Jun 282015
 
 June 28, 2015  Posted by at 9:59 am Finance Tagged with: , , , , , ,  9 Responses »


Harris&Ewing Red Cross Motor Corps, Washington, DC 1917

Just another normal morning at the Automatic Earth. Shaking off the local drink – when in Rome.. – and perusing a thousand views and pieces, many on the inevitable topic of ‘Da Referendum’. And I got to say, I can’t even tell whether it’s just me, but there is this huge divide between what a simple vote can and should be, and how it is perceived and presented.

And no, it’s not my ouzo-riddled stupor, it’s what common sense I have left that has me wondering what causes the divide. Case in point, Bloomberg has a piece called “Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair”. The implied connotation being that asking grandma about anything other than knitting patterns and souvlaki recipes is asking for trouble. What does she know? Politics should be decided by politicians. Well, and bankers of course. And Bloomberg editors. Did I mention economists?

Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair

Economists with PhDs and hedge-fund traders can barely stay on top of the vagaries of Greece’s spiraling debt crisis. Now, try getting grandma to vote on it. That’s what Prime Minister Alexis Tsipras is doing by calling a snap referendum for July 5 on the latest bailout package from creditors.

The 68-word ballot question namechecks four international institutions and asks voters for their opinion on two highly technical documents that weren’t made public before the referendum call and were only translated into Greek on Saturday. Worse, they may no longer be on the table. IMF chief Christine Lagarde told the BBC late on Saturday that “legally speaking, the referendum will relate to proposals and arrangements which are no longer valid.”

Tsipras’s decision means everyone from fishermen to taxi-drivers and factory workers will have to form an opinion on the package, with their country’s economic future hanging in the balance. A rejection of the bailout terms could lead to an exit from the euro area and economic calamity; accepting them would probably keep Greece in the euro, but with more austerity.

“Usually in democracies, it’s the technocrats and the politicians who take care of the details, while voters are asked about broader issues and principles,” said Philip Shaw, the chief economist in London at asset manager Investec. “This is a transfer of responsibility from parliament to the voters.”

Now, we all know that when and where democracy was born, and I’m quite literally at a stone’s throw from the very spot it was, as I write this, grandma had precious little say. But grandpa did, and repeatedly, the idea was that people would vote on all big decisions to be made, instead of having them decided by some power-happy individual.

We all, or most of us, think to this day that that was a good, and indeed world-changing, initiative. We talk about democracy all the time like it’s a good thing. So where does Bloomberg come from belittling the concept to the point where they put the word ‘Grandma’ in their headline, in an obvious attempt at making the entire thing look ridiculous?

They could instead have said ‘grandpa’ (big difference already) or ‘cab driver’ or ‘unemployed person’ or, get ready for this, ‘the people’. “Tsipras Asking The People to Figure Out If Greek Debt Deal Is Fair”. Sounds completely different, doesn’t it? Really, we cannot talk about democracy anymore without trying to ridicule it, Bloomberg?

Greece’s own Mr Piggy, Evangelos Venizelos, who bears a lot of blame for what Greece goes through today from his stint as finance minister, and is still PASOK’s go-to guy, though they were almost voted out of existence in January, tried a nice take. He claimed that the referendum was unconstitutional, something to do with fiscal matters not being allowed to be out before the people.

As if Syriza were too stupid to have read the law before letting Tsipras call the July 5 vote.

I’m thinking there’s not a shade of doubt that we will see the craziest claims and reports and theories. From Greek opposition parties, from ‘respectable media’, from US and European spin doctors offering ‘help’ to the likes of Venizelos and Samaras et al.

But that Bloomberg thing sure sets the tone. We have lost even the most basic principle and notion of what democracy means: a vote by the people on matters that concern the people. As Yanis Varoufakis tweeted yesterday:

Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)

What else can we say? Let’s keep it at this: we’ve come a long way. We can’t even talk about democracy anymore without ridiculing it.

Oh, and the title of this piece? Blame Virgil, Roman poet, well over 2000 years ago.

OXI

Jun 272015
 
 June 27, 2015  Posted by at 10:45 am Finance Tagged with: , , , , , , , ,  5 Responses »


Harris&Ewing Woodward & Lothrop dept. store trucks, Washington DC 1912

While many voices will be seeking to define the precise terms of the referendum announced last night by Alexis Tsipras for July 5, I think perhaps the general gist is more important. It’ll be a vote between being governed by Tsipras, and Greeks in general, on the one hand, and being governed by Germany, the ECB and IMF on the other. “Who do you want to decide your future?”

And the Greek population will have to understand that voting to go with the latter, voting yes to the troika proposals, will mean there will be no getting out of the stranglehold of the institutions, there will be no more sovereignty, and there will be far more severe austerity, all for years to come. All that must be caught in the exact wording of the referendum question, but what lies underneath is what really counts.

In a similar vein, I don’t think it’s all that interesting to go through the precise text and numbers of the latest troika proposal, the one Tsipras labeled ‘blackmail’ and which led to the referendum announcement. This is not about those numbers. It never was.

It’s about two things: the battle for power in Europe, all of Europe, and the refusal by the troika members to admit to their past failures. I see the word ‘failures’ as fundamentally different from ‘mistakes’, because the latter indicates a lack of intent, and I am very hesitant to suggest there was no intent involved in the handling of the crisis over the past 5 years.

I would also suggest that unless one or more troika members admit to past failures, and honestly and openly work to correct them retroactively, there will never be a solution to the Greek issue that does not involve huge defaults and political fall-out. They should not want that, but their notion of the battle for power seems to have them too entrenched to get out.

Still, for the neutral observer, there is no way not to realize that the troika has to a large extent been responsible for creating the Greek problem. Which is a whole other problem all by itself, since the troika consists of three entirely different institutions, who often don’t agree. If just one of the three would admit to past failures, and look at and propose ways to correct these failures, the entire Greek issue could be resolved in no time.

I said a while ago that the IMF could be the one to break the chains, (How The IMF Can Save Greece And Itself), by insisting on ‘retroactive debt restructuring’, an applying the losses and write-offs for French, Dutch and German banks that should have been applied in 2010. But the IMF sits a lot closer to those banks than it does to the people of Greece.

The problem with that is that it makes the Fund’s position a political one, and it should stay away from politics at all costs. It ostensibly is part of the troika only because it has more experience in restructurings than the ECB and EU. But the so-called restructuring that has taken place in 2010 and 2012 could just as well have been done by the other two members. It’s what Varoufakis called the difference between a meat cleaver and surgery.

Still, the IMF did sign off on what happened, and that means a large risk to its credibility and the trust it can expect to encounter in subsequent cases. There are elections in Spain and Portugal later this year, and people there have duly noted how Greece has been handled even just so far.

Lagarde and her staff may still think they’re above everyone else on the planet, that they’re even more omnipotent than central banks, but the cracks are showing. The Fund’s own researchers have recently issued quite a few reports critical of the course set in recent events, and the Asian Infrastructure Investment Bank looms on the horizon as an IMF alternative. The IMF’s position, and future, may be much better served by opening up on its failures than by digging in. But hubris is a powerful incentive.

As for the ECB and EU and their ability and willingness to eat their hats and their crows, there is little hope. The ECB, like the IMF, has veered far too deep into political territory, blindly following the example set by the Fed and other central banks. And as long as Goldmanites like Mario Draghi lead the dance, there’ll be no moving away from power politics. It’s what these people feed on.

This has put the ECB into a place where the more political power it seeks, the less independent it becomes. Draghi wouldn’t dream of doing anything that might upset Berlin and Paris, for example. But that’s exactly what he should do, and should have done. Granted, Draghi didn’t get his seat until late 2011, but he could and should have turned things around, and insisted on a -much- better deal for Greece, and a worse one for French and German banks. He did nothing of the kind.

Karl Whelan came with an interesting scenario yesterday that describes what could have happened, had the troika made the right choices in dealing with the Greek crisis. That is hasn’t speaks volumes about the political agendas of the three-headed beast:

An Alternative Version Of How The Greek Crisis Could Have Played Out

The Grexit scenario relies crucially on the Eurozone not having a proper lender of last resort or a functioning banking union. It is easy to imagine an alternative scenario to the current one. Consider the following alternative version of how the Greek crisis could have played out.

  1. As tension builds up in Greece prior to the Greek election in early 2015, Mario Draghi assures depositors in Greece that the ECB has fully tested the Greek banks and they do not have capital shortfalls. For this reason, their money is safe.
  2. Draghi announces that the ECB will thus provide full support to the Greek banks even if the government defaults on its debts, subject to those banks remaining solvent.
  3. Eurozone governments agree that, should Greek banks require recapitalisation to maintain solvency, the European Stabilisation Mechanism (ESM) will provide the capital in return for an ownership stake in the banks.
  4. Provided with assurances of liquidity and solvency support, there is no bank run as Greek citizens believe there banking system is safe even if the government’s negotiations with creditors go badly. The ECB stays out of the negotiations for a new creditor deal for Greece (because they are not a political organisation and are not involved in directly loaning money to the government) and its officials assure everyone that the integrity of the common currency is in no way at stake.

There are no legal impediments to this scenario. Despite the constant blather from ECB officials about how it is constantly constrained by its own persnikety rules, it is well known that the ECB can stretch these rules pretty much as far as it likes. Supporting banks that you have deemed solvent is pretty standard central banking practice. So Draghi’s ECB could have provided full and unequivocal support to the Greek banks if they wished. They just chose not to.

Similarly, procedures are in place for the ESM to invest directly in banks so a credible assurance of solvency could have been offered. Why did this not happen? Politics. European governments did not feel like providing assurances to Greek citizens about their banking system at the same time as their government was openly discussing the possibility of not paying back existing loans from European governments. Indeed, the ability to unleash the bank-driven Grexit mechanism has been the ace in the creditors’ pack all along.

Faced with massive political opposition in Germany and other Northern European countries to their existing monetary policy programmes, Mario Draghi and the ECB Governing Council have decided it is better for them to play along with the creditor country squeeze on Greece than to stabilise the Greek banking system. Imagine the hue and cry in Germany now if the ECB were refusing to threaten cutting off credit to Greek banks, thus undermining Angela Merkel’s leverage in negotiations.

This is what could have been done. That it hasn’t tells you all you need to know about the motives behind the troika’s stance.

The more I look at it, the more it seems that the Greeks on July 5 will vote not only on their own position and their own sovereignty, dignity and independence, they will also cast a vote on the future of the troika members. And that makes this a dangerous ‘experiment’, because the three will not give up without a fight.

The propaganda showered over Greece in the next week will be an exercise in absurdism. Attemps at instigating bank runs are a certainty. If the ECB wants to get even more political, it could cause one with the flick of a switch. But what credibility and trust it has left would fly out the window with that same flick.

There are already comments I see that miss the boat by a mile. :

Greeks will be voting under “extremely difficult conditions of national division and extreme economic conditions,” said Nicholas Economides, an economics professor at New York University’s Stern School of Business. “Tsipras is gambling with the future of Greece.”

I’m sorry, but that’s just dumb. It’s the ‘partners’ in the negotiations that gamble with that future. The only thing Tsipras has done is to refuse to get on his knees with his pants down his ankles. In what setting do we call that a gamble?

Something Tyler Durden (with whom I agree in 99% of cases) said on the Zero Hedge page today also struck me as worthy of a comment:

Greek PM Tsipras just delivered the biggest Friday night bomb in recent European history: he stunned the Troika and his peers in Europe with the biggest shocker of all – a referendum announcement, aka the Greek “nuclear option”, something which cost his predecessor George Papandreou his job. At this point there is no turning back, and the Greeks – of which 80% want to stay in the Euro even as 80% want an end to austerity – will get to choose their own fate. Whatever choice they make, they will now only have only themselves to blame.

You know, that makes me think of a schoolyard bully giving his victim the choice between a punch in the stomach or a blow to the head. However that would play out, can the victim be saddled with the blame for it?

It’s not as if the Greeks volunteered for their current misery. It was imposed upon them. And it’s not as if Syriza didn’t offer substantial concessions in the troika talks, they only said ‘there are limits to what we’ll do, imposed upon us by our mandate’.

I don’t think we can get away from a broader, pretty unforbidding, perspective such as that offered by Paul Craig Roberts in an article I read earlier this week, and which I think must be a part of the entire discussion.

Greek Democracy Is Failing

The Greek debt is unpayable. It is simply too large to be repaid. The austerity that the EU and IMF have imposed on Greece has worsened the problem by driving down the Greek economy, thus making the burden of the debt even heavier. Despite the obvious fact that the EU’s austerity policy is a failure and cannot succeed, the Greek “debt crisis” drama continues.

A solution was possible at the beginning of the “crisis” prior to the economy being driven down by austerity. The debt should have been written down to the amount that the Greek economy could service or pay. This traditional solution was unacceptable to creditors, to the EU, and to the ECB.

[..] the EU and the ECB have agendas unrelated to Greece’s ability to pay. The creditors are determined to establish the principle that they can over-lend to a country and force the country to pay by selling public assets and cutting pensions and social services of citizens. The creditor banks then profit by financing the privatization of public assets to favored customers.

The agenda of the EU and the central bank is to terminate the fiscal independence of EU member states by turning tax and budget policy over to the EU itself.

In other words, the Greek “sovereign debt crisis” is being used to create a precedent that will apply to every EU member government. The member states will cease to exist as sovereign states. Sovereignty will rest in the EU. The measures that Germany and France are supporting will in the end terminate their own sovereignty, very little of which actually remains as they do not have their own currency and their foreign policy is subservient to Washington.

Default and a turn to Russia is the only possible way out for Greece. The entire world would benefit from this course of action as Greece’s departure from the EU and NATO would begin the unraveling of NATO, Washington’s principal mechanism for creating conflict with Russia. In the end, all of Europe and the rest of the world would thank Greece for derailing the violence that will result from Washington’s effort to assert hegemony over Russia.

As a Greek default and a turn to the East is the only workable solution for Greece, the EU’s agents inside Greece have launched a huge campaign against a Greek turn to the East.

I fear that the Greek people are too brainwashed to be able to avail themselves of the opportunity to rescue themselves from the clutches of the One Percent, who will drive the Greek population into the ground. The Greek voters did not have sufficient judgment to give their current government a large enough percentage of the vote for the government to have any credibility with the EU and Greece’s creditors. What we are witnessing in Greece is the failure of democracy due to the people themselves.

I don’t agree with Roberts’ conclusion, or let me put it this way: we’re not there yet. I would tend to be more worried about what awaits the Greeks if they support Tsipras and Syriza on July 5, through a big fat OXI (no!). But they haven’t given in yet.

And perhaps unfortunately from them, their decision will have a much wider impact than only in Greece, politically, economically, and even morally. The way Europe is presently structured is certain, over time, to take ever more powers away from people, and the people they elect to represent them, and centralize them in the hands of far-away, only semi-elected, career politicians in Brussels and bankers in Frankfurt and Washington.

Nobody should choose that last option. It can only lead to disaster.

Jun 262015
 
 June 26, 2015  Posted by at 10:14 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


NPC Dr. H.W. Evans, Imperial Wizard 1925

Yield-Starved Investors Drive Asset Prices To Dangerous Levels: OECD (Reuters)
What’s Gone Wrong For Germany Inc.? (Bloomberg)
Europe: Writing Off Democracy As Merely Decorative (Habermas)
The Beatings Will Continue Until Morale Improves (Irish Independent)
Bureaucrazies Versus Democracy (Steve Keen)
The Courage Of Achilles, The Cunning Of Odysseus (Jacques Sapir)
Cash-Starved Greek State Posts Surplus (Kathimerini)
IMF Would Be Other Casualty of Greek Default (El-Erian)
Breaking Greece (Paul Krugman)
The Upstarts That Challenge The Power In Beijing (FT)
With $21 Trillion, China’s Savers Are Set to Change the World (Bloomberg)
Shadow Lending Crackdown Looms Over China Stock Market (FT)
Hedge Funds Love Consumer Stocks the Way Cows Love a Trombone (Bloomberg)
UK Developers Play Flawed Planning To Minimise Affordable Housing (Guardian)
Indebted Shale Oil Companies See Rough Ride Ahead (Fuse)
Chief Justice John Roberts’ Obamacare Decision Goes Further Than You Think (MSNBC)
French Justice Minister Says Snowden And Assange Could Be Offered Asylum (IC)
Italy Rebukes EU Leaders As ‘Time Wasters’ On Migrants Plan (Reuters)
Why Do We Ignore The Obvious? (ZenGardner)
Robots Will Conquer The World and Keep Us As Pets – Wozniak (RT)

The by far biggest issue of our times. The world will never be the same. Ever.

Yield-Starved Investors Drive Asset Prices To Dangerous Levels: OECD (Reuters)

Encouraged by years of central bank easing, investors are ploughing too much cash into unproductive and increasingly speculative investments while shunning businesses building economic growth, the OECD warned on Wednesday. In its first Business and Finance Outlook, the Organisation for Economic Cooperation and Development highlighted a growing divergence between investors rushing into ever riskier assets while companies remain too risk-averse to make investments. It urged regulators to keep a close eye on investors as they piled into leveraged hedge funds and private equity and poured cash into illiquid assets like high-yield corporate bonds.

Meanwhile, judging by stock market returns, investors were rewarding corporate managers focused on share-buybacks, dividends, mergers and acquisitions rather than those CEOS betting on long-term investment in research and development. “Stock markets in advanced economies are punishing firms that invest,” OECD secretary general Angel Gurria said in a presentation of the report. “The incentives are skewed.” According to the OECD’s research, over the 2009-2014 period buying US shares in companies with a low investment spending while selling those with high capital expenditure would have added 50% to an investor’s portfolio.

Fidelity Worldwide chief investment officer for equities Dominic Rossi begged to differ with the OECD’s pessimism on corporate investment, saying that for every dollar of depreciation companies were reporting that 1.3 was invested. “Our own analysis would point to quite healthy levels of investment,” Rossi said, adding however that it was lower in the Unites States than in other countries.

Read more …

Can’t hurt to inject some humility there.

What’s Gone Wrong For Germany Inc.? (Bloomberg)

All is not well in corporate Germany. Be it Deutsche Bank or Deutsche Lufthansa, Siemens or RWE, the missteps plaguing the country’s flagbearers have helped turn the DAX into Europe’s worst-performing benchmark index this quarter and a laggard compared with U.S. gauges. Some of the biggest companies in Europe’s economic powerhouse are in upheaval and finding themselves playing catch-up as competitors adapt more quickly to disruptive technologies and new challengers. The problem: As European peers scale back fixed-income trading and other investment-bank activities, the bank that once boasted about making it through the financial crisis without state aid has pledged to gain market share as others retreat.

The plan hasn’t quite worked out as regulatory demands to rein in risk are shaving profit margins and prompting shareholders to question the bank’s strategy. The precedent: UBS Group. Deutsche Bank has appointed John Cryan to succeed Anshu Jain as co-CEO and become sole CEO next year as the bank prepares to carry out a strategic overhaul not unlike the one Cryan undertook about six years ago as finance chief at the bank’s Swiss rival. Siemens: The problem: Europe’s largest engineering company has frequently lagged the profitability of its biggest competitors. CEO Joe Kaeser’s response has been to shed fringe businesses such as home appliances with annual sales of about €11 billion and focus on energy generation and industrial processes.

That bet has proven ill-timed, with a slump in oil prices prompting even more job cuts. The precedent: General Electric. CEO Jeff Immelt started shedding the entertainment, finance and home appliances arms four years ago as he seeks to focus the Fairfield, Connecticut-based company on its industrial business.

Read more …

That’s not just in Europe.

Europe: Writing Off Democracy As Merely Decorative (Habermas)

The latest judgment of the European Court of Justice (ECJ) casts a harsh light on the flawed construction of a currency union without a political union. In the summer of 2012 all citizens owed Mario Draghi a debt of gratitude for uttering a single sentence that saved them from the disastrous consequences of the threat of an immediate collapse of their currency. By announcing the purchase if need be of unlimited amounts of government bonds, he pulled the chestnuts out of the fire for the Eurogroup. He had to press ahead alone because the heads of government were incapable of acting in the common European interest; they remained locked into their respective national interests and frozen in a state of shock. Financial markets reacted then with relief over a single sentence with which the head of the ECB simulated a fiscal sovereignty he did not possess.

It is still the central banks of the member states, as before, which act as the lender of last resort. The ECJ has not ruled out this competence as contrary to the letter of the European Treaties; but as a consequence of its judgment the ECB can in fact, subject to a few restrictions, occupy the room for manoeuvre of just such a lender of last resort. The court signed off on a rescue action that was not entirely constitutional and the German federal constitutional court will probably follow that judgment with some additional precisions. One is tempted to say that the law of the European Treaties must not be directly bent by its protectors but it can be tweaked even so in order to iron out, on a case by case basis, the unfortunate consequences of that flawed construction of the European Monetary Union.

That flaw – as lawyers, political scientists and economists have proven again and again over the years – can only be rectified by a reform of the institutions. The case that is passed to and from between Karlsruhe and Luxembourg shines a light on a gap in the construction of the currency union which the ECB has filled by means of emergency relief. But the lack of fiscal sovereignty is just one of the many weak spots. This currency union will remain unstable as long as it is not enhanced by a banking, fiscal and economic union. But that means expanding the EMU into a Political Union if we want to avoid even strengthening the present technocratic character of the EU and overtly writing off democracy as merely decorative.

Those dramatic events of 2012 explain why Mario Draghi is swimming against the sluggish tide of a short-sighted, nay panic-stricken policy mix. With the change of government in Greece he immediately piped up: “We need a quantum leap in institutional convergence…. We must put to one side a rules-based system for national economic policy and instead hand over more sovereignty to common institutions.” Even if it’s not what one expects a former Goldman Sachs banker to say, he even wanted to couple these overdue reforms with “more democratic accountability” (Süddeutsche Zeitung, March 17, 2015).

Read more …

“What do you think happened next? Yes, you got it; the mutiny on the Bounty.”

The Beatings Will Continue Until Morale Improves (Irish Independent)

Did you know that on the same day that Greece – home of the first openly gay city, Sparta – was forced to humiliate itself again at the feet of the EU’s creditor nations, the isolated island of Pitcairn became the smallest nation to legalise same-sex marriage, despite having only 48 inhabitants and no gay couples? While reading about Pitcairn, the expression attributed to Captain Bligh of the stricken HMS Bounty, against whom the mutineers revolted, came to mind. While flogging sailors for small misdemeanours, he is said to have declared: “The beatings will continue until morale improves.” When we see the torture of Greece by its creditors, I see that the EU has taken the same approach with one of its own family. The economic beatings of Greece will continue until its political morale improves.

Have you ever seen anything so stupid? The Greek crisis has gone on for the past five or six years now. It is a brilliant example of Einstein’s observation that the definition of insanity is repeating the same thing over and over again and expecting different results. Yesterday, Greece promised to raise a fresh €8bn in taxes from the rich in order to satisfy the EU creditors. The cycle has been more or less the same, year in year out. Every year, the Greek government cuts spending and raises taxes. This is followed by the economy collapsing, and so tax revenues fall and this means more austerity is demanded – and the process is repeated. All the while, the economy shrinks. It is 25pc smaller than it was in 2009 and wages are down by 35pc. As activity and wages fall, so too does demand.

The EU response is to repeat the beatings. Every time, the EU imposes a creditors’ levy in the form of higher taxes. The people of Greece, knowing that the taxes won’t go to paying for Greek education or health but will line the pockets of rich creditors, try to find ways to avoid paying the creditors’ levy. So what does the EU do? It imposes more taxes on a problem that was in part due to the inability of the government to raise taxes on the rich in the first place. What do you think will happen now? Do you think the Greeks will give in, and say ‘take our money’? Of course they won’t. The rule of the world is the higher the personal tax, the higher the tax evasion. Did we not learn that in our tax amnesties of the 1980s and 1990s?

The Greeks will just find different ways of getting their money out of the country because they know that the money isn’t being raised for Greece, but for Germany. What would you do if you had the ability? So this latest EU solution will fail spectacularly and we will be back at square one. What then? Repeat the beatings until Greek morale improves? [..] What do you think happened next? Yes, you got it; the mutiny on the Bounty.

Read more …

Steve and I are on the same page. And we both know it too.

Bureaucrazies Versus Democracy (Steve Keen)

The most recent of the almost daily “Greek Crises” has made one thing clear: the Troika of the IMF, the EU and the ECB is out to break the government of Greece. There is no other way to interpret their refusal to accept the Greek’s latest proposal, which accepted huge government surpluses of 1% of GDP in 2015 and 2% in 2016, imposed VAT increases, and further cut pensions which are already below the poverty line for almost half of Greece’s pensioners. Instead, though the Greeks offered cuts effectively worth €8 billion, they wanted different cuts worth €11 billion. Syriza, which had been elected by the Greek people on a proposal to end austerity, is being forced to continue imposing austerity—regardless of the promises it made to its electorate.

There are many anomalies in Greece—which its creditor overlords are exploiting to the hilt in their campaign against Syriza—but these anomalies alone do not explain Greece’s predicament. If they did, then Spain would be an economic heaven, because none of those anomalies exist there. But Spain is in the same economic state as Greece, because it is suffering under the same Troika-imposed austerity program. The willingness of the Troika to point out Greece’s failures stands in marked contrast to its unwillingness to discuss its own failings too—like, for example, the IMF’s predictions in 2010 of the impact of its austerity policies on Greece. The IMF predicted, for example, that by following its program, Greece’s economy would start growing by 2012, and unemployment would peak at under 15% the same year.

Instead, unemployment has exceeded 25%, and the economy has only grown in real (read “inflation-adjusted”) terms in the last year because the fall in prices was greater than the fall in nominal GDP. That is, measured in Euros, the Greek economy is still shrinking, four years after the IMF forecast that it would return to growth. A huge part of Greece’s excessive government debt to GDP ratio is due to the collapse in GDP, for which the Troika is directly responsible. This trumpeting of Greece’s failures, and unwillingness to even discuss its own, is the hallmark of a bully. And it makes transparently obvious that the agenda underlying the EU itself is fundamentally anti-democratic. Obviously the overthrow of democracy was not the public agenda of the EU—far from it. The core political principles of the EU were always about escaping from Europe’s despotic past, of moving from its conflictual history and the horrors of Nazism towards a collective brotherhood of Europe.

Read more …

Sapir’s been writing a good series.

The Courage Of Achilles, The Cunning Of Odysseus (Jacques Sapir)

The latest adventures in the negotiations between the Greek government and its creditors shines a light against the grain of many commentators. They assume that the Greek government “can only give” or “will inevitably give way” and consider each tactical concessions made by the Greek government as “proof” of its future capitulation, or that it regrets the promises of their vows. From this point of view, there is a strange and unhealthy synergy between the most reactionary commentators and others who want to pass for “radicals” who deliberately fail to take into account the complexity of the struggle led by the Greek government. The latter fights with the courage of Achilles and the cunning of Odysseus. Let us note today that all those who had announced the “capitulation” of the Greek government were wrong. We must understand why.

In fact, although the Greek government made significant concessions from the month of February, all these concessions are conditional on a general agreement on the issue of debt. Be aware that it is the burden of repayments that is forcing the Greek government to be in the dependence of its creditors. The tragedy of Greece is that it has made considerable budgetary effort but only to the benefit of creditors. Investment, both tangible and intangible (education, health) has been sacrificed on the altar of creditors. In these circumstances it is hardly surprising that the productive apparatus of Greece is deteriorating and that she regularly loses competitiveness. It is this situation that the current government of Greece, born of the alliance between SYRIZA and ANEL, seeks to reverse. The Greek Government did not request additional money from its creditors. It asked that the money that Greece produces can be used to invest in both the private and public sectors, both in tangible and intangible investments. And on this point, it is not ready to compromise, at least until now.

The creditors of Greece, meanwhile, continue to demand a full refund – despite knowing perfectly weII that this is impossible – so as to maintain the right to take money from Greece via debt interest payments. Everyone knows that no State has repaid all its debt. From this perspective the discourses that are adorned with moral arguments are completely ridiculous. But, it is appropriate to maintain the fiction of the inviolability of debt if we want to maintain the reality of Greece’s flow of money to the creditor countries. When on June 24, Alexis Tsipras noted the failure to reach an agreement, which he summarized in a tweet into two parts, he pointed to this problem.

Read more …

But no surplus will ever be enough.

Cash-Starved Greek State Posts Surplus (Kathimerini)

The Greek economy is at its worst point since entering the bailout process over five years ago, as reflected in the data on the execution of the state budget. The result for the first five months may show a surplus, but this is misleading. The shortfall in tax revenues in the year to end-May exceeded €1.7 billion, while, apart from salaries and pensions, the state is not paying its obligations within the country, as expenditure was €2.6 billion less than that provided for in the budget. Had the government not decided to freeze all payments in a bid to secure cash for the timely payment of salaries and pensions, the primary budget balance would have shown a deficit of €1 billion, against the €1.5 billion primary surplus it showed in the January-May period, according to the official data.

However, the cash reserves have now run dry, as according to sources there will not even be enough for the payment of salaries and pensions at the end of June unless the social security funds and local authorities contribute their own reserves. The figures released on Thursday by the Finance Ministry showed that tax revenues were lagging €1.74 billion in the year to end-May, as in direct tax revenues not a single euro has yet been collected from taxpayers and companies in the form of 2015 income tax. Meanwhile, Alternate Finance Minister Nadia Valavani on Thursday issued a decision extending the deadline for the submission of income tax declarations from June 30 to July 27, with the exception of companies that have to file their statements by July 20.

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The IMF should be dismantled, along with the EU. These clubs only hurt people.

IMF Would Be Other Casualty of Greek Default (El-Erian)

All sides are working hard to prevent Greece from defaulting on its debt obligations to the IMF – and with good reason: Such an outcome would have dire consequences not only for Greece and Europe but also for the international monetary system. The IMF’s “preferred creditor status” underpins its ability to lend to countries facing great difficulties (especially when all other creditors are either frozen or looking to get out). Yet that capacity to act as lender of last resort is now under unprecedented threat. Preferred creditor status, though it isn’t a formal legal concept, has translated into a general acceptance that the IMF gets paid before almost any other lender.

And should debtors fail to meet payments, they can expect significant pressure from many of the fund’s other 187 member countries. That’s why instances of nations in arrears to the fund have been limited to fragile and failed states, particularly in Africa. The IMF has been able to act as the world’s firefighter, willing to walk into a burning building when all others run the other way. Time and again, its involvement has proved critical in stabilizing national financial crises and limiting the effects for other countries. Not long ago, it would have been improbable for the IMF to engage in large-scale lending to advanced European economies (the last time it did so before the euro crisis was in the 1970s with the U.K.). And it would have been unthinkable for the fund to worry about not getting paid back by a European borrower.

Yet both are happening in the case of Greece. Moreover, compounding the unprecedented nature of the Greek situation, other creditors (such as the European Central Bank and other European institutions) are in a position to help provide Greece with the money it needs to repay the IMF. Yet that would only happen if an agreement is reached on a policy package that is implemented in a consistent and durable fashion. If Greece defaults to the IMF, it would find its access to other funding immediately and severely impacted, including the emergency liquidity support from the ECB that is keeping its banks afloat. The resulting intensification of the country’s credit crunch would push the economy into an even deeper recession, add to an already alarming unemployment crisis, accelerate capital flight, make capital controls inevitable and, most probably, force the country to abandon Europe’s single currency.

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I know, I know, quoting Krugman. Got to get used to that yet.

Breaking Greece (Paul Krugman)

I’ve been staying fairly quiet on Greece, not wanting to shout Grexit in a crowded theater. But given reports from the negotiations in Brussels, something must be said — namely, what do the creditors, and in particular the IMF, think they’re doing?
This ought to be a negotiation about targets for the primary surplus, and then about debt relief that heads off endless future crises. And the Greek government has agreed to what are actually fairly high surplus targets, especially given the fact that the budget would be in huge primary surplus if the economy weren’t so depressed. But the creditors keep rejecting Greek proposals on the grounds that they rely too much on taxes and not enough on spending cuts. So we’re still in the business of dictating domestic policy.

The supposed reason for the rejection of a tax-based response is that it will hurt growth. The obvious response is, are you kidding us? The people who utterly failed to see the damage austerity would do — see the chart, which compares the projections in the 2010 standby agreement with reality — are now lecturing others on growth? Furthermore, the growth concerns are all supply-side, in an economy surely operating at least 20% below capacity. Talk to IMF people and they will go on about the impossibility of dealing with Syriza, their annoyance at the grandstanding, and so on. But we’re not in high school here. And right now it’s the creditors, much more than the Greeks, who keep moving the goalposts.

So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default, to encourage the others? At this point it’s time to stop talking about “Graccident”; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen.

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Alibaba for president!

The Upstarts That Challenge The Power In Beijing (FT)

There is an overarching force in China with tentacles reaching deep into almost everybody’s life. That force is not the Communist party, whose influence in people’s day-to-day affairs — though all too real — has waned and can appear almost invisible to those who do not seek to buck the system. The more disruptive force to be reckoned with these days is epitomised by the three large internet groups: Baidu, Alibaba and Tencent, collectively known as BAT, which have turned much of China upside down in just a few short years. Take the example of Ant Financial. Last week, it completed fundraising that values the company at $45bn to $50bn. It operates Alipay, an online payments system that claims to handle nearly $800bn in e-transactions a year, three times more than PayPal, its US equivalent.

That system, an essential part of China’s financial and retail architecture, and one familiar to almost every Chinese urbanite, is no brainchild of the Communist party. Instead it was the creation of Jack Ma, the former English teacher who founded Alibaba. Mr Ma established the system a decade ago as the backbone for Taobao, his consumer-to-consumer business. The name literally means “digging for treasure”, something that Mr Ma, one of China’s richest people, has clearly found. Alibaba handles 80% of China’s ecommerce, according to iResearch, a Beijing-based consultancy. That is a monopolistic position that even the Communist party, with its 87m members out of a population of 1.3bn, can only dream about.

True, the Communist party still regulates where people live (in the city or the countryside), what they publish (though less what they say) and how many children they have (though the one-child policy is fast fading). China’s internet companies, on the other hand, hold ever greater sway on how people shop, invest, travel, entertain themselves and interact socially. The BAT companies, which dominate search, ecommerce and gaming/social media, together with other upstarts, such as Xiaomi, a five-year-old company that has pioneered the $50 smartphone, are upending how people live.

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Sounds cute, but will happen when Chinese stock markets crash?

With $21 Trillion, China’s Savers Are Set to Change the World (Bloomberg)

Few events will be as significant for the world in the next 15 years as China opening its capital borders, a shift that economists and regulators across the world are now starting to grapple with. With China’s leadership aiming to scale back the role of investment in the domestic economy, the nation’s surfeit of savings – deposits currently stand at $21 trillion – will increasingly need to be deployed overseas. That’s also becoming easier, as Premier Li Keqiang relaxes capital-flow regulations. The consequences ultimately could rival the transformation wrought by the Communist nation’s fusion with the global trading system, capped by its 2001 World Trade Organization entry. That stage saw goods made cheaper across the world, boosting the purchasing power of low-income families at the cost of hollowed-out industries.

Some changes are easy to envision: watch out for Mao Zedong’s visage on banknotes as the yuan makes its way into more corners of the globe. China’s giant banks will increasingly dot New York, London and Tokyo skylines, joining U.S., European and Japanese names. Property prices from California to Sydney to Southeast Asia already have seen the influence of Chinese buying. Other shifts are tougher to gauge. International investors including pension funds, which have had limited entry to China to date, will pour in, clouding how big a net money exporter China will be. Deutsche Bank is among those foreseeing mass net outflows, which could go to fund large-scale infrastructure, or stoke asset prices by depressing long-term borrowing costs.

“This era will be marked by China shifting from a large net importer of capital to one of the world’s largest exporters of capital,” Charles Li of Hong Kong Exchanges & Clearing, the city’s stock market, wrote in a blog this month. Eventually, there will be “fund outflows of historic proportions, driven by China’s needs to deploy and diversify its national wealth to the global markets,” he wrote. The continuing opening of China’s capital account will also promote the trading of commodities in yuan, and boost China’s ability to influence their prices, according to an analysis by Bloomberg Intelligence. As was the case with China’s WTO entry, where many of the hurdles had been cleared in the years leading up to 2001, policy makers in Beijing have been easing restrictions on the currency, the flow of money and interest rates for years.

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China will fall to bits if there’s a real crackdown.

Shadow Lending Crackdown Looms Over China Stock Market (FT)

China’s shadow banks, increasingly wary of lending into a slowing economy, have turned to the stock market, fueling a surge in unregulated margin lending that has driven the market’s dizzying gains over the past year. Now regulators are cracking down on shadow lending to stock investors, a campaign analysts say is partly to blame for last week’s 13% fall in the Shanghai Composite Index — the largest weekly drop since the global financial crisis in 2008. “The price of funds has increased, the flow has shrunk, and transaction structures are getting more complicated,” says a Chongqing-based shadow banker who provides grey-market loans to stock investors.

“We’re no longer in a growth period. It’s more like, feed the addiction until you die, earn fast money. No one treats this as their main career.” China officially launched margin trading by securities brokerages as a pilot project in 2010. It expanded the program in 2012 with the creation of the China Securities Finance, established by the state-backed stock exchanges specifically to provide funds for brokerages to lend to clients. Official margin lending totaled Rmb2.2 trillion ($354 billion) as of Wednesday’s close, up from Rmb403 billion a year earlier, according to stock exchange figures. Yet this officially sanctioned margin lending, which is tightly regulated and relatively transparent, is only the tip of the iceberg for Chinese leveraged stock investing.

For standardized margin lending by brokerages, only investors with cash and stock worth Rmb500,000 in their securities accounts may participate. Leverage is capped at Rmb2 in loans for every Rmb1 of the investor’s own funds, and only certain stocks are eligible for margin trading. In the murky world of grey-market margin lending, however, few rules apply. Leverage can reach 5:1 or higher, and there are no limits on which shares investors can bet on. The money for these leveraged bets comes mainly from wealth management products sold by banks and trust companies. WMPs, a form of structured deposit that banks market to customers as a higher-yielding alternative to traditional savings deposits, also spurred China’s original shadow banking boom beginning in 2010.

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Can’t go wrong with a headline t like that.

Hedge Funds Love Consumer Stocks the Way Cows Love a Trombone (Bloomberg)

There’s a mesmerizing video making the rounds on Facebook of a guy who takes a trombone out into an empty cow pasture, sits down in a lawn chair and plays the song “Royals” by the New Zealand singer Lorde. Before he even gets to the first chorus, cows begin hustling over the hill toward the sound of the music. By the end of the video, he has a whole herd crowded together in front of him and they all wag their tales and moo their approval for the trombonist. What on Earth, you may ask, does this Facebook video have to do with the stock market? Great question, thanks for asking! Returns have been a lot like these cows – individual stocks over the last few years have appeared to be moving together like a herd of cows mesmerized by the same trombonist.

Market pundits have lamented this lack of return dispersion again and again and tried to wish it away, without much success. It’s hard to know – without access to a herd of cattle, a trombone and a lot of free time – whether it’s the specific song or the moo-like sound of the instrument itself that has enthralled the cattle. Similarly, it’s not 100% obvious what’s caused the herding in the stock market – maybe it’s the sweet music of low interest rates played by the Federal Reserve that has caused fixed-income cows to march into the stocks pasture, or maybe it’s the growth in popularity of index funds that makes the whole market look like a field of grass rather than a buffet table covered with an assortment of treats.

Yet, there’s an interesting surprise lurking amid all this herding in returns: dispersion among performance of equity hedge funds is actually increasing. The spread between the top fourth and bottom fourth of long-short strategy returns in the Credit Suisse Hedge Fund Index has widened from 10% to as high as 20% over the last year. That type of contrast is usually only seen during very volatile periods, not the calm markets we’ve seen this year, according to Mark Connors, Credit Suisse’s global head of risk advisory.

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A great take on UK housing. Don Corleone would be proud.

UK Developers Play Flawed Planning To Minimise Affordable Housing (Guardian)

Golden towers emerge from a canopy of trees on a hoarding in Elephant and Castle, snaking around a nine-hectare strip of south London where soon will rise “a vibrant, established neighbourhood, where everybody loves to belong”. It is a bold claim, given that there was an established neighbourhood here before, called the Heygate Estate – home to 3,000 people in a group of 1970s concrete slab blocks that have since been crushed to hardcore and spread in mounds across the site, from which a few remaining trees still poke. Everybody might love to belong in Australian developer Lend Lease’s gilded vision for the area, but few will be able to afford it.

While the Heygate was home to 1,194 social-rented flats at the time of its demolition, the new £1.2bn Elephant Park will provide just 74 such homes among its 2,500 units. Five hundred flats will be “affordable” – ie rented out at up to 80% of London’s superheated market rate – but the bulk are for private sale, and are currently being marketed in a green-roofed sales cabin on the site. Nestling in a shipping-container village of temporary restaurants and pop-up pilates classes, the sales suite has a sense of shabby chic that belies the prices: a place in the Elephant dream costs £569,000 for a studio, or £801,000 for a two-bed flat.

None of this should come as a surprise, being the familiar aftermath of London’s regenerative steamroller, which continues to crush council estates and replace them with less and less affordable housing. But alarm bells should sound when you realise that Southwark council is a development partner in the Elephant Park project, and that its own planning policy would require 432 social-rented homes, not 74, to be provided in a scheme of this size – a fact that didn’t go unnoticed by Adrian Glasspool, a former leaseholder on the Heygate Estate.

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No ride at all.

Indebted Shale Oil Companies See Rough Ride Ahead (Fuse)

There has been a lot of speculation about how deeply and how quickly U.S. shale production would contract in the low price environment. The industry has proven resilient, with rig counts having fallen by more than half since October 2014 but actual production not exhibiting a corresponding precipitous decline. That could soon change. Shale companies drastically cut spending and drilling programs following the collapse in oil prices. For example, Continental Resources, a prominent producer in the Bakken, slashed capital expenditures for 2015 from $5.2 billion to $2.7 billion. Whiting Petroleum, another Bakken producer, gutted its capex by half. The list goes on. To be sure, exploration companies are achieving a lot of efficiency gains in their drilling operations.

After years of pursuing a drill-anywhere strategy, many are now approaching the shale patch with more forethought and cost-saving technologies. Oil field service companies are also dropping their rates, allowing for drilling costs to decline. That will allow U.S. companies to squeeze more oil out of shale while spending less. However, the improved productivity could be temporary. Much of the cost reductions have come in the form of layoffs rather than fundamental gains in the cost of operations. If drilling activity picks up in earnest, costs could rise again as workers will need to be rehired. The tumbling “breakeven” costs for producing a barrel of oil could be a bit of a mirage.

If oil prices remain relatively weak, or even drop further in the second half of the year, the problems could start to mount. Shale wells suffer from steep decline rates after an initial rush of output. That means that unless enough new wells are drilled to offset natural decline, overall output could drop precipitously. Add to that the fact that the companies are bringing in 40% less per barrel than they were last year because of lower oil prices, and falling revenues start to become a problem for weaker companies.

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Has it really been such a disaster?

Chief Justice John Roberts’ Obamacare Decision Goes Further Than You Think (MSNBC)

Chief Justice John Roberts did more than simply save Obamacare by ruling for the administration on Thursday – he etched the president’s signature policy into American law for a generation or more. And in a bitter irony for the political right, Robert’s ruling actually puts Obamacare on firmer ground than it would have been if conservatives never brought the suit in the first place. A narrow decision could have simply upheld today’s health care subsidies by accepting the Obama administration’s interpretation of the health law’s tax rules. Roberts’ decision in King v. Burwell goes further, however, in a way many policymakers and critics have yet to fully grasp.

The ruling not only upholds current healthcare subsidies – the first big headline on Thursday – it also establishes an expansive precedent making it far harder for future administrations to unwind them. That is because Roberts’ opinion doesn’t simply find today’s subsidies legal. It holds that they are an integral, essentially permanent part of Obamacare. In other words, for the first time, the Supreme Court is ruling that because Congress turned on this spigot for national health care funding, only Congress can turn it off. That is bad news for potential Republican presidents, who may have hoped that down the road they might hinder Obamacare by executive action. Now their only apparent route to dialing back the policy is by controlling the White House, the House, and a 60-vote margin in the Senate.

Roberts establishes this precedent by essentially wresting power from the White House, and handing it back to Congress. While that might sound like a good thing for Republicans, who control Congress now, the case attacked the statute’s original meaning, so Roberts hands that power to the Democratic Congress that enacted Obamacare. That legal reasoning is the crucial backdrop for one of the most striking lines in the opinion, Roberts’ closing flourish that Congress passed the ACA “to improve health insurance markets, not to destroy them.”

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Still a good idea.

French Justice Minister Says Snowden And Assange Could Be Offered Asylum (IC)

French Justice Minister Christiane Taubira thinks National Security Agency whistleblower Edward Snowden and WikiLeaks founder Julian Assange might be allowed to settle in France. If France decides to offer them asylum, she would “absolutely not be surprised,” she told French news channel BFMTV on Thursday (translated from the French). She said it would be a “symbolic gesture.” Taubira was asked about the NSA’s sweeping surveillance of three French presidents, disclosed by WikiLeaks this week, and called it an “unspeakable practice.”

Her comments echoed those in an editorial in France’s leftist newspaper Libération Thursday morning, which said giving Snowden asylum would be a “single gesture” that would send “a clear and useful message to Washington,” in response to the “contempt” the U.S. showed by spying on France’s president. Snowden, who faces criminal espionage charges in the U.S., has found himself stranded in Moscow with temporary asylum as he awaits responses from two dozen countries where he’d like to live; and Assange is trapped inside the Ecuadorian Embassy in London to avoid extradition to Sweden. Taubira, the chief of France’s Ministry of Justice, holds the equivalent position of the attorney general in the United States.

She has been described in the press as a “maverick,” targeting issues such as poverty and same-sex marriage, often inspiring anger among French right-wingers. Taubira doesn’t actually have the power to offer asylum herself, however. She said in the interview that such a decision would be up to the French president, prime minister and foreign minister. And Taubira just last week threatened to quit her job unless French President François Hollande implemented her juvenile justice reforms.

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Explode that union. Get it over with. People are getting killed.

Italy Rebukes EU Leaders As ‘Time Wasters’ On Migrants Plan (Reuters)

Italian Prime Minister Matteo Renzi rebuked fellow EU leaders on Thursday for failing to agree a plan to take in 40,000 asylum-seekers from Italy and Greece, saying they were not worthy of calling themselves Europeans. EU leaders are divided over a growing migrant crisis in the Mediterranean and have largely left Italy and Greece to handle thousands of people fleeing war and poverty in Africa and the Middle East. “If you do not agree with the figure of 40,000 (asylum seekers) you do not deserve to call yourself Europeans,” Renzi told an EU summit in Brussels. “If this is your idea of Europe, you can keep it. Either there’s solidarity or don’t waste our time,” he said.

Another official described the debate as “controversial”. Much of the tension appeared to be about ensuring that the migration plan was voluntary, not mandatory as the European Commission had initially suggested. Stung by deaths this year of almost 2,000 migrants trying to reach Europe by boat, the European Union has promised an emergency response but not national quotas for taking people. According to a draft final summit communique, governments would agree to relocation over two years from Italy and Greece to other member states of 40,000 people needing protection. It said all member states will participate.

As EU leaders tackled the issue over dinner, some eastern and central European countries, which are reluctant to take refugees, sought guarantees that the system be temporary and voluntary. “We have no consensus on mandatory quotas for migrants, but … that cannot be an excuse to do nothing,” said Donald Tusk, president of the European Council who chairs summits. “Solidarity without sacrifice is pure hypocrisy.”

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It’s all in the design. No escaping that.

Why Do We Ignore The Obvious? (ZenGardner)

I have a hard time with people not being willing to recognize what’s obviously in front of their faces. It’s a voluntary mind game people play with themselves to justify whatever it is they think they want. This is massively exacerbated by an array of social engineering tactics, many of which are to create the very mind sets and desires people so adamantly defend. But that’s no excuse for a lack of simple conscious recognition and frankly makes absolutely no sense. We can’t blame these manipulators for everything. Ultimately we all have free choice. Plainly seeing what’s right in front of our noses, no matter how well sold or disguised, is our human responsibility. That people would relinquish this innate right and capability totally escapes me.

The Handwriting On the Wall Actually, it’s much more obvious than even that. Pointless wars costing millions of innocent lives, poisoned food, air and water, demolished resources, manipulated economies run by elitist bankers who nonchalantly lend money with conditions for “interest”, corporate profiteering at any cost to humanity, a medical system built on sickness instead of health, media mindmush poisoning children and adults alike, draconian clampdowns for any reason, and on and on. Why is this not obvious to people that something is seriously wrong, and clearly intended to be just the way it is? Do they really think it’s gonna iron itself out, especially with clearly psychopathic power mad corrupt maniacs in charge? That’s what they’ll tell you. “Give it time, we’re just going through a hiccup. Everything works out…” yada yada. Why? Because that’s what they want to believe. And the constructed world system is waiting with open arms to reinforce that insanity. And “Heck, if millions of others feel the same as me I can’t possibly be wrong.”

Fear of Drawing Conclusions That’s pretty much the bottom line. Acceptance for seeming security. However, if even one of these inroads of control vectors becomes clear to people then their whole world threatens to turn upside down. When two or more start appearing then the discomfort becomes quite intense, and that’s when the decision takes place. Either they keep pursuing this line of awakened thought or they shut it down. It’s all about comfort. And what a deceptive thing that is! Call it sleepwalking to oblivion or what have you, it’s endemic to today’s dumbed-down society. This is why the education system was their primary target since way back, conditioning humanity from childhood to not think analytically but to simply repeat whatever is in their carefully sculpted curriculum. But most of all do not question authority.

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And have a yearly man-eating fest?!

Robots Will Conquer The World and Keep Us As Pets – Wozniak (RT)

Apple co-founder Steve Wozniak, who used to be gloomy about a distant future dominated by artificial intelligence, now believes it would be good for humanity in the long run. Super smart robots would keep us as pets, he believes. “They’re going to be smarter than us and if they’re smarter than us then they’ll realize they need us,” Wozniak told an audience of 2,500 people at the Moody Theater in Austin, Texas, on Wednesday. The speech was part of the Freescale Technology Forum 2015. “They’ll be so smart by then that they’ll know they have to keep nature, and humans are part of nature. So I got over my fear that we’d be replaced by computers. They’re going to help us. We’re at least the gods originally,” he explained.

The timetable for humans to be reduced from the self-crowned kings of Earth to obsolete sentient life forms sustained by their own creations is measured in hundreds of years, Woz soothed the audience. And for our distant descendants life won’t really be bad. “If it turned on us, it would surprise us. But we want to be the family pet and be taken care of all the time,” he said. “I got this idea a few years ago and so I started feeding my dog filet steak and chicken every night because ‘do unto others,'” he quipped. Wozniak, who invested some $10 million into an IA firm, used to refer to artificial intelligence as “our biggest existential threat.” The concern is shared by some leading IT experts, inventors and scientists, including Elon Musk, Bill Gates and Stephen Hawking.

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Jun 262015
 
 June 26, 2015  Posted by at 7:38 am Finance Tagged with: , , , , , ,  4 Responses »


NPC O Street Market, Washington DC 1925

Perhaps I should apologize for writing about Greece all the time. Thing is, not only have I just arrived in Athens last night (and been duly showered in ouzo), but Greece is the proverbial early harbinger of everything that’s wrong with the world (not to worry, I know that’s a hyperbole), and of everything that could be done about it.

That places a responsibility on the shoulders of Syriza leader Alexis Tsipras and his team that maybe they don’t want, and for all I know don’t deserve either. But they’re all we have, and besides, they’re all their own people have. In that sense, this is not about everything that’s wrong with the world, other than that’s the same as everything that’s wrong with Greece.

I was struck last night, talking to people here in Athens, by how much their appreciation of Tsipras, his overall composure and the way he handles the Troika talks, has increased over the past five months. They were doubtful about him before the Syriza election win; they no longer are.

Still, the negotiations are nice and all, but they’re not going anywhere, and they never will. The Troika side of the table is interested in one thing only: to humiliate Athens and force it into ultimate submission, along the lines of those photographs we’ve come to know of Abu Graibh.

Yanis Varoufakis labeled the Troika policies vis-a-vis Greece ‘fiscal waterboarding’ when he started out as finance minister, and here’s thinking he should have stuck with that image in a much more persistent and a much louder fashion.

Yes, we know, Syriza doesn’t have the mandate to take the country out of the eurozone. A daily dose of fear tactics in the domestic and international media still have Greeks, even Syriza voters, scared stiff about going it alone.

It’s time for Tsipras to turn to his people, on national TV, and say look, whatever we can discuss with the Troika, and whatever compromise we may be able to reach, there is no option on or off the table that would allow for you, the people of Greece, to not be debt slaves for the rest of your lives.

The European Union is merely a crude modern version of a feudal society (but without the debt jubilee older versions had), that’s all the morals that Brussels and Berlin can muster. And, Tsipras should say, if that is what you want, if you want to be slaves instead of a free people, tell me so. I will draw my conclusions from that.

But this is getting painful. We have an entire team of Greece’s brightest drawing up plan after plan, most of which are never even discussed by the Troika. It all comes down to you, the people, and we, your representatives, being rudely insulted every minute of the day by people whose only interest is their own personal careers and agendas.

I, Alexis Tsipras, think I deserve better than that, and much more importantly, I think my people deserve better than that. But in these negotiations, no matter how long they last, we will never get what we deserve. The Troika seeks to humiliate us, and force us on our knees with our pants down our ankles and a hood over our faces..

This will take courage on the part of Tsipras; it may well end his political career. But such courage is exactly what the Greek people need to see. They need a leader who is willing to put it all on the line, or else why would they themselves?

The threat of Armageddon following an exit from the euro is an abstract and unknown phenomenon akin to various bogeymen used to keep children in check, akin to the threat of drowning that makes waterboarding such an inhumane experience.

But whatever may or will happen, there is nothing that says or guarantees that a euro-less Greece will be worse off than it is now. Not even from a purely financial point of view (other than for an initial short period of time).

What the Greeks are sure to gain, though, is their independence, their dignity, their pride. Why on earth would they, once they understand the predicament, vote to stay on and pay their odious debts and kowtow to the five families in Brussels and Berlin for the rest of their lives?

It makes no sense at all, and it makes no sense for Tsipras and his team to keep on negotiating for a deal that will never do anything but humiliate them, and shackle the people who voted for them. There is no other possible option on the table, and there won’t be in the future.

As I was writing this in the early Athens morning, I saw an article by my dear friend Steve Keen come in, and I’m very pleased to see Steve think along the same lines I do, at the same time.

Bureaucrazies Versus Democracy

This belief that economists know better than politicians how to run an economy was enshrined in the Maastricht Treaty itself, which limited government deficits to 3% of GDP and government debt to 60% of GDP. It was a set of rules designed to shackle political freedom, so that the economy could flourish under the incorruptible leadership of experts.

Some experts. Firstly they designed a system which would only work if capitalism never had crises. Secondly, when a crisis hit, rather than backpedalling on their flawed rules, they doubled up on them. Then, when the people had the temerity to elect a government which opposed their agenda… Well it’s obvious, isn’t it? The people must be overthrown.

I know from personal conversations with Varoufakis and his advisors, as well as from the public record, that Syriza is willing to do almost anything to stay within the Euro. As Yanis put it at the INET conference in Paris in April, the Euro is a bit like the Hotel California: you should never check into it in the first place, but if you do, you can never leave.

But the conditions the IMF, EU and ECB are insisting upon here are so extreme, and their behaviour so counter to the very concept of democracy, that maybe the Greeks would do better to show them what a democratic government can do. Maybe they should leave the Euro, and default on all their debts—especially those to the Troika. The financial stimulus from throwing off the yoke of debt may counterbalance the initial chaos from re-instituting a national currency in a seriously damaged society.

It may also teach the bureaucrazies -and no, that is not a misprint- a lesson about the limits of bureaucratic power.

You know, it’s true that maybe it’s too much for outsiders such as Steve Keen and myself to ask of Alexis Tsipras, and the people of Greece, to jump into a big unknown. But it’s also too much to bear to watch the inane piece of theater being played out by quasi elected B movie protagonists.

And no, none of us get a free pass on this one. Your voice is long overdue. Because no matter where you are or who you are, whether you’re American or European, it’s still your government, acting in your name, that supports and magnifies the craziness unloaded upon the cradle of democracy.

All the Greek people know until now is that Europe and the IMF are attempting to strangle them. Still, so many among us don’t agree with that at all. Thing is, it’s time to let that be known. To the people of Greece, and to our own ‘leaders’ who if we don’t get vocal will continue to do as they please. Just because the people you’ve elected don’t have any morals doesn’t mean you don’t have to either.

I shouldn’t forget of course: you can start showing your support for Greece and justice right now by donating to the AE for Athens fund, just go to the Paypal widget, top of the left side bar. Make sure you end the amount you donate with $.99, so I know it’s for Greece. I’ll be seeking out foodbanks and clinics momentarilly.

Jun 162015
 
 June 16, 2015  Posted by at 10:32 pm Finance Tagged with: , , , , , ,  6 Responses »


Jack Delano Conductor picks up message from operator on the Atchison, Topeka & Santa Fe 1943

While I’m on the Greece topic again today, I can’t help but pointing out some of the changes in tone I’ve noticed in the press recently, shifting towards outright oftentimes vicious if not ridiculous antagonism vs Greece. Remember, there is an agenda, there are pre-cooked narratives galore, and these people are not your friends.

I won’t be able to cover all the things I would like to right now, let’s start with just the one. And I’m warning you: it might get philosophical.

This is from Marc Champion for Bloomberg yesterday:

Tsipras Isn’t on the Side of Democracy

Recently, I asked whether the Greek government actually wants to strike a deal on its debt, or if its increasingly erratic approach to negotiations might reflect a determination to ensure that Greeks blame their creditors, not their government, for a coming meltdown. [..] Here’s what Tsipras said in a statement about the abortive talks and current bailout:

“One can only suspect political motives behind the fact that the institutions insist on further pension cuts, despite five years of pillaging via the memoranda. The Greek government has been negotiating with a specific plan and documented proposals. We will wait patiently till the institutions adhere to realism.

Those who consider our sincere wish for a solution as well as our efforts to bridge the gap as a sign of weakness, should have in mind the following: We are not only carrying a historical past underlined with struggles. We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It is not a matter of ideological stubbornness. It has to do with democracy.”

Tsipras’s proposition that he’s championing the hope of downtrodden masses across Europe is nonsense. Germans may be wrong and unfair to prefer losing the loans they made Greece to taking a haircut, but they have a democratic right to believe they’re correct.

Really, Champion? Where do I start? How about “its increasingly erratic approach to negotiations”? At the very least, that doesn’t sound like a subjective view at all. It’s also completely off, but that’s another matter.

Syriza has stuck to what it said all along: negotiations are possible, but not about everything. Not about making a desperate people even more desperate. Not only is that useless and harmful to all parties involved in the talks, it’s also immoral. Granted, ‘immoral’ may be considered a subjective view too. Then again, it shouldn’t be.

But how sticking to your convictions qualifies as ‘erratic’, I simply don’t know. I presume that’s a subjective interpretation of what the author reads in the press. Maybe he never realized there were convictions in play, maybe he figured it was all just another political barter trade, two goats for a cow. It’s not.

Then, “championing the hope of downtrodden masses across Europe” is merely a frankly pretty stupid interpretation of Tsipras’ words. Who talks about “our people’s dignity” and “the aspirations of all Europeans”. Oh, and “democracy”. Why that needs to be translated as ‘downtrodden masses’ reveals a lot about who Champion is, but nothing about Tsipras. It’s just not what he says.

The last point is more interesting, and more cantankerous at the same time. Champion contends that Germans have the right to insist on Greek haircuts before they take losses on loans they made to Greece. And the right to “believe they’re correct” about whatever it is they believe.

Is that an attempt to turn democracy into a religion, or is it just me?

First off, Germans made no such loans to Greeks, not in the way they are consistently presented. Instead, their government insisted in 2010 on bailing out their own banks and have the Greek people pay for that bailout when it was crystal clear the Greeks wouldn’t be able to, let alone should.

If that is still not obvious, here’s the thing: it’s why we are where we are. If Merkel and Sarkozy had simply told their people what was really going on, we wouldn’t be in this mess. And they might have lost their office.

Bailouts of French banks were even more costly. Costly not to the French, but to the Greeks. And I’ll repeat myself again: that is and was a political decision, not an economic one. Which is the pivotal point in the entire Greek saga.

Thing is, this was never explained to the German or French people. Their media, and their politicians, have always persisted in maintaining the less-than-honest version. That is it was wasteful Greeks who were to blame, not German and French greedy well-connected bankers and their losing wagers.

Which leads to the question: if Germans have been consistently misled about the whole Greece issue, what exactly is the value of their “democratic right to believe they’re correct”? A phrase that sounds pretty absurd to begin with, mind you, if you read it more than once.

Is it that being lied to in and of itself is a ‘democratic right’, or is this about the right to draw -inevitably faulty- opinions based on those lies? How does that work? Honest, I don’t get it.

Do Bloomberg’s mostly American readers, after reading Champion’s obvious distortions of what Tsipras said, spiced with the author’s personal ‘opinions’, then also have a democratic right to judge Greece based on those words? I’m going to have to guess so.

But let’s get real: What does any of this have to do with democracy anymore? And, more importantly, where does it leave the democratic rights of the Greek people? Do they need to be fed lies too to participate in this game?

The Greek people have had no say in how Berlin and Paris presented the bailouts of their domestic banks to their respective homebase(s). All they have a say in is how Tsipras and Syriza stand up for them. That right there defines, and limits, their democratic rights. That’s all they got -left-. They have the right to elect a government that promises to take care of their interests, better than umpteen governments before them who didn’t.

How does that compare with the Germans’ alleged right to “believe they’re correct”? When all they’ve been fed is a greatly distorted version of what actually went down?

I couldn’t tell you if I wanted to.

I think what Champion says is that people have a democratic right to be wrong. But do they then also have the right to hurt others while exercising that ‘right’?

Doesn’t this put the onus on their governments and media? Do they have a democratic right to spread distorted information? If so, what is democracy, exactly? What is left of it if all that is valid?

I suggest you and I revisit this, and in the meantime I’m curious to see what you have to say about it. How do lies, distortions and subjective opinions relate to democracy? Is lying and distorting a democratic right, for politicians and journalists?

May 142015
 
 May 14, 2015  Posted by at 9:58 pm Finance Tagged with: , , , , , ,  13 Responses »


Harris&Ewing Washington Monument, view from air 1919

I know I’ve talked about this before, but it just keeps coming and it keeps being crzay. Bloomberg ‘reports’ that the ‘German Finance Ministry’, let me get this right, “is supporting the idea of a vote by Greek citizens to either accept the economic reforms being sought by creditors to receive a payout from the country’s bailout program or ultimately opt to leave the euro.” And that’s it.

They ‘report’ this as if it has some sort of actual value, as if it’s a real thing. Whereas in reality, it has the exact same value as Greek Finance Minister Varoufakis suggesting a referendum in Germany. Or Washington, for that matter. Something that Bloomberg wouldn’t even dream of ‘reporting’ in any kind of serious way, though the political value would be identical.

Apparently there is some kind of consensus in the international press – Bloomberg was by no means the only ‘news service’ that ‘reported’ this – that Germany has obtained the right to meddle in the internal politics of other eurozone member nations. And let’s get this one thing very clear: it has not.

No more than the Greek government has somehow acquired the right to even vent its opinions on German domestic issues. It is a no-go area for all European Union countries. More than that, it’s no-go for all nations in the world, and certainly in cases where governments have been democratically elected.

So why do Bloomberg and Reuters and all the others disregard such simple principles? All I can think is they entirely lost track of reality, and they live in a world where reality is what they say it is.

Now, I know that Schäuble ‘merely’ said – I quote Bloomberg -: “If the Greek government thinks it should hold a referendum, it should hold a referendum.. Maybe it would even be the right measure to let the Greek people decide whether they’re ready to accept what needs to be done.”

That’s admittedly not the same thing that Bloomberg makes of it, though it’s possible that the ‘reporter’ got some additional background information from the German Finance Ministry, and that that’s the reason the ministry gets mentioned, instead of just Schäuble.

But that still doesn’t make it alright by any stretch of the imagination. The EU, and the eurozone, are made up of sovereign nations. Who function in a system of equal partners, certainly from a political point of view. So the German FinMin has no business even talking about a Greek referendum, no more than the Greeks have talking about a German referendums. And Angela Merkel should be on his case for this. But she’s not. At least not in public.

Whether or not Greece has a referendum -about the euro or anything else- is up to the Greek people, and first of all to the government they elected only 3.5 months ago. It has absolutely nothing to do with whoever is in charge in Berlin, or Paris, or even in the EU headquarters in Brussels. It’s a fatal mistake to think otherwise. Bloomberg has made that fatal mistake. Schäuble has come so close Athens should file a complaint against him.

Granted, all parties involved may be influenced by what happened 4 years ago -more Bloomberg-:

Schaeuble’s stance on a Greek plebiscite is a departure from Germany’s position in 2011. Back then, Prime Minister George Papandreou dropped his plan for a referendum after Chancellor Angela Merkel and French President Nicolas Sarkozy urged him not to hold the vote.

That referendum involved a haircut on Greek debt ‘negotiated’ by the troika, which Papandreou wanted the Greek people to vote on. And Merkel and Sarkozy did much more than ‘urge’ Papandreou not to hold the vote. They were afraid it would drive Greece from the eurozone, and scared the sh*t out of him so much he withdrew the plan a few days after proposing it.

Which is just another case of Euro nations meddling in the internal affairs of a fellow member nation. Something for which there wasn’t then, and still isn’t now, any political or legal support or framework inside the EU. Still, Brussels, Berlin and Paris applied similar pressure on Italy PM Berlusconi in those days, and installed – helped install – a technocrat PM, Mario Monti. In Greece, they got Papademos. Both Papandreou and Berlusconi were gone soon after the ‘pressure’ was applied.

That’s how Europe operates. And they have no legal right to do it. But that you won’t read at Bloomberg. The whole thing is so accepted that not even Syriza tells the Germans – or Bloomberg for that matter – to shut their traps. Even though they would have a lot more right to do that than Schäuble has to comment on internal Greek affairs.

And from where I’m sitting that means that Ashoka Mody’s piece for Bruegel is too little too late. Nice try but..

Europe’s Integration Overdrive

The problems will worsen in Greece and, will inevitably, arise elsewhere. The economic and political costs of breaking the Eurozone are so horrendous that the imperfect monetary union will be held together. Instead, the cost of the ill-judged rush to the euro and mismanagement of Greece will eventually be a substantial forgiveness of Greek debt.

But this is a good moment to step back and loosen European ties. As Schuman said, “Europe will not be built according to one plan.” The task is to create a de facto solidarity—not to force a fragile embrace. A new architecture should scale back the corrosive power relationships of centralized economic surveillance. Let nations manage their affairs according to their priorities.

And put on notice private creditors that they will bear losses for reckless lending. The European fabric -held together by commercial ties- is fraying as European businesses seek faster growing markets elsewhere. That fabric could tear if political discord and economic woes persist. History and Schuman will be watching.

Things have moved way beyond where Mody thinks they are at present. The secret ingredient is simply the crisis. The way the eurozone was hastily slapped together allows only for good times. The idea was that as long as things go well, nobody would notice the cracks. But Europe has been nothing but cracks for 7 years now, and there’s no end in sight.

The Greek people can vote all they want to end the misery Europe has inflicted on them, it doesn’t matter to the major powers in the union. They simply blame it all on the same Greeks, and judging from how Bloomberg approaches the issue, they have the upper hand. They live above their means, they’re wasteful and they’re lazy. That’s the portrait painted, and that’s how 90% of the world therefore sees them.

It makes no difference whether it is true or not. It’s all just about who has more money and power and press; they get to decide what people think about other people.

Does the euro have a future? If it does, it won’t look anything like it does today. The eurozone has only ever been a mechanism to make more money flow from the south to the north. And now the north will have to come up with a measure of solidarity, of being an actual union, and they bluntly refuse.

Rich European countries are all led by politicians who want to win their next elections. And these are national elections, not European elections. Those hardly matter. Because Europe is made up of sovereign nations. And that’s why the European Union in its present shape is doomed to fail.

Brussels will always clamor for a closer union, politically, fiscally, economically. But the way Germany et al has treated Greece and Italy and Spain over the past 7 years makes abundantly clear that such a close union will never come to fruition. These are all countries that are proudly independent, that commemorate battles from hundreds of years ago where their ancestors shed the blood and gave the lives that made them independent.

They’re not going to let Germany and France and Holland call the shots in their economies and countries now. Not a chance.

Europe only has a -peaceful- future as a continent of independent nations that work together where they can. To get there, they will need to abolish the euro and completely redo the union project, from scratch, close down all offices in Brussels, and they will have to do it soon, or there will be no peace.

Meanwhile, what’s left for Greece in Brussels that is beneficial to the country? I don’t see it. It makes me think more of a Stockholm syndrome by the hour. Get out, get your own currency, negotiate a treaty with Italy and Spain, maybe France. But don’t stay in a ‘union’ with outsiders who think they can tell you, Greeks, how to run a democracy, or when to hold a referendum. That can only be a road to nowhere.

May 092015
 
 May 9, 2015  Posted by at 11:07 am Finance Tagged with: , , , , , , , ,  11 Responses »


Arthur Rothstein Steam shovels on flatcars, Cherokee County, Kansas 1936

Wall Street Soars On Hopes Of Fed Reprieve, Yet Sting In The Tail (AEP)
Wall Street Is One Sick Puppy (David Stockman)
Currencies’ Wild Ride to Get Wilder as US Rate Rise Beckons (Bloomberg)
Low Productivity Alarms US Policy Makers (FT)
Countdown To The Stock-Market Crash Of 2016 Is Ticking Louder (Paul B. Farrell)
‘Good’ Jobs Report? 15 Million Unemployed People Want To Work (MarketWatch)
UK Braces for Battle Over Europe After Cameron’s Victory (Bloomberg)
The $364 Billion Real Estate Threat Inside China’s Biggest Banks (Bloomberg)
Deflation Works! (Bill Bonner)
Documents Distributed by Greece’s Varoufakis ‘Baffle’ Eurozone Officials (WSJ)
Illinois Supreme Court Strikes Down Law to Rein in Public Sector Pensions (WSJ)
Democracy Is A Religion That Has Failed The Poor (Guardian)
Petrobras: The Betrayal of Brazil (Bloomberg)
The Clintons and Their Banker Friends- The Wall Street Connection (Nomi Prins)
Germany Spies, US Denies (Bloomberg)
Trans-Pacific Partnership Will Lead To A Global Race To The Bottom (Guardian)
Is There Such A Thing As A Skyscraper Curse? (Economist, March 28)
Global Crime Syndicates Are Buying Expensive Australia Real Estate (Domain)
Australian PM Adviser Exposes Cimate Change As Hoax, Shames All of Science (SBS)

“Markets keep treating weak data as “good news” (because it delays Fed tightening), but there comes a point when the macro-economic malaise does so much damage to earnings that reality catches up.”

Wall Street Soars On Hopes Of Fed Reprieve, Yet Sting In The Tail (AEP)

Pay packets have fallen across the gamut of US industry, manufacturing, and trade over the last two months, greatly reducing the likelihood of any rise in interest rates by the US Federal Reserve until later this year. The Dow Jones index of stocks soared by 260 points to 18,186 in early trading after the US non-farm payrolls report for April revealed that wage pressures remain all but dead in the American labour market. Contracts on the futures markets immediately pushed out the first rate rise for several months, pricing in a 51pc chance of ‘lift-off’ in December. The long-feared inflexion point for the global monetary cycle may have been delayed once again. Emerging market equities rallied strongly on hopes of another six-month reprieve for dollar debtors across the world.

Companies and state entities outside the US have borrowed a record $9 trillion in dollars, leaving them acutely vulnerable to a currency “margin call” triggered by Fed tightening. This dollar leverage has jumped from $2 trillion fourteen years ago. It is heavily concentrated in Brazil, Russia, South Africa, Turkey, China and the rest of emerging Asia. The US generated 223,000 jobs in April and the unemployment rate fell to a 7-year low of 5.4pc, yet the underlying trend remains disappointingly weak. Both overtime and the number of hours worked edged down. The jobs figure for March was revised down sharply to 85,000. The labour participation rate for men is still stuck at 69.4pc, six percentage points lower than it was fifteen years ago and the lowest level since modern data began after WWII.

Had it not been for a surge in pay for financial services – the spill-over from an increasingly frothy asset boom – overall weekly earnings would have dropped for a second month in a row. It is unclear how the Fed will respond this soggy data. Dennis Lockhart, head of the Atlanta Fed, remained hawkish this week, insisting that the economy would soon return to growth rates of 2.5pc to 3pc after grinding to halt in the first quarter. He warned that a rate rise in June was still “in play”, contrary to market assumptions. “I’m still of the view that the conditions will be appropriate in the middle of the year, which we are getting closer to,” he said. Yet the US economy has not yet recovered from a winter shock.

Mr Lockhart’s own advance indicator – the Atlanta Fed’s GDPNow series – suggests that growth has been running at a pace of just 0.8pc in the five weeks to early May. It is below the Fed’s stall speed gauge. China’s exports fell 6.9pc in April from a year earlier and remain shockingly weak. The eurozone’s retail sales unexpectedly slid 0.8pc in March, and Germany’s index of core industrial orders has turned negative. Markets keep treating weak data as “good news” (because it delays Fed tightening), but there comes a point when the macro-economic malaise does so much damage to earnings that reality catches up.

Read more …

“..the number of full-time jobs dropped by 252,000 in April – hardly an endorsement of the awesomeness theme.”

Wall Street Is One Sick Puppy (David Stockman)

The robo-traders – both the silicon and carbon based varieties – were raging again today in celebration of a “goldilocks” jobs report. That is, the headline number for April was purportedly strong enough to sustain the “all is awesome” meme, while the sharp downward revision for March to only 85,000 new jobs will allegedly enable the Fed to kick-the-can yet again – this time until its September meeting. As one Cool-Aid drinker put it, ‘“Probably best scenario in which the market was hoping for growth but not (so strong) that the Fed needs to hike in June,” said Ryan Larson at RBC Global Asset Management.’ Today’s knee jerk rip, of course, is the fifth one of roughly this magnitude since February 20th, but its all been for naught.

The headline based rips have not been able to levitate the S&P 500 for nearly three months now.In fact, however, the incoming data since February 20 has been uniformly bad. The chop depicted in the graph, therefore, only underscores that the market is desperately churning as it attempts to sustain an irrationally exuberant high. Indeed, today’s jobs data was not bullish in the slightest once you get below the headline. Specifically, the number of full-time jobs dropped by 252,000 in April – hardly an endorsement of the awesomeness theme. True enough, the monthly number for this important metric bounces around considerably. Yet that’s exactly why the algo fevers stirred by the incoming data headlines are just one more piece of evidence that the stock market is completely broken.

What counts is not the headline, but the trend; and when it comes to full time jobs there are still 1.1 million fewer now than at the pre-crisis peak in Q4 2007. Needless to say, a net shrinkage of full-time jobs after seven and one-half years is not exactly something that merits a 20.5X multiple on the S&P 500 or 75X on the Russell 2000. That’s the case especially when that same flat lining jobs trend has been underway for nearly a decade and one-half. To wit, since April 2000 the BLS’ full time job count has grown at only 0.35% annually. Now how in the world do you capitalize earnings at a rate which implies gangbusters growth of output and profits as far as the eye can see, when the US economy is self-evidently trapped in a deep rut that represents a drastic downshift from all prior history?

Read more …

Rollercoaster ahead.

Currencies’ Wild Ride to Get Wilder as US Rate Rise Beckons (Bloomberg)

If you thought the past week in the foreign-exchange market was wild, you haven’t seen anything yet. That’s the outlook from investors and strategists ranging from State Street Global Advisors to Cambridge Global Payments after price swings in the euro versus the dollar approached the highest level in more than three years. Volatility surged as traders unwound bets for gains in European bonds and stocks that had been funded in euros, prompting demand for the shared currency to close out what are known as carry trades. Price swings accelerated Friday after a lackluster U.S. employment report, raising more questions than answers about the timing of Federal Reserve interest-rate increases. “This unusual backdrop is going to create some turmoil,” Dan Farley at State Street.

“The next several weeks are likely to be choppy as things continue to be absorbed, bouncing off the good and the bad news.” The euro’s one-month implied volatility jumped as high as 13.2%, inching toward the 14% level where it last closed in December 2011. The common currency was unchanged on the week at $1.1199 as of 5 p.m. on Friday in New York. The Bloomberg Dollar Spot Index slid 0.7%, falling a fourth week in its longest run of declines since October 2013. The greenback weakened 0.3% to 119.76 yen. Europe’s bond rout wiped more than $400 billion from the value of the region’s debt in the past two weeks as investors questioned whether the ECB will continue its program of asset purchases through September 2016 amid signs the region’s economy is picking up.

The selloff eroded the premium Treasuries pay over bunds to the narrowest since February, lessening the attractiveness of dollar-denominated assets. “You’re going to see continued volatility driven by the bond markets,” said Karl Schamotta at Cambridge Global Payments in Toronto. “Investors are increasingly concerned that they could be caught in the exits when everyone rushes out of the theater.”

Read more …

Apparently these people find it hard to see what’s wrong.

Low Productivity Alarms US Policy Makers (FT)

US innovators claim they have never been busier, but their ideas are persistently failing to transform the country’s economic data. Labour productivity fell an annual 1.9% in the first three months of the year, while unit labour costs rose sharply, official figures showed on Wednesday. The output per hour figures came as the country’s gross domestic product barely grew during the quarter even as it added an average of nearly 200,000 jobs a month. The numbers confirm a longer-run trend of slowing productivity that is alarming policy makers and complicating Federal Reserve decision-making. “It has slowed in quite a worrying way,” said Torsten Slok, chief international economist at Deutsche Bank.

Productivity, which measures how efficiently inputs such as labour and capital are used, evolves over years and decades. This means a single quarter’s data should not be over-interpreted — especially one that was hit by one-time factors including freezing temperatures. The first quarter dive mirrors a weather-affected first quarter in 2014. But the numbers, which follow a 2.1% annual productivity drop in the fourth quarter, confirm a broader tendency that has been mirrored in a number of advanced economies and has perplexed economists. Analysis from the San Francisco Federal Reserve shows there was a surge in US productivity between 1995 and 2003, driven by the IT boom, with growth doubling from the annualised average of 1.5% set in the 1970s, 1980s and early 1990s.

The picture then reversed, however, and the US has been stuck in a lower-productivity growth trend since. Internationally comparable figures from the Conference Board show a broader slowdown among advanced economies including the UK and Japan over recent decades. Some economists say these weak numbers are jarring given the inventiveness being displayed in sectors such as software, medicine, and advanced manufacturing, and the rapid advance of robotics. “People are saying the pace of innovation has never been higher,” says Martin Neil Baily, an economist at Brookings, the think-tank.

Read more …

“2016 sounds more and more like McCain/Palin’s 2008 loss when the GOP was also deep in denial about the coming market crash..”

Countdown To The Stock-Market Crash Of 2016 Is Ticking Louder (Paul B. Farrell)

Warning bells just keep getting louder and louder as the countdown to the Crash of 2016 keeps ticking. Wall Street’s in denial, but the Washington Post warns: “U.S. economic growth slows to 0.2%, grinding nearly to a halt.” USA Today hears “Bubble Talk” at the Vegas “Davos for Geeks.” Earlier the Wall Street Journal warned, “declining population could reduce global economic growth by 40%.” Then recently the “slow-growth Fed” was blamed. Wrong, former Fed chief Ben Bernanke counterattacked: “I’m waiting for the Journal to argue for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive.”

But for years the Fed “has been pretty much the only game in town as far as economic policy goes.” Today “we should be looking for a better balance between monetary and other growth-promoting policies, including fiscal policy.” Fiscal policy? No, Ben, not a chance. The GOP controls economic policy. And they will never give “growth-promoting fiscal policy” victories to President Obama and Hillary Clinton before the presidential election of 2016. Never. In spite of Bernanke’s obviously rational solution to the core problems of the American economy, one that would help the American people, the GOP will never, ever agree to fiscal stimulus programs that give the Democrats bragging rights and make Obama and Clinton look good before the elections.

The GOP is hungry for power, very hungry. They lost the presidency twice to Obama. They want it back. And now their collective ego is convinced that with the $889 million backing from the Koch Empire they can beat Hillary and take absolute control of the American democracy: win the presidency, hold Congress, gain the power to issue executive orders and veto legislation, appoint more than 6,000 insiders including cabinet officers, regulatory heads, federal judges, ambassadors, staff bureaucrats, and more. Yes, the GOP knows all that power is on the line in 2016. Listen: 2016 sounds more and more like McCain/Palin’s 2008 loss when the GOP was also deep in denial about the coming market crash. Money manager Jeremy Grantham’s predictions see beyond the Big Oil-funded GOP’s gross denial, he sees that “around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.”

Read more …

Only 15 million out of 93 million not in labor force? So 78 million bluntly refuse to work? Hard to believe.

‘Good’ Jobs Report? 15 Million Unemployed People Want To Work (MarketWatch)

There is good news in the jobs market, just not enough of it. The Bureau of Labor Statistics reported Friday that the U.S. economy continued to create jobs at a healthy pace of nearly 200,000 per month in the first four months of the year, and the unemployment rate dipped to 5.4% in April, the lowest since May 2008. But we are still far from achieving an economy that offers a job for everyone who wants one. And wages are barely growing for the 148 million who do have a job. Nearly 15 million jobless people say they want to work, but the Federal Reserve seems nearly ready to declare victory, figuring that the unemployment rate can’t go much lower without setting off a harmful inflationary spiral.

There is scant evidence that tight labor markets are putting any pressure on companies to raise their prices: Unit labor costs are up just 1.1% in the past year. Inflation — no matter how you measure it — is not a risk in the near term, or even in the medium term. There’s little evidence that workers have gotten those hefty raises that economists insisted were coming any day now. Growth in average hourly earnings is stuck in the same tight range of about 2% per year that it’s been at for the past five years. In April, average hourly earnings rose only 0.1%, bringing the change over the past year to 2.2%. And the “average” wage overstates the reality for most workers.

The average is boosted by rapid pay increases for just a few, including executives, whose “salaries” include bonuses and the receipt of shares of the company’s stock or options to buy shares. The encouraging acceleration in compensation that was reported in the employment cost index last week was largely due to sales commissions and bonuses collected by only a few. Most workers aren’t seeing that 2.2% pay increase. For the median full-time worker, usual weekly earnings are up just 1.5% in the past year, far below the 4% pay raise they got the last time that the unemployment rate was as low as 5.4%. (The “median” means that half of the workers got less than a 1.5% pay raise, and half got more.)

Read more …

“While the U.K. Independence Party, which campaigns for an EU exit, has only won one seat, the party won 13% of the popular vote..”

UK Braces for Battle Over Europe After Cameron’s Victory (Bloomberg)

David Cameron persuaded U.K. voters to give him a second term as prime minister. Now he needs to persuade them to stay in the European Union. The Conservatives’ surprise win came after a campaign that saw Cameron’s pledge of a referendum on EU membership by 2017 share almost equal billing with his record of delivering economic stability. Cameron, who has said he wants the country to stay in the EU, will first seek to renegotiate Britain’s membership terms. The Conservatives “may even try and bring things forward to stop this wrecking the next two years for them,” said Tim Bale, professor of politics at Queen Mary University in London.

“It’s a very tight majority which means he will have to make promises to people and do things to keep them on board on Europe, in particular as Cameron has a record of backing down under pressure to euro skeptics.” While the pound surged on Cameron’s victory amid optimism that an economic recovery will solidify under his administration, some investors warned that the euphoria could be short lived as a EU referendum draws closer into view. The vote is intended to settle a question that’s divided the nation since the U.K. joined Europe’s common market in 1973, and split the Conservatives for a generation. “Initial short-term cheer could be followed by a medium-term chill,” said Fabrice Montagne at Barclays.

“The referendum is likely to generate a substantial amount of uncertainty, particularly if polls fail to show more substantial support for EU membership in the coming weeks and months.” With most seats declared, the BBC forecast the Tories to take 331 of Parliament’s 650 seats to Labour’s 232 seats, a result that would allow Cameron to govern alone. While the U.K. Independence Party, which campaigns for an EU exit, has only won one seat, the party won 13% of the popular vote, according to the BBC. Last year, UKIP won the most votes in elections for the European Parliament, taking almost a third of Britain’s seats.

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That’s just China’s biggest four banks. “Property prices in 70 Chinese cities have fallen for more than a year..” “Loans backed by properties now comprise 40% of all facilities held by Fitch-rated banks..”

The $364 Billion Real Estate Threat Inside China’s Biggest Banks (Bloomberg)

Fitch Ratings has called real estate the “biggest threat” to Chinese banks as surging loans tied to properties coincide with defaults and falling sales. Corporate loans backed by buildings have grown almost fivefold since 2008 and residential mortgages have more than tripled in the period among lenders rated by Fitch, the company said Friday. That’s seen property loans held by China’s four biggest lenders soar to a total 2.26 trillion yuan ($364 billion), according to their annual reports. “Collateral is supposed to reduce bank risk – but the rise of property collateral in corporate loans may actually increase the chance of bank failure,” Fitch analysts Jack Yuan and Grace Wu said in the report.

“This is because the widespread use of such collateral has lowered the perceived risks of lending, fueling China’s credit build-up and spreading real-estate risk to other sectors of the economy.” Alarm bells sounded last month when Kaisa Group Holdings Ltd. became the first Chinese developer to default on offshore bonds, putting more scrutiny on a sector that made up a third of the nation’s economy in 2013, according to Gavekal Dragonomics. Property prices in 70 Chinese cities have fallen for more than a year, the worst losing streak in at least a decade, while sales have dropped for 11 of the past 24 months, Bloomberg-compiled data show. Loans backed by properties now comprise 40% of all facilities held by Fitch-rated banks, according to the report. Total credit to real estate could be as high as 60% if other types of financing besides direct loans are included, Fitch said.

“The property market is usually one of the main revenue contributors to the state,” said Raymond Chia, the head of credit research for Asia ex-Japan at Schroder Investment Management Ltd. “With the weakness in the sector, especially with excess inventory overhang as well as weak earnings by developers, economic growth will be affected.” Industrial & Commercial Bank of China, the world’s biggest bank by assets, held 443.5 billion yuan of real estate loans, or 6.6% of all facilities, at the end of last year, according to its annual report. The portion for Bank of China, the nation’s second-largest, was 714.6 billion yuan of advances, or 8.4% of its credit book.

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“Today, a long depression in the US would be unbearable. The public couldn’t stand it. Six out of ten households live paycheck to paycheck. Can you imagine what would happen if those paychecks ceased?”

Deflation Works! (Bill Bonner)

As we have seen, Japan has already had a 25-year slump. The US is now in Year 8 of its slump, with fragile growth at only half the rate of the last century. They could get better… or worse. Negative rates could keep the cronies in business. The slump itself – combined with peak debt and 500 million Chinese laborers – could keep inflation in check. But the point comes when investors see that the risk of loss (because something can always go wrong) is greater than the hope of gain. That moment must be approaching in the US stock market. Prices are near record highs, even as the economy flirts with recession. One day, perhaps soon, we will see stocks falling – as much as 1,000 points in 24 hours. Jacking up the stock market has been the Fed’s singular success. Activism has been its creed.

Interventionism is its modus operandi. It will not sit tight as the market falls apart and the economy goes into recession. Instead, it will announce QE 4. It will try to enforce negative interest rates. And it will move – as will the Japanese – to “direct monetary funding” of government deficits. That is, it will dispense with the fiction of “borrowing” from its own central bank. It will simply print the money it needs. The US Fed of 1930 was not nearly as ambitious and assertive as the Fed of 2015. In the ‘30s, it watched as the economy chilled into a Great Depression. As Ben Bernanke told Milton Friedman, “We won’t do that again.” It couldn’t if it wanted to. Back in the ‘30s, consumer debt had barely been invented. Most people still lived on or near farms, where they could take care of themselves even if the economy was in a depression.

Few people had credit. Instead, they had savings. There were no food stamps. No disability. No rent assistance. No zombie industries. No student debt. No auto debt. No cash-back mortgages. And cash was real money, backed by gold. Today, a long depression in the US would be unbearable. The public couldn’t stand it. Six out of ten households live paycheck to paycheck. Can you imagine what would happen if those paychecks ceased? Supposedly, the US economy is still growing… with the stock market near record highs. Yet, one out of every five households in America has not a single wage-earner. Among inner-city black men, ages 20-24, only 4 out of 10 have jobs. Half the households in the US count on government money to make ends meet. And 50 million get food stamps. What would happen to the cities – and the suburbs – in a real depression?

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They try to act as if Yanis were stupid, but they themselves lack understanding of the matter at hand.

Documents Distributed by Greece’s Varoufakis ‘Baffle’ Eurozone Officials (WSJ)

Economic plans and growth estimates distributed by Greek Finance Minister Yanis Varoufakis to some of his eurozone counterparts have baffled officials involved in the talks over its international bailout. Officials say that the files differ greatly from what has been discussed at the technical level in Brussels in recent days and underline how Mr. Varoufakis continues to complicate progress toward a financing deal. The 36-page document, entitled “Greece’s recovery: A blueprint” and seen by The Wall Street Journal, was presented by Mr. Varoufakis to his counterparts in Paris and Rome, as well as senior officials in Brussels, while he was touring European capitals over the past week, according to four European officials.

The Greek Finance Ministry said the document was a first draft of a new plan “for the recovery and growth of the country in the [post-bailout] era,” which it said Mr. Varoufakis had discussed informally with some of his counterparts. “This is a long-term project that goes well beyond the limits of the negotiation that is currently underway in the Brussels Group,” as the group of experts representing Greece and its creditors is known, the ministry said. Greece’s leftist-led government is locked in negotiations with the European Union and the International Monetary Fund over its next slice of financial aid as part of a €245 billion rescue package. Disagreements over cuts to Greece’s pension system and changes to its labor rules that would make it easier to dismiss workers have held up a deal on further loans.

While the talks have become more constructive, differences remain wide, European officials say. The paper focuses on the Greek economy and how it can return to growth. “Perhaps it is time to visualize a recovering Greece before we unlock the present impasse,” the document says, before going into areas where the country plans overhauls. While some of the outlined measures are the same as those agreed to in the negotiations—such as the creation of an independent tax commissioner—the paper differs in other areas. One significant difference is the creation of a so-called bad bank that would house and wind down Greek lenders’ bad loans. “Conveniently, the financing of the bad bank is not treated,” an EU official said.

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Prelude to multiple bankruptcies.

Illinois Supreme Court Strikes Down Law to Rein in Public Sector Pensions (WSJ)

The Illinois Supreme Court struck down the state’s 2013 pension overhaul, unraveling an effort by lawmakers to rein in benefits for the consistently underfunded public-sector system. The current pension shortfall is estimated at $111 billion, one of the largest nationally. The high court affirmed a decision in November by a state circuit court that the legislative changes violated pension protections written into the state constitution. The decision is a victory for a consortium of public-sector unions while creating a huge challenge for new Republican Gov. Bruce Rauner, who already faces a yawning budget deficit for the coming fiscal year.

“The financial challenges facing state and local governments in Illinois are well known and significant,” said Justice Lloyd Karmeier, writing for the entire court. “It is our obligation, however, just as it is theirs, to ensure that the law is followed.” Illinois joins Oregon and Arizona as recent examples of high courts peeling back pension overhauls. Other states, including Colorado and Florida, have upheld laws cutting benefits. Mr. Rauner’s office urged a constitutional amendment to help fix the problem. Otherwise, the state will be forced to turn to tax increases, budget cuts or, as Mr. Rauner discussed earlier this year, municipal bankruptcy. Recent federal bankruptcy cases in Detroit and Stockton, Calif., have raised the question of whether pension benefits are fully protected.

After the ruling, Standard & Poor’s Ratings Services put the state’s credit ratings on watch for potential downgrade, saying Illinois faces “profound credit challenges.” The Illinois law would have reduced retirement costs by shrinking cost-of-living increases for retirees, raising retirement ages for younger workers, and capping the size of pensions. “The court’s ruling confirms that the Illinois Constitution ensures against the government’s unilateral diminishment or impairment of public pensions,” said Michael Carrigan, president of the Illinois ALF-CIO, speaking on behalf of the We Are One Illinois coalition of unions.

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It’s not democracy, it’s what is not democracy but is still called by that name.

Democracy Is A Religion That Has Failed The Poor (Guardian)

Right now I feel ashamed to be English. Ashamed to belong to a country that has clearly identified itself as insular, self-absorbed and apparently caring so little for the most vulnerable people among us. Why did a million people visiting food banks make such a minimal difference? Did we just vote for our own narrow concerns and sod the rest? Maybe that’s why the pollsters got it so badly wrong: we are not so much a nation of shy voters as of ashamed voters, people who want to present to the nice polling man as socially inclusive, but who, in the privacy of the booth, tick the box of our own self-interest. Rewind 24 hours and it felt so different. Thursday morning was lovely in London, full of the promise of spring. Even the spat I had with the man outside my polling station shouting at “fucking immigrants” didn’t disrupt an overall feeling of optimism.

Were people walking just a little bit more purposefully? Was I mistaken in detecting some calm excitement, almost an unspoken communal bonhomie? Perhaps also a feeling of empowerment, a sense that it was “the people” that could now make a difference. But by bedtime the spell had been broken. Things were going to stay the same. No real difference had been made. The utterly miserable thought strikes me that Russell Brand just might have been right. What difference did my vote make? Why indeed do people vote, and care so passionately about voting, particularly in constituencies in which voting one way or the other won’t make a blind bit of difference? And why do the poor vote when, by voting, they merely give legitimacy to a system that connives with their oppression and alienation?

The anthropologist Mukulika Banerjee suggests a fascinating answer: elections are like religious rituals, often devoid of rational purpose or efficacy for the individual participant, but full of symbolic meaning. They are the nearest thing the secular has to the sacred, presenting a moment of empowerment. But is this empowerment illusory? Is, as Banerjee asks, “the ability to vote … a necessary safety valve which allows for the airing of popular disaffection, but which nevertheless ultimately restores the status quo. In such a reading, elections require the complicity of all participants in a deliberate mis-recognition of the emptiness of its procedures and the lack of any significant changes which this ritual brings about, but are a necessary charade to mollify a restless electorate.”

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The numbers are insane and growing. This may well make the country ungovernable.

Petrobras: The Betrayal of Brazil (Bloomberg)

Since March 2014, prosecutors have accused more than 110 people of corruption, money laundering, and other financial crimes. Six construction and engineering firms have been accused of illegal enrichment in what is known as a noncriminal misconduct action. On April 22, Moro delivered the first convictions. He found Costa and Youssef guilty of money laundering, including the Land Rover purchase. Moro gave both men reduced sentences two years house arrest for Costa and three years in prison for Youssef for cooperating with prosecutors. All of that is something of a preview of the big show: Prosecutors say they may accuse some of Brazil s largest builders with running an illegal cartel.

It’s been clearly proven in this case that there was a criminal scheme inside Petrobras that involved a cartel, bid rigging, bribes to government officials and politicians, and money laundering, Moro wrote in sentencing Costa and Youssef. There will be a cartel indictment, says Carlos Lima, a lead prosecutor in the case. I do’ t like to get ahead of myself and say this will happen, but it will. It’s just a matter of time. In filings in Judge Moro’s court, prosecutors have named 16 companies that allegedly formed a cartel to fix Petrobras contracts between 2006 and 2014. The list includes some of Brazil s largest construction and engineering firms, including Camargo Correa, OAS, UTC Engenharia, and the biggest of them all, Construtora Norberto Odebrecht. All of these companies deny being part of a cartel, except Camargo Correa, which declined to comment.

Petrobras says it knew nothing about the bid rigging and is collaborating with authorities in the investigation. As to whether it was the victim of a cartel, the company is certain, Mario Jorge Silva, Petrobras’s executive manager for performance, said at an April 22 news conference. In financial filings, Petrobras says 199.6 billion reais worth of contracts were rigged by the alleged cartel. For years, a co-owner of the engineering firm UTC called members to meetings at his offices in Sao Paulo via text messages, according to testimony and documents submitted in Moro’s court. The participants were greeted by an assistant, who handed out name tags. At the meetings, executives took copious notes detailing how the alleged cartel would divvy up Petrobras contracts, at inflated prices. One builder put together a 2 1/2-page encoded guide for group members that describes contract bidding as a soccer tournament, with leagues and teams.

Another document drawn up by a group member lists the chosen winners of upcoming bidding for 14 contracts for a refinery, with the title Fluminense Final Bingo Proposal, using a nickname for the state of Rio de Janeiro. Prosecutors say the builders got away with it by paying kickbacks, usually 3%, on every contract. Petrobras estimates that the graft added up to at least 6.2 billion reais, much of which, prosecutors say, was funneled into the war chests of the parties that backed Luiz In·cio Lula da Silva, president of the country from 2003 to 2010, and his handpicked successor, Dilma Rousseff. Lula and Rousseff haven t been charged with wrongdoing, but special prosecutors have opened criminal investigations into more than 50 members of congress and other politicians implicated in the corruption scheme.

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“..in all these years, Hillary Clinton has not publicly condemned Wall Street or any individual Wall Street leader.”

The Clintons and Their Banker Friends- The Wall Street Connection (Nomi Prins)

The past, especially the political past, doesn’t just provide clues to the present. In the realm of the presidency and Wall Street, it provides an ongoing pathway for political-financial relationships and policies that remain a threat to the American economy going forward. When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a “champion” for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton. Such relationships run too deep and are too longstanding.

To grasp the dangers that the Big Six banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley) presently pose to the financial stability of our nation and the world, you need to understand their history in Washington, starting with the Clinton years of the 1990s. Alliances established then (not exclusively with Democrats, since bankers are bipartisan by nature) enabled these firms to become as politically powerful as they are today and to exert that power over an unprecedented amount of capital. Rest assured of one thing: their past and present CEOs will prove as critical in backing a Hillary Clinton presidency as they were in enabling her husband’s years in office.

In return, today’s titans of finance and their hordes of lobbyists, more than half of whom held prior positions in the government, exact certain requirements from Washington. They need to know that a safety net or bailout will always be available in times of emergency and that the regulatory road will be open to whatever practices they deem most profitable. Whatever her populist pitch may be in the 2016 campaign – and she will have one – note that, in all these years, Hillary Clinton has not publicly condemned Wall Street or any individual Wall Street leader. Though she may, in the heat of that campaign, raise the bad-apples or bad-situation explanation for Wall Street’s role in the financial crisis of 2007-2008, rest assured that she will not point fingers at her friends.

She will not chastise the people that pay her hundreds of thousands of dollars a pop to speak or the ones that have long shared the social circles in which she and her husband move. She is an undeniable component of the Clinton political-financial legacy that came to national fruition more than 23 years ago, which is why looking back at the history of the first Clinton presidency is likely to tell you so much about the shape and character of the possible second one.

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Deepening.

Germany Spies, US Denies (Bloomberg)

Reports of German spying on European corporate targets at the behest of the U.S. have led to calls that Chancellor Angela Merkel was hypocritical for complaining about U.S. spying on Germany. Well, yes — but the hypocrisy of politicians hardly comes as a shock. What’s more striking about the recent revelations is their targets – and what they say about U.S. government claims that it doesn’t spy on behalf of private U.S. corporations. Start with a rather obvious question: Why would the U.S. government rely on Germany to spy on European corporations? Why not just do the spying directly? It’s not as if the U.S. lacks the intelligence capacity to do it. After all, the U.S. spied directly on Merkel in the episode that made her object so strongly and publicly and hypocritically.

It’s hard to know for sure, and the answer may conceivably lie in complex interstate agreements that aren’t public. But there’s a highly plausible alternative answer, one connected to the recent history of U.S. efforts to vilify Chinese government’s industrial espionage. The U.S. may be using Germany to do industrial spying because it wants to claim that, unlike other countries, the U.S. doesn’t do spying on behalf of its corporations. In August 2013, a National Security Agency spokesman told the Washington Post in an e-mail that the Department of Defense “does ***not*** engage in economic espionage in any domain, including cyber.” In case you’re wondering, the six asterisks appeared in the original e-mail. Notice that the NSA statement didn’t say that other agencies avoid economic espionage, just those that are part of the Department of Defense.

Notice, too, that the statement didn’t say that no one shares stolen information with the U.S. The next month, after a fresh round of Edward Snowden revelations, the director of national intelligence, James Clapper, issued a further statement. He acknowledged that “the Intelligence Community” (his capitalization) “collects information about economic and financial matters.” But he insisted that: “What we do not do … is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of – or give intelligence we collect to – U.S. companies to enhance their international competitiveness or increase their bottom line.” A close, retrospective reading of this statement reveals it to be completely consistent with the U.S. relying on foreign intelligence organizations, such as the Germans, to spy on private targets – and then share the proceeds with American companies for whatever reason.

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All globalization does.

Trans-Pacific Partnership Will Lead To A Global Race To The Bottom (Guardian)

At a time when economic inequality around the globe continues to widen, the Trans-Pacific Partnership (TPP) will only make things worse. Unlike what President Obama claims, the agreement will only encourage a race to the bottom, in which a small percentage of people get ridiculously rich while most workers around the globe stay miserably poor. We can’t let that happen. Today, President Obama is visiting Nike’s headquarters in Beaverton, Oregon to garner support for the trade deal, which would be signed by the US and 11 Pacific Rim countries. That’s an apt place for Obama to beat the free-trade drum – Nike, like the TPP, is associated with offshoring American jobs, widening the income inequality gap, and increasing the number of people making slave wages overseas.

Since the passage of NAFTA in 1993, we’ve seen the loss of nearly five million US manufacturing jobs, the closure of more than 57,000 factories, and stagnant wages. This deal won’t be any different. In November, Zachary Senn, a college student reporter at the Modesto Bee, spent three weeks in Indonesia living with and interviewing workers who make goods for Nike, Adidas, Puma and Converse. When you hear Obama talking about those “high-quality jobs,” think of RM, a 32-year-old mother who told Senn that she works 55 hours, six days a week and makes just $184 a month after 12 years at the PT Nikomas factory, a Nike subcontractor that employs 25,000 people. That’s 83 cents an hour or $2,208 a year. RM works in the sewing department and is expected to process 100 shoes an hour.

“If we don’t meet our quotas, we get yelled at”, she told Senn. “And then the quotas are piled into the next day”. Eating lunch is difficult because the food “smells bad,” and worse yet, RM said there is only one restroom, with 15 stalls, for 850 women. RM told Senn that she doesn’t want Nike to leave Indonesia; she wants an end to verbal abuse and a 50% raise, which would allow her to better provide for her family. Is $368 a month too much to ask from a multinational corporation that posted $27.8 billion in revenue and spent $3 billion on advertising and promotions in fiscal 2014? Nike CEO Mark Parker was paid $14.7 million in compensation last year. That’s $7,656 an hour. Wages in Vietnam, a key TPP partner, are even lower than Indonesia. Nike’s largest production center is in Vietnam where 330,000 mostly young women workers with no legal rights earn just 48 to 69 cents an hour.

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6 weeks old, but too good to leave behind.

Is There Such A Thing As A Skyscraper Curse? (Economist, March 28)

The world is in the middle of a skyscraper boom. Last year nearly 100 buildings over 200 metres tall were built—more than ever before. This year China’s business capital will welcome the Shanghai Tower, which will be the world’s second-tallest building. Saudi Arabia is building Kingdom Tower, which will be the world’s tallest (and twice the height of One World Trade Centre in New York, the tallest building in the Americas). Does this frenzy of building augur badly for the world economy? Various academics and pundits, many of them cited by The Economist, have long argued as much, but new research casts doubt on it.

In 1999 Andrew Lawrence, then of Dresdner Kleinwort Benson, an investment bank, identified what came to be known as the “skyscraper curse”.* Mr Lawrence noticed a curious correlation between the construction of the world’s tallest buildings and economic crises. The unveiling of the Singer Building and the Metropolitan Life Tower in New York, in 1908 and 1909 respectively, roughly coincided with the financial panic of 1907 and subsequent recession. The Empire State Building opened its doors in 1931, as the Great Depression was getting going (it was soon dubbed the “Empty State Building”). Malaysia’s Petronas Towers became the world’s tallest building in 1996, just before the Asian financial crisis. Dubai’s Burj Khalifa, currently the world’s tallest building, opened in 2010 in the middle of a local and global crash.

Skyscrapers can be hugely profitable, since by building upwards developers can rent out more floor space on a given plot of land. But at some point extra storeys are no longer a good deal, since marginal costs—for more lifts and extra steel to stop the building from swaying in the wind, for example—increase faster than marginal revenues (rents or sales). William Clark and John Kingston, an economist and an architect writing in 1930, found that the profit-maximising height for a skyscraper in midtown New York in the 1920s was no more than 63 storeys. (The ideal height is probably not much different today.) Record-breaking skyscrapers could therefore be seen as an indication that gung-ho investors are overestimating the probable future returns from new construction.

Indeed, developers may be building record-breaking towers even though they know they are economically inefficient. There is, after all, a certain cachet to having a very tall building with your name on it. In 1998 Donald Trump, a magnate, presented a plan to build the world’s tallest residential building in New York as the righting of a historical wrong, not a shrewd business move. “I’ve always thought that New York should have the tallest building in the world,” he proclaimed. If such vanity projects can secure funding, the theory goes, financial markets must be out of control and will soon suffer a sharp correction. Mr Trump’s tower opened just as the dotcom bubble was bursting.

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And London, New York etc. Real estate is a great way to launder cash.

Global Crime Syndicates Are Buying Expensive Australia Real Estate (Domain)

Some of Australia’s most expensive real estate is being bought by global crime syndicates, one of the country’s top crime-fighting bodies says. So worried are they about the influx of dirty money that the Australian Crime Commission has launched an investigation looking at money laundering and terrorism financing through property. Concerns that criminals may be targeting real estate were raised within the commission about six months ago, according to an ACC spokeswoman. The Targeting Criminal Wealth Special Investigation is expected to run until June next year. “Taskforce investigations have uncovered information about organised crime entities investing in high-value commodities, such as real estate, to help launder illicit funds into the legitimate economy,” said ACC chief executive Chris Dawson, APM.

“The Australian real estate sector is perceived as stable and at low risk of significant depreciation in the short term, and potential for growth in the long term. It is likely that organised crime are exploiting these conditions to invest in the Australian real estate market to launder the proceeds of illicit activity including drug profits.” The ACC declined to specify countries of concern because the investigation is ongoing. Parliamentary secretary to the Treasurer Kelly O’Dwyer said the federal government was being forced to play catch-up on the issue because there had been no co-ordinated data matching scheme on property records to date. The recently announced data-matching scheme set to start from December 1 as part of the federal government’s crackdown on foreign investment would be a big help to agencies like the ACC in these investigations, Ms O’Dwyer said.

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Brilliant.

Australian PM Adviser Exposes Cimate Change As Hoax, Shames All of Science (SBS)

Business Adviser Maurice Newman has been praised today for his stellar work uncovering that climate change was a hoax perpetrated by the United Nations and the vast majority of the entire scientific community from all around the world. Newman, who also managed to expose the New World Order as something that actually exists and isn’t just made up by conspiracy theorising weirdos, has been widely praised for his efforts in bringing down what is thought to be the most elaborate conspiracy of all time. “Of course he will be in consideration for the Nobel Prize,” said one science observer. “To completely humiliate the vast majority of the scientific community like this on such a huge issue is almost unprecedented.

“In years to come we’ll say Maurice Newman in the same breath as we say Albert Einstein and Isaac Newton. To think, thousands of scientists and millions upon millions of dollars of resources couldn’t uncover this conspiracy but one guy with no expertise managed to bring it all down on a lark.” The world’s scientists have reacted with abject shame at being found out after all this time. “I always knew we’d be found out,” said one scientist. “It’s only so long you can keep something like this up when you have to independently incorporate every person studying climate, sea levels, soil, and thousands of other aspects. The paper trail alone was incredibly obvious. Not to mention our connection with the United Nations meaning we had to have every nation on board with tricking Australia for some reason.

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May 082015
 


Jack Delano Long stairway in mill district of Pittsburgh, Pennsylvania 1940

We at the Automatic Earth always try to steer clear of elections as much as possible, because there are no functioning democracies left in the west -no more than there are functioning markets-, and no journalists reporting on them either. Interesting question, by the way: how can a journalist report on a democracy that isn’t there? And where in that setting does news turn to mere opinion, and where does opinion then become news ?

Still, of course we caught some bits of the UK elections along the way regardless. The decisive moment for us must have been when Jeremy Paxman interviewed David Cameron at the BBC, and asked him if he knew how many foodbanks had been added in Britain since he took office 5 years ago.

Cameron, well duh obviously, had no idea, and instead of answering the question he started a flowery discourse praising the many volunteers who work in the foodbanks he didn’t know existed. Paxman cut him short and said there were 66 when Cameron came to power, and 421 now. Apparently in Britain, volunteers are needed to take care of the needy, they’re not going to pay people to do that. You would think that takes care of Cameron’s candidacy, but you couldn’t be more wrong.

At least Paxman seemed to try, but interviews like his should take place on the eve of an election, not 6 weeks before them like this one. That leaves far too much time for spin doctors to repair damage done by their candidate’s ignorance and gullibility. It’s crazy enough that party leaders can refuse to discuss each other, let alone the public, in public. Then again, that too would only be significant if there would be an actual democracy in Britain.

As things are, they might as well have put the royal baby in charge as soon as she was born, or for that matter the newborn macaque in Japan that ‘stole’ her name (at least there was an honest public ballot for that). Or perhaps the adorable little monkey can take over polling in the UK, since we can’t imagine any British pollsters still being employed tomorrow morning, not with the degrees to which they missed any and all election outcomes today.

A whole bunch of ‘leaders’ will leave too, but there’s plenty of shades of dull grey humanoids waiting in the wings to replace them. Besides, though Nigel Farage has often been dead on in describing, in the European Parliament, the inherent failures of Brussels, at home he’s never been more than a sad lost clown. I had to think hard about LibDem Clegg’s first name, even needed to look it up -it’s Nick- , and that sort of says it all: he would do well to change his name to Bland.

And perhaps Ed Milibland should do the same. Can anyone ever really have believed that this lady’s underwear salesman could have won this election? Or did they all just fudge the numbers so they had material to print? Ed Milibland never stood a chance. And Russell Bland can now go lick his wounds from supporting the guy, and no, Russell, saying now that you’re just a comedian won’t do the trick. You’ve been tainted. If it’s any consolation, you screwed up the same way Springsteen did when he played Obama’s support act. No surrender, no excuses.

Milibland, by the way, had one last no-no to offer in stepping down. He tweeted: “I am grateful to the people who worked on our campaign and for the campaign they ran. The responsibility for the result is mine alone.” Sorry, boyo, but that just ain’t so. The responsibility lies at least as much with the people who put you in the leader’s chair that doesn’t fit you, and with those who kept you in that chair throughout the campaign.

All Brits should feel blessed that they’re not in America, where these campaigns, which are equally hollow and devoid of democratic principles, last ten times as long. If your blessings are few, do count them.

But then, we all get what we deserve. If the Brits want to be governed and gutted by the same people who raised the number of foodbanks the way they have, by a factor of seven in five years, and who fabricated the pretense of a functioning economy by blowing the biggest bubble in British history in selling off London town to monopoly money printing Chinese, Russian expat oligarchs and other such impeccable and blameless world citizens, if that’s what the Brits want, then let them have it.

One things’s for sure: Cameron and his ilk, now that they have a majority, will let them have it. And then some. In reality, though, even if they deserve what they get, there’s no vox populi here: the people have not spoken, the people have done what the press told them to do. Like in so many countries, there effectively is no press anymore in Britain, at least not in the sense that we used to knowl; the press no longer asks questions. Which begs yet another question: what is first to go, the media or the democratic values?

Peter Yukes wrote this for Politico just before the election:

The British Press Has Lost It

For months polls have put Conservatives and Labour close with about third of the vote each, and smaller parties destined to hold some balance of power. But there has been no balance in the papers. Tracked by Election Unspun, the coverage has been unremittingly hostile to Ed Miliband, the Labour challenger, with national newspapers backing the Conservative incumbent, David Cameron over Labour by a ratio of five to one.

Veteran US campaign manager David Axelrod finds this politicization of the print media one of the most salient differences with the US. “I’ve worked in aggressive media environments before,” he told POLITICO, “but not this partisan.” Axelrod may have ax to grind as he advises the Labour Party, but even a conservative commentator and long-serving lieutenant of Rupert Murdoch has been shocked. “Tomorrow’s front pages show British press at partisan worst,” Andrew Neil, former editor of the Sunday Times rued. “All pretense of separation between news and opinion gone, even in ‘qualities.’”

Excuse me, but how is ‘this politicization of the print media one of the most salient differences with the US’? Which US paper has not long been grossly politicized? It’s a shame Yukes devalues his article with such statements.

And that’s the difference. The whole newspaper industry seems to be affected by the tabloid tendentiousness trade-marked by Murdoch’s best-selling the Sun when it roared, in 1992, “It’s the Sun Wot Won It.” The Daily Mail specializes in political character assassination and the ‘Red Ed’ tag was predictable. But when the paper went on from attacking Miliband’s dead father to a hit-job on his wife’s appearance, the politics of personal destruction sank from gutter to sewer.

In this precipitous race to the bottom, perhaps the Daily Telegraph had the steepest fall. Known as a bastion of the Tory thinking, it had long been respected for separating fact from comment. During this election cycle is was caught sourcing its front pages direct from Conservative Campaign HQ, seeming to confirm the parting words of its senior political commentator, Peter Oborne, that it was intent on committing “a fraud on its readership.”

Well, at least it’s no surprise that the Telegraph does what it’s always done. Nobody expects them to be impartial.

The paper of record, The Times, fared a little better, in that there has been two vaguely positive front pages about Miliband — compared to 18 for Cameron.Meanwhile, the publication that arose in rebellion to Murdoch’s acquisition of the Times in the 80s, The Independent, shocked most its staff and readership by backing a continued Lib Dem/Tory Coalition. Reports said the endorsement was a ‘diktat’ from the wealthy Russian-born owner, Evgeny Lebedev, causing many to mock its original ad slogan “The Independent: It’s Not. Are You?” or renaming it ‘The Dependent’.

Even the sober, tight-lipped Financial Times, which once supported Blair and endorsed Obama, lost credibility. The paper said it backed another Conservative-led coalition because Ed Miliband was too “preoccupied with inequality.” But that magisterial tone was undermined when it emerged the leader writer, Jonathan Ford, was pictured in the notorious 1987 photo of Oxford’s elite hard drinking Bullingdon Club next to the Tory mayor Boris Johnson and just below David Cameron.

A bigger problem would seem to be that Milibland can’t have been far from that club; he attended much of the same educational institutions the other ‘leader elites’ did. Yukes is on to something, but he’s missing the point.

Therein lies the problem, and an indication the newspaper world is a microcosm of a wider malaise. The Conservative politician John Biffen once said “whenever you find a senior politician and a powerful media owner in private conclave, you can be certain that the aims of healthy, plural democracy are not being well-served.” This election that conclave looks like an exclusive club.

Rarely have the economic interests of the handful of wealthy men who own most the press (nine men own 90% of all national and regional titles) appeared so brutally transparent. Most of the conservatives among them don’t like Cameron’s modernizing project, or the fact he looks set to fail to get a majority for a second time. But they fear Miliband with a passion because he threatens their power in several ways.

They fear(ed) Milibland? I don’t believe that for a second. I think it’s much more likely that they’ve all intentionally exaggerated Milibland’s poll numbers to make it look like there was an actual race going on. That they were only too happy to have a guy run against theirs that everybody could see from miles away would never be a contender (maybe if his first name would have been Marlon? or Stanley?)

Plus they have the outdated and somewhat inane electoral system, in which for instance the Green Party got – roughly – one million votes and 1 seat, while the Conservatives accumulated 10 million votes and 331 seats. If you can work that system in your favor, you’re half way home. Moreover, if and when you hire the cream of the crop American spin doctors, as the Cons have certainly done, who love purchasing media, you’re way past halfway.

The system can certainly be given some sort of name, but a functioning democracy it’s not. If anything, a democracy is “A system of government in which power is vested in the people”. Makes us wonder how many clients of the 421 foodbanks and counting have voted Con. and figured they were proudly doing their democratic duty.

May 032015
 
 May 3, 2015  Posted by at 1:21 pm Finance Tagged with: , , , , ,  5 Responses »


Jack Delano Near Shawboro, North Carolina, Florida migrants on way to Cranberry, NJ 1940

With US GDP growth ‘officially’ back where it belongs, in the Arctic zone close to freezing on the surface but much worse in real life, for reasons both Albert Edwards and Ambrose Evans-Pritchard (not exactly a pair of Siamese twins) remarked this week; that is, excluding the “biggest inventory build in history, the economy contracted sharply”, it’s time for everyone to at long last change the angle from which they view the world, if not the color of their glasses.

But ‘everyone’ will resist, refuse and refute that change, leaving precious few people with an accurate picture of the – economic – world. Still, for you it’s beneficial to acknowledge that very little of what you read holds much, if any, truth or value. This is true when it comes to politics, geopolitics and economics. That is, the US is not a democracy, it is not the supreme leader of the world, and the American economy is not in recovery.

Declining business investment, a record inventory build and extreme borrowing to hold share prices above water through buybacks, it all together paints a picture of a very unhealthy if not outright dying economy, and certainly not one in which anything at all is recovering. But how are you supposed to know?

The entire financial media should change its angle of view, away from the recovery meme (or myth), but the media won’t because the absurd one-dimensional focus on that perpetuated myth is the only thing that makes the present mess somewhat bearable, palatable and, more importantly, marketable, to the general public.

This has the added simultaneous benefit of keeping that same general public from understanding how sinister the myth really is; it can only be upheld by greatly increasing the debt levels which burden their shoulders, in hidden ways. If the media can no longer keep the consequences of the debt increases hidden, the game is up.

And there are undoubtedly many people who find it more important right now to profit from the whole scale distortion by central banks of what were once the financial markets, than they find it to know the truth and understand the system they owe their gains to. But that may no be all that smart; they risk losing their gains again overnight. You can’t rely on what you don’t understand. So here are a notes:

1 – There are no markets anymore (and therefore no investors either).

There are ways to make money, but that’s not the same thing. Markets must of necessity reflect – the performance of – underlying economies, and to even pretend today’s markets do that is preposterous. Financial markets these days exclusively reflect central banks’ pumping money into their respective bankrupt banking systems, a practice poetically known as QE. Markets need to be functional in order to be called markets and if they don’t we should find another term to label them with.

Or, in other words, present day western economies – and their former markets – are being artificially propped up by either making already poor people poorer today, making them poorer tomorrow, or both. It’s the only way left to make things look passable. And those who still desire in these non-markets to call themselves ‘investors’ are merely little piglets sucking spoilt milk oozing from the teats of their mother sow’s long-dead bloated corpse.

2 – You have no idea what anything is truly worth.

Central bank stimulus across the globe has fully demolished price discovery. And whether you like it or not, financial markets can not and do not function without it. Lots of people try to make us believe that central bank announcements have momentarily taken the place of price discovery, but that is nonsense. And if you don’t know what any asset is really worth, how can you be sure you want to own it other than for myopic short-term reasons?

3- There is no recovery now, and there’s not one around the corner.

The weight of our debt, just to name one thing, has kept us from turning that corner for 7-8 years now, and the weight is getting more forbidding, not less. Publishing falling unemployment numbers while out-of-labor-force data rise (to a record 93 million working age Americans today) is an insult to everyone’s intelligence, not a sign of economic health. Whatever is seen as recovery or expansion is a testament to the power of illusion and propaganda, not the power of the economy. If you choose to look at the world from a point of view that focuses only on recovery, you’re not going to understand what is happening, because there is no recovery anywhere in sight.

4- You can’t trust anything your government and media say.

The entire apparatus is geared towards selling you a doctored image of the world you live in, instead of presenting you with reality. Not because as Jack Nicholson said “You can’t handle the truth”, but because you knowing the truth is not in the interest of those who run governments, nations and supranational organizations. You’re caught in a trap somewhere between Goebbels and Orwell, and it takes a lot of energy to escape it, energy you will be inclined and tempted to instead use to improve your position inside the trap. Just like everyone else does. We are social animals, we are disposed to do as those around us do.

As I said above, you can’t trust anything you hear or read about politics, geopolitics and economics:

• The US is not a democracy. You can’t have a democracy and SuperPacs at the same moment. For the hundredth time: if you allow money into your political system, it will end up buying the entire system. And if you allow endless amounts of money to enter it, that process is greatly accelerated.

• The US is not the supreme leader of the world. Today’s world doesn’t allow for a supreme leader. Neither does it need one. Countries like Russia and China will not tolerate American supremacy to dictate what they do. Not economically, and not militarily. This is very hard to stomach for parts of American society, but they’re going to have to get used to it. Going to war over these issues is pointless. Unfortunately, it increasingly looks like the entire globe will have to find that out the hard way. The very hard way.

• The American economy is not in recovery. I already mentioned the creative jobs numbers accounting. Also, without Fed intervention, asset prices (bonds, stocks, real estate..) would be much lower. This would have been a lot healthier for everyone, except for banks and their shareholders. But once QE is unleashed, there is no smooth exit possible. It will need to continue until it self-implodes.

At present, Japan is leading the way to economic self-immolation, but the US and Europe must inevitably follow. The only thing that helps is what the banks most resist: restructuring, cutting the leverage from the debt. But all we get is fantasy stories about how the crisis was left behind. Stories that of course all 42 million or so Americans on foodstamps and tens of millions of otherwise underpaid can confirm. Why am I even trying to show that, and why, there is no recovery?

We need to start thinking from the perspective of what we can and must do if and when that elusive and illusionary recovery is not going to happen. Decisions made from that point of view will substantially differ from those taken in order to ‘produce’ the recovery, which is the only perspective that exists in politics, media and indeed the minds of 99% of the population today.

We need to think about how we’re going to lay a foundation, as solid as we can, under our societies now, with the means we still possess to achieve that, knowing there will be times when those means will be increasingly less available. We’re not doing that, because we focus only on a world that does manage to attain a recovery. We truly think the world is one-dimensional.

Which is why, among other things, we strive to make individuals richer, and fail to see that this makes communities and societies poorer. Everything seems fine as long as we deny the bigger picture, and because we like things to look fine, we stick to that one dimension of our world that is ourself. And ignore each other.

May 022015
 
 May 2, 2015  Posted by at 10:36 am Finance Tagged with: , , , , , , , , ,  11 Responses »


NPC National Service Co. front, 1610 14th Street N.W., Washington DC 1920

Grantham Says Fed “Bound And Determined” To Engineer “Full-Fledged Bubble” (ZH)
Our Banking System is a Giant House of Cards (Lynn Parramore)
For China To Start All Over, The Dinosaurs Will Have To Change (Satyajit Das)
Your No. 1 End-Of-The-World Investing Strategy (Paul B. Farrell)
How Ben Bernanke Let Down America (MarketWatch)
Quick Breakthrough At Brussels Group Looks Unlikely (Kathimerini)
The Coming Defaults Of Greece (Vox.eu)
FastTrack TPP: The Death of Sovereignty, Separation of Powers and Democracy (JF)
Iceland Pirate Party Popularity Rivals Government Coalition (RT)
Angela Merkel’s NSA Nightmare Just Got A Lot Worse (Don Quijones)
Rioters In Milan Smash Shopfronts, Throw Smoke Bombs As Expo Opens (CNBC)
Russia Preparing Offensive In Ukraine, NATO General Imagines (Zero Hedge)
Kiev Is Making No ‘Tangible Steps’ To Investigate Year-Old Odessa Massacre (RT)
Kim Dotcom Awarded Millions For Legal Bills And Living Expenses (TF)

I think people should stop calling this a ‘market’.

Grantham Says Fed “Bound And Determined” To Engineer “Full-Fledged Bubble” (ZH)

Back in November, we highlighted the accuracy of Jeremy Grantham’s predictions about the trajectory of the central bank liquidity-fueled equity rally. In terms of how far the market can run before reality and gravity finally reassert themselves, bursting the centrally planned bubble and prompting a 2008-style “correction”, Grantham defined a “full-fledged” bubble as S&P 2250 and warned that a retracement of some 50% was possible depending on how assertive the Fed’s response to its real favorite economic indicator (stocks) turns out to be.

In GMO’s latest quarterly letter, Grantham is out reiterating his view that although US stocks may not have reached their peak in what he accurately calls a “strange, manipulated world” (we prefer “new paranormal”), he’s sticking with the idea that “bubble territory” is likely just around the corner as the Yellen Fed is “bound and determined” to facilitate an inexorable rise in asset prices. He also notes that the Yellen seems no more inclined than her predecessor to take Jeremy Stein’s advice on being careful not to adopt an “implicit policy of inaction” when it comes to bubbles. Here’s more:

The key point here is that in our strange, manipulated world, as long as the Fed is on the side of a strong market there is considerable hope for the bulls. In the Greenspan/Bernanke/Yellen Era, the Fed historically did not stop its asset price pushing until fully- fledged bubbles had occurred, as they did in U.S. growth stocks in 2000 and in U.S. housing in 2006. Both of these were in fact stunning three-sigma events, by far the biggest equity bubble and housing bubble in U.S. history.

Yellen, like both of her predecessors, has bragged about the Fed’s role in pushing up asset prices in order to get a wealth effect. Thus far, she seems to also share their view on feeling no responsibility to interfere with any asset bubble that may form. For me, recognizing the power of the Fed to move assets (although desperately limited power to boost the economy), it seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble. And we are not there yet.

Read more …

“We are failing to take simple steps and at the same time undertaking extremely costly steps with doubtful benefits.”

Our Banking System is a Giant House of Cards (Lynn Parramore)

Anat Admati teaches finance and economics at the Stanford Graduate School of Business and is co-author of The Bankers’ New Clothes, a classic account of the problem of Too Big to Fail banks. Admati warns that we are not doing nearly enough to confront a bloated, inefficient, and dangerous financial system. The system can’t fix itself. Here’s what you need to know.

Lynn Parramore: How would you describe the problem of Too Big to Fail banks. Whey does it matter to an ordinary person?

Anat Admati: Too Big to Fail is a license for recklessness. These institutions defy notions of fairness, accountability, and responsibility. They are the largest, most complex, and most indebted corporations in the entire economy. We all have to be really alarmed by the fact that not only do we still have such institutions, but many of them are ever-larger and more complex and at least as dangerous, if not more so, than they were before the financial crisis. They are too big to manage and control. They take enormous risks that endanger everybody. They benefit from the upside and expose the rest of us to the downside of their decisions. These banks are too powerful politically as well. As they seek profits, they can make wasteful and inefficient loans that harm ordinary people, and at the same time they might refuse to make certain business loans that can help the economy.

They can even break the laws and regulations without the people responsible being held accountable. Effectively we’re hostages because their failure would be so harmful. They’re likely to be bailed out if their risks don’t turn out well. Ordinary people continue to suffer from a recession that was greatly exacerbated or even caused by recklessness in the financial system and failed regulation. But the largest institutions, especially their leaders — even in the failed ones — have suffered the least. They’re thriving again and arguably benefitting the most from efforts to stimulate the economy. So there’s something wrong with this picture. And there’s also increasing recognition that bloated banks and a bloated financial system – these huge institutions—are a drag on the economy.

LP: Have we made any progress in dealing with the problem?

AA: The progress has been totally unfocused and insufficient. Dodd-Frank claims to have solved the problem and it gives plenty of tools to regulators to do what needs to be done (many of these tools they actually already had before). But this law is really complex and the implementation of it is very messy. The lobbying by the financial industry is a large part of the reason that the law has been implemented so poorly and inefficiently with so much difficulty. We are failing to take simple steps and at the same time undertaking extremely costly steps with doubtful benefits. So we’ve had far from enough progress. We are told things are better but they are nowhere near what we should expect and demand. Much more can be done right now.

LP: Banks, compared to other businesses, finance an enormous portion of their assets with borrowed money, or debt – as much as 95%. Yet bankers often claim that this is perfectly fine, and if we make them depend less on debt they will be forced to lend less. What is your view? Would asking banks to rely more on unborrowed money, or equity, somehow hurt the economy?

AA: Sometimes when I don’t have time to unpack everything I use a quote from a book called Payoff: Why Wall Street Always Wins by Jeff Connaughton. He relates something Paul Volcker once said to Senator Ted Kaufman: “You know, just about whatever anyone proposes, no matter what it is, the banks will come out and claim that it will restrict credit and harm the economy…It’s all bullshit.” Here’s one obvious reason such claims are, in Volcker’s vocabulary, bullshit: Lending suffered most when banks didn’t have enough equity to absorb their losses in the crisis — and then we had to bail them out. The loss they suffered on the subprime fiasco was relatively small by comparison to losses to investors when the Internet bubble burst, but there was so much debt throughout the system, and indeed in the housing markets, and so much interconnection that the entire financial system almost collapsed. That’s when lending suffered. So lending and growth suffers when the banks have too little equity, not too much.

Now, banks naturally have some debt, like deposits. But they don’t feel indebted even when they rely on 95% debt to finance their assets. No other healthy company lives like that, and nobody, even banks, needs to live like that — that’s the key. Normally, the market would not allow this to go on; those who are as heavily indebted feel the burden in many ways. The terms of the debt become too burdensome for corporations, and reflect the inefficient investment decisions made by heavily indebted companies. But banks have much nicer creditors, like depositors, and with many explicit and implicit guarantees, banks don’t face trouble or harsh terms. They only have to convince the regulators to let them get away with it. And they do. So the abnormality of this incredible indebtedness is that they get away with it. There’s nothing good about it for society. If they had more equity then they could do everything that they do better —more consistently, more reliably, in a less distorted fashion.

Read more …

This will not happen, because the leaders themselves are the biggest dinosaurs. And they’re not about to give up their grip on power.

For China To Start All Over, The Dinosaurs Will Have To Change (Satyajit Das)

Central to China’s agenda of driving growth through economic reform is a shift from debt-driven investment to consumption. Since the 1980s, investment has risen from 35% of GDP to 45 to 50%. China’s annual infrastructure spend is far greater than that of the US and Europe but also of other emerging markets. It is double that of India and around four times that of Latin America. The country’s investment levels are also running at 10 to 15% of GDP – higher than in comparable countries such as Japan and South Korea at the equivalent stages of their development. In recent years, Beijing has sought to rebalance the share of GDP contributed by consumption and investment, but the task is difficult.

First, as the analyst Michael Pettis has repeatedly stated, the level of consumption growth needed to rebalance China is formidable. That rate has not been static, running at around 8% a year over the past decade. But growth in consumer spending has been slower than that in the overall economy and the increase in gross fixed investment – an average annual growth of more than 13%, which resulted in the share of private consumption in GDP falling to 35% from 45 to 50%. If China grows at 8% a year, consumption needs to expand by around 11% (3% above growth) to increase the share of consumption from 35% to 36% of GDP in a year. Assuming a growth rate of 8% and consumption increases of 11%, it would take about five years to increase consumption to 40% of GDP. If growth slows, the difficulty of the task increases.

Second, legacy issues of rapid expansion and excessive investment will need to be managed. Many projects have dubious economics and will not generate sufficient revenues to repay the borrowings used to finance them, resulting in potential losses to lenders.

Third, boosting consumption will reduce savings, affecting the deposit base and cost of funding at Chinese banks, which will reduce their flexibility in managing rising losses on bad loans. It will also require a significant boost in household income, and this will affect the profitability of Chinese companies, which already operate on thin margins.

Fourth, the rebalancing will result in slower growth, at least during the period of transition. A move away from investment-driven growth also requires reform of China’s state-owned enterprises (SOEs). China has around 150,000 SOEs, which control around 50% of industrial assets and employ around 20% of the workforce.

Read more …

Farrell misses out on the no. 1: people and communities.

Your No. 1 End-Of-The-World Investing Strategy (Paul B. Farrell)

Quarterly reports are hot news today. Listen: “While the end-of-the-world scenario will be rife with unimaginable horrors,” predicts the CEO of a major Wall Street bank at a shareholders meeting, “we believe that the pre-end period will be filled with unprecedented opportunities for profit.” That message comes from one of Robert Mankoff’s popular New Yorker cartoons, and it accurately captures the winning strategy used by most successful Wall Street bankers. But the real successful strategists have both, balancing the two: short-term opportunities for profit plus a vision of the future, the long-term megatrends that impact returns today as well as tomorrow. Here’s an example of this strategy, hedging long risks while playing a winning short game.

Here’s one strategy based on the 12 megatrends in Jared Diamond’s book “Collapse: How Societies Chose to Fail Or Succeed.” So you’d be building a portfolio that balances short-term opportunities within Diamond’s megatrends structure, picking stocks that fit near-term the best investment parameters for success in a society that’s risking a collapse:

1. Water
Diamond warns: “Most of the world’s freshwater in rivers and lakes is already being used for irrigation, domestic and industrial water,” transportation, dams, fisheries and recreation. Water problems destroyed many earlier civilizations: “Today over a billion people lack access to reliable safe drinking water.” By 2015 two-thirds of the world will live in water-stressed countries. Water will trade like oil futures today. More and more wars will be fought over water and other basic resources concluded a 2003 Pentagon report predicting that “warfare will define human life by 2020.

2. Food
The United Nations says the global food crisis is a “silent tsunami.” Two billion people, mostly poor, depend on fish and other wild foods for protein. Their supplies have “collapsed or are in steep decline,” forcing use of costly animal proteins. The rise in food prices is making it worse for billions living below poverty levels. In “The End of Plenty,” National Geographic warns “synthetic fertilizers, pesticides, and irrigation, supercharged by genetically engineered seeds” is failing. A joint World Bank/UN study “concluded that the immense production increases brought about by science and technology the past 30 years have failed to improve food access for many of the world’s poor.” Time warns that our “addiction to meat” has led to farming that’s “destructive of the soil, the environment and us.”

3. Farmland
Crop soils are “being carried away by water and wind erosion at rates between 10 to 40 times the rates of soil formation.” With forests, the soil-erosion rate is “between 500 and 10,000 times” the replacement rate, a trend accelerated by today’s new age of the 100,000-acre megafires. Ceres and Chess are hedge funds that own many small farms.

4. Forests
We are destroying natural habitats and rain forests at an accelerating rate. Half the world’s original forests have been converted to urban developments. A quarter of what remains will be converted in the next 50 years.

Read more …

How America lets down Americans.

How Ben Bernanke Let Down America (MarketWatch)

Don’t say Ben Bernanke didn’t do anything for unemployment. After all, the former Federal Reserve chairman now has three jobs. On Wednesday, Pacific Investment Management Co., or Pimco, announced — via Twitter, of course — that Bernanke had signed on as a senior adviser to the fund company known for its bond investing. Pimco joins the hedge fund Citadel and the Brookings Institution as Bernanke’s post-Fed effort to put food on the table. While Bernanke has sought to underplay or, more accurately, not disclose how much he’s being paid by these firms, it’s highly unlikely he will have to ask for public assistance. Speaking of which, just how good is that unemployment office near the Fed and Treasury Department?

We’re just teasing, of course. Bernanke, like any other public servant, has a right to work after he leaves government. And since the Fed is a quasi-governmental institution and has been accused of serving Wall Street’s interests, is this as much of a radical transition as it may appear at first glance? On the other hand, isn’t this endless pattern, known as the “revolving door” where senior regulators leave to join the firms they regulated only a few months or weeks ago, getting a little tired? Timothy Geithner, a regulator cozy with Wall Street, goes to head the Treasury Department where he’s criticized for bailing out Wall Street and almost no one else, and then leaves public service for a private equity firm, Warburg Pincus, with deep ties to banks.

Read more …

Get out, you Greeks!

Quick Breakthrough At Brussels Group Looks Unlikely (Kathimerini)

Greece’s hopes of an emergency Eurogroup being called as early as Monday to confirm the progress in Brussels Group talks, and thereby possibly prompting the European Central Bank to allow Athens to issue more treasury bills to relieve its liquidity problem, appear to be misplaced. Several European Union officials have told Kathimerini that it is unlikely eurozone finance ministers will be in a position to discuss the state of negotiations at the beginning of the week. Greece’s lenders insist that there must be a staff-level agreement on the range of measures being demanded in return for €7.2 billion in bailout funding before the matter can be referred to the Eurogroup.

Athens, though, hopes that there can be an initial agreement on a bare minimum of reforms that would prompt the ECB to increase its €15 billion ceiling on the level of Greek T-bills that can be issued and allow local banks to increase their exposure to this form of debt. The first two days of the Brussels Group deliberations, which began on Thursday, confirmed that there is a substantial distance separating Greece and its lenders. For instance, they differ on macroeconomic projections. Athens still believes growth this year can reach 1.2 to 1.4% and that this would lead to a primary surplus of 1.2%. Creditors see these projections as extremely optimistic.

Also, Athens is willing to go ahead with some but not all of the privatizations planned for this year, bringing in projected revenues of €1.5 billion, which the institutions also see as being overestimated. The target for revenues from sell-offs this year had been €2.2 billion The government looks set to keep the single property tax (ENFIA) this year despite its election pledge to scrap the highly unpopular levy, but there is still a disagreement over the value-added tax increase being demanded by creditors. The institutions believe that between €2 and €3 billion of new fiscal measures will be needed this year for Greece to hit its targets.

Read more …

“In the longer run, however, a much-depreciated drachma could lift the Greek economy and, of course, the country might appreciate monetary independence..”

The Coming Defaults Of Greece (Vox.eu)

When thinking about Greece’s dilemma, two facts from Reinhart and Rogoff (2009) research are highly relevant:
• Defaults on public debts are pretty mundane events; and
• Greece is historically the world’s leading serious defaulter.

What makes the coming event interesting is that it will be the first time that a default occurs within a monetary union. The crucial observation is that there is no automatic link between a default and monetary-union membership. As we know from previous experiments of government default within the dollar monetary union – the defaults of Orange County in California and Detroit in Michigan – a sub-central government can default and keep the currency. The unique characteristics of such events are that: 1) an exchange-rate depreciation cannot help shift expenditure to the defaulting region’s production; and 2) there is no local central bank to provide liquidity to both the government and commercial banks during the hard phase of the default. The Greek government might be tempted to recover its own currency but the short-run costs are likely to far exceed the short-run benefits.

An idea of what would await Greece is provided by Levy Yeyati (2011) in his description of how Argentina gave up its currency board link to the US dollar, an easier case given that the national currency was already in place. The Argentinian example should warn the Greek authorities of the political turmoil that could follow a default. In the longer run, however, a much-depreciated drachma could lift the Greek economy and, of course, the country might appreciate monetary independence following its wrenching experience inside the Eurozone. Basically, the trade-off is a major shock and one more year of misery versus the removal of Eurozone membership shackles forever. The balance of benefits is difficult to evaluate since it depends very much on institutional issues that are not clear now.

The key questions are:
• Will Greece be able to finally establish on its own fiscal discipline and will its central bank deliver high-quality monetary policy?
• Will the Eurozone draw all the lessons from a Grexit and amend its policies and governance?

In the short run, after a first default, even a partial one, the Greek government will have to balance its books because no one will lend anything any more. ‘Balancing the books’ can mean different things, however.

• One option is to run an overall balanced budget, thus continuing to service the debt after the initial wave of defaults.

The latest European Commission forecasts for 2015 are for a surplus of 1.1% of GDP, after a deficit of 2.5% last year. This might be optimistic as tax receipts seem to have slowed down. Another option is to balance the primary budget, which means no servicing of the debt.

Read more …

“..the death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy..”

FastTrack TPP: The Death of Sovereignty, Separation of Powers and Democracy (JF)

Ellen Brown has called the TPP “the death of the Republic.” It certainly is that. But, I think I’ve shown that it is the death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy, as well. These impacts on governance and politics are even more important, I believe, than its economic ones, since it from these that our benefits, both economic and non-economic flow. The elevation of the principle of “expectation of profits” above all other principles including the principles of “public purpose,” “consent of the governed,” “the general welfare,” and “separation of powers,” is tantamount to the overthrow of democracy, preserving its form in national level elections, but emptying its elections of meaningful content in mandating change and in conferring legitimacy on national authorities.

I’ve said previously that the rule of the TPP, even if passed over the mushrooming opposition from all segments of American society except the uncritical globalists, will never be viewed as legitimate in the United States and will also always be viewed as tyranny for as long as we live under it. This problem will become increasingly severe the larger, more frequent, and more outrageous ISDS awards defending the “expectations of profits” of multinational become. That makes those who want to pass the TPP guilty of conspiracy to create tyrannical rule of the international few over the people of the United States and other TPP member nations. Eventually, I believe that a vote for the TPP will be viewed as vote to betray the Constitution and a violation of the oath of office of any who vote that way.

How can there be any other outcome when an action taken in office destroys National Sovereignty, State Sovereignty, Separation of Powers, and Democracy with a single vote.

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A sudden surge.

Iceland Pirate Party Popularity Rivals Government Coalition (RT)

The Pirate Party of Iceland, which has the smallest faction in the national parliament after the 2013 election, is now almost as popular as the two ruling coalition parties combined, the latest opinion poll showed. The party would score 30.1% of votes in Iceland if a general election was held now, the Icelandic National Broadcasting Service (RUV) reports citing a Gallup poll. Iceland’s two ruling parties – the Independent Party and the Progressive Party – have 22.9% and 10.1% support respectively, scoring less than 3% points ahead of the Pirates. The Pirate Party experienced an astounding surge of popularity in Iceland. In 2013, polls indicated it would barely score 5% of votes needed to win parliamentary seats. The party’s approval rating in January was roughly the same.

An early March Gallup poll showed its popularity had grown to over 15%, beating the Bright Future party. In less than two months the Pirate Party doubled its rating. “People are starting to realize that the whole system is corrupt, not just a few politicians,” Helgi Hrafn Gunnarsson, Pirate Party’s chair and one of its three MPs told Vísir news website in March. “They don‘t trust it at all. I think they appreciate it when someone points this out.” Responding to the latest poll, Gunnarsson said he was glad to see such a result but expected it to rebound somewhat in the weeks to come. He added there is still some time to go to the next election in Iceland, which is scheduled for 2017. The same opinion poll showed a 32% approval of the government by Icelanders, compared to 37% in March. Among the latest big decisions of the government is the March withdrawal of its bid to join the European Union.

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“The phrase “shameless hypocrisy” comes to mind.”

Angela Merkel’s NSA Nightmare Just Got A Lot Worse (Don Quijones)


Angela Merkel, Germany’s most successful and popular politician, could be in serious trouble, after revelations that Germany’s national intelligence agency, the BND, has been spying on key European assets on behalf of US intelligence. Those “assets” include top French officials, the EU’s headquarters, the European defense corporation EADS, the helicopter manufacturer Eurocopter and even German companies. To wit, from Der Spiegel:

In 2008, at the latest, it became apparent that NSA selectors were not only limited to terrorist and weapons smugglers… But it was only after the revelations made by whistleblower Edward Snowden that the BND decided to investigate the issue. In October 2013, an investigation came to the conclusion that at least 2,000 of these selectors were aimed at Western European or even German interests.

Today, the German foreign intelligence agency is accused of processing over 40,000 spy requests from the NSA, many of which represent a clear violation of the Memorandum of Agreement that the US and Germany signed in 2002. Washington and Berlin agreed at the time that neither Germans nor Americans — neither people nor companies or organizations — would be among the surveillance targets. The scandal could be particularly damaging for the Minister of Interior Thomas de Maiziere, whose ministry is accused of misleading parliament after claiming, as recently as April 14, to have no knowledge of alleged US economic spying in Europe, and of Germany’s alleged involvement.

For Merkel, it is a dizzying reversal of roles and fortunes. In 2013 she was arguably the most high-profile victim of NSA surveillance when it was revealed that the NSA had targeted her cellphone. When confronted with Edward Snowden’s allegations of US National Security Agency mass surveillance of European citizens, Merkel famously said that “spying on friends is just not on.” According to official accounts, she even placed a “strongly worded phone call” to US President Barack Obama. At the time the scandal was a political boon for Merkel, with 62% of Germans approving of her “harsh reaction”, according to a survey by polling institute YouGov. Now the tables have turned. If Merkel’s government is found to have had prior knowledge of the BND’s spying on the French government, citizens, and companies, its behavior in the wake of the phone-tapping revelations will be cast in a starkly different light. The phrase “shameless hypocrisy” comes to mind.

While the BNS is taking most of the flak, with some pundits even questioning whose interests it serves, questions are being raised about just how much Merkel’s government knew about the surveillance program. “At least since the Snowden revelations in 2013, all those involved at all levels, including the Chancellery, should have been suspicious of the cooperation with the NSA,” Konstantin von Notz, the senior Green Party member on the NSA investigative committee, told Der Spiegel.

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Italy hates the Milan Expo. For good reason.

Rioters In Milan Smash Shopfronts, Throw Smoke Bombs As Expo Opens (CNBC)

Milan has been waiting since 2008 for this day and now it has finally come—but takeoff for the World Expo 2015 looks to be overshadowed by violent protests. The turnstiles and doors officially opened on Friday in Italy’s commercial and fashion capital. But opening day excitement for the six-month-long commercial event wasn’t necessarily present among the crowds on Friday. The wet weather may have dampened the number of visitors to the event on its first day—with noticeably empty entrances and security checkpoints. Meanwhile, thousands of protesters marched through the streets of Milan behind a banner reading “No Expo, Eat the Rich,” according to Reuters. The No-Expo movement has been critical of the amount of money the government has poured into the event, when there are fears of austerity and cuts to public services.

A large anti-expo march through the center of Milan was overtaken by anarchists groups that smashed shopfronts and clashed with police. There were several banks with smashed-in doors and windows and the streets were strewed with detritus. Teargas was used by riot police to try and disperse parts of the crowd. Although most of the march was peaceful, around 200 demonstrators threw rocks, in addition to setting off flare and smoke bombs. A large six-story building was torched, as well as the ground floor of a two-story building. At least six cars were burnt and fire crews were deployed at multiple spots across the city. AP television footage appeared to show police using water cannons on protesters.

Friday is Labor Day, also known as May Day, and is a traditional occasion for anti-capitalist protests. The Expo is bringing together 145 countries from around the world with the theme “Feeding the Planet, Energy for Life.” The organizers are expecting up to 20 million visitors during the length of the Expo and as many as 250,000 on a particularly busy day. However, estimates for attendee numbers on Friday were only in the tens of thousands. Italy is hoping for a big economic boost because of the Expo, which is held every five years in different world location and is designed to showcase innovation. Some say the Milan Expo could generate up to $10 billion. But the event has come under criticism, particularly for skyrocketing costs and a number of corruption scandals.

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“Note that Breedlove has managed to pull off what we thought was a linguistic impossibility: his statement is contradictory, vague, and definitive all at once.”

Russia Preparing Offensive In Ukraine, NATO General Imagines (Zero Hedge)

Just a day after the US Navy said it was prepared to escort US-flagged cargo ships through the Strait of Hormuz as a precautionary measure after Iran supposedly fired on and subsequently seized a ship flying the Marshall Islands flag, we get still more sabre rattling in what has become a global staring match between the US on one side and Russia, Iran, and China on the other, with points of contention ranging from territorial sovereignty in Eastern Europe, to man-made islands in the South China Sea, to nuclear energy, to cyber warfare. This time it’s U.S. Air Force General and NATO supreme allied commander Philip Breedlove ratcheting up the rhetoric (and perhaps suggesting that the Kremlin is correct in its assessment of US foreign policy) by suggesting to the Senate that Russia is planning to shatter what remains of the fragile ceasefire in Ukraine by launching an imminent offensive. Via Reuters:

Russia’s military may be taking advantage of a recent lull in fighting in eastern Ukraine to lay the groundwork for a new military offensive, NATO’s top commander told the U.S. Congress on Thursday. U.S. Air Force General Philip Breedlove, the NATO supreme allied commander, said Russian forces had been seeking to “reset and reposition” while protecting battlefield gains, despite a fragile ceasefire agreed in February.

And while the general had trouble explaining exactly how he came to this conclusion based on the evidence he had observed, he did come prepared with plenty of vague soundbites which, although largely devoid of any real meaning, sounded scary enough to get the attention of the media and will probably play well with the 348 members of the House who not long ago voted to provide lethal aid to Kiev. Here are some excerpts from the DoD press release:

“Many [Russian] actions are consistent with preparations for another offensive,” he added. Russia is aggressive in all elements of national power – diplomatic, informational, economic, and its military, the general said. “It would not make sense to unnecessarily take any of our own tools off the table,” he said about the U.S. possibility of supplying defensive weapons to Ukraine. Russia’s aggression also is destabilizing neighboring states and the region, and its illegal actions are pushing instability closer to NATO’s boundaries, Breedlove told the senators. “We cannot be fully certain what Russia will do next, and we cannot fully grasp [Putin‘s] intent,” Breedlove he said. “What we can do is learn from his actions, and what we see suggests growing Russian capabilities, significant military modernization and an ambitious strategic intent.”

Got it. So summarizing, we cannot be certain about Putin’s intent, but based on his actions, we can be certain that his intent is both ambitious and strategic. Note that Breedlove has managed to pull off what we thought was a linguistic impossibility: his statement is contradictory, vague, and definitive all at once.

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Kiev and the west are determined that no-one ever finds out what happened in Odessa, on Maidan Square, with MH-17 etc etc.

Kiev Is Making No ‘Tangible Steps’ To Investigate Year-Old Odessa Massacre (RT)

Moscow has called on the international community to put pressure on Ukrainian authorities, which are not making any ‘tangible steps’ towards an independent and impartial investigation of last year’s Odessa massacre, Russia’s Foreign Ministry said. “With a deep concern we have to state that one year [since the tragedy], the Ukrainian justice system did not take any tangible steps toward an objective, independent and impartial investigation of this horrific crime in order to bring the perpetrators to justice,” the statement by the Russian Foreign Ministry said, as cited by Sputnik news agency. On May 2 last year, the Ukrainian radicals set fire to the Trade Union House in Odessa, killing 48 and injuring over 200 anti-Kiev activists inside.

“As a result of these barbaric acts of intimidation, several dozen people, whose only fault was that they openly expressed their civic stance against the anti-constitutional coup in February 2014 and outburst of radical ultranationalists, were killed,” the Foreign Ministry’s statement reads. Moscow urged the international community, including human rights NGOs, to “decisively and honestly” demand Kiev stage a fair investigation into the Odessa massacre and correct the “glaring flaws” in Ukrainian judicial system. The ministry stressed that Kiev’s “carelessness” and passiveness in investigating the May 2 events is backed by the stance of its Western backers and some major global media outlets.

The little attention given to the Odessa massacre in European and American news is “yet another manifestation of information warfare and manipulation of the media,” the statement said. Meanwhile, the US also addressed Kiev with an appeal not to delay the investigation of deadly fire. “We reiterate the need for a thorough and transparent investigation so those responsible can ultimately be held accountable. We continue to urge the Ukrainian government to investigate and bring charges against those culpable for the events in Odessa and to do so as quickly as possible,” Marie Harf, US State Department spokeswoman, said on Thursday.

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Little bit crazy perhaps? My guess is if this comes out, he’s going to lose a lot of sympathy. Kiwi’s are sort of done with him anyway.

Kim Dotcom Awarded Millions For Legal Bills And Living Expenses (TF)

Kim Dotcom has succeeded in getting more of his seized funds released by the courts in New Zealand. In addition to millions for legal expenses, the entrepreneur will receive $128K per month including $60K to pay mansion rent, $25,600 to cover staff and security, plus $11,300 for grocery and other expenses.

How much does it cost to enjoy a reasonable standard of living in the modern world? A couple of thousand dollars a month? Three thousand? Four? For Megaupload founder Kim Dotcom, none of these amounts scratch the surface, a problematic situation considering all of his assets were previously seized by the U.S. and New Zealand governments. In February a “broke” and “destitute” Dotcom appeared before Justice Patricia Courtney, asking for living expenses and a massive cash injection to pay historical and current legal fees. Dotcom was previously granted around US$15,000 per month to live on but high costs had left him “penniless”. Following the hearing Justice Courtney’s ruling is largely good news for Dotcom, with the Judge taking into consideration claims by authorities that the entrepreneur has funds in a trust that could help pay his expenses.

“The trust’s major asset is its shareholding in Mega Ltd, said to be worth more than $30m (US$22.6m). In evidence Mr Dotcom said that there were difficulties in selling Mega shares because they were blocked from being sold until the planned listing of Mega, which is now scheduled for late May 2015 (though it is possible that this date will be pushed back). There was no evidence to the contrary,” the Judge’s ruling reads. “I have concluded that Mr Dotcom does not have the ability to meet his legal and reasonable living expenses from trust assets because, on the evidence, those assets are not sufficiently liquid.” Noting that he still owes former lawyers around US$1.5m, the Judge said that Dotcom’s estimate for financing his legal battle against extradition is between US$1.5m and US$3m.

This amount will be released from currently restrained government bonds. Next up was the Dotcom family’s accommodation costs. Rent on the now-famous mansion amounts to US$754,000 per annum under a lease Dotcom signed in February 2013 and which expires in the same month 2016. The Judge decided that terminating that lease would result in additional costs. “If [Dotcom] were to terminate the lease in order to find a more modest home, he would immediately be exposed to a significant contractual liability for the existing rental in addition to the costs of any new accommodation,” the Judge writes.

“Little would be saved by requiring Mr Dotcom to move into more modest accommodation pending the expiry of the lease; it is more likely that the total amount required to house Mr Dotcom and his children and meet his lease commitment would actually prove greater than simply remaining where he is. “I therefore accept that, in the particular circumstances of this case, a figure of $80,000 (US$60,300) per month is reasonable for accommodation.”

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