May 252017
 
 May 25, 2017  Posted by at 9:23 am Finance Tagged with: , , , , , , , , , ,  


Alfred Buckham Edinburgh c1920

 

Toronto Homeowners Are Suddenly in a Rush to Sell (BBG)
$100 Increase In Mortgage Payments Would Sink 75% Of Canadian Homeowners (CBC)
Average Asking Price for Homes in UK Hits Record High of £317,000 (G.)
The Great London Property Squeeze (Minton)
UK Police ‘Stop Passing Information To US’ Over Leaks Of Key Evidence (G.)
The Bubble That Could Break the World (Rickards)
A Bailout Is Coming In China, One Way Or Another (BBG)
China “National Team” Rescues Stocks As Downgrade Crushes Commodities (ZH)
China Says Credit Downgrade ‘Inappropriate’, ‘Exaggerates Difficulties’ (CNBC)
China’s Downgrade Could Lead To A Mountain Of Debt (BBG)
Chinese Banks Dominate Ranking Of World’s Biggest Public Companies (Ind.)
EU Declared Monsanto Weedkiller Safe After Intervention From EPA Official (G.)
Factory Farming Belongs In A Museum (G.)
Eurogroup Confronts Own Deficit: Governance (Pol.)
Podcast: Steve Keen’s Manifesto (OD)
No Greek Debt Relief Need If Primary Surplus Over 3% of GDP For 20 Years (R.)
Deadliest Month For Syria Civilians In US-Led Strikes (AFP)
30 Migrants, Most of Them Toddlers, Drown in Mediterranean (R.)

 

 

Getting out is getting harder. A crucial phase in any bubble.

Toronto Homeowners Are Suddenly in a Rush to Sell (BBG)

Toronto’s hot housing market has entered a new phase: jittery. After a double whammy of government intervention and the near-collapse of Home Capital Group Inc., sellers are rushing to list their homes to avoid missing out on the recent price gains. The new dynamic has buyers rethinking purchases and sellers asking why they aren’t attracting the bidding wars their neighbors saw just a few weeks ago in Canada’s largest city. “We are seeing people who paid those crazy prices over the last few months walking away from their deposits,” said Carissa Turnbull, a Royal LePage broker in the Toronto suburb of Oakville, who didn’t get a single visitor to an open house on the weekend. “They don’t want to close anymore.”

Home Capital may be achieving what so many policy measures failed to do: cool down a housing market that soared as much as 33% in March from a year earlier. The run on deposits at the Toronto-based mortgage lender has sparked concerns about contagion, and comes on top of a new Ontario tax on foreign buyers and federal government moves last year that make it harder to get a mortgage. “Definitely a perception change occurred from Home Capital,” said Shubha Dasgupta, owner of Toronto-based mortgage brokerage Capital Lending Centre. “It’s had a certain impact, but how to quantify that impact is yet to be determined.”

Early data from the Toronto Real Estate Board confirms the shift in sentiment. Listings soared 47% in the first two weeks of the month from the same period a year earlier, while unit sales dropped 16%. Full-month data will be released in early June. The average selling price was C$890,284 ($658,000) through May 14, up 17% from a year earlier, yet down 3.3% from the full month of April. The annual price gain is down from 25% in April and 33% in March. Toronto has seen yearly price growth every month since May 2009. The last time the city saw gains of less than 10% was in December 2015.

Brokers say some owners are taking their homes off the market because they were seeking the same high offers that were spreading across the region as recently as six weeks ago. “In less than one week we went from having 40 or 50 people coming to an open house to now, when you are lucky to get five people,” said Case Feenstra, an agent at Royal LePage Real Estate Services Loretta Phinney in Mississauga, Ontario. “Everyone went into hibernation.” Toronto real estate lawyer Mark Weisleder said some clients want out of transactions. “I’ve had situations where buyers are trying to try to find another buyer to take over their deal,” he said. “They are nervous whether they bought right at the top and prices may come down.”

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Tyler: “..given that the average house in Canada costs roughly $200,000 and carries a monthly mortgage payment of $1,000, that means that most Canadians couldn’t incur a $100 hike in their monthly mortgage payments “

$100 Increase In Mortgage Payments Would Sink 75% Of Canadian Homeowners (CBC)

Almost three quarters of Canadian homeowners would have difficulty paying their mortgage every month if their payments increased by as little as 10%, a new survey from Manulife Bank suggests. The bank polled 2,098 homeowners — between the ages of 20 to 69 with household incomes of $50,000 or higher — online in the first two weeks of February. Because they aren’t randomized samples, polling experts say online polls don’t have a margin of error, but the survey nonetheless highlights just how tight the budgets are for many Canadians. 14% of respondents to Manulife’s survey said they wouldn’t be able to withstand any increase in their monthly payments, while 38% of those polled said they could withstand a payment hike of between 1 and 5% before having difficulty.

An additional 20% said they could stomach a hike of between six and 10% before feeling the pinch. Add it all up, and that means 72% of homeowners polled couldn’t withstand a hike of just 10% from their current record lows. That’s a dangerous place to be with interest rates set to rise at some point. “What these people don’t realize is that we’re at record low interest rates today,” said Rick Lunny, president and CEO of Manulife Bank. If mortgage rates increase by as little as one percentage point, some borrowers could be facing a hike of 10% on their monthly bills. A bigger mortgage rate hike would bring more pain.

In the survey, 22% said they could handle a payment increase of between 11 to 30%, while the remaining 7% didn’t know or were unsure. Overall, nearly one quarter (24%) of Canadian homeowners polled said they haven’t been able to come up with enough money to pay a bill in the past year. And most are not in good shape to weather any sort of financial storm — just over half of those polled had $5,000 or less set aside to deal with a financial emergency, while one fifth of them have nothing saved for a rainy day. “When you put it into that context, they’re not really prepared for what is inevitable. Sooner or later, interest rates are going to rise,” Lunny said.

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You might have thought Brexit would have led to caution.

Average Asking Price for Homes in UK Hits Record High of £317,000 (G.)

Asking prices for UK homes hit a new record high over the past month as families in search of bigger properties brushed aside uncertainty caused by Brexit and June’s general election. Prices sought by sellers rose 1.2% in the four weeks to 13 May, pushing the average asking price to a fresh peak of £317,281, according to the property website Rightmove. Families with children under the age of 11 were twice as likely as the average person to be moving home, as they looked for bigger properties in school catchment areas. Asking prices for typical family homes – with three or four bedrooms but excluding detached properties – rose by 5.4% year-on-year over the last month, to £270,953.

Miles Shipside, a Rightmove director and housing market analyst, said such families were more willing to ignore any uncertainty caused by Brexit and the general election. “As well as that shrinking house feeling, parents with young children also have the pressures of travelling times to amenities as well as the weekday school commute. These have to be balanced against under-pressure finances, even more so when the sector with the property type that suits them best is seeing the biggest price jump. “What seems to be happening is that moving pressures are understandably taking priority over electioneering and Brexit worries. For many in this group, it seems that moving is definitely on their manifesto.”

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Bubble effects: the servant class the rich need can’t afford to live close enough to them.

An edited extract from Big Capital by Anna Minton, which will be published 1 June by Penguin.

The Great London Property Squeeze (Minton)

There is a direct link between the wealth of those at the top and the capital’s housing crisis – which affects not just those at the bottom but the majority of Londoners who struggle to buy properties, or pay extortionate rents. The 2008 financial crash created a new politics of space, in which people on low incomes are forced out of their homes by rising rent and the wealthy are encouraged to use property for profit. These trends are not limited to London. The same currents of global capital are also transforming San Francisco, New York and Vancouver, European cities from Berlin to Barcelona and towns and cities in the UK from Bristol and Manchester to Margate and Hastings. This isn’t gentrification, it’s another phenomenon entirely. Global capital is being allowed to reconfigure the country.

The major concern for the government and employers in London is that people who do not earn enough to meet extortionate rents will leave, hollowing out the city and threatening its labour market and culture. “We see this with employers saying they’re having a really hard time retaining professional level jobs, let alone cleaners. London is losing teachers – they’re commuting from Luton and they’re giving up – it’s having a massive knock-on effect,” Dilner said. The vacancy rate for nurses at London’s hospitals is 14-18%, according to a report from the King’s Fund thinktank, and the number of entrants to teacher training has fallen 16% since 2010, according to Ofsted. But it’s not just carers, nurses, teachers, artists and university lecturers who can’t afford to live in London. Fifty Thousand Homes is a business-led campaign group – including the RBS, the CBI and scores of London businesses – formed to push the housing crisis up the political agenda.

Its research shows that on current trends, customer services and sales staff at almost every level are being pushed out of the capital. Three-quarters of business owners believe that housing costs are a significant risk to London’s economic growth and 70% of Londoners aged 25 to 39 report that the cost of their rent or mortgage makes it difficult to work in the city. Vicky Spratt is a 28-year-old journalist who worked as a producer of political programmes at the BBC but left because she felt the issues affecting her generation, such as the housing crisis, were not being covered properly. “A lot of issues were dismissed by the older generation – it didn’t affect them. They all owned their own homes,” she told me. Spratt joined the digital lifestyle magazine The Debrief, aimed at twentysomething women, and began an online petition against lettings agents’ fees that gathered more than 250,000 signatures.

Spratt describes herself as a reluctant campaigner, but her circumstances pushed her into it. She currently pays £1,430 per month, not including bills, for a one-bedroom flat which she can afford because she shares with her boyfriend, but she used to live in a room “which was literally the size of a bed”. “The walls were very thin because it had originally been part of one room, which the landlord split into two. I noticed after about six weeks my mental health deteriorated. If I wasn’t in a relationship I would be looking at going back to that,” she said. Spratt earns enough to get a mortgage but, because rents are so high, not enough to save for the 20–30% deposit required. “The common thread for people my age is that we don’t own our own homes and potentially we never will. The housing crisis is older than me and it shocks me that nobody did anything about this, and I want it on the news agenda,” she said. “This is structural neglect. The buy-to-let boom and the unregulated market have a lot to answer for.”

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For some reason nobody blames the New York Times for publishing the info.

UK Police ‘Stop Passing Information To US’ Over Leaks Of Key Evidence (G.)

Police hunting the terror network behind the Manchester Arena bombing have stopped passing information to the US on the investigation as a major transatlantic row erupted over leaks of key evidence in the US, according to a report. Downing Street was not behind any decision by Greater Manchester police to stop sharing information with US intelligence, a Number 10 source said, stressing that it was important police operations were allowed to take independent decisions. “This is an operational matter for police,” a Number 10 spokesman said. The police and the Home Office refused to comment on the BBC report. The Guardian understands there is not a blanket ban on intelligence sharing between the US and the UK.

Relations between the US and UK security services, normally extremely close, have been put under strain by the scale of the leaks from US officials to the American media. Theresa May is expected to confront Donald Trump over the stream of leaks of crucial intelligence when she meets the US president at a Nato summit in Brussels on Thursday. British officials were infuriated on Wednesday when the New York Times published forensic photographs of sophisticated bomb parts that UK authorities fear could complicate the expanding investigation into the lethal blast in which six further arrests have been made in the UK and two more in Libya. It was the latest of a series of leaks to US journalists that appeared to come from inside the US intelligence community, passing on data that had been shared between the two countries as part of a long-standing security cooperation.

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“..today’s CAPE ratio is 182% of the median ratio of the past 137 years..”

The Bubble That Could Break the World (Rickards)

Before diving into the best way to play the current bubble dynamics to your advantage, let’s look at the evidence for whether a bubble exists in the first place… My preferred metric is the Shiller Cyclically Adjusted PE Ratio or CAPE. This particular PE ratio was invented by Nobel Prize-winning economist Robert Shiller of Yale University. CAPE has several design features that set it apart from the PE ratios touted on Wall Street. The first is that it uses a rolling ten-year earnings period. This smooths out fluctuations based on temporary psychological, geopolitical, and commodity-linked factors that should not bear on fundamental valuation. The second feature is that it is backward-looking only. This eliminates the rosy scenario forward-looking earnings projections favored by Wall Street.

The third feature is that that relevant data is available back to 1870, which allows for robust historical comparisons. The chart below shows the CAPE from 1870 to 2017. Two conclusions emerge immediately. The CAPE today is at the same level as in 1929 just before the crash that started the Great Depression. The second is that the CAPE is higher today than it was just before the Panic of 2008. Neither data point is definitive proof of a bubble. CAPE was much higher in 2000 when the dot.com bubble burst. Neither data point means that the market will crash tomorrow. But today’s CAPE ratio is 182% of the median ratio of the past 137 years. Given the mean-reverting nature of stock prices, the ratio is sending up storm warnings even if we cannot be sure exactly where and when the hurricane will come ashore.

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It’s starting to look like China cannot afford the bailout. It’s not just SOEs and LGFVs, it’s the entire banking system too, and Chinese banks are behemoths.

A Bailout Is Coming In China, One Way Or Another (BBG)

On Tuesday night, Moody’s downgraded China’s sovereign credit rating for the first time in 28 years. In doing so, the rating agency is acknowledging the dragon in the room: China will have to pay the price for its epic debt binge, whatever policymakers do from here. [..] “The downgrade,” the agency explained, “reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows.” The downgrade was slight, and China remains well within investment grade. Still, Moody’s concerns should wake up those investors who have decided, based on the apparent calm in Chinese stock and currency markets, that the country isn’t experiencing financial strain. What’s happening today may not look like the meltdowns suffered by South Korea or Indonesia in the 1990s.

But that might be only because the state retains so much more control in China. If officials hadn’t stepped in last year to curtail escalating outflows of capital, the picture would likely have looked much grimmer. This “crisis with Chinese characteristics” features all of the seeds of a much more serious downturn: still-rising debt, unrecognized bad loans and a government paying lip service to the severity of the problem. Brandon Emmerich of Granite Peak Advisory noted in a recent study that more and more new debt is being used to pay off old debt, and “a subset of zombie issuers borrowed to avoid default.” As he explains, “even as Chinese corporate bond yields have rebounded (in 2017) and issuance stalled, the proportion of bond volume issued to pay off old debt reached an all-time high – not the behavior of healthy firms taking advantage of a low-yield environment.”

Efforts to curtail credit will thus inflict serious pain on corporate China. And given that the economy remains largely dependent on debt for growth, deleveraging will also make it harder for such firms to expand and service their debt. The one-two punch could push more companies toward default, punishing bank balance sheets. What’s more, if Beijing policymakers respond by ramping up credit again, all they’ll do is delay the inevitable. Larger dollops of debt simply allow zombie companies to stay alive longer and add to the debt burden on the economy. Sooner or later, the government is going to have to bail out local governments and state-owned enterprises, and recapitalize the banks. The only question is how expensive repairing the financial sector will be for taxpayers once Chinese leaders realize the game is up. Looking at past banking crises, the tab could prove huge. South Korea’s cleanup after the 1997 crisis cost more than 30% of gross domestic product. Applying that to China suggests the cost would reach some $3.5 trillion.

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How much of China’s economy stands on its own feet?

China “National Team” Rescues Stocks As Downgrade Crushes Commodities (ZH)

Iron ore led a slump in industrial commodities after Moody’s Investor Service downgraded China’s credit rating and warned that the country’s debt position will worsen as its economic expansion slows. However, one glance at the divergence between industrial metals’ collapse and the sudden buying panic in Chinese stocks confirms what Asher Edelman noted yesterday about the US markets, China’s so-called “National Team” was clearly intervening… As Bloomberg reports, Iron ore futures on the Dalian Commodity Exchange fell as much as 5.6% to 452 yuan a metric ton, almost by the daily limit, before closing at 455.50 yuan, extending Tuesday’s 3% loss. Nickel led a broad slump among base metals, dropping as much as 2.4% to $9,125 a ton on the London Metal Exchange. Nickel stockpiles rose the most in more than a year.

In context, the overnight reversal in Chinese stocks is even more obvious… Moody’s move, downgrading China’s debt to A1 from Aa3, adds to concerns about the effects of a slowdown in the country’s economic growth, following on from downbeat manufacturing readings and weak commodity imports, Simona Gambarini, an analyst at Capital Economics, said. “We’re not particularly concerned about credit growth getting out of hand, but in regards to industrial metals, we have been negative on the outlook for some time on the basis that Chinese growth will slow.” Will The National Team be back tonight?

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They would, wouldn’t they? Isn’t it perhaps more accurate to say the downgrade is long overdue?

China Says Credit Downgrade ‘Inappropriate’, ‘Exaggerates Difficulties’ (CNBC)

China has rejected a move by Moody’s to lower its credit rating, saying the downgrade exaggerates the difficulties facing the economy and underestimates the government’s reform agenda. The country’s finance ministry claimed the credit rating agency used “inappropriate methodology” in its decision to lower long-term local and foreign currency issuer ratings from “Aa3” to “A1”. “Moody’s views that China’s non-financial debt will rise rapidly and the government would continue to maintain growth via stimulus measures are exaggerating difficulties facing the Chinese economy,” the finance ministry said in a statement Wednesday, translated by Reuters. It added that the moves are “underestimating the Chinese government’s ability to deepen supply-side structural reform and appropriately expand aggregate demand.”

Moody’s said that the downgrade reflects its expectation that China’s financial strength will “erode somewhat” over the coming years. The one-notch downgrade marks the first time Moody’s has lowered China’s credit rating in almost 30 years. It last downgraded the country in 1989. It comes as the government moves ahead with its ambitious reform agenda, which it hopes will move the country away from its traditional dependence on manufacturing and towards a services-led economy. Moody’s argues, however, that these aims will be hampered somewhat by the country’s “economy-wide debt”, which it says is set to rise as economic growth slows. Though the new rating will likely modestly increase the cost of borrowing for the Chinese government, it remains within the investment grade rating range.

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Not could, will. Actually the debt is already there.

China’s Downgrade Could Lead To A Mountain Of Debt (BBG)

China’s first credit rating downgrade by Moody’s since 1989 couldn’t have come at a worse time for the nation’s companies, which have never been more reliant on the overseas bond market for funding. While Chinese companies’ foreign-currency debt is only a fraction of the $9 trillion local bond market, China Inc. is on pace for record dollar bond sales this year after the authorities’ crackdown on financial leverage drove up borrowing costs at home. Overseas borrowing has also been part of the government’s strategy to encourage capital inflows in a bid to ease the depreciation pressure on the yuan. Airlines and shipping companies, which finance the costs of new aircraft and vessels with debt, are particularly vulnerable to higher borrowing costs, according to Corrine Png, CEO of Crucial Perspective in Singapore.

Khoon Goh, head of Asia research for Australia & New Zealand Bank, sees state-owned enterprises among firms feeling the biggest impact. Companies including State Grid and China Petroleum & Chemical raised $23 billion in bond sales in April, an increase of 141% from a year earlier. With additional $8.9 billion issuance so far in May, the sales this year totaled $69 billion, representing 71% of the record $98 billion in 2016. Moody’s lowered China’s rating to A1 from Aa3 on Wednesday, citing a worsening debt outlook. Moody’s also downgraded the ratings of 26 non-financial corporate and infrastructure government-related issuers by one level. China’s Finance Ministry blasted the move as “absolutely groundless,” saying the ratings company has underestimated the capability of the government to deepen reform and boost demand.

“The economy is dependent on policy stimulus and with that comes higher leverage,” Marie Diron, associate managing director, Moody’s Sovereign Risk Group, said. “Corporate debt is really the big part.” [..] For major Chinese airlines, every percentage-point increase in average borrowing costs can cut net profit by 5% to 9%, said Crucial Perspective’s Png. For shipping companies, cuts to net profit may reach 15% to 30%. Hainan Airlines, controlled by conglomerate HNA Group Co., plans to buy 19 Boeing aircraft, using the proceeds of a convertible bond sale of up to 15 billion yuan ($2.2 billion), according to a statement to the Shanghai Stock Exchange on May 19. HNA itself has been one of China’s most acquisitive companies, with more than $30 billion worth of announced and completed deals since 2016.

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After all of the above info on debt and bailouts, there’s this. What will save Chinese banks, does anyone think Beijing can afford to bail them out too?

Chinese Banks Dominate Ranking Of World’s Biggest Public Companies (Ind.)

Despite an explosive rise in the power and market capitalisation of technology firms over the last year, China’s banking giants have defended their dominance of Forbes magazine’s annual global ranking of the world’s biggest public companies. The list, released on Wednesday, places Industrial & Commercial Bank of China at the top for a fifth consecutive year, followed by compatriot China Construction Bank. Agricultural Bank of China and Bank of China – the other two that make up China’s “Big Four” of finance – slipped down the list but remained in the top 10, qualifying as public companies despite largely being owned by the state. Warren Buffett’s Berkshire Hathaway, which is the largest public company in the US, took third spot, followed by JPMorgan Chase in fifth.

Although Forbes in a separate list earlier this week named Apple the most valuable brand of 2017, the tech giant only managed to secure ninth spot in the overall list of the biggest public companies. Companies that made it into this year’s list faced a slew of pressures stemming from an unsteady geopolitical climate and slowing economies. But Forbes said that in aggregate the 2,000 companies analysed managed to come out stronger than last year, with increased sales, profits, assets and market values. “This list illustrates that in spite of headwinds, the world’s dominant companies remain a steady force in an unpredictable and challenging environment,” said Halah Touryalai of Forbes. She said that despite slowing GDP figures, companies in China and the US make up more than 40% of the 2017 and dominate the top ten.

Notable gainers this year included General Electric, at 14th from 68th place in 2016, Amazon, up to 83rd from 237th, Charter Communications, at 107th from 784th and Alibaba, at 140th from 174th in 2016. The US dominated the ranking with 565 companies, followed by China and Hong Kong with 263 companies, Japan with 229. The UK had 91 companies in the top 2,000. But one of the UK’s highest ranked companies last year, banking giant HSBC, fell to 48th spot from 14th in 2016, with Forbes citing “economic malaise, low interest rate, paying fines, ongoing regulatory expenses and your usual dose of political uncertainty”. Elsewhere Forbes said that low oil prices had continued to put pressure on companies in the energy sector, reflected in PetroChina falling 85 spots to 102nd place in this years’ ranking. Exxon Mobil slipped four spots to 13th while Chevron tumbled to just 359th from 28th.

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Think the EU is not corrupt?

EU Declared Monsanto Weedkiller Safe After Intervention From EPA Official (G.)

The European Food Safety Authority dismissed a study linking a Monsanto weedkiller to cancer after counsel from a US Environmental Protection Agency officer allegedly linked to the company. Jess Rowlands, the former head of the EPA’s cancer assessment review committee (CARC), who figures in more than 20 lawsuits and had previously told Monsanto he would try to block a US government inquiry into the issue, according to court documents. The core ingredient of Monsanto’s RoundUp brand is a chemical called glyphosate, for which the European commission last week proposed a new 10-year license. Doubts about its regulatory passage have been stirred by unsealed documents in an ongoing US lawsuit against Monsanto by sufferers of non-hodgkins lymphoma, who claim they contracted the illness from exposure to RoundUp.

“If I can kill this, I should get a medal,” Rowlands allegedly told a Monsanto official, Dan Jenkins, in an email about a US government inquiry into glyphosate in April 2015. In a separate internal email of that time, Jenkins, a regulatory affairs manager, said that Rowlands was about to retire and “could be useful as we move forward with [the] ongoing glyphosate defense”. Documents seen by the Guardian show that Rowlands took part in a teleconference with Efsa as an observer in September 2015. Six weeks later, Efsa adopted an argument Rowlands had used to reject a key 2001 study which found a causal link between exposure to glyphosate and increased tumour incidence in mice. Rowlands’ intervention was revealed in a letter sent by the head of Efsa’s pesticides unit, Jose Tarazona, to Peter Clausing, an industry toxicologist turned green campaigner.

In the missive, Tarazona said that “the observer from the US-EPA [Rowlands] informed participants during the teleconference about potential flaws in the Kumar (2001) study related to viral infections.” Efsa’s subsequent report said that the Kumar study “was reconsidered during the second experts’ teleconference as not acceptable due to viral infections”. Greenpeace said that news of an Efsa-Rowlands connection made a public inquiry vital. “Any meddling by Monsanto in regulatory safety assessments would be wholly unacceptable,” said spokeswoman Franziska Achterberg. “We urgently need a thorough investigation into the Efsa assessment before glyphosate can be considered for re-approval in Europe.”

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But the profits are huge.

Factory Farming Belongs In A Museum (G.)

We can feed an extra 4 billion people a year if we reject the bloated and wasteful factory farming systems that are endangering our planet’s biodiversity and wildlife, said farming campaigner Philip Lymbery on Monday night, launching a global campaign to Stop the Machine. At present, 35% of the world’s cereal harvest and most of its soya meal is fed to industrially reared animals rather than directly to humans. This is a “wasteful and inefficient practice” because the grain-fed animals contribute much less back in the form of milk, eggs and meat than they consume, according to Lymbery, the chief executive of Compassion in World Farming (CIWF). “The food industry seems to have been hijacked by the animal feed industry,” he said.

In recent years the developing world in particular has seen significant agricultural expansion. According to independent organisation Land Matrix, 40m hectares have been acquired globally for agricultural purposes in the last decade and a half, with nearly half of those acquisitions taking place in Africa. The impact of that expansion is still unclear, but meanwhile the world’s wildlife has halved in the past 40 years. “Ten thousand years ago humans and our livestock accounted for about 0.1% of the world’s large vertebrates,” said Tony Juniper, the former head of Friends of the Earth. “Now we make up about 96%. This is a timely and necessary debate, and an issue that is being debated more and more.” An exhibition at the Natural History Museum by the campaigners aims to draw explicit links between industrial farming and its impact on wildife.

The Sumatran elephant, for example, has been disastrously affected by the growing palm oil industry, with more than half of its habitat destroyed to create plantations, and elephant numbers falling rapidly. The old argument that we need factory farming if we are to feed the world doesn’t hold true, says Lymbery, who argues that ending the wasteful practice of feeding grain to animals would feed an extra 4 billion people. Putting cattle onto pasture and keeping poultry and pigs outside where they can forage, and supplementing that with waste food is far more efficient and healthy, he says. According to his calculations, based on figures from the UN’s Food and Agriculture Organisation (FAO), the total crop harvest for 2014 provided enough calories to feed more than 15 billion people (the world’s population is currently 7.5 billion), but waste and the animal feed industry means that much of that is going elsewhere.

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It confronts no such thing.

They actually argue that the Eurogroup can only function without transparency, checks and balances.

Eurogroup Confronts Own Deficit: Governance (Pol.)

For the past seven-plus years, as Greece’s debt crisis plays out in public in painful, blow-by-blow detail, the European body charged with its rescue has conducted its affairs away from prying eyes. Now there are growing calls to change the way the Eurogroup operates. Critics of the gathering of finance ministers from the 19 countries in the euro and officials from the ECB and European Commission accuse it of acting like a private club. They want greater transparency in keeping with the influence it wields over issues of vital importance to many of the eurozone’s 350 million citizens. “The euro crisis changed everything,” said Leo Hoffmann-Axthelm, an advocacy coordinator with the NGO Transparency International. “The Eurogroup should be institutionalized, with proper rules of procedure, document handling and a physical address with actual spokespeople. We can no longer be governed by an informal club.”

Although it can impose tough conditions for bailing out struggling member countries or rescuing banks, it publishes no official minutes, has no headquarters, and the people who function as its secretariat have other day jobs. Its public face is a eurozone finance minister, who works for no salary: The current president is Jeroen Dijsselbloem, a Dutch Socialist with conservative views on fiscal matters. Legally, it is governed by a single sentence in Article 137 of the EU treaty which says “arrangements for meetings between ministers of those Member States whose currency is the euro are laid down by the Protocol on the Euro Group.” Emily O’Reilly, the EU’s ombudsman, is among those calling for reform. While she credits Dijsselbloem for his efforts to peel back the curtain on Eurogroup proceedings, she said: “It is obviously difficult for Europeans to understand that the Eurogroup, whose decisions can have a significant impact on their lives, [isn’t] subject to the usual democratic checks and balances.”

Indeed, when a group of citizens from Cyprus who disagreed with the terms of the 2013 Cypriot bank bailout took their case to the European Court of Justice, the court’s response was that the Eurogroup is not “capable of producing legal effects with respect to third parties” because it is just a discussion forum. Last year, Dijsselbloem used the ECJ ruling to justify the Eurogroup avoiding standard EU transparency rules, though he did commit to individual transparency requests on an informal basis. But some of those who participate in Eurogroup meetings argue that its informality is precisely what makes it useful. The last thing they want is another bureaucratic EU institution, and if the Eurogroup were reformed out of existence, they say, a new version would pop up in its place, without the minimal accountability it currently offers in the form of meeting agendas and press conferences.

“It’s the informal nature of the Eurogroup that makes it possible to have an open exchange that you will not find in more formal bodies,” said Taneli Lahti, a former head of cabinet for European Commission Vice President Valdis Dombrovskis. “This is crucial for policymaking, negotiating, finding agreements and understanding each other.”

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Why government surpluses are the worst thing for an economy.

Podcast: Steve Keen’s Manifesto (OD)

The only times the US government ran a surplus, it was followed by the 1929 and 2008 crashes.

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First you make growth impossible be demanding surpluses till the cows come home, and then you demand growth.

No Greek Debt Relief Need If Primary Surplus Above 3% of GDP For 20 Years (R.)

Greece will not need any debt relief from euro zone governments if it keeps its primary surplus above 3% of GDP for 20 years, a confidential paper prepared by the euro zone bailout fund, the European Stability Mechanism (ESM), showed. The paper, obtained by Reuters, was prepared for euro zone finance ministers and IMF talks last Monday, which ended without an agreement due to diverging IMF and euro zone assumptions on future Greek growth and surpluses. A group of euro zone finance ministers led by Germany’s Wolfgang Schaeuble insists that the issue of whether Greece needs debt relief can only be decided when the latest bailout expires in mid-2018. The IMF says the need for a bailout is already clear now.

Under scenario A, the paper assumes no debt relief would be needed if Athens kept the primary surplus – the budget balance before debt servicing – at or above 3.5% of GDP until 2032 and above 3% until 2038. The ECB says such long periods of high surplus are not unprecedented: Finland, for example, had a primary surplus of 5.7% over 11 years in 1998-2008 and Denmark 5.3% over 26 years in 1983-2008. A second option under scenario A assumes Greece secures the maximum possible debt relief under a May 2016 agreement. Greece would then have to keep its primary surplus at 3.5% until 2022 but could then lower it to around 2% until mid-2030s and to 1.5% by 2048, giving an average of 2.2% in 2023-2060.

The paper says the maximum possible debt relief under consideration is an extension of average weighted loan maturities by 17.5 years from the current 32.5 years, with the last loans maturing in 2080. The ESM would also limit Greek loan repayments to 0.4% of Greek GDP until 2050 and cap the interest rate charged on the loans at 1% until 2050. Any interest payable in excess of that 1% would be deferred until 2050 and the deferred amount capitalized at the bailout fund’s cost of funding. The ESM would also buy back in 2019 the €13 billion that Greece owes the IMF as those loans are much more expensive than the euro zone’s. All this would keep Greece’s gross financing needs at 13% of GDP until 2060 and bring its debt-to-GDP ratio to 65.4% in 2060, from around 180% now.

Read more …

44 children.

Deadliest Month For Syria Civilians In US-Led Strikes (AFP)

US-led air strikes on Syria killed a total of 225 civilians over the past month, a monitor said on Tuesday, the highest 30-day toll since the campaign began in 2014. The Syrian Observatory for Human Rights said the civilian dead between April 23 and May 23 included 44 children and 36 women. The US-led air campaign against the Islamic State jihadist group in Syria began on September 23, 2014. “The past month of operations is the highest civilian toll since the coalition began bombing Syria,” Observatory head Rami Abdel Rahman told AFP. “There has been a very big escalation.” The previous deadliest 30-day period was between February 23 and March 23 this year, when 220 civilians were killed, Abdel Rahman said. The past month’s deaths brought the overall civilian toll from the coalition campaign to 1,481, among them 319 children, the Britain-based monitoring group said. Coalition bombing raids between April 23 and May 23 also killed 122 IS jihadists and eight fighters loyal to the Syrian government, the Observatory said.

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Well over 100 children.

30 Migrants, Most of Them Toddlers, Drown in Mediterranean (R.)

More than 30 migrants, mostly toddlers, drowned on Wednesday when about 200 people without life jackets fell from a boat into the sea off the Libyan coast before they could be hauled into waiting rescue boats. The boat was near a rescue vessel when it suddenly listed and many migrants tumbled into the Mediterranean, Italian Coast Guard commander Cosimo Nicastro told Reuters. “At least 20 dead bodies were spotted in the water,” he said. The rescue group MOAS, which also had a ship nearby, said it had already recovered more than 30 bodies. “Most are toddlers,” the group’s co-founder Chris Catrambone said on Twitter. The coast guard called in more ships to help with the rescue, saying about 1,700 people were packed into about 15 vessels in the area.

The transfer from these overloaded boats is risky because desperate migrants in them sometimes surge to the side nearest a rescue vessel and destabilise their flimsy craft, which then list dangerously or capsize. More than 1,300 people have died this year on the world’s most dangerous crossing for migrants fleeing poverty and war across Africa and the Middle East. Last Friday, more than 150 disappeared at sea, the International Organization for Migration (IOM) said on Tuesday, citing migrant testimony collected after they disembarked in Italy. In the past week, more than 7,000 migrants have been plucked from unsafe boats in international waters off the western coast of Libya, where people smugglers operate with impunity.

Read more …

Mar 242017
 
 March 24, 2017  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  


DPC “Broad Street and curb market, New York” 1906

 

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)
The US Has the Most Expensive Healthcare System in the World (Statista)
‘Deaths of Despair’ Surge in White US Middle Class (Vox)
The Retail Apocalypse Has Officially Descended On America (BI)
WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)
China’s Property Bubble Risks Youth Revolt (CNBC)
China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)
Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)
Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)
Greek Objections Mar Preparations For EU’s 60th Birthday (R.)
Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)
40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)
EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)
Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

 

 

This will attract some media attention. Better do it after the markets close.

Trump Ultimatum: Pass Health Bill Now Or Live With Obamacare (MW)

President Donald Trump reportedly laid down an ultimatum to House Republicans on Thursday night: Pass the health-care bill, as is, on Friday, or live with Obamacare. The hard line came after more than a day of frantic negotiations to win the support of conservative Republicans who oppose the bill, and could block its passage. A vote on the bill had been scheduled for Thursday night, but was postponed earlier in the day after the GOP couldn’t win over holdout lawmakers. White House budget director Mitch Mulvaney dropped Trump’s demand in a meeting with rank-and-file House Republicans, and said the administration and House Speaker Paul Ryan were done with negotiations, according to a report in The Wall Street Journal. If Friday’s bill fails, Trump is resigned to live with Obamacare and move on, he said.

CNN similarly reported that the closed-door meeting ended with an ultimatum, and Rep. Chris Collins (R-N.Y.) told the network that the vote is expected to be held Friday afternoon. The move is a gamble by the Trump administration, which has placed much political capital in its promise to repeal and replace the Affordable Care Act, also known as Obamacare. “They’re going to bring it up, pass or fail,” Rep. Mike Simpson (R-Idaho) told the Washington Post. The GOP can’t afford more than 21 dissenting votes, but CNN counted 26 “no” votes and four more “likely” no votes. Every House Democrat is expected to oppose the bill.

Read more …

And what’s worse, no way out.

The US Has the Most Expensive Healthcare System in the World (Statista)

If the American Healthcare Act, President Trump’s first major legislative effort, is going to a vote in the House of Representatives as scheduled on Thursday, it is by no means clear that it will receive the 215 votes it needs for passage. When the Republican healthcare plan was first presented to the public on March 6, it left people from both sides of the political spectrum dissatisfied. While Democrats fear that the suggested bill, which would repeal large portions of Obama’s Patient Protection and Affordable Care Act, would leave millions of Americans uninsured and hurt the poor and vulnerable, many Republicans think it doesn’t go far enough in erasing all traces of Obamacare.

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage. This chart shows health spending (public and private) per capita in selected countries.

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Not my original observation, but true: it looks a lot like Russia in the 1990s.

‘Deaths of Despair’ Surge in White US Middle Class (Vox)

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population. The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings. They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors. In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

[..] The US, particularly middle-aged white Americans, is an outlier in the developed world when it comes to this mid-life mortality uptick. “Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US,” Case and Deaton write. “In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.” If American wants to turn the trend around, then it has to become a little more like other countries with more generous safety nets and more accessible health care, the researchers said.

Introducing a single-payer health system, for example, or value-added or goods and services taxes that support a stronger safety net would be top of their policy wish list. (America right now is, of course, moving in the opposite direction under Trump, and shredding the safety net.) They also admit, though, that it’s taken decades to reverse the mortality progress in America, and it won’t be turned around quickly or easily. But there is one “no-brainer” change that could help, Case added. “The easy thing would be close the tap on prescription opioids for chronic pain.” Unlike health care and increasing taxes, opioids are actually a public health issue with bipartisan support. Deaton, for his part, was hopeful. Paraphrasing Milton Friedman, he said, “All policy seems impossible until it suddenly becomes inevitable.”

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“Visits declined by 50% between 2010 and 2013..” “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

The Retail Apocalypse Has Officially Descended On America (BI)

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model. For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, but it still sells merchandise online.

Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses. Sears is shutting down about 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down about 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar Credit Ratings report from October. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

[..] as longtime retail analyst Howard Davidowitz observed in 2014, “What’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

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This could be a huge blow to Apple. Who wants to buy something the CIA has already tinkered with in the factory? Expect giant lawsuits too. Apple knew.

WikiLeaks Releases Vault 7 “Dark Matter”: CIA Bugs “Factory Fresh” iPhones (WL)

Today, March 23rd 2017, WikiLeaks releases Vault 7 “Dark Matter”, which contains documentation for several CIA projects that infect Apple Mac Computer firmware (meaning the infection persists even if the operating system is re-installed) developed by the CIA’s Embedded Development Branch (EDB). These documents explain the techniques used by CIA to gain ‘persistence’ on Apple Mac devices, including Macs and iPhones and demonstrate their use of EFI/UEFI and firmware malware. Among others, these documents reveal the “Sonic Screwdriver” project which, as explained by the CIA, is a “mechanism for executing code on peripheral devices while a Mac laptop or desktop is booting” allowing an attacker to boot its attack software for example from a USB stick “even when a firmware password is enabled”. The CIA’s “Sonic Screwdriver” infector is stored on the modified firmware of an Apple Thunderbolt-to-Ethernet adapter.

“DarkSeaSkies” is “an implant that persists in the EFI firmware of an Apple MacBook Air computer” and consists of “DarkMatter”, “SeaPea” and “NightSkies”, respectively EFI, kernel-space and user-space implants. Documents on the “Triton” MacOSX malware, its infector “Dark Mallet” and its EFI-persistent version “DerStake” are also included in this release. While the DerStake1.4 manual released today dates to 2013, other Vault 7 documents show that as of 2016 the CIA continues to rely on and update these systems and is working on the production of DerStarke2.0.

Also included in this release is the manual for the CIA’s “NightSkies 1.2” a “beacon/loader/implant tool” for the Apple iPhone. Noteworthy is that NightSkies had reached 1.2 by 2008, and is expressly designed to be physically installed onto factory fresh iPhones. i.e the CIA has been infecting the iPhone supply chain of its targets since at least 2008. While CIA assets are sometimes used to physically infect systems in the custody of a target it is likely that many CIA physical access attacks have infected the targeted organization’s supply chain including by interdicting mail orders and other shipments (opening, infecting, and resending) leaving the United States or otherwise.

Read more …

A lot of cities around the world share that risk.

China’s Property Bubble Risks Youth Revolt (CNBC)

China faces the risk of youth disenchantment as property prices rise beyond their reach, a renowned Chinese economist said Friday. “In a regular country, wealth should be concentrated in the financial markets, not fixed assets,” said Renmin University of China Vice President Wu Xiaoqiu at a media interview at the Boao Forum in the province of Hainan. He highlighted the risks from the current property bubble in China, such as negative asset values if prices tank. More importantly, the social risks that come from the property bubble in the form of youth disenchantment with not being to afford a home will be damaging, he said. “If young people lose hope, the economy will suffer, as housing is a necessity,” he said.

Wu said he was hopeful the authorities would find a solution to constrain the froth in Chinese real estate, but admitted that repeated measures to curb speculation have so far only met with short-term success. Wu’s comments follow a People’s Bank of China survey published on Tuesday, which found that 52.2% of urban households perceived housing prices to be “unacceptably high” in the first quarter of the year, Reuters reported. In February, gains in Chinese home prices picked up pace after they slowed in the previous four months despite government efforts to curb speculation, Reuters reported on Sunday. Prices in the big cities of Beijing, Shanghai and Shenzhen rose 22.1%, 21.1% and 13.5%, respectively, from a year ago.

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Wow.

China’s Largest Dairy Operator Crashes Over 90% In Minutes (ZH)

In December 2016, Muddy Waters’ Carson Block said China’s largest dairy farm operator, Hong-Kong listed China Huishan Dairy, is “worth close to zero” and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low. The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.

In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement.” The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen at RHB OSK Securities Hong Kong. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone. About 73% of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90% owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80% through a peak in June had made the shares expensive.

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“If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.”

Eurozone Whistles Past its Biggest Threat: Italy’s Multi-Headed Hydra (ZH)

For the last three years, the political establishment in Italy and beyond have had a field day attacking, ridiculing, and vilifying Beppe Grillo’s 5-star movement. Europe’s media have tarred him with the brush of populism. In 2013 The Economist labelled him a clown on its front cover. Yet his party still leads the polls. And that lead is growing. A new Ipsos poll in Corriere della Sera newspaper has put Beppe Grillo’s 5-Star Movement on 32.3% – its highest ever reading. It placed 5.5 points ahead of the governing PD, on 26.8%, after the PD dropped more than three%age points in a month, as former prime minister Matteo Renzi battles to reassert his authority following a walkout by a left-wing faction. Internal political battles are nothing new in Italy. The country enjoys a hard-earned reputation for political instability and paralysis, having seen 63 governments come and go since 1945.

The problem this time around is that internal weakness and strife in Italy’s traditional center-left and center-right parties could end up gifting the next election to a party that refuses to play by the book. If it wins the next elections, which could be brought forward to as early as June this year, 5-Star Movement has pledged to hold a referendum of its own – albeit a non-binding one – on Italy’s membership of the euro. As polls have shown, there is much broader public apathy toward the single currency than in just about any other euro zone nation. Grillo’s plan could also receive the backing of former prime minister Silvio Berlusconi who is determined to pull off a political comeback and is talking of restoring the Italian Lira.

As Reuters reports, such a scenario could spook financial markets “wary of both the 5-Star’s euroskepticism and the threat of prolonged political instability in Italy,” which boasts a public debt burden of over €2 trillion (133% of GDP). In any normal situation that would be a problem. But Italy is not in a normal situation; it is on the cusp of a potentially very large financial crisis that, if mishandled, could bring down Europe’s entire financial system. Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.

[..] Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability. From a Eurozone-stability point of view, and from a bondholder point of view, the best-case scenario would be the rescue of Italy’s banks, with taxpayers bearing most of the brunt. That should help steady investor nerves and put an end to the gathering exodus of funds out of Italian assets. But even then, the social, political and economic price to be paid in a country already with public debt of over €2 trillion, youth unemployment of almost 40%, and an economy that is 12% smaller than it was 10 years ago, will almost certainly be way too high. If roughly half of all Italians are against the single currency today, imagine what it will be like when austerity begins really biting.

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He’s blowing up the EU without noticing a thing.

Schäuble Annoyed By Foreign Minister Saying Germany Should Pay More To EU (R.)

German Finance Minister Wolfgang Schaeuble on Friday criticised Foreign Minister Sigmar Gabriel for saying Germany should provide more money for Greece and the European Union overall. Schaueble told Deutschlandfunk radio he was annoyed by Gabriel’s suggestion because it “goes in the wrong direction completely” and sent the wrong message. He added that Europe’s problem was not primarily money but that its money needed to be used in the right way. On whether Greece can stay in the euro zone, Schaeuble said: “Greece can only do that if it has a competitive economy.” He said the country needed to carry out reforms and that would take time, adding: “But if the time is not used to carry out reforms because that’s uncomfortable, then that’s the wrong path.”

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Feels like a funeral party.

Greek Objections Mar Preparations For EU’s 60th Birthday (R.)

Greece has stuck to its objections to a declaration to mark the European Union’s 60th anniversary, officials in Brussels and Athens said on Thursday, a potentially embarrassing setback for the bloc as it seeks to rebuild unity ahead of Brexit. The leaders of the EU’s 27 remaining states will mark the anniversary on Saturday at a gathering in Rome overshadowed by Britain’s unprecedented decision to leave. London is due to formally trigger the divorce negotiations next week. Athens has threatened not to sign the Rome declaration charting the future of the post-Brexit EU, making a link between agreeing to the text and separate talks on reforms that lenders are seeking from Greece in exchange for new loans. “The negotiations on the draft Rome Declaration have ended as the text was finalized by the EU27,” an EU source said. “Only Greece has a general reservation on the text.”

Greece has said it wants the Rome text to spell out more clearly the protection of labor rights. Greece’s separate debt talks with international lenders are now stuck over this specific issue. One diplomat in Brussels said the issue may now only be resolved at the highest level with Greek Prime Minister Alexis Tsipras. Another EU diplomat said any attempt by Athens to win leverage on the international debt talks by holding off in Rome should not succeed: “We won’t be blackmailed by one member state which is linking one EU issue with a totally different one.” As well as Greece, Poland indicated on Thursday it might also refuse to endorse the declaration, though diplomats played down the threat. Warsaw is particularly opposed to a ‘multi-speed Europe,’ an idea promoted by Germany, France and Brussels, among others, to help improve decision-making in the post-Brexit EU.

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“Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Greece Says To Support Rome Declaration, Calls For EU Backing On Reforms (R.)

Greece will support a declaration marking the EU’s 60th birthday but needs the bloc’s backing against IMF demands on labour reforms, Greek Prime Minister Alexis Tsipras said ahead of a Summit in Rome on Friday. In a letter addressed to EU Council President Donald Tusk and Commission President Jean Claude Juncker, Tsipras called for a clear statement on whether the declaration would apply to Greece, as talks over a key bailout review hit a snag again. “We intend to support the Rome Declaration, a document which moves in a positive direction,” Tsipras said. “Nevertheless, in order to be able to celebrate these achievements, it has to be made clear, on an official level, whether they apply also to Greece. Whether, in other words, the European acquis is valid for all member states without exception, or for all except Greece.”

Earlier this week, Greece threatened not to sign the Rome declaration, demanding a clearer commitment protecting workers’ rights – an issue on which it is at odds with its international lenders who demand more reforms in return for new loans. The disagreements among Athens, the EU and the IMF – which has yet to decide whether it will participate in the country’s current bailout – have delayed a crucial bailout review. As leaders prepared for the summit, Greek ministers were negotiating with lenders’ representatives in Brussels pension cuts and labour reforms, including freeing up mass layoffs and on collective bargaining. The latest round of talks ended inconclusively late on Thursday, according to Greek officials. [..] Greece has cut pensions 12 times since it signed up to its first bailout in 2010. It has also reduced wages and implemented labour reforms to make its market more flexible and competitive.

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Just imagine that. And then talk about recovery. No, all you need to do is reform!

40% Of Greek Businesses Say Likely To Close Shop Within The Year (K.)

Four in 10 Greek businesses (40.3%) consider it likely that they will have to close shop within the year, according to a survey by the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), presented by the ANA-MPA news agency on Thursday. According to the survey, around 18,700 businesses will close in the first six months of the year, forcing thousands to join growing unemployment lines in the crisis-hit country. The majority of shutdowns, according to GSEVEE, will be in and around the capital and will concern the manufacturing sector, while some 34,000 jobs will be lost by the closure of companies that are currently considered high risk. 7 in 10 businesses have reported increasing liquidity problems and a shortage of capital from the market, with the number of firms indebted to the state and their suppliers growing by 10% compared to last year.

Over four in five small and medium-sized businesses (SMEs) admit to being exposed to credit risks, seeing a slump in economic activity and operating with the prospect of shrinking rather than expanding in the near future. In terms of employment, the forecasts for the first half of the year do not bode well, as for every two businesses (8.1% of the total) that plan to hire new staff, another three will be letting people go. GSEVEE estimates that 2,000 salaried jobs will be lost by June, without accounting for the impact on employment of the projected shutdowns. Moreover, 40% of those businesses that do plan to hire staff in the first half of 2017 said they won’t be offering payroll positions, but part-time or outsourced work.

Sentiment is also bleak, with 58.8% of respondents expecting conditions to deteriorate and just 11% seeing a possible improvement through June. As such, just 3.6% of businesses plan to make new investments and 6.4% have applied to investment funding programs for that period. “There needs to be a national plan for the country irrespective of who is in power, and politicians need to learn how to make decisions and give orders,” GSEVEE President Giorgos Kavvathas was quoted by the ANA-MPA news agency as saying. “Moreover, the uncertainty of the situation concerning the outcome of the negotiation [with foreign creditors] exacerbates fears and risks, which in turn make small businesses and the self-employed more vulnerable.”

Read more …

Could be another scary spring and summer.

EU Envoy: Three Million Migrants Waiting To Cross Into Greece (K.)

European Commissioner for Migration Dimitris Avramopoulos on Thursday underlined the need to safeguard a deal between Brussels and Ankara to curb human smuggling in the Aegean, noting that some 3 million refugees were in Turkey waiting to cross into Greece in a bid to reach Western and Northern Europe. In comments during a visit to Athens, Avramopoulos said the deal signed last year between Turkey and the EU had reduced an influx of migrants toward Europe and curbed deaths at sea. Reception centers on the islands of the eastern Aegean, the first point of arrival for most migrants arriving in Greece from Turkey, are already overcrowded. A woman and a child were injured in clashes between Afghan and Algerian migrants on Chios on Wednesday night.

Read more …

We’re on track for multiple records.

Over 250 Migrants Feared Drowned On ‘Black Day’ In Mediterranean (AFP)

More than 250 African migrants were feared drowned in the Mediterranean Thursday after a charity’s rescue boat found five corpses close to two sinking rubber dinghies off Libya. The UN’s refugee agency (UNHCR) said it was “deeply alarmed” after the Golfo Azzuro, a boat operated by Spanish NGO Proactiva Open Arms, reported the recovery of the bodies close to the drifting, partially-submerged dinghies, 15 miles off the Libyan coast. “We don’t think there can be any other explanation than that these dinghies would have been full of people,” Proactiva spokeswoman Laura Lanuza told AFP. “It seems clear that they sunk.” She added that the inflatables, of a kind usually used by people traffickers, would typically have been carrying 120-140 migrants each.

“In over a year we have never seen any of these dinghies that were anything other than packed.” Lanuza said the bodies recovered were African men with estimated ages of between 16 and 25. They had drowned in the 24 hours prior to them being discovered shortly after dawn on Thursday in waters directly north of the Libyan port of Sabrata, according to the rescue boat’s medical staff. Vincent Cochetel, director of the UN refugee agency (UNHCR)’s Europe bureau, said NGO boats patrolling the area had been called to the aid of a third stricken boat on Thursday afternoon, raising fears others may have perished on what Proactiva called “a black day in the Mediterranean.”

Despite rough winter seas, migrant departures from Libya on boats chartered by people traffickers have accelerated in recent months from already-record levels. Nearly 6,000 people have been picked up by Italian-coordinated rescue boats since the end of last week, bringing the number brought to Italy since the start of 2017 to nearly 22,000, a significant rise on the same period in previous years. Aid groups say the accelerating exodus is being driven by worsening living conditions for migrants in Libya and by fears the sea route to Europe could soon be closed to traffickers. Prior to the latest fatal incident, the UN had estimated that at least 440 migrants had died trying to make the crossing from Libya to Italy since the start of 2017. Its refugee agency estimates total deaths crossing the Mediterranean at nearly 600.

Read more …

Mar 212016
 
 March 21, 2016  Posted by at 9:36 am Finance Tagged with: , , , , , , , , ,  


DPC Grace Church, New York 1905

Majority Fears Future Generations ‘Will Never Be Able To Buy A Home’ (G.)
When Older People Do Better Than Those of Working Age (WSJ)
ECB Doing Whatever It Takes Can’t Push Euro-Area Banks to Lend (BBG)
Emerging-Market Currencies Fall Back to Earth After Fed Euphoria (BBG)
China Central Bank Governor Warns Over Corporate Debt (FT)
PBOC See-Saws -Again- On Yuan Rate Guidance (CNBC)
China Has a $590 Billion Problem With Unpaid Bills (BBG)
TTIP: Fake Freedom Moves Closer To Open Slavery (Gerrans)
The New Class Warfare In America (Luce)
Great Barrier Reef Coral Bleaching Threat Raised To Highest Level (G.)
Greece Struggles To Enforce Migrant Accord On First Day (NY Times)
The EU Sells Its Soul To Strike A Deal With Turkey (Münchau)
More Than 50,000 Refugees Now Stranded In Greece (Kath.)
Nine Refugees Trying To Reach Europe Drown Off Libya (AFP)
Two Refugees Die On Arrival On Greek Island (AP)
Three Baby Syrian Refugee Girls Drown Between Turkey, Greece (AFP)

How QE will tear societies apart.

Majority Fears Future Generations ‘Will Never Be Able To Buy A Home’ (G.)

A large majority of people in Britain fears that future generations will never be able to buy or rent a home to settle down in. Research published on Monday shows three-quarters of people worry that long-term homes are out of reach, with the level of concern highest among members of generation X, now aged between 37 and 50, and generation Y, aged between 15 and 36. The poll by Ipsos/ Mori for the housing charity Shelter also found that 25- to 34-year-olds have moved more than twice as frequently per year of their lifetime as pensioners. Shelter said the findings were “alarming” and warned the country was at the “mercy of the housing crisis”, which has left millions facing a “lifetime of instability”.

The survey came as the average house price in England passed the £300,000 mark for the first time, increasing from £299,287 in February to £303,190, according to the property website Rightmove. Asking prices have jumped by more than £100,000 typically over the last decade, it said. In March 2006, the average price was £200,980. Average prices hit new heights across six regions. A typical home now costs £644,045 to buy in London; £399,680 in the south-east; £326,836 in east England; £292,251 in the south-west; £204,140 in the West Midlands; and £177,437 in the north-west. Rents rose on average by 4.8% last year across the UK, according to data from Homelet, an insurance company. They rose 7.7% in London, 6.7% in the east Midlands and 6.5% in the south-east.

Campbell Robb, chief executive of Shelter, said the nation’s housing system was broken. “The fact that vast numbers of people fear their grandchildren will never have a home to put down roots highlights the sad truth that this country is once again at the mercy of a housing crisis. Our current housing shortage means millions are facing a lifetime of instability and, understandably, people are giving up hope. But if our history tells us anything, it’s that together we can make things change. For the sake of future generations we cannot make this crisis someone else’s problem.” He added: “You have graduates starting on £40,000 to £45,000 in London, and they don’t take the jobs because they can’t afford to live in London or can’t afford to buy because it is so expensive. We are seeing a generation of people now in their 50s or 60s who are looking at their children, and their children will be worse off than they are. That is the first generation since WWII that we are seeing that happen to, and that is primarily because of the housing market.”

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More of the above.

When Older People Do Better Than Those of Working Age (WSJ)

In deciphering the many forces behind income inequality, economists are flagging a widening shift in the economic fortunes of the old and everyone else. Older people typically have lower incomes than the general population because many of them have stopped working. But the gap between the incomes of those 65 and older and the rest of the population has narrowed significantly in Europe and the U.S. since the recession. The divergence is exacerbating generational imbalances in government pension systems while highlighting the wage struggles of younger workers. Seniors in the U.S. have recently enjoyed healthier income gains—from government and private pensions, investments and, for those still working, salaries—than their younger counterparts, census data shows.

In some countries, France and Spain among them, people 65 and older now earn more on average than younger people do. The average person 65 and older in the U.S. earns 77% of the income of the average citizen, up from 69% in 2008, at the start of the recession. In the U.K. the figure is 89%, up from 78%. In Spain and France, seniors now earn about 103% and 102% of the average worker’s income, respectively, according to an analysis of data from the EU’s official statistics agency. That’s up from 86% in Spain and 96% in France in 2008. This divergence between generations is in part a reflection of demographic shifts that have been brewing for years, as populations grow older and the wealthy postwar baby boomers in particular reach their golden years.

But it is also widening as a consequence of forces bearing down on the earnings of the young, creating a growing imbalance that threatens to undermine the promise that market economies will deliver rising living standards for successive generations. Younger workers are grappling with flat or falling pay, decreased job security and less-affordable housing, sapping the spending power that helps fuel the economy. As the elderly population increases, younger workers also face a rising bill for the extra tax dollars needed to fulfill past governments’ promises to retirees. In parts of Europe, especially, older generations’ incomes are growing in excess of their children’s, often as a direct result of postcrisis government policy, economists say. Consider the U.K. Between 2008 and 2014, the average annual income of seniors in Britain rose 7.3%, or £1,400. Over the same period, the average annual income of working households fell by 5.5%, or £1,600.

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ECB buys €60 billion (now $80 billion) per month, but: “..Lending to nonfinancial companies and consumers, excluding mortgages, has been stuck at about €6.8 trillion since June 2014..”

ECB Doing Whatever It Takes Can’t Push Euro-Area Banks to Lend (BBG)

The European Central Bank began charging banks interest on deposits in June 2014 to encourage them to lend more to companies and consumers. It hasn’t worked. Deposits at the ECB by euro-area banks in excess of required reserves have jumped sixfold since the introduction of negative interest rates, while lending within the currency bloc has barely budged. Of the €646 billion that banks added in assets during the period, about 85% has ended up as deposits at the central bank.

One reason banks are paying to keep money idle is a lack of demand for loans in an economy still recovering from a double-dip recession and a sovereign-debt crisis. Another is that banks saddled with bad loans or low capital levels and those in the midst of restructuring are reluctant to increase lending. Even the ECB’s latest offer to pay banks interest on money they borrow from the central bank may not do the trick. “They’re not profitable enough to substantially increase lending, so even the negative rate for lending by the ECB to the banks probably won’t help much,” said Jan Schildbach at Deutsche Bank in Frankfurt. “It’s not lack of liquidity or its price that’s the problem.”

Lending to nonfinancial companies and consumers, excluding mortgages, has been stuck at about €6.8 trillion since June 2014, ECB data show, despite the central bank’s liquidity programs to encourage more of those loans. Policy makers have looked at those figures when determining how much cheap money to provide lenders. Banks that increase such loans qualify for more funds. When it went deeper into minus territory on March 10, the ECB said it would use similar criteria to determine if a bank qualifies for negative rates on money it borrows from the central bank. That means the ECB is now willing to pay banks to borrow at the same rate it charges for excess deposits they hold there. And it’s willing to do so even if a bank isn’t increasing lending, as long as the firm is reducing lending at a slower rate than in the previous 12 months.

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Bubble.

Emerging-Market Currencies Fall Back to Earth After Fed Euphoria (BBG)

Emerging-market currencies retreated from multi-month highs as commodity prices fell and the dollar reasserted itself after the Federal Reserve’s dovish turn pushed it down last week. Malaysia’s ringgit led declines, falling from a seven-month high as a drop in Brent crude worsened the outlook for the oil exporter. Currencies from nations dependent on raw materials weakened, including South Africa’s rand and Mexico’s peso. China cut the yuan fixing by the most in three months, while South Korea’s won retreated from the strongest level since December as a technical indicator suggested it’s been overbought against the dollar. The MSCI Emerging Markets Index of stocks declined after entering a bull market Friday.

A gauge of the greenback against its major peers extended its rebound into a second day after slumping to a five-month low last week as the Federal Reserve pared its interest-rate outlook for 2016. That spurred a retreat in the prices of raw materials that have tracked gains in oil this month, damping the export outlook for many developing nations. While China’s economy has stabilized, the longer-term story of slowing growth remains unchanged, according to Bank of Singapore. “The market is making sense of the dovish Fed surprise and thinking that perhaps data in the U.S. will eventually force the Fed’s hand to raise rates more and faster,” said Sim Moh Siong at Bank of Singapore. “I don’t think emerging-market fundamentals have changed all that much.”

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Ouch!: “About one-third of listed Chinese companies owe at least three times as much in debt as they own in assets..”

China Central Bank Governor Warns Over Corporate Debt (FT)

China’s central bank governor has warned that the country’s corporate debt levels are too high and are stoking risks for the economy, just as highly-leveraged Chinese companies have gone on an overseas takeover binge. Adding his voice to a recent chorus of concern by senior Chinese officials, Zhou Xiaochuan, governor of the People’s Bank of China (PBoC), told global business leaders meeting in Beijing that the ratio of lending to gross domestic product was becoming excessive. “Lending and other debt as a share of GDP, especially corporate lending and other debt as a share of GDP, is on the high side,” he said, adding that a highly leveraged economy was more prone to macroeconomic risk. Corporate debt in China has risen to about 160% of GDP, while total debt is about 230%.

The Bank for International Settlements warned this month that a steep rise in private and corporate debt in emerging market economies -“including the largest”- was “eerily reminiscent” of the pre-crisis financial boom in advanced economies. Mr Zhou’s comments came at the end of a week of extraordinary dealmaking by Chinese companies overseas, with Anbang, the Chinese insurance company, bidding nearly $20bn for Starwood Hotels & Resorts and Strategic Hotels & Resorts. Total outbound Chinese merger and acquisitions spending since January is over $100bn, according to figures from Dealogic. Data from 54 Chinese companies that did overseas deals last year show that many are “highly leveraged”, according to S&P.

Chinese officials are concerned that the stability of China’s financial system could be threatened if Chinese companies are unable to repay a large amount of debt, which in turn can threaten economic growth. And as recent months have shown, instability in Chinese financial markets and risks to mainland economic growth rapidly feed through into global markets. [..] Last week China’s chief banking regulator announced a move to try to tackle the country’s bad debt problem by opening the way for the country’s lenders to use debt-for-equity swaps to rid themselves of some of the $200bn of bad bank loans on their balance sheets. Shang Fulin, chairman of the China Banking Regulatory Commission, raised the idea at the closing session of the annual meeting of parliament in Beijing.

The plan has been put forward as a way of tackling the trillions of renminbi of debt that have built up in the Chinese economy as a result of decades of debt-fuelled stimulus and easy credit. Chinese banks’ bad debts stand at Rmb1.27tn, according to official figures, although some analysts believe the real number is many times higher. About one-third of listed Chinese companies owe at least three times as much in debt as they own in assets, according to figures from Wind.

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Pushed it up to the highest this year on Friday, takes it down again today. Yeah, credibility…

PBOC See-Saws -Again- On Yuan Rate Guidance (CNBC)

Strategists are back to debating the direction of China’s currency after the central bank guided the yuan lower on Monday, having let it rise to its highest level of the year against the dollar on Friday. Jan Lambregts, Rabobank’s global head of financial markets research, told CNBC on Monday that he’s anticipating a ten to fifteen% depreciation over the next twelve months. The world’s second-largest economy is facing an unprecedented set of economic and policy challenges and in order to overcome them, the government will have to start making more bold moves in the currency, he explained. “We feel that [yuan depreciation] is a relatively easy step for China compared to the hard, structural reforms they need to do.”

Beijing is expected play down the significance of currency weakness but the country’s rising economic challenges, including a long-awaited restructuring of state-owned enterprises, leave policymakers with little choice, he continued. Following a volatile start to the year, the yuan hit a 2016 high last week following dovish remarks from the U.S. Federal Reserve but recent fixings by the People’s Bank of China revived speculation that authorities may prefer a weaker currency. Monday’s mid-point level was 6.4824 per dollar, 0.3% weaker than the Friday’s mid-point rate of 6.4628. China’s central bank lets the yuan spot rate rise or fall a maximum of 2% against the dollar, relative to the official fixing rate.

Like Lambregts, Michael Heise, chief economist at Allianz, said the yuan could drop to around 7 per dollar as soon as this year. In a recent CNBC editorial, he explained that would bode well with the government’s objective of a market-driven exchange rate.
Should these predictions come true however, it would further damage Beijing’s credibility in the eyes of global markets. Ever since the yuan’s landmark devaluation last August, speculation for further weakness was rife but Beijing has repeatedly shut down those assumptions, warning that it was not targeting more depreciation.

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Look, this is simply an economy in deep trouble.

China Has a $590 Billion Problem With Unpaid Bills (BBG)

Not since 1999 have China’s companies had so much trouble getting customers to actually pay for what they’ve bought. It now takes about 83 days for the typical Chinese firm to collect cash for completed sales, almost twice as long as emerging-market peers. As payment delays spread from the industrial sector to technology and consumer companies, accounts receivable at the nation’s public firms have swelled by 23% over the past two years to about $590 billion, exceeding the annual economic output of Taiwan. The raft of unpaid bills – bigger than at any time since former Premier Zhu Rongji shuttered thousands of state-run companies at the turn of the century – shows how cash shortages at the weakest firms threaten not only banks and bondholders, but also China’s vast web of interconnected supply chains.

With corporate bankruptcies projected to climb 20% this year, more Chinese businesses may be forced to choose between two unpleasant options: keep extending credit to potentially insolvent customers, or cut off the taps and watch sales sink. “There is a knock-on effect through the economy,” said Fraser Howie, the Singapore-based co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise,” who has followed the nation’s markets for more than two decades. “Part of the end game is default and closure.” It’s easy to see why collecting payments is getting harder in China. Businesses and consumers have been squeezed by the deepest economic slowdown since 1990, while overcapacity has fueled an unprecedented stretch of declines in producer prices. Record corporate debt levels have left many firms struggling to meet their liabilities, with corporate insolvencies jumping by 25% in 2015, according to Euler Hermes.

The world’s largest trade credit insurer sees another 20% increase in Chinese bankruptcies this year, the most among 43 major markets. “It’s a big problem when you have rising insolvencies, a bad economic environment and less liquidity for small companies,” said Mahamoud Islam, the firm’s senior Asia economist in Hong Kong. Those headwinds are increasingly visible in Chinese financial statements, where the accounts receivable and sales entries allow analysts to calculate “days sales outstanding,” or how long it takes a firm to get paid. The median collection time of 83 days has climbed from 79 days in 2014 and 55 days in 2010. It’s higher than in any of the world’s 20 biggest economies except Italy, and compares with the 44-day median for companies in the MSCI EM Index. Chinese industrial firms take longest to convert sales into cash, at 131 days, followed by 120 days for technology companies and 118 days for telecommunications firms.

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“The reality is that TTIP is being pushed through in the EU by US authorities and we have no choice in the matter.”

TTIP: Fake Freedom Moves Closer To Open Slavery (Gerrans)

The new trade negotiations – TTIP – sound dull. It combines the US and EU markets to make the process of fleecing the sheep simpler and cheaper for the wolves. Standard procedure, you may say – and you would be right. But what is interesting is that any pretense at democracy has been dropped from the propaganda song sheet. The Telegraph summarized TTIP thus: “The Transatlantic Trade and Investment Partnership is a series of trade negotiations being carried out mostly in secret between the EU and US. As a bi-lateral trade agreement, TTIP is about reducing the regulatory barriers to trade for big business, things like food safety law, environmental legislation, banking regulations and the sovereign powers of individual nations. It is, as John Hilary, Executive Director of campaign group War on Want, said: “An assault on European and US societies by transnational corporations.”

The advantage of TTIP branding from a population-management point of view is that it sounds so boring; a bit like a truncated version of Tippex as envisaged by someone with dyslexia – how evil can it be? The answer is: more evil than drinking noxious white fluid designed to correct typing errors. Under TTIP, public services, education and health services will be open for tender. EU food and cosmetics standards will be brought in line with the much lower standards in operation in the US. What banking protections exist after the last collapse will likely be removed. The walls in data privacy will become porous between the two blocs. And since the US is party to NAFTA, it will mean that EU workers will be in competition with Mexico. Nothing will be allowed to stand in the way of making a buck.

As the Telegraph puts it: “One of the main aims of TTIP is the introduction of Investor-State Dispute Settlements (ISDS), which allow companies to sue governments if those governments’ policies cause a loss of profits. In effect it means unelected transnational corporations can dictate the policies of democratically elected governments.” Put nicely, then, TTIP is a drive to the lowest common denominator between the laws which currently exist in the EU and the US combined with the creation of an unaccountable executive branch committed only to the interests of corporations. This means the workers in both areas will be on an accelerated race to the bottom, able only to compete on the basis of slave wages.

Put more generally, it is the creation of a mega-bloc designed to subsume the EU by stealth and place it in the thrall of the powers which control the US. Of course, those tasked with selling TTIP to the people it is going to fleece, claim nothing but upside. They cite the usual carrots: more jobs, higher wages, lower prices. But then they would say that, wouldn’t they? The reality is that TTIP is being pushed through in the EU by US authorities and we have no choice in the matter. This is where a modern commentator is supposed to be outraged: corporations and government cabals are in collusion – how could they! But I don’t see it that way. This isn’t a freak occurrence. Socrates placed democracy one step away from tyranny. What’s happening now isn’t democracy warping into something fiendish and weird. This is democracy’s natural pathway; where it was always going.

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The classes themselves are being redefined.

The New Class Warfare In America (Luce)

Say what you like about Donald Trump, he knows his market. “I love the poorly educated,” he said recently to cheers from those he loves. The rest of America inhaled sharply. Welcome to a very un-American debate. Once redundant, the term “working class” is now part of everyday conversation. In an age of stifling political correctness, the only people who are fair game in polite society are blue-collar whites. How absurd these people are, we tell each other, and how ignorant. Don’t they know Mr Trump was born rich? Can they really be so stupid as to fall for his con trick? The derision is not limited to liberal elites. Educated conservatives are just as scathing. Take the National Review, a flagship of thinking conservatives, that described Mr Trump as a “ridiculous buffoon with the worst taste since Caligula”.

In January it pulled together 22 intellectuals to condemn Mr Trump’s candidacy as an existential threat to conservatism. Their efforts had no impact on Mr Trump’s fan base. Now the magazine has switched to damning his supporters. By declaring open season on blue-collar whites, Kevin Williamson’s widely read essay on “white working class dysfunction” marks a turning point. Yet he is only putting into writing what many conservatives say. “The truth about these dysfunctional, downscale communities is that they deserve to die,” Mr Williamson writes. “Economically, they are negative assets. Morally, they are indefensible . . . the white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump’s speeches make them feel good. So does OxyContin.”

Margaret Thatcher’s acolyte, Norman Tebbit, once sparked fury by implying the jobless should get on their bikes to find work. Mr Williamson says America’s benighted working classes should hire a U-Haul and move on. As an exercise in condescension, Mr Williamson’s words rival the most inbred hereditary peer. As an economic prescription, it is wide of the mark. Millions of Americans are anchored to blighted neighbourhoods by negative equity, or other ties that bind. Their life expectancy is falling. Their participation in the labour market is dropping. The numbers signing up to disability benefits is rising. Opioid prescription drugs are rife. Those that are white tend to vote for Mr Trump. On Super Tuesday this month, the counties with the highest rates of white mortality – whether to overdoses, suicide or other symptoms of community breakdown – came out heavily for Mr Trump. The correlation was almost exact, according to a Wonkblog study.

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“..corals in the remote far north of the reef, where surface sea temperatures reached 33C in February..”

Great Barrier Reef Coral Bleaching Threat Raised To Highest Level (G.)

Australian environment minister Greg Hunt has been accused of going silent on climate change as the cause of dying coral in the Great Barrier Reef after a bleaching alert was raised to its highest level. Hunt, who surveyed the widespread death of coral in the far north of the reef by plane on Sunday, announced plans for more monitoring and programs to tackle run-off pollution and crown-of-thorns starfish outbreaks. But critics including conservationists and the Queensland environment minister, Steven Miles, said Hunt’s response sidestepped the central role of climate change and heat stress as the cause of the bleaching. Miles said Hunt’s announcements were “window dressing” that duplicated state efforts and ignored the need for a “credible federal government climate policy to address the cause”.

The Great Barrier Reef marine park authority raised the threat level of coral bleaching to a peak of three on Sunday, triggering its highest level of response to “severe regional bleaching” in the northernmost quarter of the 344,400 sq km marine park. The authority’s chairman, Russell Reichelt, said corals in the remote far north of the reef, where surface sea temperatures reached 33C in February, were “effectively bathed in warm water for months, creating heat stress that they could no longer cope with”. “We still have many more reefs to survey to gauge the full impact of bleaching, however, unfortunately, the further north we go from Cooktown the more coral mortality we’re finding,” he said.

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Hey, it’s simple, you just redefine anything you don’t like: “..several European countries recently began screening Syrians to determine whether the cities they came from were buffeted by conflict or considered “safe,” meaning that not all Syrians will be eligible for asylum.”

Greece Struggles To Enforce Migrant Accord On First Day (NY Times)

Greece and the EU scrambled on Sunday to put in place the people and the facilities needed to carry out a new deal intended to address the refugee crisis that is roiling Europe, as hundreds of migrants in rubber dinghies continued to land on the Greek islands from Turkey. The accord, struck between the union and Turkey on Friday, set a 12:01 a.m. Sunday deadline for Turkey to stem the flow of people making clandestine journeys across the Aegean Sea to Greece in an attempt to enter Europe, and required Greece to begin sending back migrants who are not eligible for asylum. Yet processing centers on the Greek island of Lesbos and on several other Greek islands were not adequately staffed to comply immediately with the new measures, and officials said they were waiting for the EU to follow through on a pledge to send at least 2,300 European police and asylum experts to help.

By Sunday afternoon, around 875 migrants in rubber boats had reached the Greek islands since midnight, the government said, despite an operation in Turkey that began Friday to detain migrants and the smugglers who make their journeys possible. Many migrants landing in Lesbos on Sunday appeared to be unaware of the new policies and were reeling from their harrowing journey. Greek television showed black and gray rafts arriving at the island laden with people, some sobbing with relief at having reached Europe, and others nearly unconscious. Two little girls were found drowned, and two Syrian refugees died in the crossings over the weekend. On Sunday, the Greek government began clearing out more than 6,000 migrants who had been waiting at processing centers and camps on several Greek islands, and transporting them on large ferries to Piraeus, the port of Athens, and to Kavala, a port in northern Greece.

From there, they are to be sent to refugee camps recently set up around the country. Nearly 50,000 migrants are stuck on the Greek mainland at camps, in Piraeus and on Greece’s northern border with Macedonia. More than 10,000 people have been living in miserable conditions in the Idomeni camp, on the Macedonian border, after west Balkan countries sealed their borders last month to cut the flow of migrants making their way to Germany and northern Europe. Once emptied of their previous occupants, the migrant centers on the Greek islands are to be used only to process those who make it across the Aegean Sea through a phalanx of patrols run by Frontex, Europe’s border agency, as well as NATO and the Greek and Turkish Coast Guards The Greek authorities will register the migrants and process asylum applications.

Migrants who do not apply for asylum or whose applications are rejected are to be returned to Turkey within two weeks. Under the accord, for every Syrian refugee returned to Turkey, the European Union will resettle one refugee directly from Turkey. For the 10s of 1000s of other migrants stuck in camps around Greece, the situation is less clear. Many of them are Syrian and Iraqi nationals who, for the most part, are considered eligible for political asylum and a program that would relocate them across Europe. Yet governments in several European countries recently began screening Syrians to determine whether the cities they came from were buffeted by conflict or considered “safe,” meaning that not all Syrians will be eligible for asylum. In addition, around one-third of migrants in Greece are from Afghanistan. After several European countries last month abruptly reclassified them as “economic migrants,” most were disqualified from political asylum, and will most likely be repatriated. That process could be lengthy, even after help from other EU countries arrives in Greece.

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Sorry, Wolfgang, way ahead of you on this one.

The EU Sells Its Soul To Strike A Deal With Turkey (Münchau)

The EU had two assets I have always considered un≠assailable, however much I may have questioned various decisions. The first is a lack of alternatives. How else can Europeans confront climate change, a refugee crisis or an over-assertive Russian president if not through the EU? The second is the moral high ground. Compared with the majority of its member states, the EU is less corrupt, more principled and rules-driven. Whereas the world of national politics is full of tacticians out to seek short-term gain, the bloc manages a better mix of politics and policies. It builds broad coalitions and formulates strategic policy objectives. Its horizon extends beyond the life of a parliament. Within a few years those assets have been demolished. The mismanagement of the eurozone crisis made it possible to formulate a rational economic argument for an exit.

Then, on Friday the EU lost its other key asset. The deal with Turkey is as sordid as anything I have seen in modern European politics. On the day that EU leaders signed the deal, Recep Tayyip Erdogan, the Turkish president, gave the game away: Democracy, freedom and the rule of law … For us, these words have absolutely no value any longer. At that point, the European Council should have ended the conversation with Ahmet Davutoglu, the Turkish prime minister, and sent him home. But instead they made a deal with him money and a lot more in return for help with the refugee crisis. Turkey will relocate some 72,000 refugees to the EU a one-for-one swap for every illegal immigrant whom the Turks pick up on smuggler boats in the Aegean Sea. In return, the EU is paying Turkey €6bn and opening up a new chapter in EU accession negotiations -this with a country whose leadership has just abrogated democracy.

The EU is further set to allow visa-free travel to 75m inhabitants of Turkey. The EU not only sold its soul that day, it actually negotiated a pretty lousy deal. I am not in a position to judge whether this deal complies with the Geneva Convention and other parts of international law. I assume that the European Council has made sure it would stand up in court. But even if it is judged to be legal, I have doubts whether it can be implemented. It will be interesting to watch whether the EU will renege on its promises to Turkey if Ankara fails to deliver. Even if the deal is implemented in full, it will not lighten the pressure much. The expected number of refugees making their way into the EU will be a large multiple of the 72,000 agreed with Turkey. A German think-tank has done the maths on refugee flows for this year and has come up with an estimated range of 1.8m-6.4m. The latter figure is a worst-case scenario that would include large numbers from Northern Africa.

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And counting fast.

More Than 50,000 Refugees Now Stranded In Greece (Kath.)

A total of 50,411 migrants and asylum-seekers are currently in Greece according to fresh data provided by the government. According to the data, which were made public Monday, 28,593 migrants and refugees are currently in northern Greece, 13,711 in Attica (Athens), 5,538 on the islands and the rest scattered around the country.

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The Libya route is (re-)opening for real. Terribly predictably. Even more drownings, it’s much longer.

Nine Refugees Trying To Reach Europe Drown Off Libya (AFP)

Nine migrants trying to reach Europe have drowned off Libya and hundreds more been rescued, the Red Crescent said on Sunday amid fears of an increase in crossing attempts as the route from Turkey closes. Leaders from six EU nations led by Britain held talks in Brussels on Friday on how to tackle the flow of migrants across the Mediterranean from Libya after a European naval task force plucked more than 3,100 from the water in just three days. The nine who died were among several hundred migrants who were discovered aboard dilapidated boats off the port of Zawiya, west of Tripoli, on Saturday, Libyan Red Crescent spokesman Malek Mersit said.

A total of 586 migrants were rescued, said Colonel Ayoub Qassem, spokesman for the navy of a Tripoli administration that has disputed power with Libya’s internationally recognised government since 2014. They included 11 children and 60 women, and were mainly Bangladeshis and Sudanese, he said. The drownings came just days after four migrants were killed in a boat fire off Libya and another 187 rescued. European leaders fear that a deal with Turkey to tackle the EU’s worst ever migrant crisis will spark an acceleration in the already large number of crossing attempts from Libya. Around 330,000 have landed in Italy from Libya since the start of 2014. The lawlessness that has reigned in the North African nation since the Nato-backed overthrow of veteran dictator Moamer Qadhafi in 2011 has made it a favoured jumping-off point.

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Saw some BBC coverage of this. Looked like heart attacks perhaps.

Two Refugees Die On Arrival On Greek Island (AP)

Two migrants have been found dead on a boat that arrived on the Greek island of Lesvos, on the first day of the implementation of an agreement between the EU and Turkey on handling the new arrivals. Medical personnel performed CPR on the two men but failed to revive them. The overcrowded boat was carrying dozens of migrants from nearby Turkey on Sunday, the first day for the implementation of the migration agreement between the EU and Turkey. It stipulates how the new arrivals from Turkey will be processed and returned. Some 2,500 migrants currently on Lesvos and other islands are being taken to mainland Greece where they are placed in shelters before EU-wide relocation.

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First thing that happened when the deal came into force. Lovely. Thanks, Europe, you make us proud.

Three Baby Syrian Refugee Girls Drown Between Turkey, Greece (AFP)

A 4-month-old baby girl drowned off the southwestern coast of Turkey when a vessel carrying refugees sank early on March 19, while two other girls, aged between 1 and 2 years-old, were found drowned by Greek Coast Guards off the tiny island of Ro. According to the Turkish Coast Guard, 21 refugees were rescued, but the infant was found dead. The refugee boat reportedly was en route to the Greek island of Chios when it sank off the coast of the Cesme district. Cesme is just 7 kilometers from the island of Chios, providing a tempting target for refugees mostly Syrians fleeing their country s civil war.

Two little girls were found drowned off Ro, while two Syrians suffered heart attacks on arrival at the island of Lesbos, Boris Cheshirkov, a spokesman for the U.N. refugee agency, told AFP. Of the more than 1 million refugees who arrived in the EU last year, more than 850,000 arrived by sea in Greece from Turkey, according to the International Organization for Migration (IOM). Up until mid-March, more than 144,000 arrivals to Greece by sea were reported by the UNHCR, while more than 400 people were reported either dead or missing perilous journey.

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Nov 152015
 
 November 15, 2015  Posted by at 10:05 am Finance Tagged with: , , , , , , , ,  


Jack Delano Atchison, Topeka & Santa Fe train at Emporia, Kansas 1943

Credit Bust In Rich Countries Caused Credit Boom In Emerging Markets (Economist)
Irish President: Unaccountable Forces Are Running EU (IT)
The Global Economy Slows Down. Is It Recession Or Protectionism? (Guardian)
Yuan’s Rise Means World Economy Takes Step To Greater Stability (Bloomberg)
Whistleblower At HBOS Bank Attacks ‘Ludicrously Bad’ City Regulation (Guardian)
More Tough Measures Loom As Greece Eyes Bailout Loans (Kath.)
ECB Demands Portugal’s Novo Banco Plug $1.5 Billion Capital Hole (Reuters)
The Streets of Paris Are as Familiar to Me as the Streets of Beirut (Joey Ayoub)
After Paris, Europe May Never Feel As Free Again (Guardian)
What’s Next for Migrants After Paris? (Atlantic)
Syrian Refugees In France Say Paris Terror Is The Terror They Fled (BuzzFeed)
There Is Only One Way to Defeat ISIS (Esquire)
Syrian Transition Plan Reached by US, Russia in Vienna (Bloomberg)
Poland to Shun Refugees After Paris Attack, Future Minister Says (Bloomberg)
After Mass Extinctions, The Meek (Fish) Inherit The Earth (WaPo)
Two Refugee Children Die In Greece In Separate Incidents (Kath.)

Recipe for mayhem.

Credit Bust In Rich Countries Caused Credit Boom In Emerging Markets (Economist)

The build-up of emerging-market credit began just as the rich world’s financial system started to creak in 2007. According to figures collated by JP Morgan, private-sector debt in emerging markets rose from 73% of GDP at the end of 2007 to 107% of GDP by the end of last year. These figures include loans made by banks and bonds issued by companies. Including the credit extended by non-bank financial institutions (so-called “shadow banks”) for the handful of emerging markets where such estimates are available gives a steeper rise and a higher total burden: 127% of GDP. The credit boom in emerging markets was in large part a response to the credit bust in the rich world. Fearing a depression in its richest export markets, the authorities in China brought about a massive increase in credit in 2009.


Meanwhile a flood of capital escaping the paltry yields on offer in developed economies pushed interest rates lower in developing ones. This search for yield by rich-world investors took them to ever more exotic places. A dollar-denominated government bond issued in 2012 by Zambia, a copper-rich country with an average GDP per person of $1,700 a year, offered just 5.4% interest; even so, it was 24 times oversubscribed as rich-world investors clamoured to buy. The following year a state-backed tuna-fishing venture in Mozambique, a country even poorer than Zambia, was able to raise $850m at an interest rate of 8.5%.

In contrast to the credit booms in America and Europe, where households were the main borrowers, three-quarters of the private debt burden in emerging markets is shouldered by businesses: corporate debt has ballooned from less than 50% of GDP in 2008 to almost 75% by 2014. Much of the lending was done in Asia, notably in China. But Turkey, Brazil and Chile also saw substantial increases in the ratio of company debt to GDP. Construction firms (notably in China and Latin America) increased their leverage a great deal. The oil and gas industry was a big player, too, according to the IMF’s latest Global Financial Stability Report.

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A point I’ve made 1000 times. “..a breakdown of trust between citizens and their institutions..”

Irish President: Unaccountable Forces Are Running EU (IT)

Unaccountable forces removed from democratic control are today in control in the European Union, President Michael D Higgins has declared in one of the most pointed speeches of his term in office. “The present institutional structure of the European Union can be seen as reflecting the distribution of political power in recent decades, decades that have seen the emergence of a new financialised global order, where unaccountable agencies and forces removed from democratic oversight or control are in the ascendancy,” he said. He made the speech as he opened the Royal Irish Academy’s Centre for the Study of the Moral Foundations of Economy and Society. The anti-austerity street protests in many EU states, he said, could be seen as “not just the mechanical result of deplorable levels of unemployment and deteriorating material circumstances”, but also a reflection of a “breakdown of trust between citizens and their institutions”.

Deep injury has been inflicted on people’s moral outlook in recent decades by an extraordinarily narrow version of economics which had cut ties with its ethical and philosophical roots, Mr Higgins said. European leaders must remain “attentive and open”, he added saying, “a social view of Europe demands that our fellow citizens should never be seen merely as ‘consumers’ of public policies, driven by a sense of their sectional interests.” He was confident, he said, that the new educational centre “will contribute in an important way, over the years to come, in tackling the deep injuries inflicted upon our moral imaginations by the extraordinary ascendancy in recent decades of what is an extraordinarily narrow version of economics”.

This connection “of economy, ecology and ethics” and “of policy, theory and method”, had been at the centre of his presidency, “because I believe that they are essential to reading and understanding the current situation in which we find ourselves”. Referring to upcoming commemorations in Ireland, he said: “One can legitimately wonder, for example, what shape would our economy and society have assumed, had our fellow citizens kept alive, during Ireland’s recent economic boom, the cultural, philosophical, political and moral motivations which underpinned the Irish national revival, or the spirit of other historical movements for social and political reform such as the co-operative movement. “We neglected the contribution of the co-operative instinct to our social cohesion,” he said.

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Every country will want to protect itself when times get worse.

The Global Economy Slows Down. Is It Recession Or Protectionism? (Guardian)

Goldman Sachs’s decision to close down its loss-making Bric fund was a symbolic reminder that the days are gone when the economic rise of Brazil, Russia, India and China (the four countries from which the fund drew its name) seemed guaranteed. Indeed, Brazil and Russia are both in recession. The US Federal Reserve’s plans to raise interest rates from near zero, which many experts now expect to happen next month, could deepen the agony of countries already struggling with plunging currencies and rising borrowing costs. The International Monetary Fund has warned of a flurry of bankruptcies in emerging economies as rates rise.

“A lot of these countries haven’t been helping themselves: Taiwan, Korea; they’ve all been cranking up their own credit growth,” says Russell Jones of Llewellyn Consulting, an economics advisory firm. But he too believes the world should escape a general slump. “I don’t think we’re on the cusp of a major downturn — probably more of the same.” Simon Evenett of St Gallen University in Switzerland, who collates detailed data for the thinktank Global Trade Alert, offers an alternative explanation for the recent slide in trade volumes. He calculates that about half of the fall, since exports peaked in September last year, has been caused by the commodity price rout; but the rest, rather than evidence of sickly global demand, has resulted from a creeping rise in protectionism.

His analysis suggests the declines have overwhelmingly taken place in just 28 categories of product. “That’s very concentrated; that makes me doubt that it’s a global downturn.” Eight of these categories are commodities; but the rest map closely on to areas where countries have taken protectionist measures. In the wake of the financial crisis, policymakers from the G20 countries pledged not to resort to the tit-for-tat protectionism that led to collapsing trade volumes in the wake of the Great Crash of 1929, and was ultimately seen as a contributor to the Great Depression. Since then, there has been little sign of anything with the scope of America’s Smoot-Hawley Act of 1930, which slapped import tariffs on more than 800 products.

But Evenett says there has been a flurry of more subtle manoeuvres: restricting public procurement to domestic firms, for example, or quietly tightening regulations to raise the bar against imports. “I think the China story is adding spice to it, but I think there’s more going on here,” he says. He is concerned that unless action is taken, politicians will continue to throw sand in the wheels of the international trading system. If he’s right, the downturn seen so far may not be sending a warning signal about global demand; instead, it would be best read as a measure of the fragility of globalisation.

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With China debt levels where they are, a curious idea.

Yuan’s Rise Means World Economy Takes Step To Greater Stability (Bloomberg)

With China’s yuan taking the biggest step yet toward joining the dollar and euro as a top-rank reserve currency, the global economy may be approaching an era of greater stability. So say economists who highlight the dollar’s role in the biggest financial crises in recent decades. Drawn to the liquidity and security of the unit of the world’s biggest economy, investors and governments relied on the dollar and produced dislocations including historically low borrowing costs in the 2000s even as the Federal Reserve raised interest rates. Rushes toward the safety of the dollar challenged global policy makers in 2008 as money markets seized up, prompting the Fed to open swap lines with counterparts that remain in place today.

China responded in 2009 with a call for reducing reliance on the dollar, with central bank Governor Zhou Xiaochuan floating the idea of a “super-sovereign” reserve currency. While the proposal fell flat, Zhou and his allies began a campaign to win inclusion for the yuan in the IMF’s special drawing rights unit. The SDR, as it’s called, is a kind of overdraft account for members of the IMF, convertible into dollars, euros, pounds and yen. The fund’s staff said Friday that the yuan has now met the qualification terms for inclusion in the SDR. “The current configuration of the global monetary-financial system that is centered and increasingly dominated by the dollar is not a stable or a sustainable one,” Stephen Jen of SLJ Macro Partners, a former IMF economist, wrote with colleague Joana Freire last week.

Some 87% of foreign-exchange trading involves the dollar, the most recent survey by the Bank for International Settlements showed. “The role of the U.S. dollar as the world’s dominant vehicle currency remains unchallenged,” the BIS said in 2013, noting that the euro had declined in the wake of the European debt crisis. With the world’s second-largest economy and as the number-one trading nation, China may offer the global system a currency that can complement the dollar. For now, restrictions on the ability to take money in and out of China, and on what foreign investors can buy, mean the yuan’s role will be limited.

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“..I hope and pray I’m not going to have to fight for the next five years.”

Whistleblower At HBOS Bank Attacks ‘Ludicrously Bad’ City Regulation (Guardian)

When the long-delayed official report into the near-collapse of HBOS is released on Thursday former bank bosses James Crosby, Andy Hornby and Lord Stevenson will be braced for a fresh round of condemnation. But if the report’s 500 pages are likely to revive painful criticism of their role in the demise of Britain’s biggest mortgage lender and savings institution, its publication also marks a crucial moment for a lesser known former executive at the bank: Paul Moore. Moore, 57, emerged some years ago as the whistleblower at HBOS. He said he was sacked as head of group regulatory risk at the end of 2004 – less than two years after joining – after warning that the then fast-growing bank was too strongly motivated by sales.

His views were first aired in public shortly after the bank had to be rescued by Lloyds in September 2008. The enlarged institution was later bailed out with £20bn of taxpayer money. On learning that the publication of the report by the Financial Conduct Authority and Bank of England – first promised in 2013 – has finally been scheduled for Thursday, Moore said: “I’m a bit nervous and a bit frightened and I hope and pray I’m not going to have to fight for the next five years.” His main fear now, he says, is that the report could turn out to be “a cover-up and a fudge”. If he was writing it, he says, he would refer the directors not just for banning orders but for criminal investigation, as well as demanding a proper judicial inquiry into the auditing of all the big banks and the conduct of the credit ratings agencies.

That is not all. “I would name and shame in the most rigorous detail the ludicrously bad regulators,” says Moore. Thursday’s report will be published alongside an analysis of the decision by the City regulator at the time of the collapse, the Financial Services Authority, to punish only one HBOS banker – Peter Cummings, who ran the bank’s commercial lending arm and has now been banned for life from the City and fined £500,000. Work on the official report only began after the enforcement action against Cummings, although in 2013 the parliamentary commission on banking standards, set up in the wake of the Libor-rigging scandal, published its own account of the collapse. It accused Crosby, Hornby and Stevenson of “colossal” management failures and questioned why it was only Cummings who had been censured by the City regulator.

Earlier evidence Moore had given to the Treasury select committee in 2009 had been so damning it led to a fresh examination of the role of Crosby, and forced his resignation as deputy chairman of the then City regulator, the Financial Services Authority. When Moore’s allegations were first aired at the select committee, Crosby had insisted there was no substance to them. A report – commissioned from the bank’s auditors, KPMG – concluded that he lost his job because of personality clashes inside the lender and not that Crosby sacked him because of warnings that HBOS was “going too fast”. Crosby has since handed back his knighthood and 30% of his pension, and keeps out of the public eye.

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The EU makes it impossible for Greece to leave its recession.

More Tough Measures Loom As Greece Eyes Bailout Loans (Kath.)

The government is hoping to clinch the release of €2 billion in loan funding, and another €10 billion for Greek banks, after a tough round of negotiations with representatives of the country’s international creditors which has focused mainly on the issue of nonperforming loans and foreclosures of primary residences. The money is linked to a series of additional measures that Greece must legislate next week before turning to a second set of prior actions including even more contentious reforms such as higher taxes on farmers and an overhaul of the pension system. Greece is already running behind schedule on reforms. But authorities are hoping the creditors will show some flexibility so the process of recapitalizing Greece’s banks is not derailed.

Talks are already under way within the key ministries on the next round of reforms. Labor and Social Security Minister Giorgos Katrougalos, whose ministry is overseeing the difficult task of pension reform, aims to reach a “comprehensive” agreement with creditors and approve it in Parliament by early next month, according to sources. The hope is that the creditors will reward an active effort by Greeks to make up for lost time by making some concessions in the pension overhaul. Already Greek authorities are seeking to soften the impact of the pension overhaul by exploring the possibility of increasing the social security contributions of employers and workers instead of further reducing monthly payouts.

Other politically contentious challenges the government faces in the coming weeks include raising taxes on Greek farmers, creating a new tax system, creating a task force that will manage a new fund for privatizing state assets and drafting new measures to meet fiscal targets for the next two years. SYRIZA officials have expressed concerns about the impact on social cohesion of the bailout program’s austerity measures, which has already struck the leftists’ popularity, according to opinion polls.

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Europe’s next powder keg…

ECB Demands Portugal’s Novo Banco Plug $1.5 Billion Capital Hole (Reuters)

The ECB has ordered Portugal’s Novo Banco to fill a €1.4 billion hole in its finances, possibly delaying its planned sale and hampering Lisbon’s efforts to draw a line under its biggest banking collapse. The request to repair Novo Banco, created from the failed Banco Espirito Santo (BES), presents a challenge for any anti-austerity, Socialist-led government that could come to power in coming weeks after a parliamentary vote this week. Of nine banks across the euro zone tested by the ECB as a follow-through on wider checks last year, only Novo Banco was found to be short of capital. It has two weeks to present a plan of action and nine months to plug the gap. The Bank of Portugal said in a statement that Novo Banco had already started working on a plan to raise capital through asset sales to meet the shortfall.

The plan will be presented in the coming weeks. The central bank failed to sell Novo Banco in September as the bids it received were seen as too low. The result of the ‘stress test’ means the sale can resume. “Preparation for the new phase of the sale process will be initiated immediately, now that one of the main factors of uncertainty hanging over the previous process is out of the way,” the Bank of Portugal said. The Bank of Portugal is in charge of the sale process under the terms of the €4.9 billion rescue plan for BES, which was carried out by a bank resolution fund that is formally the responsibility of Portugal’s other banks. The government lent part of the money to the fund used in the rescue and must be repaid.

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“The Human Body is not one. It sure feels that it should be by now. Maybe that in itself is an illusion.”

The Streets of Paris Are as Familiar to Me as the Streets of Beirut (Joey Ayoub)

I come from a privileged Francophone community in Lebanon. This has meant that I have always seen France as my second home. The streets of Paris are as familiar to me as the streets of Beirut. I was just in Paris a few days ago. These have been two horrible nights of violence. The first took the lives of over 40 in Beirut; the second took the lives of over 120 people and counting in Paris. It also seems clear to me that to the world, my people’s deaths in Beirut do not matter as much as my other people’s deaths in Paris. We do not get a “safe” button on Facebook. We do not get late night statements from the most powerful men and women alive and millions of online users. We do not change policies which will affect the lives of countless innocent refugees. This could not be clearer. I say this with no resentment whatsoever, just sadness.

It is a hard thing to realize that for all that was said, for all the progressive rhetoric we have managed to create as a seemingly united human voice, most of us members of this curious species are still excluded from the dominant concerns of the “world”. And I know that by “world”, I am myself excluding most of the world. Because that’s how power structures work. I do not matter. My “body” does not matter to the “world”. If I die, it will not make a difference. Again, I say this with no resentment. That statement is merely a fact. It is a political fact, true, but a fact nonetheless. Maybe I should have some resentment in me, but I am too tired. It is a heavy thing to realize. I know that I am fortunate enough that when I do die, I will be remembered by friends and loved ones.

Maybe my blog and an online presence might even gather some thoughts by people around the world. That is the beauty of the internet. And even that is out of reach to too many. Never so clearly as now have I understood what Ta-Nehisi Coates wrote about when he spoke of the Black Body in America. I think there is a story to be told of the Arab Body as well. The Native American Body. The Indigenous Body. The Latin American Body. The Indian Body. The Kurdish Body. The Pakistani Body. The Chinese Body. And so many other bodies. The Human Body is not one. It sure feels that it should be by now. Maybe that in itself is an illusion.

But maybe it is an illusion worth preserving because without even that vague aspiration towards oneness on the part of some part of the body, I am not sure what sort of world we would be living in now. Some bodies are global, but most bodies remain local, regional, “ethnic”. My thoughts are with all the victims of today’s and yesterday’s horrific attacks, and my thoughts are with all those who will suffer serious discrimination as a result of the actions of a few mass murderers and the general failure of humanity’s imagination to see itself as a unified entity. My only hope is that we can be strong enough to generate the opposite response to what these criminals intended. I want to be optimistic enough to say that we are getting there, wherever “there” might be. We need to talk about these things. We need to talk about Race. We just have to.

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Interesting point of view.

After Paris, Europe May Never Feel As Free Again (Guardian)

How long will it be before European liberalism cracks? The aftermath of a terrorist massacre is the worst time to make predictions. The extremity of the outrage pushes policy-makers and citizens to play with equally outraged responses. It is worth steadying yourself with the thought that until Friday night, Europe’s response to terrorism has not been extreme. Despite gruesome predictions to the contrary, European democracies have not turned themselves into police states. There have been no backlashes or pogroms against Muslims. EU countries, including Britain, have remained free and good societies overall; nations we can be proud of in our necessarily grudging way, for all the faults and abuses we must tackle.

People running from real terror know our true state better than we do. They flee to Europe, not from Europe. Callous though it may sound today to say it, the modest response to terrorism is the consequence of the modesty of the violence. Since al-Qaida’s assault on the World Trade Center and the Pentagon in 2001, the most striking feature of Islamist terrorism in Europe is how little of it there has been. You can give credit to police forces and intelligence agencies for arresting suspects before they strike. You can repeat the essential point that we are up against Islamism, not Islam, and most Muslims want nothing to do with totalitarian religion. Whatever the reason, the practical consequence remains that no one in power has felt the need to move towards anything resembling martial law.

Europe has “just” endured the attacks on Madrid and the 7/7 assault on London, and the actual and attempted murders of Jews, satirists, freethinkers in Paris, Brussels, Copenhagen and Marseille. Beyond that, there have been “lone wolf” killers of the type who did for poor Lee Rigby. I am not pretending that Europe has stayed the same. After Islamists sanctioned the murder of cartoonists who mocked Muhammad, a cowardly self-censorship spread across the arts and journalism, which was all the more cowardly for being unacknowledged. But it remains true that radical Islam has not forced a radical break with the past.

If you could travel in a time machine, you would see the continuities between our world and the Britain or France or Denmark of 20 years ago hugely outweigh the differences. I do not mean to minimise Islamist crimes when I say that Europe has been lucky. From Nigeria to Afghanistan, a clerical fascist doctrine that mandates mass murder and self-murder has pushed whole regions into civil war. Yet divinely sanctioned violence has failed to engulf our continent. Suspects are still innocent until proved guilty beyond reasonable doubt. The European convention on human rights remains in force. Terrorism is still subject to the rule of law, not martial law. In spite of all the provocations, we are what we once were.

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“What is clear is that there are 4 million people displaced by the crisis and, for them, a solution will need to be reached.”

What’s Next for Migrants After Paris? (Atlantic)

After a terrorist attack killed more than 120 people and injured hundreds more on Friday, France imposed border controls and authorities discovered a Syrian passport on one of the attackers. While it’s not clear whether any of the assailants were migrants themselves, the attack has nonetheless reignited the debate over Europe’s migrant crisis. As Quartz notes, the attacks attributed to ISIS are anything but good news for migrants in Europe. Marine Le Pen, the leader of the far-right National Front party in France, told reporters on Saturday that “urgent action is needed” to “annihilate” Islamic fundamentalism. Le Pen went on to advocate that France regain control of its borders and expel “illegal migrants.”

In Poland, incoming Minister of European Affairs Konrad Szymanski announced today that the country will not accept migrants without security guarantees. In September, Poland agreed to accept 4,500 refugees as part of a European Union quota system. In the U.S., the role the country should play in this refugee crisis is a subject of continued partisan debate. President Obama announced in September that at least 10,000 Syrian refugees will be resettled in the U.S. over the next year. While this number might seem small compared to the 4 million total refugees created by the war since 2011, it represents a marked jump from the fewer than 2,000 Syrian refugees accepted last year. But some GOP candidates argued against the administration’s policy by suggesting that ISIS militants could infiltrate the country by hiding among refugees.

According to Vox, Ben Carson, Ted Cruz, Mike Huckabee, and Rick Santorum quickly cited the Paris attacks to justify closing the borders to more Syrian refugees. On the Democratic side, Hillary Clinton, Martin O’Malley, and Bernie Sanders have remained mostly quiet on the subject so far. All three have publically expressed their condolences for the victims and their families, but no one has yet made the leap to policy. Meanwhile, to the north, Canada has its own ambitious refugee agenda to assess. Newly elected Canadian PM Justin Trudeau committed to resettling 25,000 Syrian refugees by the end of the year — a number deemed unrealistic by some observers. [..] the Toronto Star reported earlier today that the country remains steadfast in its plan despite the Paris attacks. Ultimately, how the recent events will affect the debate surrounding migration in Europe and beyond remains to be seen. What is clear is that there are 4 million people displaced by the crisis and, for them, a solution will need to be reached.

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As should be obvious. But is not at all.

Syrian Refugees In France Say Paris Terror Is The Terror They Fled (BuzzFeed)

Syrians who fled a brutal war and often undertook deadly sea journeys to settle in France reacted with horror to Friday’s terror attacks in Paris, and said they recognized the enemy all too well. “Syrians left Syria in dangerous ways to live in peace, but the killers followed them to Europe,” said Moaz Shaklab, a businessman from the Syrian city of Homs who settled in France two years ago as a refugee. The Paris attacks could spark new waves of Islamophobia in France and beyond — and with it fear of the refugees pouring into Europe from Syria and other countries. This is exactly what ISIS wants; the group has vowed to make it impossible for Muslims to exist peacefully in the West. Yet citizens in France share an ally against Islamic extremism in most refugees settling there.

Many newly arrived Syrians sought to escape the terror of ISIS and other jihadi groups, in addition to the brutal campaign being waged by Bashar al-Assad. Many worked against ISIS and other jihadi groups before leaving or have friends and family doing so now. “We’re united with the French people against terrorism,” Shaklab said. “And we don’t forget that they are united with us to get our freedom.” French police officials told the AP on Saturday that they had found a Syrian passport at the scene of an attack that they believed belonged to an assailant. But because of the refugee crisis, fake Syrian passports are now prevalent and easy to obtain.

Whether or not the passport is authentic, news of its discovery promised to help to fan refugee fears — which may have been the intent of the man who brought it to the scene. Sakher Edris, a journalist and political organizer who worked against both ISIS and the Syrian government before fleeing to France this summer, said he expected a backlash against refugees following the attacks. “We are really scared,” he said. “French people are kind, and it’s understandable to have some backlash, but we want them to know that we are with them against terror.”

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Stop our ‘friends’ from funding it.

There Is Only One Way to Defeat ISIS (Esquire)

It’s not like this is any kind of secret. In 2010, thanks to WikiLeaks, we learned that the State Department, under the direction of then-Secretary of State Hillary Rodham Clinton, knew full well where the money for foreign terrorism came from. It came from countries and not from a faith. It came from sovereign states and not from an organized religion. It came from politicians and dictators, not from clerics, at least not directly. It was paid to maintain a political and social order, not to promulgate a religious revival or to launch a religious war. Religion was the fuel, the ammonium nitrate and the diesel fuel. Authoritarian oligarchy built the bomb. As long as people are dying in Paris, nobody important is dying in Doha or Riyadh.

Saudi Arabia is the world’s largest source of funds for Islamist militant groups such as the Afghan Taliban and Lashkar-e-Taiba – but the Saudi government is reluctant to stem the flow of money, according to Hillary Clinton. “More needs to be done since Saudi Arabia remains a critical financial support base for al-Qaida, the Taliban, LeT and other terrorist groups,” says a secret December 2009 paper signed by the US secretary of state. Her memo urged US diplomats to redouble their efforts to stop Gulf money reaching extremists in Pakistan and Afghanistan.

“Donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide,” she said. Three other Arab countries are listed as sources of militant money: Qatar, Kuwait and the United Arab Emirates. The cables highlight an often ignored factor in the Pakistani and Afghan conflicts: that the violence is partly bankrolled by rich, conservative donors across the Arabian Sea whose governments do little to stop them. The problem is particularly acute in Saudi Arabia, where militants soliciting funds slip into the country disguised as holy pilgrims, set up front companies to launder funds and receive money from government-sanctioned charities.

It’s time for this to stop. It’s time to be pitiless against the bankers and against the people who invest in murder to assure their own survival in power. Assets from these states should be frozen, all over the west. Money trails should be followed, wherever they lead. People should go to jail, in every country in the world. It should be done state-to-state. Stop funding the murder of our citizens and you can have your money back. Maybe. If we’re satisfied that you’ll stop doing it. And, it goes without saying, but we’ll say it anyway – not another bullet will be sold to you, let alone advanced warplanes, until this act gets cleaned up to our satisfaction. If that endangers your political position back home, that’s your problem, not ours. You are no longer trusted allies. Complain, and your diplomats will be going home.

Complain more loudly, and your diplomats will be investigated and, if necessary, detained. Retaliate, and you do not want to know what will happen, but it will done with cold, reasoned and, yes, pitiless calculation. It will not be a blind punch. You will not see it coming. It will not be an attack on your faith. It will be an attack on how you conduct your business as sovereign states in a world full of sovereign states… And the still, stately progress of the news from Paris continues. There are arrests today in Brussels, of alleged co-conspirators. The body count has stabilized. New information comes at its own pace, as if out of respect for the dead. In the stillness of the news itself, there is refuge and reason and a kind of wounded, ragged peace, as whatever rolled up from the depths of the sickness of the human heart rolls back again, like the tide and, like the tide, one day will return.

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Given the American desire for world dominance, what are the odds?

Syrian Transition Plan Reached by US, Russia in Vienna (Bloomberg)

Seventeen nations, spurred on by Friday’s deadly attacks in Paris, overcame their differences on how to end Syria’s civil war and adopted a timeline that will let opposition groups help draft a constitution and elect a new government by 2017. As a first step, the United Nations agreed to convene Syria’s government with opposition representatives by Jan. 1, U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov said Saturday at a joint press conference in Vienna. A cease-fire between the government in Damascus and recognized opposition groups should be in place within six months, according to their statement. The terrorist attacks in Paris galvanized the diplomats, who at previous talks had been unable to resolve the discord within their ranks.

While Russia and Iran had sided with Syrian President Bashar al-Assad, the U.S. and its regional allies had insisted upon his removal. With diplomats bogged down over the question of Assad, terrorist groups like Islamic State, also known as ISIS or ISIL, grew and become more powerful inside Syria. “It is time to deprive the terrorists of any single kilometer in which to hide,” Kerry said. “There can be no doubt that this crisis is not Syria’s alone to bear.” Assad has “cut his own deal” with Islamic State, buying oil from the group and failing to attack militants, Kerry said. Assad’s allies have conveyed that he’s prepared to be serious and engage in talks, but the “proof will be in the pudding,” he said. In a statement posted on Twitter, Islamic State said the Paris attacks that killed 129 people and injured 352 came in retribution for French involvement in the Syrian civil war.

The conflict has so far cost about 250,000 lives, sent millions fleeing the region, and triggered Europe’s worst refugee crisis since World War II. Diplomats meeting in the Austrian capital also decided to place Islamic State, along with the al-Qaeda affiliated Nusra Front terrorist group, on a list of those subject to military strikes even when a cease-fire is in place. The list, managed by the Kingdom of Jordan, may later be expanded to include other groups in Syria, Kerry and Lavrov said. The Paris attacks “show that it doesn’t matter if you’re for Assad or against him,” said Lavrov, “ISIS is your enemy.”

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Many more countries will follow the example.

Poland to Shun Refugees After Paris Attack, Future Minister Says (Bloomberg)

Poland’s new government won’t accept migrant quotas imposed by the European Union, as the terror attacks in France have exposed the weakness in the bloc, the nation’s future minister for European affairs said. “In the wake of the tragic events in Paris, Poland doesn’t see the political possibilities to implement a decision on the relocation of refugees,” Konrad Szymanski was quoted as saying on Wpolityce.pl website on Saturday. “The attacks mean there’s a need for an even deeper revision of the European policy regarding the migrant crisis.” Szymanski’s rejection of the EU quotas hours after Paris was rocked by terrorist attacks underscore the divide among governments in the bloc over the influx of Middle Eastern migrants.

His Law & Justice party will take power in Poland this week after winning last month’s general election on a campaign that tapped into concerns among the country’s conservative Catholic base that too many Muslims are arriving in Europe. Poland’s previous cabinet, led by the Civic Platform party, also opposed efforts led by German Chancellor Angela Merkel to force EU member states to take in more migrants. While incoming Foreign Minister Witold Waszczykowski said Poland will meet an commitment by the Civic Platform to shelter 7,000 refugees, prime minister designate Beata Szydlo referred to the deal as “blackmail.” She will be sworn in on Monday.

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Only the small make it through. It takes many millions of years for larger creatures to develop.

After Mass Extinctions, The Meek (Fish) Inherit The Earth (WaPo)

A new study suggests that being a little shrimpy might come in handy when the going gets tough. A mass extinction called the Hangenberg event, which took place some 359 million years ago, led to a reduction in vertebrate size for around 40 million years afterward. The research, published Thursday in Science, adds support to the so-called Lilliput Effect, which suggests that mass extinctions cause marked shrinkage in the animal population. To study how fish fared after this devastating extinction, the University of Pennsylvania’s Lauren Sallen (along with Andrew K. Galimberti at the University of Maine) studied 1,120 fish fossils dating back 419 to 323 million years ago. She found that the ancient fish had been increasing in size over time — which is to be expected — but that body size plummeted after 97% of species were wiped out.

“Some large species hung on, but most eventually died out,” Sallan said in a statement. Before the extinction, some fish had grown to be as big as school buses. But in the unstable ecosystem of a post-mass-extinction ocean, only small fish — ones that could reproduce quickly and survive on less food — could thrive. That means an ocean full of enormous sea monsters gave way to an ocean full of sardine-like critters. “[T]he end result is an ocean in which most sharks are less than a meter and most fishes and tetrapods are less than 10 centimeters, which is extremely tiny. Yet these are the ancestors of everything that dominates from then on, including humans,” Sallan said. There’s a very good reason to look into these devastating extinctions of the distant past: Many scientists believe that Earth is on the verge of a sixth mass extinction — one caused by human activity.

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What Europe stands for.

Two Refugee Children Die In Greece In Separate Incidents (Kath.)

Two refugee children died in Greece in two separate incidents on Saturday. A 3-year-old boy drowned off the coast of Chios, in the eastern Aegean, after an engine blast on a refugee boat that threw the passengers in the sea, coast guard officials said. Fifteen other people were rescued while officials arrested an 18-year-old Turk believed to be a trafficker. Meanwhile, a 5-year-old Syrian girl was killed by an oncoming train while she was walking on rail tracks near the town of Alexandroupoli, police said.

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Nov 022015
 
 November 2, 2015  Posted by at 12:27 pm Finance Tagged with: , , , , , , , , , ,  


Just another 6-year old dead boy washed up on Lesbos Nov 2 2015

Industrial-Scale Misery As Soaked Refugees Pour Onto Greece’s Lesbos (CBC)
Record 218,000 Migrants Crossed Mediterranean In October, Says UN (AFP)
Total Of 19 Dead Recovered From Aegean Sea On Sunday (AP)
Plastic Boat Sinks Off Greece, Killing 11 Refugees (NY Times)
Refugee Crisis Was Not Unexpected, Top UN Official Says (Kath.)
Merkel’s Refugee Troubles Mount as Allies Clash on Border Plans (Bloomberg)
Bonds Send Same Ominous Signs No Matter Where in the World (Bloomberg)
Apocalypse Now: Has The Next Giant Financial Crash Already Begun? (Paul Mason)
Down $4 Trillion, China Faithful Buy Stocks That Hurt Them Most (Bloomberg)
Enlargement And The Euro Are Two Big Mistakes That Ruined Europe (Münchau)
Eurozone Banks Still Swamped With Bad Loans (Telegraph)
Europe Prolongs Its Diesel Problem (Bloomberg Ed.)
Puerto Rico Doesn’t Need Bankruptcy (WSJ)
Brexit Is A Life Or Death Matter For Britain’s Farmers (AEP)
Greece Sets Terms for Aiding $15.9 Billion Bank Recapitalization (Bloomberg)
IMF Pushes Europe For Formal Restructuring Accord On Greek Debt (Bloomberg)
Things Can Get Even Worse For Renewable Energy Companies (Dizard)

“We lost a baby and until now the sea didn’t give it us back.”

Industrial-Scale Misery As Soaked Refugees Pour Onto Greece’s Lesbos (CBC)

A young man just plucked from the sea between Turkey and the island of Lesbos sits wet and shivering on the deck of the coast guard ship that has just brought him and a dozen or so other survivors to the port of Mytilene. Their boat had just capsized. He was draped in the crackling gold of an emergency blanket, huddled amongst the others, and wanted to stand up. But the sailors told them all to stay seated until a gangplank was put in place. “Are you okay?,” I asked him from the dock. “Yeah, we are okay.” “Did everybody survive?” “We think so,” he said. And then he added: “Thank you very much for asking.” The polite afterthought in the moments following what must have been a terrifying ordeal stayed with me.

It was a kind of ordinary courtesy delivered in the midst of the most un-ordinary situation imaginable, and was as if to say “please forgive me if my desperate journey inconveniences in any way, that’s not my intention.” But here on this island of some 80,000 people in the Aegean Sea off the coast of Turkey, the extraordinary, the distressing and the nearly unbelievable are happening so constantly that they are in danger of becoming ordinary. That is, until the next boat full of asylum seekers sinks and startles everyone out of their torpor. And even then the rescue efforts have begun to take on a terrible sameness when it comes to the drownings, of children more often than not.

“It’s hard because I’m human,” a Palestinian doctor volunteering with an Israeli aid organization tells me as we stand next to the shore and as yet another boat disgorges its tattered passengers earlier this week. “It was crazy. We lost a baby and until now the sea didn’t give it us back.” Here in Lesbos, the daily arrivals of waterlogged boats tossing up their human cargo have reached a near industrial scale. One morning last week we watched dozens of boats docking here in a matter of hours. By nightfall, an estimated 10,000 people had crossed from Turkey to this Greek enclave. The view from the hills down on to the shoreline looks like nothing so much as a major travel terminus. It is a hive of activity. People tumble out of boats, helped to shore by a steady supply of volunteers, including a band of dashing lifeguards from Spain.

Dressed in wet suits in the orange and yellow of the Spanish flag, they plunge into the sea to steady boats and wade to shore with babies held high over their heads, the infants’ tiny arms spread out wide to the skies, as if in supplication, by the too-big life jackets they’re packed into by their parents. Some parents have tied ropes around their waists and those of their children so they don’t become separated in the event of a capsize. Once ashore people pray, collapse, cheer, hug. They’re offered blankets and bananas and a doctor’s care if needed. They take off their wet clothes and untie the plastic bags they’ve secured around their shoes. Or they look for new shoes from volunteers handing them out because they’ve lost their own or they’re too wet.

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Times twelve is 2,620,728 million.

Record 218,000 Migrants Crossed Mediterranean In October, Says UN (AFP)

More than 218,000 migrants and refugees crossed the Mediterranean to Europe in October -a monthly record and nearly the same number of crossings for all of 2014, the United Nations said Monday. “Last month was a record month for arrivals,” UN refugee agency spokesman Adrian Edwards told AFP, pointing out that “arrivals in October parallelled the entire 2014.” In October, 218,394 people made the perilous crossing — all but 8,000 of them landing in Greece – compared to 219,000 arrivals during all of last year, UN figures showed.]

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These are just the ones that are counted.

Total Of 19 Dead Recovered From Aegean Sea On Sunday (AP)

Greek authorities confirm that the bodies of four more migrants, all men, have been recovered north of the island of Farmakonissi in the eastern Aegean Sea. Four others were rescued and seven are missing. This brings the total number of dead recovered Sunday in the Aegean Sea to 19, in three separate incidents. The number of smuggling boats crossing over to Greece from the nearby Turkish coast fell Sunday as strong winds raked the eastern Aegean Sea, but some still attempted the dangerous crossing.

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Even the NYT wakes up.

Plastic Boat Sinks Off Greece, Killing 11 Refugees (NY Times)

A week of drownings in the Aegean Sea was capped on Sunday by more tragedy when a plastic boat carrying migrants from Turkey capsized and sank off the Greek island of Samos in high winds, killing 11 people including six children, according to Greek officials. Another two bodies were pulled out of the sea off the small island of Farmakonisi, south of Samos, a few hours later, and seven migrants were found dead off the island of Lesbos, according to a Greek Shipping Ministry official. The seven bodies could be from a large wreck on Wednesday in which more than 20 people died, according to the official who spoke on the customary condition of anonymity. “We had several rescue operations today, in several parts of the Aegean,” the official said.

The first instance on Sunday occurred at around 9 a.m., when a plastic boat flipped over in near-gale force winds just 20 meters from the coastline of Samos. Rescuers recovered the body of a woman from nearby rocks and divers found another 10 people trapped in the cabin of the sunken boat, the official said. “There were four women in there, as well as two children and four babies,” she said, adding that 15 people were rescued. Winds were still strong at around noon when the two bodies were found near Farmakonisi. With such strong winds, the Greek Coast Guard ordered vessels to remain anchored in many ports across the country on Sunday. The bad weather has not discouraged migrants from risking the short but dangerous sea crossing from Turkey to Greece. More than 60 have died over the last week after their boats sank in choppy waters, nearly half of them children.

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“The leaders of Europe were told it was going to happen at least two years ago.” “We are going to have more of these things and a lot worse.”

Refugee Crisis Was Not Unexpected, Top UN Official Says (Kath.)

Director-General of the United Nations office in Geneva, Denmark’s Michael Moller, expresses optimism that the agency’s sustainable development goals (SDGs) will help toward ending extreme poverty but he has no illusions about the refugee crisis, stressing that such phenomena will continue. On a recent visit to Athens to celebrated the UN’s 70th anniversary, he recommended that we remember the 1980s.

Does the UN Refugee Agency (UNHCR) have adequate funding? Over 60 million people depend on the UNHCR getting the right funding. But it doesn’t. The needs have grown exponentially over the past several years. There’s donor fatigue, the humanitarian system is now dealing with four or five top-level crises, what we call Level 3, which is testing the system to its limits. The lack of funding has to do with the decreasing quality of our leadership, the fact that we see more and more inwardness, and it has to do with the fact that our approach hasn’t evolved in synch with reality. A very, very deep rethink about the relationship between development aid and humanitarian aid is needed. A lot of the stuff happening now in humanitarian aid really ought to be in development aid, in the prevention side of development aid, long-term stuff. The average time a refugee is in a camp is ridiculous, it’s between 14 and 17 years.

The collective thinking about migration, refugees, doesn’t have a locus, there’s no one place where somebody is sitting thinking about new policies. The UNHCR is a technical organization, the International Organization for Migration (IOM) also. Except for Sir Peter Sutherland, the secretary-general’s special representative for migration and development, but he’s a one-man show, he’s not even supported financially, he hasn’t got a secretary, he pays for his own tickets. It’s at that level of ridiculousness. The crisis we have today, we knew it was going to happen. The leaders of Europe were told it was going to happen at least two years ago. So a little prevention and a little preparation in terms of the narrative to their voters would have gone a long way.

[..] looking at this crisis as an isolated incident doesn’t make any sense whatsoever. We are going to have more of these things and a lot worse. The moment climate refugee problems kick in we are going to be in real trouble, unless we sit down globally and figure out structures and ways to deal with this in the future. Not to reinvent the wheel every damn time that happens, but to rethink completely the humanitarian system, because I guarantee you that it will happen again.

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“..there can be neither caps on asylum seekers nor can the German border be closed to migrants.”.

Merkel’s Refugee Troubles Mount as Allies Clash on Border Plans (Bloomberg)

German Chancellor Angela Merkel faces further coalition discord over the refugee crisis after weekend talks with fellow party leaders failed to identify a common government stance on tackling the biggest influx of migrants since World War II. The continued coalition disagreement threatens another stormy week for the beleaguered chancellor as lawmakers prepare to return to Berlin for a parliamentary session that will again be dominated by the projected arrival of as many as a million asylum seekers in Germany this year. With public concern mounting and party support on the slide, Merkel and Horst Seehofer, the Bavarian state premier and Christian Social Union chief who has demanded she stem the flow of migrants, will address their joint parliamentary caucus Tuesday on efforts to tackle the crisis.

“It worries people that well over 10,000 people come every day across the German-Austrian border without us being able to control this in any way,” Jens Spahn, deputy finance minister and a member of Merkel’s Christian Democratic Union, said late Sunday on ARD television. “We must send a signal that we can’t help everyone in this world who is somehow in need, as hard as it is.” Merkel met for a total of some 10 hours on Saturday evening and throughout Sunday with Seehofer, who heads the CDU’s Bavarian sister party and is her chief coalition critic. Bavaria is the main gateway to Germany for the refugees pouring over the border from Austria, and Seehofer had said the Bavarian state government would take unspecified action if Merkel didn’t meet his demands to curb the number of migrants.

The two leaders agreed on the main goals of controlling immigration and combating the root causes of the crisis “so as to reduce the number of refugees,” and to help integrate those in need, according to a joint position paper e-mailed after the talks. The “most urgent” measure was to pursue the setting up of so-called transit zones along the border with the aim of filtering out economic migrants from those such as Syrian refugees with a genuine claim to asylum. Those arriving from “safe” countries, such as Kosovo or Albania, would be subject to an accelerated asylum process to send them home. A decision on transit zones should be made this week before a Nov. 5 meeting of Germany’s 16 state prime ministers and the three coalition leaders, according to the joint CDU/CSU paper.

That suggests coalition strife ahead. Social Democratic Party chief Sigmar Gabriel, who attended the Chancellery talks on Sunday morning, dismissed the concept of transit zones as “inappropriate” and legally doubtful. “Rather than huge and uncontrollable prison zones on the country’s borders, we need lots of registration and immigration centers inside Germany,” Gabriel told a party meeting on Saturday, according to the SPD website. Steffen Seibert, Merkel’s chief spokesman, said that experts from the federal government and the states will work on the topic of transit zones in preparation for the three party heads’ meeting on Thursday. While the coalition tone on refugees appears to be hardening, Merkel held to her core principles that there can be neither caps on asylum seekers nor can the German border be closed to migrants.

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“Where are the animal spirits to turn us around?” said Charles Diebel at Aviva Investors. “What you see in the bond market is “a lack of confidence in the future.”

Bonds Send Same Ominous Signs No Matter Where in the World (Bloomberg)

Ask any bond trader in Tokyo, London or New York what their view on the global economy is, and you’re likely to get a similar, decidedly downbeat answer. That’s not just because fixed-income types are a dour bunch at the best of times. A quick scan across government debt markets suggests that investors are pricing in the likelihood that growth and inflation around the world will remain tepid for years to come. In Europe, bonds yielding less than zero have ballooned to $1.9 trillion, with the average yield on an index of euro-area sovereign notes due within five years turning negative for the first time. Worldwide, the bond market’s outlook for inflation is now close to levels last seen during the global recession. And even in the U.S., the bright spot in the global economy, 10-year Treasury yields are pinned near 2% – well below what most on Wall Street expected by now.

“Where are the animal spirits to turn us around?” said Charles Diebel at Aviva Investors. “What you see in the bond market is “a lack of confidence in the future.” Diebel says his firm favors sovereign bonds issued by countries that are loosening monetary policy and betting against debt from nations that produce commodities. With the risk of deflation lingering in Europe, China slashing interest rates to combat flagging growth and a raft of indicators fueling concern the U.S. economy is losing steam, it’s not hard to understand why many investors are pessimistic. And the persistent demand for the safety of government bonds also raises thorny questions about whether the Federal Reserve should be raising interest rates when central banks in Europe, Asia and many emerging markets are struggling to revive their own economies.

Appetite for safe assets is so strong in Europe that about 30% of the $6.3 trillion of sovereign bonds in the euro area have negative yields, index data compiled by Bloomberg show. That means buyers who hold to maturity are willing to accept small losses in return for the promise that most of their money will be returned. In the past week alone, yields on about $500 billion of the bonds fell below zero, pushing the average yield for the region’s bonds due within five years to minus 0.025%, the lowest on record, data compiled by Bloomberg show.

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Mason sees the signs but doesn’t understand them.

Apocalypse Now: Has The Next Giant Financial Crash Already Begun? (Paul Mason)

The 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun. Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn. That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world.

John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present. This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.

The underlying cause of this debt glut is the $12tn of free or cheap money created by central banks since 2009, combined with near-zero interest rates. When the real price of money is close to zero, people borrow and worry about the consequences later. Next, let’s look at the price of real things. Oil collapsed first, in mid 2014, falling from $110 a barrel to $49 now, despite a slight rebound in the interim. Next came commodities. Copper cost $4.50 a pound in 2011, but was half that in September. Inflation across the entire G7 is barely above zero, and deflation stalks the southern eurozone. World trade volumes have contracted tangibly since December 2014, according to the Dutch government index, while the value of global trade in primary commodities, which scored 150 on the same index a year ago, now stands at 114.

In these circumstances, the only way in which the expanding credit mountain can be an accurate signal about the future is if we are about to go through a spectacular productivity boom. The technology is there to do that, but the social arrangements are not. The market rewards companies that create labour exchanges for minicab drivers with multibillion-dollar valuations. Hot money chases after computing graduates with good ideas, but that is – at this phase of the cycle – as much an indicator of the stupidity of the money as the brightness of the ideas.

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“I lost most of my money investing in ChiNext stocks, but they are still worth buying..”

Down $4 Trillion, China Faithful Buy Stocks That Hurt Them Most (Bloomberg)

Wu Xin says she’s got a sure-fire plan to recoup losses from the $4 trillion selloff in China’s stock market: pile into equities that hurt her the most. The 28-year-old from Hangzhou has been snapping up shares in China’s small-cap ChiNext Index, undeterred by a tumble earlier this year that erased half the measure’s value in three months. “I lost most of my money investing in ChiNext stocks, but they are still worth buying,” said Wu, an ad saleswoman in the media industry. “I can make the most money from them in a rally, too.” Doubling down on the most volatile equities has become a go-to strategy for China’s 96 million individual investors as the stock market shows early signs of recovery. The ChiNext has rallied 38% from this year’s low in September – three times as much as the benchmark Shanghai Composite Index – and volumes on the small-cap bourse surged to an all-time high last month.

The rush back into the bear market’s biggest losers shows Chinese investors are still embracing risk, even as the economy heads for its weakest annual expansion since 1990. The danger is that another market downturn could saddle individuals with even deeper losses – a double whammy that Bocom International Holdings Co. says could do lasting damage to investors’ appetite for stocks. “If the ChiNext plunges again, it’s going to hurt,’’ said Hao Hong, the chief China strategist at Bocom in Hong Kong, who predicted the stock-market rout in June. When small-cap shares are rising this fast, buying is hard to resist. Zhu Zujuan, a 60-year-old retiree, says she purchased shares of Dingli Communications, a maker of wireless network testing gear, last Tuesday at 27.2 yuan apiece.

After a tea date with friends, she came back home to find the stock had rallied to 30 yuan – a 10% gain in a few hours, without any obvious news. “The market cap of ChiNext stocks is usually small, so it’s easy for them to rise,” Zhu said from Hangzhou. “I know the risk is high, but so is the return.” The ChiNext’s rally from its September low has extended this year’s gain to 68%, despite a tumble of as much as 55% from its June peak. Investors are increasingly trying to lock in quick gains. Average daily turnover in ChiNext shares surged 64% in October from the previous month, with about 3.5% of the entire market capitalization changing hands on Oct. 23. That was a record proportion relative to Shanghai, where turnover amounted to 1.5% of bourse’s market value.

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No, the structure of the EU is the one big mistake that outdoes them all.

Enlargement And The Euro Are Two Big Mistakes That Ruined Europe (Münchau)

There has hardly been a year when the EU has not been on the brink of some crisis: banking, sovereign debt, Russia’s annexation of Crimea and now refugees. You can always point fingers at individual politicians and assign blame. But it is highly implausible that the EU’s serial failures can always be explained as the product of accident and malice. I put it down to two catastrophic errors committed during the 1990s and at the beginning of this millennium. The first was the introduction of the euro; the second, the EU’s enlargement to 28 members from 15 a couple of decades ago. You might agree with one or other of these statements, or with neither of them. But few people will agree with both. I was among those who supported monetary union at the time of its introduction.

Advocates of the euro at the time came from two different groups, who struck a Faustian Pact. Members of the first group believed the euro as constructed would fail, and hoped it would somehow be fixed. The others thought the system would stay rigid, and bend the economies of its members into a new shape. This latter group knew that, to withstand the rigours of a fixed-exchange system that resembles nothing so much as the gold standard, countries would have to adjust to economic shocks through shifts in wages and prices — a course, they believed, that the euro’s members would be forced to take. The admission that the euro was a mistake should not be confused with a desire to dissolve it. That would be even more catastrophic. It is merely a recognition that we are trapped in a dysfunctional monetary system.

But how does enlargement play into this? This is not an argument about any particular member state with whose actions one happens to disagree. Nor is it an argument about the principle of enlargement, which is fundamental to the EU. My quarrel is with the speed of accession, and the criteria that aspiring members have to meet. Just as countries have maximum absorption capacities for migrants, the EU has a maximum absorption capacity for new members. I have no idea what that number is in any given time period, but it surely is not 13 members in a single decade. Enlargement affected Europe’s ability to respond to the shocks of subsequent years in two ways. First, it forced the EU to take its eye off the ball at a critical time when it should have focused on building the institutions needed to make the euro work.

Second, enlargement meant that EU countries that were not in the eurozone suddenly found themselves in the majority. That shift naturally shaped the EU’s own agenda. I recall the obsession during those years with competitiveness, a typical small-country economic issue. Debates on the reform of Europe’s treaties during those years focused on voting rights and the protection of minorities. It was the overwhelming view of European officials and members of the European Parliament that the eurozone itself did not need to be fixed. At that time it would have been comparatively easy to set up a banking union. But once the crisis set in, and banks suffered huge losses, countries could no longer share their deposit insurance schemes, let alone to create a single one for everybody.

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“It is a sick sector, having to nurse their own capital positions.”

Eurozone Banks Still Swamped With Bad Loans (Telegraph)

European banks are failing to cut their exposures to bad loans, according to a study from law firm Linklaters, leaving the sector weak and barely able to support economic growth. Banks had scrambled to cut bad loan levels and improve their capital buffers in the run up to tough stress tests in 2014, but have failed to make progress since then. The eurozone lenders are sitting on bad loans totalling €826bn, down just €15bn from €841bn in November of last year. The banks have tried to sell off portfolios of non-performing loans to investors who want to take on the assets. Funds have raised €40bn to buy up those assets but banks are still racking up more bad loans themselves, meaning the overall level is falling only very slowly. So far banks have “barely touched the tip of the iceberg,” said Linklaters’ Edward Chan. “It still means you don’t have the banks as a credible engine for growth. It is a sick sector, having to nurse their own capital positions.”

“You don’t have any source of funding for growth, which if you look at wider eurozone picture is a bit depressing.” Banks in Greece and Italy have the highest proportions of bad loans on their books, Linklaters found. A total of 3.92pc of all European bank assets are non-performing loans. By contrast the American banking system is in much better health – only 2pc of its assets are non-performing loans, just half as bad as the eurozone’s rate. The ECB has taken over much of the regulation of the biggest eurozone banks, which had led to expectations of more rapid action on banks’ balance sheets. Linklaters’ Andreas Steck believes the authority will soon get tougher on weak banks. “The ECB is clearly working hard to deal with non-performing loans resolution and with a working group now in place to tackle these loans, we will see them engaging in a much stronger fashion with national competent authorities and banks to ensure that further action is taken ahead of next year’s stress test,” he said.

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Brussels is truly an insane city.

Europe Prolongs Its Diesel Problem (Bloomberg Ed.)

Responding to public outrage over the Volkswagen diesel emissions scandal, the European Union rightly pledged to toughen emissions testing and enforce limits on nitrogen oxides (NOx), a hazardous type of diesel pollutant. But those moves amount to very little, now that the EU is giving the auto industry until 2020 to comply, and then only partially. The delay will just prolong the shift away from diesel. While it will be useful to have on-road testing, starting in 2017, EU regulators decided Wednesday to allow new car models to exceed legal levels of NOx by 110% until the beginning of 2020. Even after that, they can go over the limit by 50%. The adjustment period for existing car models is still longer. The concessions might make sense if the technology to meet the limit had yet to be developed. But selective catalytic reduction and other NOx-limiting mechanisms have been available for years.

Carmakers argue that they impose an added hassle and expense on consumers. But it is precisely the kind of burden that consumers must consider in deciding whether to buy a diesel car rather than an electric or a hybrid. Delaying the emissions limits compounds the market-distorting effects of the Europe’s initial decision, in the mid-1990s, to promote diesel engines with lower excise taxes and relatively lax environmental standards. These benefits explain why 35% of cars in the EU are diesel. American carmakers may be quietly cheering Europe’s folly, as it could prompt China to drop European car emissions standards in favor of stricter U.S. ones. What’s worse for Europe is that the delay on diesel rules undermines its credibility on limiting emissions. With key environmental talks coming up in Paris in just over a month, Europe has promised ambitious greenhouse gas reductions by 2030. But can it be trusted to follow through?

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Puerto Rico needs debt restructuring.

Puerto Rico Doesn’t Need Bankruptcy (WSJ)

Debt service will consume less than 17% of Puerto Rico’s consolidated budget this fiscal year. In the general-fund budget, which does not include government-owned corporations and agencies, debt service is below 16%. Neither number sounds like grounds for declaring bankruptcy. Factor in all the fat in government spending that could be cut, and the case for walking away from obligations to creditors is even weaker. But the U.S. is entering a presidential-election year and pollsters say voters tend to choose the candidate who “cares about people like me.” Puerto Ricans living on the island don’t vote, but those on the mainland do. What could say “caring” to these Hispanic voters in places like Florida, Ohio and Pennsylvania more than federal permission to write-down Puerto Rico’s $73 billion in debt?

Right on cue, Treasury wants Congress to approve legislation that would allow Puerto Rico to declare bankruptcy. In an analysis posted on its website, Treasury finds debt service as a%age of the general-fund budget is actually 38%, which is to say that it believes the way Puerto Rico has been calculating its debt-service burden for the last 40 years is wrong. It would be interesting to know how that got by all the credit-rating firms, lawyers and bond underwriters. It is also worth noting that Puerto Rico’s debt burden includes $18.5 billion in debt that under the island’s constitution must be serviced before any other payments come out of the general fund.

In a July 28 letter to Senate Finance Committee Chairman Orrin Hatch, Treasury Secretary Jacob Lew wrote, “I am deeply concerned that a protracted and disorderly restructuring process will cause long-term damage to the health, safety, and financial well-being of the families living and working in Puerto Rico.” Treasury counselor Antonio Weiss ratcheted up the alarm in Oct. 22 Senate testimony. “Puerto Rico’s fiscal crisis is escalating,“ he said, adding “that without federal action it could easily become a humanitarian crisis as well.” Such hyperbole is designed to rush Congress into approving the bankruptcy law.

Yet there is little evidence that Puerto Rico faces a humanitarian crisis any more than the heavily indebted states of California or Illinois. And as to the deteriorating fiscal environment, it seems to be largely the work of Gov. Alejandro García Padilla, who has been signaling markets that default is a policy goal. As Carlos Colón de Armas, a professor of finance at the Graduate School of Business at the University of Puerto Rico, told me last week, “If, instead of doing everything it can do in order not to pay, the government of Puerto Rico were doing everything it could do in order to pay, things would be very different.”

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Farmers are addicted to cheap handouts. Not even their fault.

Brexit Is A Life Or Death Matter For Britain’s Farmers (AEP)

Land prices will crash. British agriculture will face a traumatic shock, and 90pc of the country’s farmers will be ruined. There will be a wave of debt foreclosures by banks, akin to the America Dustbowl and the Grapes of Wrath. A fresh seed of discord will be sown between England, Scotland, and Wales, imperilling the UK. This is what is likely to happen if Britain votes to leave the EU next year, according to a confidential 70-page report issued to clients by the specialist consultants Agra Europe. It is not a propaganda document. It is a detailed text, carefully researched, written for industry insiders. It is not to be dismissed lightly. British farmers currently receive 60pc of their income from EU subsidies and environmental subsidies. They would lose most of this at a stroke unless the British government guaranteed compensating support of one kind or another, and so far it has clarified nothing.

Yet like all Brexit and counter-Brexit assertions, the Devil is in the assumption. Agra Europe takes it as a given that David Cameron or any other British prime minister will do little to prevent such a bloodbath running its course if the British people vote to withdraw from Europe, and say goodbye to the Common Agricultural Policy (CAP). “What is certain is that no UK government would subsidise agriculture on the scale operated under the CAP,” it states. This is conjecture. Few Brexit advocates – including ardent free-traders – suggest that subsidies should be slashed. They accept that agriculture is strategic, even iconic, and that society has a special duty of care to farmers. Let us call it ‘une certaine idée de l’Anglettere’, to borrow from Charles de Gaulle.

“Our view is that no farmer in the UK should left out of pocket as a result of Brexit. Preserving our farms and countryside is a very high priority,” says Ian Milne from Global Britain. “Farmers and fishermen should receive exactly what they received before, for at least five years. We should recruit the excellent agricultural colleges of Cirencester, Reading, and Manchester, and those in Scotland, to invent a new model of subsidies. We paid £12.3bn into the EU budget in 2014, which we would no longer have to pay, so there would be more than enough money.” Agra Europe’s report is worth reading. It is part of the “political discovery” that forces us to confront the hard realities the Brexit. We are all weary of rhetoric at this point. Direct CAP payments to Britain will average £2.88bn a year from 2014-2020.

This is a trivial sum for those who live and breath the world of global finance, almost a rounding error for Apple, Exxon, or JP Morgan. In 2013, these subsidies were worth €200 a hectare (£58 an acre) and made up 35-50pc of total gross income. “Only the super-efficient, top 10pc could survive without them,” it said. Most farmers have thin margins, if they have any at all. DEFRA figures for 2013-2014 show that a fifth of cereal and grazing livestock farms failed to make a profit, and this was before the latest leg down in global commodity prices. Average cereal farms earn around £100,000, and £55,000 of this comes from the EU single farm payment. The European Commission estimates that land prices would fall 30pc across the EU if CAP subsidies were abolished. “For farmers who have taken out debt against the value of their land, a loss of value could be fatal. 18pc of farms have current liabilities that exceed current assets,” says the Agra Europe report.

Read more …

This looks far too easy given that over half of loans are non-performing and austerity bakes more into the cake each passing day.

Greece Sets Terms for Aiding $15.9 Billion Bank Recapitalization (Bloomberg)

Greece’s government detailed how it will help banks plug the €14.4 billion hole in their books identified by the ECB, paving the way for the lenders to seek cash from investors for the second time in 18 months. The ECB expects the banks to raise at least €4.4 billion from shareholders and bondholders, sufficient to meet the shortfall identified under baseline macroeconomic assumptions in its Asset Quality Review, the central bank said Saturday. The state-owned Hellenic Financial Stability Fund is ready to inject the €10 billion identified in the ECB’s adverse scenario, offering 25% through common shares with full voting rights in the lenders, and the rest via contingent convertible securities, according to a government statement released late on Sunday night, in Athens.

The mix between shares and CoCos for the state’s participation in the capital raising plans will largely determine the ownership structure of battered lenders, and therefore investors’ appetite to chip in. U.S. billionaire Wilbur Ross, who holds a stake in Eurobank Ergasias, said Saturday Greece should only inject funds through CoCos to prevent the dilution of the stakes held by existing shareholders, which have already dropped more than 70% this year. “Investors will not be comfortable with committing new equity capital to banks that are effectively nationalized,” Ross said in a statement. “Since it was the actions of government that caused the imposition of capital controls and since these in turn have led to the need for equity, it would be nonsensical for the government now to dilute shareholders.”

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Starting to sound like a he said she said story.

IMF Pushes Europe For Formal Restructuring Accord On Greek Debt (Bloomberg)

Eurozone countries must commit to a formal restructuring of Greece’s debt before the IMF will lend new money to the country, according to one of the IMF’s top officials. Pledges to review Greece’s debt servicing won’t be enough unless they’re accompanied by specific terms for paring back the borrowing burden, David Lipton, the IMF’s first deputy managing director, said in an interview in Washington. Greece received an €86 billion bailout in August from the 19-nation currency bloc, which now wants the IMF to provide further support. “We want a debt operation agreed between Greece and its creditors,” Lipton said. “For us to go forward, we want more than a general assurance that the matter will be handled, with enough specific details on how it will be handled to assure the fund that Greece’s debt service will be on a sustainable path.”

Greek Prime Minister Alexis Tsipras has requested a new IMF program, which would replace a dormant one that’s on track to expire in March. Any new IMF program would have to be approved by an executive board representing the fund’s 188 member nations. Lipton said the amount of new IMF funding hasn’t been decided. Germany and other creditor nations say the Washington-based IMF, which lends to countries with balance-of-payments troubles, should play a financial and technical role in shoring up Greece’s economy and restoring the nation’s access to financial markets. As a result, fund participation is a central goal in the euro area’s bid to make Greece’s third bailout its last. The bailout loans Greece has amassed over its three rescues are the focus in the debt relief talks, since Greece’s private sector debt was already restructured in early 2012.

Many euro- area nations have said writing down the principal of the loans would be a “red line,” while indicating they might agree to better servicing terms like lower rates and longer loan maturities that would reduce how much Greece has to pay back over time. A technical group in Brussels is studying details. Greece in June became the first advanced country to miss a debt payment to the IMF. The country cleared its arrears to the fund in July. In 2010, worried that a Greek default might trigger a European banking crisis, the fund’s board agreed to waive a condition of IMF bailouts that required Greece’s debt to be sustainable. But member countries outside the euro zone are unlikely to give Greece special treatment this time. Lipton said the IMF has four priorities for a new program: implementation of policy pledges, fiscal structural policies needed for medium-term sustainability, fixing the banking sector, and addressing the debt.

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You bet.

Things Can Get Even Worse For Renewable Energy Companies (Dizard)

Perhaps the most immediate threat to renewables is developing at the state level, where elected legislators and appointed regulators are beginning to chip away at the biggest source of support for the US solar industry: “net metering”. These are schemes, most prominently in California, but also in Arizona, New Jersey and Hawaii, under which you could be paid at the retail power rate if your solar panels were sending back more power to the electric company than you were using. Net metering sounds virtuous, but in its simple formulation it leaves the cost of maintaining back-up power, i.e. that runs at night and on windless days, including all those fossil fuel generators, substations and transmission and distribution lines, spread over the other ratepayers.

In Arizona, a public power authority that serves Phoenix has already started charging solar panel users about $50 per month for the fixed costs of maintaining the traditional grid. Even in California, hearings are under way on whether to change the net-metering law to impose fixed charges on solar panel owners or renters who rely on the grid for back-up. Along with the social equity case being made against renewables net metering, there is a small but influential group of transmission engineers who are worried about prospective decreases in the reliability of the grid caused by the increased penetration of intermittent renewables. One such problem is “overgeneration”, which is created when the grid operator must balance incoming energy that it is in effect required to purchase, against insufficient demand.

This occurs frequently in California during sunny days, when rooftop solar panels, large solar farms and wind turbines push energy to consumers who do not need all of it. Also, the grid operators are finding that getting a renewables-intensive grid to recover from a blackout, never mind a massive cascading one, will be much more challenging than it has been with a fossil-fuel dependent grid. So a massive, weeks-long shutdown is another potential risk for renewables investors. Un-air conditioned Americans would shed their green covering very quickly.

Read more …

Nov 022015
 
 November 2, 2015  Posted by at 10:08 am Finance Tagged with: , , , , , , , , , , ,  


RLOppenheimer New flag for EU 2015

To reiterate: People are genetically biased against change, because change means potential danger. People are also genetically biased against acknowledging this bias, because they wish to see themselves as being able to cope with both change and danger. Put together, this means that when changes come, people are largely unprepared or underprepared.

Take this beyond the bias of the individual, and apply it to that of the group (s)he belongs to, the vantage point of a society, and you find the bias multiplies and becomes self-confirming. That is, the members of the group reinforce each other’s bias. When change comes in small and gradual steps, as it mostly does, this can be said to work relatively well. When it comes in large and sudden steps, trouble ensues.

This little bit of psychology 101 may seem redundant, but it is indispensable if we wish it to recognize the implications of Europe -and the entire world with it, in its slipstream- having already entered a period of change so profound it is impossible to predict what the impact will be. We can do a lot better at this than we do today, where so far the drivers of change, and indeed the changes themselves, are ignored and/or denied.

This ignorance and denial threatens to lead to a needless increase in nationalism, fascism, violence, misery, death and warfare. If we were to acknowledge that the change is inevitable, and prepare ourselves accordingly, much of this could be avoided.

There are two main engines of change that have started to transform the Europe we think we know. First, a mass migration spearheaded by the flight of refugees from regions in the world which Europeans have actively helped descend into lethal chaos. Second, an economic downturn the likes of which hasn’t been seen in 80 years or so (think Kondratieff cycle).

Negative ideas about refugees are already shaping everyday opinion and politics in many places, and this will be greatly exacerbated by the enormous economic depression that for now remains largely hidden behind desperate sleight-of-hands enacted by central bankers, politicians and media.

People, first in Europe, then globally, will need to learn to share what they have, and do with much less. This is not optional. The refugees won’t stop coming, and neither will the depression. It would be much better if people were prepared for this by those same central bankers, politicians and media, but the opposite is happening.

It’s not only individual people who are biased against change, societies are too, and that means so are those who ‘lead’ these societies. They are all motivated, consciously or not, to resist change, because their positions and their powers depend on things remaining -largely- the same.

‘Leaders’ in Brussels and various European capitals still operate on the assumption that the refugee stream is a fleeting phenomenon they can and must stop. In a sort of positive feedback loop with their populations, this idea is continuously reinforced.

This leads to today’s reality in which at least one baby drowns every single day (and more in the past few days) off the shores of Greece, on Europe’s borders, and easily ten times as many members of their families. Moreover, the count is accelerating fast. Weather forecasts for the coming week call for Beaufort 7 winds.

There’s no society, no civilization that allows such atrocities to happen, and is not subsequently down for the count, and bound to dissolve, crumble and disappear. Societies all need common values, based on minimum levels of humanity and compassion, just to survive. And they need a whole lot more if they wish to flourish. No such values, as we see on a daily basis, exist in Europe today.

And that means it has no future – at least not in its present EU structure. It doesn’t get simpler than that. Denied and ignored as the simple fact may have been from the start, it was always clear that the European Union, if it failed to solidly unify the continent, risked becoming a force for division. And it looks as if the first real crisis the union faces will be enough to generate that division. There’s no union in sight other than in name.

Scores of people still hail Angela Merkel for her role in the refugee crisis, but they should think again. Merkel demanded the protagonist role for herself and Germany in setting if not dictating the conditions in the Greek debt negotiations over the first half of 2015, but she’s nowhere to be seen in a leading role now.

Merkel, true, has opened German doors to refugees, but she has utterly failed in expanding any such policy to the EU as a whole. And since she’s the only recognized leader in the entire union, leaving people like Hollande and Juncker far behind, she must acknowledge responsibility if things go wrong. Being a leader doesn’t mean you get to cherry-pick your challenges, it’s a package deal. Merkel cannot today act as German leader only.

But as fast increasing numbers of refugees and their children are drowning in the Aegean, in an act of supreme cynicism Merkel last week went to China to sell Volkswagens and weapons, as well to talk about… human rights. That is to say, the human rights of Chinese people. Not those of the refugees making their way to Europe, who apparently don’t even have the right to safe passage.

It’s that safe passage that must be Europe’s first and main concern right now, not how to stop people from coming. There are many voices clamoring for the ‘Evros fence’, built by Greece three years ago on a stretch of land on its border with Turkey, to be opened, so the drownings stop.

This would seem to be a good first step to halt would should by now be labeled a refugee disaster, rather than crisis. But it’s a step that could have been taken months ago, and the fact that it hasn’t even after Merkel visited Turkey recently, doesn’t bode well. Tsipras is set to visit Turkey this week in the wake of Erdogan’s election victory yesterday, but Tsipras may not get the green light from Berlin to tear down the fence.

The best thing would perhaps be for ordinary people to organize themselves into a large group, 10,000+, travel to Evros, and tear down the fence themselves, rather than wait for politicians to do it. Perhaps the time to rely on others, politicians or otherwise, to do things, has passed.

The world has seen mass migrations before, numerous times, and Europe sure has had its share. The manner is which these migrations take place typically depends to a large extent on people’s human values and their willingness to share their wealth. What’s happening with Syrian refugees today bears some eery resemblances to the boats carrying Jewish refugees prior to WWII that were refused in many ports. Let’s not go there again.

Refugees almost always make a positive contribution to the country they resettle in, both economically and in other ways. We know that, just like we know many other things. But that doesn’t lead our reactions, fear does. And the more wealth people have, the more they seem to fear losing it.

I’ve quoted before how the German federal police warned Merkel at least 8 months ago that a million refugees would be at the country’s doorstep. And that nothing was done with this knowledge for about half a year, leaving Germany woefully unprepared when the warning turned out to be correct.

UN Geneva Director General Michael Moller puts the warning even further into the past; he says EU leaders were told about it at least two years ago.

Refugee Crisis Was Not Unexpected, Top UN Official Says

Director-General of the United Nations office in Geneva, Denmark’s Michael Moller, expresses optimism that the agency’s sustainable development goals (SDGs) will help toward ending extreme poverty but he has no illusions about the refugee crisis[..]

“The crisis we have today, we knew it was going to happen. The leaders of Europe were told it was going to happen at least two years ago. So a little prevention and a little preparation in terms of the narrative to their voters would have gone a long way.”

“This very negative, xenophobic and frankly racist narrative that we’re seeing in many countries, including my own country – I don’t recognize my own country – is unacceptable [..] one of the things that I find very puzzling is that there’s some sort of global amnesia going on. In the early 80s we had pretty much the same problem in Southeast Asia, with much bigger numbers of boat people.

It took a while and then someone decided we must deal with it in a more rational way and they came up with a plan of action which was the product of an international conference where international solidarity kicked in in a much broader way than now. Then we put in place a whole series of measures in a way that minimized the pain and over seven years we resettled 2.5 million people. I don’t see why we can’t take a page or two or three out of that book. To me what’s happening isn’t a European problem, it’s an international problem.

[Washington] are evolving as well. First of all, the number [of refugees the US would accept] was 10,000 but now they’ve upped it to 100,000. I’ve talked to some of the politicians.

[..] looking at this crisis as an isolated incident doesn’t make any sense whatsoever. We are going to have more of these things and a lot worse. The moment climate refugee problems kick in we are going to be in real trouble, unless we sit down globally and figure out structures and ways to deal with this in the future. Not to reinvent the wheel every damn time that happens, but to rethink completely the humanitarian system, because I guarantee you that it will happen again.

The refugee disaster is only the first step in a long and multi-pronged process of profound change in the lives of all citizens of -formerly- rich countries. And if we collectively screw up step 1 as badly as we have and still do, what’s going to happen when our economies fall to pieces? When our alleged ‘financial security’ crumbles, our pensions, our benefits?

Are we going to blame it all on the refugees, and vote in right wing simpletons? Too many of us undoubtedly will. Whether there’s enough decency to counter that is a toss-up. What is not is that the numbers of refugees will keep rising at the same time that our economies keep sinking.

It’s up to us, wherever we live in the world, to find the best way to deal with it. We have a choice in how we react to these developments, not in whether they happen or not.

Nov 012015
 
 November 1, 2015  Posted by at 10:52 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle November 1 2015


Unknown Drowned baby boy, Lesbos Oct 25 2015

New Tragedy In The Aegean, Sinking 11 Dead, 4 Babies (In.gr)
‘So Many Of Them Were Babies. We Saw At Least 30 Bodies In The Water’ (HRW)
Crunch Talks For Merkel On Refugee Crisis As Thousands More Arrive (Reuters)
Greek Banks Need Extra €14 Billion To Survive Dire Economic Downturn (Guardian)
Greek Bad Debt Rises Above 50% For The First Time, ECB Admits (Zero Hedge)
Cash Crisis ‘Could Close 50% Of UK Care Homes’ (Observer)
Crisis In UK Care Homes Set To ‘Dwarf The Steel Industry’s Problems’ (Observer)
China Bad Loans Estimated At 20% Or Higher vs Official 1.5% (Bloomberg)
China’s Official Factory Gauge Signals Contraction Continues (Bloomberg)
‘Lipstick’-ing The GDP Pig Amid An Epochal Global Deflationary Swoon (Stockman)
Fed Admits: ‘Something’s Going On Here That We Maybe Don’t Understand’ (ZH)
Fed Looks At Way To Shift Big-Bank Losses To Investors (AP)
Australia Should ‘Tell The Story Of The Pacific To The World’ (Guardian)

At dawn Sunday: “five are women, two are children and four infants..” Four more deaths reported since… (Google translation)

New Tragedy In The Aegean, Sinking 11 Dead (In.gr)

Without end continues the refugee drama in the Aegean Sea. This time 11 refugees died when the six meter plastic boat, which was carrying them sank while approaching rocky area in Samos Blue, in the six meters from the shore, just before they occupants disembark. From the dead five are women, two are children and four infants. Most of the dead were trapped in the cabin of plastic boat. The new wreck occurred at dawn Sunday. From the new wreck rescued 15 people. The point is boat of the Coast, volunteer groups and divers.

Read more …

Deaths of single often go unreported: “The ultimate death toll is no doubt even higher, since only families with surviving members were able to report their missing to the coast guard..”

‘So Many Of Them Were Babies. We Saw At Least 30 Bodies In The Water’ (HRW)

On Wednesday off the Greek island of Lesbos, a large Turkish fishing boat carrying some 300 people trying to reach Europe sank, causing at least seven to drown, including four children, with at least 34 still missing. The needless loss of life should be enough to outrage us all. But just as outrageous is the reality that months into Europe’s refugee crisis, Europe’s leaders still have not taken the steps necessary to help prevent such unnecessary tragedies, let alone adopt policies that could provide people fleeing war and repression with legal and safe alternatives to seek asylum in Western Europe. Turkish smugglers taking advantage of those desperately fleeing the horrors of war in Syria, Afghanistan, and Iraq promised the victims that the trip aboard a “yacht” would be safer than the more common trips in overloaded rubber dinghies.

They then packed the 300 people like sardines on both decks of the aging fishing vessel. Disaster unfolded as the boat hit rough seas and high winds at about 4 in the afternoon. Suddenly, the sheer weight of those packed on the upper deck caused it to collapse, crashing everyone down onto the lower deck. Spanish volunteer life guards, working on the beaches of Lesbos to bring in the boats safely, watched the tragedy unfold through their binoculars from a beachhead on the Greek island. A Syrian man who survived told one of the doctors who treated the survivors that the collapse of the upper deck injured many people and created a large hole in the bottom of the boat, which began filling with water. The Turkish smuggler driving the boat called his fellow smugglers, and a speedboat came to evacuate him, its occupants firing several times in the air to warn off the panicking people on the boat.

As it evacuated the skipper, the speedboat hit the fishing boat, causing it to sink almost immediately. “Suddenly, we just saw hundreds of lifejackets in the sea,” Gerard, one of the Spanish volunteer lifeguards, told me over the phone. “We rushed down to get our jet skis, and we were in the water in minutes.” For more than four hours, until long after nightfall, three Spanish lifeguards tried to rescue as many of the people in the water as they could, using only their jetskis in the rough water many kilometers offshore. They performed CPR on some right on their jetskis. Several local fishing boats also came to join the rescue efforts, pulling survivors out of the water until their decks were packed with shivering, traumatized survivors.

Both the Greek coast guard and boats under the coordination of FRONTEX, the EU’s external borders agency, joined the effort as well, but their large boats sitting high out of the water made it difficult to hoist survivors unto their decks in the rough seas. The Spanish lifeguards had to risk their lives to scramble onto the Greek coast guard ship to perform CPR on those who had lost consciousness, including a tiny baby. Their jetskis were damaged in the process. Long after nightfall, the Spanish volunteers returned to shore, themselves so chilled to the bone that they were risking hypothermia. “We passed so many lifeless bodies floating in the sea as we left the rescue area,” Gerard said, his voice still shaking a day later.

“So many of them were babies. We saw at least 30 bodies at the scene in the water.” By Thursday, 242 people had been rescued, and the Greek coast guard confirmed that at least 34 people remained missing, in addition to the seven bodies recovered from the water the evening before. The ultimate death toll is no doubt even higher, since only families with surviving members were able to report their missing to the coast guard.

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WIll Merkel pull to the right with her country?

Crunch Talks For Merkel On Refugee Crisis As Thousands More Arrive (Reuters)

Nearly 10,000 refugees continued to arrive in Germany daily, police said on Saturday, highlighting the scale of the challenge facing the country’s stretched border staff ahead of a crunch meeting between Angela Merkel and a Bavarian ally on the crisis. Chancellor Merkel will discuss refugee policy on Saturday evening with Bavarian premier Horst Seehofer, head of the Christian Social Union (CSU) and who has criticized her asylum policy and handling of the crisis. The CSU, sister party to Merkel’s Christian Democratic Union (CDU), has been outspoken about her “open doors” policy towards refugees, in part because its home state of Bavaria is the entry point for virtually all of the migrants arriving in Germany.

Berlin expects between 800,000 and a million refugees and migrants to arrive in Germany this year, twice as many as in any prior year. The huge numbers have fueled anti-immigration sentiment, with support for Merkel’s conservatives dropping to its lowest level in more than three years. There have also been a spate of right-wing attacks on shelters: police in Dresden reported two more arson attacks on Friday night on a hotel and a container, both of which were planned to house refugees and asylum seekers. On Sunday, Merkel and Seehofer will hold talks with Sigmar Gabriel, who leads the other party in her “grand coalition”, the Social Democrats (SPD).

Conservative officials believe it is likely Seehofer will come away from this weekend’s meetings with Merkel with a deal to introduce so-called ‘transit zones’ at border crossings to process refugees’ asylum requests. SPD politicians have rejected that idea, instead calling for faster registration and processing of asylum applications. The crisis has also prompted squabbling among EU states over how best to deal with the influx. European leaders last weekend agreed to cooperate to manage migrants crossing the Balkans but offered no quick fix. German Defence Minister Ursula von der Leyen said Europe needed to work together to come up with a solution to the crisis but that Germany would continue to welcome refugees. “We will not slam the door in the face of the refugees,” she said at a security conference in Bahrain.

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A lot less than was prviously announced.

Greek Banks Need Extra €14 Billion To Survive Dire Economic Downturn (Guardian)

Greece’s four main banks need to find another €14bn of reserves to ensure they could withstand an economic downturn, the ECB said on Saturday. The four banks – Alpha Bank, Eurobank, NBG and Piraeus Bank – have until 6 November to say how they intend to make up that shortfall, the ECB said. The money could come from private investors or from EU bailout funds. An ECB stress test known as a “comprehensive assessment” identified a capital shortfall of €4.4bn under a best-case scenario and €14.4bn in a worst-case situation. The shortfall is smaller than originally feared, with the most recent bailout deal setting aside up to €25bn to prop up Greece’s banks.

The ECB audit examined the quality of the banks’ assets and considered the “specific recapitalisation needs” of each institution under Greece’s EU bailout. “Overall, the stress test identified a capital shortfall across the four participating banks of €4.4bn under the baseline scenario and €14.4bn under the adverse scenario,” the ECB said. “The four banks will have to submit capital plans explaining how they intend to cover their shortfalls by 6 November. This will start a recapitalisation process under the economic adjustment programme that must conclude before the end of the year.” Increasing the banks’ capital reserves would “improve the resilience of their balance sheets and their capacity to withstand potential adverse macroeconomic shock”, the central bank added.

In August, eurozone finance ministers released €26bn of the €86bn in bailout funds that went to recapitalising Greece’s stricken banking sector and make a debt payment to the ECB. Greek banks have already been bailed out under earlier deals for the country. They suffered further losses as Greece headed towards a third bailout earlier this year. Depositors pulled billions out of the country fearing that Greece would be forced to leave the euro. Limits on withdrawals and transfers imposed in June to prevent Greek banks from collapsing remain in place, although they have been loosened.

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Now that’s a real ugly number. And austerity assures the number will get worse. What does that spell for Greek banks?

Greek Bad Debt Rises Above 50% For The First Time, ECB Admits (Zero Hedge)

According to the FT, “the bill states that bank rescue fund HFSF will have full voting rights on any shares it acquires from banks in exchange for providing state aid. Under the bill the bank rescue fund will have a more active role, assessing bank managements.

The exact mix of shares and contingent convertible bonds the HFSF will buy from banks in exchange for any fresh funds it will provide will be decided by the cabinet. The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt.

And therein lies the rub, because in the span of three months, Greek NPLs have risen from 47.6% of total to 51%: an increase of just over 1% in bad debt every month. Which means that whether or not the latest attempt to boost confidence by the ECB, ESM, and the Greek parliament succeeds is moot. Yes, a few hedge funds may invest funds alongside the ESM, but in the end, as the NPLs keep rising and as long as Greek debtors refuse – or simply are unable – to pay their debt or interest, the next Greek crisis is inevitable. The biggest wildcard is whether or not the Greek population will accept this latest promise of stability in its banking sector at face value: a banking sector which since July is operating under draconian capital controls.

Granted, we should point out that in the past two months the deposit outflow from banks has stopped, and even reversed modestly adding about €900 million in deposits in the past two months, although that is mostly due to the inability of households and corporations to withdraw any sizable amount of funds. The real answer whether Greek banks have been “saved” will wait until the shape of the final bank recapitalization takes place, even as NPLs continue to mount. Remember: Greek lenders are currently kept afloat only by the ECB’s ELA but there is a rush to get the recapitalization finished. If it is not done by the end of the year, new EU rules mean large depositors such as companies may have to take a hit in their accounts.

If the proposed recap is insufficient – and it will be since under the surface the Greek economy continues to collapse and NPLs continue to mount – and a bank bail-in of depositors takes place (a bail-in which took place immediately in the case of Cyprus back in 2013 when Russian oligarch savings were “sacrificed” to bail out the local insolvent banking system), the next leg in the Greek bank crisis will promptly unveil itself, only this time Greece will have some 200% in debt/GDP to show for its most recent, third, bailout. Finally, the real question is: having read all of the above, dear Greek readers, will you hand over what little cash you have stuffed in your mattress to your friendly, neighborhood, soon to be recapitalized bank?

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The entire western world get bogged down under this pressure.

Cash Crisis ‘Could Close 50% Of UK Care Homes’ (Observer)

Ministers are under mounting pressure to pump more money into care for the elderly as investigations by the Observer reveal how some of the largest providers may have to pull out of supplying services because of an escalating financial crisis. Before chancellor George Osborne’s autumn statement on 25 November, Sarah Wollaston, the Conservative chair of the all-party Commons select committee on health, is calling for the government to act, saying that social care providers are reeling from rising costs and declining fees from cash-strapped local authorities. Meanwhile, the head of Care England, which represents independent care providers, claims that the care home sector is heading for a bigger crisis than the steel industry, while Chai Patel, the boss of one of Britain’s largest care home operators, HC-One, says half of Britain’s care homes could go bust.

The warnings come as residents in the 470 homes and specialist centres run by leading provider Four Seasons face uncertainty about the future of the company. Four Seasons has to make a £26m interest payment in December, but is losing money under the weight of £500m of debt. Four Seasons has insisted that it can make the payment, but bosses at rival companies warned that the industry was under unsustainable pressure. In the home care sector, where specialists look after the elderly in their own properties, the United Kingdom Homecare Association cautioned that leading providers could pull out of 55,125 care hours and 33 contracts because of the shortfall between the cost of care and the amount local authorities were paying for the service. Wollaston, a former GP, said she supported the new national living wage and moves to pay transport costs to carers, but added that the government had to recognise that both measures would increase the costs of care.

“There has been a longstanding gap in funding for social care and this will become much more severe if there is not adequate recognition of the rising costs the sector will face as a result of the living wage. Otherwise, we will see more care providers pulling out of the sector,” she said. Many problems result from the fact that local authorities, which have suffered funding cuts of more than 40% since 2010, cannot offer enough to make contracts attractive or, in many cases, viable. Many providers are turning to the private market as an alternative, where they can. Martin Green, the head of Care England, said the crisis would lead to more people ending up in hospitals and Patel, whose company runs 250 care homes, said he had given research to the government that showed that half of care homes could disappear.

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So who’s going to pay, now and in 5 years, 10 years?

Crisis In UK Care Homes Set To ‘Dwarf The Steel Industry’s Problems’ (Observer)

The ghost of Southern Cross hangs over Britain’s care home industry. Four years ago the country’s largest care home group collapsed, sparking months of uncertainty and worry for its 31,000 residents and their families, until Southern Cross’s rivals stepped forward to agree rescue deals for its 750 homes. Now, however, the industry could be rewarded by facing an even bigger crisis. While it was a set of circumstances unique to Southern Cross that laid it low in 2011 – particularly high rents for its properties and the costs of a debt mountain left by its private equity owners – today care homes across the country are feeling the squeeze. Four Seasons, which has more than 22,000 beds spread among 470 homes nationwide, is at forefront of the new crisis.

The company is owned by private equity group Terra Firma, the organisation led by financier Guy Hands that has, at various times, controlled companies as diverse as Méridien hotels, Odeon cinemas and record label EMI. It is losing millions of pound a year and struggling under £500m of debt. Four Seasons needs to make a £26m interest payment in December to satisfy creditors who could put it into administration. Terra Firma insists it will be able to make the payment, but the private equity group, trade unions, and local authorities all agree this is only the start of the problems for the care home industry. Justin Bowden, national officer at the GMB union, which represents thousands of care home employees, said: “You are looking potentially at several Southern Crosses in the next 12 months if something drastic is not done.”

Martin Green, chief executive of Care England, the body that represents independent care providers, warned that the crisis in the sector would dwarf the problems in the steel industry. “We are looking at Redcar happening twice a month if care homes go down,” he said. “These people can only be looked after in care homes and hospitals. If Jeremy Hunt thinks he has a problem with bed blocking now, it is nothing on what it is going to be like if these care homes start to close. Hospitals won’t be able to do elective care because they will be full of old people.” The problems for care homes are rooted in the gap between the costs of care and the amounts local authorities are paying for residents. There are staggering variations in fees across the country, ranging from £350 a week to as high as £750, according to consumer watchdog Which?

The Local Government Association itself estimates that there will be a £2.9bn annual funding gap in social care by the end of the decade. This gap will widen with the introduction of the national living wage next April, which will add another £1bn to the costs of care homes between now and 2020.

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“China is confronting a massive debt problem, the scale of which the world has never seen.”

China Bad Loans Estimated At 20% Or Higher vs Official 1.5% (Bloomberg)

Corporate investigator Violet Ho never put a lot of faith in the bad loan numbers reported by China’s banks. Crisscrossing provinces from Shandong to Xinjiang, she’s seen too much — from the shell game of moving assets between affiliated companies to disguise the true state of their finances to cover-ups by bankers loath to admit that loans they made won’t be recovered. “If I have one piece of advice for people worrying about the financial status of Chinese companies, it’s this: it’s right to be worried,” said Ho, senior managing director in Hong Kong for Kroll Inc., a U.S. risk consultancy. “Often a credit report for a Chinese company is not worth the paper it’s written on.”

As China’s banking industry persists with publishing delinquent-debt numbers that few have faith in – a survey in 2014 indicated that even lenders didn’t believe them – some financial analysts, too, have turned detectives to try to work out what the real numbers may be. The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. Bank of China Ltd. reported on Thursday its biggest quarterly bad-loan provisions since going public in 2006. While the analysts interviewed for this story differ in their approaches to calculating likely levels of soured credit, their conclusion is the same: The official 1.5% bad-loan estimate is way too low.

Charlene Chu, who made her name at Fitch Ratings making bearish assessments of the risks from China’s credit explosion since 2008, is among those crunching the numbers. While corporate investigator Ho relies on her observations from hitting the road, Chu and her colleagues at Autonomous Research in Hong Kong take a top-down approach. They estimate how much money is being wasted after the nation began getting smaller and smaller economic returns on its credit from 2008. Their assessment is informed by data from economies such as Japan that have gone though similar debt explosions. While traditional bank loans are not Chu’s prime focus – she looks at the wider picture, including shadow banking – she says her work suggests that nonperforming loans may be at 20% to 21%, or even higher.

The Bank for International Settlements cautioned in September that China’s credit to gross domestic product ratio indicates an increasing risk of a banking crisis in coming years. “A financial crisis is by no means preordained, but if losses don’t manifest in financial sector losses, they will do so via slowing growth and deflation, as they did in Japan,” said Chu. “China is confronting a massive debt problem, the scale of which the world has never seen.”

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But there’s still plenty voices willing to paint rosy picstures.

China’s Official Factory Gauge Signals Contraction Continues (Bloomberg)

China’s first key indicator this quarter, an official factory gauge, missed analysts’ estimates, signaling that the manufacturing sector has yet to bottom out as global demand falters and deflationary pressures deepen. The official purchasing managers index was unchanged at 49.8 in October, the National Bureau of Statistics said Sunday, compared with the median estimate of 50 in a Bloomberg survey. It was the third straight reading below 50, the line between expansion and contraction. The official non-manufacturing PMI, a barometer of services and construction, fell to 53.1 from 53.4 in September, the weakest since December 2008. “The manufacturing sector is still contracting, though stabilizing,” and the report indicates economic momentum remains sluggish, said Liu Ligang at Australia & New Zealand Banking Group.

“We still believe the Chinese economy will experience modest rebound supported by faster infrastructure investment in November and December.” The newest data highlight the challenges confronting China’s old growth drivers. The nation’s leaders have reiterated priorities of both reforming the economy and maintaining medium- to high-speed growth in the next five years, according to a communique released by Xinhua News Agency on Thursday. The readings suggest continued monetary easing by the central bank hasn’t yet boosted smaller businesses as much as their larger, state-owned counterparts, which are able to borrow at reduced rates. “Big companies are stabilizing, while smaller ones continue to perform below the contraction-expansion line,” Zhao Qinghe, a senior statistician at NBS, wrote in a statement interpreting the data on Sunday.

“The percentage of small companies facing a financial strain is considerably higher than that of bigger companies.” The unchanged manufacturing PMI suggests “managed stabilization” as policy makers strive to balance growth, reform, and market stability, according to Zhou Hao at Commerzbank in Singapore. The manufacturing sector stabilized “somewhat” due to monetary policy easing, Zhou said, while slowing power generation, steel production and housing sales are “suggesting that the overall economy is still under downward pressure.” The employment gauges of both manufacturing and non-manufacturing sectors remained mired in contraction zone, Sunday’s report showed. China’s survey-based unemployment rate picked up slightly to around 5.2% in September, while a ratio of job supply and demand rose in the third quarter.

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Stop confusing inflation with rising prices, and things get a lot clearer.

‘Lipstick’-ing The GDP Pig Amid An Epochal Global Deflationary Swoon (Stockman)

The talking heads were busy yesterday morning powdering the GDP pig. By averaging up the “disappointing” 1.5% gain for Q3 with the previous quarter they were able to pronounce that the economy is moving forward at an “encouraging” 2% clip. And once we get through this quarter’s big negative inventory adjustment, they insisted, we will be off to the ‘escape velocity’ races. Again. No we won’t! The global economy is in an epochal deflationary swoon and the US economy has already hit stall speed. It is only a matter of months before this long-in-the-tooth 75-month old business expansion will rollover into outright liquidation of excess inventories and hoarded labor. That is otherwise known as a recession.

Its arrival will be a thundering repudiation of the lunatic monetary policies of the last seven years; and it will send into panicked shock all those buy-the-dip speculators and robo-traders who still presume the central bank is omnipotent. So forget all the averaging and seasonally maladjusted noise in yesterday’s report and peak inside at the warning signs. To begin, the year/year gain of just 2.0% was the weakest result since the first quarter of 2014. And that’s only if you believe that inflation during the last 12 months was just 0.9%, as per the GDP deflator used by the Commerce Department statistical mills. Needless to say, there are about 90 million households in America below the top 20%, which more or less live paycheck to paycheck, that would argue quite vehemently that their cost of living including medical care, housing, education, groceries, utilities and much else – has gone up a lot more than 0.9%.

So put a reasonable “deflator” on the reported “real” GDP number, and you are getting pretty close to stall speed – even before you look inside at the internals. Indeed, even before you get to the components of the “deflated” GDP figure, you need to examine an even more important number contained in yesterday’s report that was not mentioned by a single talking head. To wit, the year/year gain in nominal GDP was only 2.9%, and it represented a continuing deceleration from 3.7% in the year ending in Q2 2015 and 3.9% in the years ending in Q1 2015 and Q4 2014, respectively. In short, the US economy is sitting there with $59 trillion of credit market debt outstanding, but owing to the tides of worldwide deflation now washing up on these shores, nominal GDP growth is sinking toward the flat line.

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QE accelerates deflation.

Fed Admits: ‘Something’s Going On Here That We Maybe Don’t Understand’ (ZH)

In a somewhat shocking admission of its own un-omnipotence, or perhaps more of a C.Y.A. moment for the inevitable mean-reversion to reality, Reuters reports that San Francisco Fed President John Williams said Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. With Japan having been there for decades, and the rest of the developed world there for 6 years… Suddenly, just weeks away from what The Fed would like the market to believe is the first rate hike in almost a decade, Williams decides now it is the time to admit the central planners might be missing a factor (and carefully demands better fiscal policy)… (as Reuters reports)

“I see this as more of a warning, a red flag that there’s something going on here that isn’t in the models, that we maybe don’t understand as well as we think, and we should dig down deep deeper and try to figure this out better,” said San Francisco Federal Reserve President John Williams on Friday pointing out that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand.

Williams, who is a voting member of the Fed’s policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace; ironically adding that the low neutral interest rate had “pretty significant” implications for monetary policy, and put more focus on fiscal policy as a response.

“If we could come up with better fiscal policy, find a way to have the economy grow faster or have a stronger natural rate of interest, then that takes the pressure off of us to try to come up with other ways to do it, like through a large balance sheet or having a higher inflation target,” Williams said. “It also means we don’t have to turn to quantitative easing and other policies as much.”

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As long as the investors are not the big banks?!

Fed Looks At Way To Shift Big-Bank Losses To Investors (AP)

In their latest bid to reduce the chances of future taxpayer bailouts, federal regulators are proposing that the eight biggest U.S. banks build new cushions against losses that would shift the burden to investors. The Federal Reserve’s proposal put forward Friday means the mega-banks would have to bulk up their capacity to absorb financial shocks by issuing equity or long-term debt equal to prescribed portions of total bank assets. The idea is that the cost of a huge bank’s failure would fall on investors in the bank’s equity or debt, not on taxpayers. The Fed governors led by Chair Janet Yellen voted 5-0 at a public meeting to propose the so-called “loss-absorbing capacity” requirements for the banks, which include JPMorgan Chase, Citigroup and Bank of America.

The eight banks would have to issue a total of about $120 billion in new long-term debt to meet the requirements of the proposal, the Fed staff estimates. If formally adopted, most of the requirements wouldn’t take effect until 2019, and the remainder not until 2022. The new cushions would come atop rules adopted by the Fed in July for the eight banks to shore up their financial bases with about $200 billion in additional capital — over and above capital requirements for the industry. And they would be in addition to 2014 rules directing all large U.S. banks to keep enough high-quality assets on hand to survive during a severe downturn. Combined with the regulators’ previous actions, the new proposal “would substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these (banks),” Yellen said at the start of the meeting.

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Problem is: Australia would need to address its own role.

Australia Should ‘Tell The Story Of The Pacific To The World’ (Guardian)

Australia should “tell the story of the Pacific to the world” when global leaders sit down to climate change talks in Paris at the end of this month, Labor has said. The impact of climate change on the nations of the Pacific is a focus for both the government and opposition ahead of COP21, where governments of more than 190 nations will gather to discuss a possible new global climate accord. The opposition leader, Bill Shorten, accompanied by foreign affairs spokeswoman Tanya Plibersek and immigration spokesman Richard Marles, will visit Papua New Guinea, the Marshall Islands, and Kiribati over four days this week, while the government’s minister for international development and the Pacific, Steve Ciobo, will travel to New Caledonia, Fiji and Niue. The Labor leaders said climate change was an existential threat to some countries in the region.

“The dangerous consequences of climate change is no more evident than in the Pacific region. Pacific leaders have consistently identified climate change as the greatest threat to their livelihoods, food production, housing, security and wellbeing. “This is a serious problem that demands serious attention.” Marles, the former parliamentary secretary for Pacific island affairs, told Guardian Australia that it was important for Australia to have strong and constructive relations with its Pacific neighbours. He praised Pacific leaders, in particular Kiribati’s president, Anote Tong, for highlighting the issues being faced by Pacific nations on the international stage. “It is crucial that, in the lead-up to Paris, the world understands the problems being faced by the Pacific. And it’s important that Australia plays a role in telling that story of the Pacific to the world.”

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 October 31, 2015  Posted by at 10:00 am Finance Tagged with: , , , , , , , , ,  


Louise Rosskam General store in Lincoln, Vermont 1940

US on Road to Third World (Paul Craig Roberts)
Janet Yellen Just Got Some Pretty Bad News (CNBC)
Fed’s Updated Model of Economy Suggests It’s Time to Raise Rates (Bloomberg)
China Has Created A Steel Monster And Now Must Tame It (Reuters)
VW Sticks to $24.2 Billion China Spending Plan Amid Cost Cuts (Bloomberg)
Chevron to Cut Up to 7,000 Jobs (WSJ)
Saudi Arabia Credit Rating Cut by S&P After Oil Prices Sink (Bloomberg)
Swiss Probe Banks to Gauge Exposure to Petrobras Scandal (Bloomberg)
Largest US Banks Face $120 Billion Shortfall Under New Rule (Reuters)
Portugal Risks Becoming ‘Ungovernable’: President (Telegraph)
Subprime Mortgages Make Surprise Comeback In The UK (Guardian)
Greek PM Tsipras Says Shamed By Europe’s Handling Of Refugee Crisis (Reuters)
Greece Says 22 Refugees Drown Off Aegean Islands, 144 Rescued (Reuters)
Tsipras: Aegean Waves Wash Up Dead Children, And Europe’s Very Civilization (AP)
Tsipras Blames Migrant Flows On Western Military Action In Middle East (AP)
The Next Wave: Afghans Flee To Europe in Droves (Spiegel)
Refugee Crisis: Germans Restrict Entry Points From Austria (BBC)

How to gut a society.

US on Road to Third World (Paul Craig Roberts)

On January 6, 2004, Senator Charles Schumer and I challenged the erroneous idea that jobs offshoring was free trade in a New York Times op-ed. Our article so astounded economists that within a few days Schumer and I were summoned to a Brookings Institution conference in Washington, DC, to explain our heresy. In the nationally televised conference, I declared that the consequence of jobs offshoring would be that the US would be a Third World country in 20 years. That was 11 years ago, and the US is on course to descend to Third World status before the remaining nine years of my prediction have expired. The evidence is everywhere. In September the US Bureau of the Census released its report on US household income by quintile. Every quintile, as well as the top 5%, has experienced a decline in real household income since their peaks.

[..] Only the top One Percent or less (mainly the 0.1%) has experienced growth in income and wealth. The Census Bureau uses official measures of inflation to arrive at real income. These measures are understated. If more accurate measures of inflation are used (such as those available from shadowstats.com), the declines in real household income are larger and have been declining for a longer period. Some measures show real median annual household income below levels of the late 1960s and early 1970s. Note that these declines have occurred during an alleged six-year economic recovery from 2009 to the current time, and during a period when the labor force was shrinking due to a sustained decline in the labor force participation rate. On April 3, 2015 the US Bureau of Labor Statistics announced that 93,175,000 Americans of working age are not in the work force, a historical record.

Normally, an economic recovery is marked by a rise in the labor force participation rate. John Williams reports that when discouraged workers are included among the measure of the unemployed, the US unemployment rate is currently 23%, not the 5.2% reported figure. In a recently released report, the Social Security Administration provides annual income data on an individual basis. Are you ready for this? In 2014 38% of all American workers made less than $20,000; 51% made less than $30,000; 63% made less than $40,000; and 72% made less than $50,000. The scarcity of jobs and the low pay are direct consequences of jobs offshoring. Under pressure from “shareholder advocates” (Wall Street) and large retailers, US manufacturing companies moved their manufacturing abroad to countries where the rock bottom price of labor results in a rise in corporate profits, executive “performance bonuses,” and stock prices.

The departure of well-paid US manufacturing jobs was soon followed by the departure of software engineering, IT, and other professional service jobs. Incompetent economic studies by careless economists, such as Michael Porter at Harvard and Matthew Slaughter at Dartmouth, concluded that the gift of vast numbers of US high productivity, high value-added jobs to foreign countries was a great benefit to the US economy. In articles and books I challenged this absurd conclusion, and all of the economic evidence proves that I am correct. The promised better jobs that the “New Economy” would create to replace the jobs gifted to foreigners have never appeared. Instead, the economy creates lowly-paid part-time jobs, such as waitresses, bartenders, retail clerks, and ambulatory health care services, while full-time jobs with benefits continue to shrink as a percentage of total jobs.

These part-time jobs do not provide enough income to form a household. Consequently, as a Federal Reserve study reports, “Nationally, nearly half of 25-year-olds lived with their parents in 2012-2013, up from just over 25% in 1999.” When half of 25-year olds cannot form households, the market for houses and home furnishings collapses.

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Damned if you do and doomed if you don’t. The loss of credibility will finish the job for Yellen no matter what the Fed does.

Janet Yellen Just Got Some Pretty Bad News (CNBC)

Two days after the Federal Reserve released what was allegedly its most hawkish statement in months came a reminder that the path toward a rate hike won’t be an easy one. One of the main economic factors for Fed officials when it comes to assessing the right time to start hiking rates is wage growth, tied with the consumer spending that is supposed to follow. There was bad news on both fronts in economic data released Friday morning. The big releases of the day were on personal income, which increased just 0.1% in September, missing even the meager consensus estimate of 0.2%, and the University of Michigan consumer confidence survey, which, at 90, whiffed as well with its second-lowest reading of the year.

Below the Wall Street radar, though, came another report that doesn’t garner the headlines but is believed to be one watched closely by Fed Chair Janet Yellen and her fellow monetary policymakers: The employment cost index. The quarterly release from the Bureau of Labor Statistics showed that compensation costs for nongovernment workers rose just 0.6% in the three-month period – about what economists had expected but not much to move the inflation needle. On an annualized basis, compensation costs rose just 2%, which actually is a decline from the 2.2% increase realized for the same period a year ago. Benefit costs increased just 1.4%, despite a 3% jump in health-care packages. The news was slightly better for state and local government workers, who collectively saw a 2.3% annualized increase, compared with 1.8% in the year-ago period.

The pace of wage increases is critical to Fed thinking. Many on Wall Street took Wednesday’s statement, which referenced conditions for an interest rate increase by the end of the year, as indicating that central bank officials are close to hiking for the first time since taking their key policy rate to near-zero in late 2008. Federal Open Market Committee members are hoping to see demand-driven inflation, something hard to come by when wage increases are so anemic. The wage and confidence news comes just a day after the government reported gross domestic product growth of just 1.5% in the third quarter. With the slow wage growth, core inflation as measured through Yellen’s preferred indicator, the personal consumption expenditures index, is tracking at just 1.25%, according to Steve Blitz, chief economist at ITG.

“The FOMC, if true they are tied to trends, can only be disappointed by the trend in consumption and wage growth coming out of the third quarter,” Blitz said in a note. “Because [if] they really, really, really want to move 25 basis points in December they have to be, by their own rules, now focused on whether the individual data points for the economy in the next six weeks indicate a change in trends to the upside. In other words, the next two payroll numbers mean everything.”

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Channeling Groucho: “Those are my principles, and if you don’t like them… well, I have others..”

Fed’s Updated Model of Economy Suggests It’s Time to Raise Rates (Bloomberg)

The Federal Reserve Board released an updated version of its large-scale model on the U.S. economy that may hold clues into why policy makers pivoted at their meeting earlier this week toward a December interest-rate increase. The revised inputs and calculations on Friday suggest the economy will use up resource slack by the first quarter of 2016, according to an analysis by Barclays Plc, and that also indicates Fed staff lowered their near-term estimate for how fast the economy can grow without producing inflation – a concept known as potential growth. “The output gap appears closed,” said Michael Gapen at Barclays in New York. “This means further progress would lead to resource scarcity and potential upward pressure on inflation in the medium term.”

Gapen said that may explain why U.S. central bankers signaled this week that they will consider the first interest-rate increase since 2006 at their next meeting, on Dec. 15-16. The model assumes that the Federal Open Market Committee raises the benchmark lending rate in late 2015. However, immediate liftoff has “been a feature” of the model since late 2014, Barclays noted. In the current model, “the long-run growth rate is two-tenths lower” at 2%, Barclays said. FOMC participants forecast the economy’s long-run growth rate at 2% in September. The unemployment rate stood at 5.1% in September, and the Fed model assumes little change from that level, dipping to a low of 4.8% in a forecast horizon that extends to 2020, according to Barclays.

FOMC officials estimated full employment – or the level of the unemployment rate consistent with stable prices – at 4.9% last month. “This view is quite different than ours,” said Gapen, who formerly worked at the Fed. “We forecast ongoing declines in the unemployment rate and see it reaching 4.3% by end-2016.” The model, known as FRB/US and updated periodically, is a series of calculations put together by Fed staff that sketch out how broad measures of the economy would change based on a set of defined parameters. The staff also constructs a bottom-up forecast for policy makers before each FOMC meeting. U.S. central bankers use the models and forecasts as reference points, not sole determinants of their decision-making.

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“By 2014, China’s production had reached 823 million tonnes. It was not just the world’s largest producer, it produced more than the rest of the world combined.”

China Has Created A Steel Monster And Now Must Tame It (Reuters)

The British steel industry is in crisis. That statement may come as a surprise to non-UK readers, many of whom might well be forgiven for thinking the country’s steel mills had gone the way of other legacy industries such as coal mining and shipbuilding. But Britain produced 12.1 million tonnes of crude steel last year, making the country the fifth-largest producer in the EU. It won’t produce that much this year. The last couple of months have brought a string of closure announcements, including that of the Redcar plant in Teeside, a symbol of previous against-the-odds survival. British steel mills are struggling with UK-specific problems, particularly high energy costs that are significantly above the European average.

Stung into belated action, the government is scrambling to assemble a rescue plan, albeit with one hand tied behind its back by EU state subsidy rules. But there is a much, much bigger problem roiling steel production, not just in Britain, but across the globe. China. China exported 11.25 million tonnes of steel last month. It was an all-time high and, expressed in annualized terms, was equivalent to 80% of the entire steel output of the 28-member EU last year. This wave of Chinese steel is creating a global steel-making crisis, of which Britain is only a minor sub-plot. But the biggest crisis of all may yet turn out to be in China itself. With exquisitely bad political timing, Britain’s steel woes erupted just before the long-planned visit to the country by Chinese President Xi Jinpeng.

Xi said China was committed to eliminating surplus steel capacity with 77.8 million tonnes already shuttered and more closures planned. Overcapacity, he added, was a global problem, not just a Chinese problem. Which is true. Steel-making has been dogged for decades by structural overcapacity, a tendency to overproduction and resulting weak pricing. But this time is different, because there has never been a steel giant like China before. China’s crude steel production tripled between 1980 and 2000 to 128.5 million tonnes and then went supernova in the following decade with annual growth rates of up to 30%. By 2014, China’s production had reached 823 million tonnes. It was not just the world’s largest producer, it produced more than the rest of the world combined.

Underpinning that breakneck pace of growth was the country’s massive investment in urban infrastructure. From new cities to new roads to new airports, it all needed massive amounts of steel, and of course the iron ore used to make the steel, generating secondary booms in key suppliers such as Australia. But now the boom is over and the world is paying the price.

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All on red. Expansion plans for a shrinking market. Time to ditch shares?!

VW Sticks to $24.2 Billion China Spending Plan Amid Cost Cuts (Bloomberg)

Volkswagen will shield its five-year, €22 billion expansion plan in China from cost cuts, underscoring the importance of its largest market to stem the fallout of the diesel-emissions manipulation scandal. This year and next, VW is pushing to update about 70% of the vehicles it sells in China and introduce more than 30 models to the market. The company is aiming to boost its production capacity in China from last year’s 3 million cars to at least 5 million vehicles. The carmaker needs growth in China to at least partly offset the towering cost of recalling as many as 11 million diesel cars worldwide. Volkswagen set aside €6.7 billion for the recalls in the third quarter, acknowledging this won’t be enough.

Analysts’ estimates for the total price tag, including fines and legal costs, range from about €20 billion to as much as €78 billion. “We continue to be committed to our investment plans in China, including our capacity goal,” Larissa Braun, a spokeswoman for VW’s Chinese business, said Friday in an e-mailed response to questions. The Wolfsburg-based manufacturer will make the investments together with joint venture partners SAIC Motor and FAW Car. The expansion comes even as the Chinese economy slows and many cities consider restricting car purchases to fight traffic jams and pollution. The market is such a priority that VW’s new Chief Executive Officer Matthias Mueller made the country his first major trip destination as CEO, joining German chancellor Angela Merkel on a trade mission this week.

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All oil majors are in far deeper doodoo then they let on. All big producing nations too.

Chevron to Cut Up to 7,000 Jobs (WSJ)

Chevron on Friday said it could cut 6,000 to 7,000 jobs and pare its capital spending by 25% next year, as profit tumbled in its third quarter. Still, results for the quarter fell less than Wall Street had expected. Shares of Chevron, down 20% this year, added 1% in premarket trading. Chevron didnt detail when the job cuts could occur. As of December 2014, Chevron had about 64,700 employees, according to a securities filing. The second-biggest U.S. oil company said it expects capital spending of $25 billion to $28 billion in 2016, down 25% from this year’s budget. The company said it expects to cut spending further in 2017 and 2018, to around $20 billion to $24 billion. For the quarter ended Sept. 30, Chevron reported earnings of $2.04 billion, or $1.09 a share, down from $5.6 billion, or $2.95 a share, a year earlier. Revenue fell 37% to $34.32 billion.

Analysts polled by Thomson Reuters expected Chevron to post 76 cents a share in earnings on $29.76 billion in revenue for the third quarter. A 15% reduction in capital spending to $7.97 billion helped prop up earnings in the period. Foreign currency effects also added $394 million to profit in the quarter, up from $366 million a year earlier. The company eked out a $59 million profit in its exploration and production segment, down from a profit of $4.65 billion a year earlier. Its U.S. segment swung to a loss of $603 million from a profit of $929 million a year earlier. The company’s average price for a barrel of crude oil and natural gas liquids was $42 in the quarter, down from $87 a year ago. The average price for natural gas was $1.96 per thousand cubic feet, down from $3.46 in the prior year.

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A deflating fairy tale of riches.

Saudi Arabia Credit Rating Cut by S&P After Oil Prices Sink (Bloomberg)

Saudi Arabia’s credit rating was cut by Standard & Poor’s , which said the decline in oil prices will increase the budget deficit in a country that relies on energy exports for 80% of its revenue. S&P cut the sovereign rating one level to A+, the fifth-highest classification, as it said the biggest OPEC producer’s deficit will increase to 16% of GDP this year. The nation’s credit outlook is negative as the decline in oil prices makes it difficult to reverse the fiscal deterioration, S&P said in a statement. “Credit metrics for oil producers like Saudi Arabia are coming under pressure,” said Steve Hooker, a money manager at Newfleet in Hartford, Connecticut, who helps oversee $12.5 billion of debt. “It’s not likely to reverse until the oil prices go up.”

The widening deficit and a high reliance on energy revenue “point to vulnerabilities in Saudi Arabia’s public finances,” the ratings company said. Brent crude has plunged 27% from this year’s high in May amid a persistent global supply glut. Still, public debt in Saudi Arabia is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2% in 2014. “We could lower the ratings within the next two years if Saudi Arabia did not achieve a sizable and sustained reduction in the general government deficit, or its liquid fiscal financial assets fell below 100% of GDP,” Trevor Cullinan, a credit analyst at the rating company, said in the statement.

The Saudi Finance Ministry said it “strongly disagrees with S&P’s approach to ratings management in this particular instance.” The downgrade was “driven by fluid market factors rather than changes in the fundamentals of the sovereign,” which “remain strong,” the ministry said in a statement on the website of state-run Saudi Press Agency. The country is rated Aa3 by Moody’s Investors Service, the equivalent of one step higher than S&P’s new grade. S&P’s classification for Saudi Arabia is the same as Slovakia, Ireland, Bermuda and Israel.

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No mention of action other than freeing up $120 million that had been frozen.

Swiss Probe Banks to Gauge Exposure to Petrobras Scandal (Bloomberg)

Switzerland’s finance regulator is investigating local banks to gauge their possible exposure to a widening scandal surrounding Brazilian oil producer Petrobras. The regulator, known as Finma, said it is looking into whether banks and securities trading firms met their due-diligence obligations in possible cases of money laundering, and whether any possible incidents were reported to authorities. Bern, Switzerland-based Finma didn’t identify the banks that it began talking to months ago as part of the ongoing investigation. Switzerland’s attorney-general in March released $120 million of $400 million in assets tied to suspicious Petrobras-related transactions that had previously been frozen. The Rio de Janeiro-based oil and gas producer is mired in a corruption scandal in which company executives allegedly directed hundreds of millions of dollars from overpriced contracts to politicians.

The worsening affair has sent investor confidence in Brazil tumbling, plunged Latin America’s largest country into recession and triggered calls for Brazilian President Dilma Rousseff to be impeached over her handling of the matter. Swiss prosecutors said in March they’d uncovered more than 300 accounts belonging to senior Petrobras executives and its suppliers at more than 30 banking institutions apparently used to “process bribery payments.” Valor reported on the Finma probe earlier. Swiss Attorney-General Michael Lauber and his Brazilian counterpart Rodrigo Janot have complimented each other on the speed and cooperation with which the two countries’ justice systems have worked together, at a time when Swiss justice has been criticized for moving too slowly.

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Makes no difference when you’re TBTF.

Largest US Banks Face $120 Billion Shortfall Under New Rule (Reuters)

Six big U.S. banks need to raise an additional $120 billion, most likely in long-term debt, under a rule proposed on Friday by the Federal Reserve. The requirements are aimed at ensuring that some of the biggest and most interconnected banks, which include Goldman Sachs, JPMorgan and Wells Fargo, can better withstand another crisis by turning some of their debt, particularly debt issued by their holding companies, into equity without disrupting markets or requiring a government bailout. The banks are expected to meet the $120 billion shortfall by issuing debt, which is usually more cost-effective than issuing equity, according to Federal Reserve officials speaking at a background press briefing Friday.

The rule proposed Friday, largely in line with banks’ expectations, concerns the lenders’ total loss-absorbing capacity. It is one of a series of rules aimed at reducing risk in the banking system by determining how much debt and equity banks should use to fund themselves. In a procedural vote, the Fed’s governors approved a draft of the proposal, meaning it will be submitted for public comment. During a public meeting with Fed officials, one staffer who worked on the rule said banks should have an easy time complying, because many requirements overlapped with existing rules. Further, the bulk of the debt requirements can be fulfilled by refinancing existing debt, the staffer said.

Some requirements must be met by Jan. 1, 2019, while more-stringent requirements must be met by Jan. 1, 2022. The requirements are most stringent for JPMorgan, followed by Citigroup. After that come Bank of America, Goldman Sachs and Morgan Stanley, all of which have the same requirement. Wells Fargo’s requirement is the next highest, followed by State Street and finally Bank of New York Mellon. JPMorgan has more than $2 trillion in total assets, making it the largest U.S. bank by that measure.

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Portugal’s president is playing a murky role in this.

Portugal Risks Becoming ‘Ungovernable’: President (Telegraph)

Portugal risks becoming “ungovernable” as Leftist forces prepare to topple the returning government of prime minister Pedro Passos Coelho after just 11 days, the country’s president has warned. Mr Passos Coelho – whose pro-bail-out coalition presided over four years of austerity policies – was sworn into office on Friday after his ruling coalition finished first in recent elections, but lost its parliamentary majority. The appointment was met with controversy after the country’s president vowed to block an alliance of Leftist, anti-EU parties from taking the reins of office. The coalition of Socialists, Communists and the radical Left have vowed to bring down the minority government when a parliamentary vote is held on November 10. A collapse would make it the shortest government in Portugal’s 40 years of post-war democracy.

Addressing the nation, president Anibal Cavaco Silva defended himself against accusations of constitutional over-reach. But the head of state struck a more conciliatory tone, calling for all the main parties to broker a compromise to stop Portugal from descending into political chaos. “Without political stability, Portugal will become an uncontrollable country. And, of course, no one trusts an ungovernable country,” said the president. “The government taking over today does not have majority in parliament so the effort of dialogue and compromise has to proceed with the other political forces to seek the necessary understanding.” Mr Cavaco Silva warned the anti-austerity Left against derailing four years of fiscal consolidation and poisoning relations with the EU.

Prime minister Passos Coelho said Portugal’s commitment to the eurozone was “imperative”. “Nobody should risk the well being of the Portuguese in the name of ideological agendas or personal or political ambition,” he said. Despite exiting its €78bn bail-out last year, Portugal has the highest combined debt levels in the eurozone and the second highest government deficit at -7.8pc. The pro-euro opposition Socialist party is presenting itself as the only stable government having agreed to work with the two more strident anti-EU forces on the left. Together they will command a majority of over 50pc in the 230-seat parliament. The Left-wing alliance has reportedly agreed to reverse many of the fiscal measures taken by the previous conservative government, providing relief to low-income pensioners and workers.

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A country ruled by money.

Subprime Mortgages Make Surprise Comeback In The UK (Guardian)

Sub-prime mortgages, widely blamed for causing the 2007-08 financial crisis, are making a surprise comeback in the UK, with several new lenders launching home loans for people with poor credit histories. Lenders are targeting people who have faced serious financial problems including repossession and bankruptcy – as well as those with more minor blots on their records – for the mortgages, which come with interest rates as high as 8%. Bluestone Mortgages, a lender part-owned by Australia’s biggest investment bank, has just launched in the UK, following hard on the heels of another Australian-owned business, Pepper Homeloans, which similarly caters for those who have experienced a “credit event” such as missing payments on a previous mortgage. Another recent arrival is Foundation Home Loans, which offers buy-to-let mortgages to people who have had financial problems.

These three join a group of other players in a sector that argues it is offering a lifeline to the sizeable number of people who have suffered a financial “hiccup” and as a result are being rejected by the big name high street lenders. But the new wave of sub-prime mortgages on offer may prompt concern among those who fear a return to the lending practices of the past. And these mortgages come at a price: some borrowers taking out a two-year fixed-rate deal will be charged as much as 7%-8%, compared with current best-buy rates of as little as 1.54% on conventional loans. Peter Tutton, head of policy at StepChange debt charity, sounded a note of caution, pointing out that “last time around, before the crash, there were some really bad lending practices. Certain sub-prime lenders were lending to people who couldn’t afford it and were vulnerable and were being repossessed.”

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“Tsipras also said any suggestion that Greece was not effectively safeguarding the EU’s outermost borders – he referred to leaders of “certain European countries” – was borne of ignorance of international law dictating protection of the lives of people in distress at sea.”

Greek PM Tsipras Says Shamed By Europe’s Handling Of Refugee Crisis (Reuters)

Greece’s prime minister said on Friday he was ashamed to be a member of a European Union that he said was sidestepping responsibilities over the migrant crisis and crying hypocritical tears for children who have drowned trying to reach its shores. In some of the hardest-hitting comments yet on a crisis resonating throughout Europe, Alexis Tsipras told parliament Greece didn’t want a “single euro” for saving lives as thousands of refugees continued to arrive daily on its shores, and the EU remained at odds on how to deal with the influx. At least 35 people drowned trying to cross the sea between Turkey and Greece this week. Authorities fear the death toll will rise as more people attempt the short but dangerous passage to Greece before the onset of winter.

“I feel ashamed as a member of this European leadership, both for the inability of Europe in dealing with this human drama, and for the level of debate at a senior level, where one is passing the buck to the other,” Tsipras told parliament. Impoverished Greece has been a transit point for more than 570,000 refugees and migrants fleeing conflict in the Middle East and beyond since January, triggering bickering among European nations. Speaking during prime ministers’ question time, Tsipras also said any suggestion that Greece was not effectively safeguarding the EU’s outermost borders – he referred to leaders of “certain European countries” – was borne of ignorance of international law dictating protection of the lives of people in distress at sea. “These are hypocritical, crocodile tears which are being shed for the dead children on the shores of the Aegean.”

“Dead children always incite sorrow. But what about the children that are alive who come in thousands and are stacked on the streets? Nobody likes them.” [..] Although his migration minister was quoted as saying earlier this week that EU financing was needed for a subsidized housing program to work, Tsipras said Greece did not expect to get paid for saving lives. “Greece is in crisis. We are a poor people, but we have retained our values and humanity, and we aren’t claiming a single euro to do our duty to people who are dying in our back yard,” Tsipras said, after an opposition lawmaker asked what Greece had received in return for agreeing to host refugees. His country, he said, couldn’t put a price on the human cost. “I’m not addressing you,” he told a lawmaker. “I’m addressing those European partners who are wagging their finger at Greece.

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The time for safe passage is long overdue.

Greece Says 22 Refugees Drown Off Aegean Islands, 144 Rescued (Reuters)

Greece rescued 144 refugees and recovered the bodies of 22, including four infants and nine children, after their boats sank in two separate incidents in the Aegean sea, the coastguard said on Friday. The death toll from drownings at sea has mounted recently as weather in the Aegean has taken a turn for the worse, turning wind-whipped sea corridors into deadly passages for thousands of refugees crossing from Turkey to Greece. The coast guard said 138 migrants were rescued and 19 drowned after their wooden boat capsized off the island of Kalymnos late on Thursday. In a second incident off the island of Rhodes, three people, including a child and an infant, drowned and four were missing. Six people were rescued at sea, the coastguard said.

Some 16 people, including two infants and eight children, were confirmed dead and 274 people were rescued when a wooden boat they were on literally fell apart in rough seas off the Greek island of Lesbos late on Wednesday. Greece has been a transit point for more than 570,000 refugees and migrants fleeing conflict in the Middle East and beyond this year, triggering bickering among European nations at odds on how to deal with one of the biggest humanitarian crises in decades. Refugees have reported smugglers offering ‘discounts’ of up to 50% on tickets costing between 1,100 to 1,400 euros to make the journey on inflatable rafts in bad weather, UN refugee agency UNHCR said on Thursday. Perceptibly sturdier wooden boats cost more, at between €1,800 and €2,500 €per passenger.

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“The waves of the Aegean are not just washing up dead refugees, dead children, but (also) the very civilization of Europe..”

Tsipras: Aegean Waves Wash Up Dead Children, And Europe’s Very Civilization (AP)

Drowned babies and toddlers washed onto Greece’s famed Aegean Sea beaches, and a grim-faced diver pulled a drowned mother and child from a half-sunk boat that was decrepit long before it sailed. On shore, bereaved women wailed and stunned-looking fathers cradled their children. At least 27 people, more than half of them children, died in waters off Greece Friday trying to fulfill their dream of a better life in Europe. The tragedy came two days after a boat crammed with 300 people sank off Lesbos in one of the worst accidents of its kind, leaving 29 dead. It won’t be the last. As autumn storms threaten to make the crossing from Turkey even riskier and conditions in Middle Eastern refugee camps deteriorate, ever more refugees – mostly Syrians, Afghans and Iraqis – are joining the rush to reach Europe.

More than 60 people, half of them children, have died in the past three days alone, compared with just over a hundred a few weeks earlier. Highlighting political friction in the 28-nation European Union, Greece’s left-wing prime minister, Alexis Tsipras, cited the horror of the new drownings to accuse the block of ineptitude and hypocrisy in handling the crisis. [..] Speaking in Athens, Tsipras accused Europe of an “inability to defend its (humanitarian) values” by providing a safe alternative to the sea journeys. “The waves of the Aegean are not just washing up dead refugees, dead children, but (also) the very civilization of Europe,” he said, dismissing Western shock at the children’s deaths as “crocodile tears.” “What about the tens of thousands of living children, who are cramming the roads of migration?” he said.

“I feel ashamed of Europe’s inability to effectively address this human drama, and of the level of debate … where everyone tries to shift responsibility to someone else.” Tsipras’ government has appealed for more assistance from its EU partners. It argues that those trying to reach Europe should be registered in camps in Turkey, then flown directly to host countries under the EU’s relocation program, to spare them the sea voyage. But it has resisted calls to demolish its own border fence with Turkey, which would also obviate the need to pay smugglers for a trip in a leaky boat. “My opinion is that at this stage — for purely practical reasons — … the opening of the border fence is not possible,” Greek Migration Minister Yiannis Mouzalas said.

“When talking about receiving refugees, it’s not under our control — they are coming,” he told state ERT TV. “So it’s a question of how we address this problem. … We will not put them in jail or try to drown them. They will have all the rights that they are allowed under (international) agreements and Greek law.” Greece’s Merchant Marine Ministry said 19 people died and 138 were rescued near the eastern island of Kalymnos early Friday, when a battered wooden pleasure boat capsized. Eleven of the victims were children, including three babies. At least three more people — a woman, a child and a baby — died when another boat sank off the nearby island of Rhodes, while an adult drowned off Lesbos.

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Curious: the version of the AP piece above, as posted by HuffPo, was quoted by Zero Hedge as containing the bolded lines in this piece below. But when I looked at the link, these lines had been edited out. An NBC version also misses the reference to western military action. The New York Post version still carries them.

Tsipras Blames Migrant Flows On Western Military Action In Middle East (AP)

Greek Prime Minister Alexis Tsipras accused Europe of an “inability to defend its (humanitarian) values” by providing a safe alternative to the dangerous sea journeys. “I want to express … my endless grief at the dozens of deaths and the human tragedy playing out in our seas,” he told parliament. “The waves of the Aegean are not just washing up dead refugees, dead children, but (also) the very civilization of Europe.” Tsipras accused western countries of shedding “crocodile tears” over children dying in the Aegean but doing little for those who make it across. “What about the tens of thousands of living children, who are cramming the roads of migration?” he said.

Tsipras blamed the migrant flows on western military interventions in the Middle East, which he said furthered geopolitical interests rather than democracy. “And now, those who sowed winds are reaping whirlwinds, but these mainly afflict reception countries,” he added. “I feel ashamed of Europe’s inability to effectively address this human drama, and of the level of debate … where everyone tries to shift responsibility to someone else,” Tsipras said.

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“Many Afghans dream of a better life in Europe. About 80,000 applied for asylum in Europe in the first half of 2015 alone, with most of them going to Germany.”

The Next Wave: Afghans Flee To Europe in Droves (Spiegel)

Redwan Eharai’s journey ends where it began: in Afghanistan, in the city of Herat. Eharai, a 15-year-old boy, is carrying the heavy body of his mother Sima up the hill to the cemetery, together with neighbors and relatives. He and his mother had set out from Afghanistan together, headed for Germany. Now he is standing at her grave. She died at the border between Iran and Turkey, struck in the head by a bullet fired by an Iranian police officer. Hundreds of people have now come to say their goodbyes. When she was still alive and urgently needed help, no one was there for her, says Eharai, as he looks into his mother’s grave. Despite his stubble, which makes him look almost like a grown man, he currently seems more like a child.

His family is poor – Eharai’s father died of a brain tumor five years ago, and Sima, his 43-year-old mother, suffered from depression. She had trouble sleeping and cried a lot. In Afghanistan, being a widow without an income, and with three children, is like being buried alive, says Eharai – you have no rights at all. Instead, Sima Eharai decided to leave Afghanistan and go to Germany with three of her children, Adnan, Erfan and Redwan. Sanaz, her eldest daughter, was already living in Frankfurt. Her mother, determined that she would have a better life, had arranged for her to marry a German of Afghan descent. “I can’t continue living like this,” Sima Eharai said when she called her daughter the last time. “Either I make it to you or I’ll follow my husband into death.”

Many Afghans dream of a better life in Europe. About 80,000 applied for asylum in Europe in the first half of 2015 alone, with most of them going to Germany. They are the second-largest group of refugees and migrants in Germany after Syrians. At the moment, people are flooding into Herat Province from all over Afghanistan. From there, they drive across the border to Iran or travel farther south to cross into Iran along a less well-guarded section of the border. About 3,000 Afghans are now coming into Iran every day illegally. From there, they continue to Turkey, where they board boats to the Greek islands of Lesbos or Kos and then cross the Balkans to Northern Europe.

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That just moves the problems somewhere else.

Refugee Crisis: Germans Restrict Entry Points From Austria (BBC)

Germany is to restrict the number of entry points for migrants arriving via Austria, in a bid to control the flow as thousands cross into Bavaria daily. It says it has reached agreement with Austria on five crossing points on the 800km (500-mile) border. Authorities in Bavaria have complained a lack of co-ordination with Austria is hampering efforts to aid new arrivals. Many others continue to make their way via Greece, in freezing temperatures, hoping to get asylum in Germany. Meanwhile, more than 20 migrants – many of them children – have drowned in more boat sinkings in Greek waters while they were trying to reach EU countries via Turkey. Greek officials said 19 people had died and 138 were rescued near the island of Kalymnos.

Three others died off Rhodes and three were missing. Six were rescued there. And the Spanish coastguard called off the search for 35 migrants missing at sea the day after their boat was shipwrecked en route from Morocco. Fifteen migrants were rescued alive from the vessel and the bodies of four others were found. A spokeswoman for Germany’s interior ministry told AFP news agency that the new rules on entry points would go into effect immediately. “We would like to have a more orderly procedure,” she said. A senior Bavarian politician said that under the agreement, 50 migrants an hour could cross into the state at the five agreed points.

Earlier this week, German Interior Minister Thomas de Maziere accused Austria of transporting refugees to the German frontier at night, leaving them there unannounced. Federal police spokesman Heinrich Onstein has said everything was being done to prevent the migrants from having to sleep outdoors. He said the problem had been that “we do not know how many people will arrive, and at which border post”. However an Austrian police spokesman dismissed such accusations as a “joke”, given that Austria was receiving 11,000 people a day just at the Spielfeld crossing from Slovenia. Germany expects at least 800,000 asylum seekers this year – some estimates put it as high as 1.5 million. That is at least four times the number who arrived last year.

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Oct 302015
 
 October 30, 2015  Posted by at 9:44 am Finance Tagged with: , , , , , , , , ,  


Arthur Rothstein Migratory fruit pickers’ camp in Yakima, Washington 1936

It Is Already Too Late To Scrap China’s One-Child Policy (AEP)
Li Floats New China Five-Year Growth Minimum of Around 6.5% (Bloomberg)
China Steel Industry Outlook ‘Worst Ever Amid Unprecedented Losses’ (Zero Hedge)
28 Chinese Investors In Fanya Metal Exchange Go Missing After Protest (Quartz)
Shell Has Biggest Loss in More Than a Decade on Price Slump (Bloomberg)
London House Prices Most Overvalued In The World, Says UBS (Guardian)
Why Investors Are Shorting Canada’s Housing Market (CNBC)
Great Expectations: The Driving Force Behind Latest Property Crisis (McWilliams)
Bank of Japan Keeps QE On Hold As It Hopes For Recovery (Reuters)
Britain’s Youth At Risk Of Being ‘Lost Generation’ (Guardian)
US Special Ops Have Been Fighting ISIS On The Ground For Months (Bloomberg)
In Defeat For Beijing, Hague Court To Hear South China Sea Dispute (Reuters)
European Parliament Votes To Urge Protection for Edward Snowden (NY Times)
Two Boats Carrying Refugees Sink Off Greece, Leaving 21 Dead (AP)
Greek Coast Guard Seeks Dozens Of Migrants Off Lesvos After Wreck (Kath.)
Germany To Spend Up To €16 Billion On Refugees Next Year (Reuters)
Refugees Risk Freezing To Death In Germany, Too (Local.de)
EU Nations Have Relocated Only 86 Refugees From 160,000 Pledged (Bloomberg)
Lesbos Volunteer Says Huge Amount Of Trauma As Refugee Boats Capsize (Guardian)
Lesbos Braces For Winter As Refugees Keep Coming (Gill)

Playing God.

It Is Already Too Late To Scrap China’s One-Child Policy (AEP)

China’s Communist Party has scrapped its hated one-child policy in a bid to shore up political support, but the move comes far too late to avert a collapse of the workforce and a demographic crisis by the late 2020s. All couples will be allowed to have a second child under new rules agreed at the party’s closely-watched 5th Plenum in Beijing. The ban on larger families in cities will remain despite pleas from Chinese academics for total freedom. The policy shift will make no difference to the workforce for almost 20 years and by then China will already be in the full grip of a demographic crunch. “They have merely moved to a two-child policy. The family planning authorities are still there, and there is still an apparatus of state power intruding into people’s intimate lives,” said Jonathan Fenby, a China veteran at Trusted Sources.

The coercive anti-natalist policies begun by Mao Zedong in the early 1970s – and pushed further by ideologues in thrall to the Club of Rome’s Malthusian doomsday theories, the “Limits of Growth” – have had powerful and perverse effects. They freed workers from family duties and created a “demographic dividend” of sorts that until recently flattered China’s growth rate. Now the process is kicking violently into reverse. The workforce began to decline in absolute terms in 2012 and has since been shrinking by 3m people a year. The IMF says the reserve army of labour peaked five years ago and is going into “precipitous decline”, threatening a labour shortage of 140m by the early 2030s. This is happening just as life expectancy soars to 75.2 – with a target of 77 in 2020 – causing a drastic deterioration in the ratio of workers to pensioners, and unlike the demographic decline in Japan it will start to bite before the country is rich.

The ratio was 6.6 in 2000. It is expected to be 2.37 in 2030 and 1.25 in 2060. The Chinese Academy of Social Sciences says the fertility rate has collapsed to 1.4 and is nearing the danger line of 1.3, the so-called “low fertility trap” where it becomes culturally self-perpetuating. This has already happened in Japan, Korea and Taiwan, and in some of China’s richest cities. The rate in Shanghai has fallen to 0.8 for complex social reasons that no longer have anything to do with one-child policy. A relaxation of the rules in 2013 has not led to a pick-up in the city. “Having children is simply too expensive. Working couples can’t afford private hospital costs, childcare and kindergartens,” said Mr Fenby. China may already have left it too late to ditch the one-child policy.

Critics say the damage has been evident for years, leaving aside the traumatic suffering of poor women seized by police after tip-offs and forced into late-term abortions, the indignity of “menstrual monitors” and the status of “illegal” children denied ration coupons and schooling. Chinese demographers say the distorted family structure undermines support for the elderly and has led to a 20pc surplus of boys over girls, leaving a volatile army of frustrated single males. The Politburo refused to listen. Harvard professor Martin King Whyte said the policy had become “sacrosanct”, frozen by bureaucratic inertia. The long-awaited reform eclipsed the launch of the Communist Party’s latest five-year plan, intended to close the chapter on a series of errors and policy pirouettes over the past 12 months that have shattered global confidence in Chinese economic management.

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Could you be a bit more precise, please?: “The nation needs annual growth of at least 6.53% in the next five years”.

Li Floats New China Five-Year Growth Minimum of Around 6.5% (Bloomberg)

Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership’s readiness to accept the weakest period of expansion since the economy was opened up more than three decades ago. The nation needs annual growth of at least 6.53% in the next five years to meet the government’s goal of establishing a “moderately prosperous society,” Li said in an Oct. 23 speech to Communist Party members, according to people familiar with the matter who asked not to be identified as the remarks weren’t public. Communist Party leaders Thursday conclude a four-day gathering to discuss their 2016-20 five-year plan for the nation, the first since President Xi Jinping and Premier Li took office. Policy makers are managing the priorities of both reforming the economy and keeping short-term growth fast enough so that structural changes don’t cause a hard landing.

“This lower number is more realistic and feasible if substantive reforms can be implemented,” said Xiao Geng, a professor of finance and public policy at the University of Hong Kong. “It is good as Li is focusing on delivering the party’s key promise on raising the living standards of Chinese people. After all, growth is the best available verifiable indicator for progress.” Private economists have predicted a reduction in the five-year growth target to 6.5%, down from 7% in the current plan – a reflection of the Communist leadership’s continuing attempts to move away from debt-fueled expansion. “It seems that Premier Li is sending a signal through his speech that China’s government is likely to lower their growth target to 6.5% in the 13th five-year plan,” said Le Xia at Banco Bilbao Vizcaya. “The 6.5% target is still a little challenging. A target of 5-6% seems a more feasible one.”

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Shadow banks.

China Steel Industry Outlook ‘Worst Ever Amid Unprecedented Losses’ (Zero Hedge)

It’s almost difficult to believe, but just 8 years ago, in 2007 and right before the world was swept in the worst financial crisis in history, China had only $7.4 trillion in debt, or 158% in consolidated debt/GDP. Since then this debt has risen to over $30 trillion (specifically $28.2 trillion as of Q2, 2014) representing a staggering 300% debt/GDP. This means that China was responsible for more than a third of all the $57 trillion debt created since 2007, making a mockery of the QE unleashed by all the DM central banks – something we first noted about two years before the famous McKinsey report went to print. However, it was precisely this credit expansion that not only allowed China to completely ignore the global depression of 2008/2009 but to build lots and lots of ghost cities such as these.

To be sure, many noticed but everyone kept quiet: after all, to build these cities China not only had to create trillions in debt, it had to import a hundreds of billions worth of commodities from places such as Brazil and Australia. Then, in the late summer and fall of 2014 something happened: for whatever reason, as we noticed one year ago, the most unregulated aspect of China’s financial system, its shadow banks, not only stopped lending money but actually went into reverse, thus putting a lid on China’s Total Social Financing expansion, which had been the world’s “under the radar” growth dynamo for so many years. At that moment not only did China’s ghost cities officially die, but it meant an imminent collapse for China’s feeder commodity economies such as the abovementioned China and Brazil.

In the US this phenomenon was given a very simpler name by the brilliant economists: “snow.” And since China’s domestic demand, not only from “ghost cities” but all other fixed investment was a function of pervasive credit, suddenly China’s commodity industry in general, and steel industry in particular, entered a state of shocked stasis. To get a sense of how bad it is, look no further than China’s steel industry. It is here that, as Bloomberg reports, “demand is collapsing along with prices,” and “banks are tightening lending and losses are stacking up, the deputy head of the China Iron & Steel Association said on Wednesday.” “Production cuts are slower than the contraction in demand, therefore oversupply is worsening,” said Zhu at a quarterly briefing in Beijing by the main producers’ group. “Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”

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“..police detained 2,800 people who planned to participate in the Oct. 26 demonstration [..] the future could be bleak for the 28 who remain in custody.”

28 Chinese Investors In Fanya Metal Exchange Go Missing After Protest (Quartz)

Over two dozen Chinese investors in Fanya Metal Exchange haven’t made any contact with friends or family members since they were arrested on Oct. 25, ahead of a planned protest in Beijing. They were detained as part of a massive police crackdown on Fanya investors, who have been agitating for the government to help them recover an estimated $6 billion they invested in the trading platform that now many suspect is a fraud. Investors have been unable to access any of their money since April, and about 10,000 signed up to participate in a protest in Beijing on Oct. 26. A total of 28 protest organizers, who represented investors from different provinces and cities, were arrested by police during an evening meeting in Beijing on Oct. 25, several investors told Quartz.

None of them had been in touch with their families or other investors by Thursday morning, these investors said. Family members of seven have received police notices that their relative is being held on suspicion of “gathering crowds to disturb public order,” which could carry a five-year jail term. There has been no news about the 21 others. Quartz talked directly to four investors who had been jailed as part of the larger crackdown, and three who witnessed or heard about the arrests of others in the past 48 hours. These would-be protesters, and others Quartz has spoken to in the past, are mostly middle class people in their thirties and forties who have never had any run-ins with the government before.

But they say they see no other way to get the government to notice their plight after complaints and previous protests got no reaction. “We were just exercising rights given by the constitution,” one told Quartz. Article 35 of China’s constitution guarantees citizens freedom of speech, assembly, and demonstration, among other rights, but it is rarely upheld. Investors estimate police detained 2,800 people who planned to participate in the Oct. 26 demonstration, rounding them up in the capital city and as they traveled to Beijing from Shanghai, the northern Shanxi province and other areas. Most have been released without incident, but the future could be bleak for the 28 who remain in custody.

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“The oil price rout has wiped almost $500 billion since the end of last year ..”

Shell Has Biggest Loss in More Than a Decade on Price Slump (Bloomberg)

Royal Dutch Shellreported its biggest net loss in at least 16 years after Europe’s largest energy group abandoned some projects and lowered its oil-price expectations, resulting in a charge of almost $8 billion. The loss highlights the pain oil and gas companies are enduring as prices plunge, forcing them into the biggest belt-tightening in a generation. Eni, the Italian oil group, also fell into a loss in the third quarter, while profit slumped at BP and Total. The oil price rout has wiped almost $500 billion since the end of last year from Bloomberg World Oil & Gas Index, which tracks energy stocks globally including Shell, ExxonMobil and Chevron.

Shell, which is buying BG Group in the energy industry’s largest deal this year, reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. Adjusted for one-time items and inventory changes, profit dropped 70% to $1.77 billion, The Hague-based Shell said Thursday in a statement. That missed the $2.92 billion average estimate of 17 analysts surveyed by Bloomberg. Shell took a $4.61 billion charge resulting from the withdrawal from offshore drilling in Alaska and an oil-sands project in Canada, and $3.69 billion triggered by cuts to its outlook for oil and natural gas prices.

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Each single one of these cities will deny it’s in a bubble.

London House Prices Most Overvalued In The World, Says UBS (Guardian)

House prices in London are the most over-valued of any major city in the world and are in “bubble-risk territory”, a report by economists at UBS has found. Foreign investment, the help-to-buy scheme, “alluring” yields for buy-to-let landlords, and ongoing population growth have all led property prices in the city to decouple from local incomes, and there could be a “substantial price correction” if the conditions for investment deteriorated, the report said. The UBS Global Real Estate Bubble Index looked at 15 cities around the world, including Hong Kong, Sydney, New York, San Francisco and Geneva, examining prices against the economic backdrop in each country.

It found London was less affordable for locals who wanted to buy than any city except Hong Kong, and that it was at most risk of prices falling. The city rated 1.88 on UBS’s bubble index, and the report said that between 1985 and 2009, whenever the index exceeded 1.0 “a real price correction of on average 30% began within three years 95% of the time”. It added: “Investors in overvalued markets should not expect real price appreciation in the medium to long run.” Price increases of 40% since the start of 2013 have more than offset losses during the financial crisis and mean that homes in London now cost more than ever before. On Wednesday, the Land Registry said the average price had almost hit the £500,000 mark, with the annual rate of inflation running at 9.6%.

Meanwhile, wage growth has been sluggish, and the price increases have made London one of the most expensive cities in the world based on price-to-income and price-to-rent ratios, the UBS report said. “It takes a skilled service-sector worker approximately 14 years of average earnings to be able to buy a 60 sq m dwelling; the expense of buying a flat is comparable to renting it for 30 years,” it said. In Hong Kong, the same property costs 21 times income to buy, and the average yearly income of a highly skilled worker can buy only around 3 sq m of living space. The report said the Chinese territory was also at risk of a downward cycle, and that housing prices were expected to fall by more than 10% by the end of 2016.

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Let me guess…

Why Investors Are Shorting Canada’s Housing Market (CNBC)

A growing number of investors are betting Canada’s frothy property market will nosedive, according to research firm Markit, as low energy prices drag down the country’s economic outlook. Investors are taking out an increasing number of “short” positions on banks and insurers with high exposure to the property market, Markit explained, with these investors expecting share prices to slide. This comes amid record low interest rates in the country— which have been cut twice this year, down to 0.5%. Financial groups now account for three of the top 10 shorted stocks in the country, it said. Home Capital Group — one of Canada’s largest financial institutions— currently ranks as the most shorted stock in Canada. Markit measures the short interest in a stock by calculating the amount of shares that are out on loan.

Home Capital Group recently saw an 18% share sell-off and the cost to borrow its shares jump 10% after second-quarter results showed fewer mortgage starts than expected. Shares on loan now total 31.9%, according to Markit. That’s followed closely behind by Canadian Western Bank, which has 54% of its $19 billion portfolio in real estate, personal loans and mortgages. About 27.7% of its shares are on loan, making it the fourth most shorted stock in the country. Genworth Mi Canada, which underwrites private residential mortgages, has not only seen its stock slide approximately 22% in the last 12 months, but the number of short holdings increased to 19.3%, Markit said. “Short sellers have been trying to call the top of the Canadian property market for some years now, which has proven to be a tricky trade as the continued cheapness of credit has continued to propel local demand and prices,” the report, led by Markit analyst Relte Stephen Schutte, said.

But it seems investors are taking a hint from declining market conditions. Data from the RBC Purchasing Managers Index (PMI) clocked the sharpest decline in Canadian business conditions in the survey’s history in September. Weak demand and stagnating exports helped send the PMI reading to a 5-year low of 48.6 — with any reading below 50 indicating a contraction. Furthermore, with oil prices widely forecast to stay lower for longer, it’s likely there could be further pain heaped on an economy which Markit estimates has a 20% structural exposure to energy markets. Canada’s economy technically entered recession after clocking two quarters of economic contraction in the first half of 2015. Meanwhile, property prices have continued to soar across the country, particularly in cities like Toronto and Vancouver. The latter was earlier this year dubbed one of the most expensive markets in the world in a housing survey by The Economist. It claimed Vancouver property was overvalued by 89%.

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Ireland’s back at it too.

Great Expectations: The Driving Force Behind Latest Property Crisis (McWilliams)

Is it possible that we have got ourselves into the position where we have a housing crisis again, where those at the bottom and middle can’t find a place to live and those moving from the middle upwards are locked into, yet again, bidding wars for homes where the speculator and the owner are pitted against each other? Could we be in the situation where investors and large foreign funds are sitting on land waiting for the prices to go up in order to make a killing, thus exacerbating the supply shortage? It’s hard to believe – after everything we have been through – but it’s true. Above all, the Irish property market needs stability. It needs to be liberated from constantly changing expectations about where prices are going to go. Expectations about future prices are what destroy a property market and lead to the unhealthy intrusion of speculators in the market for accommodation.

Accommodation should be a fixed cost in an economy, a cost faced by all of us, like the cost of electricity. Can you imagine what would happen to the use of electricity in Ireland if people thought the price was going to change on a daily basis and everyone had their own generator trying to sell at the best price to a national grid? Imagine the surges and scarcities in both use and supply as users and suppliers tried to get the best price. Now think about the housing market. When there is an expectation that prices are going to go up, it is understandable in a capitalist system that the people who own the land will wait for prices to go ever higher, thus squeezing potential buyers. It is also understandable that potential buyers will panic when they see prices rising and bring forward their demand so they won’t be left behind.

This is precisely the opposite of what is suggested by classical economics. In classical economics, we are told that when the price of something rises then the demand will fall, but this is not the case in property. When the price rises, the demand rises too. What do you think happens to supply? Traditional economics suggests that when the price rises the supply will rise, but is this what actually happens in real life? If owners of land and houses believe that prices are going to rise, wouldn’t they be mad to sell now when they can make more money by delaying? So supply doesn’t rise when price expectations rise, it actually falls – exacerbating the panic. So you can see that the issue for the property market is not so much supply and demand at today’s prices as the traditional economics model suggests, but rather the reaction of supply and demand to the expectations about future prices.

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If only the Japanese would believe in Abenomics…

Bank of Japan Keeps QE On Hold As It Hopes For Recovery (Reuters)

The Bank of Japan has held off expanding its massive monetary stimulus programme, preferring to keep its powder dry in the hope that the economy can overcome the drag from China’s slowdown without extra support. But the central bank is likely to remain under pressure to expand its asset-buying or quantitative easing programme as slumping energy costs, weak exports and a fragile recovery in household spending kept inflation well short of its 2% target. Consumer prices fell 0.1% in the year to September, a second monthly decline, while household spending slid 1.3% from a year earlier, official figures released on Friday said. The BOJ maintained its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($662bn) through aggressive asset purchases.

The US dollar fell 0.5% against the yen and the Nikkei share average lost 0.6% before recovering into positive territory despite disappointment that the BOJ had backed away from another increase in liquidity for equity markets. Markets will now focus on the BOJ’s twice-yearly outlook report due to be released later on Friday. They will also scrutinise comments by BOJ governor Haruhiko Kuroda’s for clues on the timing of any future monetary easing when he gives a news conference on Friday afternoon. With the economy skirting recession, the BOJ is likely to cut its economic growth and inflation forecasts for the fiscal year that began in April. But it will only slightly alter its forecast that inflation will hit 1.9% next fiscal year, sources have told Reuters, giving it grounds to argue that Japan can hit its inflation target without expanding stimulus.

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They already are.

Britain’s Youth At Risk Of Being ‘Lost Generation’ (Guardian)

Young people face the the worst economic prospects for several generations and their lives have got worse over the past five years, a comprehensive report has concluded. The Equality and Human Rights Commission (EHRC) said that young people – defined as those under 34 – suffered the biggest slide in income and employment and now faced higher barriers to achieving economic independence and success than five years ago. The period during which their fate has worsened coincides with the election of the Conservative-led coalition government in 2010. The commission, which has a mandate from parliament to tackle discrimination, said that although life had become fairer for many, progress had stalled or even worsened for some groups in society.

The report, Is Britain Fairer?, showed that during the recession and up to 2013, people aged under 34 were hit by the steepest drops in pay and employment, had less access to decent housing and better paid jobs, and were experiencing deepening levels of poverty. The unemployment rate for 16- to 24-year-olds stood at 14.8% for the three months to August, according to official figures, with some 683,000 classed as unemployed. That rate was higher than the 13.8% recorded for the three months to February 2008 – before the financial downturn struck. EHRC commissioner Laura Carstensen said that while barriers were being lowered in some sections of society, young people in particular were having to cope with far more difficult circumstances.

“Theirs are the shoulders on which the country will rely to provide for a rapidly ageing population, yet they have the worst economic prospects for several generations,” she said. TUC general secretary Frances O’Grady said the government could no longer afford to ignore the plight of young people, who were struggling to cope with low levels of pay, worsening employment prospects and rising housing costs. “This report should be wake-up call to ministers. Hiking up university and college fees and excluding young people from the new higher minimum wage rate is not the way to build a fair and prosperous Britain. It is the blueprint for a lost generation,” she said.

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And not just a few.

US Special Ops Have Been Fighting ISIS On The Ground For Months (Bloomberg)

When Defense Secretary Ashton Carter announced Tuesday that the U.S. would begin “direct action” against Islamic State targets in Syria and Iraq, it sounded like a new mission for U.S. forces in a country where the president has repeatedly insisted Americans would not be engaged in combat operations. But America’s special operations forces have been engaging in these kinds of missions for several months, particularly in the Kurdish-controlled provinces in northern Iraq. And the special operations forces have already built up an extensive infrastructure to support these activities. This casts doubt on the official Pentagon statements that last week’s raid was “a unique circumstance.”

Since President Barack Obama authorized the first special operations teams to deploy to Iraq in the summer of 2014, the White House has provided few details on the mission and composition of the forces. The Pentagon today refers to the mission for the 3,500 U.S. service members as primarily “advise and assist,” with an emphasis on training local forces. But the small and highly classified military footprint in northern Iraq shows the U.S. is more involved in the fight against the Islamic State. According to U.S. and Kurdish officials, the U.S. now runs an operations center in Irbil staffed by a special operations task force whose work is so classified its name is a state secret.

The task force has worked in recent months to identify and locate senior leaders of the Islamic State and participated in the mission last Thursday, in which a member of the Army’s Delta Force was killed freeing prisoners from an Islamic State prison in Hawija. (He was the first U.S. soldier killed by enemy fire in the fight against ISIS) The secret U.S. military presence in northern Iraq doesn’t end there. Highly trained American special operations forces known as Joint Terminal Attack Controllers, who help paint targets for airstrikes of Islamic State vehicles, camps and buildings, also operate in northern Iraq. U.S. officials tell us these controllers also work closely with other Western countries and the Iraqis to avoid collisions and direct air traffic for drones and other aircraft to support the mission against the Islamic State. Finally, according to these officials, there is a contingent from the Marine Special Operations Command in charge of training Kurdish counter-terrorism forces fighting against the Islamic State.

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We’ll sell out the Philippines. Want to bet?

In Defeat For Beijing, Hague Court To Hear South China Sea Dispute (Reuters)

In a legal setback for Beijing, an arbitration court in the Netherlands ruled on Thursday that it has jurisdiction to hear some territorial claims the Philippines has filed against China over disputed areas in the South China Sea. Manila filed the case in 2013 to seek a ruling on its right to exploit the South China Sea waters in its 200-nautical mile exclusive economic zone (EEZ) as allowed under the United Nations Convention on the Law of the Sea (UNCLOS). The Hague-based Permanent Court of Arbitration rejected Beijing’s claim that the disputes were about territorial sovereignty and said additional hearings would be held to decide the merits of the Philippines’ arguments. China has boycotted the proceedings and rejects the court’s authority in the case.

Beijing claims sovereignty over almost the entire South China Sea, dismissing claims to parts of it from Vietnam, the Philippines, Taiwan, Malaysia and Brunei. The tribunal found it had authority to hear seven of Manila’s submissions under UNCLOS and China’s decision not to participate did “not deprive the tribunal of jurisdiction”. The Chinese government, facing international legal scrutiny for the first time over its assertiveness in the South China Sea, would neither participate in nor accept the case, Vice Foreign Minister Liu Zhenmin told reporters. “The result of this arbitration will not impact China’s sovereignty, rights or jurisdiction over the South China Sea under historical facts and international law,” Liu said. “From this ruling you can see the Philippines’ aim in presenting the case is not to resolve the dispute. Its aim is to deny China’s rights in the South China Sea and confirm its own rights in the South China Sea.”

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Will France dare invite and protect Snowden?

European Parliament Votes To Urge Protection for Edward Snowden (NY Times)

The European Parliament narrowly adopted a nonbinding but nonetheless forceful resolution on Thursday urging the 28 nations of the European Union to recognize Edward J. Snowden as a “whistle-blower and international human rights defender” and shield him from prosecution. On Twitter, Mr. Snowden, the former National Security Agency contractor who leaked millions of documents about electronic surveillance by the United States government, called the vote a “game-changer.” But the resolution has no legal force and limited practical effect for Mr. Snowden, who is living in Russia on a three-year residency permit. Whether to grant Mr. Snowden asylum remains a decision for the individual European governments, and none have done so thus far.

Still, the resolution was the strongest statement of support seen for Mr. Snowden from the European Parliament. At the same time, the close vote — 285 to 281 — suggested the extent to which some European lawmakers are wary of alienating the United States. Many European citizens have expressed sympathy for Mr. Snowden and criticism of eavesdropping and wiretapping by the United States and its closest intelligence-sharing allies, which include Britain and Canada. The resolution calls on European Union members to “drop any criminal charges against Edward Snowden, grant him protection and consequently prevent extradition or rendition by third parties.” In June 2013, shortly after Mr. Snowden’s leaks became public, the United States charged him with theft of government property and violations of the Espionage Act of 1917.

By then, he had flown to Moscow, where he spent weeks in legal limbo before he was granted temporary asylum and, later, a residency permit. Four Latin American nations have offered him permanent asylum, but he does not believe he could travel from Russia to those countries without running the risk of arrest and extradition to the United States along the way. The White House, which has used diplomatic efforts to discourage even symbolic resolutions of support for Mr. Snowden, immediately criticized the resolution. “Our position has not changed,” said Ned Price, a spokesman for the National Security Council in Washington. “Mr. Snowden is accused of leaking classified information and faces felony charges here in the United States. As such, he should be returned to the U.S. as soon as possible, where he will be accorded full due process.”

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Story after story after story….

Two Boats Carrying Refugees Sink Off Greece, Leaving 21 Dead (AP) /span>

Authorities have said 21 people when two boats carrying people trying to reach Greece from Turkey sank over Thursday night in the latest deadly incidents in the eastern Aegean Sea. The Greek merchant marine ninistry said 18 people were killed and 138 people rescued near the island of Kalymnos, while another three died and six were rescued in a separate incident early on Friday off the island of Rhodes. The deaths occurred amid a surge of crossings to Greek islands involving people fleeing Syria, Afghanistan and other countries ahead of winter and as European governments weight taking tougher measures to try and limit the number of arrivals in Europe. Eight people were killed early on Thursday after a boat capsized off the island of Lesbos.

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…after story after story after story after tragic story….

Greek Coast Guard Seeks Dozens Of Migrants Off Lesvos After Wreck (Kath.)

Hellenic Coast Guard vessels scoured the coastline of Lesvos on Thursday night in a bid to find more than 30 migrants feared to be missing after a large boat capsized near the eastern Aegean island on Wednesday, killing at least nine people. Following a huge operation on Wednesday evening that resulted in the rescue of 242 migrants, Greek coast guard vessels continued the search with Frontex boats on Thursday night. A senior coast guard official on Lesvos told Kathimerini that it was unclear exactly how many people were missing as many of the migrants are said to have been traveling alone and were not being sought by relatives. According to the Shipping Ministry, at least 17 migrants died in several incidents between Wednesday morning and late Thursday night, including 11 children.

Another 15 children were being treated at the pediatric clinic of Lesvos’s general hospital while another three were flown by C-130 military transport plane to the intensive-care unit of an Athens hospital. Coast guard officers on Lesvos and other islands struggling with the migrant influx, such as Samos and Agathonisi, have appealed for backup, Kathimerini understands. Space constraints for the temporary accommodation of the migrants pose another problem. On Thursday a small church near the port of Molyvos on Lesvos was used to shelter migrants, including children, some with symptoms of hypothermia or fever.

As the influx of migrants into Greece continues unabated, despite the worsening weather, some have called for a fence on the Greek-Turkish land border to be brought down to ease the wave of migrants arriving by sea, a proposal that has been rejected by the government. According to official figures of the Citizens’ Protection Ministry, more than 545,000 migrants have entered Greece this year. Of these, 23% are children. A total of 70 deaths have been recorded and another 100 people are believed to be missing. This month alone, more than 72,000 migrants have arrived in Greece, according to the UN refugee agency. The figure is only slightly smaller than the 77,163 migrants who arrived in Greece in the whole of 2014.

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Any chance of spending some of that to save lives now?

Germany To Spend Up To €16 Billion On Refugees Next Year (Reuters)

Germany’s federal states and municipalities could face costs of up to €16 billion next year to deal with the refugee crisis, the Association of German Cities said on Thursday. Europe’s richest country has become a favoured destination for people fleeing war, violence and poverty in Asia, Africa and the Middle East. It expects 800,000 to a million migrants to enter the country this year, twice as many as in any prior year. Germany’s states have long complained that they are struggling to cope with the record influx and have urged the federal government in Berlin to provide more help.

Helmut Dedy, deputy managing director of the Association of German Cities, said the federal states and municipalities could end up spending €7 billion to €16 billion on costs related to refugees next year, depending on the number of new arrivals. Taking into account funds the government has already agreed to provide, that means the states and municipalities will still need €3 billion to €5.5 billion in financing, Dedy said. The association’s estimates are based on two scenarios with between 500,000 and 1.2 million refugees arriving next year. “The challenge is noticeable everywhere – from providing accommodation and on the housing market to schools, in daycare centres and in healthcare,” said Stephan Articus, managing director of the Association of German Cities.

He said the federal states therefore needed to pass the approved federal funds for accommodating and providing for refugees on to municipalities in full because until now the states’ involvement in financing the communities had been “extremely varied”. The federal government has already agreed to set aside €5 billion in windfall income from this year’s budget to help finance the states and municipalities in 2016. The government in Berlin pays the 16 federal states €670 each month for every asylum seeker they take in.

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“It’s only a question of time before the first baby freezes to death here..”

Refugees Risk Freezing To Death In Germany, Too (Local.de)

Police near Passau, on the Bavarian border with Austria, have warned that there are no places left in emergency accommodation centres as crowds wait to cross into Germany in plummeting temperatures. “It’s only a question of time before the first baby freezes to death here,” Passau district police spokesman Lothar Venus said. Around 2,500 people were waiting in the open on the Austrian side of the border on Wednesday night, huddling together under the harsh glare of searchlights. Police have complained that Austrian authorities often bring large groups to the border in the late afternoon or evening. “It’s no problem up until midday. But in the late afternoon, it’s blow after blow. Our Austrian colleagues are just as overloaded as we are,” Freyung district police spokesman Thomas Schweikl said.

At 700 metres above sea level, temperatures fell to around 2 C, and a stream flowing nearby added damp to the harsh conditions. On the German side, there are simply not enough buses to bring refugees to accommodation elsewhere in Bavaria, leaving them stuck until transport arrives. “What do ten buses mean faced with this many people? We would need 40 to bring these people here quickly into the warm,” Venus said. He added that the risk was increasing that the refugee groups would begin moving into Germany of their own accord, walking the three kilometres along an unlit main road Two nights ago, 1,000 people did exactly that.

On Wednesday night, officers were able to avoid that scenario repeating itself, in part by housing people in a workshop cleared out specially by a local business owner – at least offering 300 people a roof over their head. At the border itself, the Red Cross handed out tea, vegetable soup and fruit. But few of the refugees accepted the proffered blankets, preferring to hang on to their place in the queue. All eyes will be on a meeting Angela Merkel has called with state leaders this weekend to deal with the problem. The Chancellor’s gathering is a response to Bavarian state premier Horst Seehofer’s ultimatum demanding that she work with Austria to stop the flow of people by Sunday – or else he would act on his own initiative.

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Emptiness rules Europe.

EU Nations Have Relocated Only 86 Refugees From 160,000 Pledged (Bloomberg)

A European Union plan to resettle 160,000 refugees who have arrived in Greece and Italy has relocated just 86 so far. The pledge, made last month by EU governments, was meant to share the burden of the influx of migrants from Middle Eastern wars and civil strife between the bloc’s different countries in an effort to decrease the number of people making the journey northward through Europe. The 86 refugees who have been relocated so far had all been staying in Italy, EU Commission spokeswoman Natasha Bertaud told reporters in Brussels on Thursday. The EU is planning further transfers this week from Italy to Finland and France, and later to Spain, she said.

With more than 700,000 refugees arriving by sea so far this year and tens of thousands more on their way, EU governments are grappling with an influx on a scale not seen since the 1940s. Some have responded by closing borders and building fences, others by shuttling migrants across frontiers for other countries to deal with. The 160,000 redistribution plan laid bare the disunity within the EU over the crisis with bigger countries forcing the process through over the opposition of Hungary, the Czech Republic, Slovakia and Romania. All of the bloc’s 28 nations are now participating in the program apart from the U.K., which is not bound by EU rules on migration.

The failure to relocate more refugees is largely because countries have not told the EU Commission, which is coordinating the program, how many spaces they have for migrants to take up, Bertaud said. The EU needs “all member states to tell us how many places they have available right now out of their share of 160,000,” she said. “We have some of this information but we do not have it from all member states.” Countries also need to install officials in Greece to process the applications, she said. “We now have 30 people who are ready to be relocated from Greece and expect the flight to go to Luxembourg soon,” she said.

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“Two of our volunteers tried to resuscitate a child that died in the harbour and they kept doing CPR because the dad was distraught and they just wanted to show the dad that they had done their absolute best.”

Lesbos Volunteer Says Huge Amount Of Trauma As Refugee Boats Capsize (Guardian)

A British volunteer on Lesbos has described horrendous scenes after worsening weather caused boats to capsize in the Aegean Sea, killing at least 11 people, including several children. Authorities on the Greek island said 38 people were believed to be missing at sea on Thursday after high winds battered the ageing wooden fishing boats that are increasingly used to make the perilous crossing from Turkey to Greece. Tracey Myers, a volunteer based in the port town of Molyvos, said: “I’ve never seen a day like yesterday. I never ever want to see another day like yesterday in my life. These people are escaping war and can’t get a route to safety. There is the need for the shelter, but the real need is for them to have a safe way to apply for asylum.”

Eleven people drowned on Wednesday after a boat carrying hundreds of refugees capsized and several smaller boats were also swamped, triggering one of the biggest rescue missions in the Aegean Sea this year. The Greek coastguard said it had rescued 242 people. Speaking to the Guardian by telephone from a rescue centre, Myers said volunteers had been warned of a “hideous medical need” when the high winds caused a “constant stream of boats sinking in the sea” on Wednesday afternoon. “We had one boat come and we had 10 half-drowned babies, and we had to lay them out on stretchers and try [to] resuscitate them. Then we had to move all those people on and the same thing happened again. “The harbour was just a scene of half-dead kids, with us trying to get the water out of them and trying to resuscitate them.”

Myers said about a third of the people rescued on Wednesday were children younger than five, mainly from Syria, with at least 25 suffering serious shock, hypothermia and other injuries. She said: “Two of our volunteers tried to resuscitate a child that died in the harbour and they kept doing CPR because the dad was distraught and they just wanted to show the dad that they had done their absolute best. One of the volunteers did CPR on this kid for 25 minutes, but the kid was gone. “Another of our volunteers came across a three or four-year-old boy and they tried to electroshock him and bring him back to life and resuscitate him, but he passed in his arms. The volunteers here are seeing a huge amount of trauma.”

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“They brought us this body the other day and begged us to bury it even though there was no space. But I don’t know what we’ll do from now on…”

Lesbos Braces For Winter As Refugees Keep Coming (Gill)

Agios Panteleimonas is a saint known for his miracles and his steadfast faith.These days, at the sprawling cemetery in Mytilene named after him, there are no miracles to be found. The cemetery has three levels of gravesites, ranging from the best to the cheapest at the back. Now there is a new category beyond the pauper’s grave – the refugee grave. In a corner at the back of the site are mounds of earth that lie at a different angle compared to the rest of the graves with pieces of broken marble serving as headstones. “Our dead are buried facing east,” explains Christos Mavraheilis, “but the Muslims ask to be buried on their side, facing Mecca.” This is the final resting place for those who were unsuccessful in completing the perilous journey from Turkey to Lesbos.

The graves are marked with a serial number, burial date and the words “unknown minor” or “unknown Afghan.” “We’re not running out of space, we’re already completely out of space.” Mavraheilis explained. A local church’s philanthropic organization undertakes the process of the burials. DNA samples are taken at the hospital in the hopes of one day finding relatives. Several identified bodies are awaiting repatriation. There is already a backlog of bodies waiting to take their place. “There isn’t an inch of space left,” said Mavraheilis. He pointed to a fresh grave. “They brought us this body the other day and begged us to bury it even though there was no space. But I don’t know what we’ll do from now on. Especially when we bury a child, the local mothers from around here cry too. We’re all human,” he said. “They left for a better tomorrow which they never saw.”

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Oct 292015
 
 October 29, 2015  Posted by at 10:22 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing National Emergency War Garden Commission display, Wash. DC 1918

Fed Keeps Interest Rates Unchanged But Hints At December Rise (Guardian)
Fed Keeps December Rate Hike in Play (Hilsenrath)
The Death Of Monetary Policy In 1 Dismal Chart (Zero Hedge)
Inflation Fixated Central Banks Have Lost Their Way (Stephen Roach)
The Unnatural Rate Of Interest -Ultra Wonkish- (Steve Keen)
Britain Is Heading For Another 2008 Crash: Here’s Why (David Graeber)
Paris Climate Deal To Ignite A $90 Trillion Energy Revolution (AEP)
China Running Out Of Strategic Oil Reserve Space (Reuters)
Nigel Farage Rages At EU’s Modern Day “Brezhnev Doctrine” (Zero Hedge)
British Bookmaker Doubles Probability of Exit From EU (Bloomberg)
Putin Tests English Debt Law as Ukraine Feud Heads to London Court (Bloomberg)
European Parliament Opposes National Bans on GMO-Food Imports (Bloomberg)
Germany To Oblige Banks To Offer Accounts To Refugees (Reuters)
Inside Europe’s Migrant-Smuggling Rings (WSJ)
Three Migrants Drown Off Lesvos, Coastguard Rescues 242 As Boat Sinks (Reuters)
At Least Five Refugees, Including Four Children, Drown In Aegean (AP)
Dozens Of Refugees Missing After Boat Sinks Off Lesvos (AP)

December is Yellen’s final chance to restore credibility.

Fed Keeps Interest Rates Unchanged But Hints At December Rise (Guardian)

The Federal Reserve on Wednesday kept interest rates unchanged at their record low of near-zero, but raised the likelihood of a rate hike in December by dropping previous warnings about the fragility of the global economy. Following a two-day meeting in Washington, Fed policymakers voted to leave rates at 0-0.25% – where they have been for the seven years since the financial crisis. However, the bank’s Federal Open Market Committee (FOMC), which sets the rate, significantly raised the prospect of a historic rate rise at its next meeting in December by removing cautious statements about unstable international markets could adversely effect the US economy.

In September, following concerns about the health of the Chinese economy, the committee said: “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.” This was modified on Wednesday to: “The committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring global economic and financial developments.” The committee specifically pointed towards the possibility of raising rates at its December meeting – the last of 2015.

“In determining whether it will be appropriate to raise [rates] at its next meeting, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2% inflation,” it said in the statement. Nine out of 10 FOMC members voted to keep rates unchanged. That is the same proportion as in September with Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, being the only member to push for a 25 basis points increase.

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Does having a mouthpiece at the WSJ give the Fed more credibility?

Fed Keeps December Rate Hike in Play (Hilsenrath)

Federal Reserve officials explicitly said they might raise short-term interest rates in December, pushing back against investors who have bet that the central bank wouldn’t move this year. The message appeared to have the desired effect. Before the Fed released its policy statement Wednesday, traders in futures markets put about a 1-in-3 probability on a Fed rate increase this year; after the release, that probability rose to almost 1-in-2. While the Fed kept rates steady after its two-day meeting this week, investors appeared to welcome a vote of confidence in the economy from the central bank. Top Fed officials have been saying for months they believed the economy was nearly strong enough to tolerate an increase in the benchmark short-term rate from near zero, where it has been since December 2008. But they have hesitated to move.

The last instance was in September, when the Fed pointed to worries about turbulence in financial markets and uncertainties about growth overseas—particularly in China—as reasons to stay put. “They are trying to tell us that December is still their base case,” said Roberto Perli, an analyst at Cornerstone Macro, a research firm that advises investors. Market and international developments have turned in the Fed’s favor in recent weeks. The People’s Bank of China last week cut short-term lending rates in an effort to boost growth in the world’s second-largest economy. ECB President Mario Draghi suggested he might extend a bond-purchase program in an effort to stimulate his region’s economic growth rate. The moves sparked a global stock-market rally and could support world-wide growth.

The Dow is up 6% since the Fed met last month, a sign financial-market stress has dissipated. The Fed responded Wednesday by playing down its earlier-stated concerns. Officials struck from their policy statement a sentence introduced in September that pointed to market turbulence and global developments as potential restraints on U.S. economic activity. As those concerns recede, the Fed has fewer impediments standing in the way of a rate increase. Though not mentioned in their statement, officials likely took note in their meeting of the recent progress toward an agreement between Congress and the White House on a federal budget and raising the government’s borrowing limit.

If enacted, the budget and debt-limit resolution would reduce uncertainty about the fiscal outlook and boost government spending and short-term economic growth. Officials pointed specifically in the policy statement to their Dec. 15-16 meeting as a moment when they might act on rates. Individual officials have signaled before that they expected to move before year-end, but the Fed’s policy-making committee hadn’t previously pointed so explicitly in an official statement to the potential timing of a rate increase.

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Do keep this in mind: “..when the world is offering ‘money’ for free, one can only surmise its worth is also close to zero…”

The Death Of Monetary Policy In 1 Dismal Chart (Zero Hedge)

Perhaps “The Japanification of Monetary Policy” would have been a more appropriate title… “well it didn’t work for them, so we should all try more of it” appears to be the repost of policy-makers worldwide which, inevitably, will lead to the total collpase of their credibility (and th every ‘faith’ of the world’s investors shattered). As the old adage goes “you get what you pay for” and when the world is offering ‘money’ for free, one can only surmise its worth is also close to zero…

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TBTF banks like the Fed clueless.

Inflation Fixated Central Banks Have Lost Their Way (Stephen Roach)

Fixated on inflation targeting in a world without inflation, central banks have lost their way. With benchmark interest rates stuck at the dreaded zero bound, monetary policy has been transformed from an agent of price stability into an engine of financial instability. A new approach is desperately needed. The US Federal Reserve exemplifies this policy dilemma. After the Federal Open Market Committee decided in September to defer yet again the start of its long-awaited normalization of monetary policy, its inflation doves are openly campaigning for another delay. For the inflation-targeting purists, the argument seems impeccable. The headline consumer-price index (CPI) is near zero, and “core” or underlying inflation – the Fed’s favorite indicator – remains significantly below the seemingly sacrosanct 2% target.

With a long-anemic recovery looking shaky again, the doves contend that there is no reason to rush ahead with interest-rate hikes. Of course, there is more to it than that. Because monetary policy operates with lags, central banks must avoid fixating on the here and now, and instead use imperfect forecasts to anticipate the future effects of their decisions. In the Fed’s case, the presumption that the US will soon approach full employment has caused the so-called dual mandate to collapse into one target: getting inflation back to 2%. Here, the Fed is making a fatal mistake, as it relies heavily on a timeworn inflation-forecasting methodology that filters out the “special factors” driving the often volatile prices of goods like food and energy. The logic is that the price fluctuations will eventually subside, and headline price indicators will converge on the core rate of inflation.

This approach failed spectacularly when it was adopted in the 1970s, causing the Fed to underestimate virulent inflation. And it is failing today, leading the Fed consistently to overestimate underlying inflation. Indeed, with oil prices having plunged by 50% over the past year, the Fed stubbornly maintains that faster price growth – and the precious inflation rate of 2% – is just around the corner. Missing from this logic is an appreciation of the new and powerful global forces that are bearing down on inflation. According to the International Monetary Fund’s latest outlook, the price deflator for all advanced economies should increase by just 1.5% annually, on average, from now to 2020 – not much higher than the crisis-depressed 1.1% pace of the last six years.

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Steve vs Krugman redux.

The Unnatural Rate Of Interest -Ultra Wonkish- (Steve Keen)

Paul Krugman’s latest column—“Check Out Our Low, Low (Natural) Rates” (which he didn’t flag as “Wonkish”, even though it is so in spades)—noted that the “natural real rate of interest” was falling, and that this justified the low interest rate set by the Federal Reserve. And this made me think about Karl Marx. Why? Because the “natural real rate of interest” is an unobservable entity—in that it’s not a rate you’ll find charged by any bank, but a rate that has to be statistically derived. But more importantly, it is a fantasy: there is no such thing. However it is required as part of a theory in which the economy returns to equilibrium after it is hit by an “exogenous shock”. So Neoclassical economists—meaning both “New Classicals” and “New Keynesians”, as the two fractious clans in this economic tribe call themselves—have to go in search of this phantom.

Marx had an equally important unobservable fantasy at the heart of his attempt to produce a mathematical version of his own economics: the “Labor Theory of Value”. This is the proposition that all value—and hence all profit—emanates solely from labor. Machinery, Marx asserted, simply passed on the value that had been transferred to it by the labor expended in making it. It is mathematically impossible to reconcile this proposition with the Marxist belief that profit rates in different industries converge (for competitive reasons), when you acknowledge that different industries have different ratios of capital to labor. But Marxist economists have tied themselves up in logical (and illogical) knots over this fantasy for well over a century. However Marxists have something over Neoclassicals in this regard: at least they’re aware that there is an issue.

Even though they continue to cling to this belief, they don’t shy away from acknowledging the conundrum. Neoclassicals, on the other hand, don’t even realize that they might have a problem. Some Marxists attempted to circumvent their conundrum on statistical grounds, while making the dubious assumption that the actual wage corresponded to an important concept in Marxian economics, the “value of labor power” (which strictly speaking is a subsistence wage). The great British scholar Ronald Meek rightly derided this fudge, stating that he was “unconvinced by … redefining `the value of labour-power’ so that it becomes equivalent … to any wage which the workers happen to be getting” The real problem for Marxists was that their model of how the economy operated was simply wrong. Statistical work on this chimera wasn’t going to rescue them from that problem.

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Watch video at the link.

Britain Is Heading For Another 2008 Crash: Here’s Why (David Graeber)

British public life has always been riddled with taboos, and nowhere is this more true than in the realm of economics. You can say anything you like about sex nowadays, but the moment the topic turns to fiscal policy, there are endless things that everyone knows, that are even written up in textbooks and scholarly articles, but no one is supposed to talk about in public. It’s a real problem. Because of these taboos, it’s impossible to talk about the real reasons for the 2008 crash, and this makes it almost certain something like it will happen again. I’d like to talk today about the greatest taboo of all. Let’s call it the Peter-Paul principle: the less the government is in debt, the more everybody else is. I call it this because it’s based on very simple mathematics. Say there are 40 poker chips. Peter holds half, Paul the other. Obviously if Peter gets 10 more, Paul has 10 less. Now look at this: it’s a diagram of the balance between the public and private sectors in our economy:

Notice how the pattern is symmetrical? The top is an exact mirror of the bottom. This is what’s called an “accounting identity”. One goes up, the other must, necessarily, go down. What this means is that if the government declares “we must act responsibly and pay back the national debt” and runs a budget surplus, then it (the public sector) is taking more money in taxes out of the private sector than it’s paying back in. That money has to come from somewhere. So if the government runs a surplus, the private sector goes into deficit. If the government reduces its debt, everyone else has to go into debt in exactly that proportion in order to balance their own budgets. The chips are redistributed. This is not a theory. Just simple maths.

Now, obviously, the “private sector” includes everything from households and corner shops to giant corporations. If overall private debt goes up, that doesn’t hit everyone equally. But who gets hit has very little to do with fiscal responsibility. It’s mostly about power. The wealthy have a million ways to wriggle out of their debts, and as a result, when government debt is transferred to the private sector, that debt always gets passed down on to those least able to pay it: into middle-class mortgages, payday loans, and so on. The people running the government know this. But they’ve learned if you just keep repeating, “We’re just trying to behave responsibly! Families have to balance their books. Well, so do we,” people will just assume that the government running a surplus will somehow make it easier for all of us to do so too. But in fact the reality is precisely the opposite: if the government manages to balance its books, that means you can’t balance yours.

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Ambrose is techno-happy incorporated. ‘Save the world for profit!’ But we won’t have the money to do it even if we wanted to.

Paris Climate Deal To Ignite A $90 Trillion Energy Revolution (AEP)

The fossil fuel industry has taken a very cavalier bet that China, India and the developing world will continue to block any serious effort to curb greenhouse emissions, and that there is, in any case, no viable alternative to oil, gas or coal for decades to come. Both assumptions were still credible six years ago when the Copenhagen climate summit ended in acrimony, poisoned by a North-South split over CO2 legacy guilt and the allegedly prohibitive costs of green virtue. At that point the International Energy Agency (IEA) was still predicting that solar power would struggle to reach 20 gigawatts by now. Few could have foretold that it would in fact explode to 180 gigawatts – over three times Britain’s total power output – as costs plummeted, and that almost half of all new electricity installed in the US in 2013 and 2014 would come from solar.

Any suggestion that a quantum leap in the technology of energy storage might soon conquer the curse of wind and solar intermittency was dismissed as wishful thinking, if not fantasy. Six years later there can be no such excuses. As The Telegraph reported yesterday, 155 countries have submitted plans so far for the COP21 climate summit to be held by the United Nations in Paris this December. These already cover 88pc of global CO2 emissions and include the submissions of China and India. Taken together, they commit the world to a reduction in fossil fuel demand by 30pc to 40pc over the next 20 years, and this is just the start of a revolutionary shift to net zero emissions by 2080 or thereabouts. “It is unstoppable. No amount of lobbying at this point is going to change the direction,” said Christiana Figueres, the UN’s top climate official.

Yet the energy industry is still banking on ever-rising demand for its products as if nothing has changed. BP is projecting a 43pc increase in fossil fuel use by 2035, Exxon expects 35pc by 2040, Shell 43pc and Opec is clinging valiantly to 55pc. These are pure fiction.
The Intergovernmental Panel on Climate Change (IPCC) may or may not be correct in arguing that we cannot safely burn more than 800bn tonnes of carbon (two-thirds has been used already) if we are to stop global temperatures rising two degrees above pre-industrial levels by 2100. I take no view on the science. But this is the goal accepted by world leaders. It is solemnly enshrined in international accords, and while it might once have been possible for energy companies to dismiss these utterings as empty pieties, to persist now is to trifle with fate.

“This is a world apart from where we were going into Copenhagen. The centre of gravity has fundamentally and irreversibly shifted,” said Mark Kenber, head of the Climate Group. China switched sides several years ago, not least because it faces a middle class insurrection that has shaken the Communist Party to its core. An estimated 100m people viewed the anti-pollution video “Under the Dome” in just 24 hours before it was shut down by horrified officials in February. The IEA says China invested $80bn in renewable energy last year, as much as the US and the EU combined. It is blanketing chunks of the Gobi Desert with solar panels, necessary to absorb the massive surplus production of its own solar companies. The party’s Energy Research Institute has floated the idea of raising the renewable share of electricity to 86pc by 2050.

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What’s that going to do with prices? Deflation equals demand crash.

China Running Out Of Strategic Oil Reserve Space (Reuters)

About 4 million barrels of crude oil bought by a Chinese state trader for the country’s strategic reserves have been stranded in two tankers off an eastern port for nearly two months due to a lack of storage, two trade sources said. The delays will cost millions of dollars and indicate how China is struggling to import record amounts of crude if storage and port capacity at Qingdao, its largest oil import terminal, are unable to keep pace. Ocean Lily and Plata Glory, two very large crude carriers (VLCCs) carrying oil for Sinochem Corp, arrived at Huangdao, Qingdao’s main oil terminal, in early September, and both were still at anchor this week, waiting to unload. “They are both for SPR (strategic petroleum reserve), but no tank space is available to take that oil in,” said a senior trader familiar with Sinochem’s oil trading.

China’s crude oil imports rose nearly 9% in the first nine months of the year over a year earlier to 6.65 million bpd, driven partly by reserve building. China said late last year the first phase of the government’s emergency stockpile is storing about 90 million barrels of crude oil, with the construction of a second phase due by 2020, partly through private investment. Huangdao is the site of one of China’s first SPR tanks, with space for 20 million barrels of oil and also has plans for a second phase of similar size. A recent move to increase competition for oil imports by granting quotas to independent refineries has added to congestion at Huangdao, where operations were already hampered following a pipeline accident two years ago. “Storage and berths were not ready for such a quick market opening,” the trader said.

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“..for all of us that believe in democracy and want to see it reimplemented, the British referendum offers a golden opportunity.”

Nigel Farage Rages At EU’s Modern Day “Brezhnev Doctrine” (Zero Hedge)

Nigel Farage unleashes another of his must-watch rage-fests aimed at the collapse of democracy in Europe. Amid the stunning “democracy crisis” in Portugal, where, as we detailed here, the government has lost its majority but the anti-EU opposition is being prevented from attempting to form a coalition, Farage fumes “this is the modern day implementation of the Brezhnev Doctrine. This is exactly what happened to states living inside the USSR.” One of his best…

“This is the modern day implementation of the Brezhnev Doctrine. This is exactly what happened to states living inside the USSR . What is being made clear here with Greece and indeed with Portugal is that a country only has democratic rights if it’s in favour of the [European] project. If not, those rights are taken away. And perhaps none of this should surprises us as Mr. Juncker has told us before: there can be no democratic choice against the European treaties. And the German Finance Minister, Mr. Schäuble, has said: elections change nothing – there are rules.

I think for anyone that believes in democracy, Portugal should be the final straw. It should be the warning that this project, [in order to] to protect itself and all its failings, will destroy the individual rights of peoples and of nations. My country has always believed in parliamentary democracy so strongly that twice in the last century it risked everything to fight for parliamentary democracy, not just for Britain but for the rest of Europe too. And I actually believe that for all of us that believe in democracy and want to see it reimplemented, the British referendum offers a golden opportunity.”

The opposition in Portugal might be socialists, but the country is effectively suspending democracy to prevent Eurosceptics with a massive electoral mandate from taking power. As we concluded previously, note what’s happened here. The will of the people is now being characterized as a “false signal” to “financial institutions, investors, and markets.”

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Break it up! Break it down!

British Bookmaker Doubles Probability of Exit From EU (Bloomberg)

The chances of the U.K. leaving the EU have almost doubled in just three months, if the odds from Betfair’s gambling exchange are any indication of sentiment. The probability of a majority vote for leaving the EU has jumped to 36%, from 18.5% at the end of July, based on the odds given to bettors on the outcome of the referendum. While bettors are following the momentum of the polls, it would require a huge swing for so-called Brexit to become the favorite outcome. “A vote in favor of staying in the EU is still the firm favorite at 1.56 (4/7 or a 64% chance), in much the same way as the Scottish Referendum market was predicting a No to independence from very early on,” Betfair spokeswoman Naomi Totten said. “The price for a vote in favor of leaving the EU is the shortest it has been since June, currently trading at 2.76 (7/4 or a 36% chance), but in the context of the market it is still very much assumed that Britain will vote to remain within the EU.”

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The West cannot win this.

Putin Tests English Debt Law as Ukraine Feud Heads to London Court (Bloomberg)

Russia and Ukraine are about to test the boundaries of sovereign-debt litigation in a dispute that could have far-reaching implications for government bailouts the world over. The neighbors are vowing to fight each other in a London court over a $3 billion bond Vladimir Putin bought to reward his Ukrainian ally, Viktor Yanukovych, for rejecting closer trade ties with the European Union two years ago. That move fueled the protests in Kiev that led to Yanukovych’s ouster, Putin’s annexation of Crimea and an insurgency that’s killed 8,000 people. Ukraine’s government, on life support from the IMF, says Russia has until Oct. 29 to agree to the same writedown and extension that Franklin Templeton, which manages the largest U.S. overseas bond fund, and most other creditors accepted this month.

Russia’s Finance Ministry says it won’t negotiate and is shopping for a law firm to file suit as soon as Ukraine makes good on its threat to default when the bond comes due Dec. 20. “This issue will go to court, there’s no other way around it,” said Christopher Granville, a former U.K. diplomat in Moscow who runs Trusted Sources research group in London. “There’s no way Russia will remain under financial sanctions from the U.S. government and accept the same terms as Franklin Templeton.” The bond is unusual for a state-to-state loan. It was drafted as a commercial instrument under English law, meaning any dispute will be settled by a judge in the U.K. It also contains a clause designed to prevent Ukraine from offsetting its debt due to damages inflicted by Russia, such as the annexation of Crimea, which President Petro Poroshenko plans to seek compensation for.

Ukraine’s government, which accuses Yanukovych and his allies of stealing tens of billions of dollars before fleeing to Russia, says the bond should be considered commercial and treated the same as debt held by private investors. “This $3 billion was in reality a bribe from Russia, so that President Viktor Yanukovych would stop the association agreement with the EU,” Prime Minister Arseniy Yatsenyuk told German newspaper Handelsblatt this week. Russia maintains the loan is official, a designation that would, if Ukraine doesn’t pay, force the IMF to either end its $17.5 billion bailout or alter its policy of not lending to any country that’s in arrears to another. The crisis lender has said it will only decide on the classification if Ukraine defaults.

Either way, the showdown is shaping up to be one of the most unique cases in memory, one followed closely by governments and scholars around the world, including Mitu Gulati, a law professor at Duke University who specializes in sovereign debt. “This kind of court case has never really happened before,” Gulati said. “To see the argument play out as to what Russia owes Ukraine because of its involvement in Crimea, to have that be in court in London would be fabulous.”

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“.. the European Commission proposed the draft law in April in a bid to give opponents of GMOs fewer grounds to hold up EU approvals urged by supporters of the technology.”

European Parliament Opposes National Bans on GMO-Food Imports (Bloomberg)

The European Parliament rejected a draft law that would give individual countries in Europe scope to ban imports of genetically modified food and animal feed, potentially killing an initiative that was greeted with widespread criticism. The EU assembly voted against granting EU governments a right to opt out of rules making the 28-nation bloc a single market for gene-altered food and feed. With Europe split over the safety of gene-modified organisms, the European Commission, the EU’s regulatory arm, proposed the draft law in April in a bid to give opponents of GMOs fewer grounds to hold up EU approvals urged by supporters of the technology.

The commission proposal was modeled on European legislation approved three months earlier – following more than four years of deliberations – that lets national governments go their own way on the cultivation of gene-modified crops. The EU Parliament’s rejection on Wednesday in Strasbourg, France, of the food and feed measure reflects concerns it would have been a step too far in denting a free-trade tenet of the bloc. “Member states should shoulder their responsibilities and take a decision together at EU level, instead of introducing national bans,” said Giovanni La Via, an Italian who chairs the 751-seat assembly’s environment committee, which earlier this month recommended throwing out the draft legislation on GMO food and feed. The commission said it would pursue talks on the proposal with EU governments, which also have a say on the matter.

The moment it was unveiled six months ago, the commission proposal drew rebukes from anti- and pro-GMO groups as well as from the U.S. government. Environmental organization Greenpeace called the initiative “a farce,” saying the opt-out option wouldn’t stand up in court against EU free-market rules. The European Association for Bioindustries, whose members include GMO manufacturers, said the proposal would limit choice for livestock farmers, weaken the EU economy and rattle innovative companies’ confidence in the bloc’s approval procedures. The U.S. government said the draft legislation would enable EU nations to ignore “science-based safety and environmental determinations,” would fragment the European market and was inconsistent with current trans-Atlantic talks on a free-trade agreement.

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Not bad.

Germany To Oblige Banks To Offer Accounts To Refugees (Reuters)

Germany’s cabinet signed off on a draft law on Wednesday which will make it easier for hundreds of thousands of asylum seekers in the country to set up bank accounts. Under the new rules, everyone will have the right to access basic banking services, including the homeless and people who fall under the protection of the Geneva Convention on Refugees. This means that migrants will be able to open accounts at any bank, enabling them to deposit and withdraw cash, carry out bank transfers, set up direct debits and make payments with cards. Germany expects between 800,000 to one million people, many fleeing war zones in the Middle East and Africa, to arrive this year, although not all of them will be given asylum.

Giving refugees access to current accounts is seen as a vital first step to help them integrate them into society. “Those who don’t have a bank account, don’t have good prospects on the labour market. Hunting for a flat is also a problem for many people without an account,” said Justice Minister Heiko Maas. In Germany, the number of people without a bank account is in the high six figures, according to estimates by the European Commission, and that figure is expected to rise due to the influx of refugees. Until now, only a few saving banks, which are publicly owned or controlled, have accepted refugees as customers. Asylum seekers were often turned away by other banks since they had no fixed address or lacked the necessary documents.

Under the draft law, which must be approved by parliament to go into effect, all banks that offer current accounts would be obliged to do so for a wider group of consumers. Last month, Germany’s financial watchdog Bafin said it was going to allow banks to accept a broader spectrum of documents, such as papers provided by Germany’s immigration authorities. The draft law also obliges banks to become more transparent about their charges and make it easier for customers to change bank accounts.

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Brought to you by Brussels.

Inside Europe’s Migrant-Smuggling Rings (WSJ)

The entry of established crime syndicates operating between the Middle East and Europe has brought a new level of organization and brutality to the people-smuggling game. In Sofia, many taxis from Lion’s Bridge drive northwest to Vidin, Bulgaria’s smuggling capital, where gangs move up to 500 migrants nightly across the Timok river into Serbia, Bulgarian officials say. On the town outskirts, smugglers store transiting refugees in pig farms and disused airport hangars. The money at stake has sparked a turf war between rival gangs. One public official seeking to crack down was attacked with a Molotov cocktail. Five hundred miles west, Bulgarian crime gangs have played a central role as industrial-scale migrant-smuggling expands into the heart of Europe.

In the case of 71 migrants found asphyxiated in a van in Austria in August, five of six men arrested, including the truck’s owner, are Bulgarian, Austrian police say, adding that five were arrested in Hungary and one in Bulgaria. The Hungarian prosecutor says it won’t release additional information until the men are charged and that the men aren’t reachable for interviews. Bulgaria’s prosecutor’s office says it has initiated criminal proceedings, declining to provide more information. “Our main focus now is the Balkans,” says Col. Gerald Tatzgern, Austria’s vice squad chief, who estimates the illicit transport generates more money in Europe than drug-running or weapons-trafficking. The mushrooming smuggling trade, he says, “has forced us to rethink everything we knew about the industry.”

Smugglers are positioned for another windfall: Hungary’s border-wall construction and increased checks on Austria and Germany’s normally open borders have the unintended effect of handing business to groups that skirt migrants across frontiers, says Wil van Gemert, Europol’s deputy director of operations. Closing borders “opens up new opportunities for criminals to benefit from smuggling,” he says. Smuggling “is becoming a big business in Balkan countries as they are sitting on the main migrant routes.”

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“..turning into a constant operation of locating and collecting drowned refugees..”

Three Migrants Drown Off Lesvos, Coastguard Rescues 242 As Boat Sinks (Reuters)

The Greek coastguard rescued 242 migrants when their wooden boat sank north of the island of Lesbos on Wednesday, but at least three drowned, including two small boys, authorities said. “We do not have a picture of how many people may be missing yet,” a coastguard spokeswoman said. A man and the two boys were found drowned and an extensive search was under way in the area after what was thought to be the largest maritime disaster off Greece in terms of numbers involved since a massive refugee influx began this year. More than 500,000 refugees and migrants have entered Greece through its outlying islands since January, transiting on to central and northern Europe in what has become the biggest humanitarian crisis on the continent in decades.

Inflows have increased recently as refugees are trying to beat the onset of winter, crossing the narrow sea passages between Turkey and Greece on overcrowded small boats. “These praiseworthy attempts of the coastguard to save refugees at sea is at risk of now turning into a constant operation of locating and collecting drowned refugees,” Greek shipping minister Thodoris Dritsas said.

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11 confirmed drowned today so far, 39 missing, little hope of survivors

At Least Five Refugees, Including Four Children, Drown In Aegean (AP)

Greek authorities say at least five people, including four children, have drowned as thousands of refugees and economic migrants continued to head to the Aegean Sea islands in frail boats from Turkey, in worsening weather. The coast guard said Wednesday that two children and a man died off the coast of Samos, while 51 people from the same small boat were rescued. A 5-year-old girl also drowned in a separate incident off Samos. A 7-year-old boy died off Lesbos, where most migrants land, while a 12-month-old girl was in critical condition in hospital from the same boat accident.

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The ultimate disgrace that is the EU. Someone should send an army to start saving these people.

Dozens Of Refugees Missing After Boat Sinks Off Lesvos (AP)

Authorities on the Greek island of Lesvos say 38 people are believed still missing after a wooden boat carrying migrants sank. Three people are known to have died. At first light Thursday, a helicopter from the European border protection agency Frontex joined the search by Greek coast guard vessels off the northern coast of the island, hours after the dramatic rescue of 242 people. At least 11 people – mostly children – died in five separate incidents in the eastern Aegean Sea on Wednesday, as thousands of people continued to head to the Greek islands from Turkey in frail boats and stormy weather.

Lesvos has borne the brunt of the refugee crisis in Greece, with more than 300,000 reaching the island this year – and the number of daily arrivals recently peaking at 7,500. In a dramatic scene late Wednesday, dozens of paramedics and volunteers helped in the effort to assist the survivors, wrapping them in foil blankets and prioritizing ambulance transport. Eighteen children were hospitalized, three in serious condition, local authorities said.

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