Jun 152018
 
 June 15, 2018  Posted by at 8:10 am Finance Tagged with: , , , , , , , , , , , , ,  


OR LIGHT Compassion 2018

 

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)
ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)
Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)
Powell Orchestrates a Masterful Move (DDMB)
The Fed Creates Problems For Itself (Macleod)
The Art of the Deal Worked On Sentosa Island (AT)
Absence of “CVID” In Joint Statement? (Hani)
Optimism (Caitlin Johnstone)
Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)
‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)
Greeks Are Least Satisfied In The EU (K.)
Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)
Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)
A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

 

 

Money has left the building.

Argentina’s Peso Collapses Even Further Despite $50 Billion IMF Bailout (WS)

Today the Argentina peso plunged another 5.5% against the US dollar. It now takes ARS 27.7 to buy $1. Over the past 16 years, the peso has gone through waves of collapses. This collapse began on April 20. The central bank of Argentina (BCRA) countered it by selling $1 billion per day of scarce foreign exchange reserves and buying pesos. The peso fell more quickly. The BCRA responded with three rate hikes, to finally 40%! On May 8, the government asked the IMF for a bailout. On May 16, after a chaotic plunge of the peso, the BCRA was able to refinance about $26 billion in maturing peso-denominated short-term debt (Lebacs) at an annual interest of 40%, and the peso bounced. It was a dead-cat bounce, however, and the peso plunged another 13% against the dollar through today.

Since April 20, the peso has plunged 27.5%. The annotated chart shows the daily moves of the collapse, and the various failed gyrations to halt it (the chart depicts the value of 1 ARS in USD). The collapse of the peso comes despite an endless series of measures to halt it. Just this week so far: On Tuesday, the BCRA decided to keep its key interest rate at 40%; and on Wednesday, the Ministry of Finance announced it would hold daily auctions to sell $7.5 billion in foreign exchange reserves and buy pesos, to prop up the peso. But it was apparently the only one buying pesos. With inflation at 25.5% and heading to 27% by year-end, according to government estimates, with a rising budget deficit, a surging current account deficit, soaring borrowing costs, and burned investors, what else is there to do?

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Not Draghi’s finest hour.

ECB Calls Halt To Quantitative Easing, Despite ‘Soft’ Euro (G.)

The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year. Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. The ECB is currently boosting the eurozone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of 2018.

The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75percentage points a year to the average 2.25% annual growth rate.

The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. “We decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path,” Draghi said.

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No, really, Abenomics is dead.

Japan’s Central Bank Dials Down Inflation View, Complicates Stimulus-Exit (R.)

The Bank of Japan maintained its ultra-loose monetary policy on Friday and downgraded its view on inflation in a fresh blow to its long-held 2% price goal, further complicating the central bank’s path to rolling back its crisis-era stimulus. Markets are on the lookout for clues from BOJ Governor Haruhiko Kuroda’s post-meeting briefing on how long the central bank could hold off on whittling down stimulus given recent disappointingly weak price growth. As widely expected, the Bank of Japan kept its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero%.

The move contrasts with the European Central Bank’s decision to end its asset-purchase program this year and the U.S. Federal Reserve’s steady rate increases, which signaled a break from policies deployed to battle the 2007-2009 financial crisis. “Consumer price growth is in a range of 0.5 to 1%,” the BOJ said in a statement accompanying the decision. That was a slightly bleaker view than in the previous meeting in April, when the bank said inflation was moving around 1%. The BOJ stuck to its view the economy was expanding moderately, unfazed by a first-quarter contraction that many analysts blame on temporary factors like bad weather.

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He just likes the attention.

Powell Orchestrates a Masterful Move (DDMB)

Federal Reserve Chairman Jerome Powell has taken the first steps in remaking the central bank in his “plain-English” image, which can only be a good thing for financial markets. Earlier this week, news leaked that the central bank was considering holding a press conference following each Federal Open Market Committee meeting instead of after every other one like it does now. The reports set off a mini-storm. Speculation rose the Fed would implement this new policy immediately, which could mean the central bank was considering accelerating the pace of interest-rate increases as soon as August. After all, investors had become accustomed to the Fed only making a major policy move at meetings followed by a press conference. Now, every meeting would be “live.”

But in a masterful move, Chairman Jerome Powell managed to confirm the policy while also putting financial markets at ease. Rather than announcing the change in the official statement outlining the Fed’s plan to raise its target for the federal funds rate for the seventh time since December 2015, Powell waited until the start of his press conference to drop the bomb, noting that the policy wouldn’t start until January. Here’s Powell’s reasoning: “My colleagues and I meet eight times a year and take a fresh look each time at what is happening in the economy and consider whether our policy needs adjusting. We don’t put our interest rate decisions on auto-pilot because the economy can always evolve in unexpected ways.

History has shown that moving interest rates either too quickly or too slowly can lead to bad economic outcomes. We think the outcomes are likely to be better overall if we are as clear as possible about what we are likely to do and why. To that end, we try to give a sense of our expectations for how the economy will evolve and how our policy stance may change. As Chairman, I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. And one practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings. We’re going to do that beginning in January. That will give us more opportunities to explain our actions and to answer your questions.

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“..the unsustainable excesses of unprofitable debt created by suppressing interest rates..”

The Fed Creates Problems For Itself (Macleod)

Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates. Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis.

The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis. Previous peaks in the FFR coincided with the onset of economic downturns, because they exposed unsustainable business models. On the basis of simple extrapolation, the area between the two dotted lines, which roughly join these peaks, is where the current FFR cycle can be expected to peak. It is currently standing at about 2% after yesterday’s increase, and the Fed expects the FFR to average 3.1% in 2019. The chart tells us the Fed is already living dangerously with yesterday’s hike, and further rises will all but guarantee a credit crisis.

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The view from Asia Times. Many people in that part of the world don’t understand the criticism.

The Art of the Deal Worked On Sentosa Island (AT)

Some statesmen by their sheer force of personality and unorthodox ways of politicking arouse disdain among onlookers. US President Donald is perhaps the most famous figure of that kind in world politics today. No matter what he does, Trump attracts criticism. He evokes strong feelings of antipathy among a large and voluble swathe of opinion within half of America. The making of history in a virtual solo act on his part, which is the rarest of efforts, on Sentosa Island in Singapore on Tuesday and which the world watched with awe and disbelief, will be instinctively stonewalled. Half of America simply refuses to accept the positive tidings about him coming from Singapore.

The skeptics are all over social media pouring scorn, voicing skepticism, unable to accept that if the man has done something sensible and good for his country and for world peace, it deserves at the very least patient, courteous attention. The problem is about Trump – not so much the imperative need of North Korea’s denuclearization. But western detractors – ostensibly rooting for the “liberal international order” – will eventually lapse into silence because what emerges is that North Korean leader Kim Jong-un has enough to “bite” here in the deal that Trump is offering – broadly, a security guarantee from the US and the offer of a full-bodied relationship with an incremental end to sanctions plus a peace treaty.

Succinctly put, Trump has offered a deal that Kim simply cannot afford to reject. The ending of the US-ROK military exercises forthwith; Trump’s agenda of eventual withdrawal of troops from ROK; the lure of possible withdrawal of sanctions once 20% of the denuclearization process gets underway, or once the process becomes irreversible; Trump’s hint that he has sought assurances from Japan and the ROK that they will be “generous” in offering economic assistance to the reconstruction of North Korea; China’s involvement in the crucial process – these are tangibles.

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The view from South Korea.

Absence of “CVID” In Joint Statement? (Hani)

The absence of any reference to “complete, verifiable, and irreversible dismantlement” (CVID) of North Korea’s nuclear program in the joint statement reached at US President Donald Trump and North Korean leader Kim Jong-un’s June 12 summit in Singapore is being seen by some as a “negotiation failure” on the US’s part. But an analysis of Trump’s subsequent remarks – and a reading between the lines of the Pyongyang’s official announcement – suggests the US achieved practical gains in terms of a commitment from the North in exchange for the face-saving measure of avoiding use of the “CVID” term due to possible North Korean objections to it.

To begin with, the Singapore joint statement’s language marks a step forward from the Panmunjeom Declaration of Apr. 27 in terms of the final goal of denuclearizing the Korean Peninsula. The latest statement refers to Kim having “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.” While the Panmunjeom Declaration referred to “realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” the new statement includes the additional reference to a “firm and unwavering commitment.”

From the reference to Kim’s “firm and unwavering” commitment to denuclearization, some experts are suggesting North Korea may have agreed to verification in addition to denuclearization – in other words, that the language may be a substitute for the “verifiable” part of the CVID approach demanded by Washington. “You could see them as having used the term out of awareness of North Korea’s discomfort with the word ‘verification,’” Handong Global University professor Kim Joon-hyung said after a Korea Press Foundation debate at Singapore’s Swissotel on June 13. “It may be fair to say North Korea made a definite commitment on the implementation and verification issues,” Kim argued.

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“..while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter. ”

Optimism (Caitlin Johnstone)

Off the top of my head I have a hard time thinking of anything sleazier than smearing peace talks in order to gain partisan political points, but that has indeed been the theme of the last few days when it comes to the Singapore summit. Liberal pundits everywhere have been busily circulating the narrative that Kim Jong-Un “played” Trump by getting him to temporarily halt military drills in exchange for suspended nuclear testing. It was the most fundamental beginning of peace negotiations and a slight deescalation in tensions on the Korean Peninsula, but the way they talk about it you’d think Kim had taken off from Singapore in Air Force One with the keys to Fort Knox and Melania on his lap.

I’m not sure how far up the military-industrial complex’s ass one’s head needs to be to think that one single step toward peace is a gigantic take-all-the-chips win for the impoverished North Korea, but many of Trump’s political enemies are taking it even further. Senate Democrats have introduced a bill to make it more difficult for Trump to withdraw US troops from South Korea, because while you can always count on Capitol Hill to make it incredibly easy for a president to deploy military personnel around the globe, giving that same office the power to bring troops home is a completely different matter.

Surprising no one, MSNBC’s cartoon children’s program The Rachel Maddow Show took home the trophy for jaw-dropping, shark-jumping ridiculousness with an eighteen-minute Alex Jones impression claiming that the chief architect of the Korean negotiations was none other than (and if you can’t guess whose name I’m going to write once we get out of these parentheses I deeply envy your ignorance on this matter) Vladimir Putin. [..] This president is facilitating acts of military violence and dangerous escalations around the world; anyone who isn’t relieved by the possibility of one powder keg being defused in that rampage actually has a lot more faith in Trump’s competence than they’re pretending to.

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Easy pickings.

Blackstone Becomes Biggest Hotel & Property Owner in Spain (WS)

Private equity firm Blackstone, the undisputed king of property funds, continues to bet big on global real estate. In the last week it raised $9.4 billion for Asian real estate. It was also given the green light to acquire Spain’s biggest real estate investment fund (REIT), Hispania, for €1.9 billion. The move, after its prior acquisitions, will cement its position as Spain’s biggest hotel owner and fully private landlord. Hispania’s 46 hotels, added to Blackstone’s other hotels, will turn the PE firm into Spain’s largest hotelier with almost 17,000 rooms, far ahead of Meliá (almost 11,000), H10 (more than 10,000) and Hoteles Globales (just over 9,000).

It took Blackstone just three moves to become market leader. First, it acquired the hotel group HI Partners from struggling Spanish lender Banco Sabadell for €630 million in October 2017. Then, a month ago, it bought 29.5% of the hotel chain NH Hoteles, which is currently in the hands of the Chinese conglomerate HNA. Now, by raising its stake in Hispania from 16.75% to 100%, it will take up a dominant position in one of the world’s biggest tourist markets. With this deal, it will also expand its residential property empire in Spain. Blackstone has over 100,000 real estate assets controlled via dozens of companies. Those assets include a huge portfolio of impaired real estate assets, including defaulted mortgages and real estate-owned assets (REOs).

Blackstone also owns 1,800 social housing units, which it acquired from Madrid City Hall in a controversial deal brokered by the son of former Spanish prime minister José María Aznar and former Madrid mayor Ana Botella. Blackstone paid €202 million for the apartments in 2013; they are now estimated to be worth €660 million — a 227% return in just five year! Since its purchase of the properties, Blackstone has hiked rents on the flats by 49%. Those who can’t pay have been evicted. Blackstone also played a starring role in one of the world’s biggest real estate operations of 2017, in which it payed €5.1 billion for the defaulted loans Banco Santander inherited from its shotgun-acquisition of Banco Popular.

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“..a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction.”

‘Tourism Pollution’: Japanese Crackdown Costs Airbnb $10 Million (G.)

It has become a familiar scene: tourists in rented kimonos posing for photographs in front of a Shinto shrine in Kyoto. They and other visitors have brought valuable tourist dollars to the city and other locations across Japan. But now the country’s former capital is on the frontline of a battle against “tourism pollution” that has already turned locals against visitors in cities across the world such as Venice, Barcelona and Amsterdam. The increasingly fraught relationship between tourists and their Japanese hosts has spread to the short-stay rental market. On Friday a new law comes into effect that requires property owners to register with the government before they can legally make their homes available through Airbnb and other websites.

The restriction has caused the number of available properties to plummet and has cost the US-based company millions of dollars. Thanks to government campaigns, the number of foreign tourists visiting Japan has soared since the end of a flat period caused by a strong yen and radiation fears in the aftermath of the 2011 Fukushima disaster. A record 28.7 million people visited last year, an increase of 250% since 2012. Almost seven million were from China, with visitors from South Korea, Taiwan, Hong Kong Thailand and the US taking the next five spots. By 2020, the year Tokyo hosts the Olympic Games, the government hopes the number will have risen to 40 million.

[..] Under the new private lodging law, which was supposed to address a legal grey area surrounding short-term rentals – known as minpaku – properties can be rented out for a maximum of 180 days a year, and local authorities are permitted to impose additional restrictions. The result has been a dramatic drop in the number of Japanese properties available via Airbnb, from more than 60,000 this spring to just 1,000 on the eve of the law’s introduction. The legislation has forced the firm to cancel reservations for guests planning to stay in unregistered homes after Friday and to compensate clients to the tune of about $10m.


A sign in Kyoto cautions against touching geishas, taking selfies, littering, sitting on fences and eating and smoking on the street. Photograph: Justin McCurry for the Guardian

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Surprise!

Greeks Are Least Satisfied In The EU (K.)

Greece is the least satisfied nation in the European Union, according to a Eurobarometer survey published Thursday. More specifically, the survey, conducted between March 17 and 28, showed that just 52% of Greeks said they were satisfied with their lives, compared to a 83% average for the 28-member bloc. Only 35% of Greeks surveyed said they were satisfied with the financial situation of their households, compared to 71% across the EU. A staggering 98% said the state of the country’s economy is bad while one in two Greeks said the country’s financial crisis is not over yet and that it will deteriorate even further. As for the country’s general situation, 94% said it is negative. Just 6% said the general situation was positive compared to the 51% average for EU member-states.

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Even turkeys?!

Turkey: Even Birds Need Our Consent To Fly In The Aegean (K.)

With Greece featuring prominently in Turkey’s election campaigning, Turkish Foreign Minister Mevlut Cavusoglu raised the tension a notch again Thursday, warning that not even a bird will fly over the Aegean without Ankara’s permission. Responding to criticism by Turkish ultra-nationalists that 18 islands have been “lost” to Greece in recent years, Cavusoglu said that since the crisis over the Imia islets in 1996 there have been no changes in the legal status of the Aegean. “Not only during our own rule, but before that there has been no change in the status of the Aegean. We will not allow this. Even in the case of research we will not give permission, not even to a bird in the Aegean,” he said during an interview with a Turkish radio station.

He went on to say that Turkey will make no concessions in the Aegean and Cyprus, and that Ankara will also begin gas exploration “around” the Eastern Mediterranean island. “We also have a drill,” he said. Turkey has vowed to stop Cyprus from drilling for gas and oil in its exclusive economic zone (EEZ), insisting there can be no development of the island’s natural resources without the participation of the Turkish Cypriots in the island’s Turkish-occupied north. “In the last few months we have prevented drilling and we drove the Italians away. We will not allow anyone to take away the rights of Turkish Cypriots,” he said. Cyprus government spokesman Prodromos Prodromou said that Nicosia will not be dragged into the “climate of tension” that Turkey is cultivating. He cited international law and said that Cyprus has an established EEZ. Moreover, he said the US, Russia and the European Union have all backed Cyprus’s rights.

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Wonder what the fallout will be.

Comey et al Just Made It More Difficult For Mueller To Prosecute Trump (Hill)

James Comey once described his position in the Clinton investigation as being the victim of a “500-year flood.” The point of the analogy was that he was unwittingly carried away by events rather than directly causing much of the damage to the FBI. His “500-year flood” just collided with the 500-page report of the Justice Department inspector general (IG) Michael Horowitz. The IG sinks Comey’s narrative with a finding that he “deviated” from Justice Department rules and acted in open insubordination. Rather than portraying Comey as carried away by his biblical flood, the report finds that he was the destructive force behind the controversy. The import of the report can be summed up in Comeyesque terms as the distinction between flotsam and jetsam.

Comey portrayed the broken rules as mere flotsam, or debris that floats away after a shipwreck. The IG report suggests that this was really a case of jetsam, or rules intentionally tossed over the side by Comey to lighten his load. Comey’s jetsam included rules protecting the integrity and professionalism of his agency, as represented by his public comments on the Clinton investigation. The IG report concludes, “While we did not find that these decisions were the result of political bias on Comey’s part, we nevertheless concluded that by departing so clearly and dramatically from FBI and department norms, the decisions negatively impacted the perception of the FBI and the department as fair administrators of justice.”

The report will leave many unsatisfied and undeterred. Comey went from a persona non grata to a patron saint for many Clinton supporters. Comey, who has made millions of dollars with a tell-all book portraying himself as the paragon of “ethical leadership,” continues to maintain that he would take precisely the same actions again. Ironically, Comey, fired FBI deputy director Andrew McCabe, former FBI agent Peter Strzok and others, by their actions, just made it more difficult for special counsel Robert Mueller to prosecute Trump for obstruction. There is now a comprehensive conclusion by career investigators that Comey violated core agency rules and undermined the integrity of the FBI. In other words, there was ample reason to fire James Comey.

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Many heads will roll at the Bureau.

A Closer Look At Extreme FBI Bias Revealed In OIG Report (ZH)

As we digest and unpack the DOJ Inspector General’s 500-page report on the FBI’s conduct during the Hillary Clinton email investigation “matter,” damning quotes from the OIG’s findings have begun to circulate, leaving many to wonder exactly how Inspector General Michael Horowitz was able to conclude: “We did not find documentary or testimonial evidence that improper considerations, including political bias, directly affected the specific investigative actions we reviewed” We’re sorry, that just doesn’t comport with reality whatsoever. And it really feels like the OIG report may have had a different conclusion at some point.

Just read IG Horowitz’s own assessment that “These texts are “Indicative of a biased state of mind but even more seriously, implies a willingness to take official action to impact the Presidential candidate’s electoral prospects.” Of course, today’s crown jewel is a previously undisclosed exchange between Peter Strzok and Lisa Page in which Page asks “(Trump’s) not ever going to become president, right? Right?!” to which Strzok replies “No. No he’s not. We’ll stop it.” Nevermind the fact that the FBI Director, who used personal emails for work purposes, tasked Strzok, who used personal emails for work purposes, to investigate Hillary Clinton’s use of personal emails for work purposes. Of course, we know it goes far deeper than that…

The Wall Street Journal’s Kimberley Strassel also had plenty to say in a Twitter thread:
1) Don’t believe anyone who claims Horowitz didn’t find bias. He very carefully says that he found no “documentary” evidence that bias produced “specific investigatory decisions.” That’s different
2) It means he didn’t catch anyone doing anything so dumb as writing down that they took a specific step to aid a candidate. You know, like: “Let’s give out this Combetta immunity deal so nothing comes out that will derail Hillary for President.”
3) But he in fact finds bias everywhere. The examples are shocking and concerning, and he devotes entire sections to them. And he very specifically says in the summary that they “cast a cloud” on the entire “investigation’s credibility.” That’s pretty damning.
4) Meanwhile this same cast of characters who the IG has now found to have made a hash of the Clinton investigation and who demonstrate such bias, seamlessly moved to the Trump investigation. And we’re supposed to think they got that one right?
5) Also don’t believe anyone who says this is just about Comey and his instances of insubordination. (Though they are bad enough.) This is an indictment broadly of an FBI culture that believes itself above the rules it imposes on others.
6) People failing to adhere to their recusals (Kadzik/McCabe). Lynch hanging with Bill. Staff helping Comey conceal details of presser from DOJ bosses. Use of personal email and laptops. Leaks. Accepting gifts from media. Agent affairs/relationships.
7)It also contains stunning examples of incompetence. Comey explains that he wasn’t aware the Weiner laptop was big deal because he didn’t know Weiner was married to Abedin? Then they sit on it a month, either cuz it fell through cracks (wow) or were more obsessed w/Trump
8) And I can still hear the echo of the howls from when Trump fired Comey. Still waiting to hear the apologies now that this report has backstopped the Rosenstein memo and the obvious grounds for dismissal.

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Jun 072018
 
 June 7, 2018  Posted by at 8:17 am Finance Tagged with: , , , , , , , , , , ,  


Ivan Aivazovsky Stormy Night at Sea 1850

 

Is Draghi Risking Everything To Teach Rome A Lesson? (ZH)
The Next Economic Crisis Begins in the European Union (Bruno)
David Stockman: Stocks Will Plunge 50% In This ‘Daredevil Market’ (CNBC)
Euro Recovers On Rising Bets ECB May Unwind Stimulus (R.)
Indonesia Joins India In Begging Fed To Stop Shrinking Its Balance Sheet (ZH)
Fed Clambers Back To Positive Real Rates, Now Debate Is When To Stop (R.)
Social Security To Tap Into Trust Fund For First Time In 36 Years (MW)
Opioids Are Responsible For 20% Of US Millennial Deaths (ZH)
The ‘Doomsday Brexit Plan’ Document Should Frighten Us All (TP)
Nearly 4 Million UK Adults Forced To Use Food Banks (Ind.)
How We Created The Anthropocene (BBC)

 

 

“..watch as the EUR and bond yields tumble, and the dollar resumes its relentless push higher.”

Is Draghi Risking Everything To Teach Rome A Lesson? (ZH)

[..] as Bloomberg’s Lisa Abramowicz said in a podcast today, it was the ECB “basically just giving the finger to Italy.” Confirming as much, Anne Mathias, Global Rates and FX strategist for Vanguard, responded that “part of the vocal nature of the ‘talking about the talking about’ [the end of QE] probably has something to do with Italy, especially as they’ve been paring their purchases of Italian debt. What the ECB is trying to say is hey, “this is our party, and you’re welcome to it, but if you’re going to leave it’s not going to be easy for you.” The ECB is trying to show Italy a future without the ECB as backstop.”

A spot-on follow up question from Pimm Fox asked if this is “a situation in which the ECB is cutting off its nose to spite its face, because you can stick to rules for the sake of sticking to rules, but when you have a potential crisis, why wait for it to be a real crisis such as Italy, which the new government has pledged to spend a lot of money, to lower taxes, while they still have a huge government deficit. Why would the ECB do this.” The brief answer is that yes, it is, because sending the Euro and yields higher on ECB debt monetization concerns, only tends to destabilize the market, and sends a message to investors that the happy days are ending, in the process slamming confidence in asset returns, a process which usually translates into a sharp economic slowdown and eventually recession, or even depression if the adverse stimulus is large enough.

As for the punchline, it came from Abramowicz, who doubled down on Pimm Fox’ question and asked if the “European economy can withstand the shock” of the ECB’s QE reversal, which would send trillions in debt from negative to positive yields. While the answer is clearly no, what is curious is that the ECB is actually tempting fate with the current “tightening” scare, which may send the Euro and bond yields far higher over the next few days, perhaps even to a point where Italy finds itself in dire need of a bailout… from the ECB. Then again, don’t be surprised if during next Thursday’s ECB press conference, Mario Draghi says that after discussing the end of QE, no decision has been made or will be made for a long time. At that moment, watch as the EUR and bond yields tumble, and the dollar resumes its relentless push higher.

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Downsize Germany or else.

The Next Economic Crisis Begins in the European Union (Bruno)

Mercantilism is a practice of conducting economic affairs that Europe practiced especially during the period between the 16th and 17th centuries. It’s the progenitor of colonialism and favors the idea that a state’s—or nation’s—power increases in direct proportion to its ability to export. The more a nation exports, producing a trade surplus, the stronger it becomes. The current “imperfection” of the euro stems from this concept. Germany has become a mercantilist power within a union of nation states (the EU) that had agreed to pursue common as well as national interests. The result has not only been an imbalance of trade; rather, it’s been a complete political and economic disparity.

Some EU countries, of which Germany represents the best example, have also used their surplus to lower their inflation rate below the eurozone-accepted two-percent standard. Indeed, Germany’s trade surplus formula was predicated on a minimal increase in salaries—and reduced government spending on infrastructure and other public services. The result has been the accumulation of significant competitive advantages. Ironically, whenever the euro drops in value, Germany gains with respect to the PIGS. The products that make up the core of its surplus become even more competitive within and beyond the EU.

That explains President Donald Trump’s ever more vociferous suggestions to ban the import of German cars in the United States. It’s no accident that Trump launched a literal trade war, focusing on Germany and China, just days before the start of the G7 Summit in Canada. Germany’s accumulated gains from the low inflation and the more competitive conditions allow it to literally “colonize” (financially speaking) the so-called less virtuous or “deficit” nations. Germany can buy up their best businesses and services. In the meantime, Germany has also acquired a political dominance to match its surplus within the EU itself.

It can control the rules of the EU economy and influence their evolution. That’s why there are few options for the PIGS. And that’s why society and political discourse have deteriorated. The rise of the so-called populist—I prefer the term “protest”—parties, Left or Right, in countries like Italy is a trend destined to expand throughout the EU and cause irreparable fissures. If the EU does not change (and by change, I mean a downsizing of Germany’s stature), the fissures will be irreparable, and one or more states will leave, breaking the union.

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“It’s all risk and very little reward in the path ahead..”

David Stockman: Stocks Will Plunge 50% In This ‘Daredevil Market’ (CNBC)

David Stockman is intensifying his bear case. President Ronald Reagan’s Office of Management and Budget director blames a bull market that’s getting longer in the tooth — paired with headwinds ranging from President Donald Trump’s leadership to fiscal policy decisions to questionable earnings. “I call this a daredevil market. It’s all risk and very little reward in the path ahead,” Stockman said Tuesday on CNBC’s “Futures Now.” “This market is just way, way over-priced for reality.” His thoughts came as the Nasdaq was reaching all-time highs again, while S&P 500 rose slightly but the Dow failed to extend its win streak to three days in a row.

“The S&P 500 could easily drop to 1,600 because earnings could drop to $75 a share the next time we have a recession,” Stockman warned. “We’re about eight or nine years into this expansion. Everything is crazily priced. I mean the S&P 500 at 24 times at the end, tippy top of a business cycle.” One of his biggest gripes with the bulls is the notion that President Donald Trump’s tax cuts are providing a fundamental lift to stocks. “These tax cuts are going to add to the deficit in the 10th year of an expansion. It’s just irresponsible crazy,” he said. “It’s all going to stock buybacks and M&A deals anyway. That doesn’t cause the economy to grow. It’s just a short-term boost to the stock market that doesn’t last.”

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All it takes is some hollow words.

Euro Recovers On Rising Bets ECB May Unwind Stimulus (R.)

The euro stayed near two-week highs against many of its rivals on Thursday, on rising bets the ECB may soon announce it will start winding down its massive bond purchase program. Jens Weidmann, the head of Germany’s central bank, said expectations the ECB would taper its bond-buying program by the end of this year were plausible while his Dutch counterpart, Klaas Knot, said there was no reason to continue a quantitative easing program. The trio of comments drove the euro to a two-week high of $1.1800 sharp. The common currency last traded at $1.1781, extending its gains so far this week to 1.15%.

“In the near term, we are likely to see event-driven trading on the euro. We should expect the euro to jump 100 pips (one cent) quite easily on comments from key officials,” said Kyosuke Suzuki, director of forex at Societe Generale. The ECB has been debating whether to end the unprecedented 2.55 trillion euro ($2.99 trillion) bond purchase program this year as the threat of deflation has passed. Still many market players were surprised by the flurry of comments as they had thought uncertainty caused by a political crisis in Italy could make policymakers cautious about indicating an end to stimulus at its policy meeting on June 14.

Indeed, the yield spread of Italian debt to German Bunds widened on Wednesday as Italian bonds are seen as the biggest beneficiary of the ECB’s buying. “This euro buying is essentially short-term trade. People don’t know when Italian debt problems will be solved but they do know when the ECB might announce an exit from stimulus,” said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

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But then Europe and Japan signal they’ll do the same.

Indonesia Joins India In Begging Fed To Stop Shrinking Its Balance Sheet (ZH)

On the same day that the governor of Malaysia’s central bank quit, and just days after Urjit Patel, governor of the Reserve Bank of India, took the unprecedented step of writing an oped to the Federal Reserve, begging the US central bank to step tightening monetary conditions, and shrinking its balance sheet, thereby creating a global dollar shortage which has slammed emerging markets (and forced India into an unexpected rate hike overnight), Indonesia’s new central bank chief joined his Indian counterpart in calling on the Federal Reserve to be “more mindful” of the global repercussions of policy tightening amid the ongoing rout in emerging markets.

As Bloomberg reports, in his first interview with international media since he took office two weeks ago, Bank Indonesia Governor Perry Warjiyo echoed what Patel said just days earlier, namely that the pace of the Fed’s balance sheet reduction was a key issue for central bankers across emerging markets. As a reminder, the RBI Governor made exactly the same comments earlier this week, arguing that slowing the pace of stimulus withdrawal at a time when the US Treasury is doubling down on debt issuance, would support global growth, as the alternative would be an emerging markets crisis that would spill over into developed markets.

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Get the hell out. Take their powers away.

Fed Clambers Back To Positive Real Rates, Now Debate Is When To Stop (R.)

The Federal Reserve will likely raise its target interest rate to above the rate of inflation for the first time in a decade next week, igniting a new debate: when to stop. The Fed has been gradually hiking rates since late 2015 with little sign of tighter conditions hampering economic recovery. The expected June increase will raise the stakes as the Fed seeks to sustain the second-longest U.S. expansion on record while continuing to edge rates higher. With inflation still tame, policymakers are aiming for a “neutral” rate that neither slows nor speeds economic growth. But estimates of neutral are imprecise, and as interest rates top inflation and enter positive “real” territory, analysts feel the Fed is at higher risk of going too far and actually crimping the recovery.

The Fed is “gradually entering a new world when rates are at 2 percent,” nearing zero on a real basis and approaching where they are no longer felt to be stimulating economic activity, said Thomas Costerg, senior U.S. economist at Pictet Wealth Management. The last time rates moved into positive real territory on a sustained basis was the spring of 2005 when the Fed began tightening rapidly after a period of arguably too-lax monetary policy, ending just months before the start of the 2007-2009 financial crisis. The debate over the current cycle’s end point “came earlier than I expected,” Costerg said, with the Fed facing imminent calls on where the neutral rate of interest lies.

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Opaque topic, but this is obviously not good.

Social Security To Tap Into Trust Fund For First Time In 36 Years (MW)

Medicare’s finances were downgraded in a new report from the program’s trustees Tuesday, while the projection for Social Security’s stayed the same as last year. Medicare’s hospital insurance fund will be depleted in 2026, said the trustees who oversee the benefit program in an annual report. That is three years earlier than projected last year. This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034. For the first time since 1982, Social Security has to dip into the trust fund to pay for the program this year. It should be stressed that the reports don’t indicate that benefits disappear in those years.

After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits. Congress could at any time choose to pay for the benefits through the general fund. Medicare beneficiaries also wouldn’t face an immediate cut after the trust fund is depleted in 2026. The trustees said the share of benefits that can be paid from revenues will decline to 78% in 2039. That share rises again to 85% in 2092. The hospital fund is financed mainly through payroll taxes. Social Security trustees said that reserves for the fund that pays disability benefits would be exhausted in 2032. Combined with the fund that pays benefits to retirees, all Social Security reserves would be exhausted by 2034, they said.

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Better start acting.

Opioids Are Responsible For 20% Of US Millennial Deaths (ZH)

The opioid crisis has become a significant public health emergency for many Americans, especially for millennials, so much so that one out of every five deaths among young adults is related to opioids, suggested a new report. The study is called “The Burden of Opioid-Related Mortality in the United States,” published Friday in JAMA. Researchers from St. Michael’s Hospital in Toronto, Ontario, found that all opiate deaths — which accounts for natural opiates, semi-synthetic/ humanmade opioids, and fully synthetic/ humanmade opioids — have increased a mindboggling 292% from 2001 through 2016, with one in every 65 deaths related to opioids by 2016. Men represented 70% of all opioid-related deaths by 2016, and the number was astronomically higher for millennials (24 and 35 years of age).

According to the study, one out of every five deaths among millennials in the United States is related to opioids. In contrast, opioid-related deaths for the same cohort accounted for 4% of all deaths in 2001. Moreover, it gets worse; the second most impacted group was 15 to 24-year-olds, which suggests, the opioid epidemic is now ripping through Generation Z (born after 1995). In 2016, nearly 12.4% of all deaths in this age group were attributed to opioids. “Despite the amount of attention that has been placed on this public health issue, we are increasingly seeing the devastating impact that early loss of life from opioids is having across the United States,” said Dr. Tara Gomes, a scientist in the Li Ka Shing Knowledge Institute of St. Michael’s.

“In the absence of a multidisciplinary approach to this issue that combines access to treatment, harm reduction and education, this crisis will impact the U.S. for generations,” she added. Over the 15-year period, more than 335,000 opioid-related deaths were recorded in the United States that met the study’s criteria. Researchers said this number is an increase of 345% from 9,489 in 2001 (33.3 deaths per million population) to 42, 245 in 2016 (130.7 deaths per million population).

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“At what stage of their hapless fiddling, constant arguing and pitiful attempts to administer the kiss of life to the corpse that Brexit has turned out to be, does a politician officially earn the title of – stupid idiot?”

The ‘Doomsday Brexit Plan’ Document Should Frighten Us All (TP)

This is the first paragraph of The Times article (paywall) regarding Britain’s now famous Doomsday Brexit plan. “Britain would be hit with shortages of medicine, fuel and food within a fortnight if the UK tries to leave the European Union without a deal, according to a Doomsday Brexit scenario drawn up by senior civil servants for David Davis.” The Times confirms that the port of Dover will collapse “on day one” if Britain crashes out of the EU, leading to critical shortages of supplies. This was the middle of three scenarios put forward by senior advisors. A type of best guestimate if you like. You simply do not want to know the outcome of the worst of those three scenarios. Indeed, we have been spared from such details.

The article states that the RAF would have to be deployed to ferry supplies around Britain. And yes, we’re still on the middle scenario here. “You would have to medevac medicine into Britain, and at the end of week two we would be running out of petrol as well,” a contributing source said. The report continues to describe matters such as cross-channel disruption for heavy goods vehicles, which would also be catastrophic. Massive carparks will be required. A senior official said in the ‘Doomsday’ Brexit plan: “We are entirely dependent on Europe reciprocating our posture that we will do nothing to impede the flow of goods into the UK. If for whatever reason, Europe decides to slow that supply down, then we’re screwed.”

Let’s not worry about the fact that French borders are often left in chaos due to the all too familiar strikes that appear almost monthly during holiday season for one reason or another. Home secretary Sajid Javid makes an unconvincing comment stating he’s ‘confident’ a deal will be done. That’s hardly the type of assurance we need is it? UK officials emphasised that the June EU summit due on the 28th was heading for a “car crash” because “no progress has been made since March” to devise plans for a long-term deal. If your confidence in Brexit is starting to wane, don’t worry, half the nation are not just anxious but downright fearful – mainly because, neither in or out has given any concreate evidence of likely outcomes. This is probably because Brexit hasn’t been done before – and was designed that way. Deliberately.

At what stage of their hapless fiddling, constant arguing and pitiful attempts to administer the kiss of life to the corpse that Brexit has turned out to be, does a politician officially earn the title of – stupid idiot? “Just bloody get on with it” shout the Brexiteers, except both they and the UK government still can’t decide what ‘it’ is.

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I’ve asked it before: where will Britain be 10 years from now?

Nearly 4 Million UK Adults Forced To Use Food Banks (Ind.)

Nearly 4 million adults in the UK have been forced to use food banks due to ”shocking” levels of deprivation, figures have revealed for the first time. An exclusive poll commissioned by The Independent reveals one in 14 Britons has had to use a food bank, with similar numbers also forced to skip meals and borrow money as austerity measures leave them “penniless with nowhere to turn”. The findings come as a major report by the Joseph Rowntree Foundation (JRF) shows more than 1.5 million people were destitute in the UK last year alone, a figure higher than the populations of Liverpool and Birmingham combined. This includes 365,000 children, with experts warning that social security policy changes under the Tory government were leading to “destitution by design”.

Destitution is defined as people lacking two “essential needs”, such as food or housing. The polling on food poverty, from a representative sample of 1,050 UK adults carried out for The Independent by D-CYFOR, suggests that 7 per cent of the adult population – or 3.7 million people – have used a food bank to receive a meal. A million people have decreased the portion size of their child’s meal due to financial constraints, the survey says. The results come after it emerged in April that the number of emergency meals handed out at food banks had risen at a higher rate than ever, soaring by 13 per cent in a year, with more than 1.3 million three-day emergency food supplies given to people in crisis in the 12 months to March.

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I haven’t read the book -and it’s not out yet- but this seems, let’s say, naive. If you figure that a constant increase in energy use is the culprit, how can you say renewable nergy is the solution, and not call for using less energy?

How We Created The Anthropocene (BBC)

Factories and farming remove as much nitrogen from the atmosphere as all of Earth’s natural processes, and the climate is changing fast because of carbon dioxide emissions from fossil fuel use. Beyond these grim statistics, the critical question is: will today’s interconnected mega-civilisation that allows 7.5 billion people to lead physically healthier and longer lives than at any time in our history continue from strength to strength? Or will we keep using more and more resources until human civilisation collapses? To answer this, we re-interpret human history using the tools of modern science, to provide a clearer view of the future.

Tracing the ever-greater environmental impacts of different human societies since our march out of Africa, we found that there are just five broad types that have spread worldwide. Our original hunter-gatherer societies were followed by the agricultural revolution and new types of society beginning some 10,500 years ago. The next shift resulted from the formation of the first global economy, after Europeans arrived in the Americas in 1492, which was followed in the late 1700s by the new societies following the Industrial Revolution. The final type is today’s high-production consumer capitalist mode of living that emerged after WWII.

A careful analysis shows that each successive mode of living is reliant on greater energy use, greater information and knowledge availability, and an increase in the human population, which together increase our collective agency. These insights help us think about avoiding the coming crash as our massive global economy doubles in size every 25 years, and on to the possibilities of a new and more sustainable sixth mode of living to replace consumer capitalism. Seen in this way, renewable energy for all takes on an importance beyond stopping climate breakdown; likewise free education and the internet for all has a significance beyond access to social media – as they empower women, which helps stabilise the population.

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May 302018
 
 May 30, 2018  Posted by at 9:07 am Finance Tagged with: , , , , , , , , , , , ,  


Wassily Kandinsky Moscow II 1916

 

Italy: No Easy Fixes For The European Central Bank (G.)
Investors Ask If ECB Has Will And Means To Save Euro From Italian Turmoil (R.)
Blanchard: Europe Should Be OK – But ‘I’m Very Worried About Italy’ (CNBC)
NIRP’s Revenge: Italian Bonds Plunge, Worst Day in Decades (WS)
Italy Could Be The Next Greece – Only Much Worse (CNBC)
“Everything Has Gone Wrong”: Soros Warns “Major” Financial Crisis Is Coming (ZH)
Soros-Backed Campaign To Push For New Brexit Vote Within A Year (G.)
Pace Of Greek Credit Contraction Increases In April (K.)
EU Plans To Boost Spending In South, Cut Funds For Eastern Europe (RT)
It’s Hard To Be An Empire (Jim Kunstler)
China Slams Surprise US Trade Announcement, Says Ready To Fight (R.)
High Number Of Workers With No Pay Raise Says Inflation Worries Overblown (MW)
industrial-Scale Beef Farming Comes To The UK (G.)
Meat And Fish Multinationals ‘Jeopardising Paris Climate Goals’ (G.)

 

 

“Under the Target2 system, which is the way eurozone central banks keep account of liabilities to each other, Italy already owes £442bn.”

Italy: No Easy Fixes For The European Central Bank (G.)

The last eurozone crisis was solved – or deferred – when the president of the European Central Bank, Mario Draghi, declared in July 2012 that the institution was ready to do “whatever it takes” to save the euro. Bond markets calmed down, weak banks got access to funding again and an economic recovery of sorts materialised. In terms of central bank rescue acts, it was a textbook operation. Unfortunately, there are no easy ECB fixes for the new Italian crisis. The ECB’s first problem is its own powers. Even if it were minded to try to reverse the dramatic sell-off in Italian bonds, the rules say it is only supposed to respond to emergency calls from countries that have agreed to budget conditions.

With new elections now likely in Italy in the autumn, it’s hard to see how a deal could be done. Even if a technical fudge could be found, the second problem is that the eurozone’s big powers might prefer the ECB to do nothing. Günther Oettinger, the EU’s budget commissioner, seems to believe a bout of market turmoil “might become a signal to [Italian] voters after all to not vote for populists on the right and left”. In practice, the experience might provoke a bigger vote for anti-euro parties, but the strategy seems set.

The third problem for the ECB will come if capital drains from Italian banks. In that case the ECB could in theory claim a clear need to intervene to prevent damage to eurozone banks outside Italy. But, again, there could be pressure to stay on the sidelines. Under the Target2 system, which is the way eurozone central banks keep account of liabilities to each other, Italy already owes £442bn. Any ECB-backed support for its banks would see that figure rise further, provoking fears over repayment. Note that Target2 imbalances are already a hot topic in Germany, where the Bundesbank is the single biggest creditor.

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I’m sure it has the will. Draghi’s Plunge Protection Team is working hard today, euro’s up 0.5%. The problem is that everyone knows whatever the ECB does is only a temp stopgap.

Investors Ask If ECB Has Will And Means To Save Euro From Italian Turmoil (R.)

Investors are again speculating what the ECB could do to solve the problem of a surge in Italy’s debt yields that is causing stress for Italian banks and reviving questions about a euro break up. The stakes will be huge if a repeat election in the euro zone’s third-largest economy become a de facto referendum on Italy’s membership of the euro and its role in the European Union. Italy’s economy is at least 10 times bigger than that of Greece, which needed 250 billion euros ($289 billion) of euro zone and IMF money to bail it out. If Italy needed a similar level of support, the numbers involved would be eyewatering.

Total IMF firepower would only add up to around 500 billion euros and even with the 400 billion euros that the European Stability Mechanism could conceivably get together, it still wouldn’t completely cover Italy. Perhaps it’s no wonder then that Italy’s bond markets saw their worst sell-off in 26 years on Tuesday and investors are starting to look inquisitively at the ECB. “If this continues for another couple of sessions, I think you will have to see some official (European) response,” said Saxo Bank’s head of foreign exchange strategy John Hardy. “It becomes a ‘whatever it takes’ kind of moment,” he added, recalling the promise made in 2012 by ECB President Mario Draghi to keep the euro intact.

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Inflexibility killed the cat.

Blanchard: Europe Should Be OK – But ‘I’m Very Worried About Italy’ (CNBC)

Political chaos in the euro zone’s third-biggest economy won’t be going away anytime soon, according to IMF former chief economist Olivier Blanchard, who on Tuesday issued an ominous assessment of the country. Panic roiled markets Tuesday as a political fight in Italy prompted one of its worst market sell-offs in years. Underlying investor fear was the prospect of Italy leaving the euro and others following suit, which Blanchard, now an economics professor at the Massachusetts Institute of Technology, described as more of a psychological fear than a realistic threat.

The potential concern, rather, involves Italy’s creditors, who would have to “move carefully,” the economist told CNBC’s Joumanna Bercetche in Paris. The rest of Europe may avoid a domino effect, but Italy looks to remain mired in a quagmire. “I suspect in this case the EU will do whatever is needed to prevent contagion, so I’m not terribly worried about contagion,” Blanchard said. “I’m very worried about Italy. Not worried about the rest of Europe. It will be tough, but the rest of Europe, the rest of (the) euro will be OK.” [..] “The writing was on the wall,” Blanchard said. “When you have capital mobility, and you give signals that you might not stay in the euro … then you expect investors to move, and I think that’s what we are seeing.”

Markets were already nervous about M5S and Lega’s economic plans for Italy. Though the parties did not in fact pledge to leave the euro, they signaled a disregard for the EU’s fiscal rules, such as those limiting states’ deficit levels. [..] Asked if there may be positives to the standoff in the form of EU concessions for Italy in order to prevent a pull-out, Blanchard responded, “No. I am not optimistic.” Unsurprisingly, he described himself as very bearish on the country. The best-case scenario, the economist said, would be for the winners of the next elections to provide a program that satisfies the voter base — victory is predicted for the populist parties again — but remains fiscally responsible.

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Wolf Richter is dead on: “..Italian bonds – no matter what maturity – should never ever have traded with a negative yield..”

NIRP’s Revenge: Italian Bonds Plunge, Worst Day in Decades (WS)

On Tuesday, Italian bonds had their worst day in Eurozone existence, even worse than any day during the worst periods of the 2011 debt crisis. And this comes after they’d already gotten crushed on Monday, and after they’d gotten crushed last week. And this happened even as the ECB is carrying on its QE program, including the purchase of Italian government bonds; and even as it pursues its negative-interest-rate policy (NIRP). As bond prices plunge, yields spike by definition, and the spike in the two-year yield was spectacular, going from 0.3% on Monday morning to 2.73% on Tuesday end of day:

But note that until May 26, the two-year yield was still negative as part of the ECB’s interest rate repression. On that fateful day, the two-year yield finally crossed the red line into positive territory. To this day, it remains inexplicable why the ECB decided that Italian yields with maturities of two years or less should be negative – that investors, or rather pension beneficiaries, etc., who own these misbegotten bonds, would need to pay the Italian government, one of the most indebted in the world, for the privilege of lending it money. But that scheme came totally unhinged just now. The 10-year Italian government bond yield preformed a similar if not quite as spectacular a feat. Over Monday and Tuesday, it went from 2.37% to 3.18%:

But here’s the thing: Italian bonds – no matter what maturity – should never ever have traded with a negative yield. Their yields should always have been higher than US yields, given that the Italian government is in even worse financial shape than the US government. Italy’s debt-to-GDP ratio is 131%, and more importantly, it doesn’t even control its own currency and cannot on its own slough off a debt crisis by converting it into a classic currency crisis, which is how Argentina is dealing with its government spending. The central bank of Argentina recently jacked up its 30-day policy rate to 40% to keep the peso from collapsing further. That’s the neighborhood where Italy would be if it had its own currency. But the ECB’s QE shenanigans and NIRP drove even Italian yields below zero, and so now here is NIRP’s revenge.

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Oettinger takes the prize for the biggest fool so far.

Italy Could Be The Next Greece – Only Much Worse (CNBC)

Nearly a decade after a protracted Greek debt crisis spooked global markets, a fresh round of political turmoil in Italy has revived fears about the fate of the European financial system and its common currency. This time, the numbers are a lot bigger. “Italy’s economy is 10 times larger than that of Greece, whose debt crisis shook the euro area’s foundations,” wrote Desmond Lachman, a resident fellow at the American Enterprise Institute, in a recent blog post. “The single currency is unlikely to survive in its present form if Italy were forced to exit that monetary arrangement.”

Italy’s economy has been struggling since the Great Recession years with a debt load that rivals the heavy Greek borrowing that forced massive cuts in public services there and drove Greece into a deep recession. That Italian debt crisis has become central to the ongoing political instability, as multiple governments have failed to resolve it. [..] Even if the populist parties stop short of a clear call for exiting the euro, their strength has widened the political gap with EU officials in Brussels. In an echo of the Greek debt crisis, the latest turmoil has reopened a political rift between Germany and the “peripheral” economies of Greece, Italy and Spain. That political divide will further complicate ongoing efforts to resolve Italy’s crushing debt burden.

On Tuesday, EU officials promised to respect Italian voters’ right to choose their own government, after Germany’s European commissioner said Italians should not vote for the populists. “My worry, my expectation, is that the coming weeks will show that the markets, government bonds, Italy’s economy, could be so badly hit that these could send a signal to voters not to elect populists from the left or right,” Guenther Oettinger, a German commissioner who oversees the EU budget committee, said in a German television interview.

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“..a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.”

“Everything Has Gone Wrong”: Soros Warns “Major” Financial Crisis Is Coming (ZH)

Until recently, it could have been argued that austerity is working: the European economy is slowly improving, and Europe must simply persevere. But, looking ahead, Europe now faces the collapse of the Iran nuclear deal and the destruction of the transatlantic alliance, which is bound to have a negative effect on its economy and cause other dislocations. The strength of the dollar is already precipitating a flight from emerging-market currencies. We may be heading for another major financial crisis. The economic stimulus of a Marshall Plan for Africa and other parts of the developing world should kick in just at the right time. That is what has led me to put forward an out-of-the-box proposal for financing it.

“The EU is in an existential crisis. Everything that could go wrong has gone wrong,” he said. To escape the crisis, “it needs to reinvent itself.” “The United States, for its part, has exacerbated the EU’s problems. By unilaterally withdrawing from the 2015 Iran nuclear deal, President Donald Trump has effectively destroyed the transatlantic alliance. This has put additional pressure on an already beleaguered Europe. It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality.” “We may be heading for another major financial crisis,” Soros said explicitly.

“I personally regarded the EU as the embodiment of the idea of the open society. It was a voluntary association of equal states that banded together and sacrificed part of their sovereignty for the common good. The idea of Europe as an open society continues to inspire me. But since the financial crisis of 2008, the EU seems to have lost its way. It adopted a program of fiscal retrenchment, which led to the euro crisis and transformed the eurozone into a relationship between creditors and debtors. The creditors set the conditions that the debtors had to meet, yet could not meet. This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based.”

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Interference in a country’s politics. Hmm.

Soros-Backed Campaign To Push For New Brexit Vote Within A Year (G.)

A campaign to secure a second Brexit referendum within a year and save the UK from “immense damage” is to be launched in days, the philanthropist and financier George Soros has announced. The billionaire founder of the Open Society Foundation said the prospect of the UK’s prolonged divorce from Brussels could help persuade the British public by a “convincing margin” that EU membership was in their interests. In a speech on Tuesday ahead of the launch of the Best for Britain campaign – said to have already attracted millions of pounds in donations – Soros suggested to an audience in Paris that changing the minds of Britons would be in keeping with “revolutionary times”.

Best for Britain had already helped to convince parliamentarians to extract from Theresa May a meaningful vote on the final withdrawal deal, he said, and it was time to engage with voters, and Brussels, to pave the way for the UK to stay in the bloc. It is expected to publish its campaign manifesto on 8 June. Soros, 87, said: “Brexit is an immensely damaging process, harmful to both sides … Divorce will be a long process, probably taking more than five years. Five years is an eternity in politics, especially in revolutionary times like the present. “Ultimately, it’s up to the British people to decide what they want to do. It would be better however if they came to a decision sooner rather than later. That’s the goal of an initiative called the Best for Britain, which I support.

“Best for Britain fought for, and helped to win, a meaningful parliamentary vote which includes the option of not leaving at all. This would be good for Britain but would also render Europe a great service by rescinding Brexit and not creating a hard-to-fill hole in the European budget. “But the British public must express its support by a convincing margin in order to be taken seriously by Europe. That’s what Best for Britain is aiming for by engaging the electorate. It will publish its manifesto in the next few days.”

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Recovery.

Pace Of Greek Credit Contraction Increases In April (K.)

The funding deficit is growing in the Greek economy, as there was a sharper credit contraction in April, data from the Bank of Greece showed on Tuesday. The pace of financing Greek households and enterprises stood at -1.9% last month, from -1% in March and -0.9% in February. The flow of credit turned negative by 1.2 billion euros in April from the positive amount of 217 million euros in March. The negative flow means that loans repaid outweighed those issued, after factoring in loan write-offs and sales of nonperforming loans by banks.

In practice the fresh credit issued is offset by the burden of the increased write-offs and payments mostly by enterprises. Data analysis showed that the funding flow to the economy’s basic domains last month was negative by 2.4% for industry and by 1.7% for construction. At the same time the financing rate for tourism was marginally positive at 1%, while in commerce the rate was zero, against a positive 1% in March. The sector with the lowest funding rate in comparison with last year was electricity and water, which declined 12.6%.

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Who blinked first?

EU Plans To Boost Spending In South, Cut Funds For Eastern Europe (RT)

The European Commission proposed on Tuesday increased spending of EU money on Italy and other southern member states hit by the economic and migrant crises, while reducing funds for regions in the former communist eastern countries, Reuters reports. The proposal on the 2021-2027 budget comes as Italy is facing the prospect of snap elections after the summer. The commission proposed a new methodology to distribute funds that takes into account unemployment levels and the reception of migrants, and not just economic output as previously done. This will result in a reduction of regional funds for eastern countries because they have grown faster in recent years. The budget would increase to €1.1 trillion ($1.2 trillion) from €1 trillion in the current seven-year period. A third of spending would be allocated to help reduce the gap between rich and poor regions of the bloc.

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Jim on Memorial Day.

It’s Hard To Be An Empire (Jim Kunstler)

I suppose that military prowess is all we’ve got left in the national pride bag in these times of foundering empire. Few are fooled these days by the “land of opportunity” trope when so many young people are lucky to get a part-time gig on the WalMart loading dock along with three nights a week of slinging Seaside Shrimp Trios for the local Red Lobster. Of course, there are a few choice perches in venture capital out in Silicon Valley, or concocting collateralized loan obligations in the aeries of Wall Street — but nobody is playing Aaron Copeland’s Fanfare for the Common Man to celebrate these endeavors.

There’s a macabre equivalency between our various overseas war operations and the school shootings that are now a routine feature of American daily life. The purposes are equally obscure and the damage is just as impressive — many lives ruined for no good reason. But consider more lives are lost every year in highway crashes than in the Mexican War of the 1840s and more Americans are dying each year lately of opioid overdoses than the entire death toll of the Vietnam War. America’s soul is at war with its vaunted way-of-life.

It’s hard to be an empire, for sure, but it’s even harder, apparently, to be a truly virtuous society. First, I suppose, you have to be not insane. It’s hard to think of one facet of American life that’s not insane now. Our politics are insane. Our ideologies are insane. The universities are insane. Medicine is insane. Show biz is insane. Sexual relations are insane. The arts are insane. The news media is utterly insane. And what passes for business enterprise in the USA these days is something beyond insane, like unto the swarms of serpents and bats issuing from some mouth of hell in the medieval triptychs. How do you memorialize all that?

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“..the trade renege could leave Washington dancing with itself..”

China Slams Surprise US Trade Announcement, Says Ready To Fight (R.)

China on Wednesday lashed out at Washington’s unexpected statement that it will press ahead with tariffs and restrictions on investments by Chinese companies, saying Beijing was ready to fight back if Washington was looking to ignite a trade war. The United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China and would use it unless Beijing addressed the issue of theft of American intellectual property. The declaration came after the two sides had agreed earlier this month to look at steps to narrow China’s $375 billion trade surplus with America, and days ahead of a visit to Beijing by U.S. Commerce Secretary Wilbur Ross for further negotiations.

William Zarit, chairman of the American Chamber of Commerce in China, said Washington’s threat of tariffs appeared to have been “somewhat effective” thus far. “I don’t think it is only a tactic, personally,” he told reporters on Wednesday, adding that the group does not view tariffs as the best way to address the trade frictions. “The thinking became that if the U.S. doesn’t have any leverage and there is no pressure on our Chinese friends, then we will not have serious negotiations.” [..] The Global Times said the United States was suffering from a “delusion” and warned that the “trade renege could leave Washington dancing with itself”.

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What you get with bogus claims of full employment.

High Number Of Workers With No Pay Raise Says Inflation Worries Overblown (MW)

An unusually high percentage of American workers still aren’t getting pay raises nine years after the end of the Great Recession — and that suggests the threat of inflation is still quite low. Some senior Federal Reserve officials, including Kansas City Fed President Esther George, want to raise U.S. interest rates more rapidly to head off the potential for higher wages to stoke inflation. The specter of higher rates has pushed up interest rates and acted as a drag on stocks. Yet a new report by researchers at the regional central bank George leads to suggest there’s little cause for alarm.

The Kansas City Fed researchers found that an abnormally high share of employees still in the same jobs haven’t received a pay raise in the last 12 months despite a 3.9% unemployment rate that is the lowest in almost two decades. Economists refer to the phenomenon as “wage rigidity.” [..] The rate of future wage growth in the U.S. also tends to rise more slowly than usual when a high number of people aren’t getting any raises at all, the research suggests. In the most recent 12-month period ended in April, hourly U.S. wages increased at a 2.6% rate. Normally when the unemployment rate is as low as it is now, wages tend to rise 3.5% to 4.5% year.

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What they claimed would never happen.

industrial-Scale Beef Farming Comes To The UK (G.)

Thousands of British cattle reared for supermarket beef are being fattened in industrial-scale units where livestock have little or no access to pasture. Research by the Guardian and the Bureau of Investigative Journalism has established that the UK is now home to a number of industrial-scale fattening units with herds of up to 3,000 cattle at a time being held in grassless pens for extended periods rather than being grazed or barn-reared. Intensive beef farms, known as Concentrated Animal Feeding Operations (CAFOs) are commonplace in the US. But the practice of intensive beef farming in the UK has not previously been widely acknowledged – and the findings have sparked the latest clash over the future of British farming.

The beef industry says that the scale of operations involved enables farmers to rear cattle efficiently and profitably, and ensure high welfare standards. But critics say there are welfare and environmental concerns around this style of farming, and believe that the farms are evidence of a wider intensification of the UK’s livestock sector which is not being sufficiently debated, and which may have an impact on small farmers. In contrast to large intensive pig and poultry farms, industrial beef units do not require a government permit, and there are no official records held by DEFRA on how many intensive beef units are in operation. But the Guardian and the Bureau has identified nearly a dozen operating across England. [..] The largest farms fatten up to 6,000 cattle a year.

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Stop the madness!

Meat And Fish Multinationals ‘Jeopardising Paris Climate Goals’ (G.)

Meat and fish companies may be “putting the implementation of the Paris agreement in jeopardy” by failing to properly report their climate emissions, according to a groundbreaking index launched today. Three out of four (72%) of the world’s biggest meat and fish companies provided little or no evidence to show that they were measuring or reporting their emissions, despite the fact that, as the report points out, livestock production represents 14.5% of all greenhouse gas emissions. “It is clear that the meat and dairy industries have remained out of public scrutiny in terms of their significant climate impact.

For this to change, these companies must be held accountable for the emissions and they must have credible, independently verifiable emissions reductions strategy,” said Shefali Sharma, director of the Institute for Agriculture and Trade Policy European office. The new Coller FAIRR Protein Producers Index has examined the environmental and social commitments of 60 of the world’s largest meat and fish producers and found that more than half are failing to properly document their impact, despite their central role in our lives and societies.

Many of the names in the index will be unfamiliar, but their consolidated revenues of $300bn cover around one-fifth of the global livestock and aquaculture market – roughly one in every five burgers, steaks or fish. The companies looked at by the index include giants like the Australian Agricultural Company, which has the biggest cattle herd in the world; the Chinese WH Group, the largest global pork company; or the US’s Sandersons, which processes more than 10 million chickens a week.

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May 252018
 
 May 25, 2018  Posted by at 2:20 pm Finance Tagged with: , , , , , , , , , , , ,  


René Magritte The therapeutist 1937

 

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain. Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies. If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

 

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

 

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them. And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

 

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

 

 

May 212018
 


Margaret Bourke-White Great Ohio River Flood, Louisville, Kentucky 1937

 

The Soaring Dollar Will Lead To An “Explosive” Market Repricing (ZH)
Draghi Calls for Consolidation of Debts? (Martin Armstrong)
Italy’s Organic Crisis (Thomas Fazi)
Italy Has A New Government As Populist Parties Agree On New Premier (ZH)
Argentina: From The “Confidence Fairy” To The -Still Devilish- IMF (CF)
US-China Trade War ‘On Hold’ As America Backs Off On Tariffs (Ind.)
Bill Aimed At Saving Community Banks Is Already Killing Them (Dayen)
EU Blocking Cities’ Efforts To Curb Airbnb (G.)
End Of Greek Bailout Means Fresh Cuts To Salaries, Pensions (K.)
Why Boomtown New Zealand Has A Homelessness Crisis
Hundreds Of Homeless People Fined And Imprisoned In UK (G.)
Scientists Revise Their Understanding of Novichok (Slane)

 

 

Dollar shortage grows as interest rates grow.

The Soaring Dollar Will Lead To An “Explosive” Market Repricing (ZH)

Something curious took place one month ago when the PBOC announced on April 17 that it would cut the reserve requirement ratio (RRR) by 1% to ease financial conditions: it broke what until then had been a rangebound market for both the US Dollar and the US 10Y Treasury, sending both the dollar index and 10Y yields soaring…

… which led to an immediate tightening in financial conditions both domestically and around the globe, and which has – at least initially – manifested itself in a sharp repricing of emerging market risk, resulting in a plunge EM currencies, bonds and stocks.

Adding to the market response, this violent move took place at the same time as geopolitical fears about Iran oil exports amid concerns about a new war in the middle east and Trump’s nuclear deal pullout, sent oil soaring – with Brent rising above $80 this week for the first time since 2014 – a move which is counterintuitive in the context of the sharply stronger dollar, and which has resulted in even tighter financial conditions across the globe, but especially for emerging market importers of oil.

Meanwhile, all this is playing out in the context of a world where the Fed continues to shrink its balance sheet – a public sector “Quantitative Tightening (QT)” – further tightening monetary conditions (i.e., shrinking the global dollar supply amid growing demand), even as high grade US corporate bond issuance has dropped off a cliff for cash-rich companies which now opt to repatriate cash instead of issuing domestic bonds, with the resulting private sector deleveraging, or “private sector QT”, further exacerbating tighter monetary conditions and the growing dollar shortage (resulting in an even higher dollar).

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Europe has no bond market left. Japan has no bond market left. All they have is central banks.

Draghi Calls for Consolidation of Debts? (Martin Armstrong)

COMMENT: You were here in Brussels a few weeks ago. Suddenly, the ECB is talking about the need to merge the debts to prevent a crisis. So your lobbying here seems to work. – RGV, Brussels. REPLY: I do not lobby. It is rather common knowledge I have made those proposals since the EU commission attended our World Economic Conference held back in 1998 in London. I focused on the reason the Euro would fail if the debts were not consolidated. So it is not a fair statement to say I meet in Brussels to lobby for anything. I meet with people who call me in because of a crisis brewing.

So everyone else understands what this is about, the ECB President Mario Draghi has come out and proposed interlocking the euro countries to create a “stronger” and “new vehicle” as a “crisis instrument” to save Europe. He is arguing that this should prevent countries from drifting apart in the event of severe economic shocks. Draghi has said it provides “an extra layer of stabilization” which is a code phrase for the coming bond crash. He has conceded that the legal structure is difficult because what he is really talking about is the consolidation of national debts into a single Eurobond market. There is no bond market that is viable in Europe after the end of Quantitative Easing. There will be NO BID.

There is no viable bond market left in Europe. The worst debt is below US rates only because the ECB is the buyer. Stop the buying and the ceiling comes crashing down. This is why what he is saying is just using a different label. He is not calling it debt consolidation, just an extra layer of stabilization to bind the members closer together. It will be a hard sell and it may take the crisis before anyone looks at this. You have “bail-in” policies because of the same problem. If the banks in Italy need a bailout from Brussels, then other members will look at it as a subsidization for Italy which is unfair. There is no real EU unity behind the curtain which is when the debt was NEVER consolidated from day one. They wanted a single currency, but not a single responsibility for the debt.

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“..20% of Italy’s industrial capacity has been destroyed, and 30% of the country’s firms have defaulted..”

Italy’s Organic Crisis (Thomas Fazi)

The Italian Marxist Antonio Gramsci coined the term “organic crisis” to describe a crisis that differs from ”ordinary” financial, economic, or political crises. An organic crisis is a “comprehensive crisis,” encompassing the totality of a system or order that, for whatever reason, is no longer able to generate societal consensus (in material or ideological terms). [..] Gramsci was talking about Italy in the 1910s. A century later, the country is facing another organic crisis. More specifically, it is a crisis of the post-Maastricht model of Italian capitalism, inaugurated in the early 1990s.

[..] The downfall of the political establishment—and the rise of the “populist” parties—can only be understood against the backdrop of the “the longest and deepest recession in Italy’s history,” as the governor of the Italian central bank, Ignazio Visco, described it. Since the financial crisis of 2007–9, Italy’s GDP has shrunk by a massive 10%, regressing to levels last seen over a decade ago. In terms of per capita GDP, the situation is even more shocking: according to this measure, Italy has regressed back to levels of twenty years ago, before the country became a founding member of the single currency. Italy and Greece are the only industrialized countries that have yet to see economic activity surpass pre–financial crisis levels.

As a result, around 20% of Italy’s industrial capacity has been destroyed, and 30% of the country’s firms have defaulted. Such wealth destruction has, in turn, sent shockwaves throughout the country’s banking system, which was (and still is) heavily exposed to small and medium-sized enterprises (SMEs). Italy’s unemployment crisis continues to be one of the worst in all of Europe. Italy has an official unemployment rate of 11% (12% in southern Italy) and a youth unemployment rate of 35% (with peaks of 60% in some southern regions). And this is not even considering underemployed and discouraged workers (people who have given up looking for a job and therefore don’t even figure in official statistics).

If we take these categories into consideration, we arrive at a staggering effective unemployment rate of 30%, which is the highest in all of Europe. Poverty has also risen dramatically in recent years, with 23% of the population, about one in four Italians, now at risk of poverty—the highest level since 1989.

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Europe gets nervous.

Italy Has A New Government As Populist Parties Agree On New Premier (ZH)

Taking the biggest step toward forming Italy’s next government, the head of the anti-immigration League party Matteo Salvini said he’s reached a deal with Five Star leader Luidi Di Maio on forming a populist government, and picked a premier. According to a report in Corriere, Florence University law professor Giuseppe Conte was chosen as prime minister, while Matteo Salvini would be proposed as interior minister, and Five Star head Luigi and Di Maio would be labor minister. On Saturday, Il Messaggero reported that Salvatore Rossi, the Bank of Italy’s director general, could be picked as finance minister.

Today, Ansa added that according to Di Maio, Five Star will head joint ministry of economic development and labor; separately Giancarlo Giorgetti, Matteo Salvini’s right-hand man, will be proposed as economy minister, while Nicola Molteni would become minister of the infrastructure and transport and Gian Marco Centinaio would head the department of Agriculture and Tourism. ANSA added that Salvini will present the proposal to President Sergio Mattarella on Monday. As Bloomberg adds, the endgame follows a week of turmoil in Italian bonds and stocks triggered by reports about the coalition’s spending plans and rejection of European Union budget rules.

Italy’s 10-year yield spread over German bonds shot up to 165 bps on Friday, the most since October, prompting a warning from Paris. French Finance Minister Bruno Le Maire said in a Sunday interview with Europe 1 radio that “if the new government took the risk of not respecting its commitments on debt, the deficit and the cleanup of banks, the financial stability of the entire euro zone will be threatened.” Salvini fired back on Twitter, suggesting the warning was “unacceptable” interference. “Italians first!” he said, clearly referencing Donald Trump.

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No crisis until now because so much was borrowed. Crisis now because so much was borrowed. It’s like a blue print for the entire world.

Argentina: From The “Confidence Fairy” To The -Still Devilish- IMF (CF)

[..] looking at the external front, one may even be forgiven for asking: why did this crisis take so long to burst? Argentina was haemorrhaging dollars for many years, and with no sign of reversal: since 2016 the domestic non-financial sector acquired an accumulated amount of USD 41 billion in external assets. During the same period, the current account deficit totalled another USD 30 billion, in the form of trade deficit, tourism deficit, profit remittances by foreign companies and increasing interest payments. The well-known factor that allowed all these trends to last until now is the foreign borrowing spree that involved the government, provinces, firms, and the central bank, including the inflow from short-term investors for carry trade operations.

In the case of debt issuance, since 2016 the central government, provinces and private companies, have issued a whopping USD 88 billion of new foreign debt (13% of GDP). In the case of carry trade operations, since 2016 the economy recorded USD 14 billon of short-term capital inflows (2% of GDP). The favourite peso-denominated asset for this operations were the debt liabilities of the central bank called LEBAC (Letters of the Central Bank). Because of this, the outstanding stock of this instrument has now become the centre of all attention. It is important to understand the LEBACs. They were originally conceived as an inter-bank and central bank liquidity management instrument.

Since the lifting of foreign exchange and capital controls and the adoption of inflation targeting, the stock of LEBACs grew by USD 18 billion. Moreover, the composition of holders has changed significantly since 2015: At that time, domestic banks held 71% of the stock, and other investors held 29%. In 2018 that proportion has reverted to 38% banks/62% to other non-financial institution holders, which includes other non-financial public institutions (such as the social security administration) (17%), domestic mutual investment funds (16%), firms (14%), individuals (9%), and foreign investors (5%). That means that a large part of all the new issuance of LEBAC is held by investors outside the regulatory scope of the central bank, especially individuals and foreign investors. [..] these holdings could easily be converted into foreign currency, causing a large FX depreciation.

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They’re talking.

US-China Trade War ‘On Hold’ As America Backs Off On Tariffs (Ind.)

The US will hold off on imposing steep tariffs on China that ignited fears of a trade war as both sides pursue a broader deal, a top economic official said. “We’re putting the trade war on hold,” Treasury secretary Steve Mnuchin said during an appearance on Fox News Sunday. “We have agreed to put the tariffs on hold”. The announcement of a detente in the escalating trade dispute came after Chinese officials visited Washington last week, leading the White House to release an optimistic statement about both sides agreeing to take “measures to substantially reduce the United States trade deficit in goods with China” and to work on expanding trade and protecting intellectual property.

Donald Trump has railed against trade imbalances, particularly with China, as he seeks to renegotiate America’s economic relationship with other nations he accuses of exploiting the US. Breaking with some of his top economic advisers, Mr Trump announced earlier this year that he would levy tariffs on steel and aluminium. He also signed a memorandum seeking tariffs on $60bn worth of Chinese goods. [..] Mr Mnuchin signalled that America was using the leverage from tariff threats to pivot to negotiation, saying talks with Chinese officials had produced “very meaningful progress” – including a “Very productive” oval office meeting between Mr Trump and a top Chinese official.

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Unintended?

Bill Aimed At Saving Community Banks Is Already Killing Them (Dayen)

After initial reluctance, House Republicans have finally reached an agreement to move forward on a bipartisan bank deregulation bill that the Senate passed in March. Its stated aim — to help rural community banks thrive against growing Wall Street power — appears to have been enough to power it across the finish line. But banking industry analysts say the bill is already having the opposite effect, and its loosening of regulations on medium-sized banks is encouraging a rush of consolidation — all of which ends with an increasing number of community banks being swallowed up and closed down. “We absolutely expect bank consolidation to accelerate,” Wells Fargo’s Mike Mayo told CNBC the day after the Senate passed the deregulation bill in March.

The reason? Banks no longer face the prospect of stricter and more costly regulatory scrutiny as they grow. And regional banks in Virginia, Ohio, Mississippi, and Wisconsin have already taken note before the bill has even passed into law, announcing buyouts of smaller rivals. The expected consolidation simply furthers an existing trend. Community banks have been struggling for decades against an epidemic of consolidation; the number of banks in America has fallen by nearly two-thirds in the past 30 years. Ironically, the one state that has seemingly figured out how to arrest this systemic abandonment of smaller communities is North Dakota, the home state of the bill’s co-author, Democratic Sen. Heidi Heitkamp. That’s because North Dakota has a public bank.

Using idle state tax revenue as its deposit base, the Bank of North Dakota partners with community lenders on infrastructure, agriculture, and small business loans. It has thrived, earning record profits for 14 straight years, which have funneled back into state coffers. And while Heitkamp has complained that the Dodd-Frank Act has been disastrous for community banks, in North Dakota they appear to be doing well. According to a Institute for Local Self-Reliance analysis of Federal Deposit Insurance Corp. data, North Dakota has more banks per capita than any other state, and lends to small businesses at a rate that is four times the national average.

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The wonders of lobbying.

EU Blocking Cities’ Efforts To Curb Airbnb (G.)

The explosive rise of short-stay Airbnb holiday rentals may be shutting locals out of housing and changing neighbourhoods across Europe, but cities’ efforts to halt it are being stymied by EU policies to promote the “sharing economy”, campaigners say. “It’s pretty clear,” said Kenneth Haar, author of UnfairBnB, a study published this month by the Brussels-based campaign group Corporate Europe Observatory. “Airbnb is under a lot of pressure locally across Europe, and they’re trying to use the top-down power of the EU institutions to fight back.” While it might have started as a “community” of amateur hosts offering spare rooms or temporarily vacant homes to travellers, Airbnb had seen three-digit growth in several European cities since 2014 and was now a big, powerful corporation with the lobbying clout to match, Haar said.

The platform lists around 20,500 addresses in in Berlin, 18,500 in Barcelona, 61,000 in Paris and nearly 19,000 in Amsterdam. Data scraped by the campaign group InsideAirbnb suggests that in these and other tourist hotspots, more than half – sometimes as many as 85% – of listings are whole apartments. Many of the properties are also rented out year-round, removing tens of thousands of homes from the residential rental market. Even in cities where short-term lets are now restricted, about 30% of Airbnb listings are available for three or more months a year, the data indicates. In those where they are not, such as Rome and Venice, the figure exceeds 90%.

[..] local attempts to protect residents’ access to affordable housing and preserve the face of city-centre neighbourhoods are being undermined, campaigners say, by the EU’s determination to see the “collaborative economy” as a key future driver of innovation and job creation across the bloc. “The commission seems almost hypnotised by the prospect of a strong sharing economy, and not really interested in its negative consequences,” said Haar. “Commissioners talk about ‘opportunities, not threats’. The parliament, too, recently condemned cities’ attempts to restrict lettings on online platforms.”

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The torture never stops. Death by a thousand cuts.

End Of Greek Bailout Means Fresh Cuts To Salaries, Pensions (K.)

Millions of salaried workers and pensioners stand to lose at least one monthly payment within two years, in 2019 and 2020. For Greece to boast of a successful – as the government desires – exit from the third bailout program without facing any obstacles by August, the Finance Ministry has ruled out the option of avoiding a reduction to pensions from 2019 and will also be proceeding with demands to reduce the minimum tax threshold as of 2020. [..] January 2019 is when the barrage of cuts to pensions is due to start, lasting at least until 2022, with reductions to main as well as auxiliary pensions and also the abolition of family benefits. The bulk of cuts will affect some 1.1 million retirees, who will see their main pension slashed as of this December (when the January 2019 pensions are paid out) by up to 18%.

In total, in the private and public sector, the reduction of pension expenditure from this particular measure in 2019 is estimated at 2.13 billion euros. Reductions will start at 5 euros a month and may reach up to 350 euros a month. There will even be cuts to pensions where there is no personal difference, owing to the abolition of family benefits currently being paid out with the pensions in the public and private sectors. This is expected to concern around 1 million pensioners. Some 200,000 pensioners will also be affected by the cut of the personal difference from auxiliary pensions. According to the midterm fiscal plan, the reduction in 2019 will amount to savings of 232 million euros for state coffers, which is the amount pensioners will also be deprived of.

According to the government’s plans, the sum of cuts that will become evident as of this December will mean that new pensions will eventually be 30 percent below the original level before the law introduced in May 2016 by then labor minister Giorgos Katrougalos. Therefore, the vast majority of monthly pensions will hover in the 700-euro range, even for retirees who used to bring in an average of 1,300 euros.

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“They’re a long way down a hole that was created by somebody else..”

Why Boomtown New Zealand Has A Homelessness Crisis

New Zealand’s dairy-fuelled economy has for several years been the envy of the rich world, yet despite the rise in prosperity tens of thousands of residents are sleeping in cars, shop entrances and alleyways. The emerging crisis has created a milestone that New Zealanders won’t be proud of: the highest homelessness rate among the 35 high-income OECD countries. It’s a curious problem afflicting boom towns where some residents get pushed onto the streets as they can no longer afford the rocketing rents in a flourishing economy – let alone purchase a house as the price of property has soared. “I have no assets at the moment,” said 64-year-old Victor Young, who spoke to Reuters at a soup kitchen in New Zealand’s capital, Wellington.

“It’s not a kind country, it’s not an easy country. I slept in my car 20 days last year. I worked 30 hours a week.” That sentiment is something the country’s popular Prime Minister Jacinda Ardern would like to reverse. Last Thursday, across town from the Sisters of Compassion Soup Kitchen, her Labour-led government unveiled its first budget with an ambitious plan to build social infrastructure. The government has allocated NZ$3.8 billion ($2.62 billion) of new capital spending over a five-year period. This includes an extra NZ$634 million for housing, on top of the NZ$2.1 billion previously announced to fund Kiwibuild, a government building program to increase affordable housing supply.

[..] But experts say the government’s first budget underwhelms on the radical reforms the wider public wanted. “They’re a long way down a hole that was created by somebody else and they haven’t really got a great or easy solution,” said John Tookey, professor of construction management at Auckland University of Technology. He said the government’s much-vaunted Kiwibuild could come unstuck because there weren’t enough skilled workers to deliver on its ambitious target to build 100,000 homes in the next decade.

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Where does this originate? WIth Theresa May of course.

Hundreds Of Homeless People Fined And Imprisoned In UK (G.)

Growing numbers of vulnerable homeless people are being fined, given criminal convictions and even imprisoned for begging and rough sleeping. Despite updated Home Office guidance at the start of the year, which instructs councils not to target people for being homeless and sleeping rough, the Guardian has found over 50 local authorities with public space protection orders (PSPOs) in place Homeless people are banned from town centres, routinely fined hundreds of pounds and sent to prison if caught repeatedly asking for money in some cases. Local authorities in England and Wales have issued hundreds of fixed-penalty notices and pursued criminal convictions for “begging”, “persistent and aggressive begging” and “loitering” since they were given strengthened powers to combat antisocial behaviour in 2014 by then home secretary, Theresa May.

Cases include a man jailed for four months for breaching a criminal behaviour order (CBO) in Gloucester for begging – about which the judge admitted “I will be sending a man to prison for asking for food when he was hungry” – and a man fined £105 after a child dropped £2 in his sleeping bag. Data obtained by the Guardian through freedom of information found that at least 51 people have been convicted of breaching a PSPO for begging or loitering and failing to pay the fine since 2014, receiving CBOs in some cases and fines up to £1,100. Hundreds of fixed-penalty notices have been issued. Lawyers, charities and campaigners described the findings as “grotesque inhumanity”, saying disadvantaged groups were fined for being poor.

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“..one of its primary effects is to generate in its victims a strong desire to go out for a beer followed by a pizza.”

Scientists Revise Their Understanding of Novichok (Slane)

Warning: This article is likely to contain traces of satire. In the aftermath of the poisoning of Sergei and Yulia Skripal in Salisbury on 4th March, scientists are currently re-evaluating their understanding of A-234 – or Novichok as it is more commonly known. Prior to the poisoning, it had been thought that the substance was around 5-8 times more toxic than VX nerve agent, and therefore that just a tiny drop would be likely to kill a person within minutes or possibly even seconds of them coming into contact with it. In the unlikely event of a person surviving, it was believed that their central nervous system would be completely destroyed, and that they would suffer numerous chronic health issues, including cirrhosis, toxic hepatitis, and epilepsy before dying a premature and miserable death, probably within a year or so.

However, according to an anonymous source at the Porton Down laboratory, which is located just a few miles down the road from Salisbury, scientists now believe they may have completely misunderstood the properties and effects of the chemical: “All the available information we had about Novichok before March this year suggested that it was by far the most lethal nerve agent ever produced, and we had assumed that even the tiniest drop would kill a person within minutes. However, after studying the movements of the Skripals after being poisoned, we have now revised our understanding, and we now believe that one of its primary effects is to generate in its victims a strong desire to go out for a beer followed by a pizza.”

Yet it’s not only the effects of the substance that have led to this reappraisal, but also its mysterious ability to move about from location to location, seemingly at will. According to the source: “At first, differing reports of the location of the poisoning baffled us. First it was the restaurant, then it was the pub, followed by the bench, the car, the cemetery, the flowers, the luggage, the porridge, and then finally the door handle three weeks after the incident. However, we now believe we have an explanation for this phenomena. When Novichok was developed, we think it may have been given the ability to appear in one place, only to then disappear and turn up in an entirely different place.

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Apr 292018
 


John Collier Lady Godiva c1897

 

The Stock Market That’s Never Satisfied (Forsyth)
Kim Pledges to Invite Media to Witness Nuclear Site Shutdown in May (BBG)
North Korea To Wind Clocks Forward By 30 Minutes (UPI)
Are European Companies Ready for Life Without Draghi? (DQ)
Millennial Housing Crisis Engulfs Britain (G.)
Twitter Sold Information To Researcher Behind Facebook Data Scandal (ZH)
Early Facebook Investor, Mentor: “They’ve Done Bupkis To Protect Us” (ZH)
Facebook’s Global Monopoly Poses A Deadly Threat In Developing Nations (G.)
Future Uncertain For Assange In Wake Of US-Ecuador Military Deal (DisM)
‘Caravan’ Migrants Weigh Staying In Mexico Or Risking US Expulsion (R.)
In The Opioid Epidemic, White Means Victim, Black Means Addict (G.)
Australia Pledges Half A Billion To Restore Great Barrier Reef (AFP)

 

 

Why own stocks?

The Stock Market That’s Never Satisfied (Forsyth)

If anything, the stock market is being extraordinarily critical of what it’s being served, notably earnings that are exceeding already high expectations. Take Caterpillar, which initially rallied Tuesday after reporting better-than-expected results. But on the post-earnings conference call, its chief financial officer called the first quarter the farm- and construction-equipment maker’s “high-water mark for the year.” So, if it doesn’t get any better than that, the stock market’s response isn’t to savor the moment, but to sell it. CAT ended up losing 6.2% in reaction to that comment, leading a massive retreat in industrial and material names that helped the Dow industrials shed over 400 points in the trading session.

That isn’t an entirely irrational response, given data that show growth is slowing, while inflation is picking up. To those late-cycle symptoms add rising rates, both the ones administered by the Federal Reserve and those set by the bond market. On the latter score, the benchmark Treasury 10-year note briefly peaked just over 3%, a psychologically significant but otherwise not terribly meaningful number. Arguably far more significant is that investors and savers can get 2% on six-month Treasury bills and almost 2.5% on a two-year note. Two years ago, dividend stocks provided investors a one-percentage point advantage over risk-free rates, says Danielle DiMartino Booth in her Money Strong missive. Now those places have been swapped.

Adds David Rosenberg, chief economist and strategist for Gluskin Sheff, this ability to get a “safe yield” for the first time in a decade, with no risk from falling stock or bond prices, represents a “seminal shift and a huge source of competition for the dividend allure of the stock market.” The prospect of higher rates may cheer savers, but poses greater risk to an economy never more dependent on debt, DiMartino Booth says. But that’s the direction the Fed is headed, given the rise in inflation and signs of slowing growth, an unpleasant combination that suggests stagflation; if not 1970s-style double-digit inflation and unemployment, then an economy expanding more slowly than prices are rising.

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He claims it’s all still intact.

Kim Pledges to Invite Media to Witness Nuclear Site Shutdown in May (BBG)

North Korea leader Kim Jong Un has promised to close his main nuclear weapons test site in May and said he will invite South Korean and American media to witness the shutdown. Ahead of an historic meeting with U.S. President Donald Trump expected within the next three to four weeks, Kim told South Korea’s president that two tunnels at the nuclear test site are still in good condition, playing down international speculation that the site was so badly damaged by nuclear explosions that it can no longer be used. Kim’s pledges to Moon at their historic summit on Friday were detailed in Seoul on Sunday by Moon’s chief communication official.

Kim told President Moon Jae-in on the disputed Korean border that Trump will learn at their meeting that North Korea has no intention of using its nuclear arsenal toward South or the Pacific or to target the U.S. The North had no reason to own nuclear weapons if it and the U.S. promise non-aggression against each other, he said, according the the Seoul briefing. Trump said Saturday night that he expects his historic meeting with Kim will take place “over the next three or four weeks.” “Strength is going to keep us out of nuclear war, not get us in,” Trump told a rally in Washington, Michigan. Earlier, he said details of the summit are being ironed out, and that he’d spoken with the leaders of South Korea and Japan about preparations for the meeting.

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Symbols are important.

North Korea To Wind Clocks Forward By 30 Minutes (UPI)

North Korea has decided to wind its clock forward half an hour to match its time with the South’s, two years and eight months after it decided to adopt its own standard time, News 1 reported. Seoul’s presidential official Yoon Young-chan told reporters Sunday that in talks between President Moon Jae-in and North Korean dictator Kim Jong Un, Kim said he would shift time in Pyongyang to Korea Standard Time (UTC+9:00) Accompanied by his wife Ri Sol-ju, Kim is said to have pointed to the two clocks hanging inside the Peace House, located on the South’s side of Panmunjom truce village, and said that this “pained his heart,” before suggesting to Moon that the South and North “first unify the time.”

Until 2015, Pyongyang used the same time (135 degrees East) as Seoul but adopted its own standard time which was thirty minutes behind KST. The North Korean leader said, as Pyongyang was the one that changed the time, it should be the one to make the adjustment again, JoongAng Ilbo reported. Yoon said this indicates Kim’s willingness to actively coordinate with the international community.

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A continent full of zombies.

Are European Companies Ready for Life Without Draghi? (DQ)

[..] there are signs that the ECB has quietly begun to taper its corporate-bond buying program. The rate of purchases under the Corporate Sector Purchase Programme dropped 50% in April to about €700 million per week, down from €1.4 billion during the first quarter, analysts at Deutsche Bank pointed out. That could mean the ECB is starting a “stealth taper” in order to wean the European bond market off the corporate debt purchases it began in June 2016, Deutsche Bank said. But are the companies that benefited from the ECB’s largesse ready for life without Draghi? There’s no doubting the ECB’s bond buying has exacerbated distortions in the corporate bond market — distortions that were first engendered by the central bank’s low interest rate policy. Yields came crashing down and spreads narrowed.

At the peak of ECB’s bond buying binge, the average yield of the Iboxx non-financials index fell as low as 0.69%. For German blue-chip companies such as BASF, Continental, Linde, SAP and Siemens, yields fell to less than 0.5%. France’s pharmaceutical company Sanofi and German consumer goods manufacturer Henkel even managed to issue bonds at slightly negative yields, effectively helping pay off their debts. But that was then. Now, the average yield of the Iboxx non-financials index is back above 1.10%. As Reuters reports, some of Europe’s biggest money managers are reducing their exposure to corporate bonds. Some are even shorting them, betting that stress is building in a market that was buoyed by years of rock-bottom borrowing costs. Some new bond issues have even struggled to find buyers, when not so long ago they were flying off shelves.

Bank of America guesstimated last year that as many as 50 of the euro zone’s 600 biggest companies deserve to be classified as “zombies,” as they pay far too much interest in relation to their profits. For these companies the ECB’s bond-buying program was a godsend, allowing them to continue refinancing their debt and stave off default. But interest rates are beginning to rise again. Whether or not the ECB has already begun to taper its corporate bond buying on the quiet, the program will likely be phased out later this year. And yields have already been rising ever so gradually in anticipation. That means that the companies that have benefited from the central bank’s monetary support are going to soon find themselves facing a whole new, more challenging reality. For some it’s unlikely to be a pleasant one.

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That’s what happens when you try and run an economy on a housing bubble.

Millennial Housing Crisis Engulfs Britain (G.)

Home ownership among young families has plummeted across every corner of Britain over the past 35 years, according to a devastating inquiry into the housing crisis facing millennials. The proportion of families headed by a 25- to 34-year-old that own their own home has more than halved in some regions, showing that the crisis goes far beyond London. Analysis conducted as part of a two-year investigation into intergenerational fairness in Britain, chaired by a former Tory minister, found that millennials are being forced into increasingly cramped and expensive rented properties that leave them with a longer commute and little chance of saving for a home. It also finds an increasing proportion of the young living in overcrowded housing.

The commission, which has been overseen by the Resolution Foundation thinktank and includes the former universities minister David Willetts, is expected to conclude that new taxes on property wealth may be the only way to restore fairness and prepare the country to pay the care and support costs of an ageing population. Ownership among 25- to 34-year-olds has plummeted in Greater Manchester from 53% in 1984 to 26% last year. It has fallen from 54% to 25% in south Yorkshire, from 45% to 20% in the West Midlands, from 50% to 28% in Wales and from 55% to 27% in the south-east. In outer London, the proportion has collapsed from 53% to just 16%. Out of 22 regions analysed by the commission, in only one – Strathclyde in Scotland – has home ownership among the young remained stable. It stood at 32% in 1984 and 33% last year, having peaked at 45% in 2002.

Ownership in London has fallen consistently over the past 30 years, whereas rates in some other parts of the country declined more slowly before the early 2000s, but very rapidly thereafter. Even favourable economic conditions are likely to result in millennials catching up with the home ownership levels of the previous cohort only by the age of 45. Fast-growing inheritances will help some, but nearly half of young non-homeowners have parents who do not own either.

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We need an overall ban on data harvesting for profit.

Twitter Sold Information To Researcher Behind Facebook Data Scandal (ZH)

Twitter has now also become embroiled in the Facebook data harvesting scandal – as the Sunday Telegraph reveals that the social media giant sold user data to Aleksandr Kogan, the Cambridge University researcher and director of Global Science Research (GSR), who created an app which harvested the data of millions of Facebook users’ without their consent before selling it to political data firm Cambridge Analytica. “Aleksandr Kogan, who created tools for Cambridge Analytica that allowed the political consultancy to psychologically profile and target voters, bought the data from the microblogging website in 2015, before the recent scandal came to light. -Sunday Telegraph”

Kogan says that the data was only used to generate “brand reports” and “survey extender tools” which were not in violation of Twitter’s data policies. While most tweets are public information and easy for anyone to access, Twitter charges companies and organizations for access to information in bulk – though Twitter bans companies which use the data for political purposes or to match with personal user information found elsewhere. A Twitter spokesman confirmed the ban and said: “Twitter has also made the policy decision to off-board advertising from all accounts owned and operated by Cambridge Analytica. This decision is based on our determination that Cambridge Analytica operates using a business model that inherently conflicts with acceptable Twitter Ads business practices.

The company said it does not allow “inferring or deriving sensitive information like race or political affiliation, or attempts to match a user’s Twitter information with other personal identifiers” and that it had staff in place to police this “rigorously”.-Sunday Telegraph Data licensing made up 13% of Twitter’s 2017 revenue at $333 million. In a March blog post, Citron Research said that Twitter’s 2018 data-licensing business will generate $400 million (analysts polled by FactSet say $387 million) and that it represents the fastest-growing segment of the company’s operations (which it is, according to FactSet).

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“..I feel like my baby has turned out to be something horrible, and these people I trusted and helped along have forgotten where they came from..”

Early Facebook Investor, Mentor: “They’ve Done Bupkis To Protect Us” (ZH)

Even if Facebook’s stellar Q1 earnings report hadn’t helped erase some of the losses that Facebook shares incurred in the aftermath of the Cambridge Analytica scandal, Facebook executives Mark Zuckerberg and Sheryl Sanderberg would still believe that the company’s troubles are largely behind them and that the company had essentially repaired the damage done to its reputation. That was the assessment delivered by early Facebook investor and one-time Zuckerberg mentor Roger McNamee, who warned during an appearance at an event organized by Quartz in Washington DC last week that the company’s leaders are deeply complacent and still haven’t accepted the fact that Facebook has badly mislead its users about how the company profits off their data.

Despite Zuckerberg’s warning, embedded in his opening statement to Congress earlier this month, that the company planned to make changes that could “significantly impact” profitability, McNamee believes it’s likely Facebook is “going to get away” with the bad things that it has done, which is “particularly dangerous” considering the 2018 midterm elections are only months away. McNamee said he’s deeply disappointed in how Zuckerberg and Sandberg have responded to the crisis by refusing to accept responsibility. During their post-crisis media tour, both executives insisted on blaming Cambridge Analytica for “misleading” Facebook, even though Facebook never bothered to alert users whose data had been affected. “They’ve done bupkis to protect us,” McNamee said.

The whole affair has left McNamee – who considers his involvement with Facebook during its early days to be the “highlight of a long career” – deeply saddened. “Every part of this has made me sadder and sadder and sadder. I feel like my baby has turned out to be something horrible, and these people I trusted and helped along have forgotten where they came from,” he said in a conversation with Kevin Delaney, Quartz’s editor-in-chief. McNamee has become an outspoken critic of the company, comparing its role in the 2016 US election to “the plot of a sci-fi novel” while at the same time admitting that he has “profited enormously” by backing Facebook early on. The organization he helped found, the Center for Humane Technology, has made it a mission to expose Facebook’s multiple flaws, and to try to fix them.

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Facebook facilitates ethnic cleansing. But profits are more important.

Facebook’s Global Monopoly Is A Deadly Problem In Developing Nations (G.)

[..] Facebook is a new kind of monopoly. We’re accustomed to the idea of companies becoming dominant in some jurisdictions. But we have never before encountered a corporation that has a global monopoly. Because wherever you go on the planet these days, Facebook is the only social-networking game in town. It has no serious competitors – anywhere. The implications of this are only now beginning to dawn on us. In the past two years, we have woken up to Facebook’s pernicious role in western democratic politics and are beginning to think about ways of addressing that problem in our bailiwicks. To date, the ideas about regulation that have surfaced seem ineffectual and so the damage continues.

But at least liberal democracies have some degree of immunity to the untruths disseminated by bad actors who exploit Facebook’s automated targeting systems – provided by a free press, parliamentary inquiries, independent judiciaries, public-service broadcasters, universities, professional bodies and so on. Other societies, particularly the developing countries now most assiduously targeted by Facebook, have few such institutions and it is there that the company has the capacity to wreak the most havoc. We’ve had intimations of this for a while, notably after it became clear that Facebook was a medium for anti-Muslim hysteria in Myanmar, hysteria that was subsequently translated into full-blown ethnic cleansing.

One of the key figures in all this was the ultra-nationalist Buddhist monk, Ashin Wirathu, who used Facebook to broadcast his views about the Rohingya after he was banned from preaching by the government. Wirathu compared Muslims to mad dogs and posted gruesome pictures of dead bodies that he claimed were killed by Muslims – with predictable consequences. United Nations officials now say that social media has had a “determining role” in anti-Rohingya Muslim violence in Myanmar, which the UN itself has called “ethnic cleansing”. For “social media”, read Facebook, because there’s no competition to it in Myanmar.

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Torture.

Future Uncertain For Assange In Wake Of US-Ecuador Military Deal (DisM)

Late yesterday, Telesur reported that Ecuador had signed a “security deal” with the United States, which is expected to result in a US military presence in that country. Telesur wrote: “Ecuador signed Wednesday a cooperation agreement with the United States to fight transnational organized crime and drug trafficking…. Moreno’s move is a further shift away from the policies of his left-wing predecessor and former ally, Rafael Correa, who has criticized and refused to participate in the U.S.-sponsored Plan Colombia, arguing peace is not obtained with helicopters and weapons but rather by promoting economic and social development.”

The news comes as a new blow to hopes that Ecuador’s President Lenin Moreno would heed calls from around the globe to end the solitary confinement of Julian Assange. Tomorrow, the arbitrarily confined journalist will have been totally isolated for one month. The latest news of a military agreement struck between Moreno’s government and the US comes as yet another major shift away from the policies of Ecuador’s prior administration. It is also a distinct pivot away from Ecuador’s decision, made just a few months prior, to confer citizenship and diplomatic status on the Wikileaks Editor-In-Chief.

This writer previously expressed the opinion that the ongoing solitary confinement of Assange by his own government constitutes torture. Disobedient Media has also reported consistently on the numerous online and physical vigils, petitions and other efforts to encourage Ecuador to return the Ecuadorian embassy in London to a place of refuge, as intended when the previous administration bravely granted Assange political asylum from the threats to his life and work emanating from the United States.

In our previous report, Disobedient Media noted that enforced isolation is not only torture in the opinions of those who have experienced it, but has also been labeled as such by the UN. Rick Raemisch wrote in an opinion piece published by The New York Times that, according to the Nelson Mandela rules, solitary confinement lasting more than 15 days constitutes torture. This means that the length of time for which Julian Assange has been cut off from the outside world would now have almost doubled the official benchmark for being considered torture.

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if the US would simply clean ita back yard, and stop stoking tensions there, it wouldn’t have these problems.

‘Caravan’ Migrants Weigh Staying In Mexico Or Risking US Expulsion (R.)

Hondurans, Guatemalans and Salvadorans who drew the wrath of President Donald Trump in a month-long caravan to the U.S. border will make hard decisions on Sunday whether to risk being deported all the way home by trying to cross, or to build a life in Mexico. After angry tweets from Trump, U.S. border authorities said some people associated with the caravan had been caught trying to slip through the fence, and encouraged the rest to hand themselves in to authorities. “We are a very welcoming country but just like your own house, we expect everyone to enter through our front door, and answer questions honestly,” San Diego Chief Patrol Agent Rodney S. Scott said in a statement.

Most of the group of about 400 travelers who arrived in border city Tijuana on buses over the past couple of days said they intended to legally seek asylum in San Diego later on Sunday, but lawyers advising the group gave them stark advice – not everyone will be successful. After the grueling journey, a somber mood took hold as the reality sank in that many of them would be separated from their families. Lovers and parents with slightly older sons and daughters could be forced to split up. At venues around the city, U.S. immigration lawyers working on a pro bono basis on Saturday listened to harrowing tales of life in the immigrants’ home countries.

Death threats from local gangs, the murder of family members, retaliatory rape, and political persecution back home prompted them to flee, the migrants and lawyers say. Many of the immigrants who spoke at length with Reuters at various points during their trip through Mexico had been short on knowledge of their legal rights, but at least 24 recounted detailed stories of facing death threats.

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How true.

In The Opioid Epidemic, White Means Victim, Black Means Addict (G.)

My cursor is hovering over the “unfriend” button, but I haven’t clicked it. Today, my relationship-severing finger is poised to get rid of Matt. Matt is a friend with whom I spent a lot of time about six years ago. We were close in rehab, but I haven’t seen him since. I entered Greenbriar treatment center in Washington, Pennsylvania, just a few days after he’d arrived, and he showed me the ropes. For the next few weeks, we were virtually inseparable. Rehab can be a frightening place when you first arrive. With any luck, you’ve already had some sort of “come to Jesus” moment with yourself and you’ve realized that you need to be there or else you’re going to die. I had had no such moment and was fully convinced that this was all a big mistake.

Once I got through the door into the facility, I heard it lock electronically with a loud buzz and a finality that shook my bones. I immediately regretted it. There is no lonelier feeling on this Earth than sitting there, abandoned and broken. You’ve burned all your bridges on the outside and your life feels as though it’s half a world away. This is the moment when you really need a guy like Matt to walk up to you, thrust out his hand and say: “Hi! I’m Matt! What’s your name?” Over the next few weeks, he and I attended group therapy sessions together and stayed up late talking about our problems, our addictions and our families. We ugly-cried in front of each other as we shared our darkest secrets, what we had done for drugs and how deeply unhappy we were.

Matt is a man who, in many ways, helped me to take my recovery seriously in rehab and, in the first few weeks after my release, he helped me to remain sober on the outside. And, today, I sit in front of my monitor poised to cancel him forever because whiteness is apparently more addictive than any drug could ever be. We sobered up in the same facility, but he was a victim. I was an addict. Matt is a Christian. I am not. Matt is a Republican. I am not. And, most significantly, Matt is white. I am not. And these facts make all the difference in America.

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First you destroy it, then you spend taxpayers’ money to restore it. It’s called a profit model.

Australia Pledges Half A Billion To Restore Great Barrier Reef (AFP)

Australia pledged half a billion dollars to restore and protect the Great Barrier Reef Sunday in what it said would be a game-changer for the embattled natural wonder, but conservationists were not convinced. The World Heritage-listed site, which attracts millions of tourists, is reeling from significant bouts of coral bleaching due to warming sea temperatures linked to climate change.It is also under threat from the coral-eating crown-of-thorns starfish, which has proliferated due to pollution and agricultural runoff.Prime Minister Malcolm Turnbull said more than Aus$500 million ($400 million) would go towards improving water quality, tackling predators, and expanding restoration efforts.

Turnbull said it was the “largest ever single investment — to protect the reef, secure its viability and the 64,000 jobs that rely on the reef”.”We want to ensure the reef’s future for the benefit of all Australians, particularly those whose livelihood depends on the reef,” he added.The reef is a critical national asset, contributing Aus$6.4 billion a year to the Australian economy.Canberra has previously committed more than Aus$2.0 billion to protect the site over the next decade, but has been criticised for backing a huge coal project by Indian mining giant Adani nearby.With its heavy use of coal-fired power and relatively small population, Australia is considered one of the world’s worst per-capita greenhouse gas polluters.

Canberra insists it is taking strong action to address the global threat of climate change, having set an ambitious target to reduce emissions by 26 to 28% from 2005 levels by 2030.

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Apr 242018
 
 April 24, 2018  Posted by at 9:17 am Finance Tagged with: , , , , , , , , , , ,  


John French Sloan A Woman’s Work 1912

 

Japan Can Begin Reducing Stimulus In Five Years – Kuroda (CNBC)
ECB Mulls Shelving Rules Tackling Euro Zone’s Bad Loans Pile (R.)
The Return Of Honest Bond Yields (Stockman)
Stop and Assess (Jim Kunstler)
The Chinese Car Invasion Is Coming (BBG)
Greek Primary Surplus Comes At The Expense Of Growth (K.)
Tensions Grow On Greek Islands (K.)
The UK Has Turned The Right To Education Into A Charitable Cause (G.)
UK Food Bank Use Reaches Highest Rate On Record (Ind.)
Finland To End Basic Income Trial After Two Years (G.)

 

 

Abenomics is a miserable failure. Which is why Abe’s popularity is scraping the gutter. But we keep on pretending. Five years? Why not make it ten, or fifty? Kuroda is stuck….

Japan Can Begin Reducing Stimulus In Five Years – Kuroda (CNBC)

The Bank of Japan will be able to begin winding down its extraordinary monetary stimulus within the next five years, the head of the central bank said. “Sometime within the next five years, we will reach [our] 2% inflation target,” Governor Haruhiko Kuroda told CNBC’s Sara Eisen over the weekend. Once that level is reached, we will start “discussing how to gradually normalize the monetary condition.” Kuroda began his second five-year term this year. He has implemented a massive stimulus policy by cutting the central bank’s benchmark interest rate to negative, keeping the 10-year Japanese government bond yield near 0% in an effort to control the yield curve and stepping up the Bank of Japan’s asset purchases.

However, inflation remains low. Japan reported its consumer price index, excluding fresh food and energy, rose 0.5% in the 12 months through March. “In order to reach [our] 2% inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time,” Kuroda added in his interview with CNBC. Japan’s efforts to boost the sluggish national economy come amid steady growth around the world. The IMF predicts the global economy will increase 3.9% this year and next. Kuroda agreed with the positive outlook. “The world economy will continue to grow at a relatively high pace,” he said. For this year and next, “we don’t see any sign of a turning point.” But protectionism, unexpected rapid tightening of monetary policy in some countries, and geopolitical tensions in North Korea and the Middle East pose potential risks, Kuroda said.

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… and Draghi is stuck too. My article yesterday was timely. The outgoing Bundesbank director in charge of banking supervision says the ECB’s credibility is at stake. A dangerous thing to say.

ECB Mulls Shelving Rules Tackling Euro Zone’s Bad Loans Pile (R.)

The European Central Bank, after suffering a political backlash, is considering shelving planned rules that would have forced banks to set aside more money against their stock of unpaid loans. The guidelines, which were expected by March, had been presented as a main plank of the ECB’s plan to bring down a 759 billion euro ($930 billion) pile of soured credit weighing on euro zone banks, particularly in Greece, Portugal and Italy. The ECB was now considering whether further policies on legacy non-performing loans (NPLs) were necessary “depending on the progress made by individual banks”, an ECB spokeswoman said.

No decision had been made yet and the next steps were still being evaluated, she said. Central Bank sources told Reuters that if the rules were scrapped, supervisors would look to continue putting pressure on problem banks using existing powers. An alternative would be to hold off until the results of pan-European stress tests are published in November but this would be close to the end of Daniele Nouy’s mandate as the head of the ECB’s Single Supervisory Mechanism at the end of the year. A clean-up of banks’ balance sheets from toxic assets inherited from the financial crisis is a precondition for getting countries like Germany to agree on a common euro zone insurance on bank deposits.

And Andreas Dombret, the outgoing Bundesbank director in charge of banking supervision, said in an interview published on Monday that the ECB’s credibility was at stake. “One cannot say that NPLs are one of the biggest risk for the European banking sector and a top priority and then fail to act,” he told Boersen-Zeitung. “It’s about the credibility of the SSM,” he said, calling for a “timely proposal”.

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And as the central bankers find themselves trapped, the bond vigilantes roam free.

The Return Of Honest Bond Yields (Stockman)

In the wee hours this AM, the yield on the 10-year treasury note hit 2.993%. That’s close enough for gubermint work to say that the big 3.00% inflection point has now been tripped. And it means, in turn, that the end days of the Bubble Finance era have well and truly commenced. In a word, honest bond yields will knock the stuffings out of the mainstream fairy tale that passes for economic and financial reality. And in a 2-3% inflation world, by honest bond yields we mean 3% + on the front-end and 4-5% on the back-end of the yield curve. Needless to say, that means big trouble for the myth of MAGA. As we demonstrated in part 2, since the Donald’s inauguration there has been no acceleration in the main street economy—just the rigor mortis spasms of a stock market that has been endlessly juiced with cheap debt.

But the Trump boomlet in the stock averages has now hit its sell-by date. That’s because today’s egregiously inflated equity prices are in large part a product of debt-fueled corporate financial engineering—stock buybacks, unearned dividends and massive M&A dealing. Thus, since the pre-crisis peak in Q3 2007 nonfinancial corporate sector value added is up by 34%, but corporate debt securities outstanding have risen by 85%; and the overwhelming share of that massive debt increase was used to fund financial engineering, not productive assets and future earnings growth. In a world of honest interest rates, of course, this explosion of non-productive debt would have chewed into earnings good and hard because the borrowed cash went to Wall Street, not into the wherewithal of earnings growth.

In fact, during the past 10 years, net value added generated by US nonfinancial corporations rose by just $2 trillion (from $6.1 trillion to $8.1 trillion per annum), whereas corporate debt rose by nearly $3 trillion (from $3.3 trillion to $6.1 trillion). So it should have been a losing battle—with interest expense rising far faster than operating profits. But owing to the Fed’s misguided theory that it can make the main street economy bigger and stronger by falsifying interest rates and other financial asset prices, the C-suite financial engineers got a free hall pass. That is, they pleasured Wall Street by pumping massive amounts of borrowed cash back into the casino, but got no black mark on their P&Ls.

Read more …

“That’s what happens when money is just a representation of debt that can’t be paid back.”

Stop and Assess (Jim Kunstler)

Let’s pause today and make an assessment of where things stand in this country as Winter finally coils into Spring. As you might expect, a nation overrun with lawyers has litigated itself into a cul-de-sac of charges, arrests, suits, countersuits, and allegations that will rack up billable hours until the Rockies tumble. The best outcome may be that half the lawyers in this land will put the other half in jail, and then, finally, there will be space for the rest of us to re-connect with reality.

What does that reality consist of? Troublingly, an economy that can’t go on as we would like it to: a machine that spews out ever more stuff for ever more people. We really have reached limits for an industrial economy based on cheap, potent energy supplies. The energy, oil especially, isn’t cheap anymore. The fantasy that we can easily replace it with wind turbines, solar panels, and as-yet-unseen science projects is going to leave a lot of people not just disappointed but bereft, floundering, and probably dead, unless we make some pretty severe readjustments in daily life.

We’ve been papering this problem over by borrowing so much money from the future to cover costs today that eventually it will lose its meaning as money — that is, faith that it is worth anything. That’s what happens when money is just a representation of debt that can’t be paid back. This habit of heedless borrowing has enabled the country to pretend that it is functioning effectively. Lately, this game of pretend has sent the financial corps into a rapture of jubilation. The market speed bumps of February are behind us and the road ahead looks like the highway to Vegas at dawn on a summer’s day.

Tesla is the perfect metaphor for where the US economy is at: a company stuffed with debt plus government subsidies, unable to deliver the wished-for miracle product — affordable electric cars — whirling around the drain into bankruptcy. Tesla has been feeding one of the chief fantasies of the day: that we can banish climate problems caused by excessive CO2, while giving a new lease on life to the (actually) futureless suburban living arrangement that we foolishly invested so much of our earlier capital building. In other words, pounding sand down a rat hole.

Read more …

Yeah, we need more cars…

The Chinese Car Invasion Is Coming (BBG)

On a bright spring day in Amsterdam, car buffs stepped inside a blacked-out warehouse to nibble on lamb skewers and sip rhubarb cocktails courtesy of Lynk & Co., which was showing off its new hybrid SUV. What seemed like just another launch of a new vehicle was actually something more: the coming-out party for China’s globally ambitious auto industry. For the first time, a Chinese-branded car will be made in Western Europe for sale there, with the ultimate goal of landing in U.S. showrooms.

That’s the master plan of billionaire Li Shufu, who has catapulted from founding Geely Group as a refrigerator maker in the 1980s to owning Volvo Cars, British sports carmaker Lotus, London Black Cabs and the largest stake in Daimler —the inventor of the automobile. Li is spearheading China’s aspirations to wedge itself among the big three of the global car industry—the U.S., Germany and Japan—so they become the Big Four. “I want the whole world to hear the cacophony generated by Geely and other made-in-China cars,” Li told Bloomberg News. “Geely’s dream is to become a globalized company. To do that, we must get out of the country.”

[..] Chinese companies have announced at least $31 billion in overseas deals during the past five years, buying stakes in carmakers and parts producers, according to data compiled by Bloomberg. The most prolific buyer is Li, who spent almost $13 billion on stakes in Daimler and truckmaker Volvo. Tencent Holdings Ltd., Asia’s biggest internet company, paid about $1.8 billion for 5% of Tesla. As software and electronics become just as critical to a car as the engine, China is ensuring it doesn’t lag behind in that market, either. Baidu, owner of the nation’s biggest search engine, announced a $1.5 billion Apollo Fund to invest in 100 autonomous-driving projects during the next three years.

“We have secured a chance to compete in the U.S. market of self-driving cars through those partnerships,” Li Zhengyu, a vice president overseeing Baidu’s intelligent-driving unit, told Bloomberg News. “Everyone has a good chance to win if it has good development plans.”

Read more …

The Troika demands that Greece kills its society even more. 4.2% of GDP disappears from the economy. Where it’s so badly needed.

Greek Primary Surplus Comes At The Expense Of Growth (K.)

The 2017 budget has officially registered a record primary surplus of 4.2% of GDP, against a target for 1.75%, but this came at a particularly heavy price for the economy, which grew just 1.4% against a budget target for 2.7%. It is obvious that securing primary surpluses of more than twice the target, depriving the economy of precious resources, is directly associated with the stagnation of growth compared to original projections. It is no coincidence that consumption edged up just 0.1% last year, which analysts have attributed to taxpayers’ exhaustion due to overtaxation. The surplus was mainly a result of drastic cuts to the Public Investments Program (by about 800 million euros) and social benefits, due to the delay in the application of the Social Solidarity Income.

The government was quick to express its satisfaction upon the release of the fiscal results by the Hellenic Statistical Authority on Monday, although it was just two years ago that Prime Minister Alexis Tsipras accused the previous administration of setting excessive targets for the primary surpluses of 2016, 2017 and 2018 at 4.5% of GDP. Eventually he reached that target with his own government, although the creditors had lowered the bar, to 1.75% for 2017 and 3.5% this year. The Finance Ministry spoke yesterday of proof of “the credibility of the fiscal management,” adding that “those data show that not only is the target of 3.5% feasible for this and the coming years, but there will also be some fiscal space for targeted tax easing and social expenditure in the post-program period.”

That reference concerns the so-called “countermeasures” the government has planned in case it exceeds the 3.5% target in the 2019 and 2020 primary surpluses, but for now they are at the discretion of the IMF, which will decide next month whether they can be introduced. Obviously Athens hopes the 2017 figures will positively affect the Fund’s view. There was also a positive response from Brussels on Monday, with European Commissioner for Economic Affairs Pierre Moscovici and Commission spokesman Margaritis Schinas stating that the efforts and sacrifices of the Greek people are now paying dividend.

Read more …

The new head of the Greek Asylum Service flatly ignores the Council of State. Greek justice system overpowered by Brussels and Berlin.

Tensions Grow On Greek Islands (K.)

Concerns have peaked over tensions on the Aegean islands following clashes between residents of Lesvos and migrants in Mytilene port which led to several injuries. Riot police were forced to intervene early Monday morning after dozens of local residents started protesting the presence of migrants in the main square of Mytilene. The migrants, who had been camping in the square since last Tuesday demanding to be allowed to leave the island, were put onto buses and taken back to overcrowded state facilities. According to local reports, the protesters threw flares, firecrackers and stones at the migrants, who formed a circle around women and children to protect them.

Some protesters chanted “Burn them alive,” according to reports which suggested that members of far-right groups were involved. Police detained 122 people – all but two of whom were Afghan migrants – while 28 people were transferred to the hospital for first-aid treatment, 22 of whom were migrants. Political parties issued statements blaming the attack on far-right groups. The mayor of Lesvos, Spyros Galinos, did not rule out the presence of extremists on the island but pointed to broader frustration among locals. “Society is reacting as a whole,” said Galinos, who had appealed to the government last week to reduce overcrowding on the islands.

[..] meanwhile, the new head of the Greek Asylum Service, Markos Karavias, signed an agreement effectively restricting migrants arriving on the Aegean islands from traveling on to the mainland. A Council of State ruling last week overturned previous asylum service restrictions on migrants leaving the islands. The government’s proposed changes to asylum laws – aimed at speeding up the slow pace at which applications are processed – are to be discussed in Parliament on Tuesday.

Read more …

How poor Britain is becoming.

The UK Has Turned The Right To Education Into A Charitable Cause (G.)

My nine-year-old son looks at me anxiously. “Mum, you definitely, definitely have my sponsor money plus an extra pound, which I need for the fundraising games. We have to bring it in today.” I search through my wallet for a quid each for him and his brother. I’ve got no cash on me. “We have to,” he repeats, his voice going wobbly. I stick an IOU in his piggy bank and the day is saved. Yet again. And yet again I feel infuriated and indignant at being put in this position. Then I feel even more cross that I now feel mean. Cake sale, plant sale, ticket for a pamper evening, music quiz, another cake sale, school disco (with associated plastic tat and penny sweets on sale), pay to see Santa, raffle for the chocolate hamper (that you’ve already sent in the goddamn chocolate for), dress up for World Book Day (that’s a quid), go pink for breast cancer research (that’s two quid) and why not run a sponsored mile for Sport Relief while you’re at it.

Then … ping! Oh joy, a text from school – another (another?!) cake sale. How much sugar is going down in that playground? The texts keep flooding in. Ransack your wardrobe for Bag 2 School; send in dosh so your child can buy you a Mother’s Day present; scrabble through your (now denuded) wardrobe for next week’s clothes swap and pretty please, the PTA would appreciate donations of booze for this year’s summer fete. If enough of you don’t stump up by Friday, you’ll be harangued daily until you do. Welcome to summer term, peak time for school fundraising – and what feels like a constant assault. Let’s put aside my irritation at being “chugged” via leaflets in book-bags and my mobile phone, in principle it’s a good thing for kids to think about the needs of people other than themselves, so I’ll swallow official charity fundraisers on that basis, even if those charities might not be my personal choice.

What is outrageous, though, is the assumption in some schools that parents can easily afford to donate on a virtually weekly basis, and the idea that we should expect to be paying on top of our taxes for our children’s state education. Schools, suffering the terrible results of the government’s austerity policies, have cut to the chase and are now pumping parents for regular direct debits to cover essentials. But is asking parents to pay doing pupils’ education any good?

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No surprise.

UK Food Bank Use Reaches Highest Rate On Record (Ind.)

Food bank use has soared at a higher rate than ever in the past year as welfare benefits fail to cover basic living costs, the UK’s national food bank provider has warned. Figures from the Trussel Trust show that in the year to March 2018, 1,332,952 three-day emergency food supplies were delivered to people in crisis across the UK – a 13% increase on last year. This marks a considerably higher increase than the previous financial year, when it rose by 6%. Low income is the biggest single – and fastest growing – reason for referral to food banks, accounting for 28% of referrals compared to 26% in the previous year. Analysis of trends over time demonstrates it has significantly increased since April 2016.

Being in debt also accounted for an increasing percentage of referrals – at 9% of referrals up from 8% in the past year. The cost of housing and utility bills are increasingly driving food bank referrals for this reason, with the proportion of referrals due to housing debt and utility bill debt increasing significantly since April 2016. The other main primary referral reasons in the past year were benefit delays (24%) and benefit changes (18%). “Reduction in benefit value” have the fastest growth rate of all referrals made due to a benefit change, while those due to “moving to a different benefit” have also grown significantly.

Read more …

It’s dangerous when people trial basic income schemes who don’t understand them. Others will say: it failed in Finland! No it didn’t. It has to be universal, and this is not.

Finland To End Basic Income Trial After Two Years (G.)

Europe’s first national government-backed experiment in giving citizens free cash will end next year after Finland decided not to extend its widely publicised basic income trial and to explore alternative welfare schemes instead. Since January 2017, a random sample of 2,000 unemployed people aged 25 to 58 have been paid a monthly €560 (£475) , with no requirement to seek or accept employment. Any recipients who took a job continued to receive the same amount. The government has turned down a request for extra funding from Kela, the Finnish social security agency, to expand the two-year pilot to a group of employees this year, and said payments to current participants will end next January.

It has also introduced legislation making some benefits for unemployed people contingent on taking training or working at least 18 hours in three months. “The government is making changes taking the system away from basic income,” Kela’s Miska Simanainen told the Swedish newspaper Svenska Dagbladet. The scheme – aimed primarily at seeing whether a guaranteed income might incentivise people to take up paid work by smoothing out gaps in the welfare system – is strictly speaking not a universal basic income (UBI) trial, because the payments are made to a restricted group and are not enough to live on.

But it was hoped it would shed light on policy issues such as whether an unconditional payment might reduce anxiety among recipients and allow the government to simplify a complex social security system that is struggling to cope with a fast-moving and insecure labour market. Olli Kangas, an expert involved in the trial, told the Finnish public broadcaster YLE: “Two years is too short a period to be able to draw extensive conclusions from such a big experiment. We should have had extra time and more money to achieve reliable results.”

Read more …

Apr 232018
 
 April 23, 2018  Posted by at 12:46 pm Finance Tagged with: , , , , , , , , ,  


René Magritte La trahison des images 1929

 

“[Price discovery] is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers”, says Wikipedia. Perhaps not a perfect definition, but it’ll do. They add: “The futures and options market serve all important functions of price discovery.”

What follows from this is that markets need price discovery as much as price discovery needs markets. They are two sides of the same coin. Markets are the mechanism that makes price discovery possible, and vice versa. Functioning markets, that is.

Given the interdependence between the two, we must conclude that when there is no price discovery, there are no functioning markets. And a market that doesn’t function is not a market at all. Also, if you don’t have functioning markets, you have no investors. Who’s going to spend money purchasing things they can’t determine the value of? (I know: oh, wait..)

 

Ergo: we must wonder why everyone in the financial world, and the media, is still talking about ‘the markets’ (stocks, bonds et al) as if they still existed. Is it because they think there still is price discovery? Or do they think that even without price discovery, you can still have functioning markets? Or is their idea that a market is still a market even if it doesn’t function?

Or is it because they once started out as ‘investors’ or finance journalists, bankers or politicians, and wouldn’t know what to call themselves now, or simply can’t be bothered to think about such trivial matters?

Doesn’t a little warning voice pop up, somewhere in the back of their minds, in the middle of a sweaty sleepless night, that says perhaps they shouldn’t get this one wrong? Because if you think about, and treat, a ‘thing’, as something that it’s not at all, don’t you run the risk of getting it awfully wrong?

A cow is not a dinner table; but both have four legs. And “Art is Art, isn’t it? Still, on the other hand, water is water. And east is east and west is west and if you take cranberries and stew them like applesauce they taste much more like prunes than rhubarb does. Now you tell me what you know”. And when you base million, billion, trillion dollar decisions, often involving other people’s money, on such misconceptions, don’t you play with fire -or worse?

 

This may seem like pure semantics without much practical value, but I don’t think it is. I think it’s essential. What comes to mind is René Magritte’s painting “La Trahison des Images”, better known as “Ceci n’est pas une pipe”, (The Treachery of Images – this is not a pipe). People now understand -better- what he meant, but they were plenty confused in the late 1920s when he painted it.

An image of a pipe is not a pipe. In Magritte’s words: “The famous pipe! How people reproached me for it! And yet, could you stuff my pipe? No, it’s just a representation, is it not? So if I had written on my picture ‘This is a pipe’, I’d have been lying!”.

But isn’t that what the entire financial community is doing today? Sure, they’re making money right now, but that doesn’t mean there are actual markets. They don’t have to go through “the process of determining the price of an asset in the marketplace..” I.e. they don’t have to check if the pipe is a real pipe, or just a picture of one.

 

 

What killed price discovery, and thereby markets? Central banks did. What they did post-2008 is two-fold: they bought many, many trillions in ‘assets’, mortgage-backed securities, sovereign bonds, corporate bonds, etc., often at elevated prices. It’s hard to gauge how much exactly, but it’s in the $20+ trillion range. Just so all these things wouldn’t be sold at prices markets might value them at after going through that terrible process of ‘price discovery’.

Secondly, of course, central banks yanked down interest rates. Until they arrived at ultra low interest rates (even negative ones), which have led to ultra low yields and the perception of ultra low volatility, ultra low risk, ultra low fear, which in turn contributed to ultra low savings (in which increasing household debt also plays a major role). As a consequence of which we have ultra high prices for stocks, housing, crypto(?), and I’m sure I still forget a number of causes and effects.

People wanting to buy a home are under the impression they can get “more home for their buck” because rates are so low, which in turn drives up home prices, which means the next buyers pay a lot more than they would have otherwise, and get “less home for their buck”. In the same vein, ultra-low rates allow for companies to borrow on the cheap to buy back their own stock, which leads to surging stock prices, which means ‘investors’ pay more per share.

 

Numbers of the S&P 500 and its peers across the world are still being reported, but what do they really represent? Other than what central banks and financial institutions have bought and sold? There’s no way of knowing. If you buy a stock, or a bond, or a home, you no longer have a means of finding out what they are truly worth.

Their value is determined by central banks printing debt out of thin air, not by what it has cost to build a home, or by what a company has added to its value through hard work or investment in labor, knowledge or infrastructure. These things have been rendered meaningless.

Central banks determine what anything is worth. The problem is, that is a trap. And your money risks being stuck in that trap. Because you’re not getting any return on your savings, you want to ‘invest’ in something, anything, that will get you that return. And the only guidance you have left is what central banks purchase. That is a much poorer guidance than an actual market place. The one thing you can be sure of is that you’re paying more for ‘assets’ -probably much more- than you would have had central banks remained on the sidelines.

The Fed may (officially?) have quit purchasing ‘assets’, but the Bank of Japan and ECB took over with a vengeance (oh, to be a fly on the wall at the BIS); in Q1 2017 the latter two bought over $1 trillion in paper. The Bank of Japan has effectively become its nation’s bondmarket. The European Central Bank is not far behind that role in Europe.

And the ‘market’, or rather the 2-dimensional picture of a market, depends only on what they do. The one remaining question then is when will this end? Some say it can go on forever, or, you know, till these policies have restored growth and confidence. But can, will, anyone have confidence in a market that doesn’t function? Martin Armstrong recently addressed the issue:

 

The Central Bank Crisis on the Immediate Horizon

While the majority keep bashing the Federal Reserve, other central banks seem to escape any criticism. The European Central Bank under Mario Draghi has engaged in what history will call the Great Monetary Experiment of the 21st Century – the daring experiment of negative interest rates. A look behind the scenes reveals that this experiment has been not just a failure, it has undermined the entire global economic structure.

We are looking at pension funds being driven into insolvency as the traditional asset allocation model of 60% equity 40% bonds has failed to secure the future with negative interest rates. Then, the ECB has exceeded 40% ownership of Eurozone government debt. The ECB realizes it can not only sell any of its holdings ever again, it cannot even refuse to reinvest what it has already bought when those bonds expire. The Fed has announced it will not reinvest anything.

Draghi is trapped. He cannot stop buying government debt for if he does, interest rates will soar. He cannot escape this crisis and it is not going to end nicely. When this policy collapses, forced by the free markets (no bid), CONFIDENCE will collapse rapidly. Once people no longer believe the central banks can control anything, the end has arrived. We will be looking at the time at the WEC. We will be answering the question – Can a central bank actually fail?

 

So where do you go from here? Everything you -think you- know about markets is potentially useless and doesn’t apply to what you see before you today. There are many voices who talk about similarities and comparisons with what happened to markets for instance in 1987, but what’s the value of that?

Back then, to all intents, constructions, and purposes, markets were functioning. There was price discovery. There were some ‘novel’ instruments, such as portfolio insurance, that you could argue influenced markets, but nothing on the scale or depth of what we see today with high-frequency trading, robots, Kurodas and Draghis.

The temptation is obvious, and large, to compare today’s financial world with that of any point in the past that seems to fit, even if not perfectly. But the lack of price discovery means any such comparisons must of necessity be way off the mark; you cannot stuff that 2-D pipe.

The BIS-designed unity in central bank policies is under threat, as Armstrong indicates. The Fed has moved towards quantitative tightening, not investing or even re-investing, and raising rates, but it doesn’t look like the ECB will be able to follow that change of direction. It can’t stop ‘investing’ because it has become too big a player. The Bank of Japan appears to be in that same bind.

Central bankers jumped into the markets to save them (or so goes the narrative), but they will instead end up killing them. In fact, they killed them the minute they entered the fray. Markets can’t survive without price discovery, and vice versa. The moment it becomes clear that Draghi MUST keep buying sovereign debt from countries with failing economies, the game is up.

 

All those trillions created by central banks, and the even much bigger amounts conjured up by the creation of loans by commercial banks, will have to be eradicated from the system before markets and price discovery can return. And return they will. There are lots of things wrong with our economic and financial machinery, but functioning markets are not wrong.

Things run off the rails when governments and central banks start interfering, not when markets are allowed to function. But it’s long turned into a giant game of whack-a-mole, in which economists and other know-it-betters are forced to plug one hole by digging another, and so forth.

The best we can hope for is some sort of controlled demolition, but the knowledge and intelligence required to make that happen don’t appear to be available. The political climate certainly isn’t either. A politician who campaigns on “let’s take this sucker down slowly” will always lose out to one who claims to know not only how to save it, but to let it bloat even more.

The Draghis of the world will continue to believe they are in control until they are not. At first, some people will start taking out their money while it’s still there, and then after that the rest will trample over each other in a bloody stampede on the way to the exits trying to save what’s left. After the first $100 trillion is gone, we’ll be able to survey the terrain, but by then we won’t, because we’ll be too busy trying to save ourselves.

And I know you’ve heard this before, and I know central banks bought us 10 years of respite. But it was all fake, it was all just a picture of a pipe. They had to pile on insane amounts of debt on your heads, kill off your pension systems and make markets a meaningless term, to achieve that respite.

They had to kill the markets to create the illusion that there still were markets. With the implied promise that they would be able to get out when they had ‘restored growth’.

But you can’t buy growth. And yet that is the only trick they have up their sleeves, and the only thing the emperor is wearing. Next up: a rabbit and a hat. And a pipe. And then the lights go out and someone shouts “FIRE!”.

 

 

 

 

Feb 282018
 
 February 28, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , , ,  


Vincent van Gogh Le moulin de la galette 1886

 

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)
The Albatross Of Debt Part 4 (David Stockman)
Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)
Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)
EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)
People in Sweden at Risk of Losing Access to Cash Altogether (BBG)
May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)
“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)
Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)
World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)
Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

 

 

The news about Powel’s first speech is as boring as the man himself. “We’re doing so well I just gotta wear shades..”

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)

Federal Reserve Chairman Jerome Powell played down concerns about recent market volatility, arguing Tuesday that the dramatic swings do not weigh heavily on his outlook for the economy and maintaining his expectation for further gradual increases in interest rates. In Capitol Hill testimony, Powell emphasized that the job market remains robust, consumer spending is solid and wage growth is accelerating. He also highlighted gains in U.S. exports and stimulative fiscal policy as new “tailwinds” for the economy. “After easing substantially during 2017, financial conditions in the United States have reversed some of that easing,” he said in prepared remarks. “At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation. Indeed, the economic outlook remains strong.”

Powell’s appearance before the House Financial Services committee was his first as the powerful chairman of the world’s most influential central bank. The Fed has been aiming to boost inflation to 2%, but the recent pickup in monthly readings has spooked some investors who worry the central bank might overshoot its target. Instead, Powell’s remarks suggested the firmer data give Fed officials confidence they will actually hit a goal that has long proved elusive. He characterized inflation as “low and stable.” “Despite the recent volatility, financial conditions remain accommodative. At the same time, inflation remains below our 2% longer-run objective. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”

Read more …

Stockman has the best assessment of Powell. A longtime and clueless Fed puppet with no opinion of his own.

The Albatross Of Debt Part 4 (David Stockman)

Donald Trump is all about delusional and so are the casino punters. They keep buying what the robo-machines are buying, which, in turn, persist in feasting on the dip because it’s there and because it’s worked like a charm for nine years running. So doing, the punters have become downright reckless. After all, the market was already sky high last January – trading at 23X earnings on the S&P 500 and resting precariously on a record $554 billion of margin debt . Yet in order to load up on even more of these ultra risky shares, punters have since added $112 billion to their already staggering margin accounts, thereby helping to propel the S&P index to a truly ludicrous 27X by the end of January 2018.

And therein lies the true danger of the Fed’s 30-year long regime of Bubble Finance and the $67 trillion of debt it has piled upon the US economy. To wit, it has completely unmoored Wall Street from the main street economy, meaning that the speculative momentum and internals of the casino are operating in free flight: They will just keep levitating financial asset prices higher until some powerful shock triggers another meltdown of the type experienced during 2008, 2000 and 1987.

We happen to believe strongly that a bond market “yield shock” will be the crash-trigger this time around and for a self-evident reason. The central banks of the world have unleashed a credit monster – $67 trillion in the US, $40 trillion or more in China and $230 trillion on a global basis—and know they must finally stop the relentless monetization of existing debt and other assets. The leadership for that task falls to the new Fed Chairman, Jerome Powell, who is a dyed-in-the-wool Keynesian and lifetime crony capitalist bubble rider. Indeed, during the 45 meetings during which he served as a member of the Bernanke-Yellen Fed, he did not dissent a single time.

So he now owns the epic bubble generated by that madcap regime of massive money printing and drastic interest rate repression, but through his Keynesian beer goggles Powell is thoroughly clueless about the resulting giant disconnect between main street and Wall Street. Accordingly, he seems to think that there is a strong full-employment economy on main street, when it’s nothing of the kind; and a reformed, prudently regulated banking system at the center of Wall Street, when in fact it’s teeming with the fruits of relentless speculation – FANGS, leveraged ETFs, options gambling, risk parity trades, structured finance deals loaded with hidden risk and debt and countless more.`

In other words, the Fed’s new chairman avers that there is smooth sailing ahead, even suggesting to Congress today that the US economy is blessed with considerable tailwinds – including exports and fiscal policy! We will address that tommyrot below, but what’s ahead is tumult, not smooth. That’s because the disconnect between a flat-lining main street economy and Wall Street’s bubble ridden financial house of cards is blatantly unstable and unsustainable. Indeed, this fraught condition, which Powell and his Keynesian posse fail to see, will soon give rise to a thundering upheaval triggered by the Fed’s own action.

Read more …

And Draghi too just keeps claiming the economy is doing great, and it’s due to him.

Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)

A third month of slowing inflation in the euro-area has given European Central Bank President Mario Draghi ammunition to ward off the hawks a little while longer. The rate of price growth slowed to 1.2% this month from 1.3%, dropping to its weakest since 2016. The core measure was unchanged at 1%. The figures follow a series of releases that have checked the economy’s thundering momentum at the start of 2018, which had emboldened policy makers who want a faster unwinding of the central bank’s crisis-era monetary stimulus. Draghi emphasized to European lawmakers this week that an expansionary policy is still warranted even as the economic situation is “improving constantly.”

At the same time, he’s more confident that declining unemployment will boost pay and inflation eventually, even if the rate remains below the ECB’s target of just under 2% for now. The ECB’s Governing Council meets next week and is likely to discuss a change in its policy language to pave the way for an end of quantitative easing. Executive Board member Benoit Coeure – an architect of the program who has more recently taken a hawkish turn – said last week that the ECB can afford to slow bond purchases, as long as it gives clear guidance on the path of interest rates. Bundesbank President Jens Weidmann, who has long argued in favor of unwinding stimulus, chimed in on Tuesday, saying in a Bloomberg TV interview that the ECB’s guidance on interest rates is “rather vague” and could be strengthened as the end of bond buying approaches.

The European Commission said on Tuesday euro-area economic sentiment slipped for a second month in February after touching a 17-year high in December. Data last week showed business confidence in Germany and manufacturing and services activity in the euro area all weakened more than economists forecast. Such bumps along the road of Europe’s recovery from the ravages of its debt crisis underscore why Draghi is not yet ready to pare back support for the euro area.

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You mean the ones we bailed out, right?

Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)

Banks have the “right” to do the leveraged lending they want as long as it does not impair their “safety and soundness,” Joseph Otting, Comptroller of the Currency, said on Tuesday. Otting was speaking to an audience at the ABS Vegas conference co-hosted by SFIG, in response to a question from the audience about whether the OCC would be more lenient with banks about leveraged lending. The Government Accounting Office, the investigative arm of the US Congress, said last October that US bank guidelines on leveraged lending are subject to Congressional review, clearing the way for them to possibly be overturned. The GAO said the guidelines, which critics said have hampered the leveraged debt market, are under the purview of the Congressional Review Act of 1996, which they would not be if the GAO had deemed them to be less formal instruments of policy.

“As long as banks have the capital, I am supportive of banks doing leveraged lending,” said Otting. That stands even if leveraged lending activities transgresses guidelines, he said. “When (the idea of the) guidance came out – it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators,” Otting said. “But you have the right to do what you want as long as it does not impair safety and soundness. It’s not our position to challenge that.” US regulators said they are open to revising restrictions on leveraged lending, offering an olive branch to a Republican-controlled Congress keen to roll back banking regulations. The response from regulators indicated a desire to avoid a protracted battle with a Congress.

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Trump the anti-globalist. That should appeal to some people.

EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)

As the Trump administration considers what action to take on trade tariffs on steel and aluminum, EU and Chinese officials are considering taking aim at politically strategic products made in the U.S., such as bourbon and motorcycles. Of the options laid out by Commerce Secretary Wilbur Ross, the administration is considering the most wide-reaching penalty: slapping tariffs on all steel and aluminum imported into the U.S., not just imports from specific countries. The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands. Potentially in the EU’s sights: items such as Harley-Davidson motorcycles, whose corporate headquarters is in House Speaker Paul Ryan’s home state of Wisconsin.

Bourbon is another target, having enjoyed a surge in exports to the EU. Senate Majority Leader Mitch McConnell’s home state of Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission. Agriculture products such as cheese, orange juice, tomatoes and potatoes are also targets for retaliation. “The EU stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the U.S.,” a European Commission source tells CNBC. The counterpunch from China could land harder because of the scale of trade between the two countries and the reliance of American farmers on China as an export destination. China’s Ministry of Commerce is already investigating whether to limit imports of U.S. sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.

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NOW they find out: “Cash is important in a crisis situation…”

People in Sweden at Risk of Losing Access to Cash Altogether (BBG)

People living in the world’s most cashless society may soon lose their access to notes and coins. To avoid that extreme scenario, Swedish cash-handling provider Loomis wants authorities to force banks and retailers to continue accepting cash. The warning follows similar calls from the Swedish central bank, which is worried that the rapid disappearance of cash will ultimately lead to the disintegration of the infrastructure needed to use notes and coins and undermine its task to promote a safe and efficient payment system. “We have to have cars, vaults and all that, and in order to maintain the infrastructure we also need a base volume,” Loomis CEO Patrik Andersson said in an interview. He says Sweden’s more remotely populated areas in the north are most at risk of losing access to cash.

Such a scenario would be worrying in the event of natural disaster or a technological breakdown, with Swedes potentially unable to buy the basics needed to survive. “Cash is important in a crisis situation,” Andersson said. “Swedes don’t maybe have the insight to understand the effects of such a crisis, that it pervades the whole community.” A parliament committee reviewing the broader framework for the Riksbank plans to publish a special report this summer looking at the challenges posed by declines in cash usage. Riksbank Governor Stefan Ingves this week called for legal changes to safeguard the central bank’s governance of the payment system amid the rapid decrease in the use of cash. [..] The amount of cash in circulation in Sweden last year dropped to the lowest level since 1990 and is now more than 40% below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

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Much as you may wish this were to vanish from the news, it’ll drag on for a very long time.

May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)

Prime Minister Theresa May is preparing to reject the EU’s draft Brexit deal when it’s published Wednesday, a senior official said, as her government steps up its fight with the bloc over the terms of Britain’s departure. With just three weeks left to agree on the Brexit transition phase, the EU will unveil a legal text that’s likely to infuriate euroskeptics in May’s Conservative government, piling further pressure on the premier at a critical time. According to the senior official, May will take on the EU over two of its key proposals that are unacceptable to her government. These are allowing the European Court of Justice to oversee the final deal, and arranging a separate trading regime for Northern Ireland – which, although it could avoid a “hard border” with Ireland, would impose new barriers with mainland Britain.

Almost a year in since May triggered the U.K.’s withdrawal from the 28-nation club, talks have yet to begin on what kind of trade accord will follow. Time is running out to limit the damage this ongoing uncertainty will cause to British businesses, who want a status quo transitional phase to be agreed by the end of March at the latest, to help them prepare and adapt when Britain leaves in March 2019. Yet key conflicts remain unresolved between the U.K. and the EU negotiating teams. “I maintain the evaluation that I gave you three weeks ago, which is that in light of these divergences, that we haven’t achieved the transition,” EU chief negotiator Michel Barnier said Tuesday. His remarks raise the prospect that the deal will miss its crucial end-March deadline.

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Caitlin Johnstone has it right. It’s out leadership that has turned Syria into such a mess (like Lybia, Iraq), not Assad or Putin.

“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)

Arguing that the western war machine is a good way to bring about peace and justice is like arguing that a bulldozer is a useful tool for brain surgery. Arguing that the western war machine is a good way to bring about peace and justice in Syria is like arguing that the gasoline which was used to start a house fire can also be used to extinguish it. The cutesy fairy tale you will hear from empire loyalists is that what started out as peaceful protests slowly morphed into a battle between the Syrian government and various terrorist factions, with the west only backing the terrorists later on in the conflict. This is false. [..] This has never been about “saving children”; this is about money, power, and resources, which are all of course ultimately the same thing as far as the empire is concerned.

Longtime US rival Russia has recently been awarded exclusive rights to oil and gas production in Syria in return for its efforts in helping its longtime ally stop the regime change, a predictable step in the fight for fossil fuel dominance in the region. Syria’s border dispute with Israel over the Golan Heights means that Israel has every reason to want to keep Syria destabilized, not only because the Golan Heights contains oil but because it provides a third of Israel’s water supply. Bashar al-Assad also launched what he called his “Five Seas Vision” in 2004, a strategy to use Syria’s supreme geographic location to become an economic superpower. Such a plan wouldn’t sit well with the US hegemon, which can only maintain its dominance by keeping other nations down.

“Once the economic space between Syria, Turkey, Iraq and Iran becomes integrated, linking the Mediterranean, the Caspian Sea, the Black Sea and the Arabian Gulf, will not only be important in the Middle East,” Assad once famously said in 2009. “When these seas are connected, we will become the inevitable intersection of the whole world in investment, transportation, and more.” It’s not hard to imagine how the imperialists would suddenly accelerate the urgency of removing Assad once he began speaking like that. Go try and find anything damning about Bashar al-Assad in the western mainstream media prior to 2009. You’ll find a bunch of positive expressions, including a nomination for honorary knighthood in 2002 by British Prime Minister Tony Blair. Interesting how he then suddenly transformed overnight into a bloodthirsty sexual sadist who gets off on gassing children to death for no reason.

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The name dispute continues. Came upon a map recently (below), which explains quite well why Greeks don’t want FYROM to call itself Macedonia: 90% of former Macedonia is in Greece.

Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)

Several thousand protesters rallied in Skopje, the capital of the Former Yugoslav Republic of Macedonia (FYROM), late Tuesday for the government to call off talks with Greece aimed at settling a decades-long name dispute. The protesters marched peacefully from the main Orthodox cathedral in Skopje past the European Union office, chanting “Macedonia! Macedonia!” and waving national flags. Prime Minister Zoran Zaev’s 9-month-old center-left government has opened negotiations with Greece to resolve the dispute over the country’s name. Greece says the country’s name in its current form implies a territorial claim against its own region of Macedonia. Zaev has said he is willing to support a modified name. But the head of the so-called “World Macedonian Congress” group, Todor Petrov, told the protesters that changing the country’s name would be tantamount to committing treason.

“Our country has a name….To change it would mean that the Macedonian identity would be permanently lost,” he said. The rally was organized by several hard-line nationalist associations. The rally ended peacefully, but a Greek flag was burned during the march. Greeks also held a large rally in Athens earlier this month to reject a proposed compromise. Zaev has said he could accept a “geographical qualifier” in Macedonia’s name – such as “new”, “upper” or “north” – to forge a compromise, but insisted the new name must “respect the dignity” of people in both countries. Greece is also seeking changes in FYROM’s Constitution to eliminate what Athens considers tacit territorial claims. FYROM insists constitutional amendments made in 1995 already addressed Greek concerns.

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1) It’s crazy that we find this so special.

2) Shops have had plastic free aisles for many years, and in many places. Just not your supermarket.

3) That unfortunate photo makes it look as if everything is wrapped in plastic.

World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)

Shoppers in the Netherlands will get the chance to visit Europe’s first plastic-free supermarket aisle on Wednesday in what campaigners claim is an turning point in the war on plastic pollution. The store in Amsterdam will open its doors at 11am when shoppers will be able to choose from more than 700 plastic-free products, all available in one aisle. The move comes amid growing global concern about the damage plastic waste is having on oceans, habitats and food chains. Scientists warn plastic pollution is now so widespread it risks permanent contamination of the natural world. [..] Sian Sutherland, co-founder of A Plastic Planet, the group behind the campaign, said the opening represented “a landmark moment for the global fight against plastic pollution”.

“For decades shoppers have been sold the lie that we can’t live without plastic in food and drink. A plastic-free aisle dispels all that. Finally we can see a future where the public have a choice about whether to buy plastic or plastic-free. Right now we have no choice.” The aisle will open in the Amsterdam branch of the Dutch supermarket chain Ekoplaza. The company says it will roll out similar aisles in all of its 74 branches by the end of the year. Ekoplaza chief executive, Erik Does, has been working with the campaign for the past month and said the initiative was “an important stepping stone to a brighter future for food and drink”. “We know that our customers are sick to death of products laden in layer after layer of thick plastic packaging. Plastic-free aisles are a really innovative way of testing the compostable biomaterials that offer a more environmentally friendly alternative to plastic packaging.”

The aisle will have more than 700 plastic-free products including meat, rice, sauces, dairy, chocolate, cereals, yogurt, snacks, fresh fruit and vegetables. Campaigners say the products will not be anymore expensive than plastic-wrapped goods and will be “scalable and convenient”, using alternative biodegradable packing where necessary rather than ditching packaging altogether. They add the aisles will be a “testbed for innovative new compostable bio-materials as well as traditional materials such as glass, metal and cardboard.” Sutherland said: “There is absolutely no logic in wrapping something as fleeting as food in something as indestructible as plastic. Plastic food and drink packaging remains useful for a matter of days yet remains a destructive presence on the Earth for centuries afterwards.”

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Really? ‘Alarmed’? ‘Crazy’? They knew weeks ago the polar vortex was about to split. And still don’t know why that is. Keep it real.

Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

An alarming heatwave in the sunless winter Arctic is causing blizzards in Europe and forcing scientists to reconsider even their most pessimistic forecasts of climate change. Although it could yet prove to be a freak event, the primary concern is that global warming is eroding the polar vortex, the powerful winds that once insulated the frozen north. The north pole gets no sunlight until March, but an influx of warm air has pushed temperatures in Siberia up by as much as 35C above historical averages this month. Greenland has already experienced 61 hours above freezing in 2018 – more than three times as many hours as in any previous year. Seasoned observers have described what is happening as “crazy,” “weird,” and “simply shocking”.

“This is an anomaly among anomalies. It is far enough outside the historical range that it is worrying – it is a suggestion that there are further surprises in store as we continue to poke the angry beast that is our climate,” said Michael Mann, director of the Earth System Science Center at Pennsylvania State University. “The Arctic has always been regarded as a bellwether because of the vicious circle that amplify human-caused warming in that particular region. And it is sending out a clear warning.” Although most of the media headlines in recent days have focused on Europe’s unusually cold weather in a jolly tone, the concern is that this is not so much a reassuring return to winters as normal, but rather a displacement of what ought to be happening farther north.

At the world’s most northerly land weather station – Cape Morris Jesup at the northern tip of Greenland – recent temperatures have been, at times, warmer than London and Zurich, which are thousands of miles to the south. Although the recent peak of 6.1C on Sunday was not quite a record, but on the previous two occasions (2011 and 2017) the highs lasted just a few hours before returning closer to the historical average. Last week there were 10 days above freezing for at least part of the day at this weather station, just 440 miles from the north pole.


Snowstorm nears London Photo: NPAS

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Jan 262018
 
 January 26, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , ,  


Horacio Coppola Avenida Díaz Vélez al 4800, Buenos Aires 1952

 

Mario Draghi Slaps Down Steve Mnuchin Over Dollar Comments (Ind.)
Mueller Almost Done With Obstruction Part of Trump Probe (BBG)
Trump Denies Trying To Fire Mueller (BBC)
Flying Blind, Part 2: The Destruction Of Honest Price Discovery (Stockman)
China Chills (Mauldin)
Dear Elon: Tesla’s Base Is Not the Model S Coalition (Klippenstein)
Tory Civil War Erupts Over Brexit (Ind.)
Seven in 10 UK Workers Are ‘Chronically Broke’ (G.)
Rough Sleeping Is Now A Routine Sight In UK (G.)
Assange to Ask UK Court to Lift Arrest Warrant (BBG)
Turkish PM Disputes Greek Sovereignty, Tsipras Cites ‘Aggressive Neighbor’ (K.)
Majority Of Refugees Stranded On Aegean Islands To Stay In Greece (K.)
1.7 Billion-Year-Old Chunk Of Canada Found Stuck To Australia (Ind.)
Human Ancestors Left Africa Far Earlier Than Previously Thought (G.)
A Third Of Coral Reefs ‘Entangled With Plastic’ (BBC)

 

 

One Goldman alumni to another. And Trump repaired it somewhat, and then this morning the dollar falls again. Trump may address this in his speech today in Davos. Mnuchin never talked about anything but short term. Storm, teacup.

Mario Draghi Slaps Down Steve Mnuchin Over Dollar Comments (Ind.)

The President of the European Central Bank, Mario Draghi, has taken a sideswipe at the US Treasury Secretary, Steve Mnuchin, for endorsing a weaker dollar, emphasising deep concerns among central bankers over the economically destabilising impact of exchange rate swings. At the ECB’s regular conference Mr Draghi referred indirectly to the surprising comments at the World Economic Forum on Wednesday by Mr Mnuchin, who said “a weaker dollar is good for us as it relates to trade and opportunities.” These comments sent the dollar, which has been trending lower since early 2017, down still further. The dollar index, which measures the traded value of the greenback against a basket of other currencies, including sterling and the euro, hit a three-year low of 88.5.

Mr Draghi complained to reporters in Frankfurt that although exchange rate movements were “a fact of nature” reflecting economic fundamentals some recent volatility was caused by “someone else” – a clear reference to Mr Mnuchin – whose “use of language…doesn’t reflect the terms of reference that have been agreed.” Mr Draghi cited an IMF communique from last year, signed by the US, which said: “We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes”. Asked directly by journalists whether the ECB Council had been concerned by the Treasury Secretary’s comments Mr Draghi answered in the affirmative. “Several members of the Council expressed concern, and this concern was also in a sense was broader than simply the exchange rate, it was about the overall status of international relations right now,” he said.

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Objection, your honor. Leading.

Mueller Almost Done With Obstruction Part of Trump Probe (BBG)

Special Counsel Robert Mueller is moving at a far faster pace than previously known and appears to be wrapping up at least one key part of his investigation – whether President Donald Trump obstructed justice, according to current and former U.S. officials. Mueller has quietly moved closer to those around Trump by interviewing Director of National Intelligence Dan Coats, National Security Agency Director Michael Rogers, Attorney General Jeff Sessions and former FBI Director James Comey in recent weeks, officials said. His team has also interviewed CIA Director Mike Pompeo, NBC News reported. Those high-level officials all have some degree of knowledge about events surrounding Trump’s decisions to fire Comey and Michael Flynn, his first national security adviser.

“Clearly the names that are coming out now indicate that we’re into the obstruction of justice side of it,” said Stanley Twardy, a former U.S. attorney for Connecticut who’s now a white-collar criminal defense lawyer. “He’s now getting people who are closest to the president, closest to the issues.” Next, Mueller is expected to schedule an interview with Trump in coming weeks to discuss those events, according to a person familiar with the matter. “I’m looking forward to it,” Trump said of a meeting with Mueller, which he suggested may happen in about two to three weeks. He told reporters at the White House Wednesday that “I would love to do it” and “I would do it under oath” even though his Democratic rival Hillary Clinton wasn’t sworn in when she was interviewed in 2016 over her use of private emails as secretary of state.

Even if Mueller wraps up the obstruction probe, other elements of his investigation – such as whether Trump or anyone close to him helped Russia interfere in the 2016 presidential election or broke any other laws — are likely to continue for months more, said two officials who asked to remain anonymous speaking about the probe.

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New York Times based on anonymous sources as usual.

Trump Denies Trying To Fire Mueller (BBC)

US President Donald Trump has described as “fake news” a report that he ordered the firing of special counsel Robert Mueller last June, but backed down when his own lawyer threatened to resign. White House counsel Donald McGahn said the sacking would have a “catastrophic effect” on the presidency, the New York Times reported. Mr Mueller is leading an inquiry into possible Trump campaign collusion with Russia to influence the US election. Both Moscow and Mr Trump deny this. “Fake News. Typical New York Times. Fake Stories,” Mr Trump said at the World Economic Forum in the Swiss town of Davos, where he is due to give a speech later.

He has also been speaking about other issues: • Russian news agency Tass quoted Mr Trump as saying he “hoped” for more dialogue between the US and Russia • White House officials said Mr Trump was open to rejoining the Paris climate change agreement, if better terms for the US could be agreed • Mr Trump will say in his speech that he is in favour of “fair and reciprocal” free trade but will not tolerate trade abuses and intellectual property theft, according to US officials
Mr Mueller, a former FBI director, was appointed special counsel last May to look into the collusion allegations.

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Nobody acknowledges the importance of price discovery anymore. Without which there are no functioning markets. How fast people forget.

Flying Blind, Part 2: The Destruction Of Honest Price Discovery (Stockman)

[..] the real economic iniquity of central bank driven Bubble Finance is that it destroys all the pricing signals that are essential to financial discipline on both ends of the Acela Corridor. And as quaint at it may sound, discipline is the sine qua non of long-term stability and sustainable gains in productivity, living standards and real wealth. The pols of the Imperial City should be petrified, therefore, by the prospect of borrowing $1.2 trillion during the upcoming fiscal year (FY 2019) at a rate of 6.0% of GDP during month #111 through month #123 of the business expansion; and doing so at the very time the central bank is pivoting to an unprecedented spell of QT (quantitative tightening), involving the disgorgement of up to $2 trillion of its elephantine balance sheet back into the bond market.

Even as a matter of economics 101, the forthcoming $1.8 trillion of combined bond supply from the sales of the US Treasury ($1.2 trillion) and the QT-disgorgement of the Fed ($600 billion) is self-evidently enough to monkey-hammer the existing supply/demand balances, and thereby send yields soaring. But that’s barely the half of it. All the laws of economics, which are now being insouciantly ignored by the stock market revilers, are also time and place bound. That is to say, deficit finance in a muscle-bound Welfare State/Warfare State democracy like the US is always a questionable idea. After all, it is virtually guaranteed based on the budgetary doomsday forces now at work that by 2030 the public debt will approach $40 trillion compared to the $930 billion level where it stood when the Gipper took office in January 1981. In a half century, therefore, the GDP – swollen by inflation notwithstanding – will have grown by 8.5X versus a 43X eruption of the debt.

[..] At the present time, the S&P 500 is trading at the absurd multiple of 26.3X what are estimated to be reported profits for 2017. Yet the sell-side stock peddlers say not to worry because the one-year forward multiple on ex-items earnings is still only in the high teens. So what! The business cycle has not been outlawed and this one has at best a few quarters or even a year or two to go. So forward earnings are irrelevant nonsense. They are an interim place holder before the 30% to 50% hit to profits happens when the US economy finally experiences its next rendezvous with recession. The very idea that you would value the market based on a timeless forward PE multiple is complete baloney, of course. Yet that’s exactly where the Fed’s drastic financial repression and destruction of honest price discovery has led.

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That is one graph.

China Chills (Mauldin)

People have been predicting Chinese real estate crashes for years. Eventually they will be right. Is that time approaching? Here’s the lead from a January 16 Wall Street Journal story, “China’s Hot Housing Market Begins to Cool.” “BEIJING—China’s housing market has defied gravity and government restraints for two years, floating on a tide of bank loans and speculation. Until now. In Beijing and Shanghai – two of the country’s largest markets – and other megacities, sales have stalled and prices have dropped, falling slightly in some pockets and dramatically in others. Demand has dried up in these areas as a result of government measures including higher mortgage rates, higher down-payment requirements and limits on buying a second or third home. Would-be sellers are increasingly putting plans on hold in hope that prices will rebound.” That doesn’t sound good at all. WSJ backs up the gloomy language with data, though:

Some of this shake-out is happening by design as the government tries to manage growth on a sustainable path. The picture also varies greatly by city and region. Beijing and Shanghai are China’s equivalents of Washington and New York – except that they are much, much larger. What happens to them affects the whole country to some degree – and other countries, too. By some estimates, China’s property market accounts for a third of GDP growth. Falling construction activity will mean less need to import construction materials from Australia – and maybe fewer Chinese buyers in Canada. Falling demand won’t be good for housing prices in either of those places.

Then there are wild cards. President Trump has so far held back on promises to crack down on trade with China, in part because he wants Beijing’s help managing the North Korea issue. I doubt he will wait forever. He has a lot of latitude to impose tariffs, quotas, and other restrictions on China. Ironically, a peaceful resolution on the Korean Peninsula might be economically negative if it removes a barrier to trade war.

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Bunch of hipsters.

Dear Elon: Tesla’s Base Is Not the Model S Coalition (Klippenstein)

Losing the Obama coalition cost Hillary Clinton the Presidency in 2016; her base wasn’t big enough to bring success. Losing the Model S coalition could cost Elon Musk his own dreams, because his base isn’t big enough on its own, either. The Model S coalition of technophiles (techies) and progressives gave Tesla a strong tailwind when the vehicle launched. Techies formed the base, while progressives were the balance of the coalition. But while they came together for the Model S to strike a blow against Big Oil, these two groups aren’t natural allies.

We can see the rift growing in real time: while techies continue to celebrate Amazon, Uber, and Silicon Valley in general, there’s an escalating progressive backlash against labor conditions at warehouse distribution centres, more and more and more and more evidence of Uber’s culture of toxic lawlessness, and the obscene excesses of startup culture (which include a Dickensian digital class divide, possibly-endemic sexism, predatory sex parties and entitlement complexes worthy of the sons of Trump — and that’s only the stuff we know about so far).

The difference between the groups is aptly captured in the 2015 Canadian Plug-in Electric Vehicle study conducted by Simon Fraser University in Canada (webpage here, full report here, executive summary here).

Figure 23 from the SFU Canadian Plug-in Electric Vehicle Study 2015

The chart above shows the results of a study of Volt, Leaf, and Model S early adopters who were asked what images would be attributed to their vehicles. This tells us something about the buyers, because consumers purchase products whose so-called “symbolic benefits” (the brand, basically) match their own self-image, values, interests, and aspirations.

Volt and Leaf owners (yellow and green bars, respectively) are pretty similar, except when it comes to thinking their vehicle is attractive or sporty — the styling of the Leaf 1.0 is, shall we say, an acquired taste! Joking aside, this tells us that first-generation Leaf 1.0 buyers, like first-generation Prius buyers before them, really didn’t care about style. These people, and others of like mind, form the progressive coalition. The Tesla early adopters are different in two categories, and extremely different in four, suggesting that Tesla buyers have different motivations than Volt and Leaf owners. Tesla’s “tribe” wants status goods – which for automobiles means something sporty, exotic, powerful, and successful. They’re Tesla’s techie base.

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As if that is the most important thing as the ship sinks.

Tory Civil War Erupts Over Brexit (Ind.)

A fresh outbreak of Tory infighting is threatening Theresa May’s leadership after Philip Hammond vowed to keep Britain interlocked with the EU – while hard Brexit supporters staged an open revolt. The Prime Minister was accused of “losing control of the Brexit process” as the two wings of her party fought over her withdrawal policy, which Eurosceptics increasingly see as a sellout. In Davos, the Chancellor inflamed tensions with a dramatic call for only “very modest” changes to the UK’s trading rules with the EU, setting out the risks of trying to break free. He went out of his way to praise the plea by the CBI employers’ organisation for the “closest possible relationship between the EU and the UK post-Brexit” – days after it called for permanent membership of the customs union.

Britain must not agree to anything that “throws away all the benefits we have of the complete alignment of our regulatory systems, the complete integration of our economies”, Mr Hammond said. He later sought to clarify his remarks by saying “for anyone concerned” that the UK would be outside the customs union and single market “which clearly represents change”. But, in a major speech, Jacob Rees-Mogg put himself at the head of a growing Brexiteer revolt. The Government was accused of planning to leave the UK “shackled to the EU” and of putting the free-trade benefits of Brexit “at risk”. “The British people did not vote for that. They did not vote for the management of decline,” Mr Rees-Mogg told an audience in Hampshire. “They voted for hope and opportunity and politicians must now deliver it.

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Uk and US have much in common.

Seven in 10 UK Workers Are ‘Chronically Broke’ (G.)

Economic insecurity has become the “new normal” in the UK with at least 70% of the UK’s working population “chronically broke”, according to a study by the thinktank the Royal Society of Arts. Thriving, striving or just about surviving, the RSA/Populus survey of more than 2,000 workers, found that while about 30% of respondents said they lived comfortably, 40% said their finances were permanently precarious. The remaining 30% said they were not managing to get by. “Economic insecurity now stretches right throughout our labour market, including within jobs that appear safe on the surface,” said Brhmie Balaram, the author of the report and a senior researcher at the RSA.

According to the report, 32% of the UK’s workers have less than £500 in savings and 41% have less than £1,000. Almost 30% are concerned about their level of debt while 43% of workers do not have anyone in their household they could depend on to support them financially in the event of hardship. Fewer than half of employees (44%) feel they have progressed in their careers over the last five years; only 40% feel they have good opportunities to progress in future. “From retail workers to warehouse operatives, and from care workers to cleaners, we are beginning to uncover the hidden millions who are chronically broke year in, year out,” said Balaram. “The real danger for this group of workers is a childcare bill unpaid and yet another rent rise around the corner.”

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Anyone want to argue the UK is NOT a class society?

Rough Sleeping Is Now A Routine Sight In UK (G.)

Rough sleeping in the north London borough of Camden has increased by 647%, according to government figures released on Thursday. The huge rise is accounted for in part by an official underestimate of the problem last year, but no one who lives here will be surprised to see it confirmed that there has been a sharp jump in the numbers of people sleeping on the streets. Camden reported the largest increase in rough sleeping of any area in England, from 17 rough sleepers in 2016 (an optimistic estimate) to 127 counted this year. Ten years ago there were almost no rough sleepers in Camden. So what’s gone wrong? The Labour-run council says it’s clear that cuts are to blame. Councillor Nadia Shah said: “Rough sleeping in Camden is now at unprecedented levels. This is an appalling situation made worse by the politics of austerity that have led to cuts in services across the country.”

Nationally, welfare reform and cuts to benefits have increased financial insecurity, while soaring rents and reductions in the permitted housing benefit payments have left many people with an impossible gap between rent owing and income. On top of this, changes to the way housing benefit is paid have increasingly meant money no longer goes straight to the landlord but to the tenant, which has led to a sharp rise in arrears and evictions. Huge pressure on mental health services means vulnerable people are not getting the support they need. Drug and alcohol addiction services are struggling financially. Reductions to local authority budgets mean Camden’s funding from central government will have fallen by half between 2010 and 2020. In 2019-20 the council is forecast to receive £106m, down from the £241m received in 2010-11.

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How political is the British court system?

Assange to Ask UK Court to Lift Arrest Warrant (BBG)

After more than five years holed up in Ecuador’s embassy in London, WikiLeaks leader Julian Assange will ask a U.K. court to lift his arrest warrant. A one-day hearing will take place at Westminster Magistrates court and a ruling is scheduled to be issued Friday, according to a spokesman for the Crown Prosecution Service. Assange, 46, has been in the Ecuadorian embassy in London since evading deportation in a Swedish sexual assault probe. It’s “theoretically possible” that Assange could be released Friday, the CPS spokesman said. Assange and WikiLeaks have become famous over the past decade for disclosing confidential documents about the U.S. government and politics. In 2016, WikiLeaks injected itself into the middle of the U.S. presidential race by publishing hacked emails from Hillary Clinton’s campaign.

Assange is asking the court to lift the warrant about eight months after Swedish prosecutors dropped the underlying rape probe, saying that his steps to evade questioning made it impossible to pursue the case. Assange sought refuge in the Ecuadorian embassy in June 2012, after exhausting options in U.K. courts to avoid extradition over the allegations stemming from a 2010 trip to Sweden. He refused to return to the Scandinavian country, citing risks he would be extradited to the U.S. London police say that warrant is still in force unless lifted by court. “Westminster Magistrates’ Court issued a warrant for the arrest of Julian Assange following him failing to surrender to the court” in 2012, the police said in an emailed statement. “The Metropolitan Police Service is obliged to execute that warrant should he leave the embassy.”

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Last time they were on the brink of war was 1996. Never far away.

Turkish PM Disputes Greek Sovereignty, Tsipras Cites ‘Aggressive Neighbor’ (K.)

Turkish Prime Minister Binali Yildirim has again disputed Greece’s sovereignty over parts of the Aegean Sea, while accusing Athens of building up bilateral tension while Ankara is busy fighting what he described as “terrorism” in its wider region. In comments made to local media on Wednesday, Yildirim accused Athens of pursuing a repeat of the 1996 Imia crisis, when the two countries came to the brink of war over ownership of the uninhabited Aegean islets, adding that such an attempt “will not go down well” in Ankara. “In case something similar occurs, there are always means at Turkey’s disposal to defend itself. Let there be no qualms about that,” he said. Turkey disputes Greece’s territorial sovereignty over the rocky formations, known in Turkish as Kardak, on the basis of its “gray zones” theory.

Last week, a Turkish patrol boat conducting a dangerous maneuver bumped into a Hellenic Navy gunboat near Imia. No damage was reported from the contact. Meanwhile, notwithstanding Turkey’s ongoing air and ground operation in the Afrin region of northern Syria aimed at fighting Syrian Kurdish fighters and Islamic State militants, violations of Greek air space by Turkish fighter jets continue, if at a lower rate. A mock dogfight between Greek and Turkish F-16s took place northwest of Lesvos island on Wednesday at 2.35 p.m. The issue of Turkey’s provocations was raised on Wednesday by Greek Prime Minister Alexis Tsipras, who, speaking at the World Economic Forum in Davos, described Turkey as an “aggressive neighbor, sometimes unpredictable with an aggressive military activity in the Aegean.” “For somebody, it is very easy to be also aggressive if they are living in Luxembourg or Netherlands, because their neighbors are Belgium and Luxembourg, and not Turkey. But it’s not so easy for us,” he said in English.

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In a bankrupt country. Greece should demand hundreds of billions from the EU to handle this.

Majority Of Refugees Stranded On Aegean Islands To Stay In Greece (K.)

The majority of migrants and refugees who have landed on the Aegean islands since the March 2016 deal signed between the European Union and Ankara will remain in Greece as conditions for their return to Turkey are considered “not safe,” according to data from the country’s Asylum Service. According to the data, authorities have processed 25,814 applications for asylum submitted by individuals stuck at island screening centers, or hotspots. Authorities have rejected 5,437 of those claims and, under the terms of the deal, the applicants should be returned to Turkey. However, only around 1,400 of that number have been returned so far. Meanwhile, 20,337 people have received permission to move to the Greek mainland. They will move to the next stage of their asylum process, provided that they are not enlisted in a European relocation schemes. A total of 21,726 mostly Syrian refugees were relocated from Greece to other EU member-states under a program which was completed in 2017.

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Sometimes a headline is enough.

1.7 Billion-Year-Old Chunk Of Canada Found Stuck To Australia (Ind.)

A chunk of what is now Canada broke away from the rest of North America and collided with Australia around 1.7 billion years ago, according to a new study. A team of geologists examining rocks found in northern Queensland concluded some of them did not appear to have originated in Australia, and had characteristics more common among those found in Canada. They say the discovery indicates the region surrounding present-day Georgetown in northern Queensland broke apart from the continent of North America during its early formation and smashed into what is now known as Australia. “Our research shows that about 1.7 billion years ago, Georgetown rocks were deposited into a shallow sea when the region was part of North America,” said Adam Nordsvan, a PhD student at Curtin University, who led the study published in the journal Geology.

“Georgetown then broke away from North America and collided with the Mount Isa region of northern Australia around 100 million years later.” The discovery provides scientists with new evidence about the formation of the ancient supercontinent, Nuna – a land mass made up of many of the continents we know today. Over millennia, the Earth’s continents have slowly moved around, reorganising themselves into different combinations, and Mr Nordsvan and his collaborators are trying to understand some of these ancient movements. “This was a critical part of global continental reorganisation when almost all continents on Earth assembled to form the supercontinent called Nuna,” said Mr Nordsvan. Nuna existed long before the more well-known supercontinent of Pangaea, which was formed around 335 million years ago.

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We have no idea of our own history.

Human Ancestors Left Africa Far Earlier Than Previously Thought (G.)

A prehistoric jawbone discovered in a cave in Israel has prompted scientists to rethink theories of how the earliest human pioneers came to populate the planet, suggesting that our ancestors left Africa far earlier than previously thought. The fossil, dated to nearly 200,000 years ago, is almost twice as old as any previous Homo sapiens remains discovered outside Africa, where our species is thought to have originated. Until recently, several converging lines of evidence – from fossils, genetics and archaeology – suggested that modern humans first dispersed from Africa into Eurasia about 60,000 years ago, quickly supplanting other early human species, such as Neanderthals and Denisovans, that they may have encountered along the way. However, a series of recent discoveries, including a trove of 100,000 year-old human teeth found in a cave in China, have clouded this straightforward narrative.

And the latest find, at the Misliya cave site in northern Israel, has added a new and unexpected twist. “What Misliya tells us is that modern humans left Africa not 100,000 years ago, but 200,000 years ago,” said Prof Israel Hershkovitz, who led the work at Tel Aviv University. “This is a revolution in the way we understand the evolution of our own species.” The find suggests that there were multiple waves of migration across Europe and Asia and could also mean that modern humans in the Middle East were mingling, and possibly mating, with other human species for tens of thousands of years. “Misliya breaks the mould of existing scenarios for the timing of the first known Homo sapiens in these regions,” said Chris Stringer, head of human origins at the Natural History Museum in London. “It’s important in removing a long-lasting constraint on our thinking.”

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Plastic carrying disease.

A Third Of Coral Reefs ‘Entangled With Plastic’ (BBC)

Plastic is one of the biggest threats to the future of coral reefs after ocean warming, say scientists. More than 11 billion items of plastic were found on a third of coral reefs surveyed in the Asia-Pacific region. This figure is predicted to increase to more than 15 billion by 2025. Plastic raises by 20-fold the risk of disease outbreaks on coral reefs, according to research. Plastic bags, bottles and rice sacks were among the items found. “Plastic is one of the biggest threats in the ocean at the moment, I would say, apart from climate change,” said Dr Joleah Lamb of Cornell University in Ithaca, US. “It’s sad how many pieces of plastic there are in the coral reefs …if we can start targeting those big polluters of plastic, hopefully we can start reducing the amount that is going on to these reefs.”

More than 275 million people rely on coral reefs for food, coastal protection, tourism income, and cultural importance. It’s thought that plastic allows diseases that prey on the marine invertebrates that make-up coral reefs to flourish. Branching or finger-like forms of corals are most likely to get entangled in plastic debris. These are important habitats for fish and fisheries, the scientists say. “A lot of times we come across big rice sacks or draping plastic bags,” said Dr Lamb, who led the study. “What we do find is these corals with a lot of complexity like branches and finger-like corals will become eight times more likely to be entangled in these types of plastics.” In the study, published in the journal Science, international researchers surveyed more than 150 reefs from four countries in the Asia-Pacific region between 2011 and 2014.

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