Nov 202017
 
 November 20, 2017  Posted by at 9:52 am Finance Tagged with: , , , , , , , , ,  


Stanley Kubrick Laboratory at Columbia University 1948

 

Banks Show An Almost Autistic Disregard For The Law – Australia Senator (Abc)
ECB Proposes End To Deposit Protection (GC)
Europe Faces a Hamstrung Germany as Merkel’s Coalition Bid Fails
3 Things That Could Destroy One Of The Greatest Stock Rallies Of All Time (BI)
China’s Clampdown On Shadow Banking Hits The Stock Market (BBG)
Mugabe Faces Impeachment as He Holds on as Zimbabwe Leader (BBG)
Yield Curve Flattening Could Derail Fed Interest Rate Hikes (BI)
Everything Is Overvalued And Implicitly Overleveraged (Peters)
Gresham’s Law (Rivelle)
Britain’s Gravest Economic Challenge Isn’t Brexit (R.)
UK Christmas Spending Expected To Fall For First Time Since 2012 (Ind.)
Many Americans Are Still Paying Off Debt From Last Christmas (CNBC)

 

 

Headline of the day. Will they actually get their inquiry?

Banks Show An Almost Autistic Disregard For The Law – Australia Senator (Abc)

Pressure for a commission of inquiry into the banking sector is growing, with Nationals senator Barry O’Sullivan warning he might have the numbers to push his private members bill through Parliament. The banks “show an almost autistic disregard for prudential regulation and law and it’s time for these people to have their day in court”, the senator told ABC’s RN Breakfast on Monday. Senator O’Sullivan said he has support from as many as four colleagues. These include maverick Liberal National (LNP) MP George Christensen, who has already threatened to cross the floor, and fellow Queensland LNP MP Llew O’Brien, who has indicated “50-50” support. While a commission of inquiry would be an embarrassment for the Turnbull Government given its resistance to a royal commission, Senator O’Sullivan said it was time for the Prime Minister to listen.

“There’s no more important piece of business — millions and millions of Australians have been affected by the behaviour of the banks over time,” he said. “If both houses of Parliament think this is a good thing to do … then I think the Prime Minister has to … sit up and take note of that, and support the parliamentary decision.” But Senator O’Sullivan refused to comment on whether his move would embarrass and further destabilise the Prime Minister. “I am not going to be drawn on the question of the impacts on the Prime Minister and the Government — this is about democracy at work.” The proposed commission of inquiry would have similar powers to a royal commission. It would also look beyond banking and include superannuation, insurance and services associated with the scandal-plagued sector.

Read more …

Time to be afraid in Europe.

ECB Proposes End To Deposit Protection (GC)

It is the ‘opinion of the European Central Bank’ that the deposit protection scheme is no longer necessary: ‘covered deposits and claims under investor compensation schemes should be replaced by limited discretionary exemptions to be granted by the competent authority in order to retain a degree of flexibility.’ To translate the legalese jargon of the ECB bureaucrats this could mean that the current €100,000 (£85,000) deposit level currently protected in the event of a bail-in may soon be no more. But worry not fellow savers, as the ECB is fully aware of the uproar this may cause so they have been kind enough to propose that: “…during a transitional period, depositors should have access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request.”

So that’s a relief, you’ll only need to wait five days for some ‘competent authority’ to deem what is an ‘appropriate amount’ of your own money for you to have access to in order eat, pay bills and get to work. The above has been taken from an ECB paper published on 8 November 2017 entitled ‘on revisions to the Union crisis management framework’. It’s 58 pages long, the majority of which are proposed amendments to the Union crisis management framework and the current text of the Capital Requirements Directive (CRD). It’s pretty boring reading but there are some key snippets which should be raising a few alarms. It is evidence that once again a central bank can keep manipulating situations well beyond the likes of monetary policy. It is also a lesson for savers to diversify their assets in order to reduce their exposure to counterparty risks.

According to the May 2016 Financial Stability Review, the EU bail-in tool is ‘welcome’ as it: “…contributes to reducing the burden on taxpayers when resolving large, systemic financial institutions and mitigates some of the moral hazard incentives associated with too-big-to-fail institutions…” As we have discussed in the past, we’re confused by the apparent separation between ‘taxpayer’ and those who have put their hard-earned cash into the bank. After all, are they not taxpayers? This doesn’t matter, believes Matthew C.Klein in the FT who recently argued that “Bail-ins are theoretically preferable because they preserve market discipline without causing undue harm to innocent people.” Ultimately bail-ins are so central banks can keep their merry game of easy money and irresponsibility going. They have been sanctioned because rather than fix and learn from the mess of the bailouts nearly a decade ago, they have just decided to find an even bigger band-aid to patch up the system.

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Feels like the FDP never wanted the talks to succeed. But they will support a minority government.

Europe Faces a Hamstrung Germany as Merkel’s Coalition Bid Fails (BBG)

Angela Merkel may be running out of road after 12 years at the helm in Germany. With the chancellor’s attempt to form a fourth-term government in disarray, Merkel’s once unquestioned ability to steer Europe is waning as the region’s biggest economy heads into uncharted waters and possibly a protracted political stalemate. Markets reacted with unease, with the euro slumping the most in three weeks against the dollar. The breakdown in coalition talks late Sunday – amid disputes over migration and other policies between a grab-bag of disparate parties – raised the prospect of fresh elections, which probably would be held next spring. Relying on a minority administration with shifting alliances to pass legislation would run counter to Merkel’s promise to provide a stable government.

However she attempts to move forward, European decisions on everything from Brexit and Greece to Russian sanctions and French President Emmanuel Macron’s proposals for strengthening the euro will now be hemmed in by Merkel’s weakened role as a caretaker chancellor. “What it means is that Germany is pulled inward because it has to manage its political transition,” said Daniel Hamilton, executive director of the Center for Transatlantic Relations at Johns Hopkins University in Washington. “So the state of drift in Europe continues and now Germany, which has been the stabilizer of the last number of years, is part of that.” Merkel, 63, said she plans to stay on as acting chancellor and will consult with Germany’s president later Monday on what comes next.

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We can all name 27 more.

3 Things That Could Destroy One Of The Greatest Stock Rallies Of All Time (BI)

Extreme leverage build-up Morgan Stanley points out that previous comparable cycles have been derailed by steep increases in a measure of US debt to GDP. While the firm doesn’t see conditions as dire as they were around the Great Depression or the most recent financial crisis, it notes that deleveraging has stalled. While this situation may be sustainable in the near-term, since interest rates are still locked near zero, that could soon change with the Federal Reserve signaling multiple rate hikes by the end of 2018. Morgan Stanley also notes that interest coverage — or the ability to service debt — has been declining for both US investment-grade and junk debt since 2015. The chart below shows the ratio of debt/GDP, which has gone sideways in the past few years, implying that companies are no longer reducing debt burdens like they did when they were trying to dig out of the last market crash.

Exuberant sentiment This next driver is one that was briefly addressed in the introduction: investor overconfidence. The thinking here is that when the market gets too cocky, it becomes blind to potential risks and therefore more susceptible to downward shocks. As Morgan Stanley puts it, when there’s a “descent from thinking to feeling,” that could spell trouble. Morgan Stanley doesn’t think the market is too exuberant quite yet. While one measure shows that expectations around the economy have gotten overly optimistic, it’s still lower than where it was during the last financial crisis or the dotcom bubble. Still, the chart below shows that US consumer confidence is the highest it’s been since 2000, including a precipitous surge since the start of the bull market in 2009.

Excessive policy tightening When Morgan Stanley says that cycle downturns follow prolonged periods of monetary policy tightening, it speaks from experience. After all, the Federal Reserve persistently hiked interest rates in the periods leading up to both the dotcom bubble and the financial crisis. And while the firm doesn’t see excessive tightening yet, it warns that it could be right around the corner. “We have a bit of a ‘runway’ to the cycle peak, but not much,” a group of Morgan Stanley strategists wrote in a recent client note. “Over the next 12 months, our US economists expect further hikes in excess of core inflation, which would take us to ~190bp of cumulative hikes over 24 months, in line with the typical end-of-cycle policy environment.”

But before you start to panic, Morgan Stanley would like to remind you that the stock market can continue to soar, even in the final year of an expansion cycle. They point out that in the past, the S&P 500 has rallied an average of 15% in the last 12 months of an equity bull market. “The final year of the bull market can still be uncomfortably profitable,” the Morgan Stanley strategists wrote. “Timing is everything.”

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A thin line.

China’s Clampdown On Shadow Banking Hits The Stock Market (BBG)

China’s sweeping new plan to rein in its shadow banking industry rippled through the nation’s stock market on Monday, sending the Shanghai Composite Index to a two-month low. Investors pushed the benchmark gauge down as much as 1.4% amid concern that the government’s latest attempt to tighten supervision of $15 trillion in asset-management products will siphon funds from the market. Developers and brokerages paced losses. While analysts applauded the plan as an important step toward curbing risk in China’s financial system, they also warned of turbulence as markets adjust to outflows from popular shadow-banking products. The government directives, which are set to take effect in 2019, add to signs that President Xi Jinping is willing to sacrifice growth as he tries to put the world’s second-largest economy on a more stable financial footing.

“The rules dealt a blow to the market,” said Zhang Gang, a Shanghai-based strategist with Central China Securities Co. “A lot of such products had positions in the equity market, and those that don’t qualify under new rules may choose to exit some small and medium caps.” The Shanghai Stock Exchange Property Index dropped 1.3%, with Gemdale Corp. losing as much as 2.6% and Poly Real Estate Group Co. declining 3.2%. China Vanke Co. sank as much as 4.9% in Shenzhen. A measure of securities firms fell to a five-month low, with Citic Securities Co. tumbling 3.7%.

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He reportedly has just agreed to step down.

Mugabe Faces Impeachment as He Holds on as Zimbabwe Leader (BBG)

President Robert Mugabe shocked Zimbabwe on Sunday night with a televised address that failed to announce his highly anticipated resignation, a dramatic twist that means the 93-year-old may face immediate impeachment hearings. Whether the final act of defiance was planned or simply the result of reading the wrong remarks, three senior party officials who spoke on the condition of anonymity said Mugabe deviated from an agreed-upon-text announcing he was leaving office. His ruling Zimbabwe African National Union-Patriotic Front will start a bid in parliament on Monday to force an end to this 37 years in power, the officials said. Delivering the nationally televised address with the armed forces commanders who took power last week looking on, Mugabe, who is the world’s oldest serving leader at 93, frequently lost his place and had to repeat himself.

He said the southern African nation must not be guided by “bitterness” and urged Zimbabweans to “move forward.” “Mugabe is dragging down the process as he tries to look for a dignified exit on his own terms,” Rashweat Mukundu, an analyst with the Harare-based Zimbabwe Democracy Institute, said by phone. “The impeachment process will still go ahead while on the other hand he will try and resign on his own terms.” Earlier Sunday, Zanu-PF central committee decided to fire Mugabe as its leader and ordered him to step down. Emmerson Mnangagwa, who Mugabe dismissed as vice president this month, will be reinstated, take over as interim president and be Zanu-PF’s presidential candidate in elections next year, the party said. It also expelled the president’s wife, Grace, the nation’s other vice president, Phelekezela Mphoko, along with several other senior officials.

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“..an inverted yield curve, where long-term interest rates fall below their short-term counterparts, has been a reliable predictor of recessions.”

Yield Curve Flattening Could Derail Fed Interest Rate Hikes (BI)

The Federal Reserve’s plan to keep raising interest rates could soon run into a wall of its own making: low long-term borrowing costs that signal expectations for weak economic growth and anemic investment returns for the foreseeable future. Why is the Fed to blame? They’re not the only culprits, but the subdued economic recovery from the Great Recession and continued expectations for weakness stem in part from an insufficient, halting policy reaction to the deepest downturn in generations — both from monetary, and importantly, fiscal policy. In the past, including before the Great Recession of 2007-2009, an inverted yield curve, where long-term interest rates fall below their short-term counterparts, has been a reliable predictor of recessions.

The bond market is not there yet, but a sharp recent flattening of the yield curve has many in the markets watchful and concerned. The US yield curve is now at its flattest in about 10 years — in other words, since around the time a major credit crunch of was gaining steam. The gap between two-year note yields and their 10-year counterparts has shrunk to just 0.63 percentage point, the narrowest since November 2007. In fact, Shyam Rajan, Carol Zhang, and Olivia Lima, rate strategists at Bank of America Merrill Lynch, think low long-term bond yields could actually prevent the central bank from hiking interest rates further, as it plans to do. “We believe a precondition for the Fed to continue its hiking cycle in 2018 should be higher intermediate and long term rates,” they wrote in a research note to clients. “Without the latter, we would have doubts on the former.”

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Eric Peters gets the style price again.

Everything Is Overvalued And Implicitly Overleveraged (Peters)

“People ask, ‘Where’s the leverage this time?’” said the investor. Last cycle it was housing, banks. “People ask, ‘Where will we get a loss in value severe enough to sustain an asset price decline?’” he continued. Banks deleveraged, the economy is reasonably healthy. “People say, ‘What’s good for the economy is good for the stock market,’” he said. “People say, ‘I can see that there may be real market liquidity problems, but that’s a short-lived price shock, not a value shock,’” he explained. “You see, people generally look for things they’ve seen before.” “There’s less concentrated leverage in the economy than in 2008, but more leverage spread broadly across the economy this time,” said the same investor. “The leverage is in risk parity strategies. There is greater duration and structural leverage.”

As volatility declines and Sharpe ratios rise, investors can expand leverage without the appearance of increasing risk. “People move from senior-secured debt to unsecured. They buy 10yr Italian telecom debt instead of 5yr. This time, the rise in system-wide risk is not explicit leverage, it is implicit leverage.” “Companies are leveraging themselves this cycle,” explained the same investor, marveling at the scale of bond issuance to fund stock buybacks. “When people buy the stock of a company that is highly geared, they have more risk.” It is inescapable. “It is not so much that a few sectors are insanely overvalued or explicitly overleveraged this time, it is that everything is overvalued and implicitly overleveraged,” he said. “And what people struggle to see is that this time it will be a financial accident with economic consequences, not the other way around.”

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For some reason, people fail to apply Gresham’s law to all assets.

Gresham’s Law (Rivelle)

There is a tale told by a lesser known Nobel laureate, Kenneth Arrow. As a World War II weather officer, he was tasked with analyzing the reliability of the army’s long-range weather forecasts. His conclusion: statistically speaking, the forecasts weren’t worth the paper they were printed on. Captain Arrow sent along his report only to be told, “Yes, the General is well-aware the forecasts are completely unreliable. But, he needs them for planning his military operations.” Okay, maybe you don’t actually need a Nobel prize to know that rationality in the decision-making department is often lacking. Case in point: the capital markets. While subtle and ingenious in construction, the capital markets are, nonetheless, driven by the mass action of millions. They are a reflection of ourselves and necessarily express both the summit of our knowledge as well as the pit of our fears, and everything else in-between.

And, this brings us to the subject at hand: Gresham’s Law. Sir Thomas Gresham was a financier in the time of King Henry VIII and his name is, of course, attached to the principle that “bad money drives out good money.” Coin collectors of a certain age are familiar with the near immediate disappearance from circulation of all silver American coins once Congress had mandated the use of base metals beginning with the 1965 vintage. While all coins – silver and copper alike – carried identical legal tender value, it was the silver coins that vanished. Perhaps you are wondering what this has to do with bond investing? Everything! Consider the state of financial markets as witnessed by metrics of implied volatility:

VIX Index

 

MOVE Index

Both indices hover at generational low levels. If markets were “run” today by humanity’s better angels of wisdom and rationality, you would have to conclude that Mr. Market has drawn on his collective insight and pronounced the capital markets to be safer now than at any other time in the past quarter-century. That is a stunning conclusion! But if rationality can’t explain a 25-year trough in expected risk, then we must necessarily conclude that there must be some other, less rational explanation. How about this: investors are, by and large, famished for yield and willing to underwrite most any risk to get some income. In short, the marginal price setter is “irrationally exuberant”, or dare we say it out loud? “Greedy.”

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It’s productivity.

Britain’s Gravest Economic Challenge Isn’t Brexit (R.)

Few British budgets have mattered as much as the one that Philip Hammond will deliver to the House of Commons on Nov. 22. The chancellor of the exchequer must shore up Theresa May’s perilously shaky government ahead of a vital Brexit summit of European leaders in mid-December. At the same time Hammond has to keep a grip on the public finances. But the gravest challenge he faces is economic: Britain’s persistent productivity blight.Productivity – output per hour worked – is the mainspring of economic growth. In the decade before the financial crisis of 2007-08 productivity was increasing in Britain by just over 2% a year, outpacing the average for the other economies of the G7. But since the crisis British performance has been dismal. Although productivity jumped in the third quarter of 2017, prolonged weakness means that it is barely higher than its pre-crisis peak a decade ago.

The recovery in GDP has been driven overwhelmingly by more labor input, a source of growth that is running dry – not least since the vote to leave the European Union delivered a message to curb immigration. Other advanced economies have also experienced setbacks to productivity growth following the financial crisis. Where Britain stands out is in the severity of its reverse. The shortfall in productivity is the main reason real wages are now 4% lower than 10 years ago, a potent reason why the leave campaign prevailed in the Brexit referendum. Productivity is so central to prosperity and to macroeconomic management – by determining how fast the economy can sustainably grow – that a gaggle of economic researchers have been busy in their labs trying to diagnose the now decade-long disease.

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It could be disastrous.

UK Christmas Spending Expected To Fall For First Time Since 2012 (Ind.)

Christmas spending across the UK is expected to fall for the first time since 2012, research by Visa and IHS Markit shows. According to a report published on Monday, a challenging economic environment, in which real wages are falling and economic growth is sluggish, will likely lead to a 0.1% fall in consumer spending during the 2017 festive season. That’s in sharp contrast to last year, when spending increased by 2.8% over the Christmas period. “While it still looks likely that consumers will be hitting stores and websites in search of bargains this Black Friday and Cyber Monday, we expect spending for the duration of the festive season to be lower in comparison to last year,” said Mark Antipof, chief commercial officer at Visa.

“Looking back, consumers were in a sweet spot in 2016 – low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period,” he said. “2017 has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.” The research anticipates that high street spending will be particularly hard hit, falling by 2.1% compared to equivalent figures for last year – the biggest contraction since 2012. Online spending, however, is still expected to rise – by 3.6% over this Christmas period – meaning that it will account for a record share of this year’s Christmas spend. Visa said that of every £5 spent during the period, almost £2 will likely be spent online.

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There’ll be more next Christmas.

Many Americans Are Still Paying Off Debt From Last Christmas (CNBC)

As the holiday season approaches, the pressure to spend spikes. This year, gift-buying Americans plan to spend $660 on average. That’s according to new data from NerdWallet’s 2017 Consumer Holiday Shopping Report, which analyzed spending and behavior trends of more than 2,000 Americans aged 18 and over. And holiday-induced debt is a growing problem. Although survey respondents say they plan to spend roughly the same amount as they spent last year, 24% of shoppers say they overspent in 2016, while 27% admit to not making a budget at all. Even a budget is only a good start.

“There’s this myth that planning ahead and budgeting always ensures you don’t overspend. But in reality, creating and even sticking to a budget won’t make you immune to holiday debt,” Courtney Jespersen, a consumer savings expert at NerdWallet, says in the survey. “It’s so important to set a realistic ceiling for your spending.” During the 2016 season, boomers proved most likely to take on debt to finance their purchases, with 63% of respondents copping to the habit. Other generations took on debt as well, including 58% of Gen-Xers and 40% of millennials. What’s alarming about this pattern is that many Americans are still carrying last year’s debt as they head into yet another holiday season. Millennials are the worst culprits here: 24% still haven’t paid off credit card debt incurred during the 2016 shopping season, while 16% of Gen-Xers haven’t and only 8% of boomers haven’t.

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Nov 152017
 
 November 15, 2017  Posted by at 8:53 am Finance Tagged with: , , , , , , , , ,  


Arkady Shaikhet Express 1939

 

Richest 1% Own 50% Of Global Wealth, Poorest 50% Own 1% (BI)
US Auto-Loan Subprime Blows Up Lehman-Moment-Like (WS)
Household Debt Rises By $116 Billion As Credit-Card Delinquencies Pile Up (MW)
Sweden’s Housing Market Shock is Hitting Its Currency (BBG)
ECB Seeks Power To Freeze Bank Deposits (BBG)
What History Teaches About Interest Rates (DR)
Deus ex Mueller isn’t Coming (CJ)
Raqqa’s Dirty Secret (BBC)
How Western Imperial Power Set Out To Destroy Syria (Ren.)
US Directly Supports ISIS Terrorists In Syria – Russia (Tass)
Zimbabwe’s Military Seizes Power (BBG)
Airbnb Puts Automatic Rental Cap On Central Paris Offers (R.)
Airbnb Refuses To Disclose Financial Data To Greece’s Finance Ministry (KTG)

 

 

How do we do it? What an achievement!

Richest 1% Own 50% Of Global Wealth, Poorest 50% Own 1% (BI)

The world’s richest 1% of families and individuals hold over half of global wealth, according to a new report from Credit Suisse. The report suggests inequality is still worsening some eight years after the worst global recession in decades. The release of the Paradise Papers, a trove of leaked documents uncovered by investigative journalists detailing the offshore tax holdings of the world’s super wealthy, has reinforced just how rampant the problem of wealth inequality has become. “The bottom half of adults collectively own less than 1% of total wealth, the richest decile (top 10% of adults) owns 88% of global assets, and the top percentile alone accounts for half of total household wealth,” the Credit Suisse report said.

Put another way: “The top 1% own 50.1% of all household wealth in the world.” This handy pyramid chart, which shows the relative number of people at different wealth levels and how much of the world’s assets each bracket controls, speaks volumes about the level of income concentration, which by some measures has not been seen since the early 20th century:

In most countries, including the United States, a large wealth gap translates into those at the top accruing political power, which in turn can lead to policies that reinforce benefits for the wealthy. President Donald Trump’s tax cut plan, for instance, has been widely criticized for favoring corporations and the wealthy over working families. Measured overall, Credit Suisse found total global wealth rose 6.4% in the year between mid-2016 and mid-2017 to $280.3 trillion. Stock market gains helped add $8.5 trillion to US household wealth during that period, a 10.1% rise. US inequality is considerably worse than in its more developed-country peers.

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You really have to check the dates, to make sure this is not 10 year old news. The key word here is ‘surge’.

US Auto-Loan Subprime Blows Up Lehman-Moment-Like (WS)

Given Americans’ ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. If the word “surged” appears a lot, it’s because that’s the kind of debt environment we now have: Mortgage debt surged 4.2% year-over-year, to $9.19 trillion, still shy of the all-time record of $10 trillion in 2008 before it all collapsed. Student loans surged by 6.25% year-over-year to a record of $1.36 trillion. Credit card debt surged 8% to $810 billion. “Other” surged 5.4% to $390 billion. And auto loans surged 6.1% to a record $1.21 trillion. And given how the US economy depends on consumer borrowing for life support, that’s all good.

However, there are some big ugly flies in that ointment: Delinquencies – not everywhere, but in credit cards, and particularly in subprime auto loans, where serious delinquencies have reached Lehman Moment proportions. Of the $1.2 trillion in auto loans outstanding, $282 billion (24%) were granted to borrowers with a subprime credit score (below 620). Of all auto loans outstanding, 2.4% were 90+ days (“seriously”) delinquent, up from 2.3% in the prior quarter. But delinquencies are concentrated in the subprime segment – that $282 billion – and all hell is breaking lose there. Subprime auto lending has attracted specialty lenders, such as Santander Consumer USA. They feel they can handle the risks, and they off-loaded some of the risks to investors via subprime auto-loan-backed securities. They want to cash in on the fat profits often obtained in subprime lending via extraordinarily high interest rates.

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Oh well.

Household Debt Rises By $116 Billion As Credit-Card Delinquencies Pile Up (MW)

The numbers: Household debt rose by $116 billion, or 0.9%, to $12.96 trillion in the third quarter, the New York Fed said Tuesday. Credit-card debt rose by 3.1% while home equity lines of credit, or HELOC, balances fell by 0.9%. There were small gains in mortgage, student and auto debt. Flows into credit-card and auto loans delinquencies rose, with 4.6% of credit card debt 90 days or more delinquent, up from 4.4% in the second quarter, and 2.4% of auto loan debt seriously delinquent, up from 2.3%. That’s still nowhere near the 9.6% of student loan debt that is delinquent, which itself is understated because about half of those loans are currently in deferment, grace periods or in forbearance.

What happened: U.S. households aren’t aggressively leveraging up, and the ones that are did so had better credit. The higher level of auto loan originations was mainly to prime borrowers, and the median credit score to individuals originating new mortgages ticked up to 760 from 754. [..] Auto loans have grown for 26 straight quarters. But there are some worries as subprime auto loan performance continues to deteriorate — the delinquency rate for auto finance companies have grown by more than 2 percentage points since 2014, the New York Fed said.

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World’s biggest housing bubble?

Sweden’s Housing Market Shock is Hitting Its Currency (BBG)

Can a central bank steer the housing market? Not so long ago, Sweden’s Riksbank decided: no. Now, there’s a risk that decision may backfire as the biggest property market in Scandinavia risks sinking into a correction. The evidence of price declines was so worrying on Tuesday that it contributed to a 1.5 percent slump in the krona against the euro. A weak currency puts the Riksbank’s inflation target at risk. So should it be looking at the housing market more closely? Developments in Sweden’s housing market “could spark some doubts at the Riksbank as it may affect the overall economic outlook and inflation,” Nordea analyst Andreas Wallstrom said in a note. Sweden’s Riksbank has thrown all its energy into fighting deflation and, earlier this year, finally regained credibility on its inflation mandate.

Policy makers now say they may be ready to start raising rates in the middle of next year. At the same time, the Riksbank may extend a bond purchase program due to end this year. But in the minutes of the Riksbank’s latest rate meeting, Deputy Governor Cecilia Skingsley suggested that monetary policy, “under certain circumstances, can be used to combat the effects of major household debt.” She also said the housing market “must be carefully monitored,” given the latest developments. Nordea’s Wallstrom says the central bank will probably need to see a “sharp drop” in house prices with a direct impact on the real economy before it will look into adding significant stimulus. But the bank might decided to signal rates will stay where they are for even longer.

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Which would cause panic and bank runs.

ECB Seeks Power To Freeze Bank Deposits (BBG)

The European Central Bank intensified its push for a tool that would hand authorities the power to stop deposit withdrawals when a bank is on the verge of failing. ECB executive board member Sabine Lautenschlaeger said that bank resolution cases this year showed that a so-called moratorium tool, which would temporarily freeze a bank’s liabilities to buy time for crucial decisions, is needed. Her comment comes as policy makers in Brussels debate how such measures should be designed, and just days after the ECB officially called for the moratorium to extend to deposits as well. “If we have a long list of exemptions and we have a moratorium that doesn’t work, I do not want to have a moratorium tool,” Lautenschlaeger told a conference in Frankfurt on Tuesday. “Then you will never use it.”

EU member states appear ready to heed the request, according to a Nov. 6 paper that develops their stance on a bank-failure bill proposed by the European Commission. They suggest giving authorities the power to cap deposit withdrawals as part of a stay on payments only after an institution has been declared “failing or likely to fail.” The power to install a moratorium “can in principle apply to eligible deposits,” the paper reads. “However, resolution authority should carefully assess the opportunity to extend the suspension also to covered deposits, especially covered deposits held by natural persons and micro, small and medium sized enterprises, in case application of suspension on such deposits would severely disrupt the functioning of financial markets.”

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Low interst rates = low growth economies. The chicken and the egg.

What History Teaches About Interest Rates (DR)

“At no point in the history of the world has the interest on money been so low as it is now.” Who can dispute the good Sen. Henry M. Teller of Colorado? For lo eight years, the Federal Reserve has waged a ceaseless warfare upon interest rates. Economic law, history, logic itself, stagger under the onslaughts. We suspect that economic reality will one day prevail. This fear haunts our days… and poisons our nights. But let us check the date on the senator’s declaration… Kind heaven, can it be? We are reliably informed that Sen. Teller’s comment entered the congressional minutes on Jan. 12… 1895. 1895 — some 19 years before the Federal Reserve drew its first ghastly breath! Were interest rates 122 years ago the lowest in world history? And are low interest rates the historical norm… rather than the exception?

Today we rise above the daily churn… canvass the broad sweep of history… and pursue the grail of truth. The chart below — giving 5,000 years of interest rate history — shows the justice in Teller’s argument. Please direct your attention to anno Domini 1895: Rates had never been lower in all of history. They would only sink lower on two subsequent occasions — the dark, depressed days of the early 1930s — and the present day, dark and depressed in its own right. A closer inspection of the chart reveals another capital fact… Absent one instance at the beginning of the 20th century and a roaring exception during the mid-to-late 20th century, long-term interest rates have trended lower for the better part of 500 years.

Paul Schmelzing professes economics at Harvard. He’s also a visiting scholar at the Bank of England, for whom he conducted a study of interest rates throughout history. Could the sharply steepening interest rates that began in the late 1940s be a historical one-off… an Everest set among the plains? Analyst Lance Roberts argues that periods of sharply rising interest rates like this are history’s exceptions — lovely exceptions. Why lovely? Roberts: Interest rates are a function of strong, organic, economic growth that leads to a rising demand for capital over time. In this view, rates rose steeply at the dawn of the 20th century because rapid industrialization and dizzying technological advances had entered the scenery.

Likewise, Roberts argues the massive post-World War II economic expansion resulted in the second great spike in interest rates: There have been two previous periods in history that have had the necessary ingredients to support rising interest rates. The first was during the turn of the previous century as the country became more accessible via railroads and automobiles, production ramped up for World War I and America began the shift from an agricultural to industrial economy. The second period occurred post-World War II as America became the “last man standing”… It was here that America found its strongest run of economic growth in its history as the “boys of war” returned home to start rebuilding the countries that they had just destroyed.

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“If you attribute all your problems to Trump, you’re guaranteeing more Trumps after him..”

Deus ex Mueller isn’t Coming (CJ)

We know from the Snowden leaks on the NSA, the CIA files released by WikiLeaks, and the ongoing controversies regarding FBI surveillance that the US intelligence community has the most expansive, most sophisticated and most intrusive surveillance network in the history of human civilisation. Following the presidential election last year, anonymous sources from within the intelligence community were haemorrhaging leaks to the press on a regular basis that were damaging to the incoming administration. If there was any evidence to be found that Donald Trump colluded with the Russian government to steal the 2016 election using hackers and propaganda, the US intelligence community would have found it and leaked it to the New York Times or the Washington Post last year.

Mueller isn’t going to find anything in 2017 that these vast, sprawling networks wouldn’t have found in 2016. He’s not going to find anything by “following the money” that couldn’t be found infinitely more efficaciously via Orwellian espionage. The factions within the intelligence community that were working to sabotage the incoming administration last year would have leaked proof of collusion if they’d had it. They did not have it then, and they do not have it now. Mueller will continue finding evidence of corruption throughout his investigation, since corruption is to DC insiders as water is to fish, but he will not find evidence of collusion to win the 2016 election that will lead to Trump’s impeachment. It will not happen. This sits on top of all the many, many, many reasons to be extremely suspicious of the Russiagate narrative in the first place.

[..] If you attribute all your problems to Trump, you’re guaranteeing more Trumps after him, because you’re not addressing the disease which created him, you’re just addressing the symptom. The problem is not Trump. The problem is that America is ruled by an unelected power establishment which maintains its rule by sabotaging democracy, exacerbating economic injustice and expanding the US war machine. Stop listening to the lies that they pipe into your echo chambers and turn to face your real demons.

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“IS may have been homicidal psychopaths, but they’re always correct with the money.” Says Abu Fawzi with a smile.

Raqqa’s Dirty Secret (BBC)

Lorry driver Abu Fawzi thought it was going to be just another job. He drives an 18-wheeler across some of the most dangerous territory in northern Syria. Bombed-out bridges, deep desert sand, even government forces and so-called Islamic State fighters don’t stand in the way of a delivery. But this time, his load was to be human cargo. The Syrian Democratic Forces (SDF), an alliance of Kurdish and Arab fighters opposed to IS, wanted him to lead a convoy that would take hundreds of families displaced by fighting from the town of Tabqa on the Euphrates river to a camp further north. The job would take six hours, maximum – or at least that’s what he was told. But when he and his fellow drivers assembled their convoy early on 12 October, they realised they had been lied to. Instead, it would take three days of hard driving, carrying a deadly cargo – hundreds of IS fighters, their families and tonnes of weapons and ammunition.

Abu Fawzi and dozens of other drivers were promised thousands of dollars for the task but it had to remain secret. The deal to let IS fighters escape from Raqqa – de facto capital of their self-declared caliphate – had been arranged by local officials. It came after four months of fighting that left the city obliterated and almost devoid of people. It would spare lives and bring fighting to an end. The lives of the Arab, Kurdish and other fighters opposing IS would be spared. But it also enabled many hundreds of IS fighters to escape from the city. At the time, neither the US and British-led coalition, nor the SDF, which it backs, wanted to admit their part. Has the pact, which stood as Raqqa’s dirty secret, unleashed a threat to the outside world – one that has enabled militants to spread far and wide across Syria and beyond?

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Narratives are starting to move.

How Western Imperial Power Set Out To Destroy Syria (Ren.)

Virtually unknown among large swaths the general public both in Britain and the U.S is the fact that Bashar-al Assad’s secular government won the first contested presidential election in Ba’athist Syria’s history on July 16, 2014, which was reported as having been open, fair and transparent. American Peace Council delegate, Joe Jamison, who was allowed unhindered travel throughout Syria, stated: “By contrast to the medieval Wahhabist ideology, Syria promotes a socially inclusive and pluralistic form of Islam. We [the USPC] met these people. They are humane and democratically minded…. The [Syrian] government is popular and recognised as being legitimate by the UN. It contests and wins elections which are monitored. There’s a parliament which contains opposition parties – we met them. There is a significant non-violent opposition which is trying to work constructively for its own social vision.”

Jamison added: “Our delegation came to Syria with political views and assumptions, but we were determined to be sceptics and to follow the facts wherever they led us”, he said. “I concluded that the motive of the US war is to destroy an independent, Arab, secular state. It’s the last of this kind of state standing.” The notion that the United States government and its allies and proxies, want to see the destruction of Syria’s pluralistic state under Assad destroyed, is hardly a secret. Indeed, one of Washington’s key allies in the region, Israel, has conceded as much. The claim by Israel’s defence minister, Avigdor Lieberman, that Assad’s removal is the empires “ultimate goal”, would appear to be consistent with the notion that the aim of the U.S government is to stymie the non-violent opposition inside Syria. Washington has been engaged in this strategy since early 2012 after having deliberately helped scupper Kofi Annan’s six point peace plan.

Members of the Syrian opposition within a newly reformed constitution who wanted to participate in democratic politics have instead been encouraged by the Western axis – as a result of bribing government forces to defect and through funding the Free Syrian Army – to overthrow the Assad government by violent means. As commentator Dan Glazebrook put it: “Within days of Annan’s peace plan gaining a positive response from both sides in late March, the imperial powers openly pledged, for the first time, millions of dollars for the Free Syrian Army; for military equipment, to provide salaries to its soldiers and to bribe government forces to defect. In other words, terrified that the civil war is starting to die down, they are setting about institutionalising it.”

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Now proven by the BBC. What’s next?

US Directly Supports ISIS Terrorists In Syria – Russia (Tass)

The Russian Defense Ministry has said it has obtained evidence the US-led coalition provides support for the terrorist group Islamic State (outlawed in Russia). “The Abu Kamal liberation operation conducted by the Syrian government army with air cover by the Russian Aerospace Force at the end of the last week revealed facts of direct cooperation and support for ISIS terrorists by the US-led ‘international coalition,’” the Russian Defense Ministry said. The ministry showed photo shoots made by Russian unmanned aircraft on November 9 which show kilometers-long convoys of IS armed groups leaving Abu Kamal towards the Wadi es-Sabha passage on the Syrian-Iraqi border to avoid strikes by the Russian aviation and the government army.

The US refused to conduct airstrikes over the leaving IS convoy. “Americans peremptorily rejected to conduct airstrikes over the ISIS terrorists on the pretext of the fact that, according to their information, militants are yielding themselves prisoners to them and now are subject to the provisions of the Convention relative to the Treatment of Prisoners of War,” the Russian Defense Ministry said. The Defense Ministry specified that “the Russian force grouping command twice addressed the command of the US-led ‘international coalition’ with a proposal to carry out joint actions to destroy the retreating ISIS convoys on the eastern bank of the Euphrates.” The Americans failed to answer the Russian side’s question on why IS militants leaving in combat vehicles heavily equipped are regrouping in the area controlled by the international coalition to conduct new strikes over the Syrian army near Abu Kamal, the Russian Defense Ministry stressed.

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Mugabe under house arrest and according to South African media ‘planning to step down’. Rumors that Emmerson Mnangagwa, the vice-president Mugabe fired recently, will be interim president. Which in turn would confirm that the army acted because it doesn’t want Grace Mugabe in power.

Zimbabwe’s Military Seizes Power (BBG)

The armed forces seized power in Zimbabwe after a week of confrontation with President Robert Mugabe’s government and said the action was needed to stave off violent conflict in the southern African nation that he’s ruled since 1980. The Zimbabwe Defense Forces will guarantee the safety of Mugabe, 93, and his family and is only “targeting criminals around him who are committing crimes that are causing social and economic suffering in the country in order to bring them to justice,” Major-General Sibusiso Moyo said in a televised address in Harare, the capital. All military leave has been canceled, he said. Denying that the action was a military coup, Moyo said “as soon as we have accomplished our mission we expect the situation to return to normalcy.” He urged the other security services to cooperate and warned that “any provocation will be met with an appropriate response.”

The action came a day after armed forces commander Constantine Chiwenga announced that the military would stop “those bent on hijacking the revolution.” As several armored vehicles appeared in the capital on Tuesday, Mugabe’s Zimbabwe African National Union-Patriotic Front described Chiwenga’s statements as “treasonable” and intended to incite insurrection. Later in the day, several explosions were heard in the city. The military intervention followed a week-long political crisis sparked by Mugabe’s decision to fire his long-time ally Emmerson Mnangagwa as vice president in a move that paved the way for his wife Grace, 52, and her supporters to gain effective control over the ruling party. Nicknamed “Gucci Grace” in Zimbabwe for her extravagant lifestyle, she said on Nov. 5 that she would be prepared to succeed her husband.

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65,000 homes in Paris alone.

Airbnb Puts Automatic Rental Cap On Central Paris Offers (R.)

Short-term rental website Airbnb, which has been challenging traditional hotel operators such as Accor and Marriott, said it would automatically cap the number of days its hosts can rent their property each year in central Paris. The decision, which goes into effect in January and mirrors initiatives already in place in London and Amsterdam, will force hosts to effectively comply with France’s official limit on short-term rentals of 120 days a year for a main residence. It comes as Airbnb, similar to its taxi-hailing peer Uber, is facing a growing crackdown from legislators worldwide – triggered in part by lobbying from the hotel industry, which sees the rental service as providing unfair competition. Airbnb and other rental platforms have also been criticized for driving up property prices and contributing to a housing shortage in some cities such as Paris or Berlin.

Airbnb, which has denied having a significant impact on housing shortages, has been trying to placate local authorities. “Paris is Airbnb number one city worldwide and we want to insure our community of hosts expands in a responsible and sustainable manner,” said Emmanuel Marill, Airbnb general manager for France. In Paris, the automatic rental cap will apply only to the city’s first four districts (“arrondissements”) unless the property owner has proper authorization. These districts include tourist hotspots such as the Marais, and landmarks such as the Louvre and the place de la Concorde square. Airbnb is implementing the cap as the Paris city council has made it mandatory from December for people renting their apartments on short-term rental websites to register their property with the town hall.

Ian Brossat, the housing advisor to the Paris Mayor, told Reuters that the cap should extend to the whole of Paris. “Under the law, websites must withdraw listings that do not comply with the law throughout Paris. One cannot accept that a website complies with the law only in the first four arrondissements of Paris,” said Brossat. With over 400,000 listings, France is Airbnb’s second-largest market after the United States. Paris, which is the most visited city in the world, is Airbnb’s biggest single market, with 65,000 homes.

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Fine them until they do?! Half the city of Athens will turn into Airbnb if they don’t.

Airbnb Refuses To Disclose Financial Data To Greece’s Finance Ministry (KTG)

Airbnb refused to provide the Greek Finance Ministry with information on property rentals thus delaying the launch of an online platform where owners should register the rental transactions and pay the necessary taxes. According to information obtained by economic news website economy365.gr, the Finance Ministry has tried for five months to get in touch with executives of the company in California as well as of other companies (Novasol etc). However, the companies showed no intention to cooperate with Greek authorities who have requested that the tax number of property owner is being registered to every property at the Airbnb platform. Owner’s tax number would facilitate the imposition of taxes on rentals via Airbnb. The tax legislation on short-term leases through digital platform like Airbnb was voted last year. The law foresees taxes of 15%-45% and a limited number of rentals per year.

Registration is mandatory. Authorities will provide the property owner with a certification number that has to be declared on any website and social media advert, including, of course, the Airbnb platform. Fines can reach up to 5,000 euros, if a property owner does not register on the Greek authorities registration platform and tries to evade taxes from short-term rentals. The state has estimated that revenues from Airbnb rentals could reach 48 million euros per year. According to the Finance Ministry property owners try to bypass the 3% commission to Airbnb and upcoming taxes by direct contact to customers via messenger or telephone. The payments are done cash at the arrival and not through the platform. In this way, property owners can bypass not only the commission but also registration of the rentals and future taxes. Just in case and even if one day, the Airbnb decides to hand over its Greek data to the tax authorities. For the time being it looks as the Greek goal to tax Airbnb properties has to be postponed.

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May 302017
 
 May 30, 2017  Posted by at 8:50 am Finance Tagged with: , , , , , , , , , , ,  


Inge Morath Paris 1954

 

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)
Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)
Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)
The Great US Energy Debt Wall (SRSRocco)
Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)
Draghi Rules Out Including Greece in ECB QE For Now (K.)
Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)
Deposits And Loans At Greek Banks Continue Slide (K.)
EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)
Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)
May Battles Against Complacency as UK Election Lead Slips Away (BBG)
Russia Expects China To Help Resolve Syrian Crisis (DS)
Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)
Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)
The So-Called Resistance (Jim Kunstler)
Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)
Greece, Germany Agree To Slow Refugee Family Reunification (F24)

 

 

After having milked the bubble for all it’s worth…

Australia Hedge Fund Returns Cash To Clients Citing Looming Calamity (SMH)

Australian asset manager Altair Asset Management has made the extraordinary decision to liquidate its Australian shares funds and return “hundreds of millions” of dollars back to its clients, citing an impending property market “calamity” and the “overvalued and dangerous time in this cycle”. “Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, who serves as Altair’s chairman and chief investment officer, said in a statement on Monday. The 30-year veteran of funds management said that he had on May 15 advised all Altair clients that he planned to “sell all the underlying shares in the Altair unit trusts and to then hand back the cash to those same managed fund investors”.

Mr Parker said he had “disbanded the team for time being”, including his investment committee of chief economist Steve Roberts, senior healthcare analyst Sally Warneford and independent strategist Gerard Minack. “I would like to make clear this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point,” Mr Parker’s statement said. “We think that there is too much risk in this market at the moment, we think it’s crazy,” Mr Parker said more candidly. “Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that’s after we’ve ticked them up over the past year.” “Now we are asking ‘is there any more juice in these companies valuations?’ and the answer is stridently, and with very few exceptions, ‘no there isn’t’.”

Mr Parker outlined a roll call of “the more obvious reasons to exit the riskier asset markets of shares and property”. They included: the Australian east-coast property market “bubble” and its “impending correction”; worries that issues around China’s hot property sector and escalating debt levels will blow up “later this year”; “oversized” geopolitical risks and an “unpredictable” US political environment; and the “overvalued” Aussie equity market. But it was the overheated local property market that was the clearest and most present danger, Mr Parker said. “When you speak to people candidly in the banks, they’ll tell you very specifically that they are extraordinarily worried about the over-leverage of the Australian population in general,” he said.

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More looming calamity.

Hong Kong Throngs of Thousands Defy Bid to Cool Home Market (BBG)

Snaking queues of thousands of prospective apartment buyers in Hong Kong signaled authorities have made no progress in cooling a red-hot property market, where prices are at records. People were lining up on Friday and over the weekend at Victoria Skye, a luxury project at the former airport site of Kai Tak, and at the Ocean Pride development by Cheung Kong Property and MTR. “Successive moves by the government in recent memory to cool the property market only resulted in it becoming crazier,” The Standard newspaper said in an editorial on Monday. “The result is a sea of madness.” The Hong Kong Monetary Authority has been tightening rules for lenders, including restricting levels of lending to developers, as it tries to limit financial risks and take some of the heat out of the market.

The Centaline Property Centa-City Leading Index of existing homes has advanced 23% in the past year, setting new price records week after week. At a Legislative Council meeting on Monday, HKMA Chief Executive Norman Chan said levels of demand were reminiscent of 20 years ago – before Hong Kong suffered a property bust – and he expressed concern that people with limited financial resources were buying just because they thought prices would only keep going up. [..] Developers sold 8,616 homes in the first five months of the year, already more than were sold in any first half since new purchasing rules were introduced in 2013, the Hong Kong Economic Times reported. K&K Property has offered an additional 200 units at Victoria Skye after it sold 306 flats on Saturday, Ming Pao newspaper reported. Cheung Kong will put another 346 up for grabs after selling 496 in a single day, May 26.

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Buying too many weapons. The House of Saud is nervous.

Saudi Foreign Reserves Dip Below $500 Billion in April (BBG)

Saudi Arabia’s net foreign assets dropped below $500 billion in April for the first time since 2011 even after the kingdom raised $9 billion from its first international sale of Islamic bonds. The Saudi Arabian Monetary Authority, as the central bank is known, said on Sunday its net foreign assets fell by $8.5 billion from the previous month to about $493 billion, the lowest level since 2011. That brings the decline this year to $36 billion. “Didn’t really see any major driver for such a huge drop, especially when accounting for the sukuk sale,” said Mohamed Abu Basha at EFG-Hermes, an investment bank. Even if the proceeds from the sale weren’t included, “the reserve decline remains huge,” he said.

Saudi Arabia’s foreign reserves have dropped from a peak of more than $730 billion in 2014 after the plunge in oil prices, prompting the IMF to warn that the kingdom may run out of financial assets needed to support spending within five years. Authorities have since embarked on an unprecedented plan to overhaul the economy and repair public finances. But the pace of the decline in reserves this year has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen. Finance Minister Mohammed Al-Jadaan said in April that the government didn’t withdraw from its central bank reserves during the first quarter. He said the decline could be attributed to local contractors paying overseas vendors after the government settled its arrears.

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It’s not (just) the shale companies, it’s their lenders who are in danger.

The Great US Energy Debt Wall (SRSRocco)

While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL. So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations.

As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast. According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year. As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive.

Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt: Shale Oil Production, Cost & Profit Estimates For 2018 • REVENUE = 5 million barrels per day shale oil production x 365 days x $50 a barrel = $91 billion. • EST. PROFIT = 5 million barrels per day shale oil production x 365 days x $10 a barrel = $18 billion. If these shale oil companies do actually produce 5 million barrels of oil per day in 2018, and were able to make a $10 profit (not likely), that would net them $18 billion. However, according to the Bloomberg data, these companies would need to pay back $110 billion in debt (bonds) in 2018. If they would use all their free cash flow profits to pay back this debt, they would still owe $92 billion.

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BILD says Greeks have mentioned defaulting on July payments.

Greece, Italy Tensions Hit Euro, Asian Stocks, Lift Yen, Gold (R.)

Concerns about a Greek bailout, early Italian elections and comments by the ECB chief about the need for continued stimulus all kept the euro under pressure on Tuesday. European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays. The euro slid 0.3% to $1.1129 in its fourth session of declines. James Woods at Rivkin Securities in Sydney attributed most of the currency’s decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal. “The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Woods said.

However, he cautioned against reading “too much into it” without more details or confirmation, adding it was unlikely Greece would forego the bailout payment at this stage. Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting. Comments by former Italian Prime Minister Matteo Renzi on Sunday in favour of holding an election at the same time as Germany’s in September also pulled the euro lower. So did a statement by ECB President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

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If he includes Greece, it becomes harder for Germany to plunder it. And they’re not done with that.

Draghi Rules Out Including Greece in ECB QE For Now (K.)

ECB chief Mario Draghi took the wind out of the government’s sails on Monday, telling the European Parliament that the ECB will not consider including Greece in its QE program before the conclusion of its bailout review and its debt is made sustainable. “First, let’s have an agreement, a full agreement, and let’s find measures that will make the debt sustainable through time,” Draghi told European lawmakers in Brussels, adding that he regretted that “a clear definition of the debt measures was not reached in the last Eurogroup.” Draghi also said that after creditors agree on what sort of debt relief measures Greece will get, the Governing Council of the ECB will carry out its own “fully independent” analysis to see if the debt would also be sustainable in adverse scenarios.

His comments came as Prime Minister Alexis Tsipras said that Greece was hoping that there will be an initiative in June for “a definitive settlement of the crisis through a clear solution of reducing the debt.” “Let there be a solution and let it come when it comes,” he said after his meeting in Athens with Estonian Prime Minister Juri Ratas, adding that the sooner the matter is solved the better. The tough road ahead for Greece was reflected in remarks yesterday by Finance Minister Euclid Tsakalotos, who said the country’s inclusion in QE is indeed “a difficult issue.” “The ECB, like our Lord, works in mysterious ways,” he told reporters. Draghi’s remarks were seen as another another blow, if not the killer, to the government’s narrative regarding the time frame it had laid out for the country to get on the road to economic recovery.

More specifically, Prime Minister Alexis Tsipras’s roadmap stipulated that after the second review of the country’s third bailout is wrapped up, creditors and the IMF would agree on how to make the country’s debt sustainable, and this would in turn allow Greece join the QE program, which would pave the way for the country’s return to international markets. But with the review all but concluded, and no definitive statements from the creditors on what sort of debt relief measures it can expect – or when – the best the government can hope for now is that the sequence of events outlined in the Tsipras roadmap will take place in the fall at the earliest, and definitely after the German national elections in September. The way things stand now, the most the government can expect from the June 15 Eurogroup is the release of the bailout tranche of more than €7 billion, but not the reassurance it wants in order to join the QE program.

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That’s exactly why these deals keep on being blocked. The EU doesn’t want a Greek recovery. Cart, horse.

Greece Warns Recovery Threatened If Debt Deal Is Blocked At Next Talks (G.)

Greece on Monday issued a panic warning that its recovery would be thrown into doubt if Brussels blocked a debt deal at the next meeting of euro area finance ministers. Fearing that Germany will insist on delays to an agreement until at least after elections in September, Athens’ finance minister hinted that the beleaguered nation could be plunged deeper into recession after seeing its economy contract by more than 25% since the start of its financial crisis. With £7.5bn in debt repayments due in July and lenders meeting on 15 June to try and reach an agreement after failing last month, Euclid Tsakalotos made an urgent appeal for clarity on Monday. “It is incumbent on all sides to find a solution,” he told foreign correspondents. “There is very little point in entering a [bailout] programme if the goal is not to leave the programme. And leaving the programme should be the responsibility not just of the debt country but the creditor country as well.”

Athens, Tsakalotos continued, had kept its side of the bargain, legislating highly unpopular reforms to produce savings of 2% of GDP, while the EU and IMF had not kept theirs. “We can’t accept a deal which is not what was on the table,” he said. “What was on the table was if Greece carried outs its reform package then creditors would ensure that there would be a clear runway through clarity for debt.” Instead, the IMF had refused to endorse the proposed solution – saying it fell far short of what was necessary to engender debt sustainability – with the result that Athens had been forced to reject it, Tsakalotos added. The Fund and Berlin – the biggest contributor of Greece’s three rescue programs – have long been in disagreement over how to reduce Greek debt.

Tsakalotos was addressing a hastily arranged press conference. Held in the dining room of the Athens’ mansion that houses the prime minister’s office, it appeared to highlight the mood of nervousness pervading the Greek government. With a debt mountain hovering around €314bn – or 180% of GDP – the Syriza-dominated coalition of Alexis Tsipras has long argued that debt relief is essential to foreign investment and economic recovery. [..] ..time, said Tsakalotos on Monday, was running out. “Our ask is … that everyone keeps their side of the bargain. The position [of creditors] is going to be very difficult to defend. What can they say? That the Greek government did everything but we will send it to the rocks.”

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Which will affect Greek banks, which will affect the state, etc etc. There never was another option.

Deposits And Loans At Greek Banks Continue Slide (K.)

Deposits in Greek banks declined by more than €2.4 billion in the first four months of the year, while credit contraction has continued in 2017 for an eighth consecutive year. Still, April was the second month of credit expansion. The sum of Greek deposits reached almost €118.9 billion at the end of last month, down from about €121.4 billion at end-December 2016, due to the uncertainty that has prevailed over the Greek economy this year. Bank of Greece data show a fresh €313.3 million drop in deposits from end-March to end-April – a result of the €665.3 million decline in the cash flow of corporations, from nearly €20.5 billion in March to almost €19.8 billion last month. In fact the picture of corporate deposits in April looks technically better than it would had it not been for the €620 million share capital increase by Fraport Greece and Sklavenitis’s €400 million bond.

The level of savings has practically reverted to what it was in 2001, when Greece was still using the drachma, and forecasts speak of a stable picture with few fluctuations expected in the rest of 2017. Senior bank officials say the next few months will be difficult despite the projections for more revenues from tourism: The tax obligations starting from July, with income tax and later Single Property Tax (ENFIA) deadlines, are expected to eat further into the savings of households and corporations’ cash flow. Meanwhile the difference between loans issued and old loans paid back has remained in negative territory in 2017, reaching a rate of -0.9% in the first four months. However, April showed a positive flow amounting to €659 million after an expansion of €307 million in March.

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Yeah, they’re going to risk bankrupting German and French carmakers, right?

EU Moves To Crack Down On Carmakers In Wake Of VW Emissions Scandal (G.)

The European Union has moved towards cracking down on carmakers who cheat emissions tests by giving the EU executive more powers to monitor testing and impose fines. The European council overcame initial objections from Germany and agreed to try to reform the system for approving vehicles in Europe in the wake of the Volkswagen emissions scandal. The draft now goes for negotiations with the European commission and the European parliament, where the car industry holds a strong influence. “Above all, the objective is building trust and credibility again in the European type-approval system,” said Chris Cardona, the economy minister of Malta, which holds the EU’s six-month rotating presidency.

The VW emissions scandal erupted in September 2015, with the carmaker admitting it had installed software defeat devices in 11m diesel cars worldwide, meaning the vehicles only cut their nitrogen oxide pollution during certification tests. The draft EU rules call for reducing the power of national authorities and empowering the European commission to test and inspect vehicles, to ensure compliance with emissions standards, and to respond to any irregularities. “This will increase the independence and quality of the EU type-approval system,” the council said in a statement. “The commission could also impose fines for infringements on manufacturers and importers of up to €30,000 [£26,000] per noncompliant vehicle.” Under the draft rules, every EU country will be required to check emissions in one in every 50,000 new vehicles based on real driving conditions.

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The EU comes prepared.

Painstaking Detail Of Brexit Process Revealed In EU Documents (G.)

Just 10 days before the general election, the EU published two documents that will affect every person living in Britain for years to come. Despite being dropped into the maelstrom of an election caused by Brexit, there was hardly a murmur. The documents were the most detailed positions yet from the EU’s chief negotiator, Michel Barnier, on the upcoming divorce talks with the UK. In two policy papers, the bloc has elaborated its stance on the Brexit bill and citizens’ rights. [..] The muted reaction can be explained partly by the fact that the texts were published with zero fanfare, when the country was still reeling from the terrorist atrocity in Manchester. Furthermore, the EU documents contain no surprises. The equivalent of dotting the Is and crossing the Ts, they are a reminder the EU has had 11 months to get ready for Brexit.

That is almost one year to assemble squadrons of specialists to pore over EU treaties and legal tomes to map the way ahead. The 10-page paper on the bill does not put a price on the divorce, but sets out in painstaking detail all EU bodies with a vested interest in the spoils – 40 agencies, eight joint projects on new technologies and a panoply of funds agreed by all countries, from aid for refugees in Turkey to supporting peace in Colombia. No detail is too small. Britain is even on the hook for funding teachers at the elite European schools that educate EU civil servants’ children. On citizens’ rights, the EU spells out in greater detail the protections it wants to secure for nearly 5 million people on the wrong side of Brexit – 3.5 million EU nationals in the UK and 1.2 million Britons on the continent.

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Fear is all they have left. Blunt lies about Corbyn.

May Battles Against Complacency as UK Election Lead Slips Away (BBG)

Theresa May began the U.K. election campaign warning that pollsters giving her a 20-point lead could be wrong. With her lead now slashed, she’s hoping they really are. A series of missteps by May and her advisers, along with a populist Labour campaign, have put the prime minister on the defensive. Activists no longer laugh when she raises the prospect of a Corbyn victory at her rallies and some have questioned the wisdom of building a campaign around her own personal brand, urging people to vote for “Theresa May and her team.” Investors have awoken to the fact that May’s promise of “strong and stable” government — never mind a landslide to match Tony Blair’s in 1997 — could be in jeopardy with the pound dipping after a specific poll showed May’s Conservative Party leading the Labour Party by just five points.

“The Tories are right to be worried if the momentum looks to be with Labour, but they can still turn it around,” Andrew Hawkins, chairman of pollsters ComRes, said in a telephone interview. With a nation still in shock over the Manchester bombing and June 8 elections round the corner, May got back to the campaign trail and reverted to her tested lines on Brexit: That Labour leader Jeremy Corbyn cannot be trusted to navigate Britain through two years of talks. “It’s important as people come closer to that vote – that’s only next week – that they focus on the choice that’s there before them,” the prime minister told activists at a rally in Twickenham, southwest London, on Monday. “If I lose just six seats my government loses its majority, that could mean in 10 days time a government in chaos with Jeremy Corbyn in Number 10.”

But gone was the confidence when she stunned Britain by calling a snap election on April 18. On the day of the announcement, an ICM/Guardian poll gave May’s Tories a lead over Labour of 21 points and surveys in the following weekend’s newspapers suggested leads of 24 and 25 points. Now, she is vulnerable to attack. Interviewer Jeremy Paxman quizzed May about her U-turns, in an interview on Sky News on Monday: “You have backed down over social care, and over national insurance. If I was in Brussels, I would think you are a blowhard who collapses at the first sign of gunfire.” Her rival on the other hand has grown more relaxed, holding his own against the same interviewer who has a reputation for being a rottweiler in his style of questioning. In one instance, Corbyn won a big round of applause when asked about whether he’d want to abolish monarchy: “Do you know what? I had a very nice chat with the Queen.”

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US room to move gets smaller fast.

Russia Expects China To Help Resolve Syrian Crisis (DS)

Moscow hopes for China’s help in solving the Syrian crisis and restoring the country, Russian Deputy Foreign Minister Igor Morgulov said Monday. “Our cooperation with China on Syria at various international venues is unprecedented. We blocked six attempts to pass anti-Syrian resolutions in the U.N. Security Council,” Morgulov said at “Russia and China: Taking on a New Quality of Bilateral Relations” international conference. The Russian deputy foreign minister added that Russia values Beijing’s position on the Syrian crisis, and hopes that, “the Chinese partners will continue their efforts to promote a political settlement.”

“Together we call for a peaceful and political-diplomatic solution to conflicts, without double standards, unilateral action or attempts at ousting regimes. Our approaches coincide, among other things, on the uncompromising fight against terrorism,” Morgulov said. Russia and China have repeatedly vetoed U.N. Security Council resolutions imposing sanctions against the Assad regime. Moscow has long-standing links to the Assad regime and is its key ally, while China has an established policy of non-intervention in other countries’ affairs.

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French interests in Russia are substantial. Macron going after RT and Sputnik is a weird way to not offend Merkel.

Putin, Macron Have ‘Open, Frank Exchange Of Opinions’ (RT)

Russian President Vladimir Putin and his French counterpart, Emmanuel Macron, had “difficult” but “frank” talks during their first meeting in Versailles. The two leaders vowed to improve relations and jointly address international problems. The first meeting of the Russian and French leaders lasted almost three hours, with Macron saying that “Franco-Russian friendship” was at the heart of the talks. The French president admitted, however, that he has “some disagreements” with his Russian counterpart, but said that the two leaders discussed them openly in a “frank exchange of views.” Putin also said that the two leaders have some differences, but said that they view many issues in a similar way, and that French-Russian relations could be “qualitatively” improved. “We sought … common ground [in dealing] with key issues of the international agenda. And I believe that we see it. We are able to … at least try to start resolving the key contemporary problems together,” Putin said.

The Russian leader went on to say that his talks with Macron helped the pair to find common points in dealing with major international problems, and the that two sides would try to further bring together their views on these issues. Putin also invited his French counterpart to Russia, saying: “I hope that he will be able to spend several weeks in Moscow.” French President Macron said that serious international problems cannot be resolved without Moscow, as he stressed the importance of the role Russia plays in the modern world. “No major problem in the world can be solved without Russia,” he told the press conference. Macron then said that France is interested in intensifying cooperation with Russia, particularly in resolving the Syrian crisis. The French leader went on to say that this issue demands “an inclusive political solution.”

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Pretty brilliant. Much more at the link.

Let’s All Agree To Lock In This Russophobia For At Least 3.5 More Years (Saker)

There I was again, flying first class on my shareholders’ dime from New York to San Francisco, when I was deeply saddened to read about the death of Zbigniew Brzezinski, National Security Adviser to Jimmy Carter. For a moment I thought: “Surely I can find some anti-Putin articles to read rather than this one?” Those always make me so happy! But then I remembered that Zbig was a man after my own heart, because he was one of the West’s greatest Russophobes. Even the New York Times talked of his “rigid hatred of the Soviet Union”. Zbig ended the détente led by Nixon as Carter, not Reagan, restarted good, old-fashioned, American Russophobia: Selling the Soviets computers with bugs for industrial sabotage, the propaganda effort of the 1980 Olympic Boycott, the US grain embargo to try and starve the Russian people, the arming of the Taliban’s forerunners to destabilize a left-wing government in Afghanistan and thus unleashing Islamic terrorism on the world, etc.

Just as American Democrats know for an undeniable fact that Jimmy Carter is our nation’s greatest living man of peace, I contend that Zbig’s anti-Russian stance makes him nearly as great a humanitarian, and certainly a model Democrat in 2017. And Zbig knew, as I and all good Democrats know, that the greatest fight of our generation is the fight against Vladimir Putin. Poverty, starvation, refugees, terrorism, climate change – everyone in America is realizing that if we can just get rid of Putin, everything else will surely fall into line. Surely! So I was pretty sad to read of Zbig’s passing, but that’s when it hit me: Just because he’s gone, it doesn’t mean we have to give up hating Russia! We’ve been hating Russia since November – more than 6 months now – and, frankly…it feels awesome! I don’t how long it takes to make a habit permanent, so let’s all agree to lock in this Russophobia for at least 3.5 more years, possibly 7.5!

It would be a fitting testament to a man whose prophetic Russophobia was misunderstood as “anti-communism”. Say it loud: It’s time for progressive Americans to unite behind hating Russians! Again! Let’s party like it’s 1979! Now, I’m as politically-correct a CEO as was ever made -my allegiance to Hillary proves that – but I can tell that some people think that I should equivocate by writing “hating the Russian government” instead of the “Russians”. Well, it’s bold, but being bold is why we CEOs deserve the big bucks and you deserve our crumbs. Not our table crumbs – those are too good for you – I mean the crumbs that fall around our fine, Italian shoes. Here’s the problem with the Russians: Putin’s approval rating is over 85%. It is a testament to the master of evil that he has duped nearly all 144 million Russian citizens. They said that 50 million Elvis fans can’t be wrong, but 124 million Putin fans clearly are. I don’t know anything about Russian domestic politics, but I don’t have to – that’s my right as an American.

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Hillary posing as the resistance says it all. They don’t even have a narrative left.

The So-Called Resistance (Jim Kunstler)

[..] what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do. The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing.

A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious. But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.

One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened. Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion.

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Election coming up, perhaps?

Germany Steps Up Attack On Trump For ‘Weakening’ The West (G.)

Germany has unleashed a volley of criticism against Donald Trump, slamming his “short-sighted” policies that have “weakened the west” and hurt European interests. The sharp words from foreign minister Sigmar Gabriel came after the US president concluded his first official tour abroad taking in Saudi Arabia, Israel, Brussels and then Italy for a G7 summit. Angela Merkel warned on Sunday that the US and Britain may no longer be completely reliable partners. Germany’s exasperation was laid bare after the G7 summit, which wrapped up on Saturday with Trump refusing to affirm US support for the 2015 Paris climate accord. Days earlier, in Saudi Arabia, Trump presided over the single largest US arms deal in American history, worth $110bn over the next decade and including ships, tanks and anti-missile systems.

Gabriel said on Monday that “anyone who accelerates climate change by weakening environmental protection, who sells more weapons in conflict zones and who does not want to politically resolve religious conflicts is putting peace in Europe at risk”. “The short-sighted policies of the American government stand against the interests of the European Union,” he said, judging that “the west has become smaller, at least it has become weaker”. “We Europeans must fight for more climate protection, fewer weapons and against religious [fanaticism], otherwise the Middle East and Africa will be further destabilised,” Gabriel said. [..] The relationship between Merkel and Trump contrasts with the warm ties between herself and Barack Obama. The previous US president last week travelled to Berlin to attend a key Protestant conference. Obama’s participation in a forum with Merkel last Thursday came hours before her meeting with Trump in Brussels at the Nato summit.

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Right, election coming up. Which trumps human rights and international law.

Greece, Germany Agree To Slow Refugee Family Reunification (F24)

Greece and Germany have agreed to slow the reunification of refugee families divided between the two nations during their scramble to safety, according to a leaked letter published Monday. “Family reunification transfer to Germany will slow down as agreed,” Greek Migration Minister Yiannis Mouzalas wrote to German Interior Minister Thomas de Maiziere in a May 4 letter obtained by leftist daily Efimerida ton Syntakton. The Greek migration ministry declined to comment, but earlier this month Mouzalas said the slowdown was due to “technical difficulties.” In the letter, Mouzalas reportedly acknowledges that the move – enacted because of the sheer volume of asylum requests – will affect “more than two thousand people” while some “will have to wait for years” to reach Germany even though their requests have been approved.

Asylum seekers – mostly Syrian refugees in Greece’s case – are entitled to join family members elsewhere in the European Union within six months from the date their request is approved. In his letter, Mouzalas said Berlin and Athens had to agree on a “common line” to address “increasingly desperate and critical comments” so that Athens is not blamed for the delays. He then suggests a joint response: “We understand that asylum seekers are eager to meet with their family, but given that both Greece and Germany have very large asylum seeking populations, delays are inevitable.” Ulla Jelpke, a deputy of German far-left Party Die Linke, earlier this month said Berlin had capped the number of refugees eligible for reunification at 70 people per month. Accordingly, Efimerida ton Syntakton said there were just 70 transfers in April compared to 540 in March and 370 in February.

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May 202015
 
 May 20, 2015  Posted by at 10:24 am Finance Tagged with: , , , , , , , , , , , ,  


NPC District National Bank, Dupont branch, Washington, DC 1924

The Low Velocity Economy – US Money Velocity At All-Time Low (CI)
Euro Plunges As ECB Official Pledges To Speed Up Bond Purchases (Bloomberg)
5 Bubbles Draghi’s QE Is Already Blowing (MarketWatch)
Is The UK In The Early Stages Of Deflation? (Guardian)
Bernie Sanders Wants Wall Street To Pay For Your College Tuition (Vox)
The Economy for Young Americans Is Still Terrible (Atlantic)
Theft Of Greek Bank Deposits To Send Shockwaves Around The World (KWN)
Greek Deception, Greek Tragedy, German Farce, German Myth (Steve Keen)
Athens Proposes Bank Transaction Levy, Creditors Reject VAT Plan (Kathimerini)
Varoufakis’ Overhaul Of VAT System May Skyrocket Food & Utility Prices (KTG)
Europe’s Moment Of Truth (Tassos Koronakis, Central Committee of Syriza)
China Slowdown Deepens Provincial Economic Divide (FT)
John Kerry Admits Defeat Over Ukraine, And That’s A Good Thing (Salon)
It Begins: Ukraine Takes First Real Steps To Default (Mercouris)
Angela Merkel Has Been Abandoned By Kerry, Nuland And Putin (Helmer)
No, You Can’t Go Back To The USSR! (Dmitry Orlov)
Dead Nation Walking (Jim Kunstler)
Air Bag Defect Triggers Largest Auto Recall In US History (Guardian)
I’ve Read Obama’s Secret Trade Deal. Warren’s Right to Be Concerned (Politico)
Italian Coastguards: Military Action Will Not Solve Migrant Crisis (Guardian)
Anti-Euro Far Right Set To Enter Government Coalition In Finland (Guardian)
The Best Show This Summer: Pope’s ‘Morality Vs. Capitalism’ (Paul B. Farrell)
That’s Billion, With A Bee: The Massive Cost Of Hive Collapse (Reuters)

This spells deflation.

The Low Velocity Economy – US Money Velocity At All-Time Low (CI)

The velocity of money is a measure of the economic activity. It looks at how many times a unit of currency ($1 in the case of the United States) flows through the economy and is used by the various members of the economy. In the case of M2 velocity (includes cash and checking deposits (M1) as well as savings deposits, money market mutual funds and other time deposits), it is at an all-time low after peaking in 1998.

An alternative measure of velocity is MZM. MZM represents all money in M2 less the time deposits, plus all money market funds. Like M2 velocity, MZM velocity is at an all-time low.

Here is a chart of MZM velocity against the 10 year constant maturity Treasury rate.

What this chart says is that the economy is not catching fire despite the massive amount of money in circulation. And wage growth is terrible as well, despite Fed intervention.

Here’s to our policy makers in Washington DC!

1972GratefulDeadEurope72

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Back on the road to parity and beyond.

Euro Plunges As ECB Official Pledges To Speed Up Bond Purchases (Bloomberg)

The euro tumbled the most in two months against the dollar after a European Central Bank official said the bank will speed up its bond-buying program before an anticipated mid-year lull. The single currency extended Monday’s decline after Executive Board member Benoit Coeure said the ECB will increase purchases under its quantitative-easing program from €60 billion in May and June, ahead of an anticipated drop-off in market liquidity. The euro was already weighed down by speculation Greece’s banking system is weeks away from insolvency, and fell versus all 16 of its major peers. Coeure’s remarks “provided an acute reminder of how fragile and volatile the markets have been in 2015,” said Lee McDarby at Nomura Holdings Inc. in London. “The euro weakened by over 1% almost instantly in response.”

The euro dropped as much as 1.4% to $1.1160, the lowest level in a week. A decline through $1.10 would reignite calls for a drop to parity with the dollar, McDarby said. Coeure’s comments about injecting money more quickly into the euro-zone economy emerged Tuesday morning as the text of a speech delivered in London the day before. ECB Governing Council member Christian Noyer said separately in Paris on Tuesday that the central bank is ready to extend QE if needed. The euro stayed lower after reports Tuesday showed regional consumer-price growth flatlined in April and German investor confidence declined this month by more than forecast in a Bloomberg economist survey.

Greece’s travails were already hurting Europe’s single currency, undoing a 4.6% rally in April that snapped nine months of losses. That rebound came amid signs of improvement in the 19-nation economy. Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis said Monday they were optimistic a deal to unlock bailout funds was within reach, even as creditors warned the country has yet to comply with the terms of its emergency loans. “We’re coming closer to the endgame for Greece,” said Lee Hardman at Bank of Tokyo-Mitsubishi. “The expectation is still an agreement will be reached between Greece and its creditors, but there’s a risk that they fail to reach one,” which may send the euro lower, he said.

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Just a start.

5 Bubbles Draghi’s QE Is Already Blowing (MarketWatch)

Sixty billion euros here. A hundred billion there. To paraphrase Everett Dirksen’s apocryphal quote about the U.S. budget, pretty soon you are talking about real money. Earlier this year, the European Central Bank launched its quantitative easing program with €60 billion a month of asset purchases by the central bank. Now, in response to some mild turbulence in the bond market, it is talking about front-loading QE, taking the total of fresh cash minted in Frankfurt every month up to 100 billion or even more. In short, real money. Academics will no doubt be discussing the effectiveness of QE in lifting the real economy for a couple of generations at least, and probably not reaching any definitive conclusions.

Perhaps it pulls countries out of a recession, or perhaps they would have eventually started to grow again anyway? One thing we can say for sure, however, is that it boosts asset prices. In fact, it is already happening. A series of Mario Draghi bubbles are already inflating across the eurozone. Where exactly? Well, Spanish construction is booming, Dublin house prices are soaring, German wages are accelerating, Malta is riding a wave of hot money, and Portuguese equities are among the best performers in the world. For a lucky few investors, QE is already working its magic.

The ECB president probably had no choice but to finally bite the bullet and launch the ECB’s own version of QE earlier this year. The continent was sliding rapidly into deflation, with prices dropping in countries such as Spain. The economy was slipping into a depression, and unemployment was rising relentlessly even as the rest of the global economy was recovering. The only real surprise was that it took so long. That doesn’t mean, however, that the money created won’t blow up asset prices. Indeed, it is already happening.

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“Deflation is where prices fall across the board for a sustained period.” No, it is not. And how can you solve a problem you don’t understand?

Is The UK In The Early Stages Of Deflation? (Guardian)

Blink and you ll miss it. That sums up what the experts think about inflation turning negative in the UK for the first time since 1960, a time when Dwight Eisenhower was the US president and before the pre-fame Beatles had played a single note in Hamburg. That year, the period when the annual cost of living was falling proved to be brief, and the expectation is that it will be this time too. Why? Because the reason inflation has dipped below zero is largely due to the halving of oil prices in the second half of last year. Unless those falls in the cost of crude are repeated this year and it s almost certain they won t inflation will start to pick up again. The timing of Easter, which has an impact on the cost of air and sea travel, was also a factor. So, for now, it is a mistake to say the UK is in the early stages of Japanese-style deflation.

Deflation is where prices fall across the board for a sustained period. It is an environment in which consumers put off making major purchases because they assume that the TV, car or freezer they want will be cheaper in the future than it is today. With consumer confidence high and unemployment falling, there seems no immediate prospect of this happening. Indeed, the opposite may well happen, with consumers tempted to increase their spending because their monthly pay cheques stretch further. Earnings growing at around 2% a year in conjunction with inflation 0.1% lower than a year ago equals a modest increase in real incomes that are likely to keep shop tills jangling in the months ahead.

A cut in average earnings growth from 2% to 1% would suggest the economy was in a downward wage-price spiral All that said, a wary eye needs to be kept on the inflation numbers. Core inflation the cost of living excluding volatile items such as energy and food fell to 0.8% in April, the lowest since 2001. If it fell further, the risk of deflation proper would increase. he unknown factor that could push core inflation lower is wages. Despite two and a half years of steady growth and shortening dole queues, earnings are still only growing at around their pre-crisis levels of 4%. The Bank of England believes they will start to pick up because firms will struggle to find workers from a shrinking pool of labour. But if the supply of labour continues to increase, employers could respond to falling inflation by making their pay offers less generous.

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Good plan. No chance.

Bernie Sanders Wants Wall Street To Pay For Your College Tuition (Vox)

The big banks got bailed out, and presidential contender Bernie Sanders says they should pay it forward. The independent senator from Vermont introduced his plan on Tuesday, which would use a tax on stock trades to help pay students’ tuition. The price of attending a public college has been climbing since the 1980s. Sanders’s plan would shift the burden to pay for college away from students and families and back onto the government. Sanders’s bill, which he says would cost $47 billion in the first year, doesn’t stand a chance in the Senate. But it highlights an important question for higher education policy: can the federal government force states to make college more affordable?

Public college tuition has risen 30% in the past decade. Since 2004, published tuition rates have jumped from $6,448 in 2004 to $9,139 in 2014. Net tuition at public colleges — the amount students actually pay after financial aid is taken into account — has, meanwhile, nearly doubled since 2000. Part of this is a story about rising tuition costs, as the price to attend both public and private colleges has grown rapidly in recent years. But there is a second story here, one about states’ funding for higher education not keeping pace with all the students who want to attend — and leaving students to pay a bigger chunk of their bill.

In the late 1980s, only about a quarter of public college revenue came from tuition. The rest came from the state or other sources. Now students cover about half the cost of their education — and may soon provide the majority of public college revenues. In general, public colleges spend about the same amount per student that they did in 1987. States are spending more on higher education than they did in the past. But more people go to college than used to, and state budgets haven’t been able to keep up with enrollment increases and inflation. Students at public universities are now increasingly likely to borrow, and more likely to graduate with debt: 59% of students at public colleges took out loans in 2012, and students who borrowed graduated with an average of $25,600 in debt.

Sanders’s plan would set up a grant program to cover the share of tuition that students currently pay. The federal government would pay for two-thirds of the grant program’s budget, using a new tax on stock trades to raise an estimated $47 billion in revenue. States would be required to chip in the additional one-third of funding, as well as keep up their current spending levels on higher education. While Sanders’s proposal is far to the left of many Democrats, the type of grant program he proposed isn’t totally different from other proposals floated on Capitol Hill. Requiring states to fund higher education has been tried before, and it worked.

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Screwed by boomers.

The Economy for Young Americans Is Still Terrible (Atlantic)

I’ve been doing a lot of thinking recently about the labor market for a longer forthcoming piece, and one of the mysteries I’ve been grappling with is: How do you describe how this economy is treating young people? Let’s start by singing the necessary praises. Last year was was the best for job-creation this century. We’re in the middle of the longest uninterrupted stretch of private-sector job creation on record. After creating mostly low-paying service jobs for the first few years of the recovery, the labor market is finally churning out more high-skill jobs. All of these things should be great news for young people. Should. But a deeper look at the Young-American Economy today suggests that, in contrast to the overall labor market, it is still sort of terrible.

To start with the camera lens zoomed all the way out: The majority of young people aren’t graduating from a four-year university. Rather they are dropping out of high school, graduating from high school and not going to college, or dropping out of college. Millennial is often used, in the media, as a synonym for “bachelor-degree-holding young person,” but about 60% of this generation doesn’t have a bachelor’s degree. And how are they doing, as a group? Young people don’t seem to have a jobs problem—their jobless rate is a bit elevated, but not alarmingly so. Rather they have a money problem. The jobs they’re getting don’t pay much and their wages aren’t growing. A recent analysis of the Current Population Survey last year found that the median income for people between 25 and 34 has fallen in every major industry but healthcare since the Great Recession began.

Zoom in on recent college graduates, and the picture gets more complicated. In The Washington Post, Ylan Q. Mui says “the era of the overeducated barista is coming to a close.” That would be nice, indeed. But the data suggests that the era is hardly over: Overeducated baristas, once totally ubiquitous, are now merely super-abundant. Under-employment (the share of college grads in jobs that historically don’t require a college degree) is high. The quality of jobs that underemployed young people are getting is getting worse. And for these reasons, wages are growing incredibly slowly, if at all.

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The EU, ECB and IMF have their eyes on Greek bank deposits.

Theft Of Greek Bank Deposits To Send Shockwaves Around The World (KWN)

The troika of the EU, ECB and IMF have not yet pulled the plug on the Greek banks, but the following quote in the Financial Times from this weekend should be a warning to anyone who still has money on deposit in that country: “The idea of a ‘Cyprus-like’ presentation to Greek authorities has gained traction among some eurozone finance ministers, according to one official involved in the talks.” The ECB is up to its eyeballs swimming in unpayable Greek debt that it holds. The ECB is not going to take a loss on this Greek paper on its books. Because Greece does not have the financial capacity to repay what is now about €112 billion of credit exposure on the ECB’s books, the ECB has only two alternatives.

It can push the €112 billion of Greek debt it holds to the national central banks of the Eurozone and on to the backs of the taxpayers in those countries, which is politically untenable. Or it can confiscate depositor money in Greek banks, like it did in Cyprus and as the FT has now reported. The difference is that Greece presents a problem that is an order of magnitude bigger than Cyprus because of the huge debt it has outstanding. That means the shockwaves from a ‘Cyprus-like’ confiscation of bank deposits will reverberate throughout the Eurozone and far beyond because bank depositors in other countries will start asking, which country is next to confiscate bank deposits?”

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Steve’s excellent takedown of austerity.

Greek Deception, Greek Tragedy, German Farce, German Myth (Steve Keen)

There is no prospect of Schäuble’s program working without a substantial write-down of Greek government debt—yet this is something the Troika refuses to countenance. In this sense the Troika’s program is the essence of farce, since it is persisting with a ludicrously improbable program. Schäuble’s assertion that the program imposed on Greece is “not blind “austerity”” also cannot be reconciled with the fact that the Troika’s program has had a far worse impact on Greece than the Troika expected. A European Parliament study pointed out that the Troika predicted that unemployment in Greece would peak at 15% in 2012, and fall thereafter. Instead, it rose to over 25%, and remains above this level today. Who else but the blind—or those acting in a farce—could ignore such a huge disparity between the ambitions of the Troika’s program and its actual results?

This failure is not because the Greeks haven’t tried hard enough—far from it. The cutbacks that were imposed at the direction of the Troika were extreme. They included, for example, a reduction in the minimum wage of more than 20%, and a 25% cut to hospital funding. How can this last measure be reconciled with Schäuble’s description of the Troika’s policies as “preparing aging societies for the future”? The Troika’s program has failed on its own terms because it had a far more drastic negative impact on the Greek economy than the Troika’s economic models predicted. The economy has contracted by 6% a year in nominal terms for several years—and by as much as 10% in inflation-adjusted terms. What was expected to be a “short, sharp shock” followed by a return to sustained growth has instead become a Greek Great Depression.

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Tell the creditors to go take a hike.

Athens Proposes Bank Transaction Levy, Creditors Reject VAT Plan (Kathimerini)

Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2%, while the government’s proposal for a two-tier value-added tax – depending on whether the payment is in cash or by card – has met with strong opposition from the country’s creditors. A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect €300-600 million on a yearly basis.

Available data show that the annual level of bank transactions comes to over €660 billion but the government will likely exempt debit card transactions, such as cash machine withdrawals, given that the Finance Ministry is eager to promote the use of debit cards as part of its efforts to combat tax evasion. The precise terms of the levy have not yet been addressed but the idea is being discussed in principle, as it is seen to have considerable fiscal benefits and a low impact on ordinary household budgets. As for the proposal for shaving three percentage points from the VAT rate when a transaction is not made in cash, Greece’s creditors are opposed to the scheme, arguing that it would bring annual losses of 6.5 billion euros for state coffers.

Instead, they propose the main rate to be set at 18-20% and the low one (applying to food, drugs and books) to stand at 8%. At the same time, they want the discounted rate that applies on Aegean islands to be scrapped. Athens proposed a top VAT rate of 18%, dropping to 15% for cash-free transactions, and a 9.5% rate for food, drugs and books, falling to 6.5% for card transactions. Following the rejection of this idea from the country’s lenders, the Finance Ministry sent a new proposal that includes three VAT rates. According to sources, these are 7.5%, 15 and 21 or 22. It is estimated that this scheme would bring in an additional €800 million in revenues. However, €200 million of this would be returned to the Aegean islands to compensate for the increase in their VAT rates.

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The creditors want even higher rates.

Varoufakis’ Overhaul Of VAT System May Skyrocket Food & Utility Prices (KTG)

Greek Finance Minister Yanis Varoufakis said it clearly Monday night on political program on private STAR TV. There will be a flat Value Added Tax of 18% for cash-transactions and a 3% discount – ie. 15% V.A.T. – for payments with credit or debit card. He assured that “the low V.A.T. of 6.5% will still be valid for food items, medicines, books, newspapers and other print material” provided the payments will be done via non-cash transactions. Otherwise,the VAT for these items will be 9.5%. With the current state of V.A.T. there is hardly any basic food item with 6.5% V.A.T. except bread and pasta. Varoufakis’ proposal for a rather complicated V.A.T. system will be submitted to the creditors with the aim to tackle Value Added Tax evasion, which is estimated to be €9.5 billion per year.

At the same time, the new system will allow tax authorities to follow step by step all purchases done by taxpayers due the online access of tax offices to bank accounts. It will not only give incentives of 3% V.A.T. discount to consumers for the purchase of products and services and force entrepreneurs to accept the “new deal and sell innovation”, it will also enable the tax authorities to check each newspaper, each shampoo and each carrot you buy, then sum the purchases up and check if taxpayers’ tax declaration and income matches to the expenses he/she has done. This however has not so much to do with people’s tax evasion or not.

It has to do with the unfair tax system of “deemed and fictitious income and taxation” imposed by the Troika in 2012 (or 2011) and according to which the tax office considers that each person needs €3,000 per year to cover his basic needs (food, cleaning material etc.). The person is then been taxed accordingly independently of whether it has an income or not. In fact, this measure is been implemented to people without income, that is Greece’s famous 25% jobless labor craft. If the person happens to live in own or rented apartment, another €2,000-3,000 are being added and the jobless has to be tax for the €5,000-6,000 income he does not have. Furthermore, with this measure it will be time for the Greeks to say Goodbye to privacy of their purchases and dirty little habits.

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From the Syriza desks.

Europe’s Moment Of Truth (Tassos Koronakis, Central Committee of Syriza)

Dear friends, After almost four months of intensive negotiations, we have reached a moment of truth for our common European project. The Syriza-led government does its best to reach an honorable agreement with its European and international partners that respects both the obligations of Greece as a European member-state, but also the Greek peoples’ electoral mandate. The Syriza-led government has already started a series of reforms that tackle corruption and widespread tax-evasion. Spending is reined in and collected tax revenue exceeds expectations, reaching a primary budget surplus of 2.16 bn (January-April 2015), far above the initial estimation for a 287m deficit. Meanwhile, Greece has honored all debt obligations by its own resources, a unique case among European nations since any disbursement of funds has been cut off since August 2014.

Four months of exhausting negotiations have passed, where Greece’s creditors systematically insist on forcing on the SYRIZA-led government the exact austerity program that was rejected by the Greek people in the January 25 elections. Liquidity asphyxiation, orchestrated by the Institutions, has led to a critical situation for our country’s finances, making it unbearable to serve upcoming debt obligations. The Greek government has done its best to reach an agreement, but red lines -having to do with sustainable and not unrealistic primary surpluses, the restoration of collective contracts and the minimum wage, workers protection from massive lay-offs, the protection of wages, pensions and the social security system from further cuts, stopping fire-sale privatizations etc- are to be respected.

Popular sovereignty and democratic mandates are to be respected. Greek people’s patience and goodwill is not to be mistaken as willingness to succumb to unprecedented blackmail. European democracy is not to be asphyxiated. Times are crucial; political will from our European partners is needed to overcome the current stalemate. This call is not just a call for solidarity, it is a call for due respect of the foremost of European values. In this framework, SYRIZA appeals to all progressive and democratic social and political actors who acknowledge that Greece’s fight is not limited within its national borders, but constitutes a fight for democracy and social justice in Europe.

In these critical moments, we are calling for acts of social and political solidarity, ranging from the organization of rallies and awareness campaigns across Europe, to institutional initiatives in local, regional and national parliaments and personal or collective statements of support to the efforts of Greece to swift the European paradigm from disastrous austerity to a new model for sustainable growth. Your support is of utmost importance, not only for the people of Greece, but for the fate of the European idea.

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“Our economy here has relied almost entirely on building housing but everyone who can afford an apartment already has one..”

China Slowdown Deepens Provincial Economic Divide (FT)

Last month more than 30 provincial taxi drivers drank poison and collapsed together on the busiest shopping street in Beijing in a dramatic protest against economic and working conditions in their home town. The drivers, who the police say all survived, were from Suifenhe, a city on the Russian border in the northeastern province of Heilongjiang. Such lurid acts of protest are an ancient tradition in China but the extremity of their action highlights one of the biggest problems facing Beijing as it tries to manage the worst economic slowdown in nearly three decades: a deepening provincial economic divide. An examination of regional growth rates across the country shows the slowdown has affected some areas far worse than others. Perhaps predictably, the worst-hit places are those that can least afford it.

Heilongjiang is among the poorest performers. While national nominal growth slipped to 5.8% in the first quarter compared with a year earlier — its lowest level since the global financial crisis — the province’s nominal GDP actually contracted, by 3.2%. In the provincial capital of Harbin, signs of economic malaise are everywhere. A large upscale mall in the centre of town with half a dozen boarded-up shopfronts is abandoned inside apart from a luxury home furnishing shop and a Bentley dealership with three salespeople asleep on couches in the corner. A short drive from the city centre and the primary reason for the region’s economic woes becomes clear. As far as the eye can see there are empty or half-built residential tower communities boasting names such as “Jade Lake World”, “River Chateau”, “Polyup Town” and Intime City”.

Each tower holds roughly 400 units and each community has between 20 and 50 towers. In the new Qunli district alone there are more than 30 completed or half-built communities. Without much industry, Harbin’s economy has traditionally relied on agriculture, tourism and trade with Russia but in the past five years it has been boosted by the enormous residential property construction binge seen all over China. “In the past few years a decent-sized cement company could sell 1m cubic metres of cement annually but now they are lucky to sell 100 cu m a day and they are all losing money,” says Chen Liyong, a 31-year-old taxi driver who lost his job at a cement company late last year. “Our economy here has relied almost entirely on building housing but everyone who can afford an apartment already has one and we don’t have anyone moving here from other places.”

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As I said: a kow-tow.

John Kerry Admits Defeat Over Ukraine, And That’s A Good Thing (Salon)

It is just as well Secretary of State John Kerry’s momentous meetings with Russian leaders last week took place in Sochi, the Black Sea resort where President Putin keeps a holiday home. When you have to acknowledge that two years’ worth of pointless hostility in the bilateral relationship has proven none other than pointless, it is best to do so in a far-away place. Arriving in the morning and leaving in the afternoon, Kerry spent three hours with Sergei Lavrov, Russia’s very competent foreign minister, and then four with Putin. After struggling with the math, these look to me like the most significant seven hours the former senator will spend as this nation’s face abroad.

Who cannot be surprised that the Obama administration, having turned the Ukraine question into the most dangerous showdown since the Cold War’s worst, now declares cordiality, cooperation and common goals the heart of the matter? The question is not quite as simple as one may think. On the one hand, the policy cliques’ long swoon into demonization has been scandalously juvenile, and there has been no sign until now of sense to come. Grown men and women advancing the Putin-is-Hitler bit with straight faces. Getting the Poles, paranoids for understandable reasons on all questions to with Russia, to stage ostentatious displays of teenagers in after-school military exercises. American soldiers in those silly berets they affect drilling Ukrainian Beetle Baileys in “war-making functions,” as the officer in charge put it.

When the last of these theatrics got under way in mid-April, it was time for paying-attention people to sit up. As noted in this space, it seemed to indicate that we Americans were prepared to go to war with another nuclear power to rip Ukraine from its past and replant it in the neoliberals’ hothouse of client states—doomed to weakness precisely because corrupt leaders were enticed with baubles to sever their people from history. On the other hand, it took no genius to see what would eventually come. This column predicted long back—within weeks of the American-cultivated coup that deposed President Yanukovych in February of last year—that the Obama administration would one day be forced to retreat before it all came to resolution.

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Trying to stiff Russia. Not a good idea.

It Begins: Ukraine Takes First Real Steps To Default (Mercouris)

The Ukrainian government is on the brink of declaring default. The Ukrainian government has proposed a bill allowing the government to impose a “moratorium” on payment of the country’s external debts. Such a moratorium is just another word for a default. It is the same device the Russian government used when it defaulted on its external debt in 1998. This is not quite the end of Ukraine’s debt saga. Ukraine will only be formally in default when it misses a payment. It is possible Ukraine has taken this step as a negotiating tactic to put more pressure on its Western creditors. It is also possible Ukraine is hoping to preserve some financial credibility by picking and choosing which creditors it will pay. As we have discussed previously, it might try to go on paying its Western creditors while defaulting on the debts it owes to Russia.

Frankly, this all looks unlikely and it seems that what we are looking at is an across-the-board default. In truth, as has been pointed out by several people — notably by Eric Kraus — the numbers of the various IMF plans have never added up, and a default looked increasingly inevitable from the moment the Maidan coup happened, when it became clear the Ukrainian government was heading into a confrontation with its economically critically important eastern regions and with its biggest trade partner Russia. The accelerating collapse of Ukraine’s economy (with GDP contracting by 17% in the first quarter by comparison with last year) and the deadlock in the negotiations with the Western creditors, appears to have made today’s default announcement unavoidable.

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“../the word Merkel said, “verbrecherische” has rarely been used by her before; it carries the connotation in colloquial German of gangsterism — and of Nazism.”

Angela Merkel Has Been Abandoned By Kerry, Nuland And Putin (Helmer)

Angela Merkel, the German Chancellor, would do almost anything to get and keep power. That, in the opinion of powerful German bankers, includes making herself look ready for war with Russia in order to make her political rival, Frank-Walter Steinmeier, the coalition Foreign Minister and opposition leader in Berlin, look too weak to be electable when the German poll must be called by 2017. So, sources close to the Chancellery say, Merkel insulted President Vladimir Putin and all Russians to their faces last week. This week Victoria Nuland, the junior State Department official who told the chancellor to get fucked a year ago, was in Moscow, replacing Merkel with a settlement of the Ukraine conflict the Kremlin prefers.

“We are ready for this,” Foreign Minister Sergei Lavrov said last Thursday after meeting Secretary of State John Kerry. Referring to Nuland, Lavrov added: “we were not those who had suspended relations. Those, who had done it, should reconsider their stance….But, as usual, the devil is in the details.” Lavrov meant not one, but two devils, who have sabotaged every move towards a settlement of the Ukraine conflict since the start of 2014 – Nuland and Merkel. Merkel’s Kaput! moment came on May 10, when she went to Moscow to lay a wreath at the Tomb of the Unknown Soldier. Deutsche Welle, the state German press agency, called it Merkel’s “compromise after she stayed away from a Russian military parade the day before.”

At the following press conference with Putin, Merkel said: “We have sought more and more cooperation in recent years. The criminal and illegal annexation of Crimea and the military hostilities in eastern Ukraine has led to a serious setback for this cooperation.” German sources say the word Merkel said, “verbrecherische” has rarely been used by her before; it carries the connotation in colloquial German of gangsterism — and of Nazism. “Merkel doesn’t seem to care what she says any longer,” a high-level German source says. “She exhibits more and more emotion these days, more irritation, and less care for what she says, and where. Putin understood exactly what she meant, and on the occasion she said it. He acted with unusual generosity not to react.”

The Kremlin transcript omitted Merkel’s remarks altogether. The Moscow newspapers ignored Merkel’s word and emphasized the positive Putin ones. “Our country fought not against Germany,” Putin replied to Merkel, “but against Nazi Germany. We never fought Germany, which itself became the Nazi regime’s first victim. We always had many friends and supporters there.

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“He who doesn’t regret the collapse of the USSR doesn’t have a heart; he who wants to see it reborn doesn’t have a brain.” (Putin)

No, You Can’t Go Back To The USSR! (Dmitry Orlov)

One of the fake stories kept alive by certain American politicians, with the help of western media, is that Vladimir Putin (who, they vacuously claim, is a dictator and a tyrant) wants to reconstitute the USSR, with the annexation of Crimea as the first step. Instead of listening to their gossip, let’s lay out the facts. The USSR was officially dissolved on December 26, 1991 by declaration 142-H of the Supreme Soviet. It acknowledged the independence of the 15 Soviet republics, and in the place of the USSR created a Commonwealth of Independent States, which hasn’t amounted to much. In the west, there was much rejoicing, and everyone assumed that in the east everyone was rejoicing as well.

Well, that’s a funny thing, actually, because a union-wide referendum held on March 17, 1991, produced a stunning result: with over 80% turnout, of the 185,647,355 people who voted 113,512,812 voted to preserve the USSR. That’s 77.85% not exactly a slim majority. Their wishes were disregarded. Was this public sentiment temporary, borne of fear in the face of uncertainty? And if it were to persist, it would surely be a purely Russian thing, because the populations of all these other Independent States, having tasted freedom, would never consider rejoining Russia. Well, that’s another funny thing: in September of 2011, fully two decades after the referendum, Ukrainian sociologists found out that 30% of the people there wished for a return to a Soviet-style planned economy (stunningly, 17% of these were young people with no experience of life in the USSR) and only 22% wished for some sort of European-style democracy.

The wish for a return to Soviet-style central planning is telling: it shows just how miserable a failure the Ukraine’s experiment with instituting a western-style market economy had become. But, again, their wishes were disregarded. This would seem to indicate that Putin’s presumptuously postulated project of reconstituting the USSR would have plenty of popular support, would it not? What he said on the subject, when asked directly (in December of 2010) is this: He who doesn’t regret the collapse of the USSR doesn’t have a heart; he who wants to see it reborn doesn’t have a brain. Last I checked, Putin does have a brain; ergo, no USSR 2.0 is forthcoming.

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Third world.

Dead Nation Walking (Jim Kunstler)

Many people seem to think that America has lost its sense of purpose. They overlook the obvious: that we are striving to become the Bulgaria of the western hemisphere. At least we already have enough vampires to qualify. You don’t have to seek further than the USA’s sub-soviet-quality passenger railroad system, which produced the spectacular Philadelphia derailment last week that killed eight people and injured dozens more. Six days later, we’re still waiting for some explanation as to why the train was going 100 miles-per-hour on a historically dangerous curve within the city limits.

The otherwise excellent David Stockman posted a misguided blog last week that contained all the boilerplate arguments denouncing passenger rail: that it’s addicted to government subsidies and that a “free market” would put it out of its misery because Americans prefer to drive and fly from one place to another. One reason Americans prefer to drive — say, from Albany, NY, to Boston — is that there is only one train a day, it never leaves on time or arrives on time, and it takes twice as long as a car trip for no reason that makes any sense. Of course, this is exactly the kind of journey (slightly less than 200 miles) that doesn’t make sense to fly, either, given all the dreary business of getting to-and-from the airports, not to mention the expense of a short-hop plane ticket.

I take the popular (and gorgeous!) Hudson River Amtrak train between Albany and New York several times a year because bringing a car into Manhattan is an enormous pain in the ass. This train may have the highest ridership in the country, but it’s still a Third World experience. The heat or the AC is often out of whack, you can’t buy so much as a bottle of water on the train, the windows are gunked-over, and the seats are often broken. They put wifi on trains a couple of years ago but it cuts out every ten minutes.

Anyway, even if Americans seem to prefer for the present moment to drive or fly, it may not always be the case that they will be able to. Several surprising forces are gathering to take down the Happy Motoring matrix. Peak oil is actually not playing out in the form of too-high gasoline prices, but rather a race between a bankrupt middle class unable to pay the total costs of motoring and an oil industry that can’t make a profit drilling for hard-to-get oil. That scenario is plain to see in the rapid rise and now fall of shale oil.

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Are there any cars left that have not been recalled?

Air Bag Defect Triggers Largest Auto Recall In US History (Guardian)

Japanese air bag manufacturer Takata is expected to declare about 33.8m vehicles defective on Tuesday, a move that is expected to lead to the largest auto recall in US history, the Detroit News reported, citing three officials briefed on the announcement. The company is expected to announce that it has filed a series of four defect information reports with the US National Highway Traffic Safety Administration (NHTSA), declaring both driver and passenger air bag inflators defective in the vehicles, the report said. The US Department of Transportation and the NHTSA said earlier that they would make a “major” announcement related to the air bag recall.

The number of vehicles with potentially defective Takata air bags recalled globally since 2008 has risen to about 36m following recalls over the past week by Japan’s Toyota, Nissan and Honda. The automakers have said that they decided to proceed with the recalls after finding some Takata air bag inflators were not sealed properly, allowing moisture to seep into the propellant casing. Moisture damages the propellant and can lead to an inflator exploding with too much force, shooting shrapnel inside the vehicle. Six deaths have been linked to the defective air bags, all in cars made by Honda, which has borne the brunt of the Takata recalls to date and which gave a disappointing profit forecast last month due to higher costs related to quality fixes.

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Great piece from a ‘cleared advisor’ to the government.

I’ve Read Obama’s Secret Trade Deal. Warren’s Right to Be Concerned (Politico)

“You need to tell me what’s wrong with this trade agreement, not one that was passed 25 years ago,” a frustrated President Barack Obama recently complained about criticisms of the Trans Pacific Partnership (TPP). He’s right. The public criticisms of the TPP have been vague. That’s by design—anyone who has read the text of the agreement could be jailed for disclosing its contents. I’ve actually read the TPP text provided to the government’s own advisors, and I’ve given the president an earful about how this trade deal will damage this nation. But I can’t share my criticisms with you. I can tell you that Elizabeth Warren is right about her criticism of the trade deal.

We should be very concerned about what’s hidden in this trade deal—and particularly how the Obama administration is keeping information secret even from those of us who are supposed to provide advice. So-called “cleared advisors” like me are prohibited from sharing publicly the criticisms we’ve lodged about specific proposals and approaches. The government has created a perfect Catch 22: The law prohibits us from talking about the specifics of what we’ve seen, allowing the president to criticize us for not being specific. Instead of simply admitting that he disagrees with me—and with many other cleared advisors—about the merits of the TPP, the president instead pretends that our specific, pointed criticisms don’t exist.

What I can tell you is that the administration is being unfair to those who are raising proper questions about the harms the TPP would do. To the administration, everyone who questions their approach is branded as a protectionist—or worse—dishonest. They broadly criticize organized labor, despite the fact that unions have been the primary force in America pushing for strong rules to promote opportunity and jobs. And they dismiss individuals like me who believe that, first and foremost, a trade agreement should promote the interests of domestic producers and their employees.

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Of course it won’t. It will kill people.

Italian Coastguards: Military Action Will Not Solve Migrant Crisis (Guardian)

The Italian coastguards leading migrant rescue missions in the southern Mediterranean have voiced concern about the EU’s migration strategy, arguing that military operations will not stop migration to Europe and calling instead for European navies to prioritise search-and-rescue missions. Speaking on Monday before EU defence and foreign ministers agreed to launch military operations against Libyan smugglers, coastguard captain Paolo Cafaro said a military campaign would not eradicate the root causes of the Mediterranean crisis. His colleagues Admiral Giovanni Pettorino and Capt Leopoldo Manna called for an increased focus on saving migrants’ lives, with Manna urging European navies, including that of Britain, to give him more control over their boats in order to streamline Mediterranean search-and-rescue activities.

All three are senior officers within Italy’s Guardia Costiera, a semi-autonomous wing of the Italian navy. Pettorino leads its search-and-rescue division; Cafaro is in charge of the division’s planned rescue missions; and Manna heads its emergency response control room, which has ultimate responsibility for managing how coastguard, navy, and merchant vessels of all nationalities respond to migrant SOS calls. Cafaro said: “The problem of migration, of desperate people, will not be solved with these [military] measures. It will assume other forms. They will try to find other ways.” Cafaro admitted it was desirable “to stop all the involvement of criminal organisations in this traffic, all the money that they earn from this traffic, this is [something that is] necessary to destroy. But the problem of migration cannot be solved with measures like these.”

Cafaro also questioned whether European navies would be able to target smugglers’ boats before they are used for migration missions, due to both the absence of a blessing from Libya’s official government and the UN, as well the complexities of the smuggling process. Smuggling boats are often simply fishing boats bought in the days prior to a trip, and kept in civilian harbours until the night of their departure. Cafaro said: “I think that different European navy ships at sea can intercept and destroy wooden boats – that I think is very possible and feasible. [But] they can’t do that in Libyan territorial waters. They must do that when they are in international waters, after the people on board have been rescued, and then they can do it.”

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Of course the Guardian can’t help itself: it must label Syriza ‘a populist party’.

Far Right Set To Enter Government Coalition In Finland (Guardian)

Finland’s government is expected to include far right representation after the new prime minister, Centre party leader Juha Sipilä, confirmed that he was opening negotiations to bring the populist Finns party (PS) into coalition for the first time. The PS’s charismatic leader, Timo Soini, is poised to become a minister, probably with the finance or foreign affairs portfolio, after the party finished second in the general election on 19 April. Sipilä said it was the “best option” to meet the challenges facing the country, notably the economy. He said he wanted a strong coalition capable “of making reforms and implementing those decisions”.

The third partner in the coalition will be the conservative National Coalition party, led by outgoing premier Alexander Stubb. The coalition will have a comfortable majority, with 123 seats out of 200. Negotiations have begun on a detailed agenda for government. The Social Democrats, part of the previous government, will be in opposition after their crushing election defeat. Throughout the campaign, Soini, 52, assured voters he was ready to govern. He is a well-known Eurosceptic and a critic of the financial rescue package for Greece.

Soini avoided any reference to the euro on the campaign trail, though his party manifesto clearly states that Finland should renegotiate the terms of European Union membership and recover powers from Brussels. Soini also toned down his criticism of immigration, though he made no attempt to condemn the xenophobic comments of some other PS candidates. There is a consensus view, shared by the three main parties that have governed in the past, that it is preferable to have the populists on board, rather than allow them to gain ground in opposition. Along with Belgium and Greece, Finland is the third EU country with populist Eurosceptics in government.

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“WWIII: Capitalism vs Morality, the Final Battle to Save the World.”

The Best Show This Summer: Pope’s ‘Morality Vs. Capitalism’ (Paul B. Farrell)

Yes it’s summertime, folks! Family vacations! Rock stars on concert tours across America: Garth Books. Katy Perry. U2. One Direction. Plus endless movie blockbusters opening in theaters near you: “Mad Max.” “Jurassic World.” “Age of Ultron.” “Terminator Genisys.” “Tomorrowland.” “Mission Impossible: Rogue Nation.” But one blockbuster tour is destined to beat all competition, break all records, hit the music charts at No.1 with a bullet, fill stadiums seating millions and rattling enemies with endless screenings condemning the dark side of capitalism, while raking in billions for humanity. Yes, when ticket sales ante up, Pope Francis will crush the competition with his summer-long blockbuster rollout: “WWIII: Capitalism vs Morality, the Final Battle to Save the World.”

On the surface it’s “WWIII: Capitalism vs Climate.” But in fact, capitalism’s at war with morality. Capitalism has lost its soul, has no moral code. Yes, capitalism does hate the very mention of global warming, bristles at any suggestion of protecting Planet Earth from climate change. But bottom line, this is a battle to the death with morality, capitalism’s at war with the gods. In their arrogance and narcissism, capitalists really do believe they are superior, the “Invisible Hand” of God. Unfortunately they don’t see what’s about to hit them, some even dismissing the pope as politically irrelevant. Big mistake. They’re also distracted by the traveling tent circus overcrowded with 20 GOP presidential candidates fighting for money from rich donors, headlines in local newspapers, broadcast sound bites, all to get a few voters out in Iowa cornfields.

But so far, this is little more than a noisy distraction, previews of coming attractions for a home movie. So what’s ahead for capitalists? Some talking points already emerged from the pope’s recent trial balloon. A “Declaration of Religious Leaders, Political Leaders, Business Leaders, Scientists and Development Practitioners” was released right after the Vatican’s “Climate Summit” at the Pontifical Academies of Sciences and Social Sciences in Rome. The summit opened with a clear declaration that everyone, rich and poor, has a “moral duty” to protect the environment. Listen:

“Human-induced climate change is a scientific reality, and its decisive mitigation is a moral and religious imperative for humanity … the poor and excluded face dire threats from climate disruptions, including the increased frequency of droughts, extreme storms, heat waves, and rising sea levels … The world has within its technological grasp, financial means and know-how to mitigate climate change while also ending extreme poverty … through the relentless pursuit of peace, which also will enable the shift of public financing from military spending to urgent investments for sustainable development.”

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Permaculture understands this: “.. attracting wild bees (in this case, by planting wildflowers at the edge of a crop) could aid in crop pollination – up to 50% of it, at least.”

That’s Billion, With A Bee: The Massive Cost Of Hive Collapse (Reuters)

In farming, technology will only take you so far. GPS can help drive automated harvesters around the fields, satellites help to ensure the right crops get planted at the right time. But if you want your crops to grow, you’ll have to rely on something a little more old-fashioned: honey bees. And they’re dying in enormous numbers: The makers of insecticides containing neonics, Bayer and Syngenta chief among them, have a lot to lose if regulatory bodies end up siding with the environmentalists. More than 90% of the corn in the U.S. is treated with neonics, according to this release from Bayer. To put this in perspective, last year the USDA estimated that around 91.6 million acres of corn were planted in the United States. That’s a lot of neonic’d corn.

So what happens if — or when — we run out of honey bees? In addition to posing a huge risk to global food supply, there would be dire economic repercussions. Right now, the honey bee adds more than $15 billion to the U.S. economy alone, through its pollination of fruits, vegetables and other crops, according to a 2014 report from the White House. Worldwide, that number is around $365 billion per year. And it’s not just traditional farmers who would suffer. The honey bee industry in the U.S. pulls in more than $300 million in revenue a year, according to a December 2014 IbisWorld report.

But as the bees die, some fear the industry will go with them. The American Beekeeping Federation told the Wall Street Journal that its membership has been massively depleted over the past 20 years. The solution to a lack of honey bees might just be… different bees. At least that’s according to a University of Wisconsin-Madison study, which showed that attracting wild bees (in this case, by planting wildflowers at the edge of a crop) could aid in crop pollination – up to 50% of it, at least.

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Mar 272015
 
 March 27, 2015  Posted by at 8:09 am Finance Tagged with: , , , , , , , , ,  


Wyland Stanley Transparent Car, General Motors exhibit, San Francisco 1940

For Most American Families, Wealth Has Vanished (Yahoo!)
Fed Officials Say Rate Hike Plan Intact Despite Weak US Data (Reuters)
China Stocks May Be In Serious Bubble (MarketWatch)
You’re Playing Liar’s Poker at the Wall Street Casino (Paul B. Farrell)
European Central Bank QE Is Masking Eurozone Struggles (MM)
No, Greece Is NOT The Most Unhelpful Country Ever, IMF Says (MarketWatch)
Greek Bank Deposits Plunge to 10-Year Low (Bloomberg)
Charting Greece’s Draining Coffers (Bloomberg)
Bank of Japan Under Pressure As Inflation Stalls (CNBC)
Saudi Battle For Yemen Exposes Fragility Of Global Oil Supply (AEP)
Putin Plays Wildcard as Ukraine Bond Restructuring Talks Begin (Bloomberg)
Spain Urges EU to Remove Barriers to Banking Takeovers (Bloomberg)
Deutsche Bank Wins German Backing to Be More Like Goldman (Bloomberg)
Asylum Claims Up 45%, ‘Highest Level For 22 Years’ (BBC)
California’s Epic Drought: One Year of Water Left (Ellen Brown)
It’s The End Of March And 99.85% Of California Is Abnormally Dry Already (ZH)
What Is Dark Matter Made Of? Galaxy Cluster Collisions Offer Clues (CSM)
Antarctic Ice Shelf Thinning Speeds Up (BBC)

And nothing else matters one bit.

For Most American Families, Wealth Has Vanished (Yahoo!)

If you re a typical family, you re considerably poorer than you used to be. No wonder the recovery feels like a recession. A new study published by the Russell Sage foundation helps explain why many families feel like they re falling behind: They actually are. The study, which measures the average wealth of U.S. households by income level, reveals a startling decline in wealth nationwide. The median household in 2013 had a net worth of just $56,335 – 43% lower than the median wealth level right before the recession began in 2007, and 36% lower than a decade ago. There are very few signs of significant recovery from the losses in wealth suffered by American families during the Great Recession, the study concludes.

Not surprisingly, lower-income households have lost a larger portion of their wealth than those with higher incomes. Wealth generally comes from two types of assets: financial holdings and real estate. Financial assets have more than recovered ground lost during the recession, thanks largely to a stock-market rally now in its sixth year. The S&P 500 index, for instance, has hit several new record highs this year and is up more than 25% from the peak it reached in 2007. Home values, however, are still about 18% below the peak reached in 2006, according to the S&P/Case-Shiller index. Since wealthier households tend to hold more financial assets, they ve benefited the most form the stock-market recovery, which itself has been assisted by the Federal Reserve s super-easy monetary policy.

Fed policy has been intended to help typical homeowners and buyers too, by pushing long-term interest rates unusually low and, in theory, goosing demand for housing. But a housing recovery is taking much longer to play out than the reflation of financial assets. That’s part of the reason the top 10% of households have held onto more of their wealth than the other 90% during the past 10 years.

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Wall Street insists.

Fed Officials Say Rate Hike Plan Intact Despite Weak US Data (Reuters)

The Federal Reserve should remain on track to raise interest rates later this year despite the U.S. economy’s weak start to the year and a stock market sell-off this week, two Fed officials said on Thursday. In separate events in Frankfurt and Detroit, St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart said U.S. monetary policy might need to be adjusted in light of the economy’s steady improvement since the 2007-2009 financial crisis. “Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years,” Bullard said at a conference in the German financial hub.

The comments came amid a spate of weak U.S. economic data that prompted major analyst firms to scale down their growth this week. Fed policymakers also lowered their growth forecasts at last week’s policy-setting meeting. Investors have followed suit, sending shares on Wall Street down for four consecutive trading sessions. The challenge now, Lockhart said, is to sort out whether recent weakness in exports, manufacturing and capital investment indicate the start of an economic slowdown or other temporary factors such as the soaring value of the U.S. dollar. Lockhart said he is confident for now that the weakness is “transitory,” and still regards it as highly likely that the Fed will raise rates at either its June, July or September meetings.

“We’re still on a solid track … The economy is throwing off some mixed signals at the moment and I think that is going to be passing or transitory,” Lockhart said in an interview with CNBC from a Detroit investment conference. The conflicting signals are partly familiar – seasonal softness that often accompanies severe winter weather – and partly uncharted. The Fed, for example, now finds itself moving in a divergent direction from other major global central banks, planning a rate hike at a time when Europe and Japan are still flooding markets with liquidity, and other central banks are cutting rates. That has driven the value of the dollar steadily higher, and Lockhart said he, for one, was caught off guard by how much that currency move has apparently impacted U.S. exports and manufacturing..

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You think?

China Stocks May Be In Serious Bubble (MarketWatch)

Some say that when the average “mom-and-pop” retail investors get back into the stock market, it could be time to get out. But what about when even teenagers start buying? China has entered a new stock frenzy, like something out of America in the Roaring 20s or the dottiest days of the dot-com bubble, with trading volumes continuing to push to new record highs. On Wednesday, combined trading on the Shanghai and Shenzhen markets hit 1.24 trillion yuan ($198 billion), the seventh straight session in which turnover surpassed the 1 trillion yuan mark. By comparison, the New York Stock Exchange typically saw $40 billion-$50 billion a day in trading during the first two months of this year.

The Shanghai Composite Index is hovering near its seven-year closing high of 3,691, hit on Tuesday when the index completed a 10-session winning streak. For the year so far, the benchmark is up 13.8%, making it the best-performing major East Asian stock index of 2015 to date, though it still has a way to go to match 2014’s 53% surge. The lure of flush times on the Shanghai market is sweeping in unlikely investors by the hundreds of thousands. This week, both the China Securities Daily and the Beijing Morning Post had dueling reports about recent college graduates and, yes, teenagers buying shares.

Typically these young investors speculate with money given to them by their parents, according to a Great Wall Securities broker quoted in the Beijing Morning Post story. Yet another report, this time by the Beijing News newspaper, relates that at the Beijing trading halls of China Securities Co., “even the cleaning lady” has opened an account to play the market. The data appear to agree with the anecdotes: Within the last week alone, 1.14 million stock account were opened in China, the biggest such surge since June 2007, according to China Securities Depository & Clearing Corp.

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“..17 of the absolutely “stupidest statements” made by Wall Street’s best and brightest..

You’re Playing Liar’s Poker at the Wall Street Casino (Paul B. Farrell)

Yes, you are playing liar’s poker at the Wall Street casino. So how do know Wall Street’s lying? You need this foolproof test. My friends from the anonymous programs use this test all the time. And it really works: “How can you tell when alcoholics and addicts are lying? Their lips are moving!” Same test fits Wall Street, they’re lying when their lips are moving. We have four years of proof and 17 examples. Why’s this test important? The SEC chairwoman recently announced plans to “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investors.” Something Jack Bogle, Vanguard’s founder, has been unable to get government to pass for over 50 years: a fiduciary rule to put the investor ahead of Wall Street insiders. Maybe now he’ll get his wish!

So if you remember nothing else today, here’s your big takeaway: Never trust Wall Street bulls, they’re lying to you over 93% of the time. Behavioral-science research tells us bankers, traders and other market insiders are misleading us, manipulating us the vast majority of the time in their securities reports, PR, ads, speeches, sales material, in their predictions on television, cable shows and when quoted in newspapers and magazines. “Read Bull! 144 Stupid Statements from the Market’s Fallen Prophets,” hit America’s book stores near the end of a 30-month recession a decade ago, after the market wiped out over $8 trillion of the retirement money for 95 million Main Street Americans. The Dow peaked at 11,722 in January 2000, didn’t bottom for 32 months, in October 2002 at 7,286, over 40% down.

We picked 17 of the absolutely “stupidest statements” made by Wall Street’s best and brightest to illustrate their tendency to lie, manipulate, mislead and steal from investors by hook or by crook, using hype, happy talk and all kinds of BS. And it’s guaranteed to happen again in 2015-2016, igniting another market and economic collapse like 2008, which is why the new SEC fiduciary rule would save billions for Main Street in the next round of liar’s poker. Remember, this time is never different, the names change but the BS stays the same, repeating before’ and after every market cycle, never stops, wiping out trillions of our money.

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They’re faking it. Everybody is.

European Central Bank QE Is Masking Eurozone Struggles (MM)

The ECB QE (quantitative easing) regime is officially in full swing. ECB data released last Friday indicated as much. The sovereign bond-buying program began March 9. And in less than two weeks, Eurozone central banks had already purchased €26.3 billion worth of these bonds. At the same time, economic indicators seem to point toward a recovery. Markit’s Purchasing Managers’ Index data released yesterday (Tuesday) revealed Eurozone businesses are at their most optimistic in four years. The EURO STOXX 50 Index – the leading blue-chip index for the Eurozone – is up 21% in 2015. And what’s more, it’s at nearly seven-year highs.

Even the beleaguered euro has stepped off a bit from the precipice of euro-dollar parity . This morning, it was trading at $1.0967. This is after falling to $1.0484 on March 15. This positivity in Eurozone markets all seems unwarranted. The Greek debt crisis , perhaps the biggest problem facing the Eurozone right now, doesn’t have a solution. And Eurozone QE was never built to address it. Eurozone QE is a “confidence trick,” Financial Times columnist Wolfgang Münchau wrote on Sunday. Positive economic data came as a result of falling oil prices , which provided a windfall to the Eurozone, the world’s largest net importer of oil and gas. And those benefits are easily wiped away by any surge in oil prices.

It’s hard to actually be bullish on the Eurozone even with economic data providing a thin veneer of Eurozone confidence. The situation in Greece is worse and more contentious than it has ever been. And QE, a policy aimed at bringing on a recovery, is hardly what it’s cracked up to be. The benefits of Eurozone QE are illusory. This surge in Eurozone optimism is built on a false premise that a largely impotent policy will be the saving grace for a struggling Eurozone. But a closer look at how Eurozone QE works should shatter all those illusions…

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Bloomberg made that one up.

No, Greece Is NOT The Most Unhelpful Country Ever, IMF Says (MarketWatch)

The IMF on Thursday denied a report that officials view Greece as the most unhelpful country the organization had ever dealt with in its 70-year history. “There is no basis in fact for that contention. No such remark was made,” said IMF spokesman William Murray at a news conference. Bloomberg had reported on March 18 that IMF officials had told their euro-area colleagues that Greece stands out as its worst client ever. “I wish they had checked with us before that story was published,” Murray said. IMF managing director Christine Lagarde had a “constructive” conversation Wednesday with Greece’s prime minister Alexis Tsipras, Murray said.

“They had a constructive conversation that focused on next steps in taking forward the policy discussions related to the IMF’s continued support of Greece’s reform program,” Murray said. Greece is locked in talks with the IMF and European creditors on a deal on economic reforms that would unlock €7.2 billion in aid. Greece needs the funding as it faces several major debt repayments in early April. On Wednesday, Greece’s central bank Governor Yannis Stournaras said in London that further debt relief was needed to boost economic growth. Stournaras said exiting the single currency union wasn’t an option for the Hellenic Republic.

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“..give Greece a bit of leeway to announce its reform proposals, give it some easy wins that it can implement in the next week or two.”

Greek Bank Deposits Plunge to 10-Year Low (Bloomberg)

Greek bank deposits plunged to their lowest level in 10 years in February as a political standoff between the government in Athens and the country’s creditors raised the prospect of a possible euro exit. The deposits of households and businesses fell 5% in February to €140.5 billion, their lowest level since March 2005, according to Bank of Greece data released on Thursday. Greeks have pulled about €23.8 billion from banking system in the past three months, 15% of the total deposit base. Greek lenders are depending on Emergency Liquidity Assistance controlled by the European Central Bank to stay afloat as depositors flee.

The country’s creditors have given Prime Minister Alexis Tsipras, elected in January on a platform to end austerity, a Monday deadline to present enough details of a new economic plan to convince them to release more bailout funds. “What we’re likely to see is over the course of the next few weeks is still the drip-feed of liquidity,” said Janet Henry, chief European economist at HSBC Holdings Plc in London, in a Bloomberg TV interview. “We could get more of the ELA, that’s essential to keep the banking system afloat; they could give Greece a bit of leeway to announce its reform proposals, give it some easy wins that it can implement in the next week or two.”

The ECB Governing Council on Wednesday made more than €1 billions of ELA available to Greek lenders, its latest move to defer a financial meltdown. That raised the limit to just over €71 billion. Bank of Greece governor Yannis Stournaras, who is also an ECB Governing Council member, acknowledged at a speech in London on Wednesday that the crisis has unsettled the banking system, saying that there has been “some outflow of deposits due to uncertainty.” While officials including Stournaras and Finance Minister Yanis Varoufakis said bank system deposits stabilized after a Feb. 20 agreement that extended the country’s loan accord to the end of June, outflows picked up again last week, when about 1.5 billion euros left the system.

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Getting serious.

Charting Greece’s Draining Coffers (Bloomberg)

When Dutch Finance Minister Jeroen Dijsselbloem raised the possibility that Greece might need to impose capital controls in a radio interview last week, it seemed like a crazy indiscretion. Why would a senior member of the euro establishment effectively tell people “Hey, we’re considering locking your money inside the country, so you might want to get your euros out while you still can,” and risk accelerating outflows from the country’s already enfeebled banking system? And when the European Central bank decided yesterday to grant more than €1 billion of extra funds to Greece’s banks, it was hard to divine the motivation for the altruism. Was it a carrot to incentivize the government to get serious about meeting the demands of its creditors? Or was it an emergency infusion, acknowledging that Greece is fast running out of money as well as time? The following chart, based on data just released by the Bank of Greece, hints strongly at the latter explanation:

So the Greek banking system had just a bit more than 140 billion euros at the end of February. That’s down almost 15% since the end of November, suggesting bags of capital are fleeing the country as fast as their little legs can carry them. And while extrapolation is an imperfect science, taking the trend from November and running it to the end of this month suggests there could be as little as €133 billion left at the current pace of withdrawals, which would be the lowest in more than a decade. So the reason Dijsselbloem is talking about capital controls may be because the authorities are mulling last-resort, worst-case scenarios as the banking system bleeds out. And the reason the ECB has suddenly become more accommodative might not be a gesture of friendship to Greek Finance Minister Yanis Varoufakis; it might be because its lender-of-last-resort duties are compelling it to act. Today’s figures, though, suggest Greek depositors are voting with their bank balances on the increasing risk of Grexit.

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Inevitable when you don’t understand what inflation is.

Bank of Japan Under Pressure As Inflation Stalls (CNBC)

Japan’s consumer inflation eased in February for a seventh straight month increasing expectations that the Bank of Japan (BOJ) will have to undertake further stimulus measures to achieve its price target. The consumer price index (CPI) rose 2.0% in February from the year-ago period, government data showed on Friday, compared with Reuters’ forecast for a rise of 2.1% and down from a 2.2% rise in January. Excluding the effects of the consumption sales tax hike in April, the nationwide consumer price index was flat in February after increasing 0.2% in January. That marks the first time since May 2013 that it stopped rising. “I think this will keep the pressure on the Bank of Japan to keep their foot on the accelerator,” Joe Zidle, portfolio strategist at Richard Bernstein Advisors, told CNBC.

“You’ve had this split between the BOJ and the government over quantitative and qualitative easing and I think this is going to force the to keep the spigots open.” “This is an economy thats showing data point after data point that its too weak to stand on its own,” he added. Many analysts believe the trend will continue. “The Tokyo CPI result suggests that the nationwide core CPI will probably remain flat yoy in March. However, electricity and gas charges are expected to start declining from April onwards, putting larger downward pressures on the core CPI inflation rate going forward,” it said in a note.

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“..Yemen is very difficult terrain, as the British learned in the Aden crisis..”

Saudi Battle For Yemen Exposes Fragility Of Global Oil Supply (AEP)

The long-simmering struggle between Saudi Arabia and Iran for Mid-East supremacy has escalated to a dangerous new level as the two sides fight for control of Yemen, reminding markets that the epicentre of global oil supply remains a powder keg. Brent oil prices spiked 6pc to $58 a barrel after a Saudi-led coalition of ten Sunni Muslim states mobilized 150,000 troops and launched air strikes against the Iranian-backed Houthi militias in Yemen, prompting a furious riposte from Tehran. Analysts expect crude prices to command a new “geo-political premium” as it becomes clear that Saudi Arabia has lost control over the Yemen peninsular and faces a failed state on its 1,800 km southern border, where Al Qaeda can operate with near impunity.

Over 3.8m barrels a day (b/d) pass through the 18-mile Bab el-Mandeb Strait off Yemen, one of the world’s key choke points for crude oil supply. While there is little likelihood of disruption to tanker traffic, Saudi Arabia is increasingly threatened by Shiite or Jihadi enemies of different kinds. Shiite Houthi rebels have already seized Yemen’s capital, Sanaa, and pose a potential contagion risk for aggrieved Shia minorities across the Saudi border in the kingdom’s Southwest pocket, never an area friendly to the ruling Wahhabi dynasty in Riyadh. The Houthis are well-armed with rocket-propelled grenades and surface-to-air missiles that were either caputured or came from Iran. They have been trained by the Lebanese Hezbollah. “I don’t think air strikes are going to do the job, and it is not clear whether Saudi Arabia is really willing to put boots on the ground,” said Alastair Newton, head of political risk at Nomura and a former intelligence planner for the first Gulf War.

“Nor do I have much confidence in the ability of the Saudis to wage a successful campaign against the Houthis, despite their massive superiority on paper. Yemen is very difficult terrain, as the British learned in the Aden crisis,” he said. The Saudis face an impossible dilemma. The harder they hit the Houthis, the greater the danger of a power vacuum that can only benefit Al Qaeda and Islamic State groupings that already control central Yemen. They are among the most lethal of the various Al Qaeda franchises. A cell from that area was responsible for the Charlie Hebdo attack in Paris. The last 120-strong contingent of US military advisers has been evacuated from the country, while Yemen’s own security apparatus is disintegrating. It is now much harder for the US to coordinate drone strikes or harass Al Qaeda strongholds.

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Nothing wild about it.

Putin Plays Wildcard as Ukraine Bond Restructuring Talks Begin (Bloomberg)

As Ukraine begins bond-restructuring talks, it finds itself face-to-face with a familiar foe: Russia. President Vladimir Putin, who the U.S. and its allies accuse of sending troops and weapons into Ukraine to back a separatist uprising, bought $3 billion of Ukrainian bonds in late 2013. The cash was meant to support an ally, then-President Yanukovych. While his government fell just two months later, Russia was left with the securities. Now, those holdings take on an added importance as Putin’s stance on the debt talks could affect the terms that all other bondholders get in the restructuring. Russia, which is Ukraine’s second-biggest bondholder, has maintained that it won’t take part in any restructuring deal. Here are the three most likely tacks – as seen by money managers and analysts – that Putin’s government could pursue.

Ukraine, after gaining a lifeline from the IMF, included Russia’s bond among the 29 securities and enterprise loans it seeks to renegotiate with creditors before June. Finance Minister Natalie Jaresko has promised not to give any creditor special treatment. The revamp will include a reduction in the coupon, an extension in maturities as well as a cut in the face value, she said. Russian Deputy Finance Minister Sergey Storchak said March 17 that the nation isn’t taking part in the debt negotiations because it’s an “official” creditor, not a private bondholder. If the Kremlin maintains this view, it would be “negative” for private bondholders as “other investors will be more tempted to hold out as well,” according to Marco Ruijer at ING. He predicts a 45% chance of a hold out, while Michael Ganske at Rogge in London says it’s 70%.

There is little precedence of sovereigns and private bondholders taking part in the same talks, given that a nation’s debt considerations include a “foreign-policy dimension,” according to Matthias Goldmann at the Max Planck Institute in Heidelberg, Germany. Ukraine and Russia may need to find an “appropriate forum,” such as the Paris Club, for separate negotiations, he said. Holding out can lead to two outcomes: Russia gets paid back in full after the notes mature in December, or Ukraine defaults. The former option is politically unacceptable in Kiev, according to Tim Ash, chief emerging-market economist at Standard Bank, while the latter would likely start litigation and delay the borrower’s return to foreign capital markets, which Jaresko expects in 2017. “Russia will be holdouts, to try and force a messy restructuring,” Ash said by e-mail on March 19.

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Worst idea ever: make Spain’s biggest bank grow bigger. Who’s going to bail them out?

Spain Urges EU to Remove Barriers to Banking Takeovers (Bloomberg)

Spain, home of the euro area’s largest bank, is pushing the EUto remove obstacles to cross-border mergers of retail lenders. The European Commission should stop national regulators using discretionary powers to hamper tie-ups that strengthen the financial links between euro member states, Alvaro Nadal, chief economic adviser to Prime Minister Mariano Rajoy, said in an interview this week. “One of the problems with monetary union is the lack of risk sharing across the system,” Nadal said. “Imagine if half of Spanish mortgages had been provided by German banks, the crisis would have been very different.” Europe’s retail banking industry should follow the path of the telecommunications industry which has seen a wave of consolidation since EU action facilitated deals, Nadal said.

That would make the currency bloc’s financial system more resilient to shocks like the real-estate collapse that forced Spain to seek a banking-system bailout in 2012. Nadal said he wants to see measures to promote cross-border bank mergers included in the plans to strengthen the euro financial system being drawn up by the so-called four presidents – the heads of the EU, the commission, the ECB and the finance ministers’ group. Spain still has to sell its majority stake in Bankia, a lender with more than €230 billion of assets, which was bailed out with European funds in 2012. Bankia has cleaned up its books selling non-performing real estate assets to Spain’s bad bank and received more than €22 billion of state aid.

While European banking rules are already harmonized in general terms, national regulators still have discretion in how they apply those rules, said Ricardo Wehrhahn, a Madrid-based managing partner at Intral Strategy Execution, a banking and business consultant.
“Within the margins of the law a regulator can make your life harder,” said Wehrhahn, who has analyzed possible targets in Spain for German lenders. “The French, German and Italian banking markets are particularly difficult to penetrate.” Banco Santander, the euro region’s largest bank by market value, has submitted one of seven non-binding offers for Portugal’s state-owned Novo Banco.

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What a great plan! Why didn’t I think of that? The more squids the merrier.

Deutsche Bank Wins German Backing to Be More Like Goldman (Bloomberg)

Deutsche Bank is winning support from German politicians for a plan to transform the country’s biggest bank into a company more like Goldman Sachs. That would be the result of an option the firm is weighing as it seeks to bolster capital levels and profitability, according to a person with knowledge of the matter, who asked to remain anonymous because the talks are confidential. Exiting retail banking to focus on global fund management and investment banking would cut fewer jobs and deliver the quickest boost to returns among three scenarios under review, said the person. Deutsche Bank co-Chief Executive Officers Anshu Jain and Juergen Fitschen are revamping their strategy after the stock fell 24% last year, the most among the top investment banks.

At stake for Germany, the world’s third-biggest exporter, is maintaining a competitive advantage by having a domestic corporate and investment bank with global reach that can offer local companies access to capital markets. “Deutsche Bank is Germany’s only global player in banking,” Michael Fuchs, the deputy parliamentary leader of Chancellor Angela Merkel’s Christian Democratic Union said by phone from Berlin. “If they decide to restructure their business, we should support them.” The lender would still shrink its investment bank, which is Europe’s largest, in all three scenarios it is considering, according to one of the people. The bank may pare its interest-rate trading business and the prime finance activities that cater to hedge funds, the person said.

The company said on Friday that it would present the results of its strategy review in the second quarter. Politicians might have an interest in Deutsche Bank’s plan because Germany is its single biggest market, making up 34% of the bank’s 31.9 billion euros ($35.1 billion) of revenue last year and accounting for 46% of its 98,138 staff at the end of December, company filings show. If Deutsche Bank has concluded that it’s “economically” better to sell its consumer unit, “we have to accept this,” said Ingrid Arndt-Brauer, chairwoman of the parliamentary finance committee and a member of Merkel’s Social Democratic Party coalition partners.

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So what are we going to do?

Asylum Claims Up 45%, ‘Highest Level For 22 Years’ (BBC)

The number of refugees seeking asylum in developed countries rose by almost half last year to the highest level for 22 years, a UN report says. The UN refugee agency said an estimated 866,000 asylum seekers lodged claims in 2014, a 45% rise on the year before and the highest figure since the start of the war in Bosnia. It said the increase had been driven by the conflicts in Syria and Iraq. Germany received the most applications at 173,000 – 30% of claims in the EU. It was followed by the US, Turkey, Sweden and Italy as the countries with the most claims. Between them, the top five receiving countries accounted for 60% of all new asylum bids among the 44 included in the report. The surge is linked to the spiralling conflicts in Syria and Iraq, which have created “the worst humanitarian crisis of our era,” UNHCR spokeswoman Melissa Fleming said.

She urged European countries to open their doors, and respond as generously to the current situation as they did during the Balkan wars in the 1990s. “We need countries to step up to the plate,” AFP news agency quoted her as saying. The UNHCR figures do not include the millions of Syrians who have been taken in by countries such as Lebanon and Jordan. Syrians accounted for the most applications for asylum in 2014 – at nearly 150,000 – more than double the 2013 figure of 56,300. More than 215,000 people are estimated to have been killed since the conflict in Syria started in 2011. Iraqis came in second with 68,700 asylum requests, up from 37,300 the year before. Afghans formed the third largest group, followed by citizens of Serbia and Kosovo, and Eritreans, the UNHCR said.

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Tom Joad just turned around in his car..

California’s Epic Drought: One Year of Water Left (Ellen Brown)

Wars over California’s limited water supply have been going on for at least a century. Water wars have been the subject of some vintage movies, including the 1958 hit The Big Country starring Gregory Peck, Clint Eastwood’s 1985 Pale Rider, 1995’s Waterworld with Kevin Costner, and the 2005 film Batman Begins. Most acclaimed was the 1975 Academy Award winner Chinatown with Jack Nicholson and Faye Dunaway, involving a plot between a corrupt Los Angeles politician and land speculators to fabricate the 1937 drought in order to force farmers to sell their land at low prices. The plot was rooted in historical fact, reflecting battles between Owens Valley farmers and Los Angeles urbanites over water rights.

Today the water wars continue, on a larger scale with new players. It’s no longer just the farmers against the ranchers or the urbanites. It’s the people against the new “water barons” – Goldman Sachs, JPMorgan Chase, Monsanto, the Bush family, and their ilk – who are buying up water all over the world at an unprecedented pace. At a news conference on March 19, 2015, California Senate President Pro Tem Kevin de Leon warned, “There is no greater crisis facing our state today than our lack of water.” Jay Famiglietti, a scientist with NASA’s Jet Propulsion Laboratory in La Cañada Flintridge, California, wrote in the Los Angeles Times on March 12th:

Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

Maps indicate that the areas of California hardest hit by the mega-drought are those that grow a large%age of America’s food. California supplies 50% of the nation’s food and more organic food than any other state. Western Growers estimates that last year 500,000 acres of farmland were left unplanted, an amount that could increase by 40% this year. The trade group pegs farm job losses at 17,000 last year and more in 2015. Farmers with contracts from the Central Valley Project, a large federal irrigation system, will receive no water for the second consecutive year, according to preliminary forecasts. Cities and industries will get 25% of their full contract allocation, to ensure sufficient water for human health and safety. Besides shortages, there is the problem of toxic waste dumped into water supplies by oil company fracking. Economists estimate the cost of the drought in 2014 at $2.2 billion.

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And his grave…

It’s The End Of March And 99.85% Of California Is Abnormally Dry Already (ZH)

With NASA scientists warning about California only having one year of water left, it appears The Kardashians and March Madness continue to distract Americans from the ugly looming reality of water shortages. With summer around the corner, the US Drought Minitoring service reports today that a stunning 99.85% of California is “abnormally dry,” and 98.11% of the state is in drought conditions leaving over 37 million people in harm’s way. As we concluded previously: Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain. In short, we have no paddle to navigate this crisis. Several steps need be taken right now.

First, immediate mandatory water rationing should be authorized across all of the state’s water sectors, from domestic and municipal through agricultural and industrial. The Metropolitan Water District of Southern California is already considering water rationing by the summer unless conditions improve. There is no need for the rest of the state to hesitate. The public is ready. A recent Field Poll showed that 94% of Californians surveyed believe that the drought is serious, and that one-third support mandatory rationing.

Second, the implementation of the Sustainable Groundwater Management Act of 2014 should be accelerated. The law requires the formation of numerous, regional groundwater sustainability agencies by 2017. Then each agency must adopt a plan by 2022 and “achieve sustainability” 20 years after that. At that pace, it will be nearly 30 years before we even know what is working. By then, there may be no groundwater left to sustain.

Third, the state needs a task force of thought leaders that starts, right now, brainstorming to lay the groundwork for long-term water management strategies. Although several state task forces have been formed in response to the drought, none is focused on solving the long-term needs of a drought-prone, perennially water-stressed California.

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NOT a mirror version of the visible universe.

What Is Dark Matter Made Of? Galaxy Cluster Collisions Offer Clues (CSM)

Dark matter may not be part of a “dark sector” of particles that mirrors regular matter, as some theories suggest, say scientists studying collisions of galaxy clusters. When clusters of galaxies collide, the hot gas that fills the space between the stars in those galaxies also collides and splatters in all directions with a motion akin to splashes of water. Dark matter makes up about 90% of the matter in galaxy clusters: Does it splatter like water as well? New research suggests that no, dark matter does not splatter when clusters of galaxies collide, and this finding limits the kinds of particles that can make up dark matter. Specifically, the authors of the new research say it is unlikely that dark matter is part of an entire “dark sector” — a mirror version of the visible universe.

Our galaxy contains hundreds of billions of stars, and there are hundreds of billions of galaxies in the observable universe. There’s also a lot of gas and dust between the stars and the galaxies. But all of those stars, galaxies, gas and dust make up only about 10 to 15% of the matter in the universe. The other 85 to 90% is dark matter. Scientists don’t know what dark matter is made of or where it comes from, only that it doesn’t appear to reflect or radiate light. It does, however, exert a gravitational pull on the regular matter around it. David Harvey, a postdoctoral researcher at the Swiss Federal Institute of Technology Lausanne, is one of many scientists currently trying to figure out what dark matter is made of.

There are lots of ways to go about this, and Harvey decided to see what happens when dark matter collides with itself. To do this, Harvey and his colleagues at the University of Edinburgh, where Harvey did his PhD work, looked at collisions among entire clusters of galaxies, where as much as 90% of the mass involved in the collision is dark matter, according to a statement from the Swiss Federal Institute of Technology Lausanne. “[Galaxy cluster mergers] are incredibly messy,” Harvey said. “You’ve got [the stars], the highest densities of dark matter and hot gas all swirling together.”

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“Many of Antarctica’s ice shelves are huge. The one protruding into the Ross Sea is the size of France.” “A number of these ice shelves are holding back 1m to 3m of sea level rise..”

Antarctic Ice Shelf Thinning Speeds Up (BBC)

Scientists have their best view yet of the status of Antarctica’s floating ice shelves and they find them to be thinning at an accelerating rate. Fernando Paolo and colleagues used 18 years of data from European radar satellites to compile their assessment. In the first half of that period, the total losses from these tongues of ice that jut out from the continent amounted to 25 cubic km per year. But by the second half, this had jumped to 310 cubic km per annum. “For the decade before 2003, ice-shelf volume for all Antarctica did not change much,” said Mr Paolo from the Scripps Institution of Oceanography in San Diego, US. “Since then, volume loss has been significant. The western ice shelves have been persistently thinning for two decades, and earlier gains in the eastern ice shelves ceased in the most recent decade,” he told BBC News.

The satellite research is published in Science Magazine. It is a step up from previous studies, which provided only short snapshots of behaviour. Here, the team has combined the data from three successive orbiting altimeter missions operated by the European Space Agency (Esa). The findings demonstrate the value of continuous, long-term, cross-calibrated time series of information. Many of Antarctica’s ice shelves are huge. The one protruding into the Ross Sea is the size of France. They form where glacier ice running off the continent protrudes across water. At a certain point, the ice lifts off the seabed and floats. Eventually, as these shelves continue to push outwards, their fronts will calve, forming icebergs.

If the losses to the ocean balance the gains on land though precipitation of snows, this entirely natural process contributes nothing to sea level rise. But if thinning weakens the shelves so that land ice can flow faster towards the sea, this will kick the system out of kilter. Repeat observations now show this to be the case across much of West Antarctica. “If this thinning continues at the rates we report, some of the ice shelves in West Antarctica that we’ve observed will disappear by the end of this century,” said Scripps co-author Helen Amanda Fricker. “A number of these ice shelves are holding back 1m to 3m of sea level rise in the grounded ice. And that means that ultimately this ice will be delivered into the oceans and we will see global sea-level rise on that order.”

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