Aug 242017
 
 August 24, 2017  Posted by at 9:11 am Finance Tagged with: , , , , , , , , , ,  


Egon Schiele Meadow, Church and Houses 1912

 

Wall Street Banks Warn Downturn Is Coming (BBG)
Big US Banks Could See Profit Jump 20% With Deregulation (BBG)
ECB Chief Draghi: QE Has Made Economies More Resilient (BBC)
Yellen’s Coming Speech Could Mark The ‘End Of An Era’ (BI)
Here’s Why New Home Sales Tanked (CNBC)
Autos Put Economic Downside Risks on Full Display (DDMB)
Merkel Aide Says Germany Has ‘Vital Interest’ in Diesel Survival (BBG)
China’s ‘Belt And Road’ Could Be Next Risk To Global Financial System (CNBC)
Being Here (Brodsky)
All The Countries The USA Has Invaded, In One Map (Indy)
America, Home of the Transactional Marriage (Atlantic)

 

 

More cycles.

Wall Street Banks Warn Downturn Is Coming (BBG)

HSBC, Citigroup and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle. Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. It all means stock and credit markets are at risk of a painful drop. “Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday. His bank’s model shows assets across the world are the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a selloff triggered this month by President Donald Trump’s political standoff with North Korea and racial violence in Virginia.

Just like they did in the run-up to the 2007 crisis, investors are pricing assets based on the risks specific to an individual security and industry, and shrugging off broader drivers, such as the latest release of manufacturing data, the model shows. As traders look for excuses to stay bullish, traditional relationships within and between asset classes tend to break down. “These low macro and micro correlations confirm the idea that we’re in a late-cycle environment, and it’s no accident that the last time we saw readings this low was 2005-07,” Sheets wrote. He recommends boosting allocations to U.S. stocks while reducing holdings of corporate debt, where consumer consumption and energy is more heavily represented. That dynamic is also helping to keep volatility in stocks, bonds and currencies at bay, feeding risk appetite globally, according to Morgan Stanley. Despite the turbulent past two weeks, the CBOE Volatility Index remains on track to post a third year of declines.

Oxford Economics macro strategist Gaurav Saroliya points to another red flag for U.S. equity bulls. The gross value-added of non-financial companies after inflation – a measure of the value of goods after adjusting for the costs of production – is now negative on a year-on-year basis. “The cycle of real corporate profits has turned enough to be a potential source of concern in the next four quarters,” he said in an interview. “That, along with the most expensive equity valuations among major markets, should worry investors in U.S. stocks.” The thinking goes that a classic late-cycle expansion – an economy with full employment and slowing momentum – tends to see a decline in corporate profit margins. The U.S. is in the mature stage of the cycle – 80% of completion since the last trough – based on margin patterns going back to the 1950s, according to Societe Generale.

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They warn about a downturn, but not for themselves. Their asses are covered.

Big US Banks Could See Profit Jump 20% With Deregulation (BBG)

The deregulation winds blowing through Washington could add $27 billion of gross profit at the six largest U.S. banks, lifting their annual pretax income by about 20%. JPMorgan Chase and Morgan Stanley would benefit most from changes to post-crisis banking rules proposed by Donald Trump’s administration, with pretax profit jumping 22%, according to estimates by Bloomberg based on discussions with analysts and the banks’ own disclosures. Goldman Sachs would have the smallest percentage increase, about 16%. Bloomberg’s calculations are based largely on adjustments banks could make to the mix of securities they hold and the interest they earn from such assets. The proposed changes would allow the largest lenders to take on more deposits, move a greater portion of their excess cash into higher-yielding Treasuries and municipal bonds, and issue a lower amount of debt that costs more than customer deposits.

Of the changes proposed in June by Treasury Secretary Steven Mnuchin, the one that would probably have biggest impact on profit is allowing banks to buy U.S. government bonds entirely with borrowed money. Three others could also boost income: counting municipal bonds as liquid, or easy-to-sell, assets; requiring less debt that won’t have to be paid back if a bank fails; and making it easier to comply with post-crisis rules. Regulators appointed by Trump could make these changes without congressional approval. Doing so would reverse their agencies’ efforts since 2008 to strengthen capital and liquidity requirements for U.S. banks beyond international standards. While bringing U.S. rules in line with global ones probably wouldn’t threaten bank safety, some analysts and investors worry the pendulum could swing even further.

“Since the crisis, we’ve had the luxury of excess capital buildup in the banking system and regulators reining in risky activities,” said William Hines at Standard Life Aberdeen. “If there’s too much pullback on minimum capital requirements, too much relaxation of restraints, we’re concerned there’ll be more risk-taking by banks, and the system will become vulnerable.”

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Blowing bubbles everywhere and claiming they bring strength. It’s Orwell.

ECB Chief Draghi: QE Has Made Economies More Resilient (BBC)

European Central Bank President Mario Draghi has said unconventional policies like quantitative easing (QE) have been a success both sides of the Atlantic. QE was introduced as an emergency measure during the financial crisis to pump money directly into the financial system and keep banks lending. A decade later, the stimulus policies are still in place, but he said they have “made the world more resilient”. But he also said gaps in understanding these relatively new tools remain. As the economic recovery in the eurozone gathers pace, investors are watching closely for when the ECB will ease back further on its €60bn a month bond-buying programme. Central bankers, including Mr Draghi, are meeting in Jackson Hole, Wyoming, later this week, where they are expected to discuss how to wind back QE without hurting the economy.

On Monday, a former UK Treasury official likened the stimulus to “heroin” because it has been so difficult to wean the UK, US and eurozone economies off it. In a speech in Lindau, Germany on Wednesday, Mr Draghi defended QE and the ECB’s policy of forward guidance on interest rates. “A large body of empirical research has substantiated the success of these policies in supporting the economy and inflation, both in the euro area and in the United States,” he said. The ECB buying relatively safe assets such as government bonds means that banks can lend more and improve access to credit for riskier borrowers, Mr Draghi said. He added: “Policy actions undertaken in the last 10 years in monetary policy and in regulation and supervision have made the world more resilient. But we should continue preparing for new challenges.”

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End the Fed.

Yellen’s Coming Speech Could Mark The ‘End Of An Era’ (BI)

Janet Yellen could be on her way out as chair of the Federal Reserve. On Friday, she’s set to deliver a speech on financial stability at the Fed’s annual economic symposium in Jackson Hole, Wyoming. It could be her last, following months of speculation that President Donald Trump plans to nominate a different candidate when her four-year term ends in February. And Yellen’s successor could have a very different approach to the job. Yellen’s Jackson Hole showing could be the last one, for now, under a Fed chair who takes a technocratic approach to monetary policy, according to Luke Bartholomew, an investment strategist at Aberdeen Standard Investments. “There could be an end-of-an-era feel to Jackson Hole this year,” Bartholomew told Business Insider.

The Fed chair could be replaced by someone who’s “probably not the sort of academic economist that’s been leading it through the Bernanke/Yellen period,” he said, adding that there’s “a broader feeling that under the Trump administration, the technocratic approach of the Fed is increasingly out of favor.” Yellen, 71, was a career economist and academic before President Barack Obama nominated her to replace Ben Bernanke in 2014. Trump told The Wall Street Journal last month that Gary Cohn, Yellen, and “two or three” other candidates were in the running for the job. One of those other people could be Kevin Warsh, a former Fed governor who is now a fellow at the Hoover Institution. But Cohn, the National Economic Council director and Trump’s top economic adviser, is reportedly the top contender. He’s the “archetype of Wall Street, given his job at Goldman in the past,” Bartholomew said. “He certainly brings financial acumen to the job. I’m not sure that’s what the job of Fed chairman is, but he’s a fine candidate.”

Walsh brings some years of Fed experience to the table. But he has worked for seven years in investment banking, at Morgan Stanley, and isn’t an academic policymaker like Yellen or Bernanke. That’s not the only red flag Yellen’s exit would raise. On one extreme, Yale School of Management’s Jeffrey Sonnenfeld thinks markets would crash if Cohn were to leave the White House for the Fed. Stocks dipped last week as rumors spread that he was leaving the administration following Trump’s response to the white-nationalist rally in Charlottesville, Virginia. “I don’t want to be an alarmist, but there is a lot of faith that he is going to help carry through the tax reform that people are looking for,” Sonnenfeld told CNBC last week.

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“Long term, the new home median price has been mostly 10% to 20% above the existing home median since 1990. Since 2011, however, new home prices have been at a 35% to 40% premium over resale prices..”

Here’s Why New Home Sales Tanked (CNBC)

Newly built homes are more expensive than they’ve ever been before. They are also more expensive when compared to similar existing homes than they’ve ever been before. And that is why sales are suffering, dropping an unexpected 9.4% in July compared to June, according to the U.S. Census. They are simply out of reach for too many potential buyers. You don’t have to do a lot of math to see it. The median sale price of a newly built home in July jumped more than 6% compared to July 2016, to $313,700. That marks the highest July price ever. Last December, the median price hit the highest of any month on record. In addition, the price premium for newly built homes compared to comparable existing homes has more than doubled since 2011, according to John Burns Real Estate Consulting.

“Long term, the new home median price has been mostly 10% to 20% above the existing home median since 1990. Since 2011, however, new home prices have been at a 35% to 40% premium over resale prices,” John Burns wrote in a recent note to clients. “While the exact percentages aren’t perfect due to ‘apples and oranges’ comparisons, our consultants have been confirming for years that new home sales have been slowed by larger than usual new home premiums.” The supply of existing homes for sale is still extremely low, but the supply of newly built homes moved higher in July to 5.8 months of inventory. “The scars of the housing bust are still fresh in the minds of many homebuilders, so it is not surprising that many are taking a cautious approach to ramping up production,” noted Aaron Terrazas, a senior economist at Zillow, in reaction to the July report.

Homebuilders are feeling slightly better about their business lately, but they continue to complain about the costs of land, labor, materials and regulation. They claim that is why they cannot build cheaper homes. Unfortunately, the lower end of the market is where most of the demand is and where supply is weakest. “There is still no pickup in sales for homes priced below $300,000, and this is where most of the first time households would be shopping in,” wrote Peter Boockvar, chief market analyst at The Lindsey Group in a note following the Census release on new home sales. “I repeat that the housing industry needs a moderation in home price gains in order to better compete with renting where rents increases are now moderating.”

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Auto loans are a huge part of money creation.

Autos Put Economic Downside Risks on Full Display (DDMB)

Federal Reserve data released last week on July industrial production offered little more than more of the same. Despite post-election optimism for a rebound in activity on the nation’s factory floors, the data reveal a continued throttling down in the growth rate to just over 2% compared with this time last year. The main drag on activity – the auto sector – should come as no surprise to investors. Rather than rising by 0.2% over June as projected, manufacturing production contracted by 0.1%, marking the third decline in five months. Motor vehicles and parts production fell by 3.6% on the month, taking the year-over-year slide to 5%. Evidence continues to build that a sampling error may be to blame for the surprising strength in June and July car sales.

Inventory continues to pile up, suggesting more production cuts are in the offing: As of June, the latest data on hand, auto inventories were up 7.4% over last year, leaving manufacturers choking for air. In July, General Motors alone was sitting on 104 days of supply, well above its target of 70 days. Industry-wide, the July/August average of 69 days ties the August 2008 record and sits above the historic average of 56 days of supply. In all, automakers have 3.9 million units of unsold light vehicles, up 324,600 from last August and the highest on record for the month. For context, July and August tie for the leanest stock levels of the year. The decline in July sales was already the steepest this year. Fresh loan delinquency data suggest more pain ahead.

“Deep subprime” borrowers have been a big boost at the margin, propelling back-to-back record years of sales in 2015 and 2016 as lending standards loosened sufficiently to allow millions with credit scores below 530 to access financing. Equifax, the consumer credit reporting firm, didn’t hold back in its second-quarter update, saying the performance of recent vintages of deep subprime loans was “awful.” While industry insiders are quick to point out that the overall pace of defaults across all borrowers remains in check, up just marginally over last year, there is growing concern that deep subprime delinquencies are back at 2007 levels. “The bottom line is excess auto inventories are clearly evident and the auto sector is now in recession,” said The Lindsey Group’s Peter Boockvar.

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We’re about to winess the political power of German carmakers. How many execs are being prosecuted? Right.

Merkel Aide Says Germany Has ‘Vital Interest’ in Diesel Survival (BBG)

Chancellor Angela Merkel’s chief of staff said Germany has a “vital interest” in ensuring diesel engines survive, defending the embattled technology as the industry comes under fire for cheating on emissions tests. Excessive pollution from diesel, as well as traditionally close ties between the government and auto industry, have emerged as a campaign issue in the run up to the country’s federal election in September. Merkel has been confronted by voters on the campaign trail, who accused the government of being too lenient on automakers, prompting the chancellor to question high bonuses for auto executives embroiled in Volkswagen’s cheating scandal. “We have a vital interest in preserving diesel as a technology because it emits far less CO2 than other technologies,” Peter Altmaier, Merkel’s chief of staff, said in a Bloomberg TV interview in Berlin.

“At the same time we have to make sure that all the rules are respected and all the regulations are fully implemented.” Car bosses and government officials reached a compromise deal earlier this month to lower pollution that calls for software updates on million of vehicles instead of more costly hardware fixes. Volkswagen, Daimler and BMW also agreed to a trade-in bonus for cars with outdated emissions controls. The measures have been criticized as a slap on the wrist for Germany’s biggest industry. “We have the responsibility to fight for a good deal but also to preserve the strength and the performance of the automobile industry,” Altmaier said in the interview late on Tuesday. “I’m very optimistic that we will overcome this.”Diesel software updates alone are “insufficient” for many cities to meet the legal limit for nitrogen oxides in the air, Environment Minister Barbara Hendricks told reporters on Wednesday, citing ministry tests conducted this month.

Excessive pollution impacts 70 German towns and cities, and the fixes agreed earlier this month would cut car emissions by a maximum of 6%, she said. Hendricks – a member of Merkel’s junior coalition partner, the Social Democrats – said her ministry and others will ascertain in the coming weeks whether hardware changes in diesels currently on the road are necessary to further lower emissions and will present their findings after the election. “Nobody wants to ban diesels from our cities,” she said. Merkel, who has so far largely steered clear of the debate, is hosting a meeting on Sept. 4 with representatives of the major cities, including the hometowns of BMW, Mercedes-Benz and Porsche, struggling to lower their pollution levels. A number of cities and courts continue to evaluate potential diesel driving bans as the most effective means to meet regulation quickly.

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China exports its Ponzi.

China’s ‘Belt And Road’ Could Be Next Risk To Global Financial System (CNBC)

China has pitched its mammoth, pan-Eurasian “Belt and Road” infrastructure initiative as a means of promoting economic prosperity and fostering diplomatic ties on a global scale. That rhetoric may win plaudits at a time when other global powers are voicing increasingly protectionist agendas, but it also comes with risks, and increasing levels of state-backed funding have raised concerns about just how safe of a gamble it is. Reports on Tuesday claimed that some of China’s biggest state-owned commercial banks will begin raising capital to fund investments into the initiative, also known as “One Belt, One Road,” which aims to connect more than 60 countries across Asia, Europe and Africa with physical and digital infrastructure. China Construction Bank, the country’s second-largest bank by assets, has been conducting roadshows to raise at least 100 billion yuan ($15 billion) from on- and offshore investors.

Bank of China, Industrial and Commercial Bank of China, and Agricultural Bank of China are also said to be raising tens of billions of dollars. The news highlights the risk that the state could amass hundreds of billions of dollars in nonperforming loans if the projects fail. For Xu Chenggang, professor of economics at Cheung Kong Graduate School of Business in Beijing, it was not a surprise. “It supports my concerns,” Xu told CNBC over the phone. “The impact could be damaging not just for China, but for the global financial system.” “These loans are being extended to governments in risky countries to fund risky infrastructure projects. If the projects were launched by private firms we wouldn’t have to worry because they would know they had to bear the consequences. But here we are talking about government-to-government lending and, ultimately, intergovernmental relations.”

[..] It took decades of economic reforms and loss-making firms before it succeeded in what Xu termed a process of “quiet privatization” at the turn of the 21st century. However, the process has lost momentum over the past 10 years, and the state remains burdened with issues of overcapacity and myriad “zombie firms,” especially within the metals and construction and materials sectors. Xu said that has partially been the motivation for the “Belt and Road” initiative: “Instead of solving the overcapacity problems, they are expanding the problem to projects overseas.” “They (China) are proposing lending money to foreign governments, who will then use the Chinese funds to pay the Chinese companies,” he explained.

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“.. one might say Mr. Trump represents a triumph of democracy..”

Being Here (Brodsky)

It should not surprise anyone that Western societies are becoming restless. Trump, Brexit, Charlottesville and, arguably, even radical Islamic terrorism are bi-products of global economic distortions largely created by the unwillingness of the Western political dimension to let the global factors of production naturally settle global prices and wages. (Sorry, it had to be said.) Donald Trump is a sideshow. His ascension, or someone like him, was inevitable. He may have official authority to behave like the leader of the free world (even if he is unable to do so), but so far he has only shown that virtually anyone can become president. Indeed, one might say Mr. Trump represents a triumph of democracy. Behold the robustness of America: the most powerful nation on Earth is unafraid to elect a cross between P.T. Barnum and Chauncey Gardner!

This is not to say a US president cannot raise and emphasize truly meaningful economic goals and mobilize countries around the world to help achieve them; but it is to say that this President seems to not know or be interested in what those goals might be. As discussed, the biggest challenges facing the US economy and US labor stem from a distorted global price and wage scale. Mr. Trump’s domestic fiscal, regulatory, tax and immigration goals seek only to raise US output and wages. This cannot be achieved without the participation of global commerce. There is no such thing anymore as a US business that makes US products sold only in the US without being influenced by global prices, wages and exchange rates. The romantic, patriotic “made in the USA” theme does not comport with the reality that the US also seeks to keep the dollar the world’s reserve currency and that maintaining America’s power requires the US to control the world’s shipping lanes.

Mr. Trump and his base cannot have one without the other. (Do we really have to articulate this?) Mr. Trump’s “Being There” presidency is reflecting an inconvenient truth back on a society that has, until maybe now, successfully deluded itself into believing government is functionally the glue holding society together. Though he does not mean to, Mr. Trump is single-handedly demonstrating to groups ranging from idealistic Washington elites to social media zombies to southern white supremacists that Madisonian government has become a dignified cover for the financial, commercial and national security interests that control it. We suspect those interests would rather the reach of their power be less visible.

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Two maps, actually. Click the link for fully interactive versions.

All The Countries The USA Has Invaded, In One Map (Indy)

From Montezuma to the shores of Tripoli, the US has had a military presence across the world, from almost day one of her independence. What constitutes invasion? As one map below shows, the US has a military presence in much of the world without being an occupying force (though some would dispute that definition). For instance, although the Confederacy considered the US to be a hostile invading power, indy100 are not counting the Civil War or any annexation within the continental United States as an ‘invasion’. Using data on US military interventions published by the Evergreen State College, in Olympia Washington, indy100 has created this map (below). The data was compiled by Dr Zoltan Grossman, a professor of Geography and Native Studies. The map documents a partial list of occasions, since 1890, that US forces were used in a territory outside the US.

Caveats: This includes: Deployment of the military to evacuate American citizens, Covert military actions by US intelligence, Providing military support to an internal opposition group, Providing military support in one side of a conflict (e.g. aiding Iraq during the Iran-Iraq War 1988-89), Use of the army in drug enforcement actions (e.g. Raids on the cocaine region in Bolvia in 1986 It does not include threats of nuclear weapons against a territory, such as during the Berlin Air Lift (1948-49). It also excludes any time US military personnel were deployed to a foreign country for an exclusively humanitarian purpose – e.g. sending troops to the Democratic Republic of the Congo to provide assistance to refugees fleeing the Rwandan genocide (1996-97).

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The demise of a society. Not because of marriages declining, but because of why they are.

America, Home of the Transactional Marriage (Atlantic)

Over the last several decades, the proportion of Americans who get married has greatly diminished—a development known as well to those who lament marriage’s decline as those who take issue with it as an institution. But a development that’s much newer is that the demographic now leading the shift away from tradition is Americans without college degrees—who just a few decades ago were much more likely to be married by the age of 30 than college graduates were. Today, though, just over half of women in their early 40s with a high-school degree or less education are married, compared to three-quarters of women with a bachelor’s degree; in the 1970s, there was barely a difference. The marriage gap for men has changed less over the years, but there the trend lines have flipped too: 25% of men with high-school degrees or less education have never married, compared to 23% of men with bachelor’s degrees and 14% of those with advanced degrees.

Meanwhile, divorce rates have continued to rise among the less educated, while staying more or less steady for college graduates in recent decades. The divide in the timing of childbirth is even starker. Fewer than one in 10 mothers with a bachelor’s degree are unmarried at the time of their child’s birth, compared to six out of 10 mothers with a high-school degree. The share of such births has risen dramatically in recent decades among less educated mothers, even as it has barely budged for those who finished college. (There are noticeable differences between races, but among those with less education, out-of-wedlock births have become much more common among white and nonwhite people alike.)

[..] Autor, Dorn, and Hanson found that in places where the number of factory jobs shrank, women were less likely to get married. They also tended to have fewer children, though the share of children born to unmarried parents, and living in poverty, grew. What was producing these trends, the researchers argue, was the rising number of men who could no longer provide in the ways they once did, making them less attractive as partners. Furthermore, many men in these communities became no longer available, sometimes winding up in the military or dying from alcohol or drug abuse. (It’s important to point out that this study and similar research on employment and marriage focus on opposite-sex marriages, and a different dynamic may be at work among same-sex couples, who tend to be more educated.)

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Feb 072017
 
 February 7, 2017  Posted by at 11:08 am Finance Tagged with: , , , , , , , , ,  


Russell Lee Sharecropper mother teaching children in home, Transylvania, LA. 1939

Trump To Be Barred From UK Parliament Over ‘Racism and Sexism’ (BBG)
Trump’s Wall Street Deregulation ‘The Last Thing We Need’ – Draghi (Ind.)
Meet The Men Who Could Topple Donald Trump (G.)
California Is Not ‘Out Of Control,’ Leaders Tell Trump (R.)
Our Part In The Darkness (Alameddine)
The New York Times Just Doesn’t Understand This Economics Stuff (Worstall)
The Fed’s Mortage-Bond Whale (BBG)
When The Money Supply Dries Up (IM)
Army Corps Of Engineers May Decide On DAPL By Week’s End (BBG)
New Bill Would Block EPA From Regulating Greenhouse Gases
Too Late For Couples Therapy? (DiEM25)
Varoufakis: Tsipras Should Prepare To Break Deal With Greece’s Creditors (FR)
Rare Split On IMF Board Puts Greek Bailout At Risk (MW)
Greece Won’t Meet Fiscal Surplus Targets Set By Europe, IMF Says (BBG)
Third Quake Over 5-Richter Magnitude Rattles Lesbos (K.)

 

 

Really dumb stuff. If only because Trump loves it.

Trump To Be Barred From UK Parliament Over ‘Racism and Sexism’ (BBG)

U.S. President Donald Trump must not be allowed to address the U.K. Parliament during a state visit to Britain, House of Commons Speaker John Bercow said. Prime Minister Theresa May invited Trump to visit the U.K., but there have been calls by lawmakers not to give the president the honor of addressing both houses of Parliament after he introduced a ban on people from some majority-Muslim countries traveling to the U.S. “Before the imposition of the migrant ban I would myself have been strongly opposed to an address by President Trump in Westminster Hall; after the imposition of the migrant ban by President Trump I’m even more strongly opposed,” Bercow told lawmakers on Monday.

He added, “I feel very strongly our opposition to racism and to sexism and our support for equality before the law and an independent judiciary are hugely important considerations in the House of Commons.” Trump’s predecessor, Barack Obama, and world leaders including Nelson Mandela, Angela Merkel and Pope Benedict XVI have all been invited to speak to members of the House of Commons and the House of Lords. [..] The announcement was greeted with cheers and – a rare event in the House of Commons – applause from the opposition benches. A motion arguing that Trump shouldn’t be invited to speak has been signed by 163 out of Parliament’s 650 members.

Bercow said he has a veto over a speech in Westminster Hall, the oldest part of the Houses of Parliament, and would block one. It would also be a breach with tradition if Trump spoke in the Royal Gallery behind the Lords without his name on the invitation, he said. “An address by a foreign leader to both houses of Parliament is not an automatic right, it is an earned honor,” Bercow said. “There are many precedents for state visits to take place to our country that do not include an address to both houses of Parliament.”

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Meet Mario the kettle.

Trump’s Wall Street Deregulation ‘The Last Thing We Need’ – Draghi (Ind.)

Donald Trump’s roll-back of Wall Street regulation is “very worrisome” and “the last thing we need” the President of the ECB, Mario Draghi, has warned. Giving evidence to the European Parliament’s Committee on Economic and Monetary Affairs on Monday, Mr Draghi was asked about the American President’s assault on the US post-crisis Dodd-Frank legislation, which had curbed the risk-taking of US banks, raised their capital requirements and introduced more safeguards for consumers. “The last thing we need is a relaxation of regulation,” Mr Draghi said. “The fact that we are not seeing….significant financial stability risk is the reward of the action of supervisors…. Nowadays financial intermediaries are strong. The idea of repeating the conditions of before the crisis is very worrisome.”

Mr Draghi added: “If we were to look at historical experience and ask what are the main reasons for the financial crisis starting in 2007 onwards, well, one can disagree [over] whether it was too expansive monetary policy or the dismantling of financial regulation in previous years – but surely we can agree it was a combination”. Last week President Trump signed an executive order to relax Dodd-Frank, prompting warnings that he is preparing the ground for another financial crisis. Phil Angelides, who served as chair of the Financial Crisis Inquiry Commission, branded President Trump’s decision “insane”. “In the wake of the financial crisis, millions of families lost their homes. Millions of people lost their jobs. The economy was wrecked and communities across the country were devastated. Big Wall Street banks admitted wrongdoing and paid tens of billions of dollars in fines. And now, with bankers at his side, President Trump begins to rip apart protections put in place to protect America’s families and our economy,” he said.

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As I said a few dats ago: “More interesting right now is how strongly this is dividing the White House team. Kelly refused to enact some of Bannon’s demands. Tillerson and Mattis are not sitting comfortable either.”

Meet The Men Who Could Topple Donald Trump (G.)

When Trump began putting together his cabinet, liberals and some in the media expressed concern over the number of retired generals he was appointing to top positions. “Trump hires third general, raising concerns about heavy military influence,” blared a headline in the Washington Post during the presidential transition. “I am concerned that so many of the president-elect’s nominees thus far come from the ranks of recently retired military officers,” the Democratic representative Steny Hoyer told the Washington Examiner in December. The fretting over Trump’s generals was always misplaced, not least because the number of retired generals Trump has appointed to top positions in his administration is hardly unprecedented.

Trump nominated the retired Marine generals James Mattis and John Kelly to lead the Department of Defense and Homeland Security, respectively, and tapped the retired army general Mike Flynn to be his national security adviser. When entering office after winning the 2008 presidential election, Barack Obama also appointed three retired generals to top positions and few batted an eyelid. But those concerned about Trump’s presidency should be thankful that the generals are there, particularly Mattis and Kelly. By all accounts, they are men of great honor and courage with strong backbones. Kelly led men into battle and lost a son fighting in Afghanistan. Mattis may be the most distinguished and respected Marine officer of his generation, revered for his dedication to his troops and his intellect. I had the honor of spending an hour with him one-on-one last May when he was a fellow at the Hoover Institution. Our conversation was off the record, but make no mistake, this is not a man to be trifled with.

Trump may have actually boxed himself in by picking highly respected generals such as Kelly and Mattis to helm top posts in his administration. Even conservatives who publicly stand by the president latch on to the appointments of Mattis and Kelly as their best evidence that Trump’s presidency will not be as problematic as his temperament and actions sometimes suggest, or some of his more troubling White House advisers portend. But if Mattis or Kelly were to resign in protest, that might change everything. There have already been reports that Mattis and Kelly are less than happy with some of what has gone on in the White House. During the transition, Mattis reportedly clashed with the Trump transition team over key appointments to the defense department. Tensions boiled over when Mattis and Kelly weren’t given sufficient consultation over the recent immigration executive order.

The Democratic representative Seth Moulton, a retired Marine who served under Mattis during the Iraq war, says insiders have informed him that after the executive order fiasco, some top appointments like Mattis began thinking about what would make them leave the administration. “What I’ve heard from behind the scenes,’’ Moulton told the Boston Globe: “What will make you resign? What’s your red line?”

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This is the kind of confrontation the country badly needs. Where everyone has to argue and define their viewpoints.

California Is Not ‘Out Of Control,’ Leaders Tell Trump (R.)

California leaders pushed back on Monday against President Donald Trump’s claim that the state is “out of control,” pointing to its balanced budget and high jobs numbers in the latest dustup between the populist Republican and the progressive state. The state’s top Democrats called Trump cruel and his proposals unconstitutional after the businessman-turned-politician threatened to withhold federal funding from the most populous U.S. state if lawmakers passed a so-called sanctuary bill aimed at protecting undocumented immigrants. “President Trump’s threat to weaponize federal funding is not only unconstitutional but emblematic of the cruelty he seeks to impose on our most vulnerable communities,” state Senate Pro Tem Kevin de Leon, a Democrat from Los Angeles, said in a statement on Monday.

State Assembly Speaker Anthony Rendon, an L.A.-area Democrat, said the state has the most manufacturing jobs in the nation, and produces a quarter of the country’s food. “If this is what Donald Trump thinks is ‘out of control,’ I’d suggest other states should be more like us,” Rendon said. The latest war of words between Trump and Democratic leaders in California, where voters chose his opponent, Hillary Clinton, two-to-one in November’s election, began Sunday, in an interview between Trump and Fox News host Bill O’Reilly. During the interview, O’Reilly asked Trump about a bill in the state legislature, authored by de Leon, to ban law enforcement agencies in the state from cooperating with immigration officials in most circumstances. Cities who have enacted similar bans are known as sanctuary cities, and de Leon’s bill, if passed and signed into law by Democratic Governor Jerry Brown, would effectively extend such rules to the entire state.

Trump disparaged the bill as ridiculous, saying that sanctuary cities “breed crime.” “We’ll have to, well, de-fund,” Trump said. “We give tremendous amounts of money to California.” Trump went on to say he viewed funding as a weapon. “California in many ways is out of control,” Trump said to O’Reilly. “Obviously the voters agree or otherwise they wouldn’t have voted for me.” Last week, Trump threatened to withhold federal funding from the University of California at Berkeley, where violent protests led to the cancellation of a speech by an editor for the right-wing Breitbart News. But experts said it would be difficult for the President to withhold funds from either the university or the state. Court rulings have limited the power of the president to punish states by withholding funds, and most appropriations come from the Congress and not the executive branch.

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Really excellent. Don’t miss.

Our Part In The Darkness (Alameddine)

Right after the election, my Twitter feed exploded with shock and moans. It seemed that everyone’s favorite phrase was “We are better than this.” I considered the statement so obviously wrong. I understood the convoluted logic of it, the jolt and hurt that would lead someone to type this, but it was not true. We are not better than this. We are this. The man was elected President. Ipso facto, America is this, we are this. I say this not to suggest that we must be blamed, or that someone who did not vote for Donald Trump is just as culpable as one who did. What I keep trying to point out, to friends, to anyone who will listen, is that too few of us are willing to acknowledge responsibility—not necessarily to accept blame, but to stand up and say, “This thing of darkness, I acknowledge mine.”

I remember when the photographs of torture at Abu Ghraib came to light. The response was similar. This is not us. Those soldiers were rotten. It began at the top, with George W. Bush, and it filtered down. But we would never do such a thing. Of course, we did do those things, and we kept on doing them over and over, and doing worse. Some objected, but most of us simply moved on, chose to forget. “No snowflake in an avalanche ever feels responsible,” the Polish poet Stanislaw Jerzy Lec once wrote. Trump bans Muslims and we claim that this is un-American, that we are not this. I don’t have to talk up “ancient” history to show that we are. I won’t bring up settler colonialism, genocide, and land theft, or harp on slavery, or internment camps for Japanese-Americans.

I won’t refer to the Page Act banning those deemed “undesirable,” the Chinese Exclusion Act, the Asiatic Barred Zone Act, or the Emergency Quota Act. I don’t have to mention the hundreds of thousands of Mexicans deported in the nineteen-thirties, or the thousands of Jews escaping Nazi violence who were turned away. It was F.D.R., not Trump, who claimed that Jewish immigrants could threaten national security. I won’t mention any of this, because this happened so long ago. We can always delude ourselves by saying that America was this but now we are better. Let me just say that in 2010 and 2011, state legislatures passed a hundred and sixty-four anti-immigration laws.

Many were upset when Trump campaigned on a Muslim registry, but I was surprised to find out how few knew that we’d already had one: the National Security Entry-Exit Registration System, or nseers, implemented on September 11, 2002. From the Atlantic: “It consisted of two ‘special registration’ programs: one that required foreign nationals from certain countries to check in with the government before entering and leaving the country, and another that obliged some foreigners living in the United States to report regularly to immigration officials.” Obama did not suspend the program until 2011. He dismantled it right before he left office.

[..] I was in Lesbos a year ago, helping Syrian refugees. At Moria, the biggest camp on the island, thousands of refugees were being processed every day. The crisis had been ongoing for more than six months. I’d heard that every big N.G.O. had taken a turn at leading the camp, but each one failed because of mismanagement, backstabbing, interagency bickering, governmental interference, what have you. But, as horrid as the situation was in the camp, I thought that it was being well managed, as well as it could be with so many people in and out. I met this unassuming man, a retired Mormon from Utah, who had been volunteering at the camp since the first boats arrived. He spoke no Arabic or Farsi, had no medical training of any kind, none of the identifiable skills, yet both volunteers and refugees sought him out with every conceivable question about what to do. It seems that he had arrived to offer whatever help he could. He slowly began to fill in wherever he was needed. As the N.G.O.s began to wash their hands of the camp, he was needed more and more. When I was there, he was running the damn place. We are this. We can be better.

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“That is just a howling error, to talk about the number of jobs and wages as if they are different things.”

The New York Times Just Doesn’t Understand This Economics Stuff (Worstall)

The Editorial Board of the New York Times tells us all that repealing parts of or all of Dodd Frank will damage the economic recovery. It’s possible to see the glimmerings of a point there, no one does think that if half the banks fall over again then all will be toodle dandy. However, they do manage to betray a terrible ignorance of the basics of economics and wages in the same editorial. Really, this is such a basic point that even Karl Marx was able to understand it: Mr. Trump may believe that ending Dodd-Frank will lead to more jobs by making it easier for businesses to get loans. But even if looser credit would help hiring — a very big if — the main problem in the job market today is not too few jobs, but wages that have been too low for too long. A rollback of Dodd Frank will not help that, and will hurt by forfeiting the stability that has helped the economy come this far.

That is just a howling error, to talk about the number of jobs and wages as if they are different things. They are the same thing–it is full employment which lifts the workers’ wages, nothing more and nothing less. As I say this is such a fundamental concept that even Karl Marx was able to get it right. If we have unemployment, that reserve army of the unemployed, then a capitalist can increase his labour force just by hiring some more of those unemployed. He doesn’t have to tempt anyone in with higher wages, he doesn’t need to pay his own workforce more as profits rise. For anyone gets bolshie he can just hire more of those unemployed people. However, the moment that reserve army is exhausted, the moment that there are no unemployed to hire it all changes. Suddenly, to gain access to more labour temptation must be employed.

It is necessary to tempt labour away from the jobs they are already doing. The capitalists, therefore, are in competition with each other for the profits that can be made by employment. At which point of course wages have to rise. To tempt labour into factory B away from factory A then B must pay more than A (in some form, could be shorter hours, better scheduling, more pay, whatever).And factory B had better raise its own wages for the extant workforce to stop A tempting it away. This is how wages rise over time. The capitalists compete for the profits that can be made by employing labour. And in the absence of unemployment they can only do this by raising wages as productivity rises. This process has been going on some 200 years by now, ever since productivity rises became a general feature of the economy.

And there’s no reason to think that it has stopped nor that it will. That is, contrary to the editorial board f the New York Times, it’s not that wages and jobs are different issues. It’s that wages haven’t risen because there haven’t been enough jobs. And seriously, if your understanding of capitalist and market economics is behind even that of Karl Marx are we sure that you should be writing newspaper articles on the subject of economics?

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If you create an artificial recovery, there will be a price to be eventually.

The Fed’s Mortage-Bond Whale (BBG)

Almost a decade after it all began, the Federal Reserve is finally talking about unwinding its grand experiment in monetary policy. And when it happens, the knock-on effects in the bond market could pose a threat to the U.S. housing recovery. Just how big is hard to quantify. But over the past month, a number of Fed officials have openly discussed the need for the central bank to reduce its bond holdings, which it amassed as part of its unprecedented quantitative easing during and after the financial crisis. The talk has prompted some on Wall Street to suggest the Fed will start its drawdown as soon as this year, which has refocused attention on its $1.75 trillion stash of mortgage-backed securities.

While the Fed also owns Treasuries as part of its $4.45 trillion of assets, its MBS holdings have long been a contentious issue, with some lawmakers criticizing the investments as beyond what’s needed to achieve the central bank’s mandate. Yet because the Fed is now the biggest source of demand for U.S. government-backed mortgage debt and owns a third of the market, any move is likely to boost costs for home buyers. In the past year alone, the Fed bought $387 billion of mortgage bonds just to maintain its holdings. Getting out of the bond-buying business as the economy strengthens could help lift 30-year mortgage rates past 6% within three years, according to Moody’s. Unwinding QE “will be a massive and long-lasting hit” for the mortgage market, said Michael Cloherty at RBC Capital Markets. He expects the Fed to start paring its investments in the fourth quarter and ultimately dispose of all its MBS holdings.

Unlike Treasuries, the Fed rarely owned mortgage-backed securities before the financial crisis. Over the years, its purchases have been key in getting the housing market back on its feet. Along with near-zero interest rates, the demand from the Fed reduced the cost of mortgage debt relative to Treasuries and encouraged banks to extend more loans to consumers. In a roughly two-year span that ended in 2014, the Fed increased its MBS holdings by about $1 trillion, which it has maintained by reinvesting its maturing debt. Since then, 30-year bonds composed of Fannie Mae-backed mortgages have only been about a percentage point higher than the average yield for five- and 10-year Treasuries, data compiled by Bloomberg show. That’s less than the spread during housing boom in 2005 and 2006.

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Don’t know if it’s money supply drying up or debts becoming overwhelming. Not the same thing. But the last paragraphs of the piece are interesting:

When The Money Supply Dries Up (IM)

Whenever the ability to enforce draconian legislation goes into decline, the people of a nation suddenly realise that they’ve been living in fear of a paper tiger. It doesn’t take long before some people choose to defy the system. When they’re seen to succeed, others follow in droves. So, what does this say of the US and its power? Well, as Doug Casey has been known to say, “Countries fall from grace with remarkable speed.” Quite so. On an international level, this means that international leaders will be watching the economic decline of the US closely. Countries such as China and Russia have been loading up on precious metals in preparation for a collapse in fiat currency. In addition, they’ve created their own version of the World Bank, the Asian Infrastructure Investment Bank, and have been hard at work inking deals with other nations for international settlement in currencies other than the dollar.

Most people in the world today cannot remember a time before Bretton Woods, yet they may soon witness the Bretton Woods agreement becoming a dead duck. But, if we extend this premise, we also should be questioning the other constructs of the postwar period that have become dinosaurs. What of the United Nations? This organisation was once meant to be a body for arbitration and world planning, but has in latter decades become a quagmire of bickering and gainsaying—with its decisions rarely being adopted by the nations in question. And yet the US alone pays some $8 billion annually to keep the UN afloat. Surely, when the world at large ceases its willingness to carry further US debt, the US government will jettison the expense for the UN before it cuts either its military spending or its entitlement programmes.

Similarly, NATO, which requires $2.8 billion annually (with only five of its 28 members currently meeting the recommended payments) would experience a similar fate. With the above entities heading south, the Wolfowitz Doctrine, which has since 1992 been the basis of US aggression policy, would become unachievable. In addition to the decline or cessation of the above international adventurism, enforcement of revenue pursuit in the guise of FATCA and OECD schemes would equally suffer from a loss of funding. It would not be a question of whether the empire still wished to squeeze the lemon more than ever before—it would. But once the funds to do so dried up, the US and EU would find themselves in the situation that we currently observe in Venezuela: The money to pay for the enforcement is simply not there anymore.

The decline would begin with bounced cheques, followed by massive layoffs in the enforcement departments, followed by a decline in receipts, necessitating further layoffs, and continuing in a downward spiral. At present, countless people live in fear of the present empires and their ever-increasing efforts at usurpation. However, as history shows, once debt has reached its nadir and begins its rapid fall, so does the empire’s ability to enforce draconian confiscations.

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Army vs veterans?!

Army Corps Of Engineers May Decide On DAPL By Week’s End (BBG)

The U.S. Army may decide by week’s end whether to approve construction of the Dakota Access Pipeline across North Dakota’s Lake Oahe and lands claimed sacred by Sioux Indian tribes. Justice Department lawyer Matthew Marinelli outlined the planned timeline for the Army’s decision to a federal judge in Washington hearing a three-way dispute over the planned path of the Energy Transfer Partners LP-led project. Marinelli didn’t say which way the decision might go. President Donald Trump last month issued a memorandum urging the Army Corps of Engineers to expedite its review of the conduit’s path after the federal agency put the brakes on ETP’s nearly complete $3.8 billion, 1,172-mile conduit for shunting crude from northwestern North Dakota to a Patoka, Illinois, distribution center last year amid protests raised by environmental groups and the Sioux.

[..] While U.S. District Judge James Boasberg, and then a federal appeals court, declined to grant the tribes’ request for an order halting the project, the corps stopped construction anyway, stating it was reconsidering whether to issue easements required for tunneling under the lake bed. Jan Hasselman, lead lawyer for the suing Sioux tribes, told the judge that because the Army Corps had already committed to an environmental impact review of the lake crossing, any easement granted before that analysis is complete “would be unlawful.” The Corps turned the decision to the U.S. Army. The tribes will likely file a second bid to halt the project, citing environmental impact concerns, if the pipeline project gets a U.S. government go-ahead, Hasselman said.

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Now use that to get a deal that actually achieves something.

New Bill Would Block EPA From Regulating Greenhouse Gases (EW)

Republican lawmakers have proposed a bill to curtail the U.S. Environmental Protection Agency’s (EPA) ability to address climate change. The “Stopping EPA Overreach Act of 2017” (HR637) would amend the Clean Air Act so that: “The term ‘air pollutant’ does not include carbon dioxide, water vapor, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride.” The bill was introduced by Rep. Gary Palmer (R-Ala.) and has already racked up 114 Republican co-sponsors. Palmer is a climate denier who once said that temperature data used to measure global climate change have been “falsified” and manipulated.

Palmer’s latest proposal would nullify the EPA’s regulation of carbon pollution, stating that “no federal agency has the authority to regulate greenhouse gases under current law” and “no attempt to regulate greenhouse gases should be undertaken without further Congressional action.” Liz Perera, climate policy director at the Sierra Club, told Huffington Post that the resolution would make it nearly impossible for the federal government to fight climate change. “This is the legislative equivalent of trying to ban fire trucks while your house is burning,” she said, adding its sponsors “should be embarrassed for so blatantly ignoring reality and ashamed of themselves for so recklessly endangering our communities.”

[..] Fortunately, the bill does not seem to have any legs. David Doniger, a senior attorney for Natural Resources Defense Council’s climate and clean air program told The Guardian that HR637 does not have much of a chance breaking through a Senate filibuster as Democrats would have near-universal opposition to it and even some moderate Republican Senators would vote against it as well.

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Yes. Annul the wedding. Before someone gets hurt.

Too Late For Couples Therapy? (DiEM25)

For the past seven years, Greece has been stuck in an abusive marriage with its European partners. Of course, she has not been the perfect partner, but who has? No one deserves violence. No one deserves abuse. Everyone deserves hope, and not the delusional “you will be done by 2060, if you can maintain the hilariously unsustainable 3.5% primary budget surplus” kind of hope offered by Mr Schäuble. The hypocrisy and pseudo-morality of European lenders and the IMF is painful. Germany’s “no debt-reduction” stance is particularly exasperating, when that very same country has experienced both the economic, social and political disaster that vindictive, self-righteous hardheadedness can lead to after the Treaty of Versailles in 1919, as well as the miraculous quality of debt-reduction when its own debt was cut by half (!) at the London Debt Agreement of 1953.

The more years pass, the closer Greece and the rest of Europe edge from a post-modern 1919 to a post-modern 1933. And now, with news of Greece’s three-week window to resolve its next instalment before economically imploding – a piece of news which some media outlets appeared surprised about, bless them – many of us cannot help but wonder: when will we get serious about resolving this? The obvious answer is: when there is political will for a resolution. The only place where this seems to be the case is the nation-patient itself. Two summers ago, under remarkable socio-economic pressure, amid capital-controls and an overwhelmingly pro-EU media landscape, 62% of Greeks came out and refused the terms of a third bailout. Anyone with half-an-understanding of economics and finance seems to agree that the current approach to Greek debt is unsustainable economically, socially and politically: all in all, a disaster.

Even the master chef of the entire travesty, the IMF, has come out and admitted that neo-liberalism and austerity simply do not work. So what are we waiting for? Why are millions of Europeans still suffering under utterly misguided political and economic dogmas? Quite simply because to admit defeat at this point would mark the end of a number of powerful careers. Having poisoned European voters against the lazy PIIGS, it would be nothing short of political suicide to turn around and give in to Greek demands. When would be the next electoral victory in Europe for austerity’s architects if it was revealed that the years of financial and social suffering was a pointless self-inflicted wound with only negative economic results?

So it is becoming increasingly obvious that Greece has to work its own way out of this mess. At this stage, that means an immediate halt of repayments to lenders; a stance that will either force its partners to a vital debt-reduction, or will lead the country to an exit from the Euro. With Germany (in clear breach of EU rules) stubbornly maintaining its 9% budget surplus and refusing to increase imports, Europe is at an impasse, and no one is hurt more by this than Greece. Although the former outcome would be preferred – avoiding to rock the European boat at a time of major global instability is a major plus – the latter is still preferable to the status quo.

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Translation of Greek article by Varoufakis I posted about earlier.

Varoufakis: Tsipras Should Prepare To Break Deal With Greece’s Creditors (FR)

Through a recent article at the Efimerida ton Syntakton (Newspaper of Editors), the former Minister of Finance of Greece, Yanis Varoufakis, referred to Tsipras retreat against Greece’s creditors and called him to prepare seriously this time, to break the destructive continuous agreements. As Varoufakis wrote among other things: The night of the Greek referendum, I tried hard to explain to the Greek PM that the submission of Greece to the third memorandum was Schäuble’s real plan (not Grexit). In reality, there was no hope that the 3rd toxic “program” for Greece would be rationalized progressively through the support of the European Commission to Athens. Meaning, there was no hope that IMF’s austerity and anti-social measures could be softened.

The fact that Moscovici, Juncker, Sapin and others made such promises, is no excuse because the Greek government knew since May 2015 that these people know how to tell lies, or, they are unable to keep their promises when they don’t lie. Suddenly, the Schäuble-IMF-ECB attacked on Greece, demanding exhausting measures, while Merkel-Hollande-Commission didn’t do anything. Tsipras then retreated for one more time in order to “save” Greece. This was Schäuble’s plan. With his stance, Tsipras sank Podemos, made an approach with the collapsing (ethically and politically) Social Democracy, disappointed the progressive Europeans. And all these happened at the same time where nationalism triumphs everywhere.

Tsipras promises, one more time, that he will not retreat (this time!) by legislating new austerity even after 2018. If he means it, I remind him what we had agreed that is necessary and which – even today – is the only thing that may prevent the worst things to come. Prepare for unilateral restructuring of Greek bonds held by the ECB, which must be repaid in July (and after). Prepare the electronic system of transactions through Taxisnet which I had designed, I had started building it and even announced it to the new Minister of Finance, Euclid Tsakalotos, when I delivered the Ministry. Therefore, if indeed the Greek PM means it this time that he will not retreat, he should prepare for breaking the deal with the creditors, so that to prevent it. The design of a parallel system for payments is ready since 2014, as he knows.

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Make it stop!

Rare Split On IMF Board Puts Greek Bailout At Risk (MW)

Some members of the IMF are growing concerned with the terms of Greece’s bailout program, fueling fears the fund might pull out of the much-needed rescue plan for the country. The IMF’s annual review of the Greek economy published on Tuesday revealed a rare split among its board members, showing they are in disagreement over the austerity measures imposed on Athens and over the country’s huge debt burden. The report said that “most” of the 24 IMF executive directors agreed Greece is on track to reach a fiscal surplus of 1.5% of GDP. It said Athens does “not require further fiscal consolidation at this time, given the impressive adjustment to date.” However, some of the board members argued that Greece still needs to bring the surplus up to 3.5%, as agreed in the last bailout in 2015.

“Most Executive Directors agreed with the thrust of the staff appraisal, while some Directors had different views on the fiscal path and debt sustainability,” the IMF said in the assessment. The IMF usually keeps its deliberations confidential, so any differences on the board are rarely exposed to the public. The yield on 10-year Greek government debt surged 26 basis points after the report on Tuesday to 7.925%, according to electronic trading platform Tradeweb. Economists consider borrowing costs above 7% unsustainable in the long term.

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This is getting sadistic.

Greece Won’t Meet Fiscal Surplus Targets Set By Europe, IMF Says (BBG)

Greece is on track to fall short of budget-surplus targets set under a bailout by the nation’s euro-zone creditors, the IMF said. Greece’s primary budget surplus will rise to 1.5% over the long run from about 1% last year, amid a modest recovery, the IMF said Monday after executive directors met to discuss the fund’s annual assessment of the nation’s economy. Still, the projected surplus falls short of the 3.1% forecast by the country’s European creditors. The fund reiterated its view that Greece’s debt is unsustainable. Most of the executive directors don’t believe the economy needs more fiscal consolidation, the IMF said. The IMF has said it would consider giving Greece a new loan to supplement the 86 billion euros ($92 billion) it’s receiving from euro-area countries, but only if the nation’s debt-reduction plans are credible.

Greece’s European creditors also want the IMF to sign off before disbursing the next tranche of the euro-zone bailout. Greece’s government debt will reach 275% of its gross domestic product by 2060, when its financing needs will represent 62% of GDP, the IMF said in a draft staff report obtained by Bloomberg last month. Public debt will reach 181% of GDP this year, the IMF projected Monday. Greece’s economy is expected to grow 2.7% this year, up from 0.4% in 2016, the fund said. However, long-run growth is expected to slip to about 1%, the IMF predicts. The IMF’s assumptions aren’t based in reality and don’t take into account the reform of Greece’s public finances, according to a European Union official who spoke on condition of anonymity because the discussions are sensitive.

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Yeah, sure, add some more crap. For some reason this makes me think of George Clinton: “Do Fries Come With That Shake?”

Third Quake Over 5-Richter Magnitude Rattles Lesbos (K.)

Seismologists in Greece are keeping a close eye on activity in the eastern Aegean, as a third quake in 24 hours measuring above 5 Richter rattled the area in the early hours of Tuesday. The tremor hit at 4.24 a.m. and measured 5.3 on the Richter scale, according to the Geodynamic Institute in Athens, with the epicenter located 15 kilometers north of Lesvos. With a depth of just 10 kilometers, the quake was felt quite strongly on the Greek islands of Lesvos and Chios. Seismologist Efthimios Lekkas on Monday said two tremors – with a magnitude of 5.1 and 5.3 respectively – were not linked to the North Anatolian Fault Line, the source of powerful quakes in the past.

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