway And It’s Likely To Be A Painful One (Felder)
Foreigners’ ‘Dumb Money’ Flees Japan Stocks (BBG)
‘Protectionist’ China Tax on Overseas Purchases Set to Kick In (WSJ)
Global Steel Industry Facing ‘Ice Age,’ Top China Mill Warns (BBG)
China’s Anbang Abandons $14 Billion Bid To Buy Starwood Hotels (Reuters)
The UK Once Made 40% Of Global Steel. Soon It May Produce Almost None (BBG)
Britain Courts Fate On Brexit With Worst External Deficit In History (AEP)
A Plan To Turn The Euro From Zero To Hero (Andricopoulos)
In Technology We Trust -Maybe- (Coppola)
How To Hack An Election (BBG)
Canada To Accept Additional 10,000 Syrian Refugees (Reuters)
Greece, Turkey Take Legal Short-Cuts In Race To Return Migrants (Reuters)
Amnesty Says Turkey Illegally Sending Syrians Back To War Zone (Reuters)
Turkey ‘Shooting Dead’ Syrian Refugees As They Flee Civil War (Ind.)
Greek Asylum System Under ‘Insufferable Pressure’ (IRIN)

Nikkei off 3.55%.

Asia Stocks Head for Biggest Drop in 7 Weeks Amid Broad Declines (BBG)

Asian stocks headed for the biggest decline in seven weeks as Japanese corporate sentiment deteriorated and a broad-based selloff from consumer discretionary stocks to healthcare engulfed the region’s equities markets. The MSCI Asia Pacific Index slid 2.2% to 126.04 as of 1:49 p.m. in Tokyo. The gauge climbed 8.2% in March, the best month since October, to end a tumultuous quarter for global markets. Equities had rebounded from lows in February as the Federal Reserve reassured investors that it won’t rush to increase borrowing costs. A stellar performance in March was tested immediately on the first day of the second quarter. Japan’s Topix index lost 3.4%, the worst start to a quarter since 2008, after the Tankan index of confidence among large manufacturers missed economist estimates.

“After strong gains from their February lows, shares are overbought and vulnerable to a pullback,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd., which oversees about $122 billion. “March quarter Tankan business conditions and confidence readings were disappointing.” The Tankan index of sentiment among large manufacturers fell to a reading of 6 in the first quarter, the lowest level since mid-2013, from 12 in the previous three months, the Bank of Japan reported Friday. Economists had expected a reading of 8. A positive number means there are more optimists than pessimists among manufacturers. The Shanghai Composite Index lost 1.3% even after China’s official factory gauge showed improving conditions for the first time in eight months, suggesting the government’s fiscal and monetary stimulus is kicking in.

A jump in the official factory gauge was overshadowed by a cut in the nation’s credit rating by Standard & Poor’s. S&P cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The reduction may not have much of an impact on the markets as it comes at a time when the nation’s stocks are rallying and the currency is stabilizing, according to Sinopac Securities.

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Retail sales are getting bad in multiple locations.

Hong Kong Retail Sales Plunge the Most in 17 Years (BBG)

Hong Kong’s retail sales in February have plunged the most since 1999 as fewer Chinese tourists visited the city during the Lunar New Year holiday. Retail sales dropped 21% in February to HK$37 billion ($4.8 billion) year on year, according to a statement from Hong Kong’s statistics department. Combining January and February, sales fell 14%. The monthly decline is the worst since January 1999 when sales were also down 21%. “Apart from the severe drag from the protracted slowdown in inbound tourism, the asset market consolidation might also have weighed on local consumption sentiment,” a government said in a statement on Thursday. “The near-term outlook for retail sales will still be constrained by the weak inbound tourism performance and uncertain economic prospects.”

The government will monitor closely its repercussions on the wider economy and job market, it said. Chow Tai Fook Jewellery, the world’s largest-listed jewelry chain, and Sa Sa International reported slumping sales over the holiday when mainland Chinese tourists to the territory dropped 12% during Feb. 7-13. The stock market rout and a slowing Chinese economy have affected consumer sentiment for luxury goods, Chow Tai Fook has said. Mainland China tourists “are unlikely to come back in the short term,” said Forrest Chan at CCB International Securities. Hong Kong residents are also consuming less due to stagnant property values and the weak stock market, he said. “Hong Kong’s retail market will continue to fall for the rest of 2016 as all the negative factors won’t be solved in the near term,” Chan said.

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Margin debt. Next up is margin calls.

A Bear Market Is Now Underway And It’s Likely To Be A Painful One (Felder)

NYSE margin debt fell again during the month of February. After the selloff in stocks that kicked off 2016, this should come as no surprise. Investors are usually forced to reduce leveraged bets during these sorts of episodes in the stock market. In fact, this forced selling can actually exacerbate the volatility. And because margin debt is only now beginning to come down from record highs, surpassing those seen at the 2000 and 2007 peak, this should be of concern to most equity investors. To fully appreciate this risk, I prefer to look at margin debt relative to overall economic activity. When leveraged financial speculation becomes large relative to the economy, it’s usually a sign investors have become far too greedy. As Warren Buffett would say, this is usually a good time to become more fearful, or conservative towards the stock market.

Not only did margin debt recently hit nominal record-highs, it hit new record-highs in relation to GDP, as well. In other words, over the past several decades, investors have never become so greedy as they did recently. And yes, this includes the dotcom bubble. One reason I prefer this measure is that it has a fairly high negative correlation with forward 3-year returns in the stock market. When investors become too greedy, returns over the subsequent 3 years are poor and vice versa. As of the end of February, the latest forecast implied by this measure is for a loss of about 35% over the next three years. While this measure is pretty good at forecasting 3-year returns that doesn’t help much for investors concerned with the next year or so. In this regard, it may be helpful to observe the trend of margin debt.

Where is the nominal level of margin debt relative to its 12-month moving average or simply its level from one year ago? Historically, when these indicators turn negative from such lofty levels, a bear market, as defined by at least a 20% drawdown, is already underway. Right now both of these measure are, in fact, negative. So margin debt right now is sending a very clear signal that investors have recently become very greedy. This suggests returns over the next several years should be very poor. Finally, the trend in margin debt also suggests that a new bear market is likely underway. If history is to rhyme, that means a decline of at least 20% in the S&P 500 is very likely to occur sometime soon. And because of the sheer size of the potential forced supply that could come to market in this sort of environment, that could easily be just the beginning.

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Abenomics chapter 827-B.

Foreigners’ ‘Dumb Money’ Flees Japan Stocks (BBG)

Brian Heywood, who oversees about $2 billion mostly in Japanese equities, is putting on a brave face as the market tumbles and many foreigners head for the exit. The CEO of Taiyo Pacific Partners says he welcomes the selling by overseas investors as it gives him a better chance to beat his benchmark. His logic is that many money managers invest indiscriminately in Tokyo, pushing up the entire Topix index and making stock-picking less effective. Heywood says his fund is outperforming the equity gauge this year, while declining to give details.

Foreign investors offloaded shares for 12 straight weeks, with net selling reaching a record earlier this month, as they lose faith in the Bank of Japan’s monetary policy and Prime Minister Shinzo Abe’s commitment to reviving the economy. The Topix is down 13% in 2016, and while Taiyo’s biggest holdings have posted strong gains, many others have fallen. “We don’t do well when there is a flood of money into Japan, because it’s dumb money,” Heywood, 49, said in an interview during a visit to Tokyo last week. “When the market punctures, there are companies that we want to add to. The market overreacts. We know the company. We’re at 3% and we’d like to be at 6%. We use it as an opportunity.”

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We’re going to see a lot of ‘hidden’ protectionism going forward. Globalization is now turning against individual nations.

‘Protectionist’ China Tax on Overseas Purchases Set to Kick In (WSJ)

China is tightening its grip on cross-border e-commerce, imposing a new tax system on overseas purchases that form a growing business catering to Chinese consumers with an appetite for foreign goods. The changes, announced by the Finance Ministry last week, include raising the so-called parcel tax that is currently imposed on foreign retail products that e-commerce firms ship into China. Moreover, such goods sent directly to consumers will now be treated as imports and will be subject to tariffs and value-added and consumption taxes, whose rates vary depending on the type and value of goods. The ministry said the changes, which become effective April 8, are intended to put foreign and domestic products on an equal footing.

Industry analysts said the move seems designed to give a boost to “made-in-China” products and could dent a small, but growing, market for foreign goods sold by Alibaba, JD.com. and other e-commerce players. Those marketplaces feature nutritional supplements and food by brands such as Ocean Spray, as well as diapers and other baby and maternal products. They form a slice of the 5 trillion yuan ($773 billion) in sales by e-commerce firms in China last year, double the level of 2012, according to Beijing-based research firm Analysys International. The new levies could dampen some demand, just as an increasing number of retailers world-wide are hoping to sell into China, said Charles Whiteman, senior vice president of client services for MotionPoint, a technology company that helps international retailers sync their e-commerce websites across languages and currencies.

“Increases in prices always have the effect of driving demand down,” but the effect will be “modest,” Mr. Whiteman said. “It probably won’t be too noticeable for branded products,” for which consumers are willing to pay a premium. Chinese consumers have demonstrated a willingness to pay more for products such as cosmetics, infant formula and other baby products. Chinese e-commerce companies have said that such products form the vast majority of the imported products sold on their websites, because of product-safety concerns in China. Alibaba and JD.com said they expected robust demand from Chinese consumers for overseas products, especially high-quality ones, to continue, even with the changes in policy.

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Yeah, that metaphor sort of works.

Global Steel Industry Facing ‘Ice Age,’ Top China Mill Warns (BBG)

The crisis engulfing the global steel industry is so severe that one of China’s top producers has warned a new Ice Age has set in as mills confront overcapacity and rising competition that threaten their survival. “In 2015, China experienced a slowdown in economic growth and excess steel capacity, which caused the domestic and overseas steel industry to enter into an ‘Ice Age’,” Angang Steel said after posting a net loss of 4.59 billion yuan ($710 million) for last year. There are severe challenges, fierce competition and difficult survival conditions, it said. Steel demand in China is shrinking for the first time in a generation as growth slows and policy makers seek to steer the economy toward consumption.

Faced with declining sales at home, mills in the top producer – which accounts for half of global supply – have shipped record volumes overseas, heightening competition from Europe to the U.S. Tata Steel Ltd. in India said this week it’s planning to sell off its loss-making U.K. plants, prompting Prime Minister David Cameron to call crisis talks on Thursday. The steel industry is set for a “severe winter,” Angang said, describing the market that it and others faced as complex. Output of steel by the country’s fourth-biggest producer contracted 4.4% last year, and the company is seeking to reduce costs and boost efficiency, it said.

Benchmark steel prices sank 31% in China last year, pummeling mills’ margins and spurring the government to step up efforts to force the industry to shut overcapacity and shift workers to other jobs. While reinforcement bar has rebounded since November, Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., forecasts the rally may not last. “The short-term rally we’ve seen in steel prices will give way to the longer-term dynamic of weaker steel consumption in China,” Hynes said by phone on Thursday. “I suppose the positive thing is that maybe the restructuring we’re seeing in the steel industry will speed up the rationalization of the market.”

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This is becoming a curious case. Rumor has it Anbang couldn’t produce details on how they would finance the deal.

China’s Anbang Abandons $14 Billion Bid To Buy Starwood Hotels (Reuters)

China’s Anbang Insurance said on Thursday it has abandoned its $14 billion bid for Starwood Hotels & Resorts Worldwide, paving the way for Marriott International to buy the Sheraton and Westin hotels operator. The surprise withdrawal marks an anticlimactic end to a bidding war that had pitted Marriott’s ambitions to create the world’s largest lodging company, with about 5,700 hotels, against Anbang’s drive to create a vast portfolio of U.S. real estate assets. It also represents a blow to corporate China’s growing ambitions to acquire U.S. assets. Anbang’s acquisition of Starwood would have been the largest takeover of a U.S. company by a Chinese buyer.

“We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria, including the ability to generate consistent, long-term returns over time,” Anbang said. “However, due to various market considerations, the consortium has determined not to proceed further,” Anbang added, referring to the joint bid it had put together with private equity firms J.C. Flowers and Primavera Capital. Anbang did not offer Starwood a reason for not following through on its raised offer of March 26, according to people familiar with the matter. They asked not to be identified disclosing confidential discussions. “The reason of withdrawal is simple – Anbang isn’t interested in a protracted bidding war,” Fred Hu, Chairman of Primavera, told Reuters..

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What happens when all your priorities are short term.

The UK Once Made 40% Of Global Steel. Soon It May Produce Almost None (BBG)

The U.K. once made nearly half the world’s steel. Soon it may produce almost none. Tata Steel plans to sell its U.K. business which include the country’s last blast furnace sites in Scunthorpe and Port Talbot. Used to turn iron ore into steel, these giant plants are the focus of the entire industry. They are also the assets that may prove the most difficult to unload, according to at least one potential buyer. Should Tata’s plants follow Redcar, shut last year, the U.K. would become the first member of the Group of Seven leading economies to operate no blast furnaces. It’s a far cry from its Victorian metal-bashing heyday when Britain produced about 40% of global supply. But beyond the immediate impact on employment, does it matter? Does a major industrial economy need to produce steel, a material vital to industries from construction to car making?

“They’re probably done for,” said Keith Burnett, vice-chancellor at the University of Sheffield, a place that won the moniker Steel City before the industry’s decline. “But if we accept that, it’s a really big step and the long-term consequences are to lose the capabilities to make our own railways, make our own weapon systems, make our own nuclear reactors.” The U.K. was already the industrial world’s laggard when it comes to steel, producing just 12.1 million tons in 2014, less than a third of what Germany makes each year and just over a tenth of Japan’s 110.7 million=ton output. China is the world’s biggest producer making about half the world’s 1.67 billion tons of steel.

British steelmaking has been in relative decline for more than a century, eclipsed by the by the U.S. by the start of World War I and later overtaken by Germany. In the 1970s and 1980s, inefficient and outdated plants led to production falling 64% to less than 10 million metric tons, and the country’s output slipped below France, Italy and Belgium. Still, manufacturing in steel-consuming industries is buoyant. U.K. car production hit a 10-year high last year with 1.6 million cars being made in Britain as overseas sales reached record numbers. The country employs 2.6 million people in manufacturing, much of it steel related, and it accounts for 44% of exports.

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More of the same short term focus that will end up damaging Britain for decades to come.

Britain Courts Fate On Brexit With Worst External Deficit In History (AEP)

Britain’s current account deficit is the worst ever recorded in peace-time since the Bank of England started collecting records in 1772 under the reign of George III. Even during the grimmest moments of the First World War it only slightly exceeded the eye-watering figure of 7pc of GDP racked up in the fourth quarter of last year. No other country in the OECD club is close to this. It has been getting worse for the last four years in a row. Excuses are running thin. The Government can no longer blame the double-dip recession in the eurozone, our biggest export market. Europe has been recovering for three years and is currently enjoying as much growth as it is ever likely to see. The UK deficit is prima facie evidence of a nation living beyond its means, reliant on foreign capital to fund consumption.

Global investors have so far chosen to overlook this chronic deterioration, accepting the stock assurance from London that it is a temporary blip caused by declines in investment income. This may change as the vote on Brexit draws near and the polls tighten. Most investors in Asia, the US, and the Middle East have treated the referendum as political pantomime, taking it for granted that British voters would (as the world sees it) make the “rational” choice. “Very few people have been focusing on the current account. Brexit is now bringing it firmly into focus. We are getting a lot more questions about this from clients in Europe,” said David Owen from Jefferies. The dawning realization that Britain might indeed opt for secession has clearly begun to rattle markets. Sterling has fallen 9pc against a trade-weighted basis since November. The spread between Gilts and German Bunds has been creeping up, an early warning sign of trouble.

The Bank of England’s Financial Policy Committee noted signs of stress in the sterling options market in a statement this week, and warned that it may become harder to the inflows of capital needed to cover the external deficit. Lena Komileva from G+Economics said the current account deficit is now so large that it leaves the country vulnerable to external shocks, amplifying the potential impact of Brexit. Britain’s credit-driven consumer credit is “plainly unsustainable”. The UK savings ratio has fallen to a record low of 3.8pc. Consumer credit has risen by 44pc over the last year to £1.3bn. “We are not very different from the structural fragility of the economy that we had prior to the 2007 global crash,” she said. The Office for Budget Responsibility warned earlier this month that households are running an “unprecedented” deficit of 3pc of GDP – worse than the pre-Lehman peak – with no improvement expected through to the early 2020s.

People are running through savings and taking on debt to fund their lifestyles and buy new cars. They are expected to spend £58bn more than they earn this year, rising to £68bn by the end of the decade. This roughly mirrors what was happening just before the 2007 financial crisis when people were treating their homes as a cash machine, drawing down £50bn a year in home equity. Events were to show brutally that this was not benign.

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Well, one can dream, surely. But without -unacceptable to many- ‘transfers’ from north to south, can the euro survive at all?

A Plan To Turn The Euro From Zero To Hero (Andricopoulos)

It is difficult to read the history of inter-war Europe and the US without feeling a deep sense of foreboding about the future of the Eurozone. What is the Eurozone if not a new gold standard, lacking even the flexibility to readjust the peg? For the war reparations demanded at Versailles, or the war debts owed by France and the UK to the US, we see the huge debts owed by the South of Europe to the North, particularly Germany. The growth model of the Eurozone now appears to be based largely on running a current account surplus. Competitive devaluation is required to make exports relatively cheap. While this may have been a very successful policy for Germany during a period of high economic growth in the rest of the world, it cannot work in the beggar-thy-neighbour demand-starved world economy of today.

As I’ve explained elsewhere, reasonably large government deficits are very important for sustainable economic growth. However, in the Eurozone this is prohibited both by the Stability and Growth Pact (SGP) and by the fear of losing market confidence in the national debt. At the same time credit growth for productive investment is constrained by weak banks and Basel regulation. And the Eurozone as a whole is already running a large current account surplus; the rest of the world will not allow much more export-led growth. Helicopter money would be a solution, but politically this is a long way away. Summing up, if economic growth cannot be funded by government deficits, private sector debt, export growth or helicopter money it is very difficult to see where nominal GDP growth can come from.

In a way, this can be seen as a Prisoner’s Dilemma. Every country knows (or should know) that if all states provided fiscal stimulus, the Eurozone would benefit from more economic growth. However, for any individual state, a unilateral fiscal boost would increase their own government debt whilst giving a fair amount of the GDP growth to other states (because some of the stimulus would go to increasing imports from the other nations). And if all others provide stimulus, then it is in an individual state’s interest to take the benefit of the other states’ stimulus, and become more competitive versus the rest.

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We could do with more blockchain scrutiny.

In Technology We Trust -Maybe- (Coppola)

David Andolfatto of the St. Louis Federal Reserve wonders if investors see Bitcoin as a “safe asset”. By this he means the sort of asset that investors run to when economic storm clouds gather and other asset classes start to look dangerous: “Loosely speaking, I’m thinking about an asset that people flock to in bad or uncertain economic times. In normal times, it’s an asset that is held despite having a relatively low rate of return, perhaps because of its use as a hedge, or because of its liquidity properties.” Like gold, in fact. In important respects, Bitcoin is indeed like gold. Digital gold. It is “mined”, with mining becoming more difficult and expensive as undiscovered supplies dwindle.

There is an absolute limit (21 million) on the number of bitcoins that can ever be mined: once all have been “discovered”, the supply is fixed, unless the Bitcoin community decides that the hard limit should be changed – which at present seems rather less likely than mining asteroids for gold. The gold-like nature of Bitcoin protects it from hyperinflationary collapse, believed by many goldbugs and Bitcoin geeks to be the inevitable future of today’s government-issued fiat currencies. And, importantly, it is not under the control of governments or central banks. Neither the political mafia nor the economics establishment have any say over how, when or if it is produced, nor over its market price. For people who believe that “GUBBMINT WILL STEAL YOUR MONEY”, Bitcoin is possibly even more secure than gold.

After all, in the 1930s the US government confiscated private sector gold holdings. But it has no means of confiscating Bitcoin holdings, since identifying exactly who holds them is costly and difficult, and they can easily be transferred out of reach anyway. Bitcoin is, after all, an international currency with its own highly efficient money transfer technology. Like gold, Bitcoin’s market price tends to be volatile. And like gold, its value also tends to be counter-cyclical. When the US economy weakens, or global risks rise, up goes gold…..and Bitcoin. The profiles of both vis-à-vis the US dollar since the end of 2013 look remarkably similar. We can perhaps say that investors run to gold when trust in government and its instruments fails. In God We Trust becomes In Gold We Trust. But where does Bitcoin fit in?

Bitcoin’s advocates claim that the system is a “trust-free system”, because there are no intermediaries. But for the system to work at all, there must be trust – trust that the technology will work. In Gold We Trust becomes In Technology We Trust. It is perhaps not surprising that Bitcoin use is highest among those with a background in computer science. But hang on. There’s a problem, isn’t there? After all, governments are human constructs. And so are cryptocurrencies. The coders behind Bitcoin are human. Why should anyone have more trust in a digital currency created by an anonymous group of coders accountable to no-one than in a democratically-elected government accountable to everyone? Why is an essentially feudal governance model “safer” than a democratic one?

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The election hit man.

How To Hack An Election (BBG)

It was just before midnight when Enrique Peña Nieto declared victory as the newly elected president of Mexico. Peña Nieto was a lawyer and a millionaire, from a family of mayors and governors. His wife was a telenovela star. He beamed as he was showered with red, green, and white confetti at the Mexico City headquarters of the Institutional Revolutionary Party, or PRI, which had ruled for more than 70 years before being forced out in 2000. Returning the party to power on that night in July 2012, Peña Nieto vowed to tame drug violence, fight corruption, and open a more transparent era in Mexican politics. Two thousand miles away, in an apartment in Bogotá’s upscale Chicó Navarra neighborhood, Andrés Sepúlveda sat before six computer screens.

Sepúlveda is Colombian, bricklike, with a shaved head, goatee, and a tattoo of a QR code containing an encryption key on the back of his head. On his nape are the words “” and “” stacked atop each other, dark riffs on coding. He was watching a live feed of Peña Nieto’s victory party, waiting for an official declaration of the results. When Peña Nieto won, Sepúlveda began destroying evidence. He drilled holes in flash drives, hard drives, and cell phones, fried their circuits in a microwave, then broke them to shards with a hammer. He shredded documents and flushed them down the toilet and erased servers in Russia and Ukraine rented anonymously with Bitcoins. He was dismantling what he says was a secret history of one of the dirtiest Latin American campaigns in recent memory.

For eight years, Sepúlveda, now 31, says he traveled the continent rigging major political campaigns. With a budget of $600,000, the Peña Nieto job was by far his most complex. He led a team of hackers that stole campaign strategies, manipulated social media to create false waves of enthusiasm and derision, and installed spyware in opposition offices, all to help Peña Nieto, a right-of-center candidate, eke out a victory. On that July night, he cracked bottle after bottle of Colón Negra beer in celebration. As usual on election night, he was alone.

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Bright spot. Europe must study Canadian law.

Canada To Accept Additional 10,000 Syrian Refugees (Reuters)

Canada will take in an additional 10,000 Syrian refugees, adding to the more than 25,000 already received in the last few months, said immigration minister John McCallum. McCallum told the Canadian Broadcasting Corp he was responding to complaints from Canadian groups who want to sponsor Syrian refugees but did not have their applications processed quickly enough to be among the government’s initial target of 25,000. “We are doing everything we can to accommodate the very welcomed desire on the part of Canadians to sponsor refugees,” McCallum said in a phone interview with CBC News from Berlin, where he is meeting with the German interior minister. The Liberal government won election in October 2015 pledging to bring in more Syrian refugees more quickly than the previous Conservative government.

Private groups including church, family and community organizations had lined up to sponsor Syrian families. The welcome contrasts sharply to Europe, where resettlement has sparked an anti-migrant backlash amid security fears. While there have been some delays finding permanent housing for refugees arriving in Canada, particularly in large cities like Toronto where the housing market is tight, the resettlement program has been mostly smooth. [..] . A total of 26,200 Syrian refugees had arrived in Canada as of 28 March, according to the immigration department. But nearly 16,000 more applications are in process or have been finalized, even though the refugees have not yet arrived, according to official figures.

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Fast and loose.

Greece, Turkey Take Legal Short-Cuts In Race To Return Migrants (Reuters)

Greece and Turkey are rushing through changes to their asylum rules in a race to implement a EU-Turkey agreement on the return of refugees and migrants from Greek islands to Turkey from next Monday, EU officials and diplomats said. Both Athens and Ankara must amend their legislation to permit the start of a scheme – denounced by the U.N. refugee agency and rights groups – to send back all migrants who crossed to Greece after March 20. The policy is meant to end the uncontrolled influx of refugees and other migrants in which more than a million people crossed into Europe last year, causing a political backlash and pitting EU countries against each other. Greece, which started evacuating hundreds of people stranded in Athens’ Piraeus port on Thursday, submitted to parliament an asylum amendment bill on Wednesday.

Brussels said it had assurances from Athens that it would be passed this week. But it does not explicitly designate Turkey as a “safe third country” – a formula to make any mass returns legally sound – and a senior official of the United Nations High Commissioner for Refugees said that change did not remove its concerns about protecting the rights of asylum seekers. “Our concerns regarding legal safeguards remain unchanged and we hope that the Greek authorities will take them fully into consideration,” UNHCR Europe director Vincent Cochetel said. The EU executive’s spokeswoman, Natasha Bertaud, was unable to say how exactly rejected asylum seekers would be removed from camps on Greek islands or transported back to Turkey, saying those details were still being worked out.

[..]The Greek bill does not name Turkey, but Bertaud said that was not essential provided rules were in place allowing people to be sent back to a “safe third country” or a “safe first country of asylum”, and each case was examined individually. EU officials said the formula was devised to get around unease among lawmakers in Greece’s ruling Syriza party at declaring Turkey safe when it is waging a military crackdown on Kurdish separatists and is accused of curbing media freedom and judicial independence. Asked why Turkey was not mentioned, Greece’s alternate minister for European affairs, Nikos Xydakis, told To Kokkino radio: “It cannot be in a law, because the examination of each application for asylum will be on a case by case basis. That is the safety trigger under international refugee law. Each person is a special case.”

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“It is a deal that can only be implemented with the hardest of hearts and a blithe disregard for international law..”

Amnesty Says Turkey Illegally Sending Syrians Back To War Zone (Reuters)

Turkey has illegally returned thousands of Syrians to their war-torn homeland in recent months, highlighting the dangers for migrants sent back from Europe under a deal due to come into effect next week, Amnesty International said on Friday. Turkey agreed with the EU this month to take back all migrants and refugees who cross illegally to Greece in exchange for financial aid, faster visa-free travel for Turks and slightly accelerated EU membership talks. But the legality of the deal hinges on Turkey being a safe country of asylum, which Amnesty said in its report was clearly not the case. It said it was likely that several thousand refugees had been sent back to Syria in mass returns in the past seven to nine weeks, flouting Turkish, EU and international law.

“In their desperation to seal their borders, EU leaders have wilfully ignored the simplest of facts: Turkey is not a safe country for Syrian refugees and is getting less safe by the day,” said John Dalhuisen, Amnesty International’s Director for Europe and Central Asia. Turkey’s foreign ministry denied Syrians were being sent back against their will. Turkey had maintained an “open door” policy for Syrian migrants for five years and strictly abided by the “non-refoulement” principle of not returning someone to a country where they are liable to face persecution, it said. “None of the Syrians that have demanded protection from our country are being sent back to their country by force, in line with international and national law,” a foreign ministry official told Reuters.

But Amnesty said testimonies it had gathered in Turkey’s southern border provinces suggested the authorities have been rounding up and expelling groups of around 100 Syrian men, women and children almost daily since the middle of January. Many of those returned to Syria appear to be unregistered refugees, though the rights group said it had also documented cases of registered Syrians being returned when apprehended while not carrying their papers. Amnesty also said its research showed the authorities had scaled back the registration of Syrian refugees in the southern border provinces. Those with no registration have no access to basic services such as healthcare and education. [..] “The large-scale returns of Syrian refugees we have documented highlight the fatal flaws in the EU-Turkey deal. It is a deal that can only be implemented with the hardest of hearts and a blithe disregard for international law,” Amnesty’s Dalhuisen said.

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How can Europe continue with the Turkey deal under these conditions?

Turkey ‘Shooting Dead’ Syrian Refugees As They Flee Civil War (Ind.)

Turkish security forces have shot dead refugees escaping from the Syrian conflict, according to reports. UK-based monitoring group the Syrian Observatory for Human Rights alleged 16 people seeking sanctuary in Turkey have been shot over the past four months. They said those killed included three children. Other examples compiled by the Syrian Observatory include the alleged killings of a man and his child at Ras al-Ain, at the eastern end of the Turkish-Syrian border. In the west of the country, two refugees were reportedly shot dead at Guvveci on 5 March. “It’s in all areas. It happens to people coming from Idlib, Aleppo, Isis areas, Kurdish areas,” a spokesman for the Syrian Observatory told The Independent.

Other sources, including a Syrian people smuggler based in Turkey and an officer of the UK-supported Free Syrian Police, told The Times they believed the number of refugees killed by Turkish forces was actually far higher. They said this was because people killed on the Syrian side of the border were buried in the conflict zone, where record keeping is much more difficult. The smuggler told the newspaper refugees attempting to cross the border would now “either be killed or captured”. Citing Turkey’s former open-door refugee policy, he added: “Turkish soldiers used to help the refugees across, carry their bags for them. Now they shoot at them.” It is not the first time Turkish authorities have faced criticism over their treatment of refugees. In March, the Turkish Coast Guard allegedly attacked a dinghy filled with migrants in the Aegean. The latest allegations are likely to cast further scrutiny on the EU migrant deal with Turkey.

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“This is how true refugees are lost. Do we really think that a Somali woman who has been raped will sit down and merrily rattle off her experiences?”

Greek Asylum System Under ‘Insufferable Pressure’ (IRIN)

As Greece prepares to deport an initial 500 migrants and refugees on Monday under a controversial agreement between the EU and Turkey, senior Greek officials say the pressure to process applications quickly has become too great, at the expense of legal and ethical standards. “Insufferable pressure is being put on us to reduce our standards and minimise the guarantees of the asylum process,” Maria Stavropoulou, who heads the Greek Asylum Service, told IRIN. “[We’re asked] to change our laws, to change our standards to the lowest possible under the EU directive [on asylum procedures].” Under the terms of the 18 March agreement, Greece must screen all new arrivals from Turkey as quickly as possible and return those deemed not in need of international protection on the basis that Turkey is a “safe third country” or “first country of asylum” where they were already protected.

Most of the pressure, according to Stavropoulou, is coming from “countries that are very invested in the deal with Turkey working.” Germany, which received more than one million asylum seekers last year, took a leading role in negotiations with Turkey during a tense two-day summit earlier this month. In addition to having to screen and return new arrivals, Greece is also dealing with high numbers of asylum applications from the more than 50,000 refugees and migrants who were already trapped inside Greece before the agreement with Turkey came into effect. An overland route through the western Balkans to Germany has been closed for a month and many of those who cannot afford to pay smugglers to find a new route to Western Europe are now applying for asylum in Greece. Authorities here expect to receive just under 3,000 applications in March, double the figure for January and three times last year’s monthly average.

But even as the numbers have mounted, so has the pressure for speedy processing. The Greek Asylum Service has just hired three dozen new personnel, bringing its total staff to 295. But it says it will need at least double that number to handle the expected caseload in the wake of the EU-Turkey agreement. The European Commission has estimated that some 4,000 personnel are likely to be needed in Greece and is sending reinforcements. Many of those slated to join the effort are coastguard officers, but some 800 are asylum experts and interpreters from other member states and from the European Asylum Support Office, the EU’s coordinating body for asylum matters. The first 60 are to arrive in Greece on Sunday.

[..] Some asylum experts believe that the pressure for rapid screening will mean that vital information for determining asylum claims is overlooked. “It always takes time,” said Spyros Kouloheris, head of legal research at the Greek Council for Refugees (GCR), the country’s most respected legal aid NGO. “Someone who is traumatised will speak in fits and starts. They appear not to be telling the truth. We’ve lost a lot of cases because we didn’t have the time, the information, the culture, the experience, to understand that the more broken up the narrative, the more likely it is that there is a background of torture and abuse. This is how true refugees are lost. Do we really think that a Somali woman who has been raped will sit down and merrily rattle off her experiences?”

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