Jan 142019
 
 January 14, 2019  Posted by at 7:41 pm Finance Tagged with: , , , , , , , , , , , , ,  


Johannes Vermeer The soldier and the laughing girl 1657

 

There will be elections for the European Parliament on May 23-26 2019. They will likely change the face of Europe more than anything has done since the EU was founded. That is not some wild prediction. Many European countries have held elections since the last European elections in 2014, and just about all had outcomes that shook up domestic political ratios.

In most cases, countries went from traditional parties to newly founded ones. France erased the Socialists and center-right in 2017, and the final round of the presidential elections was between Marine Le Pen’s Front National and Emmanuel Macron’s brand-new En Marche. Macron won sort of by default, because France as a country would never have voted for Le Pen.

In Italy, M5S and Lega have taken over. In Germany, Merkel’s CDU/CSU coalition lost bigly though it remained the biggest party, but Angela lost her ‘socialist’ SPD partner which gave up so much it didn’t want to be in government anymore. In Spain, Mariano Rajoy’s center right lost enough to cede power to the Socialists who came up tops because they played a smart game, not because the Spanish wanted it to rule.

We don’t have to go through all 27/28 different countries to establish that there are almost tectonic shifts happening all over, away from traditional parties and towards whoever showed up without insanely extreme views. And if you think this move is now completed, you may want to think again.

It’s amusing to realize that the country with the biggest political shift, the UK, is the only one that still hangs on to its traditional parties, and seeks its protest voice in a different way, namely through Brexit. That is, Britain shows it can get no satisfaction from the EU, whereas in the other major EU nations the dissatisfaction is projected onto domestic parties.

The underlying thought is the same: people are fed up with incumbent politicians and their affiliation with the European project. And nobody in Brussels really appears to be willing to realize this: the only thing they talk about is more Europe. But all these changes will now be reflected in the power politics of the European parliament.

And they do know that. They just hope they can limit the damage through the model in which power is divided in Europe. And to get any of that power, national parties need to find partners from other countries to form European parties (blocks) with. You need parties from at least 7 other nations to run for the European Parliament.

 

There are really only two parties in that parliament that really matter: the center right European People’s Party (EPP) which has 217 MEPs (members of European Parliament), and the center-left Progressive Alliance of Socialists & Democrats (S&D) which has 190 MEPs. Then there are the European Conservatives and Reformists – 74 MEPs, the Alliance of Liberals and Democrats for Europe (ALDE) – 70 MEPs, the European United Left/Nordic Green Left (GUE) – 52 MEPs, and the European Greens/European Free Alliance – 50 MEPs.

These numbers, like the national ones, are set to change, a lot. How exactly is hard to predict, because it’s not clear which block which -relatively- new party will be part of. But it’s not a wild guess to think that at the end of May the division of powers will not be left vs right (both of which are pretty much fake anyway), but pro-EU and anti-EU. Or rather, More Europe vs Less Europe.

Germany’s up-and-coming real right-wing AfD at their conference this weekend voted in a resolution that calls for getting rid of the European Parliament itself, calling it undemocratic, and claiming the “competence to make laws is exclusively for nation states.” Similar sentiments play out in Italy, Poland, Hungary and many other member states.

Given the changes in vote ratios mentioned before, it’s hard to see the More Europe model survive the elections. But that of course doesn’t keep the main parties (blocks) from running outspoken pro-Europe candidates to replace Jean-Claude Juncker as head chief after the elections. The EPP has German Europe stalwart Manfred Weber as ‘Spitzenkandidat’, the so-called Socialists/Democrats have Dutch Frans Timmermans, Juncker’s right-hand man.

They think they will be able to continue business as usual, and accumulate more power and sovereignty in the process, while support for the EU crumbles more by the day. But that’s all in the far far future, that is a whole 4 months away. And who knows what Europe will look like by then? Brussels sure doesn’t seem to know, or want to.

 

In Germany, the entire political system will have to reinvent itself after Merkel. And as said before, with an entire new look as far as vote numbers go. Far right and the Greens are on their way to becoming new power blocks, the Christian center right CDU/CSU and the formerly left SPD are on their way to much less support.

This is a pattern that plays out all over Europe, but what happens in Germany is, because of the way the EU is set up, crucial for all EU member states. Nothing happens in Europe without approval from Berlin. And what will the other 26 remaining members do when that level of power moves towards the AfD?

Of even more immediate concern may be Germany’s economic performance. Because the latest signs are not encouraging. Germany and Holland have done very well, but that is because they have all the others as their ‘domestic’ market. And now not even that turns out to be enough. Germany’s numbers are going down fast:

 

 

Then again, for now, worries about Germany will be trumped by those about France and Britain. The numbers of Yellow Vests in the streets of France was much larger again the past weekend than the last few ones. Macron keeps on making ever bigger mistakes. This Saturday, his riot police was filmed carrying semi-automatic weapons with live ammo. As he claimed that many of his people want to get things without making any effort.

Macron all along has tried to drive a wedge between the protesters and the people. But a large majority of the people support the protests, even if they don’t don a yellow vest. Still, Paris claims that the protesters are not the Republic, and they’re trying to overthrow democracy. When the Yellow vests approached government buildings last weekend, government spokesman Benjamin Griveaux fled, saying: “It wasn’t me who was attacked, it was the Republic.” Ergo: Not the people are the Republic, the government is. That should sell well.

For a very large number of French this sounds like they are not actually considered French by their own government. And now Macron insists on holding a national debate, in which everyone can have their say, but at the same time he insists he will not change his policies, which are what the Yellow Vests are protesting in the first place.

What they see is that Little Napoleon hasn’t hardly appeared in public for a very long time (big no-no!), but he does try to dictate to them what democracy is, and then in the same breath that they only have the choices he gives them. Protests are only allowed if the government gives permission, Paris proclaims.

Macron has cancelled his spot in the upcoming Davos spectacle for the wealthy and powerful, and I bet you the thought has crossed his mind that if he went he wouldn’t be allowed back in to his country. Not decisive, but that thought surely counts. He’s seen the whole Let Them Eat Cake scenario play out in his mind’s eye. Before putting his hand over his heart while looking in the mirror.

Macron does everything wrong than he can. And in that France has a lot in common with our for now last topic, subject, victim, take your pick, the UK.

 

Tomorrow Theresa May is going to lose another vote, and even if she doesn’t, chaos is still guaranteed. Both the Leave and the Remain camps, opposites as they are, are divided into countless other camps, and there is no way there will ever be an agreement. You’d have a hard time finding even just two people who think Brexit means the same, let alone millions.

I wrote earlier today I wondered how come Britain is so quiet in the face of that, with the Yellow Vests example just a few miles away. And I really don’t know. Maybe we’ll find out tomorrow. The EU has hinted Brexit may not happen until the summer, not on March 29. But that’s the EU, and that’s what the Brexit vote was meant to move away from, not let them dictate even more.

Theresa May basically sat on her hands for two years, and wanted to do the work in 6 months, but that was always going to be a pipedream. The UK, in 40-odd years of EU membership, signed up to thousands of pieces of legislation, which contain hundreds of thousands of pages of legalese. All that must be checked, if need be changed, negotiated about, voted on, etc.

Not something anyone can do in half a year, and that has nothing to do with liking the EU or not. May has held her country hostage for the entire time she’s been PM, and she does that even more now, as she’s saying it’s either her deal or no Brexit at all. She’s decided No Deal is not an option. Which may be wise in view of all those documents, but who is she to decide eth entire nation future for decades to come? She wasn’t even elected as PM.

We’ll know more tomorrow after that Parliament vote, which May will lose. Or will we? If Brussels accepts a major delay in Brexit, chances are May will stay in office, and we’ll have 4-5-6 more months of the same road to nowhere. Second referendum, general election? Poisoned chalices all of them.

Even if May wins the vote Tuesday, because she’s scared a sufficient number of MPs into a catatonic state, nothing will change either. All possible outcomes are guaranteed to have a large group of people standing against them. All options will create the appearance of a small group of people dictating life-changing events for everyone else.

Where are the British Yellow Vests? The mayor of Poland’s second-biggest city, Gdansk, was stabbed to death in public on a stage where he held a speech, Is that where we’re going?

And lest we forget, what happens in Europe is not very different from what happens in the US; things merely play out slightly differently in different locations. In the US, as in the UK, there are no whole new parties taking over, no AfD and Macron and Yellow Vests and Salvini, but there is Trump and Brexit.

The common denominator is people’s anger with the economic models that leave them scrambling to make do, all the while seeing their lives being taken away from them bit by bit while whoever’s in power keeps bankers and other rich folk contented.

It’s not much use seeing all this as separate incidents or developments. It’s a big wave that will reshape the world as we know it. Let Them Eat Cake has gone global, and there’s not nearly enough cake to go round.

 

 

Oct 012017
 
 October 1, 2017  Posted by at 2:02 pm Finance Tagged with: , , , , , , , ,  


Catalunya October 1 2017

 

I’ve seen a lot of videos and photos of the Catalonia attempt to hold a referendum today (Tyler has a “nice” series of them), and what struck me most of all, apart from the senseless violence police forces were seen to engage in, is the lack of violence on the side of protesters.

So when I see the Interior Ministry claim that 11 policemen were injured, That is hard to take serious. Not that the Catalans had no reason to resist or even fight back. That hundreds of protesters, including scores of grandma’s, are injured is obvious from watching the videos. Since rubber bullets were used in large numbers, fatal injuries are quite possible.

Policemen hitting peaceful older ladies till they bleed is shocking, and we are all shocked. Many of us will be surprised too, but we shouldn’t be. Spain is still the land of Franco, and his followers continue to exert great influence in politics, police and military. And it’s not just them: one video from Madrid showed people singing a fascist theme from the Franco era.

 

 

That’s the shape the EU knowingly accepted Spain as a member in, and that shape has hardly changed since. The total silence from Brussels, and from all its capitals, speaks volumes. Belgian PM Michel said earlier today that he doesn’t want to talk about other countries’ politics, and that’s more than I’ve seen anyone else say. It’s of course a piece of gross cowardly nonsense, both Michel’s statement and the silence from all others.

Because this very much concerns the EU. As Julian Assange tweeted “Dear @JunckerEU. Is this “respect for human dignity, freedom and democracy”? Activate article 7 and suspend Spain from the European Union for its clear violation of Article 2.” (Article 7 of the European Union Treaty: “Suspension of any Member State that uses military force on its own population.”) Sure, technically the Guardia Civil is not military, but are Juncker, Michel and above all Merkel really going to try and hide behind that?

Assange also re-tweeted this: “Claude Taylor Breaking: contact with Ecuadorian Govt says they plan on removing Julian Assange from their Embassy in London. Expect his arrest to follow.” Assange’s reaction: “DC based ex-White House claims I’m to be arrested for reporting on Spain’s censorship & arrests in Catalonia. Dirty.”

But that should not be a surprise either. We know from the example of Greece, and the treatment of refugees, what the morals of Europe’s ‘leaders’ are. Their morals are bankrupt. In that sense, they fit in seamlessly with those of Mariano Rajoy’s governing PP party in Spain.

 

 

Still, this is not why people want to be part of the EU. So unless very strong statements come from the various capitals, and very soon, given that they’re already way too late, the EU as a whole will find itself in such a deep crisis it might as well pack its bags and go home. Wherever home may be for these career politicians.

If you’re void of any and all ethics and morals, which is what that silence shouts out very loudly, you can’t lay any claim at all to the right to make decisions for anyone at all. That is true for Rajoy and his party, and it’s just as true for all other deadly silent European leaders.

And this is by no means over, it hasn’t started yet. Here’s a map of close vs open polling stations in Catalonia, via Assange. ‘Nuff said. What will Rajoy’s next move be? Locking up everyone? The entire Catalan governing party that organized the referendum? Make no mistake: the Spanish military have long threatened they would destroy Catalonia before allowing it independence.

 


Catalan polling stations. Green=open. Red=closed

 

Philosopher Anna M. Hennessey, who has lived in both Spain and in Catalonia, put it this way:

Franco was victorious and did not lose his war, as Hitler and Mussolini lost theirs, but this must not mean that we should let the dictator’s toxic ideological infrastructure persist any further into the twenty-first century. Supporting Catalonia is a necessary step in putting an end to fascism in Europe.

When Fascism Won’t Die: Why We Need to Support Catalonia

People in the United States, especially those from the 1980s onward, know little of Spain’s Civil War (1936-1939) and the long dictatorship that followed. This knowledge is helpful in understanding the situation in Spain and Catalonia right now. The judge (Ismael Moreno) who is set to decide on sedition charges against Catalan activists for attempting to hold a democratic referendum on October 1st, for example, has roots that are deeply connected to Francisco Franco (1892-1975), the military leader who initiated the Civil War, won it, and then went on to rule as Head of State and dictator in Spain for almost forty years.

Franco is a major figure of twentieth-century fascism in Europe. A purge of Francoist government officials never took place when the dictatorship ended in the 1970s, and this leadership has had a lasting impact on how Spain’s government makes its decisions about Catalonia, a region traumatized during and after the war due to its resistance to Franco’s regime. The lingering effects of Franco’s legacy are at this point well-documented and need to be a part of the discourse that surrounds what is quickly unraveling in Barcelona.

[..] Like the Spanish government, the Spanish police force was never purged of its Francoist ties following the dictatorship. It is a deeply corrupt institution [..] Manuel Fraga Iribarne, one of Franco’s ministers during the dictatorship, founded Prime Minister Mariano Rajoy’s Popular Party. The party is currently enmeshed in a corruption scandal of its own. Spain’s royal family is similarly linked to Franco and has also been brought to trial for its own set of corruption charges. It is impossible to ignore the fascist bedrock upon which modern Spain is founded, or to ignore the reality that this foundation has to do with the way Spain treats Catalonia.

And so we can see the dream of a united Europe die. At least one that most people will feel comfortable living in. And if you can’t achieve that, why have a union to begin with? Democracy in Europe is dying in Brussels, it’s dying in Greece and the Mediterranean, and it died today in the streets of Barcelona and other Catalan locations.

Are all Europeans simply going to sit back and wait till it dies where they live, too? My bet is they will only do that until they no longer see the EU as economically beneficial to them. And as of today, because of Catalunya, economics will no longer be the only consideration. Because Spain will not be thrown out, not even suspended. There will be lots of empty strong words, but not all Europeans are all that stupid.

Barcelona mayor Ada Colau has called for Rajoy to resign, but she knows as well as anyone that that will not be enough, and it won’t change a thing. Rajoy is merely one representative of a fascist system that is the underbelly of Spain, waiting for its opportunity to raise its ugly head. It’s found that opportunity today, and the whole world is silent. Well, the ‘leaders’ are.

 

And while we’re talking disaster, I can’t help myself from briefly addressing Puerto Rico. The anti-Trump echo chamber is louder than ever, and it’s getting absurd. I can’t see what part of it is Trump’s doing, and what is due to other sources, but it simply seems not true that help is not moving forward. In a destruction as complete as Puerto Rico, there are limits to what can be done in a limited amount of time.

All the criticism of Trump at some point becomes criticism of other people involved as well. The mayor of San Juan gets lauded as a hero in certain circles, but is she really? How about the US military, how about FEMA? They look to be doing a good job, and FEMA seems to have learned a lot from Katrina 12 years ago.

Again, I don’t know how much of that is Trump, but if I may be cynical, he’s smart enough to know how his response could or would be used against him, so he would be really thick if he let the situation get worse than it should be. Earlier today Cate Long, an expert on Puerto Rico due to its debt fiasco, and hence with a lot of contacts there, tweeted:

“Federal govt has leapfrogged Puerto Rico govt & made direct connection with 78 municipalities. Central to powerful supply chain & relief.”

While the Huffington Post, not exactly Trump cheerleaders, posted this:

US Military On Puerto Rico: “The Problem Is Distribution”

Speaking today exclusively and live from Puerto Rico, is Puerto Rican born and raised, Colonel Michael A. Valle (”Torch”), Commander, 101st Air and Space Operations Group, and Director of the Joint Air Component Coordination Element, 1st Air Force, responsible for Hurricane Maria relief efforts in the U.S. commonwealth with a population of more than 3 million.

Since the ‘apocalyptic’ Cat 4 storm tore into the spine of Puerto Rico on September 20, Col. Valle has been both duty and blood bound to help. Col. Valle is a firsthand witness of the U.S. Department of Defense (DoD) response supporting FEMA in Puerto Rico, and as a Puerto Rican himself with family members living in the devastation, his passion for the people is second to none. “It’s just not true,” Col. Valle says of the major disconnect today between the perception of a lack of response from Washington verses what is really going on on the ground.

[..] some truck drivers from outside the island have been brought in, and more are coming, however it’s not a fix-all. “We get more and more offers to help, but there is no where to stay, we can’t take any more bodies, there’s no where to put them.” Col. Valle says, adding that their “air mobility” is good, and reiterating that getting more supplies or manpower is not the issue. When asked three times what else Washington can do to help, or anyone for that matter, three times Col. Valle answered, “It’s going to take time.”

Maybe it’s time to exit your echo chamber?

 

 

May 192017
 
 May 19, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , , ,  


Jean-Michel Basquiat Untitled 1982

 

Swedish Prosecutors Drop Julian Assange Rape Investigation (AP/R.)
Australia Economy Among ‘Walking Dead Of Household Debt’ – Steve Keen (NCA)
US Household Debt Hit Record in First Quarter (WSJ)
Why Government Surpluses Is A Terrible Idea – Steve Keen (Renegade)
How Can The Greeks Save More Money? A Monetary Parable. (Steve Keen)
Greek Parliament Approves More Austerity Measures Amid Protests (DW)
Trump Aims to Balance Budget With Deep Cuts, Bullish Growth Projections (WSJ)
Get Ready for Quantitative Tightening (Rickards)
ECB Tapering to Cause “Disorderly Restructuring” of Italian Debt, Return to Lira (DQ)
Russia-US Relations Have Become ‘Extremely Paranoid’ – Sberbank CEO (CNBC)
Western Democracy – As Represented By The US – Is Crumbling (Global Times)
Secret Plans To ‘Protect’ France In The Event Of Le Pen Victory Emerge (G.)
What Jeremy Corbyn Whispered In My Ear (Ind.)
Study Of Healthcare Quality In 195 Countries Names The Best And Worst (AFP)
50 Years Since Indigenous Australians First ‘Counted’, Little Has Changed (G.)

 

 

Time for legal action against Sweden and the prosecutors.

Swedish Prosecutors Drop Julian Assange Rape Investigation (AP/R.)

Swedish prosecutors said on Friday they would drop a preliminary investigation into an allegation of rape against WikiLeaks founder Julian Assange, bringing to an end a seven-year legal standoff. “Chief Prosecutor Marianne Ny has today decided to discontinue the preliminary investigation regarding suspected rape concerning Julian Assange,” the prosecutors office said in a statement. Assange, 45, has lived in the Ecuadorian Embassy in London since 2012, after taking refuge there to avoid extradition to Sweden over the allegation of rape, which he denies. He has refused to travel to Stockholm, saying he fears further extradition to the US over WikiLeaks’ release of 500,000 secret military files on the wars in Afghanistan and Iraq. In 2015 lawyers for Julian Assange have claimed victory after a Swedish prosecutor bowed to pressure from the courts and agreed to break the deadlock in the WikiLeaks founder’s case by interviewing him in London.

Read more …

“Stop making housing into an asset.” “Make housing a place for people to actually live.”

Australia Economy Among ‘Walking Dead Of Household Debt’ – Steve Keen (NCA)

Australia has become the “walking dead of debt” due for a financial reckoning that could shock the housing market “bubble” within months. That’s according to “anti-economist” Professor Steve Keen who defines Australia as a “zombie to be” given soaring personal debt that has created a government-induced property bubble ripe to burst. “Australia has simply delayed its day of reckoning,” he told news.com.au in reference to the global financial crisis that shocked many countries around the world from 2008 but left the lucky country relatively unscathed after a series of government interventions. The Kingston University Professor claims first homeowners grants rolled out by successive governments have artificially kept prices high creating a form of “instant prosperity” that politicians are loath to stop.

“The housing bubble makes the politicians look good because A, people are feeling wealthier, and B … people are borrowing money to spend,” he said. “Then the government runs a balanced budget and looks like it really knows what it’s doing” “It hasn’t got a f***ing clue frankly, because what’s actually happening is the reason it’s making that money is credit is expanding,” he said. “It’s the old classic story, you’re criticising a party because someone’s laced the punchbowl. You try to take the punchbowl away from the party you’re a very unpopular person but you need to because what’s actually happening is people are getting intoxicated with credit”. His latest book, Can We Avoid Another Financial Crisis? argues Australia, along with Belgium, China, Canada and South Korea, is a “zombie” economy sleepwalking into a crunch that could come between 2017 and 2020.

“Both [Australia and Canada] will suffer a serious economic slowdown in the next few years since the only way they can sustain their current growth rates is for debt to continue growing faster than GDP,” he writes. [..] For Prof Keen, the solution for governments to an overheated housing market is obvious: “Stop making housing into an asset.” “Make housing a place for people to actually live. So you go back to saying ‘what’s desirable is affordable houses’ and affordable means it doesn’t cost a first homebuyer more than three or four years’ income to get a property,” he said. As for those struggling to get on the ladder in the meantime? “The only thing you can do in the middle is say I’m just not going to join in, and if it happens on a collective level …. it’s game over for the bubble because the bubble only works if more people keep taking out more leverage.”

Read more …

Wait till house prices start falling.

US Household Debt Hit Record in First Quarter (WSJ)

The total debt held by American households reached a record in early 2017, exceeding its 2008 peak after years of retrenchment against a backdrop of financial crisis, recession and modest economic growth. Much has changed over the past 8.5 years. The economy is larger, lending standards are tighter and less debt is delinquent. Mortgages remain the largest form of household borrowing but have become a smaller share of total debt as consumers take on more automotive and student loans. “The debt and its borrowers look quite different today,” New York Fed economist Donghoon Lee said. He added: “This record debt level is neither a reason to celebrate nor a cause for alarm.” The total-debt milestone, announced Wednesday by the Federal Reserve Bank of New York, was a long time coming.

Americans reduced their debts during and after the 2007-09 recession to an unusual extent: a 12% decline from the peak in the third quarter of 2008 to the trough in the second quarter of 2013. New York Fed researchers, looking at data back to the end of World War II, described the drop as “an aberration from what had been a 63-year upward trend reflecting the depth, duration and aftermath of the Great Recession.” In the first quarter, total debt was up about 14% from that low point as steady job gains, falling unemployment and continued economic growth boosted households’ income and willingness to borrow. The New York Fed report said total household debt rose by $149 billion in the first three months of 2017 compared with the prior quarter to a total of $12.725 trillion.

The pace of new lending slowed from the strong fourth quarter. Mortgage balances rose from the final three months of 2016, while home-equity lines of credit were down. Automotive loans rose, as did student loans, but credit-card debt fell along with other types of debt. The data weren’t adjusted for inflation, and household debt remains below past levels in relation to the size of the overall U.S. economy. In the first quarter, total debt was about 67% of nominal gross domestic product versus roughly 85% of GDP in the third quarter of 2008. Balance sheets look different now, with less housing-related debt and more student and auto loans. As of the first quarter, about 68% of total household debt was in the form of mortgages; in the third quarter of 2008, mortgages were roughly 73% of total debt. Student loans rose from about 5% to around 11% of total indebtedness, and auto loans went from roughly 6% to about 9%.

Read more …

Can we finally try to understand this, all of us?

Why Government Surpluses Is A Terrible Idea – Steve Keen (Renegade)

In this Renegade Short, Professor Steve Keen explains why the government isn’t supposed to balance its accounts like a household.

Read more …

TomDickHaria.

How Can The Greeks Save More Money? A Monetary Parable. (Steve Keen)

The EU’s “Stability and Growth Pact” has as one of its primary rules that “The Member States undertake to abide by the medium-term budgetary objective of positions close to balance or in surplus…” I explore what this objective implies in the context of a model of the economy of “TomDickHaria”: what happens to its collective GDP where one member tries to achieve the surplus goal set out in the “Stability and Growth Pact?

Read more …

The Troika makes sure Greece will keep drowning.

Greek Parliament Approves More Austerity Measures Amid Protests (DW)

All 153 lawmakers in Prime Minister Alexis Tsipras’ governing coalition backed the legislation that includes new pension cuts and lower tax breaks, which are expected to save Greece €4.9 billion ($5.4 billion) until 2021. All opposition lawmakers present in the 300-seat chamber rejected the package required by international lenders before the release of more aid. Athens needs the bailout funds to repay €7.5 billion of debt maturing in July this year. Relief measures will only kick in if Greece meets fiscal targets stipulated by its creditors. “Our country is being turned into an austerity colony,” leading opposition conservative Kyriakos Mitsotakis said during debate on the bill, describing added cuts as a “nightmare” for low-earners.

Tsipras countered that its passage would enable Greece from summer next year to stand on its own feet, without the intervention of creditors such as the IMF. He accused the opposition of constantly warning of a catastrophe that “hasn’t come.” Government spokesman Dimitris Tzanakopoulos told Skai TV that Greek creditors the IMF and Germany were “in the final stretch of very tough negotiations” over a compromise that should allow Greece to return to bond markets in 2018. Thursday’s austerity package lowers the income tax exception from €8,600 down to about €5,700 but increases benefits for low-income tenants, parents with children and subsidies for child care. Public stakes are to be reduced through sales of holdings in Greece’s PPC electricity utility, railways, Athens’ international airport and the Thessaloniki port.

Read more …

Same as it ever was. Fantasy numbers have ruled the day for many years.

Trump Aims to Balance Budget With Deep Cuts, Bullish Growth Projections (WSJ)

President Donald Trump next week will propose the U.S. can balance the federal budget over 10 years with substantial cuts to safety-net programs such as food stamps and other anti-poverty efforts, combined with a tax and regulatory overhaul that speeds up the nation’s economic growth rate, a senior White House budget official said. The president’s budget, due for release Tuesday, will spare the two largest drivers of future spending—Medicare and Social Security—leaving trillions in cuts from other programs. That includes discretionary spending cuts to education, housing, environment programs and foreign aid already laid out by the administration, in addition to new proposed reductions to nondiscretionary spending like food stamps, Medicaid and federal employee-benefit programs.

The budget release, which will be unveiled while Mr. Trump is visiting Europe and the Middle East, shows how his economic policy team is trying to forge ahead on his agenda even as distracting political controversies, such as the recent firing of FBI director James Comey, swirl around Washington. On Thursday, Treasury Secretary Steven Mnuchin testified on Capitol Hill, his first such appearance since his February confirmation, where he expressed confidence Congress could advance a revamp of the tax code this year. House Republicans held their first hearing on the proposed tax overhaul, following a series of meetings between lawmakers and top administration officials Wednesday.

The White House’s budget proposal next week builds upon an earlier outline in March that called for a nearly 10% boost in defense funding next year, offset by around $54 billion in cuts for nondefense programs. [..] Among the more controversial elements of the budget will be the administration’s growth forecasts. The White House projects the nation’s economic growth rate will rise to 3% by 2021, compared with the 1.9% forecast under current policy by the Congressional Budget Office. It’s unusual to see the White House’s growth forecasts differ from the CBO and other blue-chip projections by such a large margin over such a long stretch of the 10-year budget window.

Read more …

Another crazy experiment by the Fed bookworms.

Get Ready for Quantitative Tightening (Rickards)

Despite yesterday’s market sell-off, the Fed is still on track to raise interest rates in June. Wednesday’s action is no more than a speed bump for the Fed. It will not stop the Fed from moving forward with another 0.25% rate increase. The Fed is embarking on a new path, a path that started several years with QE (quantitative easing). QE is the name for the method the Fed uses to ease monetary conditions when interest rates are already zero. Conventional monetary policy calls for interest rate cuts to stimulate growth and inflate asset prices when the economy is in a recession. What does a central bank do when interest rates are already at zero and you can’t cut them anymore? One solution is negative interest rates, although the evidence from Japan and Europe indicates that negative rates do not have the same effect as rate cuts from positive levels. The second solution is to print money! The Fed does this by buying bonds from the big banks.

The banks deliver the bonds to the Fed, and the Fed pays for them with money from thin air. The popular name for this is quantitative easing, or QE, although the Fed’s technical name is long-term asset purchases. The Fed did QE in three rounds from 2008 to 2013. They gradually tapered new purchases down to zero by 2014. Since then, the Fed has been stuck with $4.5 trillion of bonds that it bought with the printed money. When the bonds mature, the Fed buys new ones to maintain the size of its balance sheet. But now the Fed wants to “normalize” its balance sheet and get back down to about $2 trillion. They could just sell the bonds, but that would destroy the bond market. Instead, the Fed will let the old bonds mature, and not buy new ones. That way the money just disappears and the balance sheet shrinks. The new name for this is “quantitative tightening,” or QT. You’ll be hearing a lot about QT in the months ahead.

Read more …

Tapering, QT, it’s all just more ‘uncharted territory’.

ECB Tapering to Cause “Disorderly Restructuring” of Italian Debt, Return to Lira (DQ)

Here’s the staggering scale of the Italian government’s dependence on the ECB’s bond purchases, according to a new report by Astellon Capital: Since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy’s deficits from 2014 to 2019. But now there’s a snag. Last month, the size of the balance sheet of the ECB surpassed that of any other central bank: At €4.17 trillion, the ECB’s assets have soared to 38.8% of Eurozone GDP. The ECB has already reduced the rate of purchases to €60 billion a month. And it plans to further withdraw from the super-expansionary monetary policy. To do this, according to Der Spiegel, it wants to spread more optimistic messages about the economic situation and gradually reduce borrowing.

[..] By the halfway point of 2018 the ECB would have completed tapering and it would then use the second half of the year to move away from negative interest rates. So far, most current ECB members have shown scant enthusiasm for withdrawing the punch bowl. The reason most frequently cited for not tapering more just yet is their lingering concern about the long-term sustainability of the Eurozone’s recent economic turnaround. The ECB’s binge-buying of sovereign and corporate bonds has spawned a mass culture of financial dependence across Europe, while merely serving to paper over the cracks that began forming — or at least became visible — in some Eurozone economies during the sovereign debt crisis. In many places the cracks are even bigger than they were back then. This is the elephant in the ECB’s room, and by now it’s too big to ignore.

In one country alone, the cracks are so large that they could end up fracturing the entire single currency project. That country is Italy. Astellon Capital’s report on Italy’s dependence on ECB bond purchases poses the question: If the ECB tapers its purchase of Italian bonds further, who would pick up the slack? The Italian banks, which are themselves deep in crisis mode and whose balance sheets are already filled to the gills with Italian bonds? Hardly. When QE ends, the banks are more likely to become net sellers, rather than net buyers, of Italian debt. The only way for the game to continue is if over the next six years non-banks increase their purchase activity up to seven times that of the past nine years. In other words, the very same investors who have used QE as the perfect opportunity to offload the immense risk of holding Italian liabilities onto the Bank of Italy’s, and then onto the Eurosystem’s, would need to step back into the market in a massive way, just at a time that the country in question is on the verge of a full-blown banking crisis.

Read more …

No kidding.

Russia-US Relations Have Become ‘Extremely Paranoid’ – Sberbank CEO (CNBC)

Diplomatic relations between America and Russia have deteriorated to such an extent that contacts between the two countries have become extremely paranoid of one another, the chief executive of Russia’s largest bank has told CNBC. “From what we see here in Russia and from the programs we see from the U.S., the unfolding situation is fairly complex. And there are certain signs of a certain… paranoid attitude to Russia and to every single contact with Russia real or imagined,” Herman Gref, Sberbank CEO, said via a translator. [..] When asked whether Gref harbored any concerns about the consequences of having met with Trump in the past, he replied, “I think the situation has become extremely paranoid for one to suspect that these sort of contacts could lead to political consequences.”

Speaking in January at the World Economic Forum in Davos, Sberbank’s CEO had predicted the Trump administration could re-establish close ties with the Kremlin and expressed his hope the newly-elected U.S. president could mark a “new beginning” for the two countries. On Friday, Gref suggested it was still too early to judge the success of Trump’s presidency however conceded that, for the time-being at least, relations between American and Russia were unlikely to change for the better. Moscow is currently enduring the sharp end of tough international sanctions from Washington[..] . “Well, I have to say that this has had an effect on us in the last two years… The inability to access international markets is painful for us,” Gref said. “You know, sanctions were put in place for political reasons and most likely their removal will also be motivated by politics…

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China’s official government paper.

Western Democracy – As Represented By The US – Is Crumbling (Global Times)

The American elite still refuse to accept Trump after his 100 days in the Oval Office. He is at odds with the mainstream media; insiders have constantly leaked information to the media. Now some commentators have compared the exposure of the Comey memo to the Watergate scandal. As Congress is under Republican control, few believe there will be a move to impeach the president, but these latest revelations will certainly further erode Trump’s presidential authority. At the beginning of the corruption scandal, few believed that South Korean president Park Geun-hye would be impeached either. Could this be a reference for Trump’s case? But evidence of Park’s illegal activities was solid, while it will be more complicated to make determinations over whether Trump obstructed justice and leaked classified intelligence.

To impeach Trump will need more evidence from further investigation. To completely discredit Trump among voters, the present scandal is not enough as it does not add to the negative image of Trump. Many just think Trump often speaks off the cuff, which ends up in silly blunders. If there is a major substantive scandal over and above him speaking out of turn then that will be another thing. But this is not the case at the moment. Every country has its own troubles. The US model represents Western democracy, but it is crumbling, and the resulting social division has become more and more serious. The US Deputy Attorney General Rod J. Rosenstein appointed a special counsel to oversee the investigation into link between Russia and the 2016 US presidential election and related matters on Wednesday.

More juicy details will continue to appear and the rifts may become wider. Trump will become one of the most frequently accused Americans. The US won’t be engulfed by chaos if its president is caught in a lawsuit. Someone has pointed out that no matter how chaotic the White House and Capitol Hill are, the overall operation of the US will not be a major problem as long as the enterprises and social organizations in the country are stable. This is seen as an advantage of the American system. Although American society is relatively stable, the political tumult can’t be taken as an advantage of the US system. The fact is that US politics is in trouble, and the benefits brought by its system are being squandered.

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Democracy as a threat to the state.

Secret Plans To ‘Protect’ France In The Event Of Le Pen Victory Emerge (G.)

It was never written down and never given a name, but France had a detailed plan to “protect the Republic” if far right leader Marine Le Pen was elected president, French media have reported. “It was like a multi-stage rocket,” an unnamed senior official told l’Obs magazine. “The philosophy, and the absolute imperative, was to keep the peace, while also respecting our constitutional rules.” [..] L’Obs cited three anonymous sources with knowledge of the emergency plan that would have been put into effect had Le Pen reached the Elysée palace, saying it was devised by a small group of ministers, chiefs of staff and top civil servants. The magazine said the plan was aimed mainly at preventing serious civil unrest and “freezing” the political situation by convening parliament in emergency session and maintaining the outgoing prime minister in office.

Police and intelligence services were particularly concerned by the threat of “extreme violence” from mainly far left protesters in the event of a Le Pen victory as the country would have found itself “on the brink of chaos”. Even before the first round of voting on 23 April, a confidential note drawn up by the intelligence services announced that “without exception, every local public safety directorate has expressed its concern”, Le Parisien reported. Regional police chiefs were asked on 21 April to detail their crowd control and deployment plans, l’Obs said. Under France’s ongoing state of emergency, more than 50,000 police and gendarmes and 7,000 soldiers were already on duty. On 5 May, two days before the second round that Macron won by 66% to Le Pen’s 34%, the national public safety directorate warned in another note that protesters were ready to use “fireworks, mortars and incendiary bombs”.

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“If you do what you believe in, you’re strong. It’s when you don’t do what you believe in that you’re weak. And we are strong.”

What Jeremy Corbyn Whispered In My Ear (Ind.)

When I shook his hand, I told him that I work for a charity and freelance as a journalist, writing on politics and social justice issues. I expressed my disappointment that Labour (and particularly Corbyn himself) doesn’t get a fair hearing from many news outlets. He spoke in my ear: “If you do what you believe in, you’re strong. It’s when you don’t do what you believe in that you’re weak. And we are strong.” The unveiling of Labour’s manifesto today was a display of strength. Labour is promising a Britain that works for everyone, where whole swathes of society aren’t left behind. The transformative manifesto will take the financial burden from the shoulders of those who can least afford to carry it, and place it upon the top 5% of earners and arrogantly tax-dodging corporations.

The Britain we currently live in is untenable for young people, university students, teachers, NHS workers, policemen, the disabled, people with long-term illnesses, people who can’t find work, first-time buyers, and those living in rented accommodation. Britain is working for a wealthy few, and Labour’s manifesto highlights the fact, often forgotten, that this is not inevitable. At Bradford University, a huge cheer went up when Corbyn promised to scrap tuition fees and end hospital parking charges. The scandal of zero hours contracts would be a thing of the past under Labour, as will NHS cuts and rises in VAT and income tax for 95% of earners. The manifesto is a document filled with long-overdue, common sense policies.

It addresses the important questions that accompany the Brexit process, including concerns about the protection of jobs and hard-won workers’ rights. It puts children and young people first, promising to invest in them through a National Education Service rather than rely on the failed academies experiment or a ridiculous and divisive reintroduction of grammar schools. In-work poverty is unacceptable. My partner and I both work two jobs and we struggle to make ends meet. We don’t indulge in avocado toast but finding enough for a deposit on a mortgage is sadly out of reach. The pledge to build one million new homes and introduce a £10 living wage by 2020 is crucial for young couples and for anyone working in poorly paid or part-time jobs, notably in care work and service industry roles. If Labour’s manifesto and the promise of more public ownership will transport us to the 1970s, where do we currently live? 1870, perhaps?

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Single payer rules. Supreme.

Study Of Healthcare Quality In 195 Countries Names The Best And Worst (AFP)

Neither Canada nor Japan cracked the top 10, and the United States finished a dismal 35th, according to a much anticipated ranking of healthcare quality in 195 countries, released Friday. Among nations with more than a million souls, top honours for 2015 went to Switzerland, followed by Sweden and Norway, though the healthcare gold standard remains tiny Andorra, a postage stamp of a country nestled between Spain (No. 8) and France (No. 15). Iceland (No. 2), Australia (No. 6), Finland (No. 7), the Netherlands (No. 9) and financial and banking centre Luxembourg rounded out the first 10 finishers, according to a comprehensive study published in the medical journal The Lancet.

Of the 20 countries heading up the list, all but Australia and Japan (No. 11) are in western Europe, where virtually every nation boasts some form of universal health coverage. The United States – where a Republican Congress wants to peel back reforms that gave millions of people access to health insurance for the first time – ranked below Britain, which placed 30th. The Healthcare Access and Quality Index, based on death rates for 32 diseases that can be avoided or effectively treated with proper medical care, also tracked progress in each nation compared to the benchmark year of 1990.

Virtually all countries improved over that period, but many – especially in Africa and Oceania – fell further behind others in providing basic care for their citizens. With the exceptions of Afghanistan, Haiti and Yemen, the 30 countries at the bottom of the ranking were all in sub-Saharan Africa, with the Central African Republic suffering the worst standards of all. “Despite improvements in healthcare quality and access over 25 years, inequality between the best and worst performing countries has grown,” said Christopher Murray, director of the Institute for Health Metrics and Evaluation at the University of Washington, and leader of a consortium of hundreds of contributing experts.

Read more …

“Dogs and cats and pigs and sheep were counted in Australia before Aboriginal people”

50 Years Since Indigenous Australians First ‘Counted’, Little Has Changed (G.)

Sol Bellear, a former rugby league player for South Sydney Rabbitohs and Aboriginal rights activist, sits in the soft autumn sunshine at a cafe intersecting Redfern Park and the oval that remains the spiritual home of his beloved club. He sips a Red Bull “heart starter” and English breakfast tea. And he shakes his head while contemplating the anniversaries of what ought to have been transformative moments for Aboriginal and Torres Strait Islander people – starting with the 1967 “citizenship” referendum that first made their existence in Australia “official”. “Things should be so much better for Aboriginal people. I think the country saw 1967 as the end of the fight,” Bellear says.

“Before 1967, we weren’t counted in the census or anything as people. Dogs and cats and pigs and sheep were counted in Australia before Aboriginal people.” Indigenous people had never previously been officially included among the Australian citizenry, nor counted in the Commonwealth census – so the federal government could not legislate for them. But on 27 May 1967, more than 90% of the Australian electorate voted at the “citizenship” referendum to effectively bring Indigenous people into the Commonwealth. “After the referendum, though, it was like the work was done for the rest of the country and governments – when it was actually just the bloody beginning,” Bellear says. “Every little thing we’ve won since, we’ve had to fight for.”

2017 is also the 25th anniversary of two more critical moments in the story: the Mabo decision – a High Court ruling that led to native title land rights, and former prime minister Paul Keating’s landmark “Redfern speech” (“We committed the murders – we took the children from their mothers”). It was Bellear who introduced Keating at Redfern Park. This was the first time an Australian prime minister had frankly, without qualification, acknowledged the violence, sickness, dispossession and ongoing oppression that colonialism had imposed on Indigenous people. Yet a quarter of a century on, Bellear says his country remains deaf to all the non-government reports into Indigenous lives – and to the savage critiques of Commonwealth policies that purported to make them better.

[..] Aboriginal and Torres Strait Islanders constitute some 3% of the country’s overall population – yet in 1991, they comprised 14% of Australia’s prisoners. A quarter of a century later, that figure was up to 27% – while more than 150 Indigenous people had died in custody in the intervening 25 years. In some parts of Australia, many more young Indigenous men complete prison terms than high school. The Indigenous rate of imprisonment is 15 times the age-standardised non-Indigenous rate. As Thalia Anthony pointed out in her 2015 book Indigenous People, Crime and Punishment, rates of Indigenous incarceration in Australia today match those of black imprisonment in apartheid South Africa.

Read more …

Mar 312017
 
 March 31, 2017  Posted by at 7:23 pm Finance Tagged with: , , , , , , , ,  


Ray K. Metzker Europe 1961

 

The true face of the EU is presently on display in Greece, not in Germany or Holland or France. Brussels must first fix what’s going wrong in Athens and the Aegean, and there’s a lot going wrong, before it can move on towards the future, indeed towards any future at all. It has a very tough job in Italy as well, which it’s trying hard to ignore.

You can’t say ‘things are fine in Germany’ or ‘Finland is recovering’ and leave it at that. Not when you’re part of a political -and to a large degree also economic- Union, let alone when you’re preaching tightening -and deepening- that Union. Not when parts of that Union are not only doing much worse than others, but are being thoroughly gutted. Then again, they’re being gutted by the very Union itself, so Brussels -and Berlin, The Hague, Paris- can’t very well feign surprise or deny responsibility.

Of course the European continent needs a ‘body’, some form of organization -and it needs it badly- that will allow its nations to cooperate, in 1000 different ways and fields, but the EU is not it. The EU is toxic. It is turning nations against each other as we speak. So much so that it’s crucial for these nations to leave the union and dismantle the entire operation before that happens, because there will be no opportunity left to do it once the toxicity takes over. The UK should count itself lucky for getting out while it did.

 

In its present setting, the EU has no future. And, more importantly, there is no mechanism available to change that setting. It should have been insisted on when the Union was founded, or in one of its various treaties after. This never happened, though, and that’s no coincidence, it was always about power. It’s therefore very hard -if not impossible- to see how the EU could be altered in such a way that it has a chance of survival.

Changing or tweaking a few rules is not going to do it. It’s the very Brussels power structure that is inherently faulty, and those parties that under this structure have the power, are the same ones who would have to change it (against their own interests). There is not a single decision concerning important -for instance economic- EU policies that can be taken against the wishes of Berlin. And Berlin demands what’s good for Germany, even if that is bad for other member states.

In order to save the EU, German representatives would have to vote against their own national interests. But they were elected specifically to protect those interests. There is no better way to illustrate the fatal flaw in the -construction of- the EU. Politicians are elected to protect the interests of their member states, and no member state can possibly prevail but Germany, because it’s the biggest. You can put any label you want on that, but democratic it’s not.

 

Germany and Holland are doing great, according to the most recent economic data. But how is that a reason to celebrate when Greece and Italy, among others, are not doing great at all? Why the difference? It’s not because they spend their money on “Schnaps und Frauen” as Eurogroup president and Dutch demissionary FinMin Dijsselbloem so poetically suggested.

It’s because the Eurogroup has not acted in their best interests. Because when their interests differed from the Dutch and German ones, the latter won out. Easily. And they always will under the present terms. As head of the Eurogroup, Dijsselbloem should represent the best interests of all member nations, not just Holland and Germany.

So should Angela Merkel as the de facto head of the EU. And it’s a very simple fact, easy to explain as well, that these interests can conflict. Obviously, that Merkel can call all the important shots in the EU should be a red, flashing, blinding and deafening alarm sign to start with. Germany should have taken a step back, back in 1960 or so, or even 1999, but for obvious reasons didn’t, and got away with that. It’s about power, it was never about Union other than to increase Power.

European politicians have not been able to make the ‘shift’ from nation to Union. Once they are faced with decisions that may harm their national interests, but benefit those of the EU as a whole, they must revert back, by default, to their own respective nationalistic priorities. Even if they are the ones who complain loudest about rising nationalism and protectionism.

And they’re -kind of- right, or justifiable. German, French, Dutch politicians are not accountable to Slovakian or Slovenian interests. That’s just extra, nice if it happens to coincide with what Berlin or Paris want, but not a priority in any sense of the word. Understandable, but lethal to the idea of a Union.

 

 

There is your fatal EU flaw. The whole common interest idea is just a sales pitch, always was. Which worked fine in times of growth. But take a look now. There’s nothing left. The rich north has used the poorer south to transfer its losses to. It’s not a union, it’s old-fashioned colonialism.

Europe’s political problem can perhaps best be expressed by comparing it to the US. Germany, plus to a lesser extent Holland, and France, have so much power that it would be like California and New York could call all important shots in America. But they can’t. Trump’s election shows that they cannot. Europe doesn’t even have that escape valve.

Delving a bit deeper, Kansas and California may be different cultures, but their people speak the same language, they watch the same TV shows, read the same news. Different cultures, but also part of the same culture. In Europe, most people have no idea who EU head Juncker is, or care, or how he got where he’s at.

Most likely know who Angela Merkel is, but they don’t know that she takes all the important decisions about their lives now. If they did, the pitchforks would be out in minutes. Luckily for Merkel, the EU is as opaque as can be,

90% of Europeans need subtitles to understand Juncker and Merkel. Or for some journalist to translate for them. Everyone in Kansas and California understands what Trump says, no matter how confused he may sound or what they may think of him. He’s American, and so are they. He’s one of them.

Needing subtitles to understand Juncker and Merkel may work in times of plenty. But in lean years, people don’t take kindly to that kind of thing, that someone you can’t even understand, and that you can’t hold to account, makes important decisions that impact you directly, as you see your jobs and savings and homes vanish and the future of your kids disappear.

That is asking for trouble. The EU has that trouble, and it will have much more of it. The only way out of that trouble is for the Union to dismantle itself. But as we can see in the whole Brexit story, that would involve so many interested parties giving up on so many perks that feed them, politicians, businesses, what have you, that none of it would ever happen voluntarily.

The EU has become a farcically intricate web of policies and laws and regulations, all built on fatally flawed foundations, that no citizen of sound mind feels connected with. The only way out of that is to literally get out. The UK got it right, whether they meant it or not.

The EU cannot be reformed because the only people -and the countries they represent- who could do the reforming, profit hugely from the present state of affairs, from not reforming. Fatal. Flaw.

As any builder can tell you who’s ever seen a structure on the verge of collapse: some can be saved and some of them you just have to let go. Raze ’em and start from scratch. Which in many cases, as builders know, is simply the best choice.

Please don’t get me wrong: of course there are tons of things the EU has done that are great, and right, and all that. But it’s the power structure that will inevitably kill it no matter what else it does that actually works. And that structure is beyond redemption.

 

 

Oct 072016
 
 October 7, 2016  Posted by at 6:34 pm Finance Tagged with: , , , , , , , , , ,  


Andre Kertesz Bumper cars at amusement park in Neuilly-sur-Seine, near Paris 1930

I read a lot, been doing it for years, about finance and affiliated topics (a wide horizon of them), which means I’ve inevitably seen a wholesale lot of nonsense fly by. But for some reason, and I think I know why, Q3 2016 has been gunning for a top -or bottom- seat in that regard, and Q4 is looking to do it one better/worse.

Apart from the fast increasingly brainless political ‘discussions’ that don’t deserve the name, in the US and UK and beyond, there are the transnational organizations, NATO, IMF, EU and all those things, all suffocating in their own hubris, things I’ve dealt with before in for instance Globalization Is Dead, But The Idea Is Not and Why There is Trump. But none of it still seems to have trickled through anywhere that I can see.

The end of growth exposes the stupidity and ignorance of all but (and even that’s a maybe) a precious few (of our) ‘leaders’. There is no other way this could have run, because an era of growth simply selects for different people to float to the top of the pond than a period of contraction does. Can we agree on that?

‘Growth leaders’ only have to seduce voters into believing that they can keep growth going, and create more of it (though in reality they have no control over it at all). Anyone can do that. So ‘anyone’ who’s sufficiently hooked on power games will apply.

‘Contraction leaders’ have a much harder time; they must convince voters that they can minimize the ‘suffering of the herd’. Which is invariably a herd that no-one wants to belong to. A tough sell.

Any end to growth will and must therefore inevitably change the structure of a democracy, any democracy, any society for that matter. It will lead to new leaders, and new parties, coming to the front. And it should not surprise anyone that some of these new leaders and parties will question the very structure of the democracy they are part of, if only because that structure is already undergoing change anyway.

The tight connection between an era of economic growth (and/or contraction) and the politicians that ‘rule’ during that era is reflected in Hazel Henderson’s“economics is nothing but politics in disguise”.

 

On the one hand you have the incumbent class seeking to hold on to their waning power, churning out false positive numbers and claiming that theirs is the only way to go (just more of it), and on the other hand you have a loose affiliation – to the extent there’s any affiliation at all- of left and right, individuals and parties, who smell change that they can use to their own benefit.

They just mostly don’t know how to use it yet. But they’ll find out, or some of them will. Blaming people and groups of people for what’s gone wrong will be a major way forward, because it’s just so easy. It’s another reason why the incumbents class, the traditional parties, will go the way of the dodo: they will be blamed, and rightly so in most cases, for the fall of the economic system.

That’ll be the number one criteria: if you’re -perceived as- part of the old guard, you’re out. Not at the flick of a switch, but nevertheless the rise of Trump and Farage and all those folks has been much faster than just about anyone would have thought possible until very recently.

They feed on discontent, but they can do so only because that discontent has been completely ignored by the ruling classes everywhere. Which has a lot to do with the rulers in all these instances we see pop up now still being well-off, while the lower rungs of societies definitely are not.

Moreover, if most people still had comfortable middle-class lives, the dislike of immigrants and refugees would have been so much less that Trump and Wilders and Le Pen and Alternative for Deutschland could never have ‘struck gold’. It’s the perception that the ‘new’ people are somehow to blame for one’s deteriorating living conditions that makes it fertile ground for whoever wants to use it.

And since the far left can’t go there, the right takes over by default. Bernie Sanders and Jeremy Corbyn have brave ideas on redistribution of wealth, but there is still too much resistance, at the moment, to that, from the incumbent class and their voters, to have much chance of getting anywhere.

Of course the traditional right wing smells the opportunity too, so Hillary (yeah, she’s right wing) and Theresa May and Sarkozy and Merkel are all orchestrating sharp turns to the right, away from their once comfortable seats in the center. They all sense that power will not be emanating from the center going forward, and it’s power, much more than principles, that they are after.

 

But enough about politicians and their parties, who can and will all be voted out of power. Much harder to get rid of will be the transnational organizations, like the EU and IMF (there are many more), though they represent the ‘doomed construction’ perhaps even more than mere local or national power-hungries. The leading principle is simple: What has all the centralization led to? To today’s contracting economies.

To that end, let’s just tear into a recent random Bloomberg piece on this week’s IMF meeting, and the ‘expert opinions’ on it:

Existential Threat To World Order Confronts Elite At IMF Meeting

Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates. From Britain’s vote to leave the EU to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years. Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that IMF Managing Director Christine Lagarde says is already “weak and fragile.”

The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment , as underscored by recent jitters over Deutsche Bank’s financial health. “The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs at Oxford Economics in Hong Kong, a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.”

Oh, but we do have consensus, Louis: Ever more people don’t want what they have now. That too is consensus. And since you said that what it takes is consensus, we should be fine then, right?!

Also, I find the term ‘elevated markets’ interesting, even if I don’t know what it’s supposed to mean. I can only guess.

In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2% in 2015, the world economy’s expansion will slow to 3.1% this year before rebounding to 3.4% in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6% this year and 2.2% in 2017.

“We’d like to see an end to the creeping protectionism in the world and more progress on moving ahead with free-trade agreements and other trade-creating measures,” Maurice Obstfeld, director of the IMF’s research department, said in a Bloomberg Television interview with Tom Keene. Lagarde said last week that policy makers attending the Oct. 7-9 annual meeting of the IMF and World Bank have two tasks. First, do no harm, which above all means resisting the temptation to throw up protectionist barriers to trade. And second, take action to boost lackluster global growth and make it more inclusive.

I can see how a vote against the likes of Hollande, Hillary or Cameron constitutes a “the backlash against globalization”. What I don’t see is how that has now become the same as the anti-trade movement. When did Trump express any feelings against trade? Against international trade deals as they exist and are further prepared, yes.

But those deals don’t define ‘trade’ to the exclusion of all other definitions. As for ‘protectionism’, that’s just a term designed to make something perfectly fine and normal look bad. Every single society on the planet should protect its basic necessities from being controlled by foreigners, either for money or for power.

Nothing good can come of relinquishing that control for any society, ever. There‘s not a thing wrong with protecting your control of your own water and food and shelter, and these are indeed things that should never be traded or negotiated in global markets.

So claiming that ‘do no harm’ equals NOT protecting your basics is nothing but a self-serving and dangerous kind of baloney coming your way courtesy of those people whose sociopathic plush seats and plusher bank accounts depend on your ongoing personal loss of control over what you need to survive.

It’s what any ‘body’ does that has reached the limits of its growth: it starts feeding on its host. Be it a cancerous tumor, the Roman Empire or our present perennial-growth driven economic models, they’re all the same same thing because they are fueled by the same -thoughtless- principle.


Ilargi: See that upward line at the end? Well, it’s an IMF growth ‘forecast’. Which are always so wrong, and always revised downward, that you must wonder if the term ‘forecast’ is even appropriate

 

Achieving even those modest objectives may prove elusive. Free trade has become polling poison in the U.S. presidential campaign, with Democratic nominee Hillary Clinton now criticizing a trade deal with Pacific nations, which isn’t yet ratified in the U.S., that she had praised when it was being negotiated. Republican challenger Trump has lashed out at Mexico and China, threatening to slap big tariffs on imports from both nations. Rattled by the U.K.’s June vote to leave the EU, European leaders know it may just be the start of a political earthquake that’s threatening the continent’s old certainties.

In case you didn’t catch it, “..the continent’s old certainties” is a goal-seeked term. Old in this case means not older than, say, 1950, if that. Look back 100 years and “the continent’s old certainties” dress in a whole other meaning.

Next year sees elections in Germany and France, the euro area’s two largest economies, and in the Netherlands. In all three countries anti-establishment forces are gaining ground. With growing resentment of the EU from Budapest to Madrid, policy makers have described the current surge in populism as the greatest threat to the bloc since its creation out of the ashes of World War II. There are also growing signs that the union and Britain are heading for a so-called “hard exit” that would sharply reduce the bloc’s trade and financial ties with the island nation. U.K. Prime Minister Theresa May said on Oct. 2 that she’ll begin her country’s withdrawal from the EU in the first quarter of next year.

I have addressed the misleading use of the term ‘populism’ before. In its core, it simple means something like: for, and by, the people. How that can be presented as somehow being a threat to democracy is a mystery to me. They should have picked another term, but settled on this one.

And in the western media consensus, it comprises anything from Trump to Beppe Grillo, via Hungary’s Orban and Nigel Farage, Spain’s Podemos, Greece’s Syriza and Germany’s AfD. All these completely different movements have one thing only in common: they protest the failed and fast deteriorating status quo, and receive a lot of support from their people for doing that.

Because it’s the people that bear the brunt of the failure, not the leadership; even Greece’s politicians still pay themselves a comparatively lush salary.

As for Britain, it’s the textbook example of utter blindness. Those who were/are well provided for, be they politically left or right, missed out on what was happening around them so much they had no idea Brexit was a real option. And in the 15 weeks since the Brexit vote, all anyone has done in the UK is seeking to blame someone, anyone but themselves for what they all failed to see coming.

Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. It’s also seeking a larger role in the existing global framework, with entry of the yuan into the IMF’s basket of reserve currencies on Oct. 1 the most recent example. An all-out trade war would be a disaster for China’s economy, with Trump’s threatened tariff potentially wiping off almost 5% of its GDP, according to a calculation by Daiwa Capital Markets.

John Williamson, whose Washington Consensus of open trade and deregulation was effectively the governing ethos for the IMF and World Bank for decades, said the 2008-09 financial meltdown had undercut support for economic integration. “There was agreement on globalization before the crisis and that’s one thing that’s been lost since the financial crisis,” said Williamson, a former senior fellow at Peterson Institute for International Economics who is now retired.

The growing opposition to economic integration has been fueled by a sub-par global recovery. “Perhaps the most striking macroeconomic fact about advanced economies today is how anemic demand remains in the face of zero interest rates,” former IMF chief economist Olivier Blanchard wrote last week in a policy brief for the Peterson Institute.

These ‘experts’ seem to have an idea there’s something amiss, but they don’t have the answers. Which is impossible to come and say out loud if you’re an expert. Experts must pretend to know it all, or at least know why they don’t know. “There was agreement on globalization before the crisis”, and now it’s no longer there. That they see.

That they ain’t coming back, neither the agreement on it nor globalization itself, is a step too far for them. To publicly acknowledge, at least. That Blanchard expresses surprise about ‘anemic demand’ at the same time that interest rates are equally anemic is something else.

That both are two sides of the same coin, or at least may be, is something he should at least mention. That is to say, low rates induce deflation, though they are allegedly supposed to induce the opposite. Economists are mostly very misguided people.

 

The world economy is getting some lift after rising at an annual rate just shy of 3% in the first half of this year, according to David Hensley, director of global economics for JPMorgan. But much of the boost will come from a lessening of drags rather than from a big burst of fresh growth, said Peter Hooper at Deutsche Bank Securities, a former Federal Reserve official. Recessions in Brazil and Russia are set to come to an end, while in the U.S. cutbacks in inventories and in oil and gas drilling will wane.

Please allow me to chip in here. ‘Lessening of drags’ in a nonsense term. And so is the idea that “..recessions in Brazil and Russia are set to come to an end”. That’s all goal-seeked day-dreaming. Smoke or drink something nice with it and you’ll feel good for a few hours, but that doesn’t make it real.

“I’m characterizing the global economy as something akin to a driverless car that’s stuck in the slow lane,” said David Stockton, a former Fed official and now chief economist at consultants LH Meyer. “Everybody feels like they’re being taken for a ride but they’re pretty nervous because they can’t see anybody in control.”

I really like this one, because off the bat I thought Stockton had it all wrong. What I think is the appropriate metaphor, is not “a driverless car that’s stuck in the slow lane”, but one of those cars in a carousel at a carnival, a merry-go-round, where you can sit in it forever and you always end up in the same spot. And the only one who’s in control in the boss who hollers that you need to pay another quarter if you want to keep on riding.

Or, alternatively, and to stay at the carnival, it’s a bumper car, which allows you to hit other cars and get hit, but never to leave the rink. That’s the global economy. Not getting anywhere, and running out of quarters fast.

Still, for the first time in the past few years, Stockton said he sees a real upside risk to his forecast of continued global growth of around 3% next year. And that’s coming from the possibility of looser fiscal policy in the U.S. and Europe. In the U.S., both Clinton and Trump have pledged to boost infrastructure spending on roads, bridges and the like. In Europe, rising populism provides a powerful incentive for governments to abandon austerity ahead of the elections next year – and perhaps beyond. Whether such a shift will be enough to mollify those who have been on the losing side of globalization for decades is debatable, however.

“The consensus in policy-making circles was that more trade meant better economic growth,” said Standard Chartered head of Greater China economic research Ding Shuang, who worked at the IMF from 1997 to 2010. “But the benefits weren’t shared equitably, so now we see a round of anti-globalization, anti-free trade. “Globalization will stall for the moment, until we can find a way to share those benefits,” he added.

Globalization is done. And while we can discuss whether that’s of necessity or not, and I continue to contend that the end of growth equals the end of all centralization including globalization, fact is that globalization was never designed to share anything at all, other than perhaps wealth among elites, and low wages among everyone else.

The EU and IMF have not delivered on what they promised, in the same way that traditional parties have not, from the US to UK to basically all of Europe. They promised growth, and growth is gone. They may have delivered for their pay masters, but they lost the rest of the world.

Anything else is just hot air. But that doesn’t mean they will hesitate to use their control of the military and police to hold on to what they got. In fact, that’s guaranteed. But it would only be viable in a dictatorial society, and even then.

We are transcending into an entirely different stage of our lives, our economies, our societies. Growth is gone, it went out the window long ago only to be replaced with debt. And that’s going to take a lot of getting used to. But there’s nothing that says we couldn’t see it coming.

Jun 222016
 
 June 22, 2016  Posted by at 1:08 pm Finance Tagged with: , , , , , , , , ,  


Founding father of the EU, French economist and financier, Jean Monnet

I stumbled upon an article by Day of the Jackal author Frederick Forsyth, published last week in the Daily Express, that I think every Briton and European and everyone else should read. Forsyth doesn’t delve into the American pressure to form a European Union as a counterweight to the Soviet Union, he sticks with ‘founding father’ Jean Monnet and his reasoning behind the particular shape the Union took. And that is bad enough.

All Forsyth has to do is to quote from Monnet’s work, and I have to admit that while reading it I increasingly got the feeling that it’s quite remarkable that no-one, especially no journalist, does this. It’s there for everyone to see, but that means little if and when no-one actually sees it.

I have repeatedly talked about how the very structure of the EU self-selects for sociopaths and/or worse, but perhaps not enough about how that was deliberately built into the design. A feature not a flaw.

And I don’t think Monnet ever thought about how structures like that develop over time, in which the flaws in that design become ever more pronounced and the more severe cases of sociopathy increasingly take over the more powerful positions. A development that is well visible in present day Brussels.

For me, as I’ve written before, being here in Athens these days is plenty testimony to what the EU truly represents. Not only do we need to help feed many tens of thousands on a daily basis, depression levels are up 80% or so and life expectancy is plunging because proper health care is ever further away for ever more people in a country that not long ago had a health care system anyone would have been proud of.

That is the EU. And, yeah, Britons, do reflect on the NHS. Sure, you can argue it’s not the EU but Cameron and his people that are breaking it down, but it’s also Cameron who is pleading with you to vote to stay in the union.

If it can do this today to one of its member states, it will do it tomorrow to others, and more, if it sees fit. The benefits of the union flow to a select few countries, and to a select few within those countries. And ever fewer are selected as economic policies continue to fail.

It is frankly beyond me to see why anyone would want to be part of that. It’s not about Boris Johnson or Nigel Farage or George Osborne, that is just more deception. It’s about being ruled by midgets, as Forsyth puts it.

Here are some snippets from Frederick Forsyth’s article:

Birth of superstate: Frederick Forsyth on how UNELECTED Brussels bureaucrats SEIZED power

There was nothing base or inhumane about Jean Monnet, the French intellectual now seen as the founding father of the dream, nor those who joined him: De Gasperi the Italian, Hallstein the German, Spaak the Belgian and Schumann the Frenchman. In 1945 they were all traumatised men. Each had seen the utter devastation of their native continent by war and after the second they swore to try for the rest of their lives to ensure nothing like it ever happened again. No one can fault that ambition.

First Monnet analysed what had gone wrong and became obsessed by one single fact. The German people had actually voted the Austrian demagogue into the office of chancellor. What could he, Monnet, learn from this? What he learned stayed with him for the rest of his life and stays with us today in the EU.

The continent of Europe, from western Ireland to the Russian border, from Norway’s North Cape to Malta’s Valletta harbour, must be unified into one huge superstate. Politically, socially, economically, militarily and constitutionally.

There could be no war between provinces so war would be banished. (For a man who had witnessed the Spanish Civil War that was an odd conclusion but he came to it. And there was more).

As coal, iron and steel were the indispensable sinews of war machinery, these industries should be unified under central control. Thus would also be prevented any single state secretly rearming. That at least had the benefit of logic and the Coal and Steel Community was his first success.

But the big question remained: how should this Europe-wide single state be governed? Then he came to the conclusion that still prevails today. In the 1930s democracy had failed. In Germany, Italy and elsewhere desperate people had flocked to the demagogues who promised full bellies and a job in exchange for marching, chanting columns.

So democracy must go. It could not be the governmental system of the new Utopia. It was not fit to be. (He was already president of the Action Committee for the Superstate, his official title. There is nothing new about the word superstate).

Instead there would be a new system: government by an enlightened elite of bureaucrats . The hoi polloi (you and me) were simply too dim, too emotional, too uneducated to be safely allowed to choose their governments.

It never occurred to him to devise a way to strengthen and fortify democracy to ensure that what happened in Italy and Germany in the 1920s and 1930s could not happen again. No, democracy was unsafe and had to be replaced. (This is not propaganda, he wrote it all down).

He faced one last stigma as he sought the support of the six who would become the kernel of his dream: Germany (still ruined by war), France (fighting dismal colonial wars in Indochina and Algeria), Italy in her usual chaos, Holland, Belgium and tiny Luxembourg. How could the various peoples ever be persuaded to hand over their countries from democracy to oligarchy, the government of the elite? Let me quote from what he wrote:

“Europe’s nations should be guided towards the Super-state without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.”

In other words he could not force them (he had no tanks). He could not bribe them (he had no money). He could not persuade them (his arguments were offensive). Hence the deliberate recourse to government by deception. Both nostrums continue to this day. Study the Remain campaign and the people behind it.

Almost without exception they are pillars of the establishment, London-based, accustomed to lavish salaries, administrative power and enormous privilege. None of this applies to 95% of the population. Hence the need for deception.

At every stage the Remain campaign has stressed the issue is about economics: trade, profits, mortgages, share prices, house values – anything to scare John Citizen into frightened submission. The gravy train of the few must not be derailed. Some of them are already sticking pins into a wax figurine of David Cameron for being soft enough to offer the proles a chance to recover their parliamentary democracy and thus their sovereignty.

Forsyth then continues with a bunch of typically British issues, and ends with:

[..] You have repeatedly been told this issue is all about economics. That is the conman’s traditional distraction. This issue is about our governmental system, parliamentary. Democracy versus non-elective bureaucracy utterly dedicated to the eventual Superstate.

Our democracy was not presented last week on a plate. It took centuries of struggle to create and from 1940 to 1945 terrible sacrifices to defend and preserve.

It was bequeathed to us by giants, it has been signed away by midgets.

Now we have a chance, one last, foolishly offered chance to tell those fat cats who so look down upon the rest of us: yes, there will be some costs – but we want it back.

Jun 082016
 
 June 8, 2016  Posted by at 2:18 pm Finance Tagged with: , , , , , , , ,  


Fred Stein Evening, Paris 1934

Two months ago, there was a referendum in Holland about an association agreement between the EU and Ukraine. A relatively new Dutch law states that with an X amount of signatures a referendum can be ‘forced’ by anyone. Before, during and -especially- after the vote, its importance was -and is actively being- pooh-poohed by both the Dutch government and the EU. That in itself paints the issue better than anything else. Both the call and the subsequent support for the referendum stem from resistance against exactly that attitude.

The Dutch voted No to the EU/Ukraine agreement. It was with a turnout not much above the validity threshold, but a large majority of those who did vote agreed they want no part of the deal. This puts Dutch PM Rutte in an awkward position, he can’t be seen ignoring the population. Well, at least not openly. The EU can’t validate the agreement, and with Holland still holding the chair of the Union until July 1, a meeting on the topic has been pushed forward until the last weekend of June. With Rutte still in charge, but only just, and with the June 23 UK Brexit vote decided.

Brussels is frantically looking for a way to push through the agreement despite the Dutch vote, and likely some sort of bland compromise will be presented, which Rutte’s spin doctors will put into words that he can -with a straight face- claim honor the vote while at the same time executing what that same vote specifically spoke out against.

The EU will claim that since 27 other nations did ‘ratify’ the agreement, the 67% of the 32% of Dutch voters who bothered to show up should not be able to block it. As they conveniently fail to mention that nobody in the other 27 countries had a chance to vote on the issue. Just imagine a Brexit-like vote in all 28 EU nations on June 23. Brussels knows very well what that would mean. There’s nothing it finds scarier than people having an active say in their lives.

 

All this is a mere introduction for what is a ‘western world wide’ trend that hardly anybody is able to interpret correctly. It what seems to many to be a sudden development, votes like the Dutch one are ‘events’ where people vote down incumbents and elites. But these are not political occurrences, or at least politics doesn’t explain them.

In the US, there’s Trump and Bernie Sanders. In Britain, the Brexit referendum shows a people that are inclined not to vote FOR something, but AGAINST current political powers. In Italy, a Five-Star candidate is set to become mayor of Rome, something two Podemos affiliated -former- activists have already achieved in Barcelona and Madrid.

All across Europe, ‘traditional’ parties are at record lows in the polls. As is evident when it comes to Brexit, but what when you look closer is a common theme, anything incumbents say can and will be used against them. (A major part of this is that the ’propaganda power’ of traditional media is fast coming undone.)

The collapse of the system doesn’t mean people swing to the right, as is often claimed, though that is one option. It means people swing outside of the established channels, and whoever can credibly claim to be on that outside has a shot at sympathy, votes, power, be they left or right. Whatever else it is they may have in common, first and foremost they’re anti-establishment.

 

To understand the reason all this is happening, we must turn our heads and face economics. Or rather, the collapse of the economy. Especially in the western world – the formerly rich world-, there is no such thing as separate political and economic systems anymore (if there ever were). There is more truth in Hazel Henderson’s quote than we should like: “economics [..] has always been nothing more than politics in disguise”.

What we have is a politico-economic system, with the former media establishment clinging to (or inside?!) its body like some sort of embedded parasite. A diseased triumvirate.

With the economy in irreversible collapse, the politico part of the Siamese twin/triplet can no longer hold. That is what is happening. That is why all traditional political parties are either already out or soon will be. Because they, more than anything else, stand for the economic system that people see crumbling before their eyes. They represent that system, they are it, they can’t survive without it.

Of course the triumvirate tries as hard as it can to keep the illusion alive that sometime soon growth will return, but in reality this is not just another recession in some cycle of recessions. Or, at the very minimum this is a very long term cycle, Kondratieff style, . And even that sounds optimistic. The system is broken, irreparably. A new system will have to appear, eventually. But…

‘Associations’ like the EU, and perhaps even the US, with all the supranational and global entities they have given birth to, NATO, IMF, World Bank, you name them, depend for their existence on an economy that grows. The entire drive towards globalization does, as do any and all drives toward centralization. But the economy has collapsed. So all this will of necessity go into reverse, even if there are very powerful forces that will resist such a development.

 

Despite what the media try to tell you, as do the close to 100% manipulated economic data emanating from various -tightly controlled- sources, the economy is not growing, and it hasn’t for years; the only thing that grows is debt. And you can’t borrow growth.

You can argue in fascinating philosophical debates about when this started, arguments can be made for Nixon’s 1971 abolishment of the -last vestiges of- the gold standard anywhere up to Clinton’s 1998 repeal of Glass-Steagall, or anything in between -or even after.

It doesn’t matter much anymore, the specifics are already gathering dust as research material for historians. The single best thing to do for all of us not in positions of politico/economic power is to recognize the irreversible collapse of the system. Since we all grew up in it and have never known anything else, that is hard enough in itself. But we don’t have all that much time to lose anymore.

The whole shebang is broke. This can easily be displayed in a US nominal debt vs nominal GDP graph:

 

 

That’s really all you need to know. That’s what broke the shebang. It is easy. And even if a bit more of the ‘surplus’ debt had been allowed to go towards the common man, it wouldn’t have made much difference. We’ve replaced growth with debt, because that is the only way to keep the -illusion of- the politico-economic system going, and thereby the only way for the incumbent powers to cling on to that power.

And that is where the danger lies. It’s not just that the vast majority of westerners will become much poorer than they are now, they will be forced to face powers-that-be that face the threat of seeing their powers -both political and economic- slip sliding away and themselves heading towards some sort of Marie-Antoinette model.

The elites-that-be are not going to take that lying down. They will cling to their statuses for -literally- dear life. That right there is the biggest threat we all face (including them). It would be wise to recognize all these things for what they really are, not for what all these people try to make you believe they are. Dead seriously: playtime is over. The elites-that-be are ready and willing to ritually sacrifice you and your children. Because it’s the only way they can cling on to their positions. And their own very lives.

It may take a long time still for people to understand the above, but it’s also possible that markets crash tomorrow morning and bring the facades of Jericho down with them. Waiting for that to happen is not your best option.

Sep 302015
 
 September 30, 2015  Posted by at 8:26 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 30 2015


Marjory Collins 3rd shift defense workers, midnight, Baltimore April 1943

Equities On Course For Worst Quarter Since 2011 (FT)
September 30 Is Historically Worst Day Of The Year For Investors (MarketWatch)
‘Cold Fusion’ Is Citi’s Answer to Fading Central Bank Firepower (Bloomberg)
Loss Of Traction Puts Central Bank Mandates Under Scrutiny (Reuters)
Two Very Disturbing Forecasts By A Former Chinese Central Banker (Zero Hedge)
Jim Chanos on China: The Emperor is In His Underwear (Lynn Parramore)
Bundesbank Chief Warns Of Risks From Cheap Money (Reuters)
Investors Pull $40 Billion From Emerging Markets in Current Quarter (WSJ)
Traders Flee Emerging Markets at Fastest Pace Since 2008 (Bloomberg)
IMF Warns Of New Financial Crisis If Interest Rates Rise (Guardian)
World Set For Emerging Market Mass Default, Warns IMF (Telegraph)
Volkswagen Board Member: Staff Acted Criminally (BBC)
Volkswagen Spain Faces Criminal Complaint Over Emissions Tests (Bloomberg)
Volkswagen To Refit Cars Affected By Emissions Scandal (Reuters)
Obama Re-Defines Democracy – A Country that Supports US Policy (Michael Hudson)
Greek Crisis a Tragedy For Education System (BBC)
Frackers Could Soon Face Mass Extinction (Fortune)
Chinese Buyers Holding Back On ‘High-End’ New Zealand Property (NZ Herald)
Berlin To Curb Refugees As Merkel Faces Backlash (FT)
Risking Arrest, Thousands Of Hungarians Offer Help To Refugees (NPR)

Debt deflation.

Equities On Course For Worst Quarter Since 2011 (FT)

US and global equities are heading for their worst quarterly performance since 2011, with investors rattled by China’s economic slowdown, uncertainty over Federal Reserve policy and growing pessimism about corporate earnings. Adding to investors unease, the IMF on Tuesday warned that corporate failures were likely to jump in the developing world, after a borrowing binge in the past decade. With an array of sectors slumping since the start of July, beyond those directly influenced by the rout in commodity prices, the global equity bull run of recent years is now facing a major challenge. The S&P 500 has fallen 8.5%, the biggest decline since the third quarter of 2011. Previously high-flying sectors that led the market earlier this year, notably biotech and healthcare stocks, have fallen appreciably in recent weeks.

“The question now is are investors ready for the first down year since 2011…and the worst year since the “bad days of 2008”, said Howard Silverblatt, analyst at S&P Dow Jones Indices. In turn, global stock markets are poised for their worst quarterly showing since 2011, shedding more than $10tn in value. The FTSE Emerging Index has tumbled more than 21% this quarter, its worst showing since 2011, and the fifth-worst quarter this millennium. Investors have become increasingly unsettled by signs of weakening global growth and are now questioning the earnings outlook for US companies as the world’s largest economy is preparing to raise rates for the first time in nearly a decade. The US earnings season, which starts in two weeks, is shaping up as pivotal driver of sentiment, Mr Silverblatt said.

Analysts expect quarterly earnings will decline 4.6% year over year in the third quarter, and revenue to decline 3.3%, the third straight quarter of declines for top-line growth, according to the data provider, FactSet. US and global companies have sold record amounts of debt against the backdrop of a blockbuster year for mergers and acquisitions. M&A, equity capital markets, debt capital markets and syndicated lending produced fees of $16.5bn in the third quarter, the lowest total since banks billed $16.3bn in the final three months of 2011 when markets were gripped by the eurozone debt crisis. Under pressure from rising defaults linked to the energy sector, corporate bond prices are signalling broader weakness that reflects the downgrading of global growth prospects, notably for emerging markets.

Read more …

Oh well…

September 30 Is Historically Worst Day Of The Year For Investors (MarketWatch)

September has been tough for stock investors. But if history is any guide, the last day of September may deliver one more blow to already battered markets, according to the financial blog Bespoke. Looking at data as far as 1945, the S&P 500 has posted positive returns just 38% on the last day of September, making it one of the worst trading days of the year, according to Bespoke (as the included table illustrates). Earlier this month, financial blogger Ryan Detrick pointed out that the 38th, 39th and the 40th weeks of the calendar—which fall in September—tend to be the weakest of the year dating back to 1950.

September has marked a particularly rough stretch for the S&P 500 with only the week of Sept. 11 closing higher as China’s slowdown, global economic uncertainties, and lack of clarity on the timing of the Federal Reserve’s expected interest-rate hike have shaken investor confidence. According to FactSet, weekly performance in 2015 for the S&P 500 was among the worst in September. For the week, the benchmark stock-market index is off 2.3% so far, putting it on track for the second-worst week of the year after Aug. 21 when the benchmark tumbled 5.8%. If tomorrow’s trading action follows the historical trend, things could get worse for investors before they get better.

Read more …

Banks rule the world.

‘Cold Fusion’ Is Citi’s Answer to Fading Central Bank Firepower (Bloomberg)

If the world economy enters a downdraft, Steven Englander, global head of G-10 FX strategy at Citigroup, proposes a more revolutionary response, akin to the “helicopter money” once advocated by Milton Friedman. In what he calls “cold fusion,” politicians would cut taxes and boost spending. Central banks would then cover the resulting increase in borrowing by purchasing more bonds as part of a commitment to permanently expand their balance sheets. The easier fiscal policy would be covered by QE Infinity. “Politically it is difficult for central banks to outright endorse monetization of government debt, but faced with another slump and armed with ineffective policy tools, we expect that central banks will quickly give the wink and nod to fiscal measures,” Englander said in a report to clients last week.

The upshot would be greater purchasing power would be injected straight into the economy, increasing activity and inflation. Long-term bond yields would rise, yet short-term yields adjusted for inflation would turn negative. “Increasingly the absence of fiscal policy is viewed as one of the reasons for a less than satisfactory recovery,” said Englander. “With rates at zero, fiscal policy will be needed to offset any negative shock that hits global economies.” Michala Marcussen, head of global economics at Societe Generale SA in London, agrees. “In a risk scenario, we believe policy makers, faced with the abyss, would take the next step into unorthodox policy, namely fiscal expansion,” she said. “Clearly not the risk that bond markets have in mind.”

Read more …

“..relatively slow growth and over-reliance on cheap credit to cope with that funk has “zombified” global economies for years to come..”

Loss Of Traction Puts Central Bank Mandates Under Scrutiny (Reuters)

Growing anxiety that the world’s top central banks have lost control of their mission has intensified scrutiny of their mandates and independence from both political and investment circles. Far from soothing already nervy financial markets, the Fed’s decision not to raise interest rates in September raised more questions than it answered. The turbulent response of equity, commodity and emerging markets marks this as a rare, if not singular instance in recent years of markets reacting so negatively to an ostensibly dovish policy signal from the Fed. Chief among the questions is whether the world’s most influential central bank, along with many of its peers, is trapped at near zero interest rates as the economic cycle crests and inflation flatlines, due to a rapid cooling of China and other emerging economies and a commodity price slump.

The uncomfortable prospect of heading into another economic slowdown with no interest rate ammunition to fight the downturn is at the root of much that investment angst. “The relative paucity of the monetary policy toolkit increases the fragility of the expansion, with risks that an adverse shock could lead businesses and consumers to retrench and thereby transform a mid-cycle slowdown into something significantly worse,” wrote Citi chief economist Willem Buiter. Yet by subsequently insisting a rate rise was still on the cards this year, the Fed simultaneously removed any low-rates balm and confused many as to its ‘reaction function’. Just which of the global pressures that stayed its hand only two weeks ago – weakening China, emerging markets and commodity prices – will disappear again by year end?

And if the rise of the dollar is at least partly behind both those pressures and the below-target U.S. inflation rate, then surely every future push to raise rates will simply strengthen the currency again and re-ignite the same chain reaction. “You can’t run a independent, domestically-focused monetary policy in this environment,” said Salman Ahmed, chief strategist at asset managers Lombard Odier, adding that a major complication is the huge uncertainty internally at the Fed about just how the world’s second biggest economy, China, is actually performing. “What has happened is that central banks have lost control to calibrate monetary policy to only domestic economic data.” The Fed may be in the hot seat, but the Bank of England has a similar dilemma.

The Bank of Japan and ECB differ only in that there’s no domestic pressure yet to tighten policy. But their attempts to avoid deep deflation and reach explicit inflation targets seem to be similarly sideswiped by global rather than domestic developments. And that’s not changing any time soon. In a world that’s wound down very little of its overall indebtedness some seven years after the credit crash was supposed to launch a wave of ‘deleveraging’, relatively slow growth and over-reliance on cheap credit to cope with that funk has “zombified” global economies for years to come, Ahmed added. And in such a low growth world, political pressure to bring central banks into a more centrally-directed policy framework will only increase.

Read more …

“..the failure will have serious consequences on China’s financial stability..”

Two Very Disturbing Forecasts By A Former Chinese Central Banker (Zero Hedge)

Earlier today, Yu Yongding – currently a senior fellow at the Chinese Academy of Social Sciences in Beijing but most notably a member of the PBOC’s Monetary Policy Committee from 2004 to 2006 as well as a member of China’s central planning bureau itself, the Advisory Committee of National Planning – gave a speech before the Peterson Institute, together with a slideshow. Since the topic was China’s debt, economic growth, corporate profitability, and since, inexplicably, it wasn’t pre-cleared by the Chinese department of truth, it was not cheerful. In fact it was downright scary. Among other things, the speech discussed:
• Capital efficiency – low and falling (capital-output ratio rising)
• Corporate profitability – has been falling steadily
• Share of finance via capital market – Very low
• Interest rate on loans – High
• Inflation rate – producer price Index is falling

A key observation was the troubling surge in China’s capital coefficient, first noted here two weeks ago in a presentation by Daiwa which also had a downright apocalyptic outlook on China, and wasn’t ashamed to admit that it expects a China-driven global meltdown, one which “would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen.” The former central banker also discussed the bursting of China’s market bubble. This, he said was created deliberately for two government purposes: 1) To enable debt-ridden corporates to get funds from the equity market, 2) To boost share prices to stimulate demand via wealth effect He admits this shortsighted approach failed and “to save the city, we bombed the city” adding that it brings “authorities’ ability of crisis managing into question.”

He also observes that the devaluation that took place on August 11 was the government’s explicit admission that its attempt to reflate an equity bubble has failed, and it was forced to find an alternative method of stimulating the economy. Of the CNY devaluaton Yu says quite clearly that it was simply to boost the economy: “In the first quarter of 2015 China’s capital account deficit is larger that than that of current account surplus” which is due to i) The Unwinding of Carry trade; ii) The diversification of financial assets by households; iii) Outbound foreign investment; and iv) Capital flight. And now that China has officially unleashed devaluation (which Yu believes should be taken to its logical end and the RMB should float) there are very material risks: “the implication of episode can be more serious than the stock market fiasco, with much large international consequences” and that “the failure will have serious consequences on China’s financial stability”

Read more …

“If you do dumb economic things, whether you’re capitalist, communist, or some hybrid, you ultimately pay the price.”

Jim Chanos on China: The Emperor is In His Underwear (Lynn Parramore)

[..] China is the only industrialized country that knows its annual GDP on Jan. 1 of that year. Because it’s planned. You can truly manufacture your growth. Now, you may end up with lots of white elephants and a banking system with lots of bad loans, and that’s the problem, whether you’re a closed system or an open system or somewhere in between (which is what I believe): a closed system with lots of leakage. At the end of the day, other countries have tried this model and it doesn’t really work that well. The Soviet Union and Japan, to some extent, in the late 80s, followed this model. If you do dumb economic things, whether you’re capitalist, communist, or some hybrid, you ultimately pay the price.

[..] We’re getting inexorably to a tipping point in China. What has made 2015 much different from 2010, other than magnitude (almost everything I saw in 2009-2010 is twice as big today: the banking system, the economy, debt to GDP), is that the veneer of technocratic excellence has been wiped away. Now the West sees that the problems. That was not the case in 2010. I was considered a crank, someone who had never been there, never spoken Mandarin. They said, you don’t know, these people are geniuses! Now I think we’ve begun to see that, no, they make the same policy mistakes that we make. They don’t always get it right.

The other thing that’s changed dramatically, and I think more ominously, is the rise of Xi Jinping, who is a much different leader than the previous two groups of party leaders. Under Hu Jintao and Jiang Zemin, China was open for business. As long as you don’t rock the political boat, you can go to Macau, buy your three Ferraris, have fun, make money. This is the new China. Then Xi comes in, and his first speech is a fiery speech in Guangdong Province, where he absolutely rips into the Soviet Union for being soft on Perestroika. He says, what were you guys thinking about? Why didn’t you put the troops on the street the first chance you got? That was his first speech.

One of the next things he did was – I know this sounds silly, but to me it was very telling — he told the auto show models to cover up. Think about that for a second. He truly said, they’re showing too much skin and this is an embarrassment to China. Cover up! He told the kids, go to bed earlier! I began to see that this guy is different. This guy really sees himself as father of China. Some might say that now he sees himself as an emperor. Sure enough, the cult of personality stuff started. He made the PLA (People’s Liberation Army) senior officers take an oath of personal loyalty to him. That’s very important. His nationalism, which was unmistakable and you couldn’t miss it by 2013-14, has also taken on a very anti-Western tone. Now, if there’s a problem with the stock market, it’s Western speculators. If there’s something going on, it’s the West’s fault.

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Weidmann wants everyone to be Germany. But that is no longer such a glorious prospect.

Bundesbank Chief Warns Of Risks From Cheap Money (Reuters)

The dip in oil prices will save German companies and individuals €25 billion this year, the head of the Bundesbank said on Tuesday, as he warned of the perils of keeping the cost of money too low. “The expansionary monetary policy should not go on for longer than is absolutely necessary,” Jens Weidmann told an audience near Frankfurt, saying the economic recovery in the 19-member euro zone was holding steady. The remarks from Weidmann illustrate the continued scepticism in Germany about the need to extend the ECB’s €1 trillion-plus money printing program.

While such opposition cannot prevent extra money printing, it can delay any such move. Weidmann, who also sits on the ECB’s policy-setting Governing Council, argued that cheap money, with borrowing rates at record low in the euro zone, risked that financial markets would ‘overdo it’. He also pointed to the threat that permanently low borrowing costs would keep ‘zombie’ companies afloat that should be out of business. Weidmann also criticized the negative impact of low interest rates on German savers, who he said earned a fraction of a percentage point of interest on their deposits.

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“Companies from developing countries quadrupled their borrowing to well over $18 trillion last year from around $4 trillion in 2004..”

Investors Pull $40 Billion From Emerging Markets in Current Quarter (WSJ)

Foreign capital is gushing out of emerging markets. Global investors are estimated to have yanked $40 billion from emerging-market stocks and bonds during the current quarter, the most for a quarter since the depths of the 2008 global financial crisis, according to the latest data from the Institute of International Finance. The retrenchment reflected growing tensions in some of the world’s once-highflying emerging economies, which are struggling with slower growth, substantial debt and plunging prices for commodities, which many of these economies rely on. In a report published on Tuesday, the IMF warned that emerging markets could brace for a rise in corporate failures as debt-laden firms find it harder to repay their loans and bonds as a result of sputtering growth and weakening currencies.

Companies from developing countries quadrupled their borrowing to well over $18 trillion last year from around $4 trillion in 2004, with Chinese firms accounting for a major share, according to the bank. Thanks to low interest rates in developed countries, many of the borrowings were conducted in hard currencies, such as the dollar and euro. Investor confidence in emerging markets was further shaken in the quarter by an epic stock-market crash in China, as well as Beijing’s botched efforts to prop up share prices. The selloff in emerging markets accelerated and rattled global financial markets after the Chinese central bank’s move to let its currency devalue in August fueled suspicions that China’s underlying economy might be faring worse than expected.

These concerns had a knock-on effect on commodities, driving prices down to levels not seen in six years. As the biggest buyer of many commodities from countries including Brazil, South Africa and Malaysia, China’s woes hurt these countries’ currencies. “Emerging markets are going to be a very difficult place to invest in for the next 12 to 24 months,” said David Spika, global investment strategist at GuideStone Capital, which oversees $10.7 billion in assets. Falling commodity prices hurt many emerging countries’ growth, leading to capital outflows and weakening their currencies, he said.

Many emerging countries rely on outside capital to finance their budget deficits, and the continuous outflow is already forcing some of these countries to devalue their currencies or dip into their foreign-currency reserves to defend their exchange rates. This quarter’s exodus was about evenly divided between equities and bonds, losing $19 billion and $21 billion, respectively, according to the IIF. The $40 billion outflow would rank the current quarter the worst quarter since the fourth quarter of 2008 when emerging markets saw outflows of about $105 billion.

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“It’s the trifecta of slowing investment growth, declining commodity prices and the strong dollar.”

Traders Flee Emerging Markets at Fastest Pace Since 2008 (Bloomberg)

Investors have pulled $40 billion out of developing economies in the third quarter, fleeing emerging markets at the fastest pace since the height of the global financial crisis. The quarterly outflow was the first since 2009 and the biggest since the final three months of 2008, when traders sold $105 billion of assets, according to the Institute of International Finance. The retreat came as data signaled faltering Chinese economic growth, commodity prices slumped and the Federal Reserve moved closer to an increase in the near-zero U.S. interest rates that have supported demand for riskier assets in developing nations. About $19 billion of the selloff was equities, with the remaining $21 billion in debt, the IIF said in a report Tuesday. There were outflows in all three months this quarter.

The MSCI Emerging Markets stocks benchmark has declined 20% in the past three months, on track for the biggest retreat in four years. Local-currency developing-nation bonds have lost 6.6% in dollar terms in the third quarter, according to Bank of America Corp. indexes, the biggest retreat on a quarterly basis since 2011. Currencies from Brazil to South Africa have tumbled, sending a gauge of 20 foreign-exchange rates to a record low. “The reaction we’re seeing is quite severe, but a lot of the damage has already probably taken place,” Brendan Ahern, managing director of Krane Fund Advisors LLC in New York, said by phone. “It’s the trifecta of slowing investment growth, declining commodity prices and the strong dollar.”

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Speaking in forked tongues.

IMF Warns Of New Financial Crisis If Interest Rates Rise (Guardian)

Rising global interest rates could prompt a new credit crunch in emerging markets, as businesses that have ridden the wave of cheap money to load up on debt are pushed into crisis, the International Monetary Fund has said. The debts of non-financial firms in emerging market economies quadrupled, from $4tn in 2004 to well over $18tn in 2014, according to the IMF’s twice-yearly Global Financial Stability Report. This borrowing binge has taken business debt as a share of economic output from less than half, in 2004, to almost 75%. China’s firms have led the spree, but businesses in other countries, including Turkey, Chile and Brazil, have also ramped up their debts — and could prove vulnerable as interest rates rise.

With the US Federal Reserve expected to raise interest rates in the coming months, the IMF warns that emerging market governments should ready themselves for an increase in corporate failures, as firms struggle to meet sharply higher borrowing costs. That could create distress among the local banks who have bought much of this new debt, causing them in turn to rein in lending, in a “vicious cycle” reminiscent of the credit crisis of 2008-09. “Shocks to the corporate sector could quickly spill over to the financial sector and generate a vicious cycle as banks curtail lending. Decreased loan supply would then lower aggregate demand and collateral values, further reducing access to finance and thereby economic activity, and in turn, increasing losses to the financial sector,” the IMF warns.

Its economists find that the sharp increase in borrowing has been driven largely by international factors, including the historically low interest rates and quantitative easing unleashed by central banks in the US, Japan and Europe, as they have sought to rekindle growth in the wake of the sub-prime crisis. “Monetary policy has been exceptionally accommodative across major advanced economies. Firms in emerging markets have faced greater incentives and opportunities to increase leverage as a result of the ensuing unusually favourable global financial conditions,” the IMF says.

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A deep dark hole lies right ahead.

World Set For Emerging Market Mass Default, Warns IMF (Telegraph)

The IMF has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates. The IMF said corporate debts in emerging markets ballooned to $18 trillion last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt. It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises. “As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,” the IMF said in a pre-released chapter of its latest Financial Stability Report.

It warned that this could create a credit crunch as risks “spill over to the financial sector and generate a vicious cycle as banks curtail lending”. In a double warning, the IMF said market liquidity, or the ease with which investors can quickly buy or sell securities without shifting their price, was “prone to sudden evaporation”, particularly in bond markets, when the Federal Reserve started to raise interest rates. It said a steady growth environment and “extraordinarily accommodative monetary policies” around the world had helped to maintain a “high level” of liquidity. However, it warned that this was not the same as “resilient” liquidity that could support markets in time of stress.

Gaston Gelos, head of the IMF’s global financial stability division, said these factors were “masking liquidity risks” that could trigger violent market swings. “Liquidity is like the oil in an engine, when there’s too little of it, the machine starts stuttering,” he said. The IMF said an “illusion” of abundant liquidity may have encouraged “excessive risk taking” by some investors that could cause market ructions if many investors suddenly rushed to the exit. “Even seemingly plentiful market liquidity can suddenly evaporate and lead to systemic financial disruptions,” the IMF said. “When liquidity drops sharply, prices become less informative and less aligned with fundamentals, and tend to overreact, leading to increased volatility. In extreme conditions, markets can freeze altogether, with systemic repercussions.”

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Politicans and board members should draw their own consequences, not point to others. This guys is both.

Volkswagen Board Member: Staff Acted Criminally (BBC)

Olaf Lies, a Volkswagen board member and economy minister of Lower Saxony has told Newsnight some staff acted criminally over emission cheat tests. He said the people who allowed the deception to happen or who installed the software that allowed certain models to give false emissions readings must take personal responsibility. He also said the board only found out about the problems at the last meeting. About 11 million diesel engine cars are affected by the problem. Mr Lies told the BBC: “Those people who allowed this to happen, or who made the decision to install this software – they acted criminally. They must take personal responsibility.” He said: “We only found out about the problems in the last board meeting, shortly before the media did. I want to be quite open. So we need to find out why the board wasn’t informed earlier about the problems when they were known about over a year ago in the United States.”

He said the company had no idea of the total bill to sort out the engines and cover any legal costs arising: “Huge damage has been done because millions of people have lost their faith in VW. We are surely going to have a lot of people suing for damages. We have to recall lots of cars and it has to happen really fast.” He added that the company was strong and that rebuilding trust – and ensuring the majority of the 600,000 workers at the car giant were not blamed, was its priority. He added his apology to those already made by senior company figures and said: “I’m ashamed that the people in America who bought cars with complete confidence are so disappointed.” VW is working out how to refit the software in the 11 million diesel engines involved in the emissions scandal. Seat is the latest VW brand to reveal it, too, used the emission cheat device.

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Be good to see how different legal systems have different approaches.

Volkswagen Spain Faces Criminal Complaint Over Emissions Tests (Bloomberg)

Volkswagen AG’s three Spanish units and their chairmen are facing a criminal complaint stemming from its rigged emissions tests that accuses them of defrauding consumers and the tax authorities and damaging the environment. Manos Limpias, a public workers’ union that has pursued corruption allegations against high-profile figures in Spain including the king’s sister, filed the private suit with the National Court on Monday. The Spanish state could face a civil liability for failing to adequately supervise the automaker, according to a copy of the lawsuit seen by Bloomberg News. German prosecutors have already started a criminal probe of the car maker that will examine the role of former CEO Martin Winterkorn. Winterkorn resigned on Friday after a tumultuous week in which Europe’s biggest car manufacturer admitted to tampering with some diesel engines to cheat on U.S. emissions tests.

The complaint named Volkswagen Audi SA Chairman James Morys Muir, Volkswagen Navarra SA Chairman Ulbrich Thomas and Seat SA Chairman Francisco Javier Garcia Sanz. Volkswagen and its Seat unit have built more than 500,000 cars in Spain with the 1.6- and 2.0-liter diesel motors subject to the German investigation, Manos Limpias said in the lawsuit. Several models from Volkswagen’s other brands that are under investigation have also been sold to Spanish consumers. In addition, the German company has been claiming subsidies from the Spanish government since at least 2009 as an incentive to produce low emission cars. While Industry Ministry Jose Manuel Soria says Spain will ask Volkswagen to give back the subsidies, the government may also face a civil charges because it ordered Seat’s technical unit to conduct the emissions tests, Manos Limpias said in the document.

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“Volkswagen did not say how the planned refit would make cars with the “cheat” software comply with regulations..”

Volkswagen To Refit Cars Affected By Emissions Scandal (Reuters)

Volkswagen said on Tuesday it will repair up to 11 million vehicles and overhaul its namesake brand following the scandal over its rigging of emissions tests. New CEO Matthias Mueller said the German carmaker would tell customers in the coming days they would need to have diesel vehicles with illegal software refitted, a move which some analysts have said could cost more than $6.5 billion. In Washington, U.S. lawmakers asked the automaker to turn over documents related to the scandal, including records concerning the development of a software program intended to defeat regulatory emissions tests. In separate letters, leading Republicans and Democrats on the House Energy and Commerce Committee requested information from both Volkswagen and the EPA as part of an investigation into the controversy.

Europe’s biggest carmaker has admitted cheating in diesel emissions tests in the US and Germany’s transport minister says it also manipulated them in Europe, where Volkswagen sells about 40% of its vehicles. The company is under huge pressure to address a crisis that has wiped more than a third off its market value, sent shock waves through the global car market and could harm Germany’s economy. “We are facing a long trudge and a lot of hard work,” Mueller told a closed-door gathering of about 1,000 top managers at Volkswagen’s Wolfsburg headquarters late on Monday. “We will only be able to make progress in steps and there will be setbacks,” he said. Volkswagen did not say how the planned refit would make cars with the “cheat” software comply with regulations, or how this might affect vehicles’ mileage or efficiency, which are important considerations for customers. It said it would submit the details to Germany’s KBA watchdog next month.

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Exactly what I was thinking listening to Obama. “We bring them democracy” has become a ridiculous line.

Obama Re-Defines Democracy – A Country that Supports US Policy (Michael Hudson)

In his Orwellian September 28, 2015 speech to the United Nations, President Obama said that if democracy had existed in Syria, therenever would have been a revolt against Assad. By that, he meant ISIL. Wherethere is democracy, he said, there is no violence of revolution. This was his threat to promote revolution, coups and violence against any country not deemed a “democracy.” In making this hardly veiled threat, he redefined the word in the international political vocabulary. Democracy is the CIA’s overthrow of Mossedegh in Iran to install the Shah. Democracy is the overthrow of Afghanistan’s secular government by the Taliban against Russia. Democracy is the Ukrainian coup behind Yats and Poroshenko. Democracy is Pinochet. It is “our bastards,” as Lyndon Johnson said with regard to the Latin American dictators installed by U.S. foreign policy.

A century ago the word “democracy” referred to a nation whose policies were formed by elected representatives. Ever since ancient Athens, democracy was contrasted to oligarchy and aristocracy. But since the Cold War and its aftermath, that is not how U.S. politicians have used the term. When an American president uses the word “democracy,” he means a pro-American country following U.S. neoliberal policies. No matter if a country is a military dictatorship or the government was brought in by a coup (euphemized as a Color Revolution) as in Georgia or Ukraine. A “democratic” government has been re-defined simply as one supporting the Washington Consensus, NATO and the IMF. It is a government that shifts policy-making out of the hands of elected representatives to an “independent” central bank, whose policies are dictated by the oligarchy centered in Wall Street, the City of London and Frankfurt.

Given this American re-definition of the political vocabulary, when President Obama says that such countries will not suffer coups, violent revolution or terrorism, he means that countries safely within the U.S. diplomatic orbit will be free of destabilization sponsored by the U.S. State Department, Defense Department and Treasury. Countries whose voters democratically elect a government or regime that acts independently (or even that simply seeks the power to act independently of U.S. directives) will be destabilized, Syria style, Ukraine style or Chile style under General Pinochet. As Henry Kissinger said, just because a country votes in communists doesn’t mean that we have to accept it. It is the style of “color revolutions” sponsored by the National Endowment for Democracy.

In his United Nations reply, Russian President Putin warned against the “export of democratic revolution,” meaning by the United States in support of its local factotums. ISIL is armed with U.S. weapons and its soldiers were trained by U.S. armed forces. In case there was any doubt, President Obama reiterated before the United Nations that until Syrian President Assad was removed in favor of one more submissive to U.S. oil and military policy, Assad was the major enemy, not ISIL. “It is impossible to tolerate the present situation any longer,” President Putin responded. Likewise in Ukraine. “What I believe is absolutely unacceptable,” he said in his CBS interview on 60 Minutes, “is the resolution of internal political issues in the former USSR Republics, through “color revolutions,” through coup d’états, through unconstitutional removal of power. That is totally unacceptable.”

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Greece had an excellent education system for a very long time. Now that is gone too.

Greek Crisis a Tragedy For Education System (BBC)

When considering the effects of the debt crisis on Greece, most people probably think of long queues outside banks and protests in the streets. A less visible but perhaps further reaching outcome is that Greece’s education system has become one of the most unequal in the developed world. Although education in Greece is free, public schools are suffering from spending cuts imposed as a condition of the bailout agreements. In practice, over the last 30 years it has become increasingly necessary for students to pay for expensive private tuition to pass the famously difficult Panhellenic exams required to get to university. But with unemployment rising and salaries falling, many poor and middle-class families are struggling to pay for this extra tuition.

A World Economic Forum report this month ranked Greece last of 30 advanced economies for education because of the close relationship between students’ performance and their parents’ income. And a professor of law and economics at the University of Athens warns that losing talented students from poor backgrounds is a “national catastrophe” which could hinder Greece’s long-term economic recovery. Greece’s education system was designed around the principle of equality. Article 16 of the constitution guarantees free education at all levels and university admission is decided solely by performance in the nationwide Panhellenic exams. But the low quality of some public education in Greece, and the difficulty of the Panhellenic exams, has led to a parallel education system being set up.

The majority of students in Greece attend private classes called “frontistiria” or one-to-one tuition in evenings and weekends. In 2008, the year before the crisis, families with children in upper secondary education spent more than €950m on these lessons, which represented nearly 20% of these households’ expenditure – more than any other European country. “If a student does not attend frontistirio, he is a dead man for the exams,” said Dimitra Kakampoura, a 22-year-old student who took the Panhellenic exams in 2011.

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“Banks lend to oil exploration companies based on the value of their reserves. But they only audit the value of those reserves every October. Given how much oil prices have tumbled in the past year, many analysts expect banks to greatly reduce in the next month..”

Frackers Could Soon Face Mass Extinction (Fortune)

An analyst says one-third of the companies could be bankrupt by the end of next year. Doomsday may finally be coming to the fracking industry. Despite the big drop in oil prices in the past year, there have been relatively few bankruptcies in the energy industry. That may be about to change. James West, an energy industry analyst at ISI Evercore, says months of low activity have left many of the companies in the hydraulic-fracturing business either insolvent or close to it. He says as many as a third of the fracking companies could go bust by the end of next year. “This holiday will not be a time of cheer in the oil patch,” says West. So far oil and gas exploration companies, while cutting back somewhat, have continued to spend based on budgets set a year ago when oil prices were much higher.

But now West says the price of oil is catching up to them, and they may soon have to drastically cut back their spending on services. The catalyst is the banks. Banks lend to oil exploration companies based on the value of their reserves. But they only audit the value of those reserves every October. Given how much oil prices have tumbled in the past year, many analysts expect banks to greatly reduce in the next month how much they are willing to lend to oil and gas companies. Regulators, worried banks may face losses, have recently been pressuring banks to cut back their lending to oil and gas companies. On Friday, credit ratings firm Standard & Poors reported that its distressed ratio, which measures the%age of corporate borrowers that investors appear nervous may not be able to pay back their debt, had reached the highest level since 2011. The oil and gas sector accounted for the largest number of the distressed borrowers, 95 out of 270.

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Clueless Kiwis.

Chinese Buyers Holding Back On ‘High-End’ New Zealand Property (NZ Herald)

While some Chinese buyers are holding back on buying “high-end” property in Auckland, there is still demand for houses in the medium and lower end of the market, a Chinese-based real estate website says. Juwai.com hasn’t yet finalised its numbers for the third quarter of this year but still expects to see growth. It also predicts a massive increase in overseas investment from Chinese buyers of international property over the next few years. The Auckland housing market is cooling slightly and the boss of the city’s biggest real estate company has said Chinese property investors are disappearing from the auction room. Peter Thompson, of Barfoot and Thompson, attributes the the drop off to financial instability in China. “There are a lot less Chinese in the auction room at the moment and at the open homes,” he told the Herald on Monday.

“The market has changed and some of that is the Chinese buyers. There are more requirements in getting money out of China now and that is having an impact.” Juwai.com’s chief executive Simon Henry said he’d noticed a slow-down at the expensive end of the market. “We have some high-end buyers holding back since China announced a tightening of enforcement on the export of capital. “We haven’t yet crunched the numbers on the third quarter, but we believe they will still show growth over the second quarter,” Mr Henry said. “Mid-market and lower priced properties, like those bought for students, are still in demand.” Changes in the way Chinese investors can export capital were predicted to lead to a huge swell in money flooding into New Zealand, which Mr Henry said was a “good thing”. “It will lead to more than $100 million of new investment in New Zealand property over the medium to long term, as well as new investment in local business and industry.”

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Flip flopping with people’s lives.

Berlin To Curb Refugees As Merkel Faces Backlash (FT)

Berlin on Tuesday agreed measures aimed at curbing an unprecedented surge in migrants, including cuts to cash payments, as a backlash grew over the German government’s handling of the refugee crisis. The new laws are aimed at lifting some of the pressures on overworked local officials and reassuring voters that the government is in control of the migrant problem. Berlin wants the laws to take effect as soon as November. Chancellor Angela Merkel has come under mounting pressure, including from within her own CDU/CSU coalition, since she pledged to set “no upper limit” on the right to asylum and promised to accept all refugees from Syria. Officials expects 800,000 refugees this year, four times more than 2014.

In a surprise development, Joachim Gauck, German president, who is widely viewed as a liberal, on Sunday launched a thinly veiled attack on Ms Merkel’s handling of the crisis, saying: “Our reception capacity is limited even when it has not yet been worked out where these limits lie.” Cash handouts of €143 a month for a single person are seen as making Germany more desirable for migrants than other European states. Refugees will instead receive non-cash benefits, such as food vouchers. Cash payments for living expenses will largely be stopped for asylum-seekers living in official reception centres.

Berlin will also add Kosovo, Albania and Montenegro to a list of countries where would-be refugees can be safely returned in an attempt to staunch inflows of economic migrants from the western Balkans. Failed asylum-seekers will face more rapid removal procedures and big cuts in financial support. However, successful applicants will have quicker access to language courses to improve integration into society and the jobs market. Berlin pledged to double its refugee-linked support for regional and local authorities to 2 billion euros this year, rising to about €4 billion in 2016, assuming refugee inflows of 800,000 annually.

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There are good people everywhere. They’re just not in charge.

Risking Arrest, Thousands Of Hungarians Offer Help To Refugees (NPR)

Driving in rural, southern Hungary, especially at night, you’re likely to see people emerging from dark forests along the side of the road. They trudge along the highway’s narrow shoulder and sometimes flag down passing cars, asking for help. They’re migrants and refugees who’ve entered Hungary by the tens of thousands in recent months, mostly en route to Germany and other northern European countries. But it’s illegal for civilians in Hungary to help them get there. Hungarian law prohibits offering rides — even for free — to people who’ve entered the country illegally and without a visa. Another law grants Hungarian police and military extraordinary powers to search private homes if they suspect someone of harboring illegal migrants.

The laws, passed in stages earlier this year, target human traffickers, and have led to a few high-profile arrests. Back in August, it was in Hungary that 71 Syrian refugees were loaded into a northbound truck. They were found suffocated to death in the same truck, on the side of a highway in Austria, on Aug. 28. Hungarian police arrested four alleged smugglers. But the laws are also making well-intentioned volunteers think twice about helping — because they, too, could be prosecuted, fined or jailed. At a Migration Aid warehouse in downtown Budapest, volunteers stockpile crates of fruit and sleeping bags for refugees. Dozens of Hungarians stop by to help, including Gyorgy Goldschmit, who offers up his own home. His wife and child are going out of town for a few weeks and he says he has room for another family, if needed.

“My family is not going to be there, and I will be there – so it’s obvious that someone could come,” Goldschmit says. But Migration Aid can’t arrange it. Its directors understand Hungarian law. “Maybe they cannot help like this because that would be considered as helping illegally or trafficking,” Goldschmit says. “But I don’t care so much.” Like many Hungarians, Goldschmit is not afraid of prosecution. Thousands are helping. But it’s unclear how many more are dissuaded by these laws. It’s also unclear how aggressively the laws are being enforced. The highest-profile case so far involved a Hungarian man arrested in April after using a local ride-share website, through which fuel costs are shared, to give lifts to refugees.

He was acquitted after a months-long legal battle, but his case served as a well-publicized warning to anyone thinking of transporting migrants. “Basically, if I drive you across [the country] and you don’t have a visa, then I’m liable criminally,” says Marta Pardavi, a human rights lawyer with the Budapest branch of the Helsinki Committee. “We have advised volunteers doing this that there is a risk involved — the risk of a criminal procedure, of having to go to interrogations — and I think that risk is very real.”

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Sep 082015
 
 September 8, 2015  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  


Dorothea Lange Country store, Person County, NC Jul 1939

The Way of the Dragon (Beppe Grillo)
Sovereign Debt as Weapon: Subverting Democracy in Greece (Zoe Konstantopoulou)
China Has Spent $236 Billion Trying to Rescue Its Stocks (Bloomberg)
Draghi’s QE Dispenses Huge Losses to European Stock Markets (Bloomberg)
Europe To Sink Into Deflation, Triggering Next Round Of Global Market Crash (SI)
In A Quota System You Do Not Kick Cans Down The Road, But People (Münchau)
Hollande Readies Syria Air Strikes as Response to Refugee Crisis (Bloomberg)
US Revamping Rebel Force Fighting ISIS in Syria (NY Times)
Europe Seeks UN Blessing to Confront Human Smugglers in the Mediterranean (Lynch)
‘Stop Bombing, Start Resettling’: Former PM’s Plea To Australia (SMH)
How Neocons Destabilized Europe (Robert Parry)
Syrian Refugees In Hungary: ‘This Is The So-Called Developed Europe?’ (Guardian)
Cameron’s Offer Of 20,000 Syrian Refugees Over 5 Years Is Derisory (Ashdown)
Merkel Channels Bank Rescue as Germany Plans Refugee Fund (Bloomberg)
Hit By New Wave Of Refugees, Germany Warns EU Partners (Reuters)
Sweden’s PM Chides Europe’s Leaders as Refugee Crisis Deepens (Bloomberg)
At Least 10,000 Migrants To Be Ferried To Mainland Greece In Next 5 Days (AP)
Oil Falls More Than 3% On Oversupply, China Equity Losses (Reuters)
US Shale Oil Industry Hit By $30 Billion Outflows
A Dutchman ‘In Control’ Of The Greek Government (Enikos)
Writing Down €4.7 Billion In Bonds May Cost Greece €49 Billion (Bloomberg)
China’s Shift Away From Industry Drains Life From a Steel Town (WSJ)
Thomas Piketty To Advise Spain’s Anti-Austerity Party Podemos (Guardian)

“There are those who are right to call it ‘creditocracy'”

The Way of the Dragon (Beppe Grillo)

The Chinese slowdown must be worrying for the Eurozone but for now it doesn’t seem to be rushing to take corrective action – to avoid another event like that happening in 2008, as this time the countries would not be in a position to help out the banks. If double digit growth in China has been what’s kept world growth going, it’s legitimate to expect the current economic slowdown to spread to the world economy, considering, for example, that every year, China is consuming 10% of the world’s oil and more than half of the world’s copper and iron. Right now the value of the Euro is strengthening and that means its value has gone up by about half the amount it devalued in June last year. This cannot help Europe’s economy even because when considering China, China absorbs 3% of Italian exports and 6% of German exports.

Germany is the winning country in this currency war because it doesn’t need to be able to devalue its currency as it is operating with a currency that is much weaker than its own economy.

It thus doesn’t need to devalue as has happened in China because it’s already operating with a Euro that’s weak in relation to its economic fundamentals, and at the same time, it’s not obliged to revalue as happened for Switzerland at the beginning of the year. Apart from the importance of monetary sovereignty, the situation in China confirms another lesson: in a healthy economy the currency must be endogenous. That means that the optimal quantity of a currency for healthy economic growth cannot be decided by a “deus ex machina“ whether that happens to be Draghi or the commercial banks that tighten or loosen credit facilities as they see fit, but for a healthy economy the quantity depends on the demand for money and on the expectations of consumers themselves about their future income.

On the other hand, by pumping more money into the system by expanding credit from the banks and doping the consumers and the real estate markets after having anchored the exchange rate has historically been the best way to subjugate the people by using private debt to remove their opportunity of future growth, mortgaging the income of the generations to come to pay the bankers the interest on the current debt. There are those who are right to call it “creditocracy”. It was like that in Latin America after the various currencies were anchored to the US dollar. It was also like that in Greece and in the countries on the periphery of Europe where consumption was disproportionately buoyed up because of easy access to German savings guaranteed by the Euro. It’s happening in China after its currency was anchored to the US dollar.

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Zoe for president!

Sovereign Debt as Weapon: Subverting Democracy in Greece (Zoe Konstantopoulou)

On the 25th of January 2015, only seven months ago, the Greek people through general elections gave a clear and unequivocal mandate to government and to parliament to do away with these homicidal policies. Negotiations started. A special Committee of the Parliament was formed, called the Truth Committee on Public Debt, to conduct an audit and a legal assessment of the debt it issued a preliminary report last June. The report found that the state’s sovereign debt is illegal, illegitimate, odious and unsustainable. It found that the sovereign debt has been concluded through procedures which grossly violate constitutional law, parliamentary procedure and fundamental human rights and freedoms guaranteed under international law, thereby justifying the denunciation of the debt.

It found that creditors had been acting in bad faith, knowingly burdening the country with unsustainable loans to save French, German and Greek private banks. Despite these findings, Greece’s creditors insisted that the people’s mandate be neglected. On June 25th, a 48 hour ultimatum was addressed to the Greek government asking it to accept, contrary to popular mandate, a series of measures dismantling labour law, abolishing social security guarantees and legal protection for over-indebted citizens, while at the same time requiring the sell-out of the most precious public assets and public enterprises, but also major ports, airports and public infrastructure. All to be sold or given away to repay an unsustainable and odious debt.

The Hellenic Parliament accepted the Government’s proposal to hold a referendum on the ultimatum, and the Greek people, through a large majority of 62%, rejected the measures. During the referendum week, international and foreign government officials tried to influence the referendum outcome through statements terrorizing the people. The referendum was held with the banks closed and capital controls imposed as a result for the ECB’s refusal to provide liquidity after the proclamation of the referendum. And yet, democracy prevailed. The people pronounced themselves clearly and said a 62% NO to those homicidal measures. What followed is a nightmare for every democratic conscience and a disgrace.

The creditors refused to consider the referendum outcome. They insisted, under the threat of provoking a bank-failure and a humanitarian disaster, that measures harsher than those rejected be adopted. [..] An over 100 page law construed in 1 article was passed on July 15th in less than 24 hours. A 1000 page law construed in 3 articles was passed on July 22nd in less than 24 hours. An almost 400 page law was passed on August 14, in 24 hours.

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Seeing today’s last minute surge in Shanghai, this is not over.

China Has Spent $236 Billion Trying to Rescue Its Stocks (Bloomberg)

China’s government has spent 1.5 trillion yuan ($236 billion) trying to shore up its stock market since a rout began three months ago, according to Goldman Sachs. The “national team” expended about 600 billion yuan in August alone, with the total now equivalent in value to 9.2% of China’s freely-traded shares, strategists including Kinger Lau wrote in a report dated Monday. Investor concern about what will happen when the government starts to pare these holdings is overdone, they wrote, citing past experiences in Hong Kong and in the U.S. The Shanghai Composite Index has tumbled 41% since its June high to erase $5 trillion in value from mainland bourses as leveraged investors fled amid signs of deepening weakness in the economy.

To stop the plunge, officials armed a state agency with more than $400 billion to purchase stocks, banned selling by major shareholders and told state-owned companies to buy equities. The rout, coupled with a shock devaluation of the yuan, has roiled global markets. The gauge slumped the most in two weeks on Monday on speculation government-backed funds halted intervention following the conclusion of a military parade last week. China Securities Finance, the agency tasked with supporting share prices, would no longer add to holdings unless there’s unusual volatility and systemic risk, although it would remain in the stock market for years to come, the regulator said on Aug. 14.

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In the private sector, he would long have been fired.

Draghi’s QE Dispenses Huge Losses to European Stock Markets (Bloomberg)

Mario Draghi’s stimulus program hasn’t quite succeeded at unleashing the desired animal spirits across Europe. Here’s the evidence: six months in, and 96% of companies in the Euro Stoxx 50 Index have actually gotten cheaper relative to earnings. The ECB’s plan to flood the financial system with cash by purchasing bonds was supposed to ignite the same celebration of risk-taking it did in the U.S. six years ago. In fact, the opposite has happened, culminating in as much as $526 billion of share values being wiped out last month. The failure of European quantitative easing to improve sentiment toward equities is a troubling sign to bulls as markets from Shanghai to New York endure their worst selloffs since 2011. Rather than set Europe apart as a haven, Draghi’s program has been marginalized in the stock market by events such as Greece’s credit impasse.

The Euro Stoxx 50 lost 9.2% in August amid concern China’s economy will subdue global growth. It rebounded 1.2% on Monday following a weekly drop. “People get very nervous when they feel there are no more policy levers left,” Graham Secker, Morgan Stanley’s head of European equity strategy, said by phone from London. “Investor confidence is extremely low at the moment, and everyone wants to de-risk. They don’t see who is going to ride to the rescue.” Going by economic data, Europe is making progress. Unemployment in the region unexpectedly fell, while German manufacturing expanded at a faster pace. Economists project Europe’s GDP will grow 1.5% this year, the most since 2011. And analysts still predict profits for companies in the currency bloc will increase 12% this year.

The figures are doing little to help stocks. In the latest rout, valuations in the Euro Stoxx 50 fell to 12.4 times projected earnings, compared with 15.3 when Draghi’s program started in March. Dragged down by exporters and commodity stocks, the gauge has tumbled 13% in the last four weeks – almost twice as much as the Standard & Poor’s 500 Index, where price-earnings ratios are about 19% higher. Europe’s carmakers – the companies that have most benefited from the depreciation in the euro – have seen valuations decline as much as 34% since this year’s peak. A similar drop occurred in energy share valuations, and a gauge of chemical stocks became 22% cheaper. France’s Vinci and Vivendi stand out as the only two companies in the Euro Stoxx 50 that trade at higher multiples than then.

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“Deutsche Bank expects the combined amount of forex sales from the central banks to be $1.5T in the next 16 months.” Could be much more.

Europe To Sink Into Deflation, Triggering Next Round Of Global Market Crash (SI)

Just one year after Mario Draghi reassured the market he would do ‘whatever it takes’ to ensure the inflation rate in the Eurozone will increase again, he seems to have been pushed back into a corner. The ECB once again had to reduce its economic growth expectations as well as the expectations for the average inflation rate in the Eurozone. Despite the ECB having been a huge buyer of bonds on the open market to increase the liquidity in the system, the €60 billion per month has been insufficient to create a serious trickle-down effect in the real economy. Whereas the central bank is targeting an inflation rate of 2% which it deems to be the ‘sweet point’ for a sustainably growing economy. The inflation expectation for the entire year 2015 is just 0.1% and is expected to increase to 1.5% in 2016 and 1.7% in 2017.

This also means that a negative inflation deflation in the next few months (on the back of a lower oil price) is a very realistic possibility now and it certainly looks like the ECB will have to step up its game to make sure it doesn’t lose control. But it also looks like it has maxed out some bond purchases, as one of the newly-instated updates on the bond-buying program is an increased ceiling of how much the ECB can buy of one issue. Whereas the previous ceiling was placed at 25%, the ECB has now increased this level to 33% and the market is now widely anticipating Draghi to upgrade his Bazooka to a Bazooka 2.0 as the ECB is reportedly considering to purchase more different asset classes, to extend the current program (which is scheduled to end in 12 months from now) and to expand the program from €60 billion per month to €75+ billion per month.

The different players in the currency war are now taking their next steps at a very fast pace. After the Chinese crash and the devaluation of the Yuan, the USA will now very likely hold off on increasing the benchmark interest rate, now the ECB will very likely increase the liquidity in the system by a few billions per week, but the next step will be unfolded next week when China will announce an updated status of its foreign currency reserves. Those reserves peaked at $4T in the summer of last year, but it will be very interesting to see how much of those reserves were dumped by China during its very agitated summer.

The forex reserves dropped by in excess of $40 billion in July, but this number will very likely be much higher in August, and Netherlands-based Rabobank is estimating the outflow could be in excess of $200 billion as the Chinese central bank had to dump foreign currency in an effort to rescue the Yuan from a semi-freefall. And this move could trigger another round of selling as Deutsche Bank expects the combined amount of forex sales from the central banks to be $1.5T in the next 16 months. Yes, that’s 1,500 billion dollar. And then the Federal Reserve will have to make the next move as a weaker Euro and Yuan is once again undermining the American economic growth. The domino pieces are falling. Fast.

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The Deadly Disunity Of The Europeans

In A Quota System You Do Not Kick Cans Down The Road, But People (Münchau)

Europe’s multiple crises share a common theme. Whether we are talking about banks, sovereign debt or, as now is the case, refugees, the EU finds it hard to act. What we have is a classic collective action problem, of the kind described by Mancur Olson, the political economist, in the 1960s. People have a common interest in acting but fail to do so because vested interests get in the way. Even the harrowing pictures of the dead young boy will not resolve the collective action problem. All it will do is to produce visible hyperactivity. The three crises share another common theme: each one of them is virtually intractable if you look at it from a micro perspective, from the vantage point of a Greek bank or Budapest East train station. But if you look at immigration from an EU-level perspective, the picture is much more nuanced.

The EU has 500m inhabitants. Setting aside refugees, net immigration — the difference between those coming into and those leaving the EU — was 539,000 in 2013, about 0.1 per cent of the total population. Net immigration was higher in 2010, when it stood at 750,000. The UN refugee agency (UNHCR) puts the number of refugees and migrants who crossed the Mediterranean at 300,000 between January and August, compared with 219,000 for the whole of 2014. If you extrapolate this year’s number to the whole of 2015, you get to around 450,000, an extra 230,000 people compared with last year. These numbers do not capture the whole story: many immigrants, from Syria in particular, use land routes. Net immigration this year may thus well end up being the highest in recent years, but still tiny compared with the EU’s total population.

Net immigration including refugees is clearly rising. Still, this is not an immigration crisis. It is a collective action crisis. Its solution would be straightforward in the presence of a central authority empowered to take decisions. But this is not how the EU works. It works through co-ordination and harmonisation — through fiscal rules, banking regulation and neighbourhood policies. But none of them prevented the crisis, and none of them helps solve it. The problem was never a lack of rules or policies. It was the simple fact that certain things in life cannot just be co-ordinated. Nor are member states big enough to act on their own — not even Germany. Angela Merkel is, for once, on the right side of the argument. But Germany does not have the capacity to absorb all the EU immigrants.

[..] A quota system is far too crude, and politically as unsustainable as fiscal transfers between countries. Such policies breed resentment, and ultimately fail. In a quota system you do not kick cans down the road, but people.

The real alternative, in the long run, is not between co-ordination and mutualisation, but between separation and mutualisation. Those who support further European integration will be in a position to make a powerful argument that only the EU is in a position to solve the crises. The debate will not be about a transfer of power from the capitals to Brussels. It will be about whether we empower the EU with tasks that nobody else can handle and whether we give it the necessary financial resources. I fear this is not going to happen for a long time — for two reasons. The less important one is that the likes of Mr Orban will be among those to take the decision. The deeper reason is that Europeans are not yet desperate enough to accept the Logic of Collective Action, the title of Olson’s 1965 book.

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Lost.

Hollande Readies Syria Air Strikes as Response to Refugee Crisis (Bloomberg)

France is preparing for air strikes in Syria as President Francois Hollande seeks ways both to stem a flood of refugees from the Middle East into Europe and grapple with the threat of terrorism. “I’ve asked the minister of defense to begin reconnaissance flights over Syria from tomorrow that would allow for strikes against the Islamic State,” Hollande said at a press conference in Paris on Monday. Hollande, who ruled out sending troops, said Syrian leader Bashar al-Assad is an impediment to peace in the country. Hollande is seeking a response to Europe’s biggest refugee crisis since World War II in tune with public opinion that remains largely hostile to a massive increase in immigration. German Chancellor Angela Merkel announced €6 billion to help the thousands of migrants pouring into the country.

Hollande said today that France will accept 24,000 refugees over two years. He estimates that there are 60,000 asylum seekers in France in 2015. France has warplanes in Abu Dhabi and at a Jordanian air force base. “These will be reconnaissance and intelligence flights,” Hollande said. “We want to know where the training and command sites are.” Hollande also called for “massive” aid to support camps in countries neighboring Syria so that refugees can stay as close as possible to home. “Let’s face reality,” he said. There are four million refugees in camps in countries such as Jordan and Turkey and “if we want to avoid an exodus, what we have to do is supply massive aid” so that “these people can stay as close as possible to the country from which they are fleeing.”

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Is this what the empire of evil looks like?

US Revamping Rebel Force Fighting ISIS in Syria (NY Times)

In an acknowledgment of severe shortcomings in its effort to create a force of moderate rebels to battle the Islamic State in Syria, the Pentagon is drawing up plans to significantly revamp the program by dropping larger numbers of fighters into safer zones as well as providing better intelligence and improving their combat skills. The proposed changes come after a Syrian affiliate of Al Qaeda attacked, in late July, many of the first 54 Syrian graduates of the military’s training program and the rebel unit they came from. A day before the attack, two leaders of the American-backed group and several of its fighters were captured. The encounter revealed several glaring deficiencies in the program, according to classified assessments: The rebels were ill-prepared for an enemy attack and were sent back into Syria in too small numbers.

They had no local support from the population and had poor intelligence about their foes. They returned to Syria during the Eid holiday, and many were allowed to go on leave to visit relatives, some in refugee camps in Turkey — and these movements likely tipped off adversaries to their mission. Others could not return because border crossings were closed. The classified options now circulating at senior levels of the Pentagon include enlarging the size of the groups of trained rebels sent back into Syria, shifting the location of the deployments to ensure local support, and improving intelligence provided to the fighters. No decisions have been made on specific proposals, according to four senior Defense Department and Obama administration officials briefed on the matter, who spoke on condition of anonymity to discuss confidential planning.

“As with any difficult endeavor, we expected setbacks and successes, and we must be realistic with those expectations,” Capt. Chris Connolly, a spokesman for the American military task force training the Syrian rebels, said. “We knew this mission was going to be difficult from the very beginning.” The Pentagon effort to salvage its flailing training program in Turkey and Jordan comes as the world is fixated on the plight of thousands of refugees seeking safety in Europe from strife in the Middle East, including many fleeing violence of the Syrian civil war and oppression in areas under the control of the Islamic State, also known as ISIS. Officials in Washington and European capitals acknowledge that halting this mass migration requires a comprehensive international effort to bring peace and stability to areas that those refugees are now fleeing.

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Got to give them one thing: they’re impervious to shame, even embarrassment.

Europe Seeks UN Blessing to Confront Human Smugglers in the Mediterranean (Lynch)

Straining to contain their worst migration crisis in generations, European powers have begun laying the groundwork for the passage of a U.N. Security Council resolution authorizing the boarding and interception of people-smuggling ships in the Mediterranean Sea. The effort, which is being led by Britain, is aimed at stemming the exodus of hundreds of thousands of Middle Eastern and African migrants and refugees seeking to reach Europe on rickety boats from Libya, a primary transit point on the illicit human smuggling trade. Britain is hoping to see the resolution adopted before world leaders arrive in New York later this month for the start of the U.N.’s annual General Assembly debate. It has begun circulating key elements of a resolution with key Security Council members.

The diplomatic push comes at a time when Britain and other European governments have come under criticism for doing too little to absorb the waves of migrants fleeing Syria, Libya, and other Middle Eastern and African countries. Thousands of migrants have died making the dangerous boat rides to European shores, and the photograph of a drowned toddler named Aylan Kurdi stirred worldwide outrage last week. One senior European ambassador said it was Europe’s worst crisis since World War II.

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A few still do have a heart.

‘Stop Bombing, Start Resettling’: Former PM’s Plea To Australia (SMH)

Former Liberal premier Jeff Kennett has launched a blistering attack on the Federal Parliament saying the lack of national leadership is failing voters and the question of welcoming tens of thousands of refugees from Syria into Australia should not even be up for debate. Hailing Australia as a great country built on successive waves of immigration since 1788, Mr Kennett called on the federal government to quit plans to bomb Syria and spend the money on processing refugees for resettlement in Australia instead. “This country is a country that has always had its arms open wide. What I see this with this latest discussion, which is based on humanitarian grounds, is actually a wonderful opportunity for us to take over the next three years 50,000 people who are displaced of their freedoms,” he said.

He said instead of constantly looking to raise taxes, state and federal leaders should seize the opportunity of boosting the population with traditionally hard-working migrants as a different way of expanding the economy. “This shouldn’t be requiring much debate,” he said. The former Victorian leader said it was up to political leaders to stare down bigots who oppose any mass migration because of their religious beliefs or claims they not fleeing persecution. Liberal Senator Cory Bernardi is being branded an “embarrassment” for saying the toddler Aylan Kurdi, pictured drowned on a Turkish beach, was not a legitimate refugee.

“There will be always be people who oppose, and there are always going to be some bigots, but leadership rises above it and the Australian public is desperately crying out for leadership,” Mr Kennett said. “The Federal Parliament has failed, absolutely failed, the people of this country for a decade,” a passionate Mr Kennett told Fairfax Media.

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A bit much throwing around of labels for my taste, but certainly worth a read.

How Neocons Destabilized Europe (Robert Parry)

The refugee chaos that is now pushing deep into Europe – dramatized by gut-wrenching photos of Syrian toddler Aylan Kurdi whose body washed up on a beach in Turkey – started with the cavalier ambitions of American neocons and their liberal-interventionist sidekicks who planned to remake the Middle East and other parts of the world through “regime change.” Instead of the promised wonders of “democracy promotion” and “human rights,” what these “anti-realists” have accomplished is to spread death, destruction and destabilization across the Middle East and parts of Africa and now into Ukraine and the heart of Europe. Yet, since these neocon forces still control the Official Narrative, their explanations get top billing – such as that there hasn’t been enough “regime change.”

For instance, The Washington Post’s neocon editorial page editor Fred Hiatt on Monday blamed “realists” for the cascading catastrophes. Hiatt castigated them and President Barack Obama for not intervening more aggressively in Syria to depose President Bashar al-Assad, a longtime neocon target for “regime change.” But the truth is that this accelerating spread of human suffering can be traced back directly to the unchecked influence of the neocons and their liberal fellow-travelers who have resisted political compromise and, in the case of Syria, blocked any realistic efforts to work out a power-sharing agreement between Assad and his political opponents, those who are not terrorists.

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We just never knew how developed Syria was before our ‘leaders’ instigated the fighting.

Syrian Refugees In Hungary: ‘This Is The So-Called Developed Europe?’ (Guardian)

In a field 500 metres north of Hungary’s border with Serbia, Mouti, a 50-year-old oil engineer, points at the muddy field around him. Several hundred mostly Syrian refugees have been camped here overnight, surrounded by a thin blue circle of Hungarian policemen. They’ve slept in the cold, if they’ve slept at all. A man lies unconscious, roused only by a splash of water. Mothers rock their babies, looking miserable. “This is the so-called developed Europe?” asks Mouti. “It’s supposed to be different to the fucking Arab world.” After the euphoria of Germany welcoming a few thousand refugees from Hungary over the weekend, reality has bitten. Just as thousands left Hungary by its north-western border, thousands more refugees are arriving by its southern one.

And many of them are being forced to camp in this field, while the Hungarian authorities wait for space to free up in reception centres across the country. Mouti and his friend Fadi, an auditor, have come all the way from Deir Ezzor, a town contested by both Islamic State and the Syrian regime. “Both of them are bombing each other,” he says, “and we were stuck in the middle.” Twenty-five days later, they’ve arrived in the EU – but it doesn’t feel much better. They are surrounded by a line of policemen and their eight children are getting sick. Fadi’s brood includes an eight-month-old son, and two boys, aged four and five. They all have colds after being forced to stay here overnight.

“We’re coming from Daesh,” says Fadi, using the pejorative Arab term for Isis, “and this is how Europe treats us?” To underline the point, a group of protesting refugees have held up a sign that reads “Daesh = Hungary”, and some of them are chanting: “Freedom”. It’s just like the situation in Syria, smiles Shoukry, a steelworker from Aleppo. Even in such a depressing situation, there is time for a bit of gallows humour.

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“David Cameron has highly developed skills in the art of following where he should be leading.” All European ‘leaders’ possess those skills.

Cameron’s Offer Of 20,000 Syrian Refugees Over 5 Years Is Derisory (Ashdown)

David Cameron has highly developed skills in the art of following where he should be leading. And so, after being taught an excruciating lesson in compassion, decency and leadership by Angela Merkel, and sensing himself behind opinion again, he has produced a plan to take in 20,000 refugees – over five years. Nothing better shows the PM’s tone deafness to the urgency of the situation than to announce this headline figure, and then add that it will take five years to implement. Not only is this response calibrated more by political expediency than compassion, he has also indicated he believes the answer to the problem is more bombing. If the best part of two years of bombing with more than enough high explosive hasn’t solved this problem, how would Britain’s widow’s mite of a few extra bombs help?

Military strikes against Isis are failing, not because we do not have enough high explosive, but because we do not have a diplomatic strategy on Syria that would make sense of the military action. But let us first consider Cameron’s refugee “plan”. Not only is he offering a derisory number of places for refugees, but the prime minister chooses to help those who are already safely housed and fed in refugee camps outside Europe, rather than those who suffer (and die too) for want of these things inside Europe. Could it be that the toxic term here is not “suffering”, but “inside Europe”, because of the effect these words have on his backbench Europhobes? If so then – irony of ironies – the desperate and the destitute tramping towards us on the dusty roads of the Balkans are hostages to Cameron’s headbangers, just as he is.

And how will we measure the success of this plan? Not by how much it assuages the suffering of those fleeing from the Syrian battlefields, obviously – for it is in no way aimed at them. By its effect on reducing the number fleeing, then? But it won’t do that either. Cameron seems to think that seeking asylum is like going to the theatre: one only does it if one has a ticket for a seat Then consider this. Cameron tells us that not helping those in flimsy boats struggling to Europe will reduce the temptation for others to take this “lethal journey”. This is exactly the same inhuman logic that government ministers gave us last Christmas when they insisted (albeit at Europe’s behest) that not saving drowning refugees in the Mediterranean was the best way to stop others following them. Hundreds had to drown before we finally saw that this immoral policy didn’t work. Do we really have to learn that lesson again?

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Angela’s in a tough spot now that she single-handedly created for herself. She’s right on one thing though: “What we are now experiencing is something that will change our country in the coming years.”

Merkel Channels Bank Rescue as Germany Plans Refugee Fund (Bloomberg)

German Chancellor Angela Merkel announced plans to spend an extra €6 billion on refugees next year as thousands more migrants poured into the country over the weekend. Merkel said on Monday that Germany will add €3 billion to the 2016 federal budget and provide another €3 billion to states and municipalities to tackle Europe’s biggest refugee crisis since World War II. The chancellor said “it’s not entirely implausible” that Germany will spend an extra €10 billion in total next year to handle the influx. “We know that we were quick to save the banks,” Merkel said in Berlin. “I think we need to be just as quick in taking the necessary measures to ease the burden on the municipalities and states. What we are now experiencing is something that will change our country in the coming years.”

The plans for added funding comes as Germany and Austria spar with Hungary over the handling of refugees, with Hungary following a more hard-line approach to deter refugees. Austrian Chancellor Werner Faymann said on Sunday that his country will end emergency measures that allowed the passage of thousands of migrants over the weekend from Hungary without registering. “I can’t repeat our message to migrants often enough: ‘Please don’t come because we won’t let you through,’” Hungarian Prime Minister Viktor Orban said in Budapest on Monday. “New laws passed by parliament will change our border defense system. Illegal border crossing will automatically trigger imprisonment or expulsion.”

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Juncker’s big plan: resettling 160,000 refugees. Germany’s reality: 100,000 refugees entered the country just in the past month.

Hit By New Wave Of Refugees, Germany Warns EU Partners (Reuters)

Struggling to cope with record numbers of asylum seekers, Germany told its European partners on Monday they too must take in more refugees, as police in Hungary used pepper spray on desperate migrants who broke out of a reception center at the border. Chancellor Angela Merkel, speaking after a weekend in which 20,000 migrants entered Germany from Hungary by train, bus and on foot, described the influx as “breathtaking” and tried to reassure German citizens that the crisis was manageable. “I am happy that Germany has become a country that many people outside of Germany now associate with hope,” she said at a news conference in Berlin.

But she and her vice chancellor, Sigmar Gabriel, coupled their message of optimism with a warning to EU partners who have resisted a push from Berlin, Paris and Brussels to agree quotas for refugees flowing in mainly from Syria, Iraq and Afghanistan. “What isn’t acceptable in my view is that some people are saying this has nothing to do with them,” Merkel said. “This won’t work in the long run. There will be consequences although we don’t want that.” Gabriel said that if countries in eastern Europe and elsewhere continued to resist accepting their fair share of refugees, the bloc’s open border regime, known as Schengen, would be at risk. “This would be a dramatic political blow for Europe, but also a heavy economic blow, also for those countries that are saying they don’t want to help now,” he said.

[..] Only months after Europe narrowly averted a Greek exit from the euro zone, the refugee crisis has emerged as the bloc’s biggest challenge. European Commission President Jean-Claude Juncker is due to unveil new proposals on Wednesday on how to distribute refugees among member states. An EU source told Reuters that under his plan, Germany would take on more than 40,000 and France 30,000 of the 160,000 asylum seekers the Commission says need to be relocated from Italy, Greece and Hungary, the main entry points to the EU for refugees arriving by sea and land.

The 160,000 that Juncker wants to redistribute within the EU are just a fraction of the hundreds of thousands of refugees and economic migrants from Asia, Africa and the Middle East who have reached Europe this year on leaky boats across the Mediterranean or over land through the Balkan peninsula. Germany has announced it is letting Syrians seek asylum regardless of where they enter the EU, suspending normal rules and accelerating a flow of migrants north and west from the edges of the bloc. Just last month, more than 100,000 asylum seekers reached Germany, which is preparing for 800,000 this year, around 1% of its population, a move with little precedent for a large Western country.

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Sweden expects fewer refugees this year than last? Good luck with that.

Sweden’s PM Chides Europe’s Leaders as Refugee Crisis Deepens (Bloomberg)

Swedish Prime Minister Stefan Loefven said the rest of Europe needs to take more responsibility as his country and Germany continue to bear the heaviest burdens in absorbing refugees fleeing crisis. The European Union needs to replace today’s voluntary system with a permanent and mandatory redistribution mechanism to tackle refugee disasters, Loefven told reporters in Stockholm on Monday. The bloc should consider raising the United Nations quota for refugees it accepts to 100,000 from 20,000, he said. “We’re in the middle of an international refugee crisis,” he said. “We also have a European crisis, but I would say that Europe’s crisis isn’t a refugee crisis, it’s a responsibility crisis.” Loefven will discuss the proposals with German Chancellor Angela Merkel in Berlin on Tuesday.

The two are the biggest recipients in the EU of asylum seekers from Syria, accepting about 50%, according to Loefven. Together with three other EU nations, they have taken about 75% of all asylum requests. That’s not sustainable and needs to change, Loefven said. Changes are needed to the Dublin Regulation, which sets the criteria for dealing with asylum seekers, and new safe and legal ways are necessary to bring refugees into the EU, he said. The conflict in Syria, which erupted after the 2011 uprising against President Bashar al-Assad, has displaced more than 6 million people internally and sent more than 4 million registered refugees to other countries, according to the UN.

“Sweden is one of the few countries that has had, and will continue to show, solidarity in its refugee policy,” Loefven said. It’s concerning that there are still countries such as Hungary that are trying to escape their responsibility, he said. A combination of longer processing times, a lack of housing and jobs and stricter border controls in other EU countries is expected to lead to a drop in the number of asylum seekers to Sweden this year. About 74,000 are expected, compared with 81,000 in 2014. Costs are seen rising to about 17 billion kronor ($2 billion) this year and to 19.8 billion kronor in 2016 from about 13 billion kronor in 2014, the Swedish National Financial Management Authority said last week.

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Haven’t seen any news of payments for refugee care from Brussels to Athens having been completed. Just lip service.

At Least 10,000 Migrants To Be Ferried To Mainland Greece In Next 5 Days (AP)

Greece’s migration minister has said at least two-thirds of the estimated 15,000-18,000 refugees and economic migrants stranded in “miserable” conditions on the eastern Aegean island of Lesvos will be ferried to the mainland in the next five days. Giannis Mouzalas told state ERT1 TV extra ferries were laid on Monday to transport the migrants, while some ships will serve as temporary screening and reception centers. Lesvos bears the brunt of the refugee influx, with more than 1,000 arriving daily on frail boats from nearby Turkey. Most remain stuck there for days, sleeping outdoors until they can be identified, and then find berths on crowded ferries to the mainland. Greece’s caretaker government, appointed ahead of elections Sept. 20, has set the problem as its main priority, significantly improving its predecessors’ stumbling efforts to deal with the influx.

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Oil just falls. Guessing at the reason is not helping.

Oil Falls More Than 3% On Oversupply, China Equity Losses (Reuters)

Oil fell more than 3% on Monday, hit by weaker Chinese equities and record North Sea crude production data that added to global oversupply concerns. China’s main indexes closed down on Monday as investors sold shares in the aftermath of a four-day market holiday, during which further restrictions on futures trading were announced. “Oil is only taking its cues from China,” SEB chief commodity analyst Bjarne Schieldrop said. “The price is taking little notice of constructive data like stronger (European) equities, stronger base metals and last Friday’s fall in U.S. rig count,” he said. Oil has fallen almost 60% since June 2014 on a global supply glut, with prices seesawing in recent weeks as concerns about a slowing Chinese economy caused turmoil in global stock markets.

“For commodities, the key demand-side figure to care about is not China’s GDP growing at 7% instead of 9 or 10%, it is the manufacturing price index, which has been falling for more than 40 months in a row,” JBC Energy said. OPEC is producing close to record volumes to squeeze out competition, especially from U.S. shale producers, which have so far weathered the price plunges to keep pumping oil. Saudi Arabia is set to maintain output at around 10.2 million to 10.3 million barrels per day, near this summer’s record high, in the fourth quarter as rising refinery demand offsets lower local use for power, according to industry sources. “The focus is shifting back to the still-high oversupply,” Commerzbank senior oil analyst Carsten Fritsch said.

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Peanuts.

US Shale Oil Industry Hit By $30 Billion Outflows

US shale producers reported a cash outflow of more than $30bn in the first half of the year, in a sign of the challenges facing the US’s once-booming industry as the slump in oil prices begins to take effect. The shortfall points to a rise in bankruptcies and restructurings in the US shale oil industry, which has expanded rapidly in the past seven years but has never covered its capital expenditure from its cash flow. Capital spending by listed US independent oil and gas companies exceeded their cash from operations by about $32bn in the six months to June, approaching the deficit of $37.7bn reported for the whole of 2014, according to data from Factset, an information service.

US oil production fell in May and June, according to the US Energy Information Administration, and some analysts expect it to continue falling as financial constraints limit companies’ ability to drill and complete new wells. Companies have sold shares and assets and borrowed cash to increase production and add to their reserves. The aggregate net debt of US oil and gas production companies more than doubled from $81bn at the end of 2010 to $169bn by this June, according to Factset. Terry Marshall of Moody’s, the rating agency, said: “The capital markets have been so strong and so open for these companies that a lot of them were able to raise a lot of debt.” Capital markets have remained open for US oil and gas companies despite the crude price more than halving in the past year.

However, there are now signs that the flow of capital is slowing. US exploration and production companies sold $10.8bn of shares in the first quarter of the year, but that dropped to $3.7bn in the second quarter and under $1bn in July and August, according to Dealogic. Similarly, those companies were selling an average of $6.5bn worth of bonds every month in the first half of the year, but the total for July and August was just $1.7bn. The next hurdle facing many US oil companies is the resetting of their borrowing base: the valuation of their oil and gas reserves that banks use to determine how much they will lend.

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Greece should never accept this, no matter what happens next.

A Dutchman ‘In Control’ Of The Greek Government (Enikos)

Dutch commissar Maarten Verwey will be the head of the Task Force for Greece and will have direct access to the Prime Minister’s office, says the leading report in financial weekly Agora. The Greek government will be placed under the strict supervision of Brussels to ensure that all agreed reforms will be implemented, says the report. Verwey, the Director General of the European Commission, will head a 20-member Task Force, which will essentially write the bills for almost all areas of government policy, from corporate income tax and labour market policy to the health and welfare system.

“Verwey’s team” will have close cooperation with the troika and will prepare interim reports during the evaluation of the economy. It could also seek the assistance of the IMF, fulfilling therefore the will of the German side for the engagement of the Fund in the third memorandum. The paper says that indicative of the power entrusted on the Task Force is the fact that Verwey will have a direct line of communication with the Prime Minister’s office, in accordance with the wishes of Jean-Claude Juncker.

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Perversity written large.

Writing Down €4.7 Billion In Bonds May Cost Greece €49 Billion (Bloomberg)

Writing down €4.7 billion of privately held senior bonds to help fix Greek lenders may cost the nation €49 billion. Banks may only be able to bail in the privately held bonds if they do the same to state-guaranteed notes used as collateral for European Central Bank loans. That would potentially hand the Greek government a €49 billion obligation, even as it struggles to pay pensions and civil-service wages. Excluding the state-backed notes, also called phantom bonds, from a bail-in could lead to lawsuits from private investors. “One potential target for aggrieved private bondholders being bailed in would be the senior phantom bonds if they were not equally bailed in,” said Michael Doran, a partner at law firm White & Case.

“That creates a dilemma, as on its face, a bail-in of these bonds could trigger the sovereign guarantee, which would then leave the Greek state with a significant and perhaps unexpected liability.” Euro-area finance ministers have suggested bailing in senior bank bonds to help refinance lenders after Greece’s economic crisis spurred bad loans, deposit withdrawals and cash shortages. Policy makers have pledged to make as much as €25 billion available to support the recapitalization. Writing down the senior bonds as part of a bailout is a possible option following the completion of ECB stress tests and an asset-quality review next month. Alternatives for filling capital shortfalls include private offerings and European aid. The Greek government may also reach a deal that voids the guarantees and shields the ECB from losses.

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China simply labels its recession a ‘transition’ or a ‘shift’… And the WSJ helps. Wanna bet the mill in the article would still be open if only there were buyers? China’s reality is it has overproduced and overinvested for years, and now it can no longer keep that up.

China’s Shift Away From Industry Drains Life From a Steel Town (WSJ)

For as long as Deng Wanyin could remember, the sprawling steel mill in the outskirts of this city has been a part of his life. The 42-year-old forged steel pipes here, as his father had before him. He met his wife in the apartments the state-owned mill provided to house its workers. Their daughter was raised in the mill’s schools. One day in late March, notice came that the mill was shutting down. “When I heard the news, all I felt was an expanse of emptiness,” Mr. Deng said. “I never imagined that this would happen.” The closing of the Pangang Chengdu Steel & Vanadium Co. is leaving Mr. Deng on the sharp edge of China’s juddering economic slowdown that is unsettling global markets.

About 16,000 workers have been given buyouts, upending long-entrenched livelihoods centered on the mill, known locally as Panchenggang, after 57 years in operation. With the mill silent, the sound that dominates the area of faded shophouses and hulking apartment complexes these days is the din of crickets, rising and falling against Sichuan province’s lush greenery. The smog that used to blanket the area has thinned out, and the sharp odor of ammonia from nearby chemical factories, also closed, is gone. The uprooting of company towns is part of a painful transition as the heavy industries that for decades powered China’s rise fade amid falling demand and overinvestment. The government is trying to shift the giant economy to a new track built on consumer spending, services and technology-driven manufacturing.

Fears that the shift is proving trickier than Beijing can handle undermined the confidence of investors world-wide that China would soon re-emerge as a source of global growth. Growth in industrial production continued to sputter in July, falling to 6%, compared with more than 23% in the heyday of growth a decade ago, and the target of 7% GDP growth this year would be China’s slowest in about a quarter century.

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Podemos must watch out, and speak much louder. It must show how much the government’s numbers are being manipulated, or it will lose badly.

Thomas Piketty To Advise Spain’s Anti-Austerity Party Podemos (Guardian)

The French economist Thomas Piketty, famous for his controversial book on wealth and inequality, is to advise Spain’s anti-austerity party Podemos. The author of Capital in the Twenty-First Century has agreed to join an international committee of experts that will advise Podemos on its economic programme as the party prepares to fight its first general election in December. Piketty will work with the leftwing party on developing policies to combat inequality, the theme of his bestselling 2013 book, and on measures to democratise the eurozone, Podemos said in a statement on Monday. Frustration with economic crisis, austerity and corruption in high places has fed the rise of new Spanish parties such as Podemos, which translates as “we can” and the centrist Ciudadanos (“citizens”), which are challenging the ruling rightwing People’s party and the opposition Socialists.

Podemos, which was formed last year, and Ciudadanos performed strongly in local and regional elections in May, at the expense of the two traditional parties and particularly the People’s party. Recent polls, however, suggest that support for the new parties may have peaked as the economy improves. A poll last month showed the People’s party with a clear lead over its rivals in a fragmented political landscape, but far short of the majority needed to govern alone. It showed the People’s party with 28.2%, the Socialists on 24.9%, both up from the previous poll, while Podemos and Ciudadanos had lost ground, with 15.7% and 11.1% respectively.

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Aug 102015
 
 August 10, 2015  Posted by at 11:25 am Finance Tagged with: , , , , , , , ,  


NPC Congressman John C. Schafer of Wisconsin 1924

Why Commodities Are Dying The Death Of 1,000 Cuts (CNBC)
The Canaries Continue To Drop Like Flies (Mark St.Cyr)
China’s Hard Landing Suddenly Gets a Lot Rougher (WolfStreet)
Quantitative Easing With Chinese Characteristics Takes Shape (Bloomberg)
China Slashes U.S. Debt Stake by $180 Billion – and Bonds Shrug (Bloomberg)
The Monetary Superpower Strikes Again (David Beckworth)
Greece Hopes to End Bailout Talks by Tuesday (Bloomberg)
Finland Throws Support Behind Greek Bailout It Says Won’t Work (Bloomberg)
Berlln Faces Isolation As Athens And Creditors Near €86 Billion Accord (FT)
Democracy At The Heart Of Fight For Greece (FT)
Analysis: Varoufakis Vs Media Manipulation (Press Project)
Portugal Cautioned By IMF Over Debt Sustainability (FT)
In Southern Europe, Bank Share Sales Can Hit Depositors Hard (WSJ)
Scotland To Issue Formal Ban On GMO Crops (Guardian)
Good For Migrants, Good For Britain (Philippe Legrain)
‘Marauding’ Migrants Threaten Standard Of Living: Foreign Secretary (Guardian)
Germany Has a Refugee Problem, and the Problem Is the Germans (FP)

“..Carlyle Group saw the holdings of a commodities fund it owns plummet from $2 billion to $50 million, due to bullish bets on a host of commodities.”

Why Commodities Are Dying The Death Of 1,000 Cuts (CNBC)

Commodities are the gift that keep on not giving. The sector is in the throes of an ‘annus horribilis’, having gotten wrecked over the past few years despite massive liquidity that should have boosted their value. Bullish investor after bullish investor has tried to call a bottom, in a set of calls that now appear ill-conceived and money losing. In the past week, the S&P GSCI Commodity Index has dropped 3.4 in the past week, as crude oil plunged 7% to hit multi-month lows, and a host of metals fell alongside it. That, of course, hardly marks the first big drop for the alternative investment group. That widely watched commodity index has fallen 17% the last three months, and a whopping 42% in the past two years. It’s not just an energy issue, either.

Copper, platinum, lumber, coffee, sugar, wheat, oats and lean hogs are all down double-digit percentages this year. While each specific commodity obviously responds to its own distinct supply-and-demand dynamics, a few fundamental factors appear to be weighing on commodities as a whole. First of all, the U.S. dollar has risen nearly 8% this year against a basket of major currencies, and has rediscovered some of its strength in the past three months. A strong dollar tends to be bad for commodities, as it should mean that it takes fewer dollars to buy the same amount of a given fixed asset. And in fact, many investors bought commodities to get protection from a Federal Reserve stimulus-stoked rise in inflation that never came.

As the Fed ended its QE program—and now appears months away from raising rates—what now appears to have been a massive bubble in commodities like gold has slowly popped. But Fed fears didn’t form the only bull case for commodities. Others maintained that the global economy would heat up, leading to greater demand for industrial commodities like oil and copper. Instead, Europe has been a mess, and that great commodity consumer China has seen its economy continue to slow. The losses in the complex have been dramatic indeed. The Astenbeck commodities fund managed by famed trader Andy Hall tumbled 17% in July. And the WSJ said last week that private equity firm Carlyle Group saw the holdings of a commodities fund it owns plummet from $2 billion to $50 million, due to bullish bets on a host of commodities.

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“That was not a “canary” but rather a “dodo.”

The Canaries Continue To Drop Like Flies (Mark St.Cyr)

One would think as “canary” after “canary” falls silent either sickened with laryngitis, or worse – completely comatose, that those on Wall Street as well as the financial media itself would not only have seen, but heard, many of the warning calls that have been obvious for quite some time. Yet, history always shows; not only do they not see, but more often than not – they don’t want to see, nor hear the warning calls. Even when all the warning signs are screaming danger – not only are they ignored, they’re explained away as if those which saw or heard them, should be ignored as they’ll contend not only did one not see; but couldn’t see. What they’ll propose is: “That was not a “canary” but rather a “dodo.” After all, with a Fed that’s as interactive as this one currently is, surely what they believe they heard, or saw is impossible.

For people say they’ve spotted warning signs in these ‘markets’ for years, and none have yet produced a crisis because – they’re now extinct!” Yet, the wheezing sounds of many a Wall Street songbird has been apparent for quite a while. Again: If only one would care to look or listen. Back in April of 2014 in an article titled “The Scarlet Absence Of A Letter of Credit” I opined a few scenarios as to why this seemingly dismissed revelation by the so-called “smart crowd” should not go unnoticed. For the implications may very well portend far greater reasons too worry in the coming future. Let’s not forget this is some 16 months ago. When the financial media et al were still reciting in unison the wonders to which, “China will be the economy that leads us out of this current malaise.”

“Over the last few years since the financial melt down of 2008, we have seen what many have believed are precursors that may tip the hand of markets as to show just how unhealthy this levitating act fueled by free money has become. And yes there are always false indicators, and we all know correlation doesn’t equal causation. And even more may shrug and think, “No letter of credit, so what.” However, if there were ever a canary in a coalmine worth noting this is one not to let one’s eyes to divert from.

The issue at hand is not just the foolishness of the absence contained in a one-off LOC gamble some company would take. Far from it. It’s the desperation that could be hidden that’s a precursor one has to watch for. For the amount of desperation, or the degree that might be hidden beneath the surface to which a commodity will be sent overseas to another country, a country for all intents and purposes is using that very product as a pseudo currency to back other financial obligations without the requisite document to be paid. Is mind numbingly dangerous in its implications in my view.”

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“..568 strikes and worker protests in the second quarter, raising this year’s tally to 1,218 incidents as of June..”

China’s Hard Landing Suddenly Gets a Lot Rougher (WolfStreet)

This has become a sign of the times: Foxconn, with 1.3 million employees the world’s largest contract electronics manufacturer, making gadgets for Apple and many others, and with mega-production facilities in China, inked a memorandum of understanding on Saturday under which it would invest $5 billion over the next five years in India! In part to alleviate the impact of soaring wages in China. Meanwhile in the city of Dongguan in China, workers at toy manufacturer Ever Force Toys & Electronics were protesting angrily, demanding three months of unpaid wages. The company, which supplied Mattel, had shut down and told workers on August 3 that it was insolvent. The protests ended on Thursday; local officials offered to come up with some of the money owed these 700 folks, and police put down the labor unrest by force.

These manufacturing plant shutdowns and claims of unpaid wages are percolating through the Chinese economy. The Wall Street Journal: The number of labor protests and strikes tracked on the mainland by China Labour Bulletin, a Hong Kong-based watchdog, more than doubled in the April-June quarter from a year earlier, partly fueled by factory closures and wage arrears in the manufacturing sector. The group logged 568 strikes and worker protests in the second quarter, raising this year’s tally to 1,218 incidents as of June, compared with 1,379 incidents recorded for all of last year. The manufacturing sector is responsible for much of China’s economic growth. It accounted for 31% of GDP, according to the World Bank. And a good part of this production is exported. But that plan has now been obviated by events.

Exports plunged 8.3% in July from a year ago, disappointing once again the soothsayers surveyed by Reuters that had predicted a 1% drop. Exports to Japan plunged 13%, to Europe 12.3%. And exports to the US, which is supposed to pull the world economy out of its mire, fell 1.3%. So far this year, in yuan terms, exports are down 0.9% from the same period last year. As important as manufacturing is to China, this debacle is not exactly conducive to economic growth. The General Administration of Customs, which issued the report, added: “We could see relatively strong downward pressure on exports in the third quarter.”

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Qe with an extra step built in.

Quantitative Easing With Chinese Characteristics Takes Shape (Bloomberg)

China’s leaders are increasingly relying on the central bank to help implement government programs aimed at shoring up growth, in an adaptation of the quantitative easing policies executed by counterparts abroad. Rather than bankroll projects directly, the People’s Bank of China is pumping funds into state lenders known as policy banks to finance government-backed programs. Instead of buying shares to prop up a faltering stock market, it’s aiding a government fund that’s seeking to stabilize prices. And instead of purchasing municipal bonds in the market, it’s accepting such notes as collateral and encouraging banks to buy the debt.

QE – a monetary policy tool first deployed in modern times by Japan a decade and a half ago and since adopted by the U.S. and Europe – is being echoed in China as Premier Li Keqiang seeks to cushion a slowdown without full-blooded monetary easing that would risk spurring yet another debt surge. While the official line is a firm “no” to Federal Reserve-style QE, the PBOC is using its balance sheet as a backstop rather than a checkbook in efforts to target stimulus toward the real economy. “It’s Chinese-style quantitative easing,” said Shen Jianguang, chief Asia economist at Mizuho in Hong Kong. “But it’s not a direct central bank asset-purchase plan. China’s easing is indirect and more subtle compared with the U.S. or Japan.”[..]

While there’s been no public unveiling of the strategy, China’s leaders are putting in place plans for the central bank to finance, indirectly, a fiscal stimulus program to put a floor under the nation’s slowdown. China will sell “special” financial bonds worth trillions of yuan to fund construction projects, and the PBOC will provide funds to state banks to buy the bonds, people familiar with the matter said this month. China Development Bank and the Agricultural Development Bank of China – known as policy banks because they carry out government objectives – will issue bonds, people told Bloomberg earlier.

The Postal Savings Bank of China will buy the debt, aided by liquidity from the central bank, according to one of the people. It’s unclear whether by taking on bonds as collateral and delivering cash in return the PBOC’s official balance sheet will expand. In the U.S., the euro region and Japan, central banks have bought securities outright in secondary markets, making the quantitative easing transparent on their books.

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Dollars flowing back home.

China Slashes U.S. Debt Stake by $180 Billion – and Bonds Shrug (Bloomberg)

To get a sense of how robust demand is for U.S. Treasuries, consider that China has reduced its holdings by about $180 billion and the market barely reacted. Benchmark 10-year yields fell 0.6 percentage point even though the largest foreign holder of U.S. debt pared its stake between March 2014 and May of this year, based on the most recent data available from the Treasury Department. That’s not the doomsday scenario portrayed by those who said the size of the holdings – which peaked at $1.65 trillion in 2014 – would leave the U.S. vulnerable to China’s whims. Instead, other sources of demand are filling the void. Regulations designed to prevent another financial crisis have caused banks and similar firms to stockpile highly rated assets.

Also, mutual funds have been scooping up government debt, flush with cash from savers who are wary of stocks and want an alternative to bank deposits that pay almost nothing. It all adds up to a market in fine fettle as the Federal Reserve moves closer to raising interest rates as soon as next month. “China may be stepping away, but there is such a deep and broad buyer base for Treasuries, particularly when you have times of uncertainty,” Brandon Swensen at RBC Global Asset Management said. America has relied on foreign buyers as the Treasury market swelled to $12.7 trillion in order to finance stimulus that helped pull the economy out of recession and bail out the banking system.

Overseas investors and official institutions hold $6.13 trillion of Treasuries, up from about $2 trillion in 2006, government data show. China was a particularly voracious participant, boosting its holdings from less than $350 billion as its economy boomed and the nation bought dollars to keep the yuan from soaring. Now, the Asian nation is stepping back as it raises money to support flagging growth and a crumbling stock market, and allows its currency to trade more freely. The latest update of Treasury data and estimates by strategists suggest that China controls $1.47 trillion of Treasuries. That includes about $200 billion held through Belgium, which Nomura says is home to Chinese custodial accounts.

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Da Fed.

The Monetary Superpower Strikes Again (David Beckworth)

China’s economy has been slowing down for the past few years and many observers are worried. The conventional wisdom for why this is happening is that China’s demographic problems, its credit binge, and the related malinvestment have all come home to roost. While there is a certain appeal to these arguments, there is another explanation that I was recently reminded of by Michael T. Darda and JP Koning: the Fed’s passive tightening of monetary policy is getting exported to China via its quasi-peg to the dollar. Or, as I would put it, the monetary superpower has struck again.

The Fed as a monetary superpower is based on the fact that it controls the world’s main reserve currency and many emerging markets are formally or informally pegged to dollar. Therefore, its monetary policy is exported across the globe and makes the other two monetary powers, the ECB and Japan, mindful of U.S. monetary policy lest their currencies becomes too expensive relative to the dollar. As as result, the Fed’s monetary policy also gets exported to some degree to Japan and the Euro. This understanding lead Chris Crowe and I to call the Fed a monetary superpower, and idea further developed by Collin Gray. Interestingly, Janet Yellen implicitly endorsed this idea in a 2010 speech:

For all practical purposes, Hong Kong delegated the determination of its monetary policy to the Federal Reserve through its unilateral decision in 1983 to peg the Hong Kong dollar to the U.S. dollar in an arrangement known as a currency board. As the economist Robert Mundell showed, this delegation arises because it is impossible for any country to simultaneously have a fixed exchange rate, completely open capital markets, and an independent monetary policy. One of these must go. In Hong Kong, the choice was to forgo an independent monetary policy.

The original context of the monetary superpower argument was that the Fed was exporting its easy monetary policy to the rest of the world in the early-to-mid 2000s. Now the argument is that its normalization of monetary policy is creating a passive tightening of monetary conditions for the rest of the world, especially the dollar peggers like China.

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And then the Troika can start stalling again.

Greece Hopes to End Bailout Talks by Tuesday (Bloomberg)

The Greek government is seeking to conclude talks on a rescue program by Tuesday, leaving enough time for national parliaments to assess the deal so funds can be disbursed for an Aug. 20 payment to the ECB. The four institutions representing Greece’s creditors – the ECB, the IMF, the EC and the European Stability Mechanism – made progress over the weekend on the details of a plan that would make as much as €86 billion available to Greece, according to three people with knowledge of the discussions. Officials are optimistic an agreement will be reached, allowing Greece’s parliament to pass any new required reforms in the middle of the week and paving the way for a meeting of euro-area finance ministers at the end of the week.

The indebted nation needs a quick release of about €20 billion to create a buffer for its banks and to make loan payments. “We are trying to make swift progress in order to have a deal preferably before the 20th of August so the disbursement can be made under the new ESM program,” EC spokeswoman Mina Andreeva told reporters on Aug. 7 in Brussels. Greece and its creditors still need to decide exactly how much money will be required for the bailout, which will be the nation’s third in five years, as well as what reforms will have to be concluded before any money is released, one of the people said. The headway comes as some members of the 19-nation common currency express skepticism that a deal can work.

Finnish Foreign Minister Timo Soini said over the weekend that his government is ready to discuss a new aid plan for Greece but that “we should admit that this isn’t going to work.” Last week, Hans Michelbach, a Bavarian lawmaker who has argued against a deal with Greece, said he didn’t believe a rescue program could be reached in time and other financing arrangements would be needed. Even as the European governments are racing to cinch an agreement before Greece needs to pay €3.2 billion to the ECB on Aug. 20, the situation isn’t as dire as it was earlier this summer; if the leaders fail to disburse the funds in time, Greece could still request a short-term loan from a European fund that has about €5 billion available.

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They have that in common with Tsipras. Just make sure to lay the blame where it belongs.

Finland Throws Support Behind Greek Bailout It Says Won’t Work (Bloomberg)

A third Greek bailout won’t work and will only prolong the difficulties plaguing the euro area, according to Finnish Foreign Minister Timo Soini. But his party, the euro-skeptic the Finns, is ready to discuss another rescue package because allowing Greece to fail would only add to Europe’s costs, he said. “Truth is the strongest force,” Soini said in an interview on Saturday. “We should admit that this isn’t going to work.” Soini shares the skepticism of Greece’s ruling Syriza party, which despite its opposition to further austerity measures, is seeking €86 billion in international loans to stay afloat. Greece is struggling to strike a deal with its creditors as €3.2 billion in debt to the ECB falls due on Aug. 20.

The Finns party, which in April became part of a ruling coalition for the first time, has no choice but to support a bailout since not doing so would cause the three-party government to collapse. That would only open the door for the left-wing opposition, Soini said. “I kept my party in the opposition for four years because of this subject,” he said. “But with this government structure we can’t block the program alone and we’d be replaced.” While Finland drove a hard bargain during Greece’s second bailout, it may no longer have the clout to block a deal. Finland has already made its 1.44 billion-euro contribution to the permanent European Stability Mechanism. Should Europe decide that the future of the euro zone is at stake, a bailout won’t require unanimous backing from members; 85% is enough.

Even without an imminent bailout agreement, a European fund deployed in July to help Greece clear arrears contains about €5 billion and could be tapped again for a bridge loan. According to Soini, bridge financing will do little to solve the long-term fiscal plight Greece faces. “This bridge funding isn’t going to be final solution,” he said. “There’s no solution for this particular problem that doesn’t cost Finnish taxpayers. If Greece collapsed and Grexit would be tomorrow’s reality, we would lose €3-4 billion more or less at once. So I hope that the EU and euro zone, that in due course, we can face the facts and say enough is enough and that we must do something else.”

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Replace Schäuble.

Berlln Faces Isolation As Athens And Creditors Near €86 Billion Accord (FT)

Greece and its creditors are close to reaching an outline deal this week on the debt-laden country’s €86bn rescue programme, amid signs of growing German isolation over its tough stance towards Athens. Significant concessions by Alexis Tsipras and his negotiators in the past month have encouraged other hawkish eurozone members such as Finland to break with Berlin, which wants to hold out longer to squeeze more reforms from Athens. Even previously sceptical EU diplomats now say that a full agreement could be reached by the August 20 deadline, when Athens must make a €3.2bn debt repayment to the ECB. The cautious optimism contrasts sharply with the acrimony at last month’s eurozone summit, which came close to ushering Greece out of the currency bloc before agreeing to negotiate a deal.

The main elements of the proposed deal include spending cuts, administrative reform and privatisations. Remaining sticking points between Athens and its creditors include details of a €50bn privatisation plan and proposals for raising the planned budget surplus, excluding debt interest, to 3.5 per cent of gross domestic product in 2018 from zero this year. Officials in Brussels said an early deal was “ambitious but feasible”. But they emphasised that while this was the “preferable” way forward, the option of a €5bn bridging loan to give negotiators more time, championed by Berlin, was still on the table. As often in the past, Greek officials were the most positive about the likelihood of a breakthrough, expressing confidence that an outline deal could come by Tuesday and be approved by the Athens parliament later this week, despite political divisions and public anger over the terms.

Eurogroup finance ministers would then meet on Friday to approve the deal, leaving time next week for national parliaments in Germany, and the other creditor countries which must vote on the plan, to do so before August 20. One Greek official said: ”If there aren’t any last-minute obstacles raised by our partners, we can wrap up a deal this week.” However, Germany, the biggest creditor, was late last week still holding out for more reforms from Athens, arguing that a two- or three-week bridging loan was better than hurriedly striking an inadequate three-year deal. Jens Spahn, deputy finance minister, tweeted on Friday: “It is better done thoroughly than hastily.” An EU official said that even if Wolfgang Schäuble, Berlin’s hawkish finance minister, dug in his heels, chancellor Angela Merkel would not want Berlin isolated.

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Didn’t we pass that point a while back?

Democracy At The Heart Of Fight For Greece (FT)

The biggest question raised by Syriza’s election victory last January was not about Greece. It was whether any national population that has adopted the euro can meaningfully express a democratic choice. This is a test case of the euro itself. If monetary union and democracy are incompatible, even the euro’s most committed friends need to choose the latter. Fortunately, they are not incompatible. But European policy is premised on the opposite view. Without a change in approach, it must lead to failure. The list of pressures on Greeks’ self-determination is uniquely long. It includes, first, the extraordinary micromanagement of policy by creditors.

Second, the shameless intervention in Greek elections by European leaders who both in 2012 and in 2015 made abundantly clear they wanted Greeks to re-elect the same discredited elites. Third, the huge efforts made to avoid any plebiscitary upset, or even support, of the eurozone’s policy programme. In November 2011, Angela Merkel, the German chancellor, and Nicolas Sarkozy, France’s then-president, bullied Prime Minister George Papandreou out of an attempt to establish Greek ownership of the second rescue loan (and the attached conditions) through a referendum. While the eurozone failed to scare Syriza off from holding a ballot this June, it was not for the lack of trying. Why this astonishingly prickly attitude to letting people make a choice?

The answer is as obvious as it is worrying: Europe’s leaders fear that the people will make the wrong choice. In Greece, opinion polls have been remarkably consistent about two things: most Greeks want to keep the euro as their currency, and most also reject the policies imposed by the creditor institutions previously known as the troika. That is what the “no” landslide this summer meant; and it is what Mr Papandreou’s referendum would also have shown had it not been aborted. It is the expression of this particular preference — keep the euro, but with different policies — that the eurozone political elite has done everything it can to prevent.

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Nice study. Translation could be better. The Press Project tries to give Greece an actual news outlet.

Analysis: Varoufakis Vs Media Manipulation (Press Project)

There comes a point in any crisis where we have to look at all the players involved and ask who ultimately is responsible, in other words, where does the buck stop? In the case of Greece it’s rather muddled, there are more villains than a Tarantino movie. But it appears that the former Finance minister, Yiannis Varoufakis, has found himself with the finger of blame pointing squarely at him. The “revelation” that Varoufakis had a contingency plan for Grexit after all has led to the filing of two lawsuits, one by the Mayor of Stylida and the other by the head of a new political party Teleia – which translates as ‘full-stop’ (yes really). At the moment Varoufakis is protected by political immunity and will not have to face trial unless the Greek Parliament decrees otherwise.

But as talk of ‘treason’ gains traction it’s important to remember what our frame of reference for all of these events is – the media. Everything we think we know about this crisis, every opinion we have formed and our knowledge of the people involved, including Varoufakis, starts with what we read and watch and how we then process that narrative or ‘story.’ It’s important to grasp that news narratives come with an array of potential variables that might influence how we see them, the cultural experiences of the author for example or the pre held-prejudices of the reader. The question then is how those involved, whether it’s the IMF, Greece or the EU, can push the public to accept their version of the narrative because capturing the public’s much coveted validation provides a cloak of legitimization for decisions.

The answer is media manipulation. The systematic warping of news narratives happens everyday almost everywhere. To demonstrate this we can start by doing what governments and institutions such as the EU do daily – analyze the media output. In the run-up to the Greek elections in January, when it was looking likely that Syriza would win, global news related to ‘corruption’ in Greece skyrocketed and has maintained relatively high levels until now. Yet, during the same period no major corruption scandals came to light. Syriza as a virgin government can claim to be untainted at that time. So why with the arrival of Syriza is there a corruption narrative flooding the airwaves and printing presses and sticking there? The media monitoring software reveals that this ‘corruption related to Greece’ news is present overwhelmingly in the IMF’s homeland – America. It’s important to point out here that stories starting in the US impact massively because they are regurgitated far and wide.

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Calling Troika!

Portugal Cautioned By IMF Over Debt Sustainability (FT)

Even if they had been compiled by his own spin-doctors, Portugal’s latest unemployment figures could hardly have been better for Pedro Passos Coelho, the country’s centre-right prime minister. The last batch of labour market numbers to be published before a general election in October showed the biggest quarterly drop in the country’s jobless rate for at least 17 years — falling by 1.8 percentage points in the second quarter to 11.9%. This is the lowest level since 2010, before painful austerity measures imposed under an international bailout saw unemployment soar to a record 17.5% in 2013.

Mr Passos Coelho’s ruling coalition welcomed the figures as “historic” – trumpeting them as proof that punishing spending cuts and tax increases have turned around a struggling economy and put Portugal definitively on a path towards export-led growth and sustained debt-reduction. But the day after the National Statistics Institute released the jobless figures last week, the euphoria was dashed by a series of sobering warnings from the IMF over the country’s heavy debt burden and a slackening pace of reform. Particularly stinging for the prime minister’s two-party coalition, which is neck-and-neck in the polls with the moderately anti-austerity opposition Socialists, was the IMF’s view that the government faced a “tangible risk” of failing to bring this year’s budget deficit below 3% of national output, as required under EU rules.

Government election pledges to ease austerity, partly by phasing out extraordinary tax charges introduced during the €78bn bailout, would have to be postponed or partially cancelled if insufficient spending cuts were put in place or revenues fell lower than forecast, the IMF warned. João Galamba, a Socialist politician, said that despite Mr Passos Coelho’s “long romance” with the IMF, the Fund’s latest assessment of the Portuguese economy showed that it no longer trusted the government’s forecasts and had been “surprised by its electioneering”.

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Why Spain still has bankcs that are going concerns?!

In Southern Europe, Bank Share Sales Can Hit Depositors Hard (WSJ)

When Spain’s Banco de Sabadell needed to raise nearly $2 billion for its takeover of a British bank this year, it instructed branch employees to sell shares directly to retail customers. One customer said his banker called him several times to entice him to purchase shares. Later, at the branch, the banker placed a 10-by-10-inch box of Nestlé chocolates next to a document and urged him to sign, ceding to Sabadell’s management the right to vote his shares at the annual meeting. The customer, who declined to be named, said he signed and took the chocolates. In southern Europe, which has a tradition of mutually owned or unlisted savings banks, it is a legal and long-standing practice for branch employees to sell stocks and bonds issued by the bank to people who have deposits and loans with the bank.

Sometimes, customers are encouraged to cede their shareholder voting rights to the bank, too. But the practice cost customers dearly during Europe’s financial crisis and is coming under fire anew as an inherent conflict of interest that prioritizes banks’ balance sheets over investors’ pocketbooks. In Portugal, clerks of the now collapsed Banco Espírito Santo sold €550 million ($603 million) in debt from the bank’s parent to retail customers in late 2013. The parent was already in trouble and has since gone bankrupt. Many clients have lost their entire savings. Spanish bank customers were saddled with around €3 billion of paper losses after they bought €7 billion of complex bonds from Banco Santander in 2007. Five years later, the bonds converted into shares that had plummeted in value.

Around 300,000 Bankia depositors also lost millions after they purchased shares in the lender’s ill-fated 2011 initial public offering. Bankia was bailed out in 2012. “The bank should always act in good faith and in the interest of the client,” said Fernando Herrero, spokesman for Spanish consumer association Adicae. But when a bank sells its own securities, he said, “the interest that is going to take priority is the bank’s interest in obtaining financing.”

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Might want to hold that next independence vote soon.

Scotland To Issue Formal Ban On GMO Crops (Guardian)

Scottish ministers are planning to formally ban genetically modified crops from being grown in Scotland, widening a policy divide with the Tory government in London. Ministers in Edinburgh are to apply to use recent EU powers which allow devolved administrations to opt out entirely from a more relaxed regime which is expected to see far more commercial use of GM crops around the EU. The move will reinforce a long-standing moratorium on planting GM crops in Scotland and allow the Scottish National party to further distance itself from the UK government.

Backed by agribusiness, scientific bodies and the National Farmers Union, ministers in London have already signalled that they plan to allow commercial cultivation of GM crops such as maize and oilseed rape in England, despite significant consumer resistance and opposition from environmental groups. The Scottish government announcement on Sunday was silent on whether this new legal power would extend to a ban on scientific and experimental research, but a spokeswoman confirmed that laboratory research on GMOs would continue. Scottish scientists, including those at the James Hutton Institute and the Rowett Institute, have taken a leading role in GM research. The Scottish government’s former chief scientific officer, Dame Anne Glover, who became the EC’s chief scientific adviser before the position was abolished, is a keen advocate of GM crops.[..]

Richard Dixon, director of Friends of the Earth Scotland, said: “The Scottish government has been making anti-GM noises for some time, but the new Tory government has been trying to take us in the direction of GM being used in the UK, so it is very good news that Scottish ministers are taking that stance. “If you are a whisky producer or breeding high-quality beef, you ought to be worried if you don’t want GM but it is going to come to a field near you and you were worried that there was going to be some contamination. It is certainly in Scotland’s interests to keep GM out of Scotland.”

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This has long ceased being a rational discussion. Not sure trying to make it one will fly.

Good For Migrants, Good For Britain (Philippe Legrain)

The chaos in Calais is a nightmare, not least for the 3,000 or so migrants scraping by in makeshift camps. It’s not fun for the 75,000 people of Calais either. And it’s a big disruption for British hauliers and holidaymakers who are delayed, and for people in Kent whose roads are jammed. With £200 billion worth of UK trade transiting between Dover and Calais each year, the Financial Times estimates that the lost trade, including wider costs such as retailers having to write off spoiled food and manufacturers not receiving crucial goods in time, amounts to (a surprisingly large) £250 million a day. Perhaps it would be cheaper to let the migrants come work here instead.

The poor people squatting in squalid conditions in the Jungle outside Calais have risked life and limb to get there from war-torn and repressive places such as Syria, Afghanistan and Eritrea. Now they are again risking death to try to reach Britain through the Channel Tunnel. Such brave, enterprising people are surely just the kind that an open, dynamic country would want to welcome. While the disruption they are causing is large, their numbers are small. The 3,000 in Calais are a tiny fraction of the 219,000 migrants who crossed the Mediterranean Sea to Europe last year. They pale into insignificance compared to the 1.2 million Syrian refugees in Lebanon (local population: 4.4 million). Overall, Britain received only 31,400 asylum applications last year – and most are rejected.

Sweden, with a seventh of our population, received 75,100. The total number of refugees in the UK at the end of 2014 was 117,161: 0.18% of the population. What attracts desperate people to Britain is not the measly benefits for asylum seekers. People don’t spend thousands of pounds risking their lives crossing the Mediterranean to get £36.95 a week in benefits. If welfare was their priority, they’d stay in France. Most asylum seekers wouldn’t need to claim benefits at all if they were allowed to work. But in a futile attempt to deter “economic migrants”, Britain bans asylum seekers from working.

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Not a rational discussion, but a sliding scale into dark days not unlik the 1930s.

‘Marauding’ Migrants Threaten Standard Of Living: Foreign Secretary (Guardian)

The foreign secretary, Philip Hammond, has weighed in to the debate over migration with some of the government’s strongest language yet, claiming millions of marauding African migrants pose a threat to the EU’s standard of living and social structure. Senior Labour figures responded by accusing Hammond of scaremongering after he claimed Europe “can’t protect itself” if it has to take in millions of migrants from Africa. Speaking to the BBC while visiting Singapore on Sunday, Hammond said: “The gap in standards of living between Europe and Africa means there will always be millions of Africans with the economic motivation to try to get to Europe.”

He said: “So long as there are large numbers of pretty desperate migrants marauding around the area, there always will be a threat to the tunnel security. We’ve got to resolve this problem ultimately by being able to return those who are not entitled to claim asylum back to their countries of origin.” Hammond said EU laws meant migrants could be “pretty confident” that after setting foot on EU soil they would not be returned to their country of origin. “Now that is not a sustainable situation because Europe can’t protect itself, preserve its standard of living and social infrastructure if it has to absorb millions of migrants from Africa.”

Three of the candidates to be Labour’s next leader condemned Hammond’s use of language. Shadow home secretary, Yvette Cooper, described it as “alarmist and unhelpful”, and Liz Kendall said there should be no place for dehumanising language in the debate. Jeremy Corbyn said Hammond’s comments were part of a pattern of language designed to whip up prejudice and hostility.

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Or do we think that sliding scale is scarier when it applies to Germany?

Germany Has a Refugee Problem, and the Problem Is the Germans (FP)

Anti-refugee sentiment has touched a nerve at a time when record numbers of people are seeking shelter in Germany. The government received nearly 203,000 asylum applications last year – more than twice as many as any other country in the EU.The government received nearly 203,000 asylum applications last year – more than twice as many as any other country in the EU. And that number is expected to double by the end of this year. Hundreds of thousands of people fleeing war and persecution, from Syria to Eritrea, are appealing to Berlin for protection. Many receive it. Of the more than 34,000 Syrians who submitted asylum applications in the first half of this year, only seven were denied permission to stay according to data from the Federal Office for Migration and Refugees.

That comes as the European Union is wrangling over a contentious plan to overhaul its immigration system. A recent proposal would see Europe distribute asylum-seekers according to a quota system, based on a country’s size, economy, and other factors. Britain and a host of Eastern European nations have refused. Germany, which stands to take in the most asylum-seekers under the new proposal (18.4%), supports the plan: It would help regulate how many migrants Berlin is expected to shelter as waves of asylum-seekers continue to arrive. Authorities here have been unprepared for the influx. Aydan Özoguz, the Federal Commissioner for Migration, Refugees and Integration, said the government has just approved 2,000 new positions to help work through a backlog of over 240,000 asylum applications.

The responsibility for housing refugees falls on states, and they have hastily arranged makeshift reception facilities in gyms and tents. Chancellor Angela Merkel’s government committed an additional 1 billion euros for support. But refugee groups say Berlin has consistently underestimated the amount of time and funds needed. “The [federal] government has reacted far too slowly in allocating more money towards shelters for asylum-seekers — that would help relieve the burden on states,” said Marei Pelzer of Pro Asyl, a refugee organization based in Frankfurt. “A lot has been discussed and announced but very little has been implemented.” “It’s still not a lot of people for such a large and rich country like Germany,” she added.

The commissioner, Aydan Özoguz, says the government has instituted some important changes – freeing up asylum-seekers to find jobs while they wait for their applications to be processed, for example. The rest takes time. “I find it a bit dishonest when people say we could have been better prepared — you can’t just create an apartment building in one year, not in the amount we need,” she said. “I think we’re doing a really good job.”

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