Sep 102025
 


Pierre Dumonstier II The right hand of Artemisia Gentileschi holding a brush 1625

 

Israel Conducts Strike On ‘Hamas Leadership’ In Qatar (RT)
Trump Condemns IDF Attack On Qatar (RT)
France Headed For ‘Black Hole’ – Financial Expert (RT)
Sacre Bleu Monday (Every)
BRICS Unlikely To Last – Trump Trade Adviser Navarro (RT)
Trump Wants EU To Slap India and China With 100% Tariffs – FT (RT)
The Eurasia High-Speed Train Keeps-a-Rollin’ (Pepe Escobar)
A Tectonic Shift Away from the West (Peter Koenig)
Behind the J6 Committee Motive to Delete all Investigative Material (CTH)
The Fed Caused High Inflation and The Current Jobs Slump (Lacalle)
MTG Moves To Block Ukraine Aid (RT)
EU Censors Post Describing A Dystopian Germany in 2050 (RMX)
Democrats Messed up Their Redistricting Gamble (Margolis)
Lisa Cook Can’t Be Fired – For Now: Judge (ZH)
Boris Johnson Accused of Profiting From Government Contacts (RT)
Africa’s Largest Hydropower Dam Launched (RT)
The Truth Has No Agenda (CTH)

 

 

https://twitter.com/its_The_Dr/status/1964876079203807273

https://twitter.com/TRobinsonNewEra/status/1965127368789672163

Crime

Scott

Von Greyerz

Custody

Cruz

Elon Hamas

 

 

 

 

Some random things while reading:
1) Qatar is/was perhaps the no. 1 peace mediator in the area. Will now be Russia?!
2) The Hamas people are in Doha because the US and others told them to go there (away from Gaza).
3) So many Americans are in Qatar (huge military base) that Israel must have given the US a heads up well in advance. Can’t risk killing Americans.
4) Qatar promised to invest $1 trillion in US.
5) Neighbors, Saudi, Egypt, UAE, Turkiye etc. fear they could be next.
6) The ‘precision’ strikes didn’t hit their targets. Decision makers are still alive.

Israel Conducts Strike On ‘Hamas Leadership’ In Qatar (RT)

Israel has conducted a “precise strike” against the “senior leadership of Hamas,” the Israel Defense Forces (IDF) announced on Tuesday, shortly after multiple blasts rocked the headquarters of the Palestinian militant group in Doha, Qatar. The Israeli military said it carried out the operation in coordination with the Shin Bet security agency (ISA). The IDF did not name the exact location targeted in the strike. “The IDF and ISA conducted a precise strike targeting the senior leadership of the Hamas terrorist organization,” the IDF said in a statement. “Prior to the strike, measures were taken in order to mitigate harm to civilians, including the use of precise munitions and additional intelligence.” The announcement came after at least ten blasts reportedly rocked the Hamas headquarters in Doha.

Footage circulating online shows the building was badly damaged. According to multiple media reports citing Hamas sources, the strike targeted the group’s negotiating team, which has been discussing the latest US proposal on the cessation of the hostilities with Israel. Qatar has condemned the “cowardly Israeli attack,” describing the location affected by the strike as “residential buildings housing several members of the political bureau of the Hamas movement.” It is not immediately clear whether the attack reached its intended target, conflicting media reports citing sources within the group indicate. While some suggest that several high-profile Hamas figures were killed in the attack, others claim that the group’s leadership escaped the strike unharmed.

Israeli Prime Minister Benjamin Netanyahu’s office insisted that the attack on Hamas in Qatar was a unilateral action and no other countries were involved in the operation. ”Today’s action against the top terrorist chieftains of Hamas was a wholly independent Israeli operation. Israel initiated it, Israel conducted it, and Israel takes full responsibility,” it said in a statement. UN Secretary-General Antonio Guterres condemned the Israeli attack as a “flagrant violation of the sovereignty and territorial integrity of Qatar.” “All parties must work towards achieving a permanent ceasefire, not destroying it,” he told reporters.

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Real condemnation, or just going through the motions? How innocent is the US?

Trump Condemns IDF Attack On Qatar (RT)

President Donald Trump has criticized Israel’s airstrike on a Hamas compound in Doha, stressing that the decision to carry out the operation inside Qatar was made unilaterally by Prime Minister Benjamin Netanyahu and not by Washington. Around 15 Israeli warplanes fired at least ten munitions during the operation on Tuesday, reportedly killing several Hamas members, including the son of senior official Khalil al-Hayya. Hamas said its top leadership survived the attack, which it described as an attempt to assassinate negotiators working on a potential settlement. In a statement posted Tuesday on Truth Social, Trump said the Israeli bombing inside “a Sovereign Nation and close Ally of the United States” did not “advance Israel or America’s goals.”

“I view Qatar as a strong Ally and friend of the U.S., and feel very badly about the location of the attack,” he wrote, emphasizing that the strike was “a decision made by Prime Minister Netanyahu, it was not a decision made by me.” Trump said that as soon as he was informed about the operation, he directed US Special Envoy Steve Witkoff to warn Qatari officials, but noted the alert came “too late to stop the attack.” The president claimed that eliminating Hamas was a “worthy goal,” but expressed hope that “this unfortunate incident could serve as an opportunity for PEACE.” Trump has since spoken with Netanyahu, who told him he wanted to make peace, and with Qatari leaders, whom he thanked for their support and assured that “such a thing will not happen again on their soil.”

Qatar’s prime minister, Sheikh Mohammed bin Abdulrahman al-Thani, denounced the strike as an act of “state terrorism” and warned that the emirate “reserves the right to respond.” He accused Netanyahu of undermining regional stability for personal gain and said the incident had derailed ongoing US-brokered mediation efforts aimed at securing a ceasefire in Gaza and the release of Israeli hostages. The White House called the strike an “unfortunate” incident. Trump said he has directed Secretary of State Marco Rubio to finalize a Defense Cooperation Agreement with Qatar, which is designated a “major non-NATO ally.”

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As black holes are wont to do, this one too sucks in all the matter around it.

Note: not long ago, investors could buy only AAA. Today, it’s apparently AA. And France can’t even hold on to that.

France Headed For ‘Black Hole’ – Financial Expert (RT)

The French government’s failure to put a lid on the country’s growing sovereign debt together with protracted political infighting could plunge the nation into a “black hole,” a financial expert has warned. France has one of the highest debts levels in the European Union, currently standing at about 113% of GDP, a ratio that is expected to climb to 125% by 2030. Its budget deficit is projected at 5.4-5.8% of GDP this year, well above the bloc’s 3% limit. Appearing on the Tocsin podcast on Monday, financier Charles Gave said that should the Fitch credit rating agency downgrade France’s rating from AA to A, it would prompt institutional investors to sell off its government bonds.

“There are a number of institutions, [such as] central banks and insurance companies, that cannot invest in something that is below AA,” he clarified. “I know that something huge is coming,” the expert warned, predicting a “black hole” caused by the “illogical” policies pursued by successive French government over the past twenty years. “We have a real collapse in the quality of our elites” reflected in the current “lamentable political state,” Gave claimed. On Monday, Prime Minister Francois Bayrou lost a confidence vote in the National Assembly, which he had called himself to secure backing for a drastic austerity plan. The measures, which included slashing public sector jobs, curbing welfare spending, as well as axing two public holidays, were vehemently opposed by the right-wing National Rally, the Socialists, and the leftist France Unbowed.

On Tuesday, President Emmanuel Macron appointed outgoing Defense Minister Sebastien Lecornu as France’s new prime minister. Despite the growing budget deficit, Paris plans to increase its military spending to €64 billion in 2027, double what it spent in 2017. Macron has repeatedly invoked a supposed Russian threat as the reason for the spending hike. Russian officials have consistently dismissed such claims as “nonsense,” accusing Western leaders of fear-mongering to justify inflated military budgets and to cover up their economic failures.

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“..they have a $35 trillion currency debt, they’ll move it into the crypto cloud, devalue it, and start from scratch. That’s the reality for those who are so enthusiastic about crypto.”

Sacre Bleu Monday (Every)

As expected, the French government collapsed yesterday, leaving the country in political chaos just as it needs to deal with massive economic and national security challenges. President Macron has ruled out a snap election. As is the way of markets –albeit helped by directionality from the US– French bond yields were lower on the day. However, markets and realpolitik have not communicated in recent years: is the second largest economy in Europe, and the only one with a nuclear trifecta, looking unable to deal with its fiscal deficit, and perhaps ungovernable, something that can be easily shrugged off?

Le Figaro English recently noted: ‘“Prices Have Literally Exploded”: Have French Restaurateurs Been Too Gluttonous for Their Own Good?”, noting “Empty terraces, silent dining rooms… Despite the heatwave, this summer has been a cold shower for restaurateurs. While the tourist season is in full swing, cafés, bistros and traditional inns are being shunned by the French.” Is this not perhaps tiptoeing towards ‘Let them eat cake’ territory? mNow ex-French PM Bayrou warned just before losing the vote, “Don’t become the UK”, and there the mood remains febrile regardless of Labour’s huge parliamentary majority. The anti-Labour Daily Mail notes ‘Desperate Starmer accused of the ‘mother of all stitch-ups’ and trying to ‘fix’ Labour’s deputy leadership contest by giving hopefuls just THREE DAYS to get the backing of 80 MPs’.

The pro-Labour Guardian says: ‘Revealed: how Boris Johnson traded PM contacts for global business deals’ (Guardian), including being paid £240,000 just after meeting Venezuelan President Maduro last year. Perhaps unsurprisingly, the anti-establishment Reform Party continues to sit at the top of all opinion polls. In the US, the Wall Street Journal reports that the ‘White House Prepares Report Critical of Statistics Agency’ and ‘The Renewed Bid to End Quarterly Earnings Reports’. What, no data and no quarterly higher/lower-than games? What is a capitalist to do?! Innovate and invest in physical capital? But who wants to do that when there are assets to speculate on?

Moreover, US Treasury Secretary Bessent threatened to punch FHFA Director Pulte in the face, with additional expletives. That likely burgeoned his reputation in some circles: the man who as a young trader broke the Bank of England for Soros in 1992 arguably now wants to break the international financial architecture, and in the US’ favour. While many in DM who don’t see it, those in EM do – albeit in exaggerated form.

Putin advisor Kobyakov just stated: “The US is now trying to rewrite the rules of the gold and cryptocurrency markets. Remember the size of their debt – $35 trillion. These two sectors –crypto and gold– are essentially alternatives to the traditional global currency system. Washington’s actions in this area clearly highlight one of its main goals: to urgently address the declining trust in the dollar. As in the 1930s and the 1970s, the US plans to solve its financial problems at the world’s expense, this time by pushing everyone into the “crypto cloud.” Over time, once part of the US national debt is placed into stablecoins, Washington will devalue that debt. Put simply: they have a $35 trillion currency debt, they’ll move it into the crypto cloud, devalue it, and start from scratch. That’s the reality for those who are so enthusiastic about crypto.”

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Is Navarro seem old, or is that jut me?

BRICS Unlikely To Last – Trump Trade Adviser Navarro (RT)

White House Trade Adviser Peter Navarro has claimed that the BRICS group is unlikely to last because the members have “long hated each other.” In an interview with US President Donald Trump’s former strategist, Steve Bannon, on Monday, Navarro said none of the BRICS members could survive without selling products to the US. ”India has been at war with China for decades… and I just remembered, it was China that gave Pakistan the nuclear bomb,” Navarro told Bannon. “They have ships flying around the Indian Ocean with Chinese flags. [Indian Prime Minister Narendra] Modi, see how you kind of work that out.” He added that China is sending illegal immigrants to Russia and has claimed territory within Russia.

“China claims they own Vladivostok, the Russian port, and they are already through massive illegal immigration into Siberia, basically colonizing Siberia, which is the biggest landmass of the Russian semi-empire.” China, however, does not claim any Russian territory, and the two countries signed the Complementary Agreement on the Eastern Section of the China-Russia Boundary in 2004 as a final resolution of their border dispute. ”I don’t see how [BRICS] stays together since historically they hate each other and kill each other,” the trade adviser added. Navarro claimed that BRICS countries are dependent on the US for trade.

“The bottom line is none of these countries can survive if they don’t sell to the United States, and when they sell to the United States, their exports, they’re like vampires sucking our blood dry with their unfair trade practices.” X posts made by the trade adviser that are critical of India have been fact-checked and have received Community Notes, for which he has accused Indian “special interests” of “trying to interfere with domestic dialogues with lies about India buying Russian oil.” A day after he called Community Notes from India “crap,” Navarro added: “India has [the] largest population in the world and all it can do is manage [a] few hundred thousand X propagandists to jerk around a poll?”

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“Talking to such partners in such a tone of voice is unacceptable.”

Trump Wants EU To Slap India and China With 100% Tariffs – FT (RT)

President Donald Trump has urged the European Union to impose tariffs of up to 100% on imports from China and India, as part of a joint effort to pressure Moscow, the Financial Times reported on Tuesday. According to the newspaper, Trump made the demand during a recent call-in to a meeting between senior US and EU officials in Washington, where strategies for raising the economic costs of the Ukraine conflict for Russia were being discussed. One US official said Washington was “ready to go, ready to go right now, but we’re only going to do this if our European partners step up with us.” “The president came on this morning and his view is that the obvious approach here is, let’s all put on dramatic tariffs and keep the tariffs on until the Chinese agree to stop buying the oil,” the source was quoted as saying. A second official added that the US was prepared to “mirror” any tariffs imposed by Brussels on Beijing and New Delhi.

EU officials had already begun debating potential secondary sanctions against China for its energy imports from Moscow, though they stressed the talks were still at an “early stage” and dependent on US support, according to an earlier FT report. India has pushed back against external demands to reduce its reliance on Russian crude. Last month, Trump doubled tariffs on Indian goods to 50%, citing its energy ties with Moscow. Finance Minister Nirmala Sitharaman responded by calling the move “unfair, unjustified, and unreasonable,” stressing that Indian oil policy is driven by domestic economic needs.

Beijing has also rejected Western pressure over its energy purchases, insisting it will “ensure its energy supply” in line with its national interests. Chinese officials have warned that “tariff wars have no winners.” Russia remains one of the largest suppliers of oil to both China and India since the escalation of the Ukraine conflict in 2022. President Vladimir Putin has cautioned the West against using a “colonial tone” toward Beijing and New Delhi, saying last week that efforts to punish them are aimed at slowing their economic rise. “Countries like India – almost 1.5 billion people, and China – 1.3 billion people, boast powerful economies and live by their own domestic political laws,” Putin said. “Talking to such partners in such a tone of voice is unacceptable.”

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“China does not intend to replace Pax Americana, which always relied on the – now aptly renamed – Department of War’s gunboat “diplomacy”.

The Eurasia High-Speed Train Keeps-a-Rollin’ (Pepe Escobar)

History will register that the first week of September 2025 propelled the advent of the Eurasia Century to a whole new level. That was the expectation ahead of three crucial intertwined dates: the SCO annual summit in Tianjin; the Victory Day parade in Beijing; and the Eastern Economic Forum in Vladivostok. Yet expectations were even surpassed considering the breath and scope of what just happened. The SCO in Tianjin solidified the Chinese push for the establishment of true Global Governance – which in practice means the unceremonious burying of the “rules-based international order” that under the new US administration has metastasized into a no-rules based international chaos: essentially an ethos of “we’ll blow up the world if we are not able to control it.”

Tianjin had not only the 10 SCO full members but also 2 observers and 15 partners – with a heavy Southeast Asian presence – discussing the finer points to be observed for peaceful development. The pic of the week, if not the year or decade, was the Putin, Xi and Modi trilateral handshake: the return of the original, Primakov-coined RIC (Russia-India-China) in full force. As Professor Zhang Weiwei of Fudan University remarked in Vladivostok, the SCO is now expanding steadily in three platforms: energy; clean industries; and AI. In parallel, Central Asia is finally being seen as a “geographical blessing”, and not “a curse”. Immediately after Tianjin, the Russia-China strategic partnership also shot up to a whole new level, as President Putin was received by President Xi at the Zhongnanhai, the official residence of the Chinese head of state, for an across-the-spectrum state of the planet recap.

The next day Beijing was resplendent under blue skies overseeing the stunning military parade celebrating the 80th anniversary of the Chinese victory over Japanese invasion and the Asian chapter of Nazi-fascism. That was a confident geoeconomic superpower showing off its military progress. On the same day the Eastern Economic Forum started in Vladivostok: an unrivalled platform for discussing the surge of pan-Eurasia business. What China has proposed, actually reiterated in Tianjin, goes way beyond the concept of wangdao, referring to an enlightened, benign power, but not a Hegemon. What could be described as the trademark motto of a Pax Sinica under Xi could be summed up as Make Trade, Not War – and for the common good, or community of a shared future”, in Beijing terminology.

SCO partners, as well as BRICS partners, fully understand that China does not intend to replace Pax Americana, which always relied on the – now aptly renamed – Department of War’s gunboat “diplomacy”. Whatever hysteria fits the West may throw – manipulating Tibet, Hong Kong, Xinjiang, South China Sea, Taiwan – won’t deviate Beijing from its civilizational inclusive path.

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“The West was absent – the “naked emperor” as well as his European puppets..”

A Tectonic Shift Away from the West (Peter Koenig)

“No mountain or ocean can distance people who have shared aspirations,” China’s President Xi Jinping said in July 2024, addressing leaders from fellow Shanghai Cooperation Organization (SCO) member states and a few other nations in Astana, Kazakhstan. It is not reaching too far, saying that this year’s 25th SCO Summit (SCO) in Tianjin, China, from 31 August to 1 September 2025, fulfilled – and more – President Xi’s vision of 2024. The summit caused a tectonic shift in the conventional world order. China’s Assistant Foreign Minister Liu Bin told a news conference in Beijing, shortly before the SCO summit, that the 2025 SCO event be “One of China’s most important head-of-state and home-court diplomatic events this year”. As the Economist says, “A New Reality is Taking hold.”

The “new reality” is not anti-US or anti-West; it is just separating the western unipolar aspirations from the newly created multi-polar, or perhaps better, multi-block, world, where countries aim at a peaceful cooperation towards a joint future with shared benefits. The SCO was established in 2001 by China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. Today the SCO consists of ten member-states with headquarters in Beijing. In addition to the founding members, SCO members have increased by India, Iran, Belarus, and Pakistan. SCO members account for 23% of the world’s GDP and for 43% of the world’s population. Further attendance included high-level government officials from Myanmar, Egypt, Cambodia, Nepal, Indonesia, Malaysia, the Maldives, Turkey, as well as the Association of Southeast Asian Nations (ASEAN) Secretary-General Kao Kim Hourn, and UN Secretary General Antonio Guterres.

This year’s summit made clearly the SCO the guiding light for the Global South which includes the 11 BRICS countries, plus the 10 BRICS partners, added at the 16th BRICS Summit in Kazan, Russia, in October 2024. While even the UNSG, Mr. Guterres, was invited – while the UN was or still is (?) considered by the US and the West in general as the World Organization in the western camp – President Trump felt snubbed by China, “left out” from the world shifting SCO event in Tianjin. So, Trump invented a last-minute opportunity to leave his mark on the meeting by requesting President Xi literally on the eve of the SCO summit for “military talks,” a phone call between the two defense ministers (in the US now called War Minister, as the Ministry of Defense has been re-christened by Trump as War Ministry).

The Chinese Foreign Ministry said that Beijing rejected the proposal, reasoning “a lack of mutual understanding between the two countries”, asking a pertinent question: “Is there any sincerity in and significance of any communication like this?” Of course not. Trump just wanted to interfere in the SCO summit, showing his self-styled emperor head. But to no avail. The West was absent – the “naked emperor” as well as his European puppets, the (almost) defunct European Union, and especially the non-elected and every time more rejected European Commission (EC).

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“This was the database into which former NSA employee Edward Snowden was creating the search engine software..”

Behind the J6 Committee Motive to Delete all Investigative Material (CTH)

There’s a reason why the J6 Committee deleted the records of their activity, an angle missed by most. When you understand what they hid and why they did it, you then understand why current Speaker of The House Mike Johnson will not go near the subject. The J6 Committee used interfaces with the NSA database and pre-existing portals with aligned DHS Social Media databases (including Twitter, see prior “Twitter Files”), as research and evidence gathering mechanisms for their investigations. The J6 targets were identified through a collaboration between the legislative research group and the FBI. [That’s unlawful by the way – but that’s another matter]. The FBI contracted Palantir to identify the targets using facial recognition software and private sector databases.

Once identified, the targets were then searched in the NSA database for a fulsome context of identity. All subsequent electronic metadata of the targets was retrieved and utilized in prosecution; however, no one ever discovered this was the collaborative method. That has not come out yet. Ultimately, the J6 Committee hiding and deleting their files and operational techniques was due to several issues. They really didn’t have a choice given the unknowns of an incoming republican majority. First, the collaboration with the FBI is unconstitutional. Legislative officers are not law enforcement officers. There is a separation of powers issue. Second, ultimately – and most consequentially – all of the participants did not want the American public aware of the mass surveillance techniques that were carried out as part of the ’round up.’

https://twitter.com/TRUMP_ARMY_/status/1965058356647002444

Wait to see what the next NSA compliance audit looks like. Remember, these reports are more than a year behind the activity they highlight. This is where a complete mental reset is needed. The modern application of the fifty-year-old concept around FISA as a constitutional mechanism to search the private papers (data) of American citizens, is a fraud, a complete ruse. The Foreign Intelligence Surveillance Act, FISA, represents the method used by the intelligence apparatus of the FBI to conduct surveillance. It was purposefully designed, as a method to avoid the problems with 4th amendment protections. However, the modern application of the FISA justification has no lawful basis.

CONTEXT – Beginning in/around 2012, after the Dept of Justice National Security Division was created by President Barack Obama and Attorney General Eric Holder, the use of FISA warrants were extended to include electronic searches of captured information held within the National Security Agency (NSA). This was the database into which former NSA employee Edward Snowden was creating the search engine software. The capturing of information was relatively new; technology was still being developed. Rapid scale-ups of archives and data processing was underway. Various iterations of the search tools and processes were being tested and deployed. Prior to 2010/2012 we were mostly talking about emails, phone calls and text messages. However, as more and more technology was deployed, the interfaces expanded.

Today, almost every electronic interface is captured/stored within either the NSA database, or a private sector database with connections to the NSA search portals. Arguably, all of the underlying data captures were unconstitutional, and when the captures were originally discovered there was some intense conversations about fourth amendment protections and Americans privacy. To set aside the concerns and justify the existence of electronic search measures, the American government justified existence via the FISA court process, which extended to cover the new capabilities. Currently, almost every American interfaces electronically with some system that captures their data. In the private sector that data is then assembled, attributed and used for consumer product micro-targeting, i.e., all data is commercially monetized.

Local and state governments also interface with the federal government database. As a consequence, all data eventually flows to the NSA capture points where searches of the total assembly are possible. As noted in various explanations of government collaboration with social media, DHS has access to the various databases which house information inside the private sector. The lines between govt and private sector data captures are nonexistent as both public information and private information databases can be searched through the same network. This is the baseline to understand the scope of data collection.

Summary: The justification of FISA or FISA (702) as a mechanism to protect the American people from illegal searches of the NSA database IS A FRAUD. The searching of the NSA database not only continues but has factually expanded through today. There are no established limits on search use, only false claims that are fed to the public for popular consumption. The DOJ and FBI are aware of this. The OIG is aware of this. The Intelligence Community is aware of this. The NSA is aware of this. The FISA Court is aware of this. The Supreme Court, which oversees the FISA Court, is aware of this. The Legislative Branch is aware of this. We have the evidence and receipts. More soon…

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“Reducing government jobs is essential for economic recovery, and in 2025, we experienced a cut of 97,000 jobs, while the period from 2021 to 2024 saw monthly increases of 50,000 government jobs.”

The Fed Caused High Inflation and The Current Jobs Slump (Lacalle)

Both the recent spike in inflation and the current decline in US jobs are, in a very significant way, the fault of the Federal Reserve. The Fed’s policies since 2021 reveal a nightmare “pendulum” effect: first, easy money and historic liquidity expansion fueled runaway inflation; then, rapid rate hikes hurt businesses and families as well as job creation, especially for small and medium-sized businesses and families. In 2021, the largest monetary expansion in decades caused an inflationary burst that was particularly negative for wage earners and small businesses. A massive rate hike exacerbated this negative impact.

The August jobs report exposes the Fed’s failure to balance its mandate. The Federal Reserve did not seem to read their own beige book that warned of a widespread job market weakness for months. The Federal Reserve’s Beige Book first alerted of a weak job market in April 2025 and continued to highlight the labor market challenges in May and June. The April Beige Book signalled flat economic activity and slow labor demand and highlighted weakness for new entrants such as graduates, with some regions noting slight declines in employment and business activity. However, despite the evident negative impact of high rates, the Fed decided to keep interest rates unchanged even when inflationary pressures proved to be nonexistent. Between April and July, CPI inflation and core CPI monthly figures showed no inflationary pressures from tariffs.

Only 22,000 jobs were created in August. Although the headline shows the weakest number since the pandemic recovery began, we must also consider that the figure includes a reduction in government jobs of 15,000. Reducing government jobs is essential for economic recovery, and in 2025, we experienced a cut of 97,000 jobs, while the period from 2021 to 2024 saw monthly increases of 50,000 government jobs. The unemployment rate increased to 4.3%, which is a small rise compared to Canada’s 6.9% and the euro area’s 6.2%, but it is concerning because this increase was unnecessary. The private sector—the real engine of growth—is bearing the brunt of high interest rates.

Claudio Borio of the BIS, as well as Congdon and Castaneda, have proven that the explosion of inflation from 2021 to 2023 was clearly tied to unprecedented monetary growth driven by government spending and Fed easing. The Fed’s loose policy, with ultra-low rates and trillions in asset purchases, led to a surge in the money supply far outpacing real economic activity. As Borio has shown, in high-inflation environments, there is a clear link between rapid money supply growth and price spikes. The key driver of the inflation burst came not from supply chain issues but from massive, coordinated monetary expansion and deficit monetisation.

Once inflation took hold, the Fed responded with rapid and significant rate hikes, pushing interest rates well above the estimated “neutral” rate. Studies show that for every 100-basis-point increase above the neutral rate, job growth among small and medium enterprises (SMEs) falls by 0.5 to 1.5 percentage points. SMEs, which lack the market power of large firms, are especially vulnerable: higher borrowing costs force many to freeze hiring, lay off workers, or even shut down. High rates have resulted in the loss of tens of thousands of SME jobs over the past year. The government remained unaffected by inflation and rate hikes. The Biden administration continued to increase government spending, the deficit, and public sector jobs while small and medium-sized enterprises (SMEs) were experiencing the dual negative effects of inflation and interest rate hikes. This was a clear case of crowding out of the private sector.

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Lonely voice.

MTG Moves To Block Ukraine Aid (RT)

US Representative Marjorie Taylor Greene has proposed removing $600 million in Ukraine support from the draft Pentagon spending bill, arguing that Americans’ “hard-earned tax dollars” should not go to foreign aid. The Georgia Republican proposed cancelling the allocation of these funds in the 2026 and 2027 fiscal years to shift priorities toward the US. With Donald Trump back in the White House, the US has dramatically cut military aid to Kiev, pausing more than $1 billion in planned funds. In a video post on X on Tuesday, Greene said that her amendment would strike $600 million from the defense bill, money that she noted “goes to Ukraine.” She argued that the US had already sent “over $175 billion to this war” and that it was “enough of your hard-earned tax dollars.”

She described the measure as part of the America First agenda, saying US funds should not be used for “foreign wars” while the country faces a $37 trillion debt. The congresswoman stated that the US usually allocates $300 million annually but that “Speaker Johnson and Republicans are feeling so generous they’re wanting to give them 600 million this time. My amendment will take it out.” Greene said, adding she has “never voted to fund this war.” Greene introduced another amendment after learning that “another $100 million” had been earmarked for Kiev and said she wanted to remove all funding in case others in Congress felt “so giving.” Greene also put forward measures to cut aid for Israel, Syria, and Iraq adding that the money should be “kept back here at home.”

While previous President Joe Biden’s administration approved large-scale aid packages to Kiev, Trump has cut assistance but allowed some deliveries, such as Patriot air-defense systems. He has repeatedly expressed concern about possible misuse of US aid to Kiev, claiming that billions allocated under Biden may have been embezzled. In July, Trump said that any additional weapons delivered to Ukraine would have to be paid for by Europe’s NATO members. Ukraine’s European backers are pressing for more weapons as part of security guarantees, while Russia insists Western military aid is an obstacle to reaching a peace deal.

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It will be a battle.

EU Censors Post Describing A Dystopian Germany in 2050 (RMX)

What will Germany look like in 2050? The outspoken deputy head of the German police union (DPolG), Manuel Ostermann, published an excerpt from his book on X about what he sees as the perils of mass immigration. His post described Arab clans dominating big cities in 2050, Sharia law, child marriage, grooming gangs, and a host of other ills. Now, the European Union has censored his post from being seen across the entire continent in a major escalation against a public official, one who is considered one of the leading voices of tens of thousands of German police officers, and a voice frequently appearing in major German news outlets, including Welt and Bild.

[..] Arab clans dominate the big cities “Imagine Germany in 2050. Arab clans dominate the big cities. Gangs fight each other in the fight for sovereignty in organized crime. People who don’t belong to the “right side” are murdered on the street. Even the police hardly dare to go to certain areas known as no-go areas anymore. Drug deaths hit an all-time high,” wrote Ostermann.

What exactly is the issue with the censors here? Clan crime is a major problem within German cities, and it is almost entirely derived from Muslim countries, including Lebanon, Turkey, and even Syria. There are similar problems in neighboring countries, including Moroccans and Chechens operating in France and the Netherlands, and warring over the country’s drug trade. Germany’s only public media networks routinely run articles and documentaries on the country’s growing clans and their power. In fact, a recent slickly produced ZDF documentary details how these clans have infiltrated the government and police forces to the point that fellow police officers cannot even trust each other.

“Kriminelle Clans in Deutschland” shows that criminal networks not only exercise control in some areas of large cities, but have also established their influence nationwide, right up to state institutions. Accumulating huge wealth illegally, they have built a tight network that includes law enforcement professionals. “It is a murderous and extremely criminal milieu that goes on there. And now on so many levels that we no longer know whether we can really stop it at all. Were raids betrayed, investigations manipulated and employees bought off by the authorities? There is even despair in certain police stations,” states the narrator.

As Germany’s foreign population grows, so does clan crime, or at least the potential for such crime. Just this year, 100 Lebanese clan members battled on the streets. Here is what Remix News wrote: “There was a bloodbath on the streets of Germany after two extended Lebanese family groups fought in a battle that reportedly involved 100 people in the city of Heiligenhaus. The two groups battled using machetes, knives, and other weapons, leading to a mass police operation that resulted in at least five serious injuries, including one that is life-threatening. Police made several arrests.”

Incredible violence, attacks on police, and corruption at the highest levels are already the case to a large degree in a number of European cities. In Marseilles, killings have hit a record high and foreign gangs dominate the city’s drug trade..In the Netherlands, even the royal family has been threatened by the power wielded by foreign criminals. Regarding the potential for drug overdose deaths, the situation could go many different ways, but drug overdose deaths in the EU are hovering near a peak. With the flood of synthetic opioids coming into Europe, the situation could worsen. Is there any guarantee that Germany can escape such developments? Certainly not. Osterman presents a valid prediction based on trend lines, and certainly, there are no grounds to censor his prediction.

Sharia law and women’s rights “In some districts, only Sharia law is recognized as valid law.“ Already, Austrian courts are recognizing Sharia law as valid so long as it does not contradict fundamental rights and higher state laws. However, this may be only a stepping-stone ruling. In Germany itself, there is a small but vocal minority of Muslims who are openly protesting in favor of a German caliphate in cities like Hamburg. However, this is not the most concerning development. Instead, in a major study conducted by the Criminological Research Institute (KFN), it showed that nearly half of young Muslims in Germany believe a theocracy is the best form of government.

In the same study, 67.9 percent of young Muslims said that the rules of the Quran were more important than the laws in Germany. This was also all reported by the state-run news network WDR. This also means there are hundreds of thousands of Muslims who do not hold these beliefs, but the sheer numbers are also extremely worrying. Nearly every single Muslim country on Earth is either ruled by classic Sharia law or has many elements of Sharia law incorporated into its legal system. Not every country is ruled by a strict standard, but many feature extremely harsh versions of such laws, including laws that openly target homosexuals and women. Within Germany itself, the situation is potentially explosive, with an alarming number of Muslims feeling alienated living in a Western democratic society. Many of them harbor ideas that can be considered more radical, including a willingness to turn to violence.

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“..Democrats need to win by 2.8 points. If Florida also redistricts, that margin jumps to 3.4 points. For context, Donald Trump won the 2024 popular vote by 1.5 points.

Democrats Messed up Their Redistricting Gamble (Margolis)

The 2026 House elections are shaping up to be a nightmare for Democrats, and frankly, they have no one to blame but themselves for escalating a redistricting war they cannot win. While the left continues to whine about gerrymandering when it works against them, they conveniently forget their own history of creative map-drawing when it suits their purposes. Let’s start with Texas, where Republicans are poised to add up to five additional seats through redistricting. That’s five more reliable conservative votes in a chamber where control often comes down to a handful of seats. Meanwhile, California Democrats are scrambling to squeeze more seats from an already gerrymandered state. They’ve already maximized their redistricting potential in the Golden State, leaving little room for meaningful gains even if they pursue further changes.

The real story here isn’t just Texas, though. Red states across the map are flexing their redistricting muscles thanks to Gov. Gavin Newsom’s flex. Indiana, Ohio, and Missouri are all redrawing their congressional boundaries in ways that will favor Republicans. While Democrats clutch their pearls about the unfairness of it all, Republican strategists are doing exactly what they should be doing by fighting back against years of Democrats rigging maps in their favor. Here’s where the math gets brutal for Democrats. Even if California somehow manages to eke out additional seats through redistricting, Democrats would still need to win the national popular vote by at least 2.3 percentage points just to have a fighting chance at retaking the House majority. If California’s redistricting effort fails — and it could — but Ohio, Indiana, and Missouri move ahead with redistricting anyway, Democrats need to win by 2.8 points. If Florida also redistricts, that margin jumps to 3.4 points.

For context, Donald Trump won the 2024 popular vote by 1.5 points. Yes, midterm elections are extremely different from presidential elections, but that’s still a significant swing. So now we have a situation where the structural advantage Republicans are building through redistricting means Democrats need to consistently win the popular vote by two to three points nationally to be favored for House control, and that makes things tough. However, it’s not impossible. “A two-to-three-point structural advantage for the G.O.P. is meaningful, but pretty modest,” notes Nate Cohn at the New York Times. “With Democrats leading by four points in the national generic ballot polls today, the party would still be favored to win next year’s midterm election. The Republicans wouldn’t stand much of any chance at all of surviving a so-called ‘wave’ election, like in 2018, when Democrats won the House popular vote by seven points.”

But here’s the catch: They have virtually no margin for error. A few weak candidates, poorly timed retirements, or shifting demographics in key districts could easily hand control back to Republicans. And if the Democrats’ popular vote advantage turns out to be much less than four points, the new maps could give the Republicans the advantage. Democrats, for instance, might not be able to get away with their own version of the G.O.P.’s disappointing “red ripple” election in 2022 and still win. They might not win if 2026 is like the narrow Democratic victory from 2020, either. Indeed, each of the last three congressional elections was decided by three points or less in the national popular vote, with the winner prevailing by less than seven seats.

With margins this razor-thin, every redrawn district carries enormous weight. Republicans aren’t apologizing for playing hardball on redistricting, and why should they? Democrats have been rigging maps for years, and the GOP is finally fighting back. Of course, Republicans gerrymander too, but PJ Media readers already know that Democrats run the most aggressively gerrymandered states in the country.

That leaves Democrats in a bind. To flip the House, they would need a genuine wave like 2018, when they won the popular vote by seven points. Anything less, and they’ll likely remain in the minority. The problem is, Democrats are doubling down on deeply unpopular positions like open borders and soft-on-crime policies that make a wave election highly unlikely. I wouldn’t bet on Democrats pulling it off. When more voters start paying attention, their radical stances on immigration and crime will drag them down even further. The generic ballot will swing against them, and when the dust settles, Democrats will realize they didn’t just lose the redistricting fight; they handed Republicans the advantage for years to come.

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Pray tell, what would be cause to fire her? Murder? Or does it have to be murder of a Fed govenor?

Lisa Cook Can’t Be Fired – For Now: Judge (ZH)

Federal Reserve Governor Lisa Cook has been granted a reprieve after her sorority-sister judge, Jia Cobb, temporarily blocked President Donald Trump from firing her – allowing Cook to remain on the job amid allegations of mortgage fraud.Cobb granted Cook’s request to continue in her role, finding that the alleged mortgage misconduct likely didn’t amount to “cause” to fire her under the Federal Reserve Act. Cobb also found that the way Cook was fired likely violated her right to due process under the Constitution. “The best reading of the ‘for cause’ provision is that the bases for removal of a member of the Board of Governors are limited to grounds concerning a Governor’s behavior in office and whether they have been faithfully and effectively executing their statutory duties,” Cobb wrote.

The ruling means that Cook will likely be able to attend an anticipated Fed policy meeting Sept. 16-17 to vote on interest rates. The DOJ is expected to quickly appeal the ruling, leaving the final say to the US Supreme Court. Abbe Lowell, Cook’s lawyer, said in a statement that tonight’s ruling “recognizes and reaffirms” the Fed’s independence from political interference. “Allowing the president to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law,” said Lowell.

Cook was fired last month after FHFA Director Bill Pulte released evidence that Cook had fraudulently listed two homes as her “primary residence” within weeks of each other in 2021 in order to secure more favorable terms on her loans. Pulte also revealed a third mortgage Cook had listed as a ‘secondary residence’ while actually renting it out. The fired ‘economist’ says that her ouster was politically motivated, while her lawyers claim that if there are any errors, they were accidental, and nobody was harmed – just nobody was harmed when NY AG Letitia James threw the kitchen sink at Trump over similar real estate malarkey.

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Color me surprised.

Boris Johnson Accused of Profiting From Government Contacts (RT)

Former British Prime Minister Boris Johnson has profited from contacts and influence he gained while in office, The Guardian alleged on Monday, citing a trove of leaked documents. The outlet said it had obtained about 2GB of files, including emails, letters, invoices, spreadsheets, speeches, and contracts, from the Office of Boris Johnson, the company that manages his post-government business dealings. Most of the material covers September 2022 to July 2024 but the trove also includes earlier records from his premiership.The Guardian highlighted four cases it described as questionable. A month after taking office in 2019, Johnson reportedly held a secret meeting with billionaire Peter Thiel, co-founder of US data giant Palantir Technologies, which was seeking UK contracts at the time.

In 2020, Johnson hosted a party for Conservative peer David Brownlow, who helped finance renovations of the prime minister’s residence – a gathering that may have violated the government’s own Covid-19 restrictions, the report said. After leaving office, Johnson allegedly lobbied Saudi officials he had met while in power, and billed a hedge fund six figures following a visit to Venezuela – money The Guardian claimed may have been payment for meeting the country’s leadership. The newspaper said it was the only UK outlet given access to the leaked files by Distributed Denial of Secrets (DDoS), a US-based nonprofit transparency group that obtained the cache earlier this year.

The report argued disclosure was in the public interest because Johnson’s firm receives a government-funded annual stipend meant to cover his official duties as a former prime minister, not personal enrichment. Johnson resigned as prime minister and Conservative Party leader in September 2022 after a string of scandals, including breaches of Covid-19 lockdown rules and the appointment of an MP accused of sexual misconduct to a deputy whip position. During his tenure, Johnson played a significant role in scuttling early peace talks between Russia and Ukraine, opposing a proposed settlement deal and encouraging Kiev to pursue a military path instead.

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Understandably, Ethiopians will be proud. Everyone else will be jittery. Many wars have been fought over water.

Africa’s Largest Hydropower Dam Launched (RT)

Ethiopia has officially inaugurated Africa’s largest hydroelectric plant, a controversial project expected to generate up to 5.15 gigawatts of power for the landlocked nation, where nearly half the population is estimated to lack access to electricity. The inauguration of the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile on Tuesday went ahead despite fierce opposition from downstream Egypt and Sudan, which fear the project will disrupt vital water flows.

“To our brothers: Ethiopia built the dam to prosper, to electrify the entire region and to change the history of black people,” Ethiopian Prime Minister Abiy Ahmed said as he addressed a crowd that included the presidents of Djibouti, Kenya, Somalia, and South Sudan. The prime ministers of Eswatini and Barbados, the chairperson of the African Union Commission, and the United Nations under-secretary-general and executive secretary of the Economic Commission for Africa were also in attendance. “It is absolutely not to harm its brothers,” Abiy stated. In a post on X, Ethiopian President Taye Atske Selassie hailed the GERD as “a reward of Ethiopian people’s resilience,” declaring, “Let there be eternal light!”

Addis Ababa announced the completion of the facility, among the 20 biggest in the world, in July after a 14-year construction period. It was initially scheduled to be completed within six years on a $4 billion budget, although Ethiopian authorities now put the final cost at about $5 billion. US President Donald Trump had claimed that Ethiopia built the dam “largely” with American money, but the GERD Coordination Office dismissed the allegation as false and “destructive,” stressing that the project was entirely financed by the government and local contributions. Local media reported jubilation across Africa’s second most populous country following the “historic” opening of the plant, which authorities have long hailed as a milestone for Ethiopia’s renaissance.

https://twitter.com/fanatelevision/status/1965341413929103543?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1965341413929103543%7Ctwgr%5E37e69e7d951c388cfd50586ae27b01079d26397f%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.rt.com%2Fafrica%2F624341-ethiopia-inaugurates-africa-largest-hydropower-dam-gerd%2F

According to the World Bank, only about 55.4% of Ethiopia’s population had access to electricity as of 2023, compared with universal coverage in Egypt at 100%. Egypt, which relies on the Nile for about 97% of its fresh water, has accused Addis Ababa of violating international laws and has taken the dispute to the UN Security Council.

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“Corporate media then labeled, isolated, ridiculed and marginalized anyone who dared to point out the obvious.”

The Truth Has No Agenda (CTH)

Everything that preceded the 2020 federal election was a complex system of control by a network of ideologues, federal agencies, allies in the private sector, financial stakeholders and corrupt interests all working toward a common goal. There’s no need to go through the background of how the election was manipulated and how the government and private sector, specifically social media, worked to influence the 2020 outcome because you have all seen it. Whether it was local election officials working to control outcomes, federal agencies working to support them (CISA, FBI, DHS), financial interests working to fund them (Zuckerberg et al), or social media platforms controlling the visible content and discussion (Twitter Files, Google, Facebook etc.), the objective was all the same. It was a massive one-sided operation against the free will of the American voter.

In the aftermath of the 2020 election, those same system operators, govt officials, corporate media, private sector groups and social media platforms then circled the wagons to scatter the evidence of their conduct. If you questioned anything, you were a threat. That’s the context to the dynamic that unfolded. Lawfare operatives joined forces with Democrat staffers, and allies in social media platforms all worked in concert to target the voices of anyone who would rise in opposition to the corruption that was stunningly clear in the outcome of the election process. Corporate media then labeled, isolated, ridiculed and marginalized anyone who dared to point out the obvious.

When AG Merrick Garland says this of January 6, 2021: […] “the Justice Department has conducted one of the largest, most complex, and most resource-intensive investigations in our history. We have worked to analyze massive amounts of physical and digital data. We have recovered devices, decrypted electronic messages, triangulated phones, and pored through tens of thousands of hours of video. We have also benefited from tens of thousands of tips we received from the public. Following these digital and physical footprints, we were able to identify hundreds of people.” {link} The targeting operation needs context. Do you remember on April 27, 2024, when DOJ Inspector General Michael Horowitz said, “more than 3.4 million search queries into the NSA database took place between Dec. 1st, 2020 and Nov. 30th, 2021, by government officials and/or contractors working on behalf of the federal government.”

The result was “more than 1 million searches of private documents and communication of Americans that were illegal and non-compliant,” and over “10,000 federal employees have access to that database.” {OIG Testimony}. Put the statement from Garland together with the statement from Horowitz, and you get an understanding of what was done. Hundreds of stakeholders in the Lawfare network joined forces with hundreds of people who became staff researchers for a weaponized Congress. Hundreds more social media background agents then poured thousands of hours into feeding private information to the DOJ, FBI, J6 Committee and all of their hired staff working on the project.

How do I know?…
…I was one of their targets.

Before telling the rest of the story, some background is needed. I am well versed in the ways of the administrative state and the corrupt systems, institutions and silos that make up our weaponized government. I can (a) see them; (b) predict their activity, and (c) know where their traps and operations are located. Traveling the deep investigative weeds of the administrative state eventually gives you a set of skills. When people ask how the outlines on this website can seem so far ahead of the sunlight that eventually falls upon the outlined corruption, this is essentially why. When you take these skills on the road, you learn to be a free-range scout, and after a long while you learn how to track the activity.

When I was outlining how the Fourth Branch of Government works, and/or Jack’s Magic Coffee Shop and the DHS system operating inside it, I wasn’t shooting from the hip. However, people will always seek to dismiss the uncomfortable truth. Sometimes you just have to wait for the evidence you know exists to surface, or for a situation to unfold that is driven by a self-fulfilling prophecy. The often uncomfy CTH predictions turn out to be the truth of the issue, because they are based on the factual evidence of the issue. That level of how the system works came in very handy when I received this subpoena from Chairman Bennie Thompson and the J6 Committee. [Warning, things could get uncomfortable if you don’t accept the scale of corruption that exists.] Pay attention to the red box on the page shown. This is essentially the probable cause that justifies the subpoena itself. I have redacted a name in the box for reasons you will see that follow.

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Apr 182016
 
 April 18, 2016  Posted by at 9:40 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »


DPC Coaches at Holland House Hotel on Fifth Avenue, NY 1905

Oil Prices Plunge After Doha Output Talks Fail (AFP)
Oil Producers Get Worst Possible Outcome, Destroy Remaining Credibility (R.)
Failure To Reach Oil Output Deal Sparks Selloff Across Emerging Markets (BBG)
Loonie, Aussie Drop After Doha Failure; Yen Near 1 1/2-Year High (BBG)
The Bad Smell Hovering Over The Global Economy (G.)
Untried, Untested, Ready: Remedies for the Global Economy (BBG Ed.)
China’s QoQ and YoY GDP Data Don’t Add Up (BBG)
Is China Ready To Let More State-Owned Enterprises Default? (BBG)
China Makes Plans for 1.8 Million Workers Facing Unemployment (WSJ)
The Trucker’s Nightmare That Could Flatten Europe’s Economy (BBG)
George Osborne: Brexit Would Leave UK ‘Permanently Poorer’ (G.)
Brazilian Congress Votes To Impeach President Dilma Rousseff (G.)
Australia’s Debt Dilemma Raises Downgrade Fears (BBG)
Peter Schiff: ‘Trump’s Right, America Is Broke’ (ZH)
Make America Solvent Again (Jim Grant)
Is Capitalism Entering A New Era? (Kaletsky)
Fears Of ‘The Big One’ As 7 Major Earthquakes Strike Pacific In 96 Hours (E.)

A curious piece of two-bit theater. It failed before it started. Why do it then? The west trying to pit Saudi vs Iran/Russia?

Oil Prices Plunge After Doha Output Talks Fail (AFP)

Oil prices plunged on Monday after the world’s top producers failed to reach an agreement on capping output aimed at easing a global supply glut during a meeting in Doha. Hopes the world’s main producer cartel, OPEC, and other major exporters like Russia would agree to freeze output has helped scrape oil prices off the 13-year lows they touched in February. But crude tanked after top producer Saudi Arabia walked away from the talks, which many hoped would ease a huge surplus in world supplies, because of a boycott by its rival Iran. Oil tumbled in early Asian trade after the collapse of Sunday’s talks, with prices dropping as much as seven% in opening deals.

At around 0100 GMT, US benchmark West Texas Intermediate for May delivery was down $2.11, or 5.23%, from Friday’s close at $38.25 a barrel. Global benchmark Brent crude for June lost 4.71%, or $2.03, to $41.07. “Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson at IG Markets. “With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share.”

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It’s impossible for a reporter to see that no output freeze was ever in the works, simply because no producer can afford a freeze.

Oil Producers Get Worst Possible Outcome, Destroy Remaining Credibility (R.)

It was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests. Expectations for the meeting had been modest at best, with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia’s insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn’t countenance. From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome.

The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports. What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports. The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised. What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the OPEC or erstwhile ally Russia. Brent crude fell nearly 7% in early trade in Asia on Monday, before partly recovering to be down around 4%.

The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal. It’s likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in. This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance for the grouping to reach some sort of agreement. For the time being, OPEC’s credibility is shot, and won’t be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market. However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely.

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Naturally. Sell-off is waning already, by the way. But the trend is clear.

Failure To Reach Oil Output Deal Sparks Selloff Across Emerging Markets (BBG)

The failure by the world’s biggest oil producers to agree on an output freeze spurred a selloff across emerging markets, with stocks halting a seven-day rally as Brent crude plunged as much as 7%. The ringgit led declines in developing-nation currencies as the disappointment stemming from the weekend meeting in Doha disrupted a recovery in commodity prices, putting pressure on Malaysian finances as a net oil exporter. Hopes an agreement would be reached had pushed Brent above $44 a barrel for the first time since December and spurred gains across asset classes in recent days. It’s now headed back toward $41 as the discussions to address a global oil glut stalled after Saudi Arabia and other Gulf nations wouldn’t commit to any deal unless all OPEC members joined, including Iran.

“We have seen a high correlation between oil, commodity prices and emerging assets this year and we have seen a strong run up, so the latest development on the failure to agree on an oil output freeze should spark profit-taking among investors,” said Miles Remington, head of equities at BNP Paribas Securities Indonesia. Energy-related companies fell the most among the 10 industry groups of the MSCI Emerging Markets Index, which dropped 0.7% and retreated from last week’s highest level since November. While that was the biggest decline since April 5, the energy component slid 1.4% and industrial stocks 1%.

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Japan can’t keep this up much longer.

Loonie, Aussie Drop After Doha Failure; Yen Near 1 1/2-Year High (BBG)

The Canadian and Australian dollars dropped as crude tumbled after oil-producing nations failed to reach an accord to freeze output. The yen, used by investors as a haven, rose toward a 17-month high. The currencies of Australia, Canada, Malaysia and Norway all retreated at least 0.7% after negotiations in Doha ended without an agreement from OPEC and other oil producers to freeze supplies. Foreign-exchange traders sought the safety of Japan’s currency as the diplomatic failure threatens to send crude back toward the more than 13-year lows reached in February. World leaders at the end of last week signaled opposition to any efforts from Japan to directly halt the yen’s 11% climb this year.

“Lack of agreement from Doha has hit commodity currencies lower,” said Robert Rennie at Westpac Banking in Sydney. “The prospects of another near-term round of talks appear limited ahead of the June OPEC meeting.” The Aussie dropped 0.8% to 76.65 U.S. cents as of 7:01 a.m. London time, set for the largest decline since April 7. Canada’s loonie tumbled 1.1% to C$1.2962 against the greenback. Crude is the nation’s second-largest export. Malaysia’s ringgit slid 0.8% to 3.9348 per dollar. Oil futures fell as much as 6.8%, the biggest intraday drop since Feb. 1. “The oil price will reset lower and could even retest $30 over the next three months,”said James Purcell at UBS’s wealth-management business in Hong Kong.

“Short term, that will dampen enthusiasm for risk assets. However, markets are being slightly myopic. Economic data have improved in both China and the U.S. of late.” The lack of agreement at Doha highlights the deep divisions between OPEC members, and importantly, within Saudi Arabia, Westpac’s Rennie said. The Aussie should hold support from about 75.75 cents to 76 cents at least through the next day or so, he said. The yen jumped 0.7% to 107.96 per dollar, and touched 107.77. It reached 107.63 on April 11, the strongest since October 2014. Hedge funds and other large speculators pushed wagers on yen strength to a record last week as Japanese authorities appeared reluctant to intervene to reverse the strengthening currency.

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Price discovery is the economy’s biggest enemy.

The Bad Smell Hovering Over The Global Economy (G.)

All is calm. All is still. Share prices are going up. Oil prices are rising. China has stabilised. The eurozone is over the worst. After a panicky start to 2016, investors have decided that things aren’t so bad after all. Put your ear to the ground though, and it is possible to hear the blades whirring. Far away, preparations are being made for helicopter drops of money onto the global economy. With due honour to one of Humphrey Bogart’s many great lines from Casablanca: “Maybe not today, maybe not tomorrow but soon.” But isn’t it true that action by Beijing has boosted activity in China, helping to push oil prices back above $40 a barrel? Has Mario Draghi not announced a fresh stimulus package from the European Central Bank designed to remove the threat of deflation? Are hundreds of thousands of jobs not being created in the US each month?

In each case, the answer is yes. China’s economy appears to have bottomed out. Fears of a $20 oil price have receded. Prices have stopped falling in the eurozone. Employment growth has continued in the US. The International Monetary Fund is forecasting growth in the global economy of just over 3% this year – nothing spectacular, but not a disaster either. Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost. The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.

Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills. For a while, consumer spending was kept going because rock-bottom interest rates allowed auto dealers to offer tempting terms to those of limited means wanting to buy a new car or truck. In an echo of the subprime real estate crisis, vehicle sales are now falling. The hidden problem has been highlighted by Andrew Lapthorne of the French bank Société Générale. Companies have exploited the Federal Reserve’s low interest-rate regime to load up on debt they don’t actually need.

“The proceeds of this debt raising are then largely reinvested back into the equity market via M&A or share buybacks in an attempt to boost share prices in the absence of actual demand,” Lapthorne says. “The effect on US non-financial balance sheets is now starting to look devastating.” He adds that the trigger for a US corporate debt crisis would be falling share prices, something that might easily be caused by the Fed increasing interest rates.

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BBG senior editor David Shipley displays the general fallacy: all that’s there are desperate attempts to go back to something that once was, only in a more centralized fashion. But there’s no going back.

Untried, Untested, Ready: Remedies for the Global Economy (BBG Ed.)

The deeper the slump, economists used to say, the stronger the recovery. They don’t say that anymore. The effects of the crash of 2008 still reverberate, with the latest forecasts for global growth even more dismal than the last. The persistently stagnant world economy is more than just a rebuke to economic theory, of course; it exacts a human toll. And while politicians and central bankers – or economists, for that matter – can’t be faulted for their creativity, their remedies might have more impact if they were bolder and better-coordinated. By ordinary standards, to be sure, governments haven’t been timid. Without fiscal stimulus and aggressive monetary easing in the U.S. and other countries, things would look even worse. And yet, worldwide output is predicted to rise only 3.2% this year, falling still further below the pre-crash trend.

Simply doubling down on current strategies is unlikely to work. Large-scale bond-buying, or so-called quantitative easing, has run into diminishing returns. Negative interest rates, where they’ve been tried, haven’t revived lending, and central banks are unable or unwilling to cut further. What about new fiscal stimulus? Where possible, that would be good – but it’s hardest to do in the very countries that need it most, because that’s where public debt is already dangerously high. True, as the IMF’s new fiscal report says, almost all countries could become more growth-friendly by combining measures to curb public spending in the longer term (for instance, raising the retirement age) with steps to increase demand in the short term (cutting payroll taxes, raising employment subsidies and building infrastructure).

Getting fiscal policy right country by country would surely help – yet probably wouldn’t be enough: No single country can adequately deal with a global shortfall of demand. A finance ministry for the world isn’t happening any time soon. Still, it’s a pity that governments aren’t trying harder to coordinate their fiscal policies more intelligently, or indeed at all. The global slump persists partly because of international spillovers. Better coordination would take these into account: Countries that could safely deploy fiscal stimulus would give some weight to global as well as national conditions, and fiscal policy would be formed interactively. Even within the EU, where you’d expect economic coordination to be the norm, and where the single currency makes it essential, there’s no sign of it.

At the global level, in forums such as the IMF, you might expect the U.S. to take the lead in any such effort. So it should – but it will need to mend its shattered policy-making machinery first. If Washington can’t come to a decision on its own on taxes or spending, the question of coordination doesn’t arise. The last resort, if the slump goes on and governments can’t coordinate better, might be to combine monetary and fiscal policy in a hybrid known (unfortunately) as helicopter money. Governments would cut taxes and/or spend more, but meet the cost by printing money rather than by borrowing. In one variant, central banks might simply send out checks to taxpayers. That’s a startling idea, no doubt – but so was quantitative easing not long ago.

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Quarter-on-quarter annualized growth rate is 4.5%..

China’s QoQ and YoY GDP Data Don’t Add Up (BBG)

China’s growth rates for quarter-on-quarter and year-on-year GDP for the past year don’t match. That, combined with confirmation that 1Q output was underpinned by an unsustainable resurgence in real estate, tarnishes the newly acquired shine on the country’s economic prospects. The initial reaction to the 1Q GDP data, published Friday, was a sigh of relief. Growth at 6.7% year on year was in line with expectations and comfortably inside the government’s 6.5-7% target range. If anyone noticed that the normal quarter-on- quarter data was missing from the National Bureau of Statistics release, few thought anything of it. Then, on Saturday, the quarter-on-quarter data was published, and some of the relief turned to consternation.

Quarter-on-quarter growth in 1Q was just 1.1% – an annualized growth rate of 4.5%, and the lowest print since the data series became available in 2011. Worse, based on the accumulated quarter-on-quarter data over the last year, annual growth in 1Q was just 6.3% – substantially below the NBS’s 6.7% reading for year-on-year growth. Explaining the inconsistency between the two data points is tough to do. Accumulated quarter-on-quarter growth over four quarters should add up to year-on-year growth. In the past, it has. The divergence in the 1Q readings might reflect something as simple as difficulties with seasonal adjustment. Even so, against a backdrop of concerns about data reliability, it can only add to skepticism about China’s true growth rate.

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Xi’s dilemma.

Is China Ready To Let More State-Owned Enterprises Default? (BBG)

China’s state-owned enterprises are likely to suffer more defaults over the next year as the government shows its readiness to shut companies in industries struggling with overcapacity, according to Standard & Poor’s. “In a major policy shift, the central government appears willing to close and liquidate struggling enterprises in the steel, mining, building materials, and shipbuilding industries,” S&P analyst Christopher Lee wrote in a report Monday. “We believe this stance will exacerbate the problems of companies in these cyclical and capital-intensive sectors, which are facing sluggish demand amid slowing investment growth.”

The warning follows S&P’s decision earlier this month to cut China’s sovereign rating outlook to negative from stable because economic rebalancing is likely to proceed more slowly than it had expected. Moody’s Investors Service also downgraded the outlook to negative in March, highlighting surging debt and the government’s ability to enact reforms. The revisions were biased, Finance Minister Lou Jiwei said in Washington on Friday. Premier Li Keqiang has pledged to withdraw support from so-called zombie firms that have wasted financial resources and dragged on economic growth, which is at the slowest in a quarter century. China’s central bank has lowered benchmark interest rates six times since 2014, underpinning a jump in debt to 247% of GDP.

China Railway Materials, a state-backed commodities trader, is seeking to reorganize debt and halted trading on 16.8 billion yuan ($2.6 billion) of bonds this month. Baoding Tianwei last year became the first government-backed company to renege on onshore bonds. Sinosteel defaulted on onshore debt in October. Leverage among the largest state-owned enterprises has reached a “critical” level, according to Lee. It is likely to worsen in 2016 as a weak top line is not fully offset by cost cuts and capital expenditure reductions, he wrote in the report.

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1.8 million is a rounding error in China.

China Makes Plans for 1.8 Million Workers Facing Unemployment (WSJ)

China etched in details of plans to help workers laid off from the bloated coal and steel industries, saying assistance would include career counseling, early retirement and help in starting businesses, among other measures. New guidelines released by seven Chinese ministries over the weekend build on previously announced commitments to restructure the coal and steel industries, whose excess production is dragging on the economy, and to take care of an estimated 1.8 million workers who will be displaced. The new measures place priority on finding jobs and cushioning the transition to reduce the unemployment that the authoritarian government sees as a threat to social stability.

“Proper placement of workers is the key to working to resolve excess capacity,” said the document issued by the labor ministry, the top economic planning agency and others. It urged local governments to “take timely measures to resolve conflicts” and to “avoid ignoring the issue.” Unlike a far-reaching restructuring of state industries two decades ago, Beijing is taking a cautious approach this time around, prompting some economists to caution that the protracted pace may make the situation worse. Government data released Friday showed economic growth slowing slightly in the first quarter, buoyed by new loans, debt and investment in real estate and factories—methods that are likely to lengthen the transition to a more consumer-driven society from one driven by investment and manufacturing.

Western-style “restructuring is not on the horizon here,” said ING economist Tim Condon. “Rebalancing, forget that. That’s for another day.” Government plans call for reducing some 10% to 15% of the excess capacity in the steel and coal sectors over the next several years. That is less than half the portion analysts say is needed to bring supply closer in line with demand. And steel and coal are only two of numerous other industries plagued by overcapacity that haven’t been addressed. The large number of ministries that have signed off on the plan dated April 7 but released more than a week later underscore the sensitivity, importance and breadth of resources China is devoting to the unemployment problem.

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Europe goes blindly into the night.

The Trucker’s Nightmare That Could Flatten Europe’s Economy (BBG)

[..] Germany, Austria, France and Sweden, among others, have reintroduced border checkpoints in some places. They are pressured by Europe’s biggest refugee crisis since World War II – about 1 million migrants arrived in Greece and Italy in 2015 – terrorist attacks, and the growth of anti-immigration movements. But the economic cost of dumping Schengen, at a time when growth across the continent is still weak, would be massive. A permanent return to border controls could lop €470 billion of GDP growth from the European economy over the next 10 years, based on a relatively conservative assumption of costs, according to research published by Germany’s Bertelsmann Foundation. That’s like losing a company almost the size of BMW AG every year for a decade.

The open borders power an economy of more than 400 million people, with 24 million business trips and 57 million cross-border freight transfers happening every year, the European Parliament says. Firms in Germany’s industrial heartland rely on elaborate, just-in-time supply chains that take advantage of lower costs in Hungary and Poland. French supermarket chains are supplied with fresh produce that speeds north from Spain and Portugal. And trans-national commutes have become commonplace since Europeans can easily choose to, say, live in Belgium and work in France. For many Europeans, passport-free travel is part of being, simply, European. For the company hiring driver Unczorg, the security checks increase costs in terms of delays, storage and inventory.

Permanent controls would destroy the business model of German industry, says Rainer Hundsdoerfer, chairman of EBM-Papst. “You get the products you need for assembly here in Germany just in time,” he said by phone. “That’s why the trucks go nonstop. They come here, they unload, they load, and off they go. The cost isn’t the only prime issue” in reinstating border checks. “It’s that we couldn’t even do it.” Nor could anyone else, he adds: “Nothing in German industry, regardless of whether it’s automotives or appliances or ventilators, could exist without the extended workbenches in eastern Europe.”

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This sort of over the top comment could be the biggest gift to the Leave side. Then again, they have Boris Johnson and Nigel Farage as their figureheads. Not going to work.

George Osborne: Brexit Would Leave UK ‘Permanently Poorer’ (G.)

Britain would be “permanently poorer” if voters choose to leave the EU, George Osborne has warned, as a Treasury study claimed the economy would shrink by 6% by 2030, costing every household the equivalent of £4,300 a year. In the starkest warning so far by the government in the referendum campaign, the chancellor describes Brexit as the “most extraordinary self-inflicted wound”. Osborne will embark on one of the government’s most significant moves in the referendum campaign on Monday when he publishes a 200-page Treasury report which sets out the costs and benefits of EU membership. In a Times article the chancellor wrote: “The conclusion is clear for Britain’s economy and for families – leaving the EU would be the most extraordinary self-inflicted wound.”

Osborne warned that the option favoured by Boris Johnson – a deal along the lines of the EU-Canada arrangement – would lead to an economic contraction of 6% by 2030. Supporters of Britain’s EU membership say the EU-Canadian deal would be a disaster for the UK because it excludes financial services, a crucial part of the British economy. The chancellor asked whether this was a “price worth paying” as he said there was no other model for the UK that gave it access to the single market without quotas and tariffs while retaining a say over the rules. Osborne continued: “Put simply : over many years, are you better off or worse off if we leave the EU? The answer is: Britain would be worse off, permanently so, and to the tune of £4,300 a year for every household.”

“It is a well-established doctrine of economic thought that greater openness and interconnectedness boosts the productive potential of our economy. That’s because being an open economy increases competition between our companies, making them more efficient in the face of consumer choice, and creates incentives for business to innovate and to adopt new technologies.”

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One corrupt clan fights the other. Rousseff may well be the cleanest of the bunch.

Brazilian Congress Votes To Impeach President Dilma Rousseff (G.)

Brazilian president Dilma Rousseff suffered a crushing defeat on Sunday as a hostile and corruption-tainted congress voted to impeach her. In a rowdy session of the lower house presided over by the president’s nemesis, house speaker Eduardo Cunha, voting ended late on Sunday evening with 367 of the 513 deputies backing impeachment – comfortably beyond the two-thirds majority of 342 needed to advance the case to the upper house. As the outcome became clear, Jose Guimarães, the leader of the Workers party in the lower house, conceded defeat with more than 80 votes still to be counted. “The fight is now in the courts, the street and the senate,” he said. As the crucial 342nd vote was cast for impeachment, the chamber erupted into cheers and Eu sou Brasileiro, the football chant that has become the anthem of the anti-government protest.

Opposition cries of “coup, coup,coup” were drowned out. In the midst of the raucous scenes the most impassive figure in the chamber was the architect of the political demolition, Cunha. Watched by tens of millions at home and in the streets, the vote – which was announced deputy by deputy – saw the conservative opposition comfortably secure its motion to remove the elected head of state less than halfway through her mandate. There were seven abstentions and two absences, and 137 deputies voted against the move. Once the senate agrees to consider the motion, which is likely within weeks, Rousseff will have to step aside for 180 days and the Workers party government, which has ruled Brazil since 2002, will be at least temporarily replaced by a centre-right administration led by vice-president Michel Temer.

On a dark night, arguably the lowest point was when Jair Bolsonaro, the far-right deputy from Rio de Janeiro, dedicated his yes vote to Carlos Brilhante Ustra, the colonel who headed the Doi-Codi torture unit during the dictatorship era. Rousseff, a former guerrilla, was among those tortured. Bolsonaro’s move prompted left-wing deputy Jean Wyllys to spit towards him. Eduardo Bolsonaro, his son and also a deputy, used his time at the microphone to honour the general responsible for the military coup in 1964. Deputies were called one by one to the microphone by the instigator of the impeachment process, Cunha – an evangelical conservative who is himself accused of perjury and corruption – and one by one they condemned the president. Yes, voted Paulo Maluf, who is on Interpol’s red list for conspiracy. Yes, voted Nilton Capixiba, who is accused of money laundering. “For the love of God, yes!” declared Silas Camara, who is under investigation for forging documents and misappropriating public funds.

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Australia played all on red. Which can you take to mean either China, for exports, or debt, for housing. Realizing that in the ned the house always wins, it’s a suicide strategy.

Australia’s Debt Dilemma Raises Downgrade Fears (BBG)

1986 may seem like a long time ago, but for Australian Treasurer Scott Morrison some of the parallels with his current budget balancing act are getting too close for comfort. Back then, Moody’s and Standard & Poor’s pulled their AAA ratings as weak commodity prices wrecked government income and external finances. With resources again in a funk and a widening funding gap, National Australia Bank and JPMorgan said last week Morrison needs to undertake repairs in his May 3 budget to safeguard the country’s top rankings. Moody’s warned Thursday that debt will grow without revenue-boosting measures. “Moody’s are understandably getting impatient,” said Shane Oliver at Sydney-based AMP Capital Investors.

“We’ve seen each successive budget update push out the return to surplus. This time around – like back in the middle of the ’80s when we did suffer downgrades – we again have a twin deficit problem.” Thirty years ago, then-Treasurer Paul Keating warned the country risked becoming a “banana republic” because of its reliance on resources and it took nearly 17 years to regain the two top credit scores. While Morrison’s language hasn’t been as strident, he has said Australia must live within its means and indicated a focus on reduced spending. The government expects Australia’s budget position to improve in coming years despite the environment for commodity prices as it controls expenditure growth, Finance Minister Mathias Cormann said Thursday in an e-mailed response to questions.

“The Government is committed to responsible budget management which protects our AAA credit rating,” he said. “Our public debt remains low internationally and consistent with our plan, the government is committed to stabilizing and reducing our debt over time.” Australia’s general government net debt is projected to peak at 19.9% in 2017, lower than any Group of Seven economy, according to the IMF’s fiscal monitor. That number has climbed from minus 0.6% in 2009. “One differentiating feature between Australia and other Aaa rated sovereigns is that, while government debt has increased markedly in Australia, it has been more stable for other Aaa sovereigns,” Marie Diron at Moody’s in Singapore wrote. “We expect a further increase in debt and will look at policy measures and the economic environment to review our analysis on this.”

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Japan and Europe are in a much better position than the US? Really?

Peter Schiff: ‘Trump’s Right, America Is Broke’ (ZH)

Euro Pacific Capital’s Peter Schiff sat down with Alex Jones last week to discuss the state of the economy, and where he sees everything going from here. Here are some notable moments from the interview. Regarding how bad things are, and what’s really going on in the economy, Schiff lays out all of the horrible economic data that has come out recently, as well as making sure to take away the crutch everyone uses to explain any and all data misses, which is weather.

“It’s no way to know exactly the timetable, but obviously this economy is already back in recession, and if it’s not in a recession it’s certainly on the cusp of one” “We could be in a negative GDP quarter right now, and I think that if the first quarter is bad the second quarter is going to be worse” “The last couple years we had a rebound in the second quarter because we’ve had very cold winters. Well this winter was the warmest in 120 years so there is nothing to rebound from.”

On the Fed, and current policies, he very bluntly points out that nothing is working, nor has it worked, but of course the central planners will try it all anyway. He also takes a moment to agree with Donald Trump regarding the fact that the U.S. is flat out, undeniably broke.

“The problem for the Fed is how do they launch a new round of stimulus and still pretend the economy is in good shape.” “Negative interest rates are a disaster. It’s not working in Japan, it’s not working in Europe, it’s not going to work here. Just because it doesn’t work doesn’t mean we’re not going to do it, because everything we do doesn’t work and we do it anyway. It shows desperation, that you’ve had all these central bankers lowering interest rates and expecting it to revive the economy. And then when they get down to zero, rather than admit that it didn’t work, because clearly if you go to zero and you still haven’t achieved your objective, maybe it doesn’t work. Instead of admitting that they were wrong, they’re now going negative.”

“The United States, no matter how high inflation gets, we’ll do our best to pretend it doesn’t exist or rationalize it away because we have a lot more debt. America is broke, if you look at Europe and Japan even though there is some debt there, overall those are still creditor nations. The world still owes Europe money, the world still owes Japan money, but America owes more money than all of the other debtor nations combined. Trump is right about that, we are broke, we’re flat broke, and we’re living off this credit bubble and we can’t prick it. Other central banks may be able to raise their rates, but the Fed can’t.”

On how he sees everything unfolding from this point, Peter again points out that the economy is weak and it’s only a matter of time before this entire centrally planned manipulation is exposed for what it is, and becomes a disaster for the Federal Reserve. He likens how investors are behaving today to the dot-com bubble, and the beginning of the global financial crisis.

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“Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes.” “..in six months we would have either a tax revolution or a startling contraction of the budget!”

Make America Solvent Again (Jim Grant)

[..] The public debt will fall due someday. It will have to be repaid or refinanced. If repaid, where would the money come from? It would come from you, naturally. The debt is ultimately a deferred tax. You can calculate your pro rata obligation on your smartphone. Just visit the Treasury website, which posts the debt to the penny, then the Census Bureau’s website, which reports the up-to-the-minute size of the population. Divide the latter by the former and you have the scary truth: $42,998.12 for every man, woman and child, as I write this. In the short term, the debt would no doubt be refinanced, but at which interest rate? At 4.8%, the rate prevailing as recently as 2007, the government would pay more in interest expense –$654 billion– than it does for national defense.

At a blended rate of 6.7%, the average prevailing in the 1990s, the net federal-interest bill would reach $913 billion, which very nearly equals this year’s projected outlay on Social Security. We always need protection against cockeyed economic experimentation. Once a national consensus on money and debt furnished this protective armor. Money was gold and debt was bad, Americans assumed. Most credentialed economists today will smile at these ancient prejudices. Allow me to suggest that our forebears knew something. Keynes himself would recoil at 0% bank-deposit rates, chronically low economic growth and the towering trillions that we have so generously pledged to one another. (All we have to do now is earn the money to pay them.) How do we escape from our self-constructed fiscal jail? According to the Government Accountability Office, unpaid taxes add up to more than $450 billion a year.

Even so, according to the Tax Foundation, Americans spend 6.1 billion hours and $233.8 billion each tax season complying with a federal tax code that runs to 10 million words. Are we quite sure we want no part of the flat-tax idea? An identical low rate on most incomes. No deductions, no H&R Block. Impractical? So is the debt. So is the spending (and the promises to spend more down the road). We need to stop the squandermania. How? By resuming the principled fight that Vivien Kellems waged against the IRS during the Truman Administration. It enraged Kellems, a doughty Connecticut entrepreneur, that she was forced to withhold federal taxes from her employees’ wages. She called it involuntary servitude, and she itched to make her constitutional argument in court. She never got that chance, but she published her plan for a peaceful revolution.

She asked her readers –I ask mine– to really examine the stub of their paycheck. Observe how much your employer pays you and how much less you take home. Notice the dollars withheld for Medicare, Social Security and so forth. If you are like most of us, you stopped looking long ago. You don’t miss the income that you never get to touch. Picking up where Kellems left off, I propose a slight alteration in payday policy. Let each wage-earning citizen hold the whole of his or her untaxed earnings–actually touch them. Then let the government pluck its taxes. “Such a payroll policy,” wrote Kellems in her memoir, Taxes, Toil and Trouble, “is entirely legal and if it were universally adopted, in six months we would have either a tax revolution or a startling contraction of the budget!” Black ink, sound money and the spirit of Vivien Kellems are the way forward. “Make America solvent again” is my credo and battle cry. You can fit it on a cap.

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“The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking.” No, it’s that today’s politicians must go.

Is Capitalism Entering A New Era? (Kaletsky)

The defining feature of each successive stage of global capitalism has been a shift in the boundary between economics and politics. In classical nineteenth-century capitalism, politics and economics were idealized as distinct spheres, with interactions between government and business confined to the (necessary) raising of taxes for military adventures and the (harmful) protection of powerful vested interests. In the second, Keynesian version of capitalism, markets were viewed with suspicion, while government intervention was assumed to be correct. In the third phase, dominated by Thatcher and Reagan, these assumptions were reversed: government was usually wrong and the market always right. The fourth phase may come to be defined by the recognition that governments and markets can both be catastrophically wrong.

Acknowledging such thoroughgoing fallibility may seem paralyzing – and the current political mood certainly seems to reflect this. But recognizing fallibility can actually be empowering, because it implies the possibility of improvement in both economics and politics. If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa. If the world is characterized by ambiguity and unpredictability, then the economic theories of the pre-crisis period – rational expectations, efficient markets, and the neutrality of money – must be revised. Moreover, politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions.

This includes not only financial deregulation, but also central bank independence, the separation of monetary and fiscal policies, and the assumption that competitive markets require no government intervention to produce an acceptable income distribution, drive innovation, provide necessary infrastructure, and deliver public goods. It is obvious that new technology and the integration of billions of additional workers into global markets have created opportunities that should mean greater prosperity in the decades ahead than before the crisis. Yet “responsible” politicians everywhere warn citizens about a “new normal” of stagnant growth. No wonder voters are up in arms. People sense that their leaders have powerful economic tools that could boost living standards.

Money could be printed and distributed directly to citizens. Minimum wages could be raised to reduce inequality. Governments could invest much more in infrastructure and innovation at zero cost. Bank regulation could encourage lending, instead of restricting it. But deploying such radical policies would mean rejecting the theories that have dominated economics since the 1980s, together with the institutional arrangements based upon them, such as Europe’s Maastricht Treaty. Few “responsible” people are yet willing to challenge pre-crisis economic orthodoxy. The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking. If responsible politicians refuse, “some rough beast, its hour come at last” will do it for them.

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Japan, Philippines, Tonga, Vanuatu, Ecuador and more

Fears Of ‘The Big One’ As 7 Major Earthquakes Strike Pacific In 96 Hours (E.)

Japan has been worst hit by the tremors. The latest quake to hit the country yesterday, measuring 7.3 on the Richter scale, injured more than 1,000 and trapped people in collapsed buildings, only a day after a quake killed nine people in the same region. Rescue crews searched for survivors of a magnitude 7.3 earthquake that struck Japan’s Kyushu Island, the same region rattled by a 6.2 quake two days earlier. Around 20,000 troops have had to be deployed following the latest 7.3 earthquake at 1.25am local time on Saturday. Roads have also been damaged and big landslides have been reported, there are also 200,000 households without power. The death toll in the latest Kyushu earthquake is 16 people and a previous earthquake that struck the area on Thursday had killed nine people.

There have been other large earthquakes recorded in recent days, including a major one in southern Japan which destroyed buildings and left at least 45 people injured, after Myanmar was rocked on Wednesday. Japan’s Fire and Disaster Management Agency said 7,262 people have sought shelter at 375 centers since Friday in Kumamoto Prefecture. Prime Minister Shinzo Abe vowed to do everything he could to save lives following the disaster. He said: “Nothing is more important than human life and it’s a race against time.” On Thursday, The Japanese Red Cross Kumamoto Hospital confirmed 45 were injured, including five with serious injuries after a quake of magnitude 6.2 to 6.5 and a series of strong aftershocks ripped through Kumamoto city.

Several buildings were damaged or destroyed and at least six people are believed to be trapped under homes in Mashiki. Local reports said one woman was rescued in a critical condition Scientists say there has been an above average number of significant earthquakes across south Asia and the Pacific since the start of the year. The increased frequency has sparked fears of a repeat of the Nepal quake of 2015, where 8,000 people died, or even worse. Roger Bilham, seismologist of University of Colorado, said: “The current conditions might trigger at least four earthquakes greater than 8.0 in magnitude. “And if they delay, the strain accumulated during the centuries provokes more catastrophic mega earthquakes.”

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Apr 172016
 
 April 17, 2016  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  4 Responses »


Underwood&Underwood Chicago framed by Gothic stonework high in the Tribune Tower 1952

South Korea Exports To China Tumble 15.7% In Q1 (Yonhap)
Chinese P2P Shadow Lender’s Woes Expose Its Global Tentacles (WSJ)
Doha Oil Freeze Talks Face Last-Minute Trouble (Reuters)
Iran Central Banker Dismisses Idea Of Oil Output Cut (CNBC)
Greece’s Creditors Weigh Extra Austerity Measures to Break Deadlock (WSJ)
Panama and a New Copernican Revolution (Tett)
Wolfgang Schäuble Warns UK Of Tough Brexit Negotiations (FT)
BlackRock Wields Its Big Stick Like a Wet Noodle (Morgenson)
Foreign Investment Turns New Zealand Stock Market Into A Casino (BBG)
Free Trade Has Won: Adapt Or Die Is The Only Option Left To Us (G.)
Economists Ignore One of Capitalism’s Biggest Problems (Steve Keen)
Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill (NYT)
Varoufakis Joins French ‘Nuit Debout’ Anti-Labor Reform Protests (AFP)
Pope Flies 12 Syrian Refugees to Vatican in Potent Symbol for EU (BBG)

China’s strongarming all of eastern Asia into submission to its exports. This could get very ugly.

South Korea Exports To China Tumble 15.7% In Q1 (Yonhap)

South Korea suffered a 15.7% fall in exports to China in the first quarter this year, data showed Sunday, deepening its overall trade woes. It marks the biggest drop in seven years in South Korea’s outbound shipments to China, its single biggest market. China accounts for about 25% of South Korea’s total exports. Exports to China stood at $28.5 billion in the year’s first three months, down 15.7% from a year earlier, according to the Korea International Trade Association (KITA). By item, exports of semiconductors, flat panel displays, petrochemical products, car parts and synthetic resins recorded notable declines. Experts cited a structural problem and suggested a shift in trade strategy. “Over 70% of South Korean goods exported to China are intermediate goods. China’s demand for those is diminishing,” said Park Jin-woo, head of KITA’s strategic market research office.

“In particular, China is making massive investments and expanding facilities in such sectors as semiconductors, while reducing imports.” He stressed the need for targeting the consumer goods market instead. South Korea’s exports to the United States also sank 3.3% on-year to $16.8 billion in the January-March period and imports were down 4.9% to $10.1 billion. Trade with Japan remains in trouble as well. Exports fell 13.1% to $5.5 billion, representing a double-digit drop for the sixth consecutive quarter, and imports dwindled 11.2% to $10.6 billion. In contrast, exports to Vietnam, which has emerged as South Korea’s third-largest exports market, maintained an upward trend. Exports grew 7.6% to $7 billion, although growth rates showed signs of slowing.

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Mom and pop, shadow banking, P2P, Hollywood, Ponzi, it’s all there.

Chinese P2P Shadow Lender’s Woes Expose Its Global Tentacles (WSJ)

A crisis rocking a loosely regulated lending network is underlining the risks of a financing boom that has channeled Chinese household money into Hollywood movies and Wall Street deals Droves of teary-eyed investors from around China have descended on Shanghai Kuailu Investment Group’s swanky offices over the past week to demand their money back after the firm halted redemptions on wealth-management products for the roughly 250,000 clients of the firm and three affiliates. The uncertainty around investments handled by Kuailu could force a re-evaluation of a financing trend that has become widespread, in the latest knock to a financial system damaged by months of stock-market turmoil and a slowing economy.

Kuailu is one of thousands of finance companies in a universe of Chinese “shadow banks” that funnel investors funds to businesses and individuals, often with an assurance of high returns. Moody’s estimated credit extended by nonbank financing companies in China stood at $370 billion in mid-2015. Many Chinese refer to the diverse industry using English: P2P, as in peer-to-peer lending, though that business of matching small lenders and borrowers is just one segment of operations at Kuailu. Kuailu isn’t the first such lender to leave investors hanging amid recent collapses in the sector. What is distinctive is how its problems are exposing an international dimension to the industry, which bankers said is common but little understood.

The Shanghai firm invested in at least 20 feature films, including the coming release of “The Bombing” starring Bruce Willis, according to the company. Client money holds a slice of a $9 billion deal to privatize NYSE-listed Chinese Internet-security company Qihoo 360 Technology, firm marketing documents show. A crisis-management specialist that Kuailu’s founding chairman this month put in charge of sorting through $1.5 billion in liabilities told the WSJ it wasn’t a Ponzi scheme, a fear some investors have raised with the company. “No cash flow. That’s the issue,” said Xu Qi, who estimated assets cover about 90% of what is owed to investors, but that most of it is tied up in investments or projects that can’t be quickly converted to cash.

Companies like Kuailu got their start in peer-to-peer lending, initially a modest effort to supply money to Chinese households and entrepreneurs that was endorsed by top government officials as a way to power new streams of consumer activity. But crowdsourced lending has quickly expanded and now powers financing across China, from wedding loans to land speculation. Like banks, but with less regulation, such lenders compete aggressively for deposits, often via online platforms. Many attract money faster than they can thoroughly research investments, according to analysts.

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B Movie.

Doha Oil Freeze Talks Face Last-Minute Trouble (Reuters)

A meeting between OPEC and non-OPEC oil producers on an agreement to freeze output ran into last-minute trouble in Qatar on Sunday due to a new request by OPEC’s de facto leader Saudi Arabia, sources told Reuters. Oil ministers were heading into a meeting with the Qatari emir, Sheikh Tamim bin Hamad al-Thani – who was instrumental in promoting output stability in recent months – in an attempt to rescue the deal designed to bolster the flagging price of crude. “There is an issue. Experts are discussing how to find an acceptable solution. I’m confident they will come up with a solution,” one of the sources said. According to another source, Saudi Arabia said it wanted all OPEC members to participate in the talks, despite insisting earlier on excluding Iran because Tehran does not want to freeze production.

Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to have refused to participate in the freeze. Tehran says it needs to regain market share after the lifting of international sanctions against it in January. Deputy Crown Prince Mohammed bin Salman told Bloomberg that the kingdom would restrain its output only if all other major producers, including Iran, agreed to freeze production. More than a dozen nations inside and outside OPEC have officially confirmed they would attend the meeting in Doha but the role of Iran has been the key issue overhanging the talks. “We have told some OPEC and non-OPEC members like Russia that they should accept the reality of Iran’s return to the oil market,” Iran’s oil minister, Bijan Zanganeh, was quoted as saying by his ministry’s news agency SHANA on Saturday.

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Iran will go all out.

Iran Central Banker Dismisses Idea Of Oil Output Cut (CNBC)

Iran’s top central banker is adding to growing doubts about an agreement to freeze output at a meeting of oil producers in Doha, Qatar on Sunday. Ahead of a pivotal meeting that may determine the near-term outlook for crude prices, Iran on Saturday announced that it would not participate in the conference. The country, still trying to recover from Western sanctions, is seen trying to preserve market share, and has steadfastly resisted any suggestions that Iran should freeze or curb output in order to prop up prices. On the sidelines of an IMF meeting in Washington, D.C., Valiollah Seif, head of Iran’s central bank told CNBC that asking Iran to freeze output right now is unfair.

“What Iran is doing right now is trying to get back and secure its share of the market,” Seif said, adding that “what Saudi Arabia is asking Iran to do is not a very fair [or] logical request.” On several occasions, the leadership of Saudi Arabia has repeatedly said they would agree to an output freeze as long as Iran did too. Currently, analysts believe the two rivals are unlikely to reach a near-term consensus. Seif told CNBC that Iran, as a member of OPEC, has a quota of 2.4 million barrels per day. Under sanctions for its nuclear program, that quota went unfilled.

At the same other members used their output to fill the gap. “And right now, Iran is trying to just take back the quota it is entitled to get, so we are going to do that and this is the main direction of our economy,” Seif added. He went as far as to say other OPEC members are to blame for the sharp fall in oil prices, which are down more than 37% year to date. “This request is coming from those countries which are responsible for this surplus production in the market, because they have exceeded output beyond their quota, and I think this is not fair,” Seif added. He cautioned that this was his personal viewpoint, and the ultimate decision lies with Iran’s oil minister, Bijan Zangeneh.

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Predators experimenting on an entire nation.

Greece’s Creditors Weigh Extra Austerity Measures to Break Deadlock (WSJ)

Greece’s creditors are considering seeking extra austerity measures that would be triggered if Athens misses its fiscal targets, in a bid to bridge differences between Europe and the IMF and break a deadlock threatening to unravel the Greek bailout. Under the proposal, say officials involved in the discussions, Greece would have to sign up to so-called contingency measures of up to about €3 billion, on top of the package of about €5 billion in tax increases and spending cuts Greece and its lenders are already negotiating. The country would only have to implement the extra measures if falls short of targeted budget surpluses for coming years that were set out in last year’s bailout agreement, the officials say.

The idea, which has support from the eurozone’s dominant power Germany, hasn’t yet been agreed upon, and officials on the creditors’ side say it would be politically hard for Greece’s embattled government to swallow. Creditors say the contingency-measures idea could finally overcome the monthslong disagreement between European institutions and the IMF about the outlook for Greece’s budget. That disunity has paralyzed talks about what Greece needs to do to secure a new IMF loan program and unlock rescue funding from Europe. Without billions of euros in fresh bailout funds, Greece faces bankruptcy in July, when large debts fall due. Months of talks without agreement have stoked concern in Europe about another Greek debt drama this summer, reviving fears the country could tumble out of the eurozone.

Athens has argued that imposing even-more austerity measures would go beyond what was agreed in the July 2015 bailout deal, according to people familiar with Athens’s thinking. The deadlock among creditors since last fall stems from Germany’s insistence that Greece get no more money from the eurozone’s bailout fund until the IMF agrees to lend more money too. Since Greece’s bailout odyssey began in 2010, German Chancellor Angela Merkel has insisted IMF involvement is essential. But the IMF is unconvinced by the math of the eurozone’s July 2015 bailout plan for Greece. The fund says it can’t resume lending to Greece unless there is a combination of a credible fiscal plan for Greece and debt relief from Europe.

The creditors and Greece agreeing on a fiscal plan would allow for the start of concrete talks on a second thorny issue: debt relief for Greece. Germany is deeply reluctant to offer much debt relief, but tends to agree with the IMF about the weaknesses of Greece’s budget, rather than with the more upbeat assessments of the European Union’s executive arm, the Commission. The Commission believes around €5 billion of austerity measures would be enough for Greece to hit a key target in the bailout plan: a primary budget surplus, meaning before interest payments, of 3.5% of gross domestic product. But the IMF is more pessimistic about Greek growth and finances. It insists about €8 billion of savings are needed to hit the target. The European side’s proposed measures, the IMF thinks, would only get Greece to a primary surplus of 1.5% of GDP.

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Dream on.

Panama and a New Copernican Revolution (Tett)

The name Nicolaus Copernicus is not usually mentioned in the same breath as corporate tax planning or Mossack Fonseca. This month, however, it probably should be. Six centuries ago, the Polish astronomer formulated a model of the universe that put the sun, rather than the earth, at the centre of the solar system. It was a paradigm shift that led to a transformation in the way that we view the universe. I suspect something similar might be happening with global finance. This month, the International Consortium of Investigative Journalists (ICIJ) published some 11.5 million documents leaked from the Panamanian law firm Mossack Fonseca. Among other things, these gave details about offshore companies the firm created for the elite.

The leak has already provoked a number of political scandals: last week, the Icelandic prime minister resigned after it emerged that he had an offshore company in Panama; and David Cameron, the British prime minister, has faced a steady stream of criticism about an offshore company created by his late father. Meanwhile, revelations about Chinese and Russian billionaires could spark further recriminations. To my mind, it is not just the revelations concerning the rich and famous that make the Panama Papers so fascinating; after all, it is not illegal to create such companies, unless they are used to evade taxes or launder money. Instead, the most interesting issue is whether this leak will create something akin to a Copernican moment.

Think about it. Most of us vaguely know that money flows through offshore centres but the details of this world are very shadowy and opaque. Thus, insofar as any of us have ever tried to visualise the 21st-century “map” of global finance, we assumed that the visible onshore activity was the “sun” that dominated this universe — and offshore finance just a fuzzy little planet, that hovered on the edge. But the Panama Papers have given contours to that fuzzy, offshore world. More specifically, anyone who wants to get a sense of what has been happening in Panama can now go on to the ICIJ website and search those 11.5 million documents with keywords. Try it out at home — it is as simple as a Wikipedia search.

As further details tumble out, it’s not just more names that will be generated but numbers too. Even before the data were readily available, activist groups such as the Tax Justice Network had claimed that some $21tn-$32tn was being stashed in offshore centres, but they had no real way of verifying the figure. With the Panama Papers online, more precise figures could emerge — and with that the ability to compare them with the overall picture of global banking. Could this spark a bigger policy change, such as a crackdown on tax avoidance or money laundering? A cynic might argue not. Remember, powerful vested interests are involved. But if you want to get a sense of what can happen when that mental map flips, think about how attitudes to shadow banking have changed in the past decade.

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EU does not rhyme with democracy, and never will. We’re going to see a lot of crazy claims and numbers pre-referendum.

Wolfgang Schäuble Warns UK Of Tough Brexit Negotiations (FT)

Wolfgang Schäuble, Germany’s finance minister, has warned British chancellor George Osborne that Berlin would be a tough negotiator if the UK votes to leave the EU. Speaking on the sidelines of the IMF spring meetings on Saturday, Mr Schäuble, one of the strongest forces in European politics, also jested that British football teams in a post-Brexit world should be excluded from the European champions league — something not actually linked to EU membership. His confirmation that Germany would not readily agree to an easy trading relationship with Britain after Brexit undermines the Leave campaign’s argument that the UK would be able to secure preferential EU trade deals without freedom of movement of people or the need for Britain to contribute to the EU budget.

The German finance minister, who is known for his unyielding negotiating positions, told German media that he wanted the UK to remain in the EU and did not want to inflame the British debate. But he added that if Britain were to leave, the process would not be easy. The Treasury confirmed that Mr Schäuble told Mr Osborne just how tough negotiations would be after Brexit during a bilateral meeting this weekend — and made the same joke about European football. In Washington this weekend, finance minsters from around the world have gradually been waking up to the possibility that Britain will seek to leave the EU within a matter of months. The IMF said it would wreak “severe damage” to the British and European economies.

Christine Lagarde, the IMF head, admitted this week that while she hoped Europe would avoid having to deal with Brexit, “the continued relationship with other countries in the EU would be at risk”. The difficulties of post-Brexit negotiations will be amplified by elections in Germany and France in 2017, European finance ministers said privately on the sidelines of the IMF meetings. With populist rightwing Eurosceptic parties threatening mainstream politics in both countries, the domestic incentives would prevent concessions to Britain as politicians would need to show their electorates that leaving the EU comes with a heavy price.

Many European officials and ministers have tried to avoid the subject of how they would negotiate with the UK after Brexit, saying instead that they hoped the British people would vote to remain. But some did speak out. Klaus Regling, head of the European Stability Mechanism, said that the leave campaign’s ambition to secure full access to the single market without accepting free movement of people and budget contributions “has never happened in Europe”. “I’m pretty certain [the negotiations ] would take quite a while — two years is not enough — so there would be several years of high uncertainty, which would have a negative impact on the UK economy,” Mr Regling said.

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BlackRock and ‘corporate responsibility’.. Yeah, sure.

BlackRock Wields Its Big Stick Like a Wet Noodle (Morgenson)

For several years, Laurence D. Fink, chairman and chief executive of BlackRock, the money management giant, has been on a crusade, exhorting corporations to change their short-term ways. Executives should forgo tricks that reward short-term stock traders, he argues, like share buybacks purchased at high valuations. Instead, corporate managers should focus on creating value for long-term shareholders. It’s an admirable argument that has won Mr. Fink wise-man status on Wall Street and accolades in the press. Hillary Clinton has echoed his ideas on the campaign trail. Certainly, as the head of BlackRock, Mr. Fink wields an outsize stick. With $4.6 trillion in assets and ownership of shares in roughly 15,000 companies, BlackRock is the world’s largest investment manager.

But if Mr. Fink really wants to get the attention of company executives on stock buybacks and other corporate governance issues, why doesn’t BlackRock vote more often against CEO pay packages of companies that play the short-term game? Executive compensation is inextricably linked to the shareholder-unfriendly actions Mr. Fink has identified; voting against pay packages infected by short-termism would help curb the problem. But BlackRock rarely takes such a stance. From July 1, 2014, to last June 30, according to Proxy Insight, a data analysis firm, BlackRock voted to support pay practices at companies 96.2% of the time. On pay issues, anyway, Mr. Fink’s big stick is more like a wet noodle. BlackRock’s “yes” percentage runs far higher than that of other money managers that express concern about corporate responsibility. Domini Funds supported pay practices only 6% of the time during the period, while Calvert Investments did so at 46% of companies.

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As if Auckland real estate wasn’t bad enough yet.

Foreign Investment Turns New Zealand Stock Market Into A Casino (BBG)

As fund manager Mark Williams deliberated from his London office where next to invest, the world’s most remote stock market was just too good to pass up. That’s worrying locals, 11,000 miles away in New Zealand. The S&P/NZX 50 Index is the world’s best-performing developed stock gauge this year, climbing more than 7% to a record after overseas buying of equities jumped 21% in 2015. That’s driven stock valuations in the South-Pacific nation close to a record high, leaving them more expensive than anywhere else in the region. Funds from Henderson Global Investors to Liontrust Asset Management are buying into New Zealand, lured by dividends almost double the global average, rising earnings and expectations the central bank will cut interest rates to maintain growth.

Yet with a market cap of about $75 billion, smaller than the publicly traded value of Nike, opportunities are becoming more limited, says Matthew Goodson, an Auckland-based investor. “We’ve seen significant offshore inflows into larger-cap stocks and that’s driven their valuations to unusually high levels,” Goodson, who helps oversee about $1 billion at Salt Funds Management, said by phone. “It’s swamped the market and it leaves them very vulnerable. We’re somewhat nervous.” Foreigners now own about one third of New Zealand’s market, about three times the overseas ownership of U.S. equities, according to estimates from brokerage JBWere. Mark Williams, a money manager at Liontrust, is optimistic, given he expects the nation’s central bank will cut its key interest rate from an already record-low 2.25%.

While New Zealand accounts for less than 0.1% of the MSCI All Country World Index, Williams said he has 4.5% of his fund invested in the country. He bought Spark New Zealand and Fletcher Building in March, attracted by dividend yields of more than 5%. Spark, a communications provider, is the largest member by weighting of the S&P/NZX 50 gauge. “We find plenty of opportunities in New Zealand,” Williams, who helps manage $6.7 billion running an Asian equity-income fund at Liontrust, said by phone from London. “Interest rates remain relatively high, so that could lead to further cuts.”

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This author gets it spectacularly wrong.

Free Trade Has Won: Adapt Or Die Is The Only Option Left To Us (G.)

The Tata Steel sale has revived the battle between protectionists and free traders, a debate that became particularly acute in the run-up to the creation of the World Trade Organisation in 1995, which marked the success of “free traders” all around the world. In the protectionist camp, there is now a wide range of political parties from the extreme left to the extreme right: from Syriza to Ukip, from the Front National to Podemos. The common element for all these parties is that they dream of returning to a time when “we were in control”; when we could easily open or close our borders; when the world was manageable and small and we did not have to compromise. That is why they want national rules rather than international ones; and that is also why ultimately most of them despise the EU, because it is based not on direct control but on compromise.

The problem with that notion is that such a cosy world does not exist any more. The new generations expect to talk, travel and trade with each other all over the world, no matter where they are. My children, for example, know more about startup products released for crowdfunding around the world than about what is sold in shops in our high street; they respond to fashions that are created thousands of miles away; and they expect products to reach them almost instantaneously, no matter where they are made. Fluidity, speed, seamlessness and complexity define the 21st century. Fighting those trends makes sense only if you are of such an age and means that you can afford the luxury of whingeing about the present and dreaming nostalgically about the past, but if you are still trying to make your way in life, you have to embrace change and adapt.

Companies are rightly responding as quickly as possible to those new demands and, as a result, we are witnessing a level of international outsourcing that we could never have imagined. “Made in” labels mean little nowadays: companies based in the west often have their production plants elsewhere and use components sourced from third countries; and are financed by investors in yet other countries. If that were not complex enough, when countries impose trade barriers and erect controls, companies simply move overnight. Regulators and governments often do not stand a chance. That does not mean regulators should let modern trade become the Wild West. But it means they need to have the flexibility and tools to react better and faster.

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Banks create money out of nothing. They’re not intermediaries.

Economists Ignore One of Capitalism’s Biggest Problems (Steve Keen)

I like Joe Stiglitz, both professionally and personally. His Globalization and its Discontents was virtually the only work by a Nobel Laureate economist that I cited favourably in my Debunking Economics, because he had the courage to challenge the professional orthodoxy on the “Washington Consensus”. Far more than most in the economics mainstream—like Ken Rogoff for example—Joe is capable of thinking outside its box. But Joe’s latest public contribution—“The Great Malaise Continues” on Project Syndicate—simply echoes the mainstream on a crucial point that explains why the US economy is at stall speed, which the mainstream simply doesn’t get. Joe correctly notes that “the world faces a deficiency of aggregate demand”, and attributes this to both “growing inequality and a mindless wave of fiscal austerity”, neither of which I dispute.

But then he adds that part of the problem is that “our banks … are not fit to fulfill their purpose” because “they have failed in their essential function of intermediation”: Between long-term savers (for example, sovereign wealth funds and those saving for retirement) and long-term investment in infrastructure stands our short-sighted and dysfunctional financial sector… Former US Federal Reserve Board Chairman Ben Bernanke once said that the world is suffering from a “savings glut.” That might have been the case had the best use of the world’s savings been investing in shoddy homes in the Nevada desert. But in the real world, there is a shortage of funds; even projects with high social returns often can’t get financing. I’m the last one to defend banks, but here Joe is quite wrong: the banks have very good reasons not to “fulfill their purpose” today, because that purpose is not what Joe thinks it is.

Banks don’t “intermediate loans”, they “originate loans”, and they have every reason not to originate right now. In effect, Joe is complaining that banks aren’t doing what economics textbooks say they should do. But those textbooks are profoundly wrong about the actual functioning of banks, and until the economics profession gets its head around this and why it matters, then the economy will be stuck in the Great Malaise that Joe is hoping to lift us out of. The argument that banks merely intermediate between savers and investors leads the mainstream to a manifestly false conclusion: that the level of private debt today is too low, because too little private debt is being created right now. In reality, the level of private debt is way too high, and that’s why so little lending is occurring.

I can make the case empirically for non-economists pretty easily, thanks to an aside that Joe makes in his article. He observes that when WWII ended, many economists feared that there would be a period of stagnation: Others, harking back to the profound pessimism after the end of World War II, fear that the global economy could slip into depression, or at least into prolonged stagnation. In fact, the period from 1945 till 1965 is now regarded as the “Golden Age of Capitalism”. There was a severe slump initially as the economy changed from a war footing to a private one, but within 3 years, that transition was over and the US economy prospered—growing by as much as 10% in real terms in some years. (see Figure 1). The average from 1945 till 1965 was growth at 2.8% a year. In contrast, the average rate of economic growth since 2008 to today is precisely zero.

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Time for Trump?!

Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill (NYT)

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks. The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts. Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States. The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated.

In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot. “It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation. President Obama will arrive in Riyadh on Wednesday for meetings with King Salman and other Saudi officials. It is unclear whether the dispute over the Sept. 11 legislation will be on the agenda for the talks. Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.”

But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role. Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot. Those conclusions, contained in 28 pages of the report, still have not been released publicly. The dispute comes as bipartisan criticism is growing in Congress about Washington’s alliance with Saudi Arabia, for decades a crucial American ally in the Middle East and half of a partnership that once received little scrutiny from lawmakers. Last week, two senators introduced a resolution that would put restrictions on American arms sales to Saudi Arabia, which have expanded during the Obama administration.

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French protests have been going on for a while. Not sure Yanis should desire a role in this.

Varoufakis Joins French ‘Nuit Debout’ Anti-Labor Reform Protests (AFP)

Former Greek finance minister Yanis Varoufakis on Saturday addressed opponents of the French government’s workplace reforms at a protest in Paris, telling them the planned changes would “devalue labor.” “He (French President Francois Hollande) wants to devalue French labor… it can’t work,” Varoufakis told protesters as he paid a visit to the latest “Nuit Debout” (Up All Night) gathering at the city’s vast Place de la Republique. “Devaluing French labor can only deepen the crisis… I’m bringing to you solidarity from Athens,” he told the crowd. The labor reforms of France’s Socialist government aim to make it easier for struggling companies to fire people.

The government says they will make France’s rigid labor market more flexible but opponents say the reforms are too pro-business and will fail to reduce the 25% jobless rate among the young. Hundreds, at times thousands, of people have been demonstrating every night for the past two weeks at the Place de la Republique in central Paris. The labor reforms are a unifying theme of the gatherings but the so-called “Nuit Debout” movement is broader, embracing a range of anti-establishment grievances. The nightly protests have been marred by sporadic violence. The latest clashes erupted late Friday when, according to police, some 100 protesters set rubbish on fire and threw bottles and stones at officers, who responded with tear gas. Twenty-two people were arrested. The “Nuit Debout” demonstrations have spread to cities across France, becoming a major headache for the government.

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I still can’t muster much enthousiasm about this. He should have used much harsher words. There are still 3,000 people locked up there, including many children.

Pope Flies 12 Syrian Refugees to Vatican in Potent Symbol for EU (BBG)

Pope Francis made an emotional visit to the Greek island of Lesbos Saturday, plucking 12 Syrian refugees to take back to Rome with him and draw attention to what he called Europe’s most serious humanitarian crisis since the end of World War II. Francis, who has made migration a defining issue of his papacy, visited a refugee center as he appealed to the international community to deal with the migrants crisis as a humanitarian catastrophe. The pope said there was “reason to weep” on his visit to the refugees, and he brushed aside any political reasons for his invitation to have three families from Syria, 12 people including six children, accompany him on the flight home. “It is a purely humanitarian thing,” he told reporters on his chartered plane.

The Vatican will take financial responsibility for the families and an organization of volunteers, Comunità di Sant’Egidio, will initially host the groups, according to a statement. During the five-hour visit to Lesbos, the pontiff visited a refugee center with Ecumenical Patriarch Bartholomeos, the spiritual leader of the Orthodox Church, and was welcomed by Greek Prime Minister Alexis Tsipras. He also criticized the use of walls to keep migrants out. “In reality, barriers create divisions instead of promoting the true progress of peoples, and divisions sooner or later lead to conflicts,” Francis said in a speech at the port of Lesbos.

The visit was made days after migrants to Greece started being sent back to Turkey under a European Union agreement that has been criticized by the Vatican and denounced by human rights groups as impractical and legally suspect. Lesbos has become a repository for migrants seeking a better life in the EU: there were 3,560 refugees on the island as of Wednesday morning with more arriving each day, according to a daily tally issued by the Greek authorities. As he began the journey to Greece, the pope told reporters on his flight that the trip is marked by sadness. “This is important. It is a sad trip,” he said. “Refugees are not numbers, they are people who have faces, names, stories and need to be treated as such,” the pontiff said through his Twitter account.

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