Oct 292016
 
 October 29, 2016  Posted by at 9:29 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 29 2016


Unknown No Dog Biscuits Today

It’s A First: Hillary Wants FBI To Publish Everything About Emails (DM)
Bernstein: New Evidence “A Real Bombshell” Or FBI Would Not Reopen Case (RCP)
2006 Audio Emerges of Hillary Proposing Rigging Palestine Election (Obs.)
China Laughs, Says US Choosing Between ‘A Crazy Guy’ And ‘A Swindler’ (DC)
Inside The Invisible Government: War, Propaganda, Clinton, Trump (John Pilger)
Prof. Michael Hudson: The Criminals Control The US (Renegade)
Sorry, But The US Economy’s Growth Spurt Isn’t Going To Last (CNBC)
The Story Of The Self Destruction Of Deutsche Bank (Spiegel)
No 10 Must Have Made Nissan Big Promise, Say Ex-Business Minister (G.)
EU-Canada CETA Trade Deal To Be Signed On Sunday (BBC)
Iceland Voters To Choose Between Pirates And Establishment This Weekend (R.)
The Strange Tale Of A Dating Site’s Attacks On Wikileaks Founder Assange (McCl.)

 

 

Clinton says she’s confident the new mails will not change the FBI’s conclusion in July. Thing is, if that were so, they probably wouldn’t have announced the mails on Friday.

It’s A First: Hillary Wants FBI To Publish Everything About Emails (DM)

The FBI is investigating Weiner’s lewd texts with an underage girl, revealed in September by DailyMail.com. ‘We’ve heard these rumors,’ said Clinton – who sat near Abedin on her campaign on the flight to Des Moines. ‘We don’t know what to believe and I’m sure there will be even more rumors. That’s why it is incumbent upon the FBI to tell us what they’re talking about,’ she said. ‘Because right now your guess is as good as mine and I don’t think that’s good enough.’ [..] Meanwhile, it was also revealed on Friday that Comey reportedly told bureau staffers in separate memo that he broke custom in telling Congress about the reopening of the investigation because of its political sensitivity. In the internal memo obtained by Fox News, Comey said the bureau would not ordinarily communicate with the public about its ongoing investigations, but said he felt he needed to do so as amid the looming election.

He also notes he felt an ‘obligation’ to inform lawmakers about the investigation given he had testified repeatedly that their investigation into Clinton’s email was completed. ‘Of course we don’t ordinarily tell Congress about ongoing investigations, but here I feel an obligation to do so given that I testified repeatedly in recent months that our investigation was completed,’ Comey wrote in the memo. ‘I also think it would be misleading to the American people were we not to supplement the record. ‘At the same time, however, given that we do not know the significance of this newly discovered collection of emails, I don’t want to create a misleading impression. ‘In trying to strike that balance, in a brief letter, and in the middle of an election season, there is significant risk of being misunderstood, but I wanted you to hear directly from me about it.’

Read more …

The NY Post suggests that NBC suggests that the FBI needs a fresh warrant to study the new batch of emails they suggest is connected to their investigation of Hillary Clinton’s use of a private server, which in turn is linked to possible mishandling of classified informaton. The (1000?!) mails were found on a laptop (and/or phone?) used by both Huma Abedin and Anthony Weiner. The ‘new warrant’ issue may be why Comey says “..the FBI cannot yet assess whether or not this material may be significant..”. They’ve seen things that led to Comey’s letter yesterday that perhaps they had no legal position to investigate. But they’ll get that warrant of course. Question is how long it will take. The Hillary camp can in the meantime try and use the uncertainty to say again and again that they don’t think the new revelations will change the FBI’s position that there was no reason to charge her, but as I suggested late last night (European time), and as Carl Bernstein confirms, for Comey to speak up now means this can only be a bombshell. Which means NOT speaking out now would down the line be seen as more partisan than speaking.

Bernstein: New Evidence “A Real Bombshell” Or FBI Would Not Reopen Case (RCP)

CARL BERNSTEIN: Well, there’s no question that the e-mails have always been the greatest threat to her candidacy for president, that her conduct in regard to the e-mails is really indefensible and if there was going to be more information that came out, it was the one thing, as I said on the air last night, actually that could really perhaps affect this election. We don’t know what this means yet except that it’s a real bombshell. And it is unthinkable that the Director of the FBI would take this action lightly, that he would put this letter forth to the Congress of the United States saying there is more information out there about classified e-mails and call it to the attention of congress unless it was something requiring serious investigation. So that’s where we are… Is it a certainty that we won’t learn before the election? I’m not sure it’s a certainty we won’t learn before the election.

One thing is, it’s possible that Hillary Clinton might want to on her own initiative talk to the FBI and find out what she can, and if she chooses to let the American people know what she thinks or knows is going on. People need to hear from her… I think if she has information available to her from the FBI or any other source as to her knowledge of what these e-mails might be, hopefully she will let us know what they are and what is under discussion here. Right now we’re all talking in a vacuum but I want to add here that in the last, oh, 36, 48 hours, there has been an undercurrent of kind of speculative discussion among some national security people that something might surface in the next few days about e-mails, and I think the expectation in this chatter – and I took it as just chatter but informed chatter, to some extent – was that it would relate to another round of WikiLeaks e-mails, which our Justice Department people seem to be saying is not the case, but there has been some noise in the national security community the last day or two of this kind of possibility of some kind of revelation.

But this is her achilles heel and we have to remember that it also comes on the – back to the word heel – of the revelations about the Clinton Foundation. So the confluence of all of this is bad for her as it stands now but with some knowledge she might be able to stop, turn things around, and give us some idea of what’s going on in a way we might not otherwise know, and also it’s very possible that some members of congress very quickly are going to get an idea of what these e-mails are, and what this is all about, and for whatever purpose put some information out there.

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Everyone’s talking about the domestic effects of things like this, but the international ones may well be much more significant.

2006 Audio Emerges of Hillary Proposing Rigging Palestine Election (Obs.)

On September 5, 2006, Eli Chomsky was an editor and staff writer for the Jewish Press, and Hillary Clinton was running for a shoo-in re-election as a U.S. senator. Her trip making the rounds of editorial boards brought her to Brooklyn to meet the editorial board of the Jewish Press. The tape was never released and has only been heard by the small handful of Jewish Press staffers in the room. According to Chomsky, his old-school audiocassette is the only existent copy and no one has heard it since 2006, until today when he played it for the Observer. The tape is 45 minutes and contains much that is no longer relevant, such as analysis of the re-election battle that Sen. Joe Lieberman was then facing in Connecticut.

But a seemingly throwaway remark about elections in areas controlled by the Palestinian Authority has taken on new relevance amid persistent accusations in the presidential campaign by Clinton’s Republican opponent Donald Trump that the current election is “rigged.” Speaking to the Jewish Press about the January 25, 2006, election for the second Palestinian Legislative Council (the legislature of the Palestinian National Authority), Clinton weighed in about the result, which was a resounding victory for Hamas (74 seats) over the U.S.-preferred Fatah (45 seats). “I do not think we should have pushed for an election in the Palestinian territories. I think that was a big mistake,” said Sen. Clinton. “And if we were going to push for an election, then we should have made sure that we did something to determine who was going to win.”

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“In the US, political elites and media magnates have the freedom to say anything they want, while others can only choose to repeat their words or shut up..”

China Laughs, Says US Choosing Between ‘A Crazy Guy’ And ‘A Swindler’ (DC)

China is laughing at America’s election and the media’s coverage of the election, noting that both make a sad argument for Western democracy. “In the past, I thought the US had the best education and most developed democracy in the world, but now what do they have for president? Either a crazy guy or a swindler,” a Chinese business owner told the Global Times. “The race to the bottom will … make [people] rethink the value of democracy,” the Global Times previously said of the elections. The election, deemed one of the “dirtiest” since World War II, “reflects the decay of U.S. politics and a deeply divided society,” the Xinhua News Agency argued. “People forget serious issues. They talk about sex, locker room conversation, men and lousy behavior.”

“Debates are getting nasty and that undermines the strength of Western democracy,” Yang Rui, an anchor for China’s state television, told the BBC. He added that using a ballot box to make major decisions is a bad idea because “you have to suppose every voter is rational and reasonable.” “[China’s non-democratic system] has allowed China forty years of uninterrupted growth within a stable system. Quiet deliberation is a more effective form of policy than a public shouting match, because policy making is complicated,” Fang Xinghai, a senior Communist Party of China official and the vice chair of the China Securities Regulatory Commission, told reporters. China regularly uses American elections to attack the U.S. political system and justify its non-democratic, authoritarian system.

“For a long time, the United States has boasted about how its extremely lively election is a sign of the superiority of the system, and it has even used this to willfully criticize the vast majority of developing countries,” asserted the People’s Daily, “The extreme self-confidence and arrogance by the ‘preacher of democracy’ should be reined in.” Beyond attacking the democratic process, Chinese critics of the election also targeted the mainstream media and America’s treasured freedom of speech, pointing out that the media has undermined this tradition. “CNN and other mainstream media’s freedom of speech only serves Hillary Clinton,” said one netizen on Guancha.cn. “In the US, political elites and media magnates have the freedom to say anything they want, while others can only choose to repeat their words or shut up,” said another, according to the Global Times.

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Pilger’s never weak.

Inside The Invisible Government: War, Propaganda, Clinton, Trump (John Pilger)

Some may remember in 2003 a succession of BBC reporters turning to the camera and telling us that Blair was “vindicated” for what turned out to be the crime of the century. The US television networks produced the same validation for George W. Bush. Fox News brought on Henry Kissinger to effuse over Colin Powell’s fabrications. The same year, soon after the invasion, I filmed an interview in Washington with Charles Lewis, the renowned American investigative journalist. I asked him, “What would have happened if the freest media in the world had seriously challenged what turned out to be crude propaganda?” He replied that if journalists had done their job, “there is a very, very good chance we would not have gone to war in Iraq”.

It was a shocking statement, and one supported by other famous journalists to whom I put the same question – Dan Rather of CBS, David Rose of the Observer and journalists and producers in the BBC, who wished to remain anonymous. In other words, had journalists done their job, had they challenged and investigated the propaganda instead of amplifying it, hundreds of thousands of men, women and children would be alive today, and there would be no ISIS and no siege of Aleppo or Mosul. There would have been no atrocity on the London Underground on 7th July 2005. There would have been no flight of millions of refugees; there would be no miserable camps.

When the terrorist atrocity happened in Paris last November, President Francoise Hollande immediately sent planes to bomb Syria – and more terrorism followed, predictably, the product of Hollande’s bombast about France being “at war” and “showing no mercy”. That state violence and jihadist violence feed off each other is the truth that no national leader has the courage to speak. “When the truth is replaced by silence,” said the Soviet dissident Yevtushenko, “the silence is a lie.”

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The banks control it all. Hudson suggests Trump should have claimed he stiffed the banks by going bankrupt six times, and say “if I can do that for me, I can do it for all of us”.

Prof. Michael Hudson: The Criminals Control The US (Renegade)

Prof. Michael Hudson, economist and author of ‘Killing the Host- How Financial Parasites and Debt Destroy the Global Economy’, speaks to Ross Ashcroft about the difficult choice faced by Americans in the upcoming US elections.

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“Soybeans? Yes, there has been a record bumper crop this year in the U.S., and strong demand from China helped fuel an export bonanza.”

Sorry, But The US Economy’s Growth Spurt Isn’t Going To Last (CNBC)

The U.S. economy grew in the third quarter at its fastest pace in two years, due largely to factors that are unlikely to last. GDP increased at a 2.9% rate, above expectations and at the best rate since the 5% posted in the third quarter of 2014. The positive surprise comes as the Fed contemplates its second interest rate hike in more than 10 years, and Americans are set to elect a new president in less than two weeks. However, a look under the hood shows that the U.S. is likely stuck in the same growth trap in which it has found itself since the Great Recession ended in mid-2009. Many of the gains came due to a surge in soybean exports. Soybeans? Yes, there has been a record bumper crop this year in the U.S., and strong demand from China helped fuel an export bonanza.

However, that’s not expected to last, and the U.S. also is likely to face competition in the market. But there were other factors besides soybeans not to like in this report. Consumer spending cooled to 2.1% from 4.3% in the previous quarter, residential investment tumbled by 6.2%, equipment purchases declined by 2.7% and the growth rate of final sales to domestic purchasers increased by just 1.4%. “Accordingly, a reasonable case could be made that this is actually a disappointing GDP report,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a client note. In addition to the soybean-led export growth, the GDP report also was aided by a 0.6 %age point gain in inventories.

Excluding “transitory” effects, the actual growth rate would have been closer to the 1.5% rate of the past four quarters, even including Friday’s reading, according to David Rosenberg, chief economist and strategist at Gluskin Sheff. “In other words, nothing here to write home about,” he said in his morning note.

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A German view of a once German bank.

The Story Of The Self Destruction Of Deutsche Bank (Spiegel)

Greed, provincialism, cowardice, unfocused aggression, mania, egoism, immaturity, mendacity, incompetence, weakness, pride, blundering, decadence, arrogance, a need for admiration, naiveté: If you are looking for words that explain the fall of Deutsche Bank, you can choose freely and justifiably from among the above list. The bank, 146 years after its founding, has become the target for all manner of pejoratives, and not just from outside observers. All of the above terms were used in interviews held during months of reporting into the causes of the downfall of Germany’s largest financial institution. They popped up over the course of several hours of interviews with four Deutsche Bank CEOs, three former and one current.

And they were uttered in interviews with eight additional senior bank managers and board members conducted over the course of several years, from the 1990s until today, and in meetings with captains of industry who know the bank well and during encounters with major stakeholders. More than anything, the disparaging words come up frequently in interviews with those who have worked or still work at the bank as customer service advisors, as branch managers or in positions lower down on the food chain. What we have found in the course of these myriad interviews – combined with the hours spent analyzing bank balance sheets, thousands of pages of files, committee meeting minutes and archive material – is that the collapse of Deutsche Bank is the result of years, decades, of failed leadership, culminating in the complete loss of control of the company by top managers during the period between 1994 and 2012.

It is a story about how Hilmar Kopper, Rolf E. Breuer and Josef Ackermann, the leaders of Deutsche Bank during those fateful years, essentially turned over the bank to a hastily assembled group of Anglo-American investment bankers before Anshu Jain, the prince of these traders, rose to the top and spent three more years sailing the bank full-speed-ahead into the shoals. It is also a story of how these bank heads, along with numerous other members of the management and supervisory boards, stood aside as Jain and the many other new investment banking heroes modified the staid German financial institution to serve their own purposes – essentially looting it and robbing it of its very soul – without leaving behind a better, stronger bank.

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You bet.

No 10 Must Have Made Nissan Big Promise, Say Ex-Business Minister (G.)

A former business minister has said that Nissan had previously suggested it could move production to France if it was not protected from trade tariffs. Anna Soubry said that No 10 must have privately told Nissan that Britain was remaining in the EU customs union or promised mitigation against any future tariffs before the car firm announced plans to build two new models in the UK. Greg Clark, the current business secretary, has insisted that no financial compensation was offered during numerous discussions with Nissan, which allowed the Japanese carmaker to commit to building its new Qashqai and X-Trail vehicles at its Sunderland plant. It is understood that the government provided a “letter of comfort” to Nissan promising that the UK car industry would remain competitive after Brexit.

Ministers, however, would neither confirm nor deny whether such a letter had been sent. Sources said the letter was understood to give an undertaking that Nissan would not face “additional costs” after the UK leaves the EU, implying that the taxpayer could be liable for subsidising the car industry in the event of tariffs being imposed on automotive exports. Downing Street also declined to say if more specific informal promises had been offered to Nissan and by implication to other carmakers, but industry sources have said they have been reassured by the government that they would not suffer from tariffs after the UK leaves the EU. No 10 is under pressure to publish the letter and Clark is to be called before the Commons business committee to explain what he has offered in the way of support to Nissan.

Soubry, who was a senior minister in the business department until July, said the carmaker had privately suggested to her in the past it would move production to France if it did not have a guarantee that it would be protected from tariffs or if the government did not do “something to mitigate the damage of tariffs”. “They didn’t give the detail of what they wanted, they made it very clear that without a guarantee that they would not be subject to tariffs or if they were subject to tariffs the government would do something to mitigate the damage of tariffs … that without that, they told me, my understanding actually was that they would go to Renault because they clearly had the capacity there,” she said. The Japanese car company has a strategic partnership with the French manufacturer.

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One question: how many Europeans would vote for CETA if they had the opportunity to do so?

EU-Canada CETA Trade Deal To Be Signed On Sunday (BBC)

Canada and the European Union are to sign a long-delayed landmark trade deal at a summit in Brussels on Sunday. Canadian Prime Minister Justin Trudeau described it as “great news” and said he looked forward to attending. A signing ceremony planned for Thursday had to be cancelled after a Belgian region vetoed the agreement. But after marathon talks, a consensus was finally reached allowing all 28 EU states to formally approve the deal on Friday. “Mission accomplished!” European Council President Donald Tusk tweeted. Mr Trudeau tweeted back: “Great news and I’m looking forward to being there.”

The Comprehensive Economic and Trade Agreement with Canada, known as Ceta, required all EU member states to endorse it. But seven years of negotiations were left hanging in the balance after Belgium’s French-speaking region of Wallonia demanded stronger safeguards on labour, environmental and consumer standards. It also wanted more protection for Walloon farmers, who would face new competition from Canadian imports. On Thursday, Belgian Prime Minister Charles Michel said that after marathon talks they had agreed on an addendum to the deal which addressed regional concerns. Prime Minister Robert Fico of Slovakia, which currently holds the EU presidency, said the final approval of the deal was “a milestone in the EU’s trade policy”.

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Their numbers are not THAT strong: “..support for the Pirates has been steady at around 20% over the past months, well above the 5% it won in the 2013 election but below a 40% peak.”

Iceland Voters To Choose Between Pirates And Establishment This Weekend (R.)

Iceland holds parliamentary elections on Saturday, with polls showing the opposition led by the anti-establishment Pirate Party could topple the current center-right ruling coalition. Icelanders’ faith in their political and financial establishment was shaken after the 2008 financial crisis and further eroded this year when several senior government figures were named in the Panama Papers. The biggest protests in the country’s history ultimately led to the resignation of Prime Minister Sigmundur David Gunnlaugsson of the Progressive Party and the early election this weekend. Founded by internet activists and led by poet Birgitta Jonsdottir, the Pirates promise to clean up corruption, look at granting asylum to former U.S. spy contractor Edward Snowden and relax restrictions on the use of the bitcoin virtual currency.

Recent polls show the Independence and Progressive parties stand to lose their current majority in the Althing, often described as the world’s oldest parliament, which means they would have to find a third coalition partner to stay in power. The Pirates would be looking to form a majority with the current opposition parties: The Left-Green Movement, the Social Democratic Alliance and Bright Future. An Oct. 27 poll conducted by Visir and Stod 2 showed 37% support for the government parties, while the four opposition parties polled around 47% combined. In a tight race, newly-established Vidreisn, the Reform Party, could become king-maker. The pro-European, liberal Vidreisn has not taken sides yet, but some analysts predict it would favor the current government as its economic policy leans rightwards. While the Independence Party remains the biggest party, support for the Pirates has been steady at around 20% over the past months, well above the 5% it won in the 2013 election but below a 40% peak.

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This stinks ten ways to Sunday.

The Strange Tale Of A Dating Site’s Attacks On Wikileaks Founder Assange (McCl.)

For an online dating site, toddandclare.com seems really good at cloak-and-dagger stuff. Disconnected phones. Mystery websites. Actions that ricochet around the globe. But the attention grabber is the Houston-based company’s target: Julian Assange, the founder of WikiLeaks, whose steady dumps of leaked emails from Hillary Clinton’s presidential campaign have given supporters of Donald Trump the only cheering news of the last few weeks. In some ways, toddandclare.com’s campaign against Assange is as revelatory as the leaked emails themselves, illustrating the powerful, sometimes unseen, forces that oppose WikiLeaks.

Whoever is behind the dating site has marshaled significant resources to target Assange, enough to gain entry into a United Nations body, operate in countries in Europe, North America and the Caribbean, conduct surveillance on Assange’s lawyer in London, obtain the fax number of Canada’s prime minister and seek to prod a police inquiry in the Bahamas. And they’ve done it at a time when WikiLeaks has become a routine target of Democratic politicians who portray Assange as a stooge of Russian President Vladimir Putin and his reported efforts to disrupt the U.S. election. One part of toddandclare’s two-pronged campaign put a megaphone to unproven charges that Assange made contact with a young Canadian girl in the Bahamas through the internet with the intention of molesting her.

The second part sought to entangle him in a plan to receive $1 million from the Russian government. WikiLeaks claims the dating site is “a highly suspicious and likely fabricated” company. In turn, the company lashed out at Assange on Thursday and “his despicable activities against American national security,” and warned journalists to “check with your libel lawyers first before printing anything that could impact or endanger innocent people’s lives.” So why are the parties to the melee coming out with both barrels blazing? That remains a mystery of the kind that might take a WikiLeaks-style document dump to suss out.

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Jul 282016
 
 July 28, 2016  Posted by at 8:11 am Finance Tagged with: , , , , , , , , , ,  


Marion Post Wolcott Main Street. Sheridan, Wyoming 1941

Beijing’s Property Sales Surge 65% In 2015 (R.)
How a Chinese Highway Became a Boulevard of Broken Dreams (WSJ)
China Shadow Banking Assets Grew 30% In 2015 (R.)
An Auction House Learns the Art of Shadow Banking (BBG)
Japan’s Real Problem Is Too Much Debt (720G)
Can the World Deal With a New Bank Crisis? (Satyajit Das)
Wolfgang Schäuble Bails Out Spain, Portugal (Pol.)
Households on the Hook for Italy’s Next Bailout (BBG)
Buying Longer Bonds Holds Danger (WSJ)
Trump Draws Ire After Urging Russia To Find ‘Missing’ Clinton Emails (R.)
In Clash Of Billionaires, Bloomberg Calls Trump White House Race ‘A Con’ (R.)
IRS Launches Investigation Of Clinton Foundation (DC)
Turkey Shuts Down 45 Newspapers, 16 TV Stations (AP)
Taxes On Apple’s Offshore Assets Would Cover Most Of US Education Budget (MW)
The Slot Machine in Your Pocket (Spiegel)

 

 

Government blows bubble. Rinse and repeat.

Beijing’s Property Sales Surge 65% In 2015 (R.)

Property sales in Beijing rose 64.8% in 2015, boosted by more favorable housing policies, according to a real estate white paper released by the city’s government. Increased government stimulus sparked a sharp reversal in the market after sales volumes fell 30% in 2014, the white paper said. The benchmark interest rate for housing loans also dropped to its lower level in almost a decade, after several interest rate cuts, the paper noted. “The country’s housing credit and tax policies have been at their most favorable levels in recent years,” the paper said.

The number of newly-built commercial homes and existing stock sold in Beijing increased 26% and 90.7% respectively year-on-year in 2015, according to the paper published by Beijing Municipal Commission of Housing and Urban-Rural Development. China reported slightly stronger-than-expected economic growth in the second quarter as the housing boom and a government infrastructure building spree boosted demand for materials from cement to steel. But recent data has also indicated that property investment growth is cooling. Some of the country’s biggest cities have had to impose curbs on property purchases as sharp price rises raise fears of possible asset bubbles.

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This bubble is popping, though.

How a Chinese Highway Became a Boulevard of Broken Dreams (WSJ)

A highway project here that is four years behind schedule and hundreds of millions of dollars over budget helps explain why Beijing s effort to raise infrastructure spending is an increasingly ineffective way to boost the economy. When construction on the Chang An Expressway began in 2008 it seemed a sure bet. Its private partners stood to collect decades of lucrative toll revenue. The economy and the environment would benefit by slashing three hours off a four-hour trip. But the project, in central Hunan province, has been beset by financial problems, resident protests and a corruption probe, issues that also have hindered hundreds of other projects in China.

Such setbacks are hurting Beijing s efforts to halt a decline in economic growth that is rippling across the globe and threatening political stability at home. China also is drawing less benefit from the infrastructure projects it completes. After a 15-year period in which the country built thousands of roads, airports, bridges and buildings, the economic benefit of adding even more is decidedly less valuable. Local governments’ heavy debt loads from prior stimulus efforts are further obstructing China’s efforts to stimulate the economy with infrastructure spending. More of their borrowed money is going to pay back previous loans. Many of these projects lose money, adding still more debt.

The upshot: China needed twice as much investment per unit of growth in 2015 as it did in 2010, official data show. This hasn’t stopped Beijing from doubling down on infrastructure spending as exports, manufacturing and other growth engines sputter. The government plans to spend $749 billion on transport projects over the next three years, compared with $171 billion worth built last year.

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Crackdown? Only in name. China is addicted to the shadows.

China Shadow Banking Assets Grew 30% In 2015 (R.)

Shadow banking activity in China has expanded further and now accounts for nearly a third of the total banking sector assets, raising financial risks in the world’s second-largest economy, rating agency Moody’s Investor Service said on Wednesday. Shadow banking assets in China increased by 30% last year, reaching almost 54 trillion yuan (6.17 trillion pounds), according to Moody’s estimates. That is equivalent to about 78% of China’s total economic output and 27.6% of its banking assets. In 2011, shadow banking products accounted for 17.2% of total banking assets, and the share grew to 24.3% in 2014. China’s crackdown on risky practices in the thinly regulated shadow banking system has taken on fresh urgency amid a growing number of corporate defaults, and as policymakers appear worried about the risks of relying on too much debt-fuelled stimulus.

Despite this, shadow banking’s share in bank loans and total bank assets has expanded rapidly, as sectors and firms reeling from overcapacity and poor credit profiles turn to other sources of funding, and investors hunt for higher yields. “The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said the Moody’s report, adding the growth highlights “spillover risks” to the financial system due to its interconnectedness. Years of breakneck growth for China’s top insurers have been partly fuelled by a splurge on shadow banking-linked products that could punch multi-billion-dollar holes in their balance sheets, a Reuters analysis showed.

Mid-tier Chinese banks are also increasingly using complex instruments to make new loans and restructure existing loans that are then shown as low-risk investments on balance sheets, masking the scale and risks of the slowing economy. The takeover tussle embroiling top Chinese developer China Vanke has also showed how local banks are increasingly exposed to highly volatile domestic stock markets through shadow lending products. “The increasing size of the shadow banking system means that during a disorderly contraction, banks could have difficulty replacing shadow banking credit, leaving borrowers who rely on such financing at risk of a credit crunch,” Moody’s said.

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Shadow banking comes in many different guises.

An Auction House Learns the Art of Shadow Banking (BBG)

A year before he got caught up in a U.S. money-laundering investigation, Malaysian financier Jho Low was looking to borrow more than $100 million without having to answer all the nosy know-your-customer questions required by U.S. banks such as JPMorgan Chase. “Prefer the boutique banks that can move fast vs the large ones like JPM,” Low wrote on March 13, 2014, to an employee of a private art dealership that had sold him a painting by Claude Monet for $35 million a few months earlier. The lender “can take all the art no problems,” he wrote the next day. “All in Geneva free port. Speed is the most important and one with a fairly quick and relaxed kyc process.”

Low got his money a month later, not from a bank but from Sotheby’s, an auction house that isn’t subject to the same money-laundering scrutiny by regulators. He pledged 17 works of art, valued between $191.6 million and $258.3 million, to secure a $107 million loan, according to a U.S. Justice Department complaint filed July 20 in an effort to seize more than $1 billion of assets allegedly siphoned from a Malaysian state fund. As prices for art skyrocketed, Sotheby’s and other firms have become shadow banks, making millions of dollars of legal loans outside the regulated financial system and raising concerns that such financing could facilitate money laundering. Sotheby’s tripled lending to $682 million over the four years ended in 2015.

Last year it almost doubled, to $1 billion, a revolving credit facility provided by banks including JPMorgan and HSBC that it can use to make loans. “One way to launder is to use art as a security for a loan,” said David Hall, who spent 10 years as a special prosecutor for the Federal Bureau of Investigation’s Art Crime Team and is now a partner at law firm Wiggin & Dana. Hall, who wouldn’t comment about Sotheby’s or the Low case, said the aim is to use ill-gotten funds to purchase assets that can be used as collateral for a loan. “The level of scrutiny you’ll receive from a bank is much higher than you will receive from an auction house.”

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It’s everybody’s real problem, but even more so for Japan.

Japan’s Real Problem Is Too Much Debt (720G)

The Japanese economy has been the poster child for economic malaise and bad fortune for so long that even the most radical policy responses no longer garner much attention. In fact, recent policy actions intended to weaken the Yen have resulted in significant appreciation of the yen against the currencies of Japan’s major trade partners, further crippling economic activity. The frustration of an appreciating currency coupled with deflation and zero economic growth has produced signs that what Japan has in store for the world falls squarely in to the category of “you ain’t seen nothin’ yet.” Assuming new fiscal and monetary policies will be similar to those enacted in the past is a big risk that should be contemplated by investors.

The Japanese economy has been fighting weak growth and deflationary forces for over 25 years. Japan’s equity market and real estate bubbles burst in the first week of 1990, presaging deflation and stagnant economic growth ever since. Despite countless monetary and fiscal efforts to combat these economic ailments, nothing seems to work. Any economist worth his salt has multiple reasons for the depth and breadth of these issues but very few get to the heart of the problem. The typical analysis suggests that weak growth in Japan is primarily being caused by weak demand. Over the last 25 years, insufficient demand, or a lack of consumption, has been addressed by increasingly incentivizing the population and the government to consume more by taking on additional debt.

That incentive is produced via lower interest rates. If demand really is the problem, however, then some version of these policies should have worked, but to date they have not. If the real problem, however, is too much debt, which at 255% of Japan’s GDP seems a reasonable assumption to us, then the misdiagnoses and resulting ill-designed policy response leads to even slower growth, more persistent deflationary pressures and exacerbates the original problem.

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Not much choice.

Can the World Deal With a New Bank Crisis? (Satyajit Das)

As Europe braces for the release of its bank stress tests on Friday, the world could be on the verge of another banking crisis. The signs are obvious to all. The World Bank estimates the ratio of non-performing loans to total gross loans in 2015 reached 4.3%. Before the 2009 global financial crisis, they stood at 4.2%. If anything, the problem is starker now than then: There are more than $3 trillion in stressed loan assets worldwide, compared to the roughly $1 trillion of U.S. subprime loans that triggered the 2009 crisis. European banks are saddled with $1.3 trillion in non-performing loans, nearly $400 billion of them in Italy. The IMF estimates that risky loans in China also total $1.3 trillion, although private forecasts are higher. India’s stressed loans top $150 billion.

Once again, banks in the US, Canada, UK, several European countries, Asia, Australia and New Zealand are heavily exposed to property markets, which are overvalued by historical measures. In addition, banks have significant exposure to the troubled resource sector: Lending to the energy sector alone totals around $3 trillion globally. Borrowers are struggling to service that debt in an environment of falling commodity prices, weak growth, overcapacity, rising borrowing costs and (in some cases) a weaker currency. To make matters worse, the world’s limp recovery since 2009 is intensifying loan stresses. In advanced economies, low growth and disinflation or deflation is making it harder for companies to pay off what they owe. Many European firms are suffering from a lack of global competitiveness, exacerbated by the effects of the single currency.

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Greece should sue him over this.

Wolfgang Schäuble Bails Out Spain, Portugal (Pol.)

Ahead of Wednesday’s meeting of the EU’s 27 commissioners, Spain and Portugal looked to be headed for the eurozone’s version of politically embarrassing fiscal purgatory. There was no question that the Iberian duo’s budget deficits were in blatant breach of the single currency zone’s rules. Momentum was growing for the Commission to impose, for the first time ever, a fine totaling in the millions of euros. Even Jean-Claude Juncker, the Commission chief, had seemingly changed his previously skeptical views on sanctions, pushing his colleagues in recent weeks to enforce the rules and shore up Brussels’ credibility on eurozone governance. Then salvation arrived from an unlikely source: Wolfgang Schäuble.

The German finance minister, curmudgeonly fiscal hawk and scourge of spendthrift southern Europeans, broke with public type in a concerted, last-minute campaign to stop the sanctions, according to people familiar with his actions. Over the past weeks and days, Schäuble worked the phones and used personal encounters, pressing commissioners on the fence, mostly from his own center-right political block, to cancel the threatened fine. The behind-the-scenes intervention was driven by political considerations particular to this moment that trumped Schäuble’s long-standing demands for the eurozone nations to keep their budgets in order and abide by commonly agreed rules.

[..] As the consensus grew against a fine, Juncker urged the participants to make clear to the outside world why Brussels ducked, once again, imposing sanctions on rule breakers. “We must not be more Catholic than the Pope, but please make it known that the Pope wanted a fine of zero,” Juncker said, speaking in French at the closed-door meeting, according to a source in the room.

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And now Schäuble can save Italy too.

Households on the Hook for Italy’s Next Bailout (BBG)

While the stability of Italy’s banks has been a front-burner issue for policy makers since the first tremors of the global financial crisis, the result of stress tests on Friday could usher in the final stage of solving their predicament. Retail investors own almost half of the most vulnerable securities, a legacy of banks using their customers as a piggy bank for cheap funding. UniCredit declined to comment on Imperatore’s recollection. The bank’s subordinated bonds available to retail investors trade close to par, indicating investors don’t expect to suffer losses. The bank is considering raising as much as €5 billion from shareholders and selling its entire stake in Poland’s Bank Pekao to raise capital, people familiar with the matter said on Wednesday.

At the zenith of the financial crisis, between July 2007 and June 2009, 80% of Italian banks’ bonds were sold to retail investors, according to regulator Consob. Through savers, banks funded themselves at a similar cost to the Italian government, whereas they gave professional money managers an extra%age point in debt interest, the 2010 report found. The channel of selling junior bonds to savers has virtually shut this year. So far in 2016, only one Italian bank, Mediobanca, has sold subordinated debt with an initial investment designed to attract small-scale investors – selling €200 million of junior bonds with a minimum denomination of €1,000. In the same period last year 10 banks sold €1.4 billion of notes with the same minimum subscription size.

Still, Italian savers held €31 billion of subordinated bank bonds as of October, more than double the €13 billion in the hands of foreign investors, according to the Bank of Italy. That translates to about €1,260 of the junior bank debt for every household in Italy. Banca Monte dei Paschi di Siena, which has more than €27 billion of toxic loans on its books and needs to be recapitalized, has about €5 billion of junior debt.

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“..if yields merely rise back to where they started the year, it would be catastrophic for those who have chased longer duration. The 30-year Treasury would lose 14% of its value, while Japan’s 40-year would lose a quarter of its value..”

Buying Longer Bonds Holds Danger (WSJ)

Investors in Japan’s 40-year bond have lost 24 years of coupon income in just three weeks as the rush into long-dated safe government paper went into sharp reverse. At one level, the 10% fall in the price of the longest-dated Japanese government bond is just a correction after this year’s extraordinary rally, which delivered returns of more than 50% before the pullback. At another, it highlights something dangerous at work in today’s markets: the scale of the risks investors are willing to take as they try to avoid anything that depends on economic growth. Japan’s bond selloff was worse than other markets’, as investors prepared for next week’s ¥28 trillion ($268 billion) spending and tax-cut package and a possible further Bank of Japan stimulus this Friday.

U.S., U.K. and German bond prices have also dropped since early July, though by less, as global demand weakened for long-duration assets. The demand for safe assets with a long duration—a proxy for how long it takes an investor to get his money back—was mirrored in stocks and corporate bonds. Rather than search out the highest-yielding assets, investors looked for those with secure yield, even if it was lower. So this year, triple-A-rated corporate bonds have outperformed double-A or single-A bonds, according to Barclays data. The same applied for junk bonds, with the higher ratings outperforming lower ones. (An exception was bonds close to or already in default, which were mainly energy companies and so were boosted by the rising oil price.)

[..] if yields merely rise back to where they started the year, it would be catastrophic for those who have chased longer duration. The 30-year Treasury would lose 14% of its value, while Japan’s 40-year would lose a quarter of its value, equal to 63 years of coupons. Has the long-run economic outlook really changed so much since January?

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Excuse me? That post is already taken: “..The Clinton campaign shot back that Trump was posing a possible national security threat..”

Trump Draws Ire After Urging Russia To Find ‘Missing’ Clinton Emails (R.)

Republican Donald Trump on Wednesday invited Russia to dig up tens of thousands of “missing” emails from Hillary Clinton’s time at the U.S. State Department, vexing intelligence experts and prompting Democrats to accuse him of urging foreigners to spy on Americans. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” Trump, the Republican presidential nominee, told reporters. Trump made the remark at a testy news conference at his Doral golf resort in Florida that allowed him to steal some of the limelight from the Philadelphia convention where Clinton on Thursday will accept the Democratic presidential nomination for the Nov. 8 election.

The Clinton campaign shot back that Trump was posing a possible national security threat by encouraging a foreign power to conduct espionage in the United States. Some intelligence experts said the comments raised questions about Trump’s judgment. A spokesman for Trump, Jason Miller, tried to tamp down the storm of protest, saying Trump did not urge Russia to hack Clinton’s emails. Trump said on Twitter that if anyone had Clinton’s emails, “perhaps they should share them with the FBI!” The criticism of Trump’s comments reverberated at the Democratic National Convention where speakers brought up the episode to try to intensify Democratic support for Clinton, who is running neck and neck with Trump in the polls.

“Donald Trump today once again took Russia’s side. He asked the Russians to interfere in American politics,” longtime Clinton supporter and former CIA Director Leon Panetta said. “Donald Trump … is asking one of our adversaries to engage in hacking or intelligence efforts against the United States of America to affect the election.” Another speaker, retired U.S. Rear Admiral John Hutson, said of Trump: “This morning, he personally invited Russia to hack us. That’s not law and order, that’s criminal intent.”

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You ain’t helping, Mikey…

In Clash Of Billionaires, Bloomberg Calls Trump White House Race ‘A Con’ (R.)

New York media mogul Michael Bloomberg assailed fellow billionaire Donald Trump on Wednesday, calling his U.S. presidential race a “con” and ripping into his history of bankruptcies and lawsuits. “Trump says he wants to run the nation like he’s running his business? God help us,” Bloomberg told the Democratic National Convention in Philadelphia to roaring applause. “I’m a New Yorker and I know a con when I see one.” Formerly a Republican and now an independent, Bloomberg was for the most part greeted warmly by the audience in the Wells Fargo Center arena where he threw his support behind the Democrats’ presidential nominee, Hillary Clinton.

The owner of the Bloomberg media empire and a former New York City mayor, Bloomberg was an odd choice for a speaker at the Democratic conclave, where many party progressives have railed against the influence of billionaires in politics. “Let me thank all of you for welcoming an outsider here, to deliver what will be an unconventional convention speech,” he said when he took the stage, eliciting cheers. “I am not here as a member of any party. I am here for one reason: to explain why I believe it is imperative that we elect Hillary Clinton as the next president of the United States.” Bloomberg had considered running for the White House as an independent this year but dropped the idea in March, saying it could increase the chances Trump would win.

Bloomberg has known Trump casually for years and twice appeared on Trump’s reality TV show “The Apprentice.” But since Trump entered the race for president in June 2015, Bloomberg has taken issue with him, lashing out at his policies and fiery rhetoric, especially his call to ban Muslims from entering the country and his promise to wall off the Mexican border and deport millions of undocumented foreigners.

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If they can get the FBI to stop, what good would the IRS be?

IRS Launches Investigation Of Clinton Foundation (DC)

IRS Commissioner John Koskinen referred congressional charges of corrupt Clinton Foundation “pay-to-play” activities to his tax agency’s exempt operations office for investigation, The Daily Caller News Foundation has learned. The request to investigate the Bill, Hillary and Chelsea Clinton Foundation on charges of “public corruption” was made in a July 15 letter by 64 House Republicans to the IRS, FBI and Federal Trade Commission (FTC). They charged the foundation is “lawless.” The initiative is being led by Rep. Marsha Blackburn, a Tennessee Republican who serves as the vice chairwoman of the House Committee on Energy and Commerce, which oversees FTC. The FTC regulates public charities alongside the IRS.

The lawmakers charged the Clinton Foundation is a “lawless ‘pay-to-play’ enterprise that has been operating under a cloak of philanthropy for years and should be investigated.” Koskinen’s July 22 reply came only a week after the House Republicans contacted the tax agency. It arrived to their offices Monday, the first opening day of the Democratic National Convention in Philadelphia. “We have forwarded the information you have submitted to our Exempt Organizations Program in Dallas,” Koskinen told the Republicans. The Exempt Organization Program is the division of the IRS that regulates the operations of public foundations and charities.

It’s the same division that was led by former IRS official Lois Lerner when hundreds of conservative, evangelical and tea party non-profit applicants were illegally targeted and harassed by tax officials. Blackburn told TheDCNF she believes the IRS has a double standard because, “they would go after conservative groups and religious groups and organizations, but they wouldn’t be looking at the Clinton Foundation for years. It was as if they choose who they are going to audit and question. It’s not right.” Blackburn said she and her colleagues will “continue to push” for answers on the Clinton Foundation’s governing policies, including its insular board of directors. She said they also will examine conflicts of interest and “follow the money trail.”

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No schools, no papers, no TV. How does that country run?

Turkey Shuts Down 45 Newspapers, 16 TV Stations (AP)

Turkey’s state run news agency says close to 1,700 officers have been formally discharged from the military following the country’s failed coup. Anadolu Agency also says the government has decided to close down dozens of media organizations, including 45 newspapers and 16 television stations. The government says a U.S.-based Muslim cleric is behind the failed uprising by a faction within the military that led to some 290 deaths on July 15. Thousands have been detained for suspected links to the coup, including Calgary’s Davud Hanci, an imam for the Correctional Service Canada and the Alberta correctional services who went to Turkey with his family on July 7 to visit his ailing father.

Hanci was detained and accused of working for U.S.-based cleric Fethullah Gulen, who Turkey alleges orchestrated the failed July 15 military coup. Gulen has repeatedly denied the claims. Hanci’s friends and family say he is innocent and they fear for his safety. Tens of thousands in Turkey have also been purged from state institutions. Earlier, authorities issued warrants for the detention of 47 former executives or senior journalists of Turkey’s Zaman newspaper for alleged links to Gulen. Such detentions have raised concerns that people could be targeted simply for criticizing the government. The media watchdog Reporters Without Borders condemned Turkey’s purges of journalists, saying they have assumed “increasingly alarming proportions.”

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“Apple and its massive $181.1 billion overseas stash, a $70 billion increase from the prior year.”

Taxes On Apple’s Offshore Assets Would Cover Most Of US Education Budget (MW)

The amount of money stashed overseas by U.S. multinationals has exploded in recent years, doubling between 2008 and 2014 to more than $2 trillion. For some perspective on the numbers, cost-estimating website HowMuch.net crunched the most recent data and created a telling interactive chart. Topping the list: Apple and its massive $181.1 billion overseas stash, a $70 billion increase from the prior year.

That total corresponds to $59.2 billion in deferred taxes, which is enough to cover more than two-thirds of the federal budget for education, training and employment, according to the 2014 numbers compiled by Citizens for Tax Justice last October. Elsewhere, General Electric’s taxes could take care of almost 5% of our Social Security costs, while taxes from Microsoft had it kept its money in the U.S., could have covered a fifth of all federal spending on veteran’s benefits. According to estimates, the prevalence of offshore tax havens causes the U.S. to lose out on $90 billion in federal income taxes each year. That’s no small chunk.

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“The average person checks their phone 150 times a day. Why do we do this? Are we making 150 conscious choices?”

The Slot Machine in Your Pocket (Spiegel)

When we get sucked into our smartphones or distracted, we think it’s just an accident and our responsibility. But it’s not. It’s also because smartphones and apps hijack our innate psychological biases and vulnerabilities. I learned about our minds’ vulnerabilities when I was a magician. Magicians start by looking for blind spots, vulnerabilities and biases of people’s minds, so they can influence what people do without them even realizing it. Once you know how to push people’s buttons, you can play them like a piano. And this is exactly what technology does to your mind. App designers play your psychological vulnerabilities in the race to grab your attention. I want to show you how they do it, and offer hope that we have an opportunity to demand a different future from technology companies.

If you’re an app, how do you keep people hooked? Turn yourself into a slot machine. The average person checks their phone 150 times a day. Why do we do this? Are we making 150 conscious choices? One major reason why is the number one psychological ingredient in slot machines: intermittent variable rewards. If you want to maximize addictiveness, all tech designers need to do is link a user’s action (like pulling a lever) with a variable reward. You pull a lever and immediately receive either an enticing reward (a match, a prize!) or nothing. Addictiveness is maximized when the rate of reward is most variable.

Does this effect really work on people? Yes. Slot machines make more money in the United States than baseball, movies, and theme parks combined. Relative to other kinds of gambling, people get “problematically involved” with slot machines three to four times faster according to New York University professor Natasha Dow Schüll, author of “Addiction by Design.”

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