Jack Delano Joliet, Illinois. Leaving the Atchison, Topeka & Santa Fe railyard 1943
“Nothing like this has been seen in European history since the 14th century, after the depletion of silver mines set off a slow monetary contraction, followed by Edward III’s default on debts to Italian banks and the Black Death soon after..”
Bond yields have plummeted to record lows across the eurozone as deflation becomes lodged in the system and markets bet on a blitz of asset purchases by the European Central Bank this month. German five-year yields dropped below zero for the first time ever, touching -0.007% on the first day of new year trading, implying that investors are willing to pay the German government to store their money for the rest of this decade. Italian, Spanish and Portuguese yields have seen spectacular drops over the past two trading days. The French state can borrow for five years at a rate of 0.13%, and Ireland can do so at 0.32%. Nothing like this has been seen in European history since the 14th century, after the depletion of silver mines set off a slow monetary contraction, followed by Edward III’s default on debts to Italian banks and the Black Death soon after, compounding a deflationary collapse.
“What we are seeing is the ‘Japanification’ trade,” said Andrew Roberts, credit chief at RBS. “The eurozone is sinking into corrosive deflation and it is too late to stop. We think the inflation rate in December may already have been negative. The ECB are in trouble, and they know it.” Mario Draghi, the ECB’s president, told Germany’s Handelsblatt that a slip into deflation “cannot be ruled out completely” and admitted that the bank is at mounting risk of breaching its price stability mandate. Mr Draghi said the ECB is “making technical preparations” to boost its balance sheet in early 2015, but offered no fresh clues on how much it will be or whether the measures will include full quantitative easing in the form of sovereign bond purchases.
Investors have taken his comments as a strong hint of QE as soon as this month, even though he repeated his usual caveat that new measures will be undertaken only “should it become necessary to further address risks of a too prolonged period of low inflation”. His interview may have been the trigger for the latest dash for EMU sovereign debt. There are not enough bonds to buy from certain countries if the ECB sweeps into the market on a grand scale. Bank of America said there would be an acute shortage of German debt since Berlin plans to run a budget surplus this year and will therefore be retiring bonds gradually instead of issuing them. The ECB would quickly run out of Latvian or Greek bonds trading on the open market. The US bank predicted bond purchases of between €180bn and €360bn a year, warning that the economic outlook will “deteriorate substantially” if the ECB is prevented from carrying out QE for political reasons.he said.
On its way to parity.
The U.S. dollar soared Friday, building on big gains scored in 2014, on expectations the Federal Reserve will raise interest rates while the ECB and Bank of Japan continue to loosen monetary policy in the year ahead. The ICE dollar index rose to 91.11, up from 90.27 in late North American trade on Wednesday and marking its highest level since March 2006, according to FactSet data. The index rose almost 13% in 2014, to mark its best yearly gain since 2005. “We have entered ‘15 with the same themes that we ended last year, namely positive U.S. sentiment fueling U.S. dollar gains,” wrote Jeremy Stretch, strategist at CIBC in London. Meanwhile, the euro “remains bedeviled by broad-based uncertainty as the Japanese yen remains on the defensive as the Bank of Japan maintains that they still have various tools to ease policy,” he said.
The euro kicked off 2015 on a downbeat note, falling to its lowest level versus the dollar since 2010, after European Central Bank President Mario Draghi hinted that the bank is moving closer to launching a full-scale quantitative easing program. The shared currency fell to $1.2001, down from $1.2099 on Wednesday, its lowest level since 2010. The euro’s weakness on Friday continued a trend seen in 2014, when it lost 12.2% against the dollar on expectations the ECB will act in early 2015 to implement full-blown quantitative easing, to help avert outright deflation in the eurozone. Renewed political turmoil in Greece, which faces a snap general election in January, is also weighing on the shared currency.
Draghi spoke about low inflation in an interview with German newspaper Handelsblatt, published on Friday, in which he said the eurozone remains in danger of falling into a downward spiral of declining consumer prices. “The risk that we do not fulfill our mandate of price stability is higher than six months ago,” he said in the interview. To fight off the risk of deflation, the central bank is therefore preparing to “adjust the scope, pace and composition of measures at the start of 2015, should this be necessary to respond to a too-long period of low inflation,” the ECB president said.
“The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors. [..] the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin.”
European media often speak of the “Greek recovery” and the growth of competitiveness of the country to try to persuade the public opinion about the effectiveness of austerity and structural reforms imposed by the Troika. Considering the macroeconomic data, however, we find a youth unemployment above 50%, a negative inflation rate and a debt-deflation spiral out of control. How is it possible to speak of “recovery” when three Greek citizen out of five have exceeded the poverty line? Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?
The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did. So, let’s be frank: There was no recovery. What we did have was a monstrous denial that was functional to the story Mrs Merkel wanted to convey to European citizens: If austerity worked even in Greece, it must be the right cure for every European realm, and it must thus be accepted unthinkingly by every European – especially the… Italians.
In Greece there will be a general election next January 25, 2015. According to the latest polls, SYRIZA, the main opposition party critic of the austerity measures imposed by the Troika, could be the winner. But, victory at the polls could be precluded by the speculative attack of the markets on spread, aimed at creating a climate of terror among the public. What remains of democracy in this oligarchic regime of the European Union? And the same scenario could be repeated in other countries with those parties critical of the institutional architecture of the EU? The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors.
When you do not borrow, you do not care about the interest rate! No, the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin. Days after its election, there is a strong chance that our European partners’ officials, in violation of democracy’s – and logic’s – most basic principles, will threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will. This is far, far worse, and morally more reprehensible, than being terrorised by the markets. Investors have every right to demand high interest rates in order to lend you money. Fellow democratic governments and unelected central bankers have no right to threaten a newly elected government with Armageddon if it dares ask for a renegotiation of an unsustainable loan agreement with the EU, the ECB and the IMF.
HA HA! “EU economic affairs commissioner Pierre Moscovici said that in joining the euro, the Lithuanian people are “choosing to be part of an area of stability, security and prosperity.“
Lithuania has celebrated the New Year by joining the eurozone. The decision is country’s bid to boost stability despite inflation fears and euro zone debt troubles. However, according to a November poll about 40% of the population opposed the move. Lithuanian Prime Minister Algirdas Butkevicius withdrew his first 10 euro bill from a Vilnius cash machine right after midnight January 1. The exchange rate is now set at one euro for 3.45 litas, the country’s old currency. Both litas and euros will circulate in the country till June. “The euro will serve as a guarantee for our economic and political security,” Butkevicius said at a ceremony which was attended by officials of other Baltic states – Estonia and Latvia.
Latvia joined the eurozone on January 1, 2014 despite opinion polls showing that a majority of the country’s population opposed the move, with just 20% strongly in favor. Estonia joined the currency bloc in 2011. “Myself, and I think, many of you feel sad that the litas, which has served us well for more than two decades, becomes history, but we have to move forward,” said Lithuania’s Finance Minister Rimantas Sadzius at the ceremony. Earlier the country’s President Dalia Grybauskaite said that joining eurozone is symbol of “deeper economic and political integration with the West.” However, not everyone in Lithuania shared the optimism of Grybauskaite.
According to a November survey released by the central bank, only 53% of the population supported the move, while 39% were against. “Financial commitments are a huge burden and increase the country’s debt. I think we should have delayed entry,” financial analyst Valdemaras Katkus told AFP. In the meantime the European Commission has put a huge banner over its headquarters in Brussels, saying “Welcome to the euro area, Lithuania!” EU economic affairs commissioner Pierre Moscovici said that in joining the euro, the Lithuanian people are “choosing to be part of an area of stability, security and prosperity.” Lithuania has already donated millions of euros to the eurozone’s rescue fund for struggling EU members, such as Greece.
“.. this action is so stupid no amount of commentary would possibly do it justice ..”
US foreign policy just jumped the shark: a few days after both the FBI and the US State department were humiliated when it was revealed that it wasn’t North Korea but a disgruntled, laid off Sony employee that was responsible for the “hack”, and when the best possible course of action would have been to simply let this latest embarrassing incident fade from memory, moments ago Obama – currently not working out next to a rainbow or flashing his support of “Shaka” – just signed his first executive order of 2015, imposing even more sanctions against North Korea. From Bloomberg:
President Obama signs order imposing additional sanctions on North Korea in response to country’s “efforts to undermine U.S. cyber-security and intimidate U.S. businesses and artists exercising their right of freedom of speech,” according to Treasury Dept statement. [..] Sanctions target 3 entities, 10 individuals [..] Including North Korea’s intelligence agency, arms dealer, North Korea’s representatives in Namibia, Sudan, Iran, Syria, China “Even as the FBI continues its investigation into the cyber-attack against Sony Pictures Entertainment, these steps underscore that we will employ a broad set of tools to defend U.S. businesses and citizens, and to respond to attempts to undermine our values or threaten the national security of the United States,” Treasury Sec. Lew says in statement.
That this action is so stupid no amount of commentary would possibly do it justice is quite clear, which is why we patiently await North Korean TV to escalate its comedic feud with the “monkey in a tropical jungle.” Perhaps the only silver lining is that Obama did not launch a nuclear attack on Pyongyang outright, although there is still a 2 year period until January 2017. And anything goes, especially once the NSA fabricates another YouTube clip.
“The truth is not being aired in the West. It’s a surreal perversion of history that’s going on once again, as in Bush pre-Iraq ‘WMD’ campaign.”
From Oliver Stone’s Facebook page: Excuse my absence these past weeks. A combination of overwork, prepping the Snowden movie in Germany & England, a side trip to Moscow, and a devastating head cold have laid me low. Recovering over Christmas in California; winter sun helps. Interviewed Viktor Yanukovych 4 hours in Moscow for new English language documentary produced by Ukrainians. He was the legitimate President of Ukraine until he suddenly wasn’t on February 22 of this year. Details to follow in the documentary, but it seems clear that the so-called ‘shooters’ who killed 14 police men, wounded some 85, and killed 45 protesting civilians, were outside third party agitators.
Many witnesses, including Yanukovych and police officials, believe these foreign elements were introduced by pro-Western factions – with CIA fingerprints on it. Remember the Chavez ‘regime change’/coup of 2002 when he was temporarily ousted after pro and anti-Chavez demonstrators were fired upon by mysterious shooters in office buildings. Also resembles similar technique early this year in Venezuela when Maduro’s legally elected Government was almost toppled by violence aimed at anti-Maduro protestors. Create enough chaos, as the CIA did in Iran ‘53, Chile ‘73, and countless other coups, and the legitimate Government can be toppled. It’s America’s soft power technique called ‘Regime Change 101.’
In this case the “Maidan Massacre” was featured in Western media as the result of an unstable, brutal pro-Russian Yanukovych Government. You may recall Yanukovych went along with the February 21 deal with opposition parties and 3 EU foreign minsters to get rid of him by calling for early elections. The next day that deal was meaningless when well-armed, neo-Nazi radicals forced Yanukovych to flee the country with repeated assassination attempts. By the next day, a new pro-Western government was established and immediately recognized by the US (as in the Chavez 2002 coup). A dirty story through and through, but in the tragic aftermath of this coup, the West has maintained the dominant narrative of “Russia in Crimea” whereas the true narrative is “USA in Ukraine.”
The truth is not being aired in the West. It’s a surreal perversion of history that’s going on once again, as in Bush pre-Iraq ‘WMD’ campaign. But I believe the truth will finally come out in the West, I hope, in time to stop further insanity. For a broader understanding, see Pepe Escobar’s analysis “The new European ‘arc of instability,’” which indicates growing turbulence in 2015, as the US cannot tolerate the idea of any rival economic entity. You might also see “Untold History” Chapter 10 where we discuss the dangers of past Empires which did not allow for the emergence of competing economic countries.
No surprise here.
In the shadow of a group of enormous smokestacks and abandoned foundries, a peeling sign welcomes visitors to the Wenxi Steel Industrial Park. But in the nearby village, the working-age men and many of the women have gone, leaving only the elderly and the very young. ‘If you cut down the big tree, all the small trees around it will die’, says 69-year-old Wang Peiqing, referring to the collapse of Highsee Iron and Steel Group, which operated the foundries before its recent closure devastated the economy of a once-prosperous corner of Shanxi province in central China. The entire region relied on the steel mill; now the young people have to go and look for work across China.
Highsee stopped paying its 10,000 employees six months ago. Local officials estimate the plant supported indirectly the livelihood of about a quarter of Wenxi county s population of 400,000. Highsee was the biggest privately owned steel mill in Shanxi, accounting for 60 per cent of Wenxi s tax revenues. For those reasons, the local government was reluctant to allow the company to go out of business, even though it had been in serious financial difficulties for several years. By 2011 Highsee was already like a dead centipede that hadn t yet frozen stiff with rigor mortis, says one official. More than half the plant shut down, but it was still producing steel even though its suppliers wouldn’t deliver anything without cash up front and it was drowning in debt.
Across the vast expanses of China, similar experiences are playing out, with thousands of companies in heavy industrial sectors plagued by chronic overcapacity that should be going bust instead being propped up by local governments. With enormous power over courts, state-owned banks and local administrative departments, Communist party officials across China are prepared to go to great lengths to support the biggest failing employers in their jurisdictions. It was only last month, four years after Highsee began to flounder, that the company was finally allowed by the government to initiate bankruptcy proceedings.
In the past month alone Chinese media have reported on at least nine large steel mills that appeared to be suspended in limbo after halting production but which are forbidden from going formally bankrupt. There are large numbers of companies across China that should go bankrupt but haven’t done so, says Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office, a Beijing legal practice. The government doesn’t want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear. By stopping companies from going bankrupt, officials are able to maintain the illusion of local prosperity, economic growth and stable taxes.
“.. the Fed is committed to sending its interest rate change messages by pony express to speculators who operate in the nano-second based cybersphere of modern trading technology. It’s not even a contest; its a bad joke which showers the 1% with stupendous windfalls.”
On August 4th the Wall Street Journal carried a breathless tale of how a handful of obscure oilfield suppliers were striking immense riches in the sand dunes of Wisconsin. Owing to the “shale revolution”, the stock price of an outfit that had originated in the stagnating business of supplying sand traps to golf courses, and which had been at death’s door as recently as 2011, had gone parabolic. Emerge Energy Services (EMES) presently traded at $145 per share, reflecting a red hot gain of 8.5X over its $17 IPO price fifteen months earlier. In a literal sense, silicon valley had come to the silicon dunes of Lake Michigan, as reflected in EMES’ valuation at 43X its LTM earnings.
Given the fact that EMES’ share price had most recently risen by $100 or $2.5 billion of market just since January 2014, the “momo” story was self-evidently all about upside growth, not current profits or cash flow. In fact, during its 14 quarters as a public filer, EMES had generated negative $50 million of operating cash flow after CapEx. So at a total enterprise value of $3.7 billion, the punters chasing the stock straight up the parabolic curve would seemingly have anticipated some stupendous growth indeed. Except……except they had no idea about EMES’ sustainable growth potential and didn’t care because the buyers were robots, day traders and flavor-of-the-month hedge funds.
They were piling into the stock of a company selling a form (white sand) of the second most abundant low-value commodity on planet earth for no other reason than Emerge Energy Services was another momo play on steroids. The “price action” was the investment thesis. Yet this typical momo “rip” had occurred not out of the natural elements of human greed and capitalist enterprise, but because the stock market has been destroyed by the Fed. That is, the combination of ZIRP and wealth effects “puts” have eviscerated all of the checks and balances that contain and modulate speculation in honest free markets. On the one hand, Fed policy has massively subsidized momo speculators in two powerful ways.
First, most of them operate through the options markets or employ other forms of heavy, short-term position leverage. Accordingly, their “carry” cost is close to zero, and their position leverage can be continuously rolled-over without risk. That’s because the Fed’s foolish commitment to “transparency” in pegging its policy rate means that speculators are in the catbird seat. In effect, the Fed is committed to sending its interest rate change messages by pony express to speculators who operate in the nano-second based cybersphere of modern trading technology. It’s not even a contest; its a bad joke which showers the 1% with stupendous windfalls.
Sand ‘producers’? Is that like water producers?
“This isn’t our first rodeo” has become a catchphrase among oil-industry executives who are laying off workers and dialing back spending in the wake of tumbling crude-oil prices. But for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride, industry analysts say. Sand is an important ingredient in hydraulic fracturing, or fracking, which has pushed American oil output above 9 million barrels a day, rivaling the production of Saudi Arabia or Russia. Sand companies’ biggest customers used to be golf courses and glass manufacturers, but the oil boom brought energy clients to their door and now roughly 60% of business is tied to fracking, according to PacWest Consulting Partners, which forecasts sand demand.
Now that oil prices have fallen, many fracking companies are retrenching—and that is bad news for sand producers. Earlier this fall PacWest projected sand use would grow by 20% each year in 2015 and 2016. But following the plunge in oil prices, PacWest now expects sand demand to stay flat. Meanwhile, new sand mines could add another 10% on top of the existing pile, creating a glut and pushing down prices, said Samir Nangia, a principal of PacWest. Global oil prices have plunged 50% since June, as the surging supply—thanks to fracking—collided with lackluster world-wide demand for fuel this fall.
With their revenue threatened, oil drillers and fracking companies are under tremendous pressure to dial down their spending and the companies they buy sand from will be easy targets, said Karen Nickerson, an energy analyst at Moody’s. “They’re going to push on who they can,” she said. U.S. Silica Holdings Inc., which operates sands mines in Wisconsin, Illinois and Oklahoma, says it is still expecting to grow in 2015, said chief executive Bryan Shinn. Even if oil companies drill fewer wells next year, they are increasing the amount of sand they use per well, he said. “This is providing us with a backstop,” said Mr. Shinn, adding that job cuts aren’t in the cards for his company. “We’re not even talking about that. If anything we might be looking to add jobs as opportunities arise.”
Big collapse coming.
The next generation of Americans to hit retirement will be ‘shocked’ when they find out how little they have to live on. A former Assistant Secretary of the Treasury warns that the US government is standing idly by. “We need to do something, we’re not doing anything,” she says. Professor Alicia Munnell, who is now director of Boston College’s Centre for Retirement Research, tells BBC World Service’s In the Balance programme that most Americans’ voluntary 401(k) pension schemes are seriously under-funded. In a new book, Falling Short, she says the only answer is to work longer and save more. But it is part of a bigger global pensions gap between what is needed to fund pensions and what is actually available in private and public pension pots.
America’s 401(k) was introduced in 1978 as a tax-efficient way of encouraging individual citizens to save for retirement. But the average 401(k) fund, to which individuals and employers contribute, stands at $111,000. That’s about enough to provide just $400 (£256) a month in retirement. On the streets of New York, we questioned people on how confident they were about their retirement income. “I’d say fairly-to-very confident,” says Mark, aged 53 from Boston. “I think we’ve done our part, put as much dough aside as possible. “In the next five to seven years we should be able to save even more – we’ll have to.”
However, Prof Munnell says the first retirees who are going to rely solely on their 401(k) are going to be “stunned” at how little that average $111,000 balance provides them in terms of monthly income. “People are going to be shocked,” she says. Hannah, a 31-year-old New Yorker says: “I think it is getting to the point now in the economy where people my age are going to have to work until they die. “I don’t think social security is going to be able to do anything by the time I retire.” While Prof Munnell says that there will always be some kind of safety net in the US, “we need to put more money in to maintain current benefit levels”.
And that collapse comes to you courtesy of Congress and Wall Street.
On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year. Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical. Wall Street’s representatives in Congress – the Democratic leadership as well as Republicans – took the opportunity to create an artificial crisis. The press called this “holding the government hostage.” The House – backed by the Senate – said that it would shut the government down at some future date if two basic laws were not changed. Most of the attention has been paid to Elizabeth Warren’s eloquent attack on the government guaranteeing bank trades in derivatives.
Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans. Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008. Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years. They are in a bind. Pension funds will fall further and further behind what theyneed to pay retirees if they do not make the impossibly high returns of 8.5%.
The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised, funds can make money purely financially – by Wall Street sharpies. The problem is that safe interest rates today are less than 1% for Treasury bonds. Everyithing else – stocks, corporate bonds, and hedge fund derivatives – are much more risky. And when Goldman Sachs, or JPMorgan Chase draw up a derivative for a client, their aim is to make money for themselves, not for the client. So pension funds have been at the losing end. Most funds would have done better simply to turn their money over to Vanguard in an indexed fund, and saved management fees.
At the state and local levels, pension funds in New Jersey and other states threaten to go the way of Detroit pension funds – to be cut back so that bondholders can be paid. Many corporate pension funds also are behind, because companies are using their record profits to pay higher dividends and to buy back their stocks to create price gains for speculators. But the funds most under attack are union pension funds. These are the funds that Congress has gone after. The fight is not merely to scale back pension funds – and avoid the government’s Pension Benefit Guarantee Corp (PBGC) being bailed out – but to break the power of unions to attract members or to defend them.
And wouldn’t you know, some try to attribute this to ‘increased confidence’.
Consumer helplines have sounded a warning after Britons ran up their highest level of new debt in November for nearly seven years, with the month’s borrowing on credit cards, loans and overdrafts hitting more than £1.25bn. National Debtline and Ste%hange said the figures from the Bank of England showed a worrying rise in consumers’ reliance on credit, and warned they expected a rush of people seeking help when the first credit card bills of the year started to arrive. Banks and credit card companies have been jostling for business with offers to attract new customers: loan rates have plummeted while balance transfer deals on credit cards have become increasingly generous. The £150bn UK credit card industry is to come under investigation this month by the Financial Conduct Authority over accusations of aggressive marketing after the watchdog suggested it had been pushing “payday loans with plastic”.
The £1.25bn net increase in unsecured borrowing during November was the biggest rise since February 2008, when Northern Rock was nationalised as the credit crunch took hold. It was the third month out of five that consumers had taken on more than £1bn of new debt. More than £980m was taken out in loans and overdrafts during the month, sharply up from the monthly average of £728m over the previous six months. Credit card lending fell to £269m, from £399m in October, but remained above the average for the previous six months. The Bank of England said over the course of three months unsecured lending had grown at its most rapid pace since October 2005, and in November was up 6.9% compared with November 2013. Howard Archer, chief UK economist at IHS Economics, said the surge in retail sales around Black Friday was probably linked to the increase in borrowing – retail experts IMRG estimated £810m was spent online during the promotional day – but he added there were also likely to be other factors behind the rise in debt.
“Relatively high consumer confidence means people have become more prepared to borrow in recent months,” he said. “It also may well be that a significant amount of people have recently been borrowing more due to the squeeze on their purchasing power coming from extended low earnings growth.” The shadow consumer minister, Stella Creasy, said the UK had a “massive looming personal debt crisis” and many households were being forced to borrow to fund living costs. “They’re not buying big fancy TVs and posh holidays – they are borrowing to cover the gap between what they earn and what they need to pay for each month,” she said. Creasy said there was a “big gaping hole at the heart of our economy” being fuelled by borrowing, and tackling problem personal debt needed to be a political priority.
In the US, it’s already taken over the government.
European leaders have joined forces to warn of the rise of right-wing political movements on the continent, amid fears of “unrest and political turmoil” in the region if their growth goes unchecked. Speaking in her traditional New Year’s address, German Chancellor Angela Merkel warned against right-wing populism and criticized recent anti-Islamic protests in the country, saying they were driven by prejudice and a hatred of foreigners. And Merkel is not the only leader aware of rise of the right among voters across Europe. Merkel’s counterparts in France and Italy have both made recent comments about the unpalatable prominence of populist movements in their countries. In their new year addresses, French President Francois Hollande attacked what he called “dangerous” populist movements, and Giorgio Napolitano, the 89 year-old outgoing Italian President, warned there was “nothing more unrealistic or dangerous” than calls for Italy to leave the euro zone.
As well as opposing immigration, many of these movements also campaign against the European Union (EU) and the single currency union, the euro zone. Examples include the Alternative for Germany (AfD) and the U.K. Independence Party (UKIP), both of which have positioned themselves as euroskeptic alternatives to the mainstream parties. But more extremist right-wing groups are also gaining in popularity in some countries, with Golden Dawn in Greece getting a boost from anger at the country’s rising unemployment and tough austerity policies, implemented as part of economic reforms. The party is often described as neo-Nazi, although it rejects this label. In countries like France, where growth remains anaemic, the political elite could face real problems from parties like the National Front, Howard Goldring, managing director of Delmore Asset Management, warned.
“The National Front is doing quite well and they are playing on popular fears (over immigration and the economy),” he told CNBC on Friday. “It’s clear that France really has problems and the economy could slow down further and, therefore, you can expect more unrest and political turmoil.” The party’s current leader, Marine Le Pen, has tried to clean up the party’s image after taking over from her father Jean-Marie Le Pen, who made several anti-Semitic comments during his tenure of the party. It comes amid growing concerns about Europe’s tentative economic recovery. Eurozone GDP grew by just 0.2% in the third quarter, on the previous quarter, and inflation remained subdued at 0.3% in November on the back of a lower oil price.
They still recall more than they produce?!
General Motors began the new year by announcing three new vehicle recalls on Thursday, as the ignition switch crisis continued to dog the automaker after millions of vehicles were recalled in 2014. No crashes or injuries were reported in the latest round of recalls involving 83,572 sport-utility vehicles and pickup trucks. GM expects that fewer than 500 will be affected by the defect, an ignition lock actuator with an outer diameter that exceeds specifications. Still, the issue could spook consumers and investors. Ignition system problems were behind the record number of recalls made in 2014 by GM, which has struggled to rebuild its reputation following its 2009 bankruptcy. The recalls hit GM’s share price, which fell 14.6% during 2014, a year in which shares of rival Ford rose about 0.5%.
GM recalled more than 2.5 million vehicles in 2014 after accidents that caused more than 40 deaths. The compensation program, which is accepting claims until Jan. 31, has received more than 2,200 claims for injuries and deaths as a result of the issue. In the primary recall announced on Thursday, the outsized ignition lock actuator can lead to the ignition key getting stuck in the “start” position. If the vehicle is driven that way and experiences a “significant jarring event,” the ignition lock cylinder could move into the “accessory” position, affecting engine power, power steering and power braking. “Also, the timing of the key movement into the accessory position relative to crash sensing could result in the air bags not deploying in certain crashes,” company spokesperson Alan Alder said in a statement.
“Investigators say they would have uncovered even more abuses if Petrobras hadn’t refused to provide key documents.”
When federal investigators first identified signs of corruption at Petrobras in 2009, Dilma Rousseff insisted Brazil’s state-run oil company had nothing to hide. “Petrobras has one of the most accurate accounting standards in the world,” said Rousseff, who was then chairwoman of its board and is now Brazil’s president. “If it wasn’t the case, investors would not be seeking out the company as one of the great investment targets.” Today, it’s clear her confidence was misplaced. Petrobras now acknowledges it overpaid on contracts for years. Prosecutors say engineering firms paid bribes to win Petrobras contracts, systematically overcharged it to the tune of billions of dollars and funneled a cut of the money to corrupt executives, vendors and political parties, including Rousseff’s ruling Workers’ Party.
A Reuters review of a 2009 federal investigation of Petrobras, and interviews with those who conducted it, indicates Rousseff missed opportunities to stop the graft before it erupted into a crisis so big it could push Brazil’s slow-growing economy back into recession next year. Rousseff says she did not know about the corruption, or participate in it, when she was Petrobras’ chairwoman from 2003 to 2010. Opposition leaders say they believe her and that she is unlikely to face impeachment. Polls show her popularity has suffered only slightly. Still, she faces mounting scrutiny over whether she did enough to halt the corruption at Brazil’s biggest company by revenue. The scandal could haunt her in her second term as president, which began on Thursday.
Petrobras’ stock has fallen nearly 50% in the last six months and its market value is down more than 80% from its peak in 2008. Two top former executives and three dozen other suspects allegedly involved in the scheme have been indicted. The accounting standards that Rousseff praised are now in such disrepute that independent auditors have refused to certify Petrobras’ quarterly results because, pending further investigation, they are unable to put a value on its assets.
Records from the Federal Audits Court, or TCU, show that investigators detected widespread over-charging on contracts and irregular tendering practices at major Petrobras projects. They included the Abreu e Lima refinery in northeast Brazil, the biggest single investment project in Petrobras’ history. The TCU advised both the government and Petrobras’ directors in a report that was sent directly to Rousseff and her board. Investigators say they would have uncovered even more abuses if Petrobras hadn’t refused to provide key documents. The TCU’s findings were “a clear warning sign of bigger problems and likely corruption,” Saulo Puttini, who was one of the auditing officials, told Reuters. “What’s happening now is not a surprise to us at all.”
“.. if they can’t have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve.”
Some people enjoy having the Big Picture laid out in front of them—the biggest possible—on what is happening in the world at large, and I am happy to oblige. The largest development of 2014 is, very broadly, this: the Anglo-imperialists are finally being forced out of Eurasia. How can we tell? Well, here is the Big Picture—the biggest I could find. I found it thanks to Nikolai Starikov and a recent article of his. Now, let’s first define our terms. By Anglo-imperialists I mean the combination of Britain and the United States. The latter took over for the former as it failed, turning it into a protectorate. Now the latter is failing too, and there are no new up-and-coming Anglo-imperialists to take over for it.
But throughout this process their common playbook had remained the same: pseudoliberal pseudocapitalism for the insiders and military domination and economic exploitation for everyone else. Much more specifically, their playbook always called for a certain strategem to be executed whenever their plans to dominate and exploit any given country finally fail. On their way out, they do what they can to compromise and weaken the entity they leave behind, by inflicting a permanently oozing and festering political wound. “Poison all the wells” is the last thing on their pre-departure checklist.
• When the British got tossed out of their American Colonies, they did all they could, using a combination of import preferences and British “soft power,” to bolster the plantation economy of the American South, helping set it up as a sort of anti-United States, and the eventual result was the American Civil War. • When the British got tossed out of Ireland, they set up Belfast as a sort of anti-Ireland, with much blood shed as a result. • When the British got tossed out of the Middle East, they set up the State of Israel, then the US made it into its own protectorate, and it has been poisoning regional politics ever since. (Thanks to Kristina for pointing this out in the comments.) • When the British got tossed out of India, they set up Pakistan, as a sort of anti-India, precipitating a nasty hot war, followed by a frozen conflict over Kashmir. • When the US lost China to the Communists, they evacuated the Nationalists to Taiwan, and set it up as a sort of anti-China, and even gave it China’s seat at the United Nations.
The goal is always the same: if they can’t have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve. And so if you see Anglo-imperialists going out of their way and spending lots of money to poison the political well somewhere in the world, you can be sure that they are on their way out. Simply put, they don’t spend lots of money to set up intractable problems for themselves to solve—it’s always done for the benefit of others.
That bad is bad.
Wildfires raging east of South Australia’s capital Adelaide are the worst the region has seen in more than 30 years, damaging homes and prompting the government to warn of “incredibly dangerous” conditions. A major emergency was declared as South Australia Premier Jay Weatherill today urged residents to leave areas threatened by fires burning out of control for a second day. Blazes have also broken out in neighboring Victoria state. “It could be a catastrophic decision to leave late,” Weatherill said in a news conference broadcast on Sky TV. “We’re dealing with an incredibly dangerous fire” in and around the southern Mount Lofty Ranges, he said.
Conditions in the area are the worst since 1983, when 75 people in the two states died in what became known as the Ash Wednesday fires, South Australia Police Commissioner Gary Burns said at the news conference. Temperatures rose over central Australia in the past week and winds are pushing that hot air south, the Bureau of Meteorology said in a statement yesterday. It forecast temperatures of more than 40 degrees Celsius (104 degrees Fahrenheit) across the southern part of the country. The nation’s hot, dry climate makes wildfires a major risk in the southern hemisphere’s summer. In February 2009, bushfires across Victoria killed 173 people and destroyed 150 homes in the worst blazes in Australian history.