Jan 212017
 
 January 21, 2017  Posted by at 10:57 am Finance Tagged with: , , , , , , , ,  3 Responses »
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Bettmann/Getty Minimum Wage 1963


Trump’s Declaration of War (Paul Craig Roberts)
The Audacity of Trump (WSJ)
Trump Trade Strategy Starts With Quitting TPP – White House (R.)
Trump, in Oval Office, Signs First Order on Obamacare (R.)
Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)
Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)
As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)
The Curse of Econ 101 (Atlantic)
Economics, Society, And The Environment (EI)
Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan
With New Constitution, Erdogan Eyes For One-Man Rule (GP)
Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

 

 

Who are Trump’s real enemies? There’s no easy answer. PCR concludes: “President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.”

Trump’s Declaration of War (Paul Craig Roberts)

President Trump’s brief inaugural speech was a declaration of war against the entirety of the American Ruling Establishment. All of it. Trump made it abundantly clear that Americans’ enemies are right here at home: globalists, neoliberal economists, neoconservatives and other unilateralists accustomed to imposing the US on the world and involving us in endless and expensive wars, politicians who serve the Ruling Establishment rather than the American people, indeed, the entire canopy of private interests that have run America into the ground while getting rich in the process. If truth can be said, President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.

The interest groups designated by Trump as The Enemy are well entrenched and accustomed to being in charge. Their powerful networks are still in place. Although there are Republican majorities in the House and Senate, most of those in Congress are answerable to the ruling interest groups that provide their campaign funds and not to the American people or to the President. The military/security complex, offshoring corporations, Wall Street and the banks are not going to roll over for Trump. And neither is the presstitute media, which is owned by the interest groups whose power Trump challenges. Trump made it clear that he stands for every American, black, brown, and white. Little doubt his declaration of inclusiveness will be ignored by the haters on the left who will continue to call him a racist just as the $50 per hour paid protesters are doing as I write.

Indeed, black leadership, for example, is enculturated into the victimization role from which it would be hard for them to escape. How do you pull together people who all their lives have been taught that whites are racists and that they are the victims of racists? Can it be done? I was just on a program briefly with Press TV in which we were supposed to provide analysis of Trump’s inaugural speech. The other commentator was a black American in Washington, DC. Trump’s inclusiveness speech made no impression on him, and the show host was only interested in showing the hired protesters as a way of discrediting America. So many people have an economic interest in speaking in behalf of victims that inclusiveness puts them out of jobs and causes.

So along with the globalists, the CIA, the offshoring corporations, the armaments industries, the NATO establishment in Europe, and foreign politicians accustomed to being well paid for supporting Washington’s interventionist foreign policy, Trump will have arrayed against him the leaders of the victimized peoples, the blacks, the hispanics, the feminists, the illegals, the homosexuals and transgendered. This long list, of course, includes the white liberals as well, as they are convinced that flyover America is the habitat of white racists, misogynists, homophobes, and gun nuts. As far as they are concerned, this 84% of geographical US should be quarantined or interred.

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WSJ licking up to power?

The Audacity of Trump (WSJ)

Donald J. Trump takes the oath of office on Friday facing unprecedented opposition but also an extraordinary opportunity. He confronts the paradox of a country skeptical that he has the personal traits for the Presidency but still hopeful he can fulfill his promise to shake up a government that is increasingly powerful even as it fails to work. In this respect he is the opposite of President Obama, whom Americans admire personally but see as a failure in delivering on his promises. Mr. Trump begins his Presidency without a reservoir of personal goodwill, so more than most Commanders in Chief he will have to win over Americans with results. He will have to do this, moreover, against a political opposition that is blunt and relentless in wanting him to fail. Inaugurations are typically moments of political unity and appeals to larger national purpose, but Mr. Trump will get no honeymoon.

Democratic leaders are calling his election illegitimate, and most of the media wants Mr. Trump to implode—for reasons of partisanship, ideology or simply to vindicate their view during the campaign that he couldn’t and shouldn’t win. No President since Nixon will face a more hostile resistance in the press and permanent bureaucracy. Yet rather than rage against this hostility, Mr. Trump should view it as an opportunity. So many elites expect him to fail that even small early successes will confound them. So many on the left are predicting the rise of fascism that he can make them look foolish by working well with Congress. So many in the media will portray him as the leader of a gang of billionaires that he can turn the tables with an up-from-poverty and education choice campaign.

Mr. Trump owes his narrow election victory to center-right and independent voters who decided he was a risk worth taking. Notably, they seem to be reserving judgment. In the new Wall Street Journal/NBC News poll, Mr. Trump’s personal popularity rating is 10 points underwater, 38% positive, 48% negative—the lowest of any modern President at inauguration. But as notably, the public is better disposed to Mr. Trump’s agenda than to his character and temperament. Tax reform, a faster campaign against Islamic State, improving roads and bridges, and fixing health care enjoy widespread support. If voters are ambivalent about Mr. Trump personally, he has a policy opening to earn their support.

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Hard not to be happy about this.

Trump Trade Strategy Starts With Quitting TPP – White House (R.)

The new U.S. administration of President Donald Trump said on Friday its trade strategy to protect American jobs would start with withdrawal from the 12-nation Trans-Pacific Partnership (TPP) trade pact. A White House statement issued soon after Trump’s inauguration said the United States would also “crack down on those nations that violate trade agreements and harm American workers in the process.” The statement said Trump was committed to renegotiating another trade deal, NAFTA, which was signed in 1994 by the United States, Canada and Mexico. “For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country,” it said.

“As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.” The statement said “tough and fair agreements” on trade could be used to grow the U.S. economy and return millions of jobs to America. “This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers.” If NAFTA partners refused to give American workers a fair deal in a renegotiated agreement, “the President will give notice of the United States’ intent to withdraw from NAFTA,” the statement added.

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Better get a replacement fast. You don’t want stories of people dying due to lack of access to health care, in your first weeks or months.

Trump, in Oval Office, Signs First Order on Obamacare (R.)

President Donald Trump directed government agencies on Friday to freeze regulations and take steps to weaken Obamacare, using his first hours in the White House to make good on a campaign promise to start dismantling his predecessor’s healthcare law. Heading into the Oval Office shortly after the conclusion of his inaugural parade, Trump signed an order on the Affordable Care Act that urged government departments to “waive, defer, grant exemptions from, or delay the implementation” of provisions that imposed fiscal burdens on states, companies or individuals. It also called for efforts to give states greater flexibility in implementing healthcare programs while developing “a free and open market in interstate commerce for the offering of healthcare services and health insurance.”

Health experts had speculated that Trump could expand exemptions from the so-called individual mandate, which requires Americans to carry insurance or face a penalty, or the requirement that employers offer coverage. Experts also believe the administration could try to reduce the “essential benefits,” such as maternity care and mental health services, that insurance plans must cover. The White House did not provide further details about the executive order. Trump’s spokesman Sean Spicer said the White House also directed an immediate regulatory freeze for all government agencies in a memo from Trump’s chief of staff, Reince Priebus. He did not offer details. Repealing and replacing the Affordable Care Act, one of former President Barack Obama’s signature laws, was a central pledge for Trump during the presidential election campaign.

Republicans in the U.S. Congress have not yet laid out a plan to recast the insurance program. In a hastily arranged ceremony, surrounded by some of his aides, Trump sat behind the presidential Resolute Desk and signed the order. He also signed commissions for his newly confirmed defense secretary, James Mattis, and his homeland security secretary, John Kelly. Trump spoke briefly about his day with reporters. “It was busy, but good. It was a beautiful day,” he said. Vice President Mike Pence then swore in Mattis and Kelly in a separate ceremony. There were other signs of change in the Oval Office, which Obama vacated on Friday morning. Golden drapes hung where crimson ones had earlier in the day and new furniture dotted the room.

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The entire US housing system is such a mess it’s hard to know where to begin. Whatever happens, it will be painful.

Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)

Soon after Donald Trump was sworn in as president, his administration undid one of Barack Obama’s last-minute economic-policy actions: a mortgage-fee cut under a government program that’s popular with first-time home buyers and low-income borrowers. The new administration on Friday said it’s canceling a reduction in the Federal Housing Administration’s annual fee for most borrowers. The cut would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year. The reversal comes after Trump’s team criticized the Obama administration for adopting new policies as it prepared to leave office. In the waning days of the administration, the White House announced new Russia sanctions, a ban on drilling in parts of the Arctic and many other regulations.

Last week, Obama’s Housing and Urban Development secretary, Julian Castro, said the FHA would cut its fees. The administration didn’t consult Trump’s team before the announcement. Republicans have argued in the past that reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults. [..] A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.” Senate Democratic leader Chuck Schumer of New York took to the chamber’s floor to denounce the reversal. “It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”

Mark Calabria, director of financial regulation studies for the libertarian Cato Institute, said it was appropriate for the administration to examine last-minute decisions by its predecessor, “especially when those decisions appear to be purely motivated by politics.” Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said at his confirmation hearing last week that he was disappointed the cut was announced in Obama’s final days in office. The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5% with a credit score of 580, on a scale of 300 to 850. The Obama administration announced last week it would cut the insurance premium by a quarter of a %age point to 0.60%, effective on Jan. 27.

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The products of a failed consensus system. Or in other words: “While you were sleeping”. Obama’s last phone call from the White House was to Merkel, not a coincidence.

Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)

Far-right populist leaders from Germany, France, Italy and the Netherlands meet in the German city of Koblenz on Saturday to present their vision for “a free Europe” that would dismantle the European Union. Marine Le Pen, who is expected to make it into a May 7 second-round run-off for the French presidency, is due to speak at the meeting, along with Frauke Petry of the anti-immigration Alternative for Germany (AfD). They will be joined by Geert Wilders, leader of the Dutch far-right Freedom Party (PVV) who was last month convicted of discrimination against Moroccans, and Matteo Salvini of the Northern League who wants to take Italy out of the euro. Emboldened by Britons’ vote last year to leave the European Union, the leaders are meeting under the slogan “Freedom for Europe” and aim to strengthen ties between their like-minded parties, whose nationalist tendencies have hampered close collaboration in the past.

“This gives us an opportunity to see how we stand with other European parties,” a spokeswoman for Salvini said. Le Pen told France’s Radio Classique that the meeting was proof that her party was not isolated. “It is therefore the revolution of the people that we are taking part in. It is obviously very important to show that the cooperative Europe we want to achieve (is reflected) in our cooperation,” she said. Several leading German media have been barred from the meeting, which is being organized by the Europe of Nations and Freedom (ENF), the smallest group in the European Parliament, in a year when the parties are hoping for electoral breakthroughs. Populist anti-immigration parties are on the rise across Europe as high unemployment and austerity, the arrival of record numbers of refugees and militant attacks in France, Belgium and Germany feed voter disillusionment with traditional parties.

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“Judged by current conditions, we won’t publish it in the future..”

As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)

That didn’t take long. Earlier this week we reported that after 19 straight months of continued acceleration in home prices, China’s latest housing bubble may have finally burst (again) after December prices in the 70 cities tracked by the NBS, rose by 12.7%, below the 12.9% annual growth rate in the previous month – the first annual decline in nearly 2 years. Fast forward to Friday, when at least two major Chinese private providers of home price data stopped publishing the figures, just as the housing market is stating to cool off at a dramatic pace across all Tier cities. According to Reuters, the China Index Academy, a unit of U.S.-listed Fang Holdings, has stopped distributing monthly housing price index data for 100 cities that it usually issued at the start of the month. The academy said it had suspended distribution indefinitely, without giving a reason for the suspension.

“I don’t know who exactly is making the order, and it’s not mandatory,” said a source with knowledge of the matter, who declined to be identified as the topic is a sensitive one. Home price data from private providers tends to show sharper increases than official data from the National Bureau of Statistics (NBS), which publishes monthly and annual %age changes in 70 major cities. It also overextends on the downside, which according to official data, has now begun, and may explain the self-imposed censorship. Since last summer, in an attempt to cool the overheating housing market, China’s government had levied curbs on buying and ownership to rein in soaring prices and limit asset bubble risks. E-house China, another influential private real estate consultancy also indefinitely suspended its monthly housing price index for 288 cities.

“Judged by current conditions, we won’t publish it in the future,” said Cherilyn Tsui, a public relations officer at CRIC, the consultancy’s real estate research branch. “We stopped distributing prices data a few months ago. At first it was just no external distribution, but now even internally we don’t distribute any more,” she told Reuters. While Tsui said she did not know the reason for the halt, she added that data on sales volumes and inventories would still be published. “Housing prices are an extremely sensitive matter right now,” a second source with knowledge of the matter told Reuters. Perhaps the reason is that having created a massive bubble to the upside, Beijing is hoping to delay the descent in prices in order to attain a smooth landing at a time when China is already faced with record capital outflows, a plunging currency and all time high levels of debt.

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Treating people like tradable resources is always a bad idea.

The Curse of Econ 101 (Atlantic)

In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.

Poverty in the midst of plenty exists because many working people simply don’t make very much money. This is possible because the minimum wage that businesses must pay is low: only $7.25 per hour in the United States in 2016 (although it is higher in some states and cities). At that rate, a person working full-time for a whole year, with no vacations or holidays, earns about $15,000—which is below the poverty line for a family of two, let alone a family of four. A minimum-wage employee is poor enough to qualify for food stamps and, in most states, Medicaid. Adjusted for inflation, the federal minimum is roughly the same as in the 1960s and 1970s, despite significant increases in average living standards over that period. The United States currently has the lowest minimum wage, as a proportion of its average wage, of any advanced economy, contributing to today’s soaring levels of inequality. At first glance, it seems that raising the minimum wage would be a good way to combat poverty.

The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case. According to economism, a pair of supply and demand curves proves that a minimum wage increases unemployment and hurts exactly the low-wage workers it is supposed to help. The argument goes like this: Low-skilled labor is bought and sold in a market, just like any good or service, and its price should be set by supply and demand. A minimum wage, however, upsets this happy equilibrium because it sets a price floor in the market for labor. If it is below the natural wage rate, then nothing changes. But if the minimum (say, $7.25 an hour) is above the natural wage (say, $6 per hour), it distorts the market. More people want jobs at $7.25 than at $6, but companies want to hire fewer employees. The result: more unemployment.

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I could write a lot about this. For now let’s just say that the lack of virtually any discussion of energy shows just how poor a field economics is. One other thing: one must at least bring to the table that the 2nd law of thermodynamics contradicts the very term ‘sustainable’.

Economics, Society, And The Environment (EI)

A common view of some is that the relationship between economics and the environment is that environmental considerations are “externalities” for economic systems. In other words, effects produced by economic activity in the environment result from a limited overlap between the economic “system” and the environment, such as the diagram shown (from Giddings, Hopewood and O’Brien): The diagram above is adopted by some to describe the fields of enivonmental economics and environmental science. EnviromentalScience.org describes their discipline: “Environmental economics is an area of economics dealing with the relationship between the economy and the environment. Environmental economists study the economics of natural resources from both sides – their extraction and use, and the waste products returned to the environment. They also study how economic incentives hurt or help the environment, and how they can be used to create sustainable policies and environmental solutions.”

This seems a resonable description. But the accompanying diagram indicates a lack of understanding of the scope of the field. Giddings, Hopewood and O’Brien point out the logical shortcomings of the traditional concept above, and suggest a more correct way of conceptualizing the relationships: “A more accurate presentation of the relationship between society, economy and environment than the usual three rings is of the economy nested within society, which in turn is nested within the environment (Figure 2). Placing the economy in the centre does not mean that it should be seen as the hub around which the other sectors and activities revolve. Rather it is a subset of the others and is dependent upon them. Human society depends on environment although in contrast the environment would continue without society (Lovelock, 1988). The economy depends on society and the environment although society for many people did and still does (although under siege) exist without the economy.”

The importance of recognizing that all of society is a subset of functions within the environment is that society cannot violate the proven physical laws of the physical world (actually universe, but we will return to that thought later). Likewise, the economy exists totally within society so economics must also obey the same physical laws. Steve Keen has argued that the forgotten parameter in economics is energy. Whereas economists develop models and theories based on labor and capital as the components of production, energy should also be explicitly defined as separate and co-variant with labor and capital. Keen argues that failure to do so has led economists to propose models and theories which violate the fundamental laws of our environment, the Laws of Thermodynamics.

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This will not end well.

Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan

In a night-long session, lawmakers voted in favor of a set of amendments presented by the ruling Justice and Development Party (AKP), which was founded by current President Recep Tayyip Erdogan in 2003. The reform bill is designed to widen Erdogan’s powers, who presently only occupies a largely ceremonial role. The bill cleared the minimum parliamentary threshold necessary to put the measures to a national referendum for final approval, which could be held as early as in the spring. The vote took place with 488 lawmakers out of the 550-seat assembly in attendance. A total of 339 parliamentarians voted in favor of the motion and 142 against it, while five cast empty ballots and two of the votes were ruled out as invalid.

The measure required at least 330 votes to be approved and be put forward to a plebiscite. Some of the lawmakers not attending the vote were absent on account of remaining in detention; as part of a wide-ranging purge on dissidents Turkey has detained opposition HDP politicians, whom it accuses of having ties to the outlawed Kurdistan Workers’ Party (PKK). Turkish Prime Minister Binali Yildirim celebrated the result saying “we are now entrusting this to the people, its actual owners. Now it’s the people’s word. It is the people’s decision.” Critics, however, say the amendments will weaken checks and balances in Turkey’s democracy, leading to too much power being consolidated in the office of the president.

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More detail; looks Google translated, but may just be poorly written.

With New Constitution, Erdogan Eyes For One-Man Rule (GP)

The Turkish Republic is on the throes of a radical transformation, even regime change, as Parliament completed 2nd round of voting 18-article constitutional reform bill, which gives expanded powers to President Recep Tayyip Erdogan in a way that removes last vestiges of separation of powers. While the world watch inauguration ceremony of U.S. President Donald J. Trump, Turkish Parliament paved way for a referendum to significantly expand powers of Mr. Erdogan, the president’s long-held political ambition. The breathtaking speed of the first round vote was a clear-cut indication of a strong will on behalf of government and its ardent backer, opposition Nationalist Movement Party (MHP) to quickly push through the controversial package.

The vote reflected the emergence of a new alignment in the Turkish political landscape, formation of an Islamist-nationalist front that harbor similar views on a number of political issues concerning the fate of the country. While the first round of voting was a scene of brawls among men, the 2nd round was women’s turn. The fighting among differing factions in Parliament reflected the deep divide the voting created in the society, with critics blasting the government for transforming the country’s regime from a parliamentary democracy into a the rule of a strongman. Aylin Nazliaka, an independent lawmaker, handcuffed herself to the rostrum to protest the voting, prompting a scuffle that hospitalized several female lawmakers. What constitutional bill brings to Turkey is at the core of ensuing debates amid ongoing emergency rule that rendered free discussion of the proposed changes in public sphere near impossible.

While dozens of national TV channels live aired Mr. Erdogan’s address to village administrators in the presidential palace a few days ago, almost no TV station broadcasted the parliamentary session where lawmakers squabbling over momentous decisions that have the power of shattering roots of the republic’s established system. A CHP lawmaker set his own “studio” in Parliament to bypass the censorship. For supporters of the bill, the shift to executive presidency long sought by President Erdogan will provide a bulwark against return to fragile coalition governments of the past. But for the critics of the proposal, it will cement Erdogan’s power and turn Turkey into a dictatorship with scrapping checks and balances, regarded as central pillars of any democratic system. Main opposition CHP says the new scheme will create one-man dictatorship.

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Not sure that reporting “data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009” helps. Let alone that it’s correct.

Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

The wealth of Greeks shrank by €167 billion during the years of the financial crisis – i.e. almost one year’s GDP – according to a survey by Credit Suisse included in the weekly bulletin of the Hellenic Federation of Enterprises (SEV). The Swiss bank estimates the net wealth of Greeks – that is with their loans deducted – at €856 billion, against €1,023 billion in 2009, just before the country entered the bailout process.The data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009, while in the rest of Europe it came to €93,000 per adult inhabitant. According to SEV, what puts Greece in a different category to the rest of Europe is the excessive borrowing.

SEV stresses that what is not obvious in the data on the fortune of Greek people and is not sufficiently presented is the huge deficits of the local social security system that will continue to absorb considerable resources in the future, putting a lid on the country’s growth unless tackled sufficiently. In practice, the older generations have not just borrowed from the savings of fellow Europeans, but also from the future savings of their children.

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Jan 072017
 
 January 7, 2017  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Arthur Rothstein Highway marker in Polk County, Florida 1937


Here Is The US Intel Report Accusing Putin Of Helping Trump Win (ZH)
A Case Study in the Creation of False News (Paul Craig Roberts)
Obama Set For Pardon Frenzy As He Leaves Office (AFP)
Worst. Recovery. Ever. (ZH)
How Many Bombs Did the United States Drop in 2016? (CFR)
Le Pen Says Brexit Isn’t a Disaster and France Should Be Next (BBG)
Economics Is Driven By Ideology, Not Science (Pettifor)
The Labor Market: The End Of The Innocence? (DiMartino Booth)
Canadian Woman Arrested In Turkey For Saying Erdogan Jails Journalists (CBC)
Giant Iceberg Poised To Break Off From Larsen C Antarctic Shelf (G.)

 

 

I’m so tired of this. No, ‘trust us’ is not good enough anymore. That is why Trump won, because it’s no longer enough to say ‘because we say so’. People don’t trust CIA et al. And you can’t turn that back on its head and demand trust now. You lost! I get so frustrated they even locked up my Facebook account again. There’s always people who want to complain about those who don’t toe lines.

Here Is The US Intel Report Accusing Putin Of Helping Trump Win (ZH)

The farce is complete. One week after a joint FBI/DHS report was released, supposedly meant to prove beyond a reasonable doubt that Russia intervened in the US presidential election, and thus served as a diplomatic basis for Obama’s expulsion of 35 diplomats, yet which merely confirmed that a Ukrainian piece of malware which could be purchased by anyone, was responsible for spoofing various email accounts including that of the DNC and John Podesta, moments ago US intelligence agencies released a more “authoritative”, 25-page report, titled “Assessing Russian Activities and Intentions in Recent US Elections”, and which not surprisingly only serves to validate the media narrative, by concluding that Russian President Vladimir Putin ‘ordered’ an effort to influence U.S. presidential election.

Specifically, the report concludes the following: “We assess Russian President Vladimir Putin ordered an influence campaign in 2016 aimed at the US presidential election. Russia’s goals were to undermine public faith in the US democratic process, denigrate Secretary Clinton, and harm her electability and potential presidency. We further assess Putin and the Russian Government developed a clear preference for President-elect Trump.” What proof is there? Sadly, again, none. However, as the intelligence agencies state, “We have high confidence in these judgments”… just like they had high confidence that Iraq had weapons of mass destruction. And while the report is severely lacking in any evidence, it is rich in judgments, such as the following:

“We assess Russian President Vladimir Putin ordered an influence campaign in 2016 aimed at the US presidential election. Russia’s goals were to undermine public faith in the US democratic process, denigrate Secretary Clinton, and harm her electability and potential presidency. We further assess Putin and the Russian Government developed a clear preference for President-elect Trump. We have high confidence in these judgments. “We also assess Putin and the Russian Government aspired to help President-elect Trump’s election chances when possible by discrediting Secretary Clinton and publicly contrasting her unfavorably to him. All three agencies agree with this judgment.”

At this point a quick detour, because the intel agencies responsible for drafting the report then explain how “confident” they are: “CIA and FBI have high confidence in this judgment; NSA has moderate confidence.” What do these distinctions mean? High confidence generally indicates judgments based on high-quality information, and/or the nature of the issue makes it possible to render a solid judgment. However, high confidence judgments still carry a risk of being wrong. Moderate confidence generally means credibly sourced and plausible information, but not of sufficient quality or corroboration to warrant a higher level of confidence. In other words, while not carrying the infamous DHS disclaimer according to which last week’s entire joint FBI/DHS report is likely garbage, the US intel agencies admit they may well be “wrong.”

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“Trump is supposed to side with the CIA which is trying to destroy him.”

A Case Study in the Creation of False News (Paul Craig Roberts)

For many weeks we have witnessed the extraordinary attack by the CIA and its assets in Congress and the media on Donald Trump’s election. In an unprecedented effort to delegitimize Trump’s election as the product of Russian interference in the election, the CIA, media, senators and representatives have consistently made wild accusations for which they have no evidence. The CIA’s message to Trump is clear: Get in line with our agenda, or we are going to mess you over. It is clear that the CIA is warring against Trump. But the CIA’s media assets have turned the facts on their head and are blaming Trump for having a negative view of the CIA. Consider the January 4 Wall Street Journal article by Damian Paletta and Julian E. Barnes, which begins: “President-elect Donald Trump, a harsh critic of U.S. intelligence agencies . . .”

The two presstitutes set up their false news story by putting the shoe on the other foot. It is Trump who is the harsh critic rather than the victim of the CIA’s harsh accusations. Set up this way, the story continues: “White House officials have been increasingly frustrated by Mr. Trump’s confrontations with intelligence officials. ‘It’s appalling,” the official said. “No president has ever taken on the CIA and come out looking good.’” Now that the story is Trump taking on the CIA and not the CIA taking on Trump, the case can be built against Trump: Analysts accustomed to more cohesion with the White House are “jarred” by Trump’s skepticism of the CIA’s assessment that Putin got him elected. Trump is supposed to respond to the allegation by saying: I am not legitimate. Here take back the presidency.

WikiLeaks’ Assange has stated unequivocally that there was no hack. The information came to WikiLeaks as a leak, which suggests that it came from inside the Democratic National Committee. That Trump sees it this way means, according to one unidentified official that “It’s pretty horrifying to me that he’s siding with Assange over the intelligence agencies.” You see, Trump is supposed to side with the CIA which is trying to destroy him. Has the CIA shot itself in both feet? How can the agency control policy by manipulating the information fed to the President when the President does not trust the agency?

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Leonard Peltier has been in jail for 40 years for a set-up. Forget about Snowden and Chelsea. Not going to happen.

Obama Set For Pardon Frenzy As He Leaves Office (AFP)

A Rastafarian prophet, a former Taliban captive and thousands of minor drug traffickers have one thing in common: Their names have been submitted to President Barack Obama for clemency before he leaves office in two weeks. Some US presidents have used this regal power of leniency in a pointed way near the end of their term in office. On the last day of his term in 2001, Democratic president Bill Clinton granted pardon in a highly controversial move to late fugitive trader Marc Rich, whose ex-wife had been a major donor to Democrats. Sixteen years later, Obama is fielding pressure from all sides to grant unlikely pardons or commutations of sentences to people whose supporters say have been unjustly sentenced or sought out by the justice system.

Among them is Bowe Bergdahl, a US Army sergeant held captive for five years by the Taliban before his release in a prisoner swap, who is due to be court-martialed for desertion. Leonard Peltier, a Native American activist convicted for the 1975 deaths of two FBI agents in what his supporters say was a setup, is also hoping to enjoy Obama’s good graces. Then there’s Edward Snowden, who made the shattering revelation in 2013 of a global communications and internet surveillance system set up by the United States. The 33-year-old, a refugee in Russia, is backed by numerous celebrities like actress Susan Sarandon and singer Peter Gabriel, as well as Amnesty International and the American Civil Liberties Union. If Obama fails to pardon Snowden, his supporters say he may face the death penalty under the incoming administration of Republican Donald Trump, who has called him a “terrible traitor.”

In another leak case, Chelsea Manning is serving a 35-year sentence in solitary confinement for handing 700,000 sensitive military and diplomatic documents to WikiLeaks, some of them classified. Activists say her sentence is excessive and point to the psychological frailty of the transgender soldier who has already made two suicide attempts. Even though the White House has dismissed a possible pardon for Snowden and Manning, their supporters are still hoping for a final magnanimous gesture from a president about to leave the constraints of his high office on January 20.

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We know.

Worst. Recovery. Ever. (ZH)

As the champagne glasses clink in Washington over a record-breaking streak of job growth on record (as the percent of the population employed slumped), and the fastest wage growth since the start of the recovery (for managers), we just wanted to remind a few blinkered media types that Obama’s “recovery” has officially been the worst recovery in US history (despite adding almost $10 trillion to the national debt)… When ‘fake news’ and ‘peddling fiction’ meet fact… Not quite as rosy an economic handover to Trump as The White House would like everyone to believe.

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Peace, man!

How Many Bombs Did the United States Drop in 2016? (CFR)

As President Obama enters the final weeks of his presidency, there will be ample assessments of his foreign military approach, which has focused on reducing U.S. ground combat troops (with the notable exception of the Afghanistan surge), supporting local security partners, and authorizing the expansive use of air power. Whether this strategy “works”—i.e. reduces the threat posed by extremists operating from those countries and improves overall security and governance on the ground—is highly contested. Yet, for better or worse, these are the central tenets of the Obama doctrine.

In President Obama’s last year in office, the United States dropped 26,171 bombs in seven countries. This estimate is undoubtedly low, considering reliable data is only available for airstrikes in Pakistan, Yemen, Somalia, and Libya, and a single “strike,” according to the Pentagon’s definition, can involve multiple bombs or munitions. In 2016, the United States dropped 3,027 more bombs—and in one more country, Libya—than in 2015.

Most (24,287) were dropped in Iraq and Syria. This number is based on the percentage of total coalition airstrikes carried out in 2016 by the United States in Operation Inherent Resolve (OIR), the counter-Islamic State campaign. The Pentagon publishes a running count of bombs dropped by the United States and its partners, and we found data for 2016 using OIR public strike releases and this handy tool.* Using this data, we found that in 2016, the United States conducted about 79% (5,904) of the coalition airstrikes in Iraq and Syria, which together total 7,473. Of the total 30,743 bombs that the coalition dropped, then, the United States dropped 24,287 (79% of 30,743).

To determine how many U.S. bombs were dropped on each Iraq and Syria, we looked at the percentage of total U.S. OIR airstrikes conducted in each country. They were nearly evenly split, with 49.8% (or 2,941 airstrikes) carried out in Iraq, and 50.2% (or 2,963 airstrikes) in Syria. Therefore, the number of bombs dropped were also nearly the same in the two countries (12,095 in Iraq; 12,192 in Syria). Last year, the United States conducted approximately 67% of airstrikes in Iraq in 2016, and 96% of those in Syria.

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Quick, Carney, cause chaos, or Le Pen will win…

Le Pen Says Brexit Isn’t a Disaster and France Should Be Next (BBG)

French presidential candidate Marine Le Pen said the U.K. economy is weathering Brexit, giving her confidence to seek an immediate renegotiation of France’s relationship with the European Union if elected. “Brexit has not been a disaster,” Le Pen said at a meeting with English-language reporters in Paris on Friday. “The economic signals are good.” National Front leader Le Pen, who polls suggest will reach the presidential runoff in May, said she would seek talks with France’s EU partners “the day after my election” and put the result to a national referendum. She said the goal is to take back what she called “the four sovereignties”: control of borders, economic policy, money and legislation. France should dump the euro and return to a national currency, though the exchange rate could be linked to some sort of European currency mechanism, Le Pen said.

“I’ll give six months to these talks, and if at the end we have won back our sovereignty, I will tell the French to vote to stay in this Europe of nations and liberty,” she said. “If we don’t, I’ll suggest that they vote to leave.” Polls suggest Le Pen would finish second in the first round of France’s presidential elections on April 23, and lose a May 7 runoff to center-right candidate Francois Fillon. An Elabe poll released Thursday showed independent Emmanuel Macron gaining on Le Pen, taking second place in some hypothetical matchups. Le Pen, whose party received a $8.5 million loan from a Russian bank in 2014, said she doesn’t fear Russian meddling in France’s election. That follows U.S. intelligence findings that Russian officials directed hacking attacks to help elect Trump, whom she said she supports because his anti-globalist views were better for France.

“Every time big corporations, big finance don’t get what they want, they say it’s a conspiracy of the Russians,” she said. “It makes one laugh.” While the U.S. shouldn’t lecture anyone given its history of spying on allies, improved ties between Russia and the U.S. are in France’s interest, especially if they can cooperate on combating Islamic militants, Le Pen said. “I think that Mr. Trump and Putin can repair ties, and I hope so,” she said. “We don’t want to see an increase in tensions between the U.S. and Russia for a very selfish reason: we are in the middle.”

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Should we let economists ‘heal’ their own field, or is it too late for that?

Economics Is Driven By Ideology, Not Science (Pettifor)

As someone who correctly predicted the financial crisis (first in 2003 and later in a 2006 book) I support Andy Haldane’s assertion that the economics profession is “to some degree in crisis”. He is not the first to argue this. The retiring head of the UK Treasury admitted in 2016 that economists failed to spot the build-up of risk before 2007 and were guilty of what he called “a monumental collective intellectual error”. It is a collective intellectual failure that I believe has played a key role in the rise of political populism. The Bank of England’s chief economist was also right to compare the challenges facing economists to the famous “Michael Fish” moment, where everyone was assured that a hurricane wouldn’t hit before it did, bringing with it much devastation, in 1987.

Meteorologists have since transformed their field and improved forecasts. But that is not true of the economics profession. The dominant economic model of financial liberalisation, monetary policy dominance and fiscal austerity remains intact. In their defence, economists can’t be faulted for getting forecasts wrong. Political events such as Brexit are not easy to predict. But unlike economists, meteorologists have a deep understanding of the major forces shaping outcomes in their fields, even when they get precise forecasts wrong. Mainstream economists, by contrast, lack that deep understanding of the economic forces driving outcomes. The reason is not hard to understand. The field of meteorology is not underpinned by policy or by an agenda. Economics, by contrast, is dogged by ideology.

It is ideology, not science, that leads economists to wrongly assert that the market in money is like the market in widgets, and must not be regulated or tampered with by governments. That financial flows across borders must be “free”, regardless of whether they cause instability. That bankers are simply intermediaries between savers and borrowers – and do not create credit out of thin air. That monetary and fiscal policies that serve the finance sector with bailouts are tolerable, while those that serve the poor must be resisted. That the reasoning that informs the micro-economy can be extrapolated to reach conclusions about the macro-economy. In other words, the fallacy that the budgets of households (the micro-economy) can be aggregated and compared to the budgets of governments (the macro-economy).

Unsurprisingly, these flawed theories and models are a great comfort to financial elites – which is why so many economists are hired and funded by big banks, corporations and the wealthy. And it explains why their words and ideas are repeated by the media outlets that faithfully serve the status quo or “the establishment”. Very little has been done to transform the dominant economic model of financial and trade liberalisation or to limit economists’ almost religious belief in the efficiency of markets and hostility to public intervention.

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“Let me take a long last look, before we say goodbye..”

The Labor Market: The End Of The Innocence? (DiMartino Booth)

One of the first of life’s lessons we all learned is that we need not rush life; it will do that for us and in the end against our will. The inspiration for this wisdom could well have sprung from Ecclesiastes wherein we read these peaceful words: To every thing there is a season, and a time to every purpose under the heaven. Co-writers Don Henley and Bruce Hornsby embraced the spirit of this message as the 1980’s were coming to a close. You must agree 1989’s The End of the Innocence, that haunting and mournful ballad, was just the coda needed to move on to the last decade of the last century. “Let me take a long last look, before we say goodbye,” the song asks of the listener who can’t help themselves but to listen.

Many veteran investors, those who don’t need to be reminded about the Reagan era because they were there, may be feeling a bit more wistful as they peer over the horizon. They have lived through extraordinary economic times and maybe even recall the early 1970’s, the last time initial jobless claims were at their current historically low levels. They know, in other words, this can’t go on forever, that we are nearing the end of our own innocence. Federal Reserve Chair Janet Yellen has been adamant that economic cycles can’t die of old age. At the end of this month, we can proclaim to be living through the third longest expansion in postwar times. The parlor game occupying those on the Street these days entails devising scenarios that can push us into the second, or dare we dream, longest expansion of all.

The Wall Street Journal perfectly captures the infectious optimism, the yearning to keep that dream alive, by asking this in a headline: How Low Can the Unemployment Rate Go? Rather than keep you in suspense, the article’s answer is as follows: “Assuming the economy adds around 200,000 jobs a month in 2017 and the labor-force participation rate stays relatively constant, the unemployment rate would fall to 3.9% by the end of the year, according to a model maintained by the Federal Reserve Bank of Atlanta.” If we do get there, a big if, we are sure to be staring down the barrel of appreciably higher interest rates and a flat, if not by then, inverted yield curve. The only precedent is, you guessed it, that which occurred in 2000, when the unemployment rate hit 3.6% as the longest cycle of all time was finally flaming out. Economics 101 teaches one tenet above all – that the unemployment rate is the most lagging within the data universe.

A recent visit with Dr. Gates, that steel-eyed sleuth, corroborated this maxim. “The unemployment rate is the single, most visible economic indicator for households. It’s easy to understand, black and white. Up is bad, down is good,” Gates observed. “If we keep getting downside surprises, it will feed even more consumer optimism. That happens late in the cycle.” What goes hand in hand with these late cycles guideposts? Since you asked, that optimism Gates cites tends to correlate with households overreaching their paychecks, which is exactly what we’re seeing. When adjusted for inflation, credit card borrowing is up 4.5% over last year, a full two percentage points above wage income, which is up 2.5% over the same period. That’s a new high for the current cycle. At 2.9%, inflation-adjusted spending is also running ahead of wage income.

These data are validated by separate data that shows state withholding tax collections are way off last year’s figures. “Vulnerabilities in household demand don’t happen overnight; they take time to rise to the surface,” Gates cautioned. “Households aren’t overstretched yet, but they’re getting there. Just like corporations substitute debt for profits late in the cycle, households also are starting to do just as they ride the wave of Trump optimism. Eventually this will run its course.”

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So is Canada going to stand up to him?

Canadian Woman Arrested In Turkey For Saying Erdogan Jails Journalists (CBC)

A Canadian woman has been arrested in Turkey for allegedly insulting the country’s president in comments posted on Facebook, her Turkish lawyer said Thursday. Ece Heper, 50, was arrested in the city of Kars in northeastern Turkey, and charged on Dec. 30, Sertac Celikkaleli told The Canadian Press. Heper, a dual Canadian-Turkish citizen, had been in the country since mid-November, according to her friends. “She is intense and opinionated, for sure,” Birgitta Pavic said from her Toronto home. “But everything is intense over there right now, especially criticizing the government.” At issue, her friends and lawyer said, are several recent Facebook posts about Turkish President Recep Tayyip Erdogan.

In one posted on Dec. 28, Heper accused Erdogan of jailing journalists who suggest there is evidence Turkey is supporting the Islamic State of Iraq and the Levant, known as ISIS or ISIL. Global Affairs Canada said they are aware of a Canadian citizen detained in Turkey and are providing consular assistance, but wouldn’t divulge further information, citing privacy laws. Heper has a log home in Norwood, Ont., about 150 kilometres northeast of Toronto, Pavic said, where she lives with five dogs she rescued from Turkey “that are like her children.” Her parents are dead and she is estranged from her brother, Pavic said, so her friends are taking up the cause to help her out.

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We’re just going to watch it happen, ain’t we? That’s all we’re capable of.

Giant Iceberg Poised To Break Off From Larsen C Antarctic Shelf (G.)

A giant iceberg, with an area equivalent to Trinidad and Tobago, is poised to break off from the Antarctic shelf. A thread of just 20km of ice is now preventing the 5,000 sq km mass from floating away, following the sudden expansion last month of a rift that has been steadily growing for more than a decade. The iceberg, which is positioned on the most northern major ice shelf in Antarctica, known as Larsen C, is predicted to be one of the largest 10 break-offs ever recorded. Professor Adrian Luckman, a scientist at Swansea University and leader of the UK’s Midas project, said in a statement: “After a few months of steady, incremental advance since the last event, the rift grew suddenly by a further 18km during the second half of December 2016. Only a final 20km of ice now connects an iceberg one quarter the size of Wales to its parent ice shelf.”

The separation of the iceberg “will fundamentally change the landscape of the Antarctic Peninsula” and could trigger a wider break-up of the Larsen C ice shelf, he added. “If it doesn’t go in the next few months, I’ll be amazed,” Luckman told BBC News. Ice shelves are vast expanses of ice floating on the sea, several hundred metres thick, at the edge of glaciers. Scientists fear the loss of ice shelves will destabilise the frozen continent’s inland glaciers. And while the splitting off of the iceberg would not contribute to rising sea levels, the loss of glacial ice would. Martin O’Leary, also of Swansea University, said: “It just makes the whole shelf less stable. If it were to collapse there would be nothing holding the glaciers up and they would start to flow quite quickly indeed.”

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 December 11, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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‘Daly’ Somewhere in the South, possibly Miami 1941


The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)
Stocks Have Only Been This Expensive During Times Of Crisis (BI)
UK Government Faces New Brexit Court Case (R.)
Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)
Does Krugman Really Support The Working Class? (Dean Baker)
Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)
Quebec Paves Way For More Oil And Gas Exploration (BBG)
Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)
Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)
The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)
WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)
Russian Bombardment ‘Forces ISIS Out Of Palmyra’ Hours After Re-Entry (AFP)

 

 

“A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk..”

The ECB Is Creating A World Of Zombie Banks And Zombie Companies (HandBl.)

Next year could turn out to be a make-or-break year for Europe. But unlike in 2008, neither the governments nor the central banks have sufficient means to deal with another crisis. And it’s not entirely clear whether their intervention last time actually made things better or worse. Take Mr. Draghi, for instance. By lowering interest rates in the euro zone and buying up debt en masse, he has been trying to give the European economy a much needed shot in the arm. Yet despite all of his efforts, the specter of deflation still looms over the bloc, the future of the common currency is uncertain and lenders in southern Europe are still fighting for their existence. At the same time, the negative effects of Mr. Draghi’s policies are becoming more apparent. The STOXX Europe 600 index may have closed at its highest level in more than two months earlier this week, but it’s still 65% lower than where it was before the financial crisis.

The IMF has even said it feared a third of European banks wouldn’t be able to become profitable again even if the economy were to recover. The weird thing about the way the European economy has fared after the financial crisis is that even though businesses have been struggling, not a lot of them are going under. Insolvencies have been below the historical average. In Germany, for instance, the%age of companies declaring bankruptcy was the same right before the Lehman Brothers crash as it was in the 1990s – between 1.5 and 2%. Since the crisis began, that metric has fallen steadily. In 2015, the last full year for which data is available, it stood at 0.6%. Insolvency rates have even dropped in the euro zone’s weakest members along its southern periphery. Common sense would have one believe that the number of bankruptcies increases in times of crisis – especially during crises as protracted as financial ones.

“With its zero interest rate policy and the massive purchasing of bonds, the ECB is undermining the process of creative destruction, which is so important to a market economy,” said Markus Krall at Goetz Partners in Frankfurt. The ECB, for its part, was willing to do anything to prevent the economy from tanking. The central bank flooded the banks with money, and that deluge reduced companies’ capital costs to practically nothing. Even the most inefficient businesses can survive in that environment. Mr. Krall did the math on what it would mean for the balance sheets of European banks if insolvency rates had been at the historical average all along. He discovered that the €1 trillion in bad loans the ECB identified in its latest report would be closer to the tune of €2.5 trillion in that hypothetical scenario. “A large part of the European banking sector would be on the brink of collapse and no stress test could anticipate the magnitude of that kind of credit risk,” Mr. Krall said. “The ECB is creating a world of zombie banks and zombie companies,” he added.

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1929, 1999, 2007.

Stocks Have Only Been This Expensive During Times Of Crisis (BI)

Stocks are getting a bit pricey. All three major indexes break though their all-time highs on a seemingly daily basis, and this has pushed earnings multiples higher and higher. The current 12-month trailing price-to-earnings ratio of the S&P 500 sits at 25.95x, while the forward 12-month price-to-earnings is roughly 17.1x, according to FactSet data. Each of these is higher than its long-term average. In fact, based on one measure of valuation, the market hasn’t been this expensive anytime other than before a massive crash. The cyclical adjusted price-to-earnings ratio, better known as Shiller P/E, which adjusts the price-to-earnings ratio for cyclical factors such as inflation, stands at 27.86 as of Friday.

There have only been a few instances in history when stocks have been this expensive: just before the crash of 1929, the years leading up to the tech bubble and its bursting, and around the financial crisis of 2007-09. This does not necessarily mean that a crash is imminent — during the tech bubble, the Shiller P/E made it well into the 30s before coming back down. Additionally, there are some criticisms that Shiller P/E is generally more backward-looking since it adjusts for the cycle, so it may not be as accurate. Another caveat is that, during the three previous instances, investors have been incredibly bullish on stocks (there’s a reason Robert Shiller’s book is titled “Irrational Exuberance”) and most indicators of sentiment — from the American Association of Individual Investors to Bank of America Merrill Lynch’s sell-side sentiment indicator — are still depressed. Still, an elevated level for the Shiller P/E certainly isn’t going to make it any easier to sleep at night.

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As the EU descends into chaos, some of these people are going to remember something about a gift horse’s mouth.

UK Government Faces New Brexit Court Case (R.)

Opponents to Britain leaving the EU will launch a fresh legal action this week, which could further hamper Prime Minister Theresa May’s Brexit plans, The Sunday Times reported. The newspaper said campaigners will write to the UK government on Monday saying they are taking it to the High Court in an effort to keep Britain in the single market. It said the claimants will seek a judicial review in an attempt to give lawmakers a new power of veto over the terms on which Britain leaves the EU. They argue the government “has no mandate” to withdraw from the single market because it was not on the referendum ballot paper on June 23 and was not part of the ruling Conservative Party’s manifesto for the 2015 general election.

May has said she wants to invoke Article 50 of the EU’s Lisbon Treaty by the end of March, kicking off up to two years of exit negotiations. However the High Court ruled last month that Article 50 cannot be triggered without parliament’s assent. That ruling is being challenged by the government in Britain’s Supreme Court. The Sunday Times said the new court case hinges on whether the government would also have to trigger another legal measure — Article 127 of the European Economic Area agreement — in order to quit the single market. It said ministers argue Britain automatically exits the single market when it quits the EU. But, it said if the claimants win the new case, the government would have to gain the approval of lawmakers.

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Sanity evaporates in the US. And it’s not Trump.

Senate Quietly Passes “Countering Disinformation And Propaganda Act” (ZH)

While we wait to see if and when the Senate will pass (and president will sign) Bill “H.R. 6393, Intelligence Authorization Act for Fiscal Year 2017”, which was passed by the House at the end of November with an overwhelming majority and which seeks to crack down on websites suspected of conducting Russian propaganda and calling for the US government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly,” another, perhaps even more dangerous and limiting to civil rights and freedom of speech bill passed on December 8.

Recall that as we reported in early June, “a bill to implement the U.S.’ very own de facto Ministry of Truth has been quietly introduced in Congress. As with any legislation attempting to dodge the public spotlight the Countering Foreign Propaganda and Disinformation Act of 2016 marks a further curtailment of press freedom and another avenue to stultify avenues of accurate information. Introduced by Congressmen Adam Kinzinger and Ted Lieu, H.R. 5181 seeks a “whole-government approach without the bureaucratic restrictions” to counter “foreign disinformation and manipulation,” which they believe threaten the world’s “security and stability.” Also called the Countering Information Warfare Act of 2016 (S. 2692), when introduced in March by Sen. Rob Portman, the legislation represents a dramatic return to Cold War-era government propaganda battles.

“These countries spend vast sums of money on advanced broadcast and digital media capabilities, targeted campaigns, funding of foreign political movements, and other efforts to influence key audiences and populations,” Portman explained, adding that while the U.S. spends a relatively small amount on its Voice of America, the Kremlin provides enormous funding for its news organization, RT.“Surprisingly,” Portman continued, “there is currently no single U.S. governmental agency or department charged with the national level development, integration and synchronization of whole-of-government strategies to counter foreign propaganda and disinformation.”

Long before the “fake news” meme became a daily topic of extensive conversation on wuch mainstream fake news portals as CNN and WaPo, H.R. 5181 would rask the Secretary of State with coordinating the Secretary of Defense, the Director of National Intelligence, and the Broadcasting Board of Governors to “establish a Center for Information Analysis and Response,” which will pinpoint sources of disinformation, analyze data, and — in true dystopic manner — ‘develop and disseminate’ “fact-based narratives” to counter effrontery propaganda.

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I don’t really want to mention Krugman ever again, but maybe just this once…

Does Krugman Really Support The Working Class? (Dean Baker)

Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true. People with college and advanced degrees tend to be strong supporters of recent trade deals [I’m including China’s entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. (We will pay $430 billion for prescription drugs this year, which would cost 10-20% of this amount in a free market. The difference is equal to roughly five times annual spending on food stamps.)

Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. (Sorry, the second Great Depression story as the alternative is nonsense — that would have required a decade of stupid policy, nothing about the financial collapse itself would have entailed a second Great Depression.)

His crew has also been at best lukewarm on defending unions. However they don’t seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses.

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OPEC members cheat. What do you think non-members will do? Still, prices can remain ‘high-ish’ until we find out.

Non-OPEC Oil States Agree To Cuts In ‘Historic’ Deal (AFP)

11 countries agreed on Saturday to cut their oil output, teaming up with the OPEC cartel in an exceptional bid to end the world’s glut of crude and reverse a dramatic fall in income. Russia and 10 other non-OPEC states will reduce their production by more than half a million barrels per day (bpd), OPEC announced. The deal will take effect from the start of 2017 and last for six months, though it may be extended depending on market conditions. “I am happy to announce that a historic agreement has been reached,” said Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada, whose country holds the rotating presidency of the OPEC. The cut will contribute to OPEC’s own initiative to ease a saturated market and end a price slump that has brutally affected the economies of many oil producers.

On November 30 its members announced a slash in output by 1.2 million barrels per day (bpd) beginning in January, to 32.5 million bpd. Under that deal, OPEC called on non-member producer states to lower their output by 600,000 bpd. Saturday’s deal approves cuts totalling 558,000 bpd. Russia had already signalled it would provide half of that production cut in the first half of 2017. Among the other countries that will contribute cuts Kazakhstan agreed to reduce production by 20,000 bpd, Mexico 100,000 bpd, Oman 40,000 bpd and Azerbaijan 35,000 bpd, according to Bloomberg. The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.

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Québec is powered by hydro. All this is just for export to the US. Turn ‘La Belle Province’ into a moonscape. It’s up to the First Nations again to stop the mess. You still like Justin?

Quebec Paves Way For More Oil And Gas Exploration (BBG)

Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups. Bill 106 passed Quebec’s National Assembly in a 62-38 vote early Saturday after an overnight debate ahead of the holiday break. The legislation is meant to implement Quebec’s clean energy plan but also contains provisions allowing for energy exploration, potentially including fracking. “Quebec’s government just voted down an amendment to ban fracking in a triumph of science over ‘leave it in the ground’ lunacy,” Calgary-based Questerre Energy tweeted early Saturday morning. Shares of companies that hold exploration rights, including Questerre and Junex, based in Quebec City, surged last week as passage of the legislation looked likely.

Questerre holds about 1 million acres and has drilled test wells in the Utica shale formation along the St. Lawrence River, according to its website. Questerre’s shares rose the most in more than eight years on Thursday and inched up again on Friday. Junex’s stock increased 30%, the most in almost two years. Bill 106 creates a new agency to promote Quebec’s transition to cleaner energy yet also lays out a framework for oil and gas development in the Canadian province. Environmental, aboriginal and citizen groups argued that the bill’s mandate is contradictory, that debate was rushed and that it should have included a moratorium on fracking as well as greater protection for landowners. [..] Bill 106 strips power from landowners who will be powerless to stop exploration by companies with drilling claims, Carole Dupuis at Regroupement vigilance hydrocarbures Quebec, said by phone.

That, in turn, will hurt property values, especially if exploration leads to fracking. “If there was not the fracking issue, the landowner issue would not be a problem. It’s an access issue,” she said. “What’s the value of your land if someone has been drilling one kilometer from you and you don’t know if your drinking water is safe?” [..] Bill 106 goes against aboriginal rights to self-determination and to establish the best use of their lands, Mi’gmaq Chief Darcy Gray said in an e-mail Saturday. “The bill also opens up our lands to exploration that we feel could have long-lasting, detrimental and irreparable damage,” he wrote “especially with regards to hydraulic fracturing and or other types of well stimulation.” “Why this would even be considered, or how it could be construed as a favorable initiative, is beyond me,” he said.

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When will Modi’s support crash?

Goa Goes Cashless: ‘Who Buys Fish With A Credit Card?’ (G.)

It’s 11 o’clock, and Laxman Chauhan still hasn’t sold any fish. His stall in the central market in the west Indian city of Panjim has been open for three hours, but none of his usual clients have come today. He checks his watch, and then takes a walk to see if other vendors have had any customers. “Sold anything yet?” he asks Ramila Pujjar, who has set her stall up with a glistening display of the morning’s catch. She hasn’t either. “I’m losing 2,000-3,000 rupees (£23-£35) a day,” says Chauhan. “I’m throwing fish away every day.” The low footfall at Panjim’s fish market is unusual; fish is a staple in Goan cuisine but, for the past month, since the prime minister, Narendra Modi, abolished the 500 and 1,000 rupee notes, business has suffered. “I’m losing money because of the government,” says Pujjar.

“The government only takes care of the rich, the poor will always be poor.” Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.” Panjim is no different to the rest of India. Long queues wind around banks and ATMs in every city as people scramble to exchange their high-value banknotes. The cash crisis has hit millions of traders, as people tighten purse strings and save up precious banknotes. But now, this sleepy tourist town is going to become the laboratory for a radical new experiment. From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone. The cash-free drive will attempt to close down India’s thriving parallel economy of untaxed cash transactions.

A government circular at the beginning of the month instructed traders: “Goa is likely to become the state in India to go for cashless transactions from 31 December. Even though cash transactions are not being banned, it is in the interest of the government to encourage cashless transactions.” The policy, announced by India’s defence minister, Manohar Parrikar, is in line with Modi’s vision for a cash-free India. Last week, the finance minister, Arun Jaitley, announced a series of discounts on digital transactions for petrol, railway tickets and insurance policies. Modi has urged young people to support his “less cash” economy in a radio broadcast: “I need the help of young people in India … There are many people in your families or neighbourhoods who may not know how to use technologies such as e-wallets and payments through mobiles. I urge you to spend some time … to teach this technology to at least 10 families who may not know it,” he said.

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Sure. Just get your most creative accountants out. A “landmark year”?

Greece Passes Austerity 2017 Budget, Eyes 2.7% Growth (AP)

Greece’s Parliament has passed a budget of continued austerity as mandated by the country’s creditors, but which forecasts robust growth for 2017. Prime Minister Alexis Tsipras says it will mark Greece’s “final exit” from its nearly decade-long financial crisis. The budget adds more than €1 billion in new taxes, mostly indirect taxes on items from phone calls to alcohol. It also cuts spending by over €1 billion. The budget was backed by the left-dominated ruling coalition and opposed by all other parties. It passed by a vote of 152-146 on Saturday. Despite the continued austerity, Tsipras predicted that 2017 will be a “landmark year” with 2.7% economic growth. He said his government has achieved a higher-than-forecast 2016 primary surplus.

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Interesting long interview.

The Icelandic Minister Who Refused To Help The FBI Frame Assange (Katoikos)

You are “the minister” who refused to cooperate with the FBI because you suspected their agents on mission in Iceland were of trying to frame Julian Assange. Do you confirm this? Yes. What happened was that in June 2011, US authorities made some approaches to us indicating they had knowledge of hackers wanting to destroy software systems in Iceland. I was a minister at the time. They offered help. I was suspicious, well aware that a helping hand might easily become a manipulating hand! Later in the summer, in August, they sent a planeload of FBI agents to Iceland seeking our cooperation in what I understood as an operation set up to frame Julian Assange and WikiLeaks.

Since they had not been authorised by the Icelandic authorities to carry out police work in Iceland and since a crack-down on WikiLeaks was not on my agenda, to say the least, I ordered that all cooperation with them be promptly terminated and I also made it clear that they should cease all activities in Iceland immediately. It was also made clear to them that they were to leave the country. They were unable to get permission to operate in Iceland as police agents, but I believe they went to other countries, at least to Denmark. I also made it clear at the time that if I had to take sides with either WikiLeaks or the FBI or CIA, I would have no difficulty in choosing: I would be on the side of WikiLeaks.

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Erdogan’s son-in-law, “groomed to be Mr Erdogan’s successor”. Parliament certain to vote to hand Erdogan much increased powers. Seen any false flags lately?

WikiLeaks Emails ‘Link Turkey Oil Minister To Isis Oil Trade’ (Ind.)

WikiLeaks has released a cache of thousands of personal emails allegedly from the account of senior Turkish government minister Berat Albayrak, son-in-law of the country’s president, Recep Tayyip Erdogan, which it says shows the extent of links between Mr Albayrak and a company implicated in deals with Isis-controlled oil fields. The 60,000 strong searchable cache, released on Monday, spans the time period between April 2000 – September 23 2016, and shows Mr Albayrak had intimate knowledge of staffing and salary issues at Powertrans, a company which was controversially given a monopoly on the road and rail transportation of oil into the country from Iraqi Kurdistan.

Turkish media reported in 2014 and 2015 that Powertrans has been accused of mixing in oil produced by Isis in neighbouring Syria and adding it to local shipments which eventually reached Turkey, although the charges have not been substantiated by any solid evidence. The emails were apparently obtained by Redhack, a Turkish hactivist collective. WikiLeaks founder Julian Assange said that they were published in response to the Turkish government’s widening crackdown on dissent. Mr Albayrak, one of the most powerful individuals in Turkey, is widely seen as being groomed to be Mr Erdogan’s successor. The hardline president has been consolidating his grip on power by implementing emergency powers and arresting thousands of journalists, activists and academics in the wake of a failed military coup in July.

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Reported without any added anti-Putin innuendo?!

Russian Bombardment Forces ISIS Out Of Palmyra Hours After Re-Entry (AFP)

A Russian aerial onslaught forced Islamic State fighters to withdraw from Palmyra at dawn on Sunday, only hours after the jihadis had re-entered the ancient Syrian city, a monitor said.“Intense Russian raids since last night forced IS out of Palmyra, hours after the jihadists retook control of the city,” said Rami Abdel Rahman of the Syrian Observatory for Human Rights.The raids killed a large number of militants in the desert city in central Syria, Abdel Rahman told AFP. “The army brought reinforcements into Palmyra last night, and the raids are continuing on jihadist positions around the city.”Isis began an offensive last week near Palmyra, which is on Unesco’s world heritage list. In May last year, the Sunni Muslim extremist group seized several towns in Homs province including Palmyra, where they caused extensive damage to many of its ancient sites. They were ousted from Palmyra in March by Syrian regime forces backed by Russia.

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Nov 252016
 
 November 25, 2016  Posted by at 9:53 am Finance Tagged with: , , , , , , , , ,  10 Responses »
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Robert Capa Anti-fascist militia women at Barcelona street barricade 1936


America’s Trade Advantage: Large Deficits (Pettis)
All Aboard Post-TPP World (Escobar)
The Bank of Japan Can’t Keep Stores From Cutting Prices (BBG)
China Banking Regulator Wrestles With $2.9 Trillion Off-Balance Sheet WMPs (R.)
China Central Bank Warns Against Outflows Disguised As Investment (R.)
ECB Says It Can Shield Eurozone From Global Finance Instability (BBG)
The Snowball of Debt (HowMuch/VC)
Russia to OPEC: Oil Freeze Is All You Get
Germany, 15 Other Countries Press For Arms Control Deal With Russia (R.)
Fillon Calls Hollande’s Hardline Policy On Russia ‘Absurd’ (EuA)
EU Parliament President Martin Schulz to Step Down, Run Against Merkel (WSJ)
Increasingly Rapid Ice Melt Could Trigger Uncontrollable Climate Change (G.)
Erdogan Threatens To Open Borders To Refugees After EU Vote (AFP)
Refugees Torch Lesbos Camp After Gas Explosion Kills Two (AFP)

 

 

Interesting point of view. What Pettis ignores is that the issuer of a global reserve currency MUST always run a deficit, or the world will be starved of money.

America’s Trade Advantage: Large Deficits (Pettis)

Even China’s official voice, the People’s Daily, pointed out Monday how unlikely it was that China could “overtake the U.S. to lead the world.” This is because China must accommodate high and rising trade surpluses to moderate a stark trade-off between rising debt and rising unemployment. After years of deep imbalances and accelerating credit growth, China this year met its 6.7% GDP-growth target—needed to stabilize employment—only by growing debt in a frightening amount equal to more than 40 percentage points of GDP. Debt limits are a major constraint on China’s difficult adjustment. The country must therefore rely on its trade surplus for crucial breathing space, with each percentage point of surplus substituting for about 10 percentage points of debt.

To see how this affects China’s leadership role, consider how the U.S., only after 50 years as the world’s largest economy and a negligible governance role, finally came to dominate global trade. This occurred over two separate periods. The first ran for roughly five decades beginning with World War I. Two highly destructive world wars left all the world’s major economies acutely short of capital—all except for the U.S., which began the period as the world’s largest surplus nation and its main exporter of savings. This inevitably put America at the center of the emerging economic order. By the 1970s, conditions were very different. The other advanced nations had rebuilt their economies, global savings were abundant and other forms of demand determined the growth rates for most economies.

Rather than receive access to scarce capital, these countries wanted instead to export capital, i.e., to expand demand by increasing exports of tradable goods while constraining imports. With its flexible financial system and the gradual elimination by the 1970s of all capital restrictions, the U.S. quickly adapted and began running large deficits, the costs of which, in the form of unemployment and consumer debt, America was willing to absorb for political advantage. This is the key reason why China cannot replace the U.S. as the leader of global trade.

[..] Opposition to trade, particularly among Americans most vulnerable to unemployment and consumer debt, was therefore inevitable. But rather than other countries reorganizing around the surpluses China requires, it is more likely that over time global trade will become unstable and increasingly contentious. That is in fact closer to the historical norm than the anomalous stability of the four decades before 1914 and the six after 1945. A U.S. retreat from trade would clearly be damaging to global prospects. Many economists argue that it will also damage U.S. prospects. But they are almost certainly wrong. History suggests that intervention usually benefits diversified economies with large, persistent trade deficits, especially when driven at least in part by distortions abroad.

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Escobar should read Pettis.

All Aboard Post-TPP World (Escobar)

A half-hearted near handshake between US President Barack Obama and Russian President Vladimir Putin before and after they spoke ‘for about four minutes’, standing up, on the sidelines of the APEC summit in Lima, Peru, captured to perfection the melancholic dwindling of the Obama era. A whirlwind flashback of the fractious relationship between Obama and ‘existential threats’ Russia and China would include everything from the Washington-sponsored Maidan in Kiev to Obama’s ‘Assad must go’ in Syria, with special mentions to the oil price war, sanctions, the raid on the ruble, extreme demonization of Putin and all things Russian, provocations in the South China Sea – all down to a finishing flourish; the death of the much vaunted TPP treaty, which was reconfirmed at APEC right after the election of Donald Trump.

It was almost too painful to watch Obama defending his not exactly spectacular legacy at his final international press conference – with, ironically, the backdrop of the South American Pacific coast – just as Chinese President Xi Jinping all but basked in his reiterated geopolitical glow, which he already shares with Putin. As for Trump, though invisible in Lima, he was everywhere. The ritual burial, in Peru’s Pacific waters, of the «NATO on trade» arm of the pivot to Asia (first announced in October 2011 by Hillary Clinton) thus offered Xi the perfect platform to plug the merits of the Regional Comprehensive Economic Partnership (RCEP), amply supported by China. RCEP is an ambitious idea aiming at becoming the world’s biggest free trade agreement; 46% of global population, with a combined GDP of $17 trillion, and 40% of world trade.

RCEP includes the 10 ASEAN nations plus China, Japan, South Korea, India, Australia and New Zealand. The RCEP idea was born four years ago at an ASEAN summit in Cambodia – and has been through nine rounds of negotiations so far. Curiously, the initial idea came from Japan – as a mechanism to combine the plethora of bilateral deals ASEAN has struck with its partners. But now China is in the lead. [..] Meanwhile, Putin and Xi met once again – with Putin revealing he’s going to China next spring to deepen Russian involvement in the New Silk Roads, a.k.a. One Belt, One Road (OBOR). The ultimate objective is to merge the Chinese-led OBOR with the development of the Russia-led Eurasia Economic Union (EEU).

That’s the spirit behind 25 intergovernmental agreements in economy, investment and nuclear industry signed by Russian PM Dmitry Medvedev and Chinese PM Li Keqiang in St. Petersburg in early November, as well as the set up of a joint Russia-China Venture Fund. In parallel, almost out of blue, and with a single stroke, Turkey President Tayyip Erdogan, on the way back from a visit to Pakistan and Uzbekistan, confirmed what had been all but evident for the past few months; “Why shouldn’t Turkey be in the Shanghai Five? I said this to Mr. Putin, to (Kazakh President) Nazarbayev, to those who are in the Shanghai Five now… I think if Turkey were to join the Shanghai Five, it will enable it to act with much greater ease”.

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How is it possible that this is still allowed to continue?

The Bank of Japan Can’t Keep Stores From Cutting Prices (BBG)

While Governor Haruhiko Kuroda’s vow to overshoot the Bank of Japan’s 2% inflation target caused a stir among monetary policy watchers in September, it’s yet to have an impact among retailers. Stores as diverse as supermarket operator Aeon, Mister Donut and Wal-Mart have all announced price cuts since Kuroda’s pledge, underscoring the weakness in Japanese consumer spending and the difficulty of overcoming the “deflationary mindset” that the BOJ set out to eradicate. Consumer prices fell for an eighth straight month in October, a government report showed Friday. “Companies are just being practical,” said Masamichi Adachi at JPMorgan. “No one is buying the BOJ’s new commitment. There is strong doubt that the BOJ can even achieve the 2% target and the name ‘overshooting commitment’ itself is hard to understand for ordinary people.”

Falling prices and expectations for more of the same could also drag on annual wage talks, which start soon. Kuroda said last week that he’s “paying close attention” to these, as weak growth in pay has been hampering efforts to generate inflation. It’s essential for Japanese companies to set salaries based on the premise of 2% inflation, he said. Base salaries, which exclude bonuses and overtime, will rise this year by less than last year, Dai-ichi Life Research Institute forecast in a report this month. This reinforces frugality among shoppers and encourages retailers to compete by discounting.

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Beijing does not control its own economy. It’s hostage to the shadow banks.

China Banking Regulator Wrestles With $2.9 Trillion Off-Balance Sheet WMPs (R.)

China’s banking regulator may be getting serious about how lenders provision for the more than 20 trillion yuan ($2.9 trillion) of wealth management products (WMPs) that have been issued as non-guaranteed off-balance sheet liabilities. The China Banking Regulatory Commission (CBRC), in new draft rules released on Wednesday, demanded banks apply a more “comprehensive” approach to cover “substantive risks” related to off-balance sheet activities, or shadow banking. The guidelines, which would replace 2011 regulations and are awaiting comment, proposed such measures as adding impairment loss allowances and properly calculating risk-weighted assets for off-balance sheet activity.

It was the latest measure announced by CBRC to curb shadow banking risks and address the rapid growth of WMPs, which amounted to 26.28 trillion yuan ($3.8 trillion) by end-June, data from the Banking Sector Wealth Management Product Registration and Custodian Centre showed. That amounts to around 39% of China’s GDP in 2015. About 77%, or 20.18 trillion yuan, of the products are non-guaranteed bank WMPs, a major component of shadow banking activity, the data showed. CBRC Chairman Shang Fulin warned banks in September the rampant growth of their off-balance sheet operations must be curtailed, and represented a “hidden credit risk that potentially threatens financial safety”.

[..] China’s mid-tier and small lenders, which have raised a greater proportion of their funding using WMPs, are more vulnerable to off-balance sheet liquidity risks. One important obstacle is capital. A very strict interpretation of the draft regulations, requiring banks to hold reserves against all off-balance sheet issuance, would require banks to raise as much as 1.7 trillion yuan to maintain current capital levels, said Jack Yuan, a banking analyst at Fitch. “The incentives for banks to issue more off-balance sheet WMPs still exists,” said Yuan. “There’s nothing in these rules that disincentivizes banks from continuing on with more off-balance sheet activity.” “It’s like driving a car,” said a risk manager at another mid-size lender. “If you don’t follow the rules, there’s a mess. But if you follow the rules, that doesn’t mean you have to slow down.”

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How do you tell them apart though?

China Central Bank Warns Against Outflows Disguised As Investment (R.)

China’s central bank has urged commercial banks in Shanghai to guard against money outflows via the Shanghai Free Trade Zone (FTZ) disguised as foreign investment, two sources with knowledge of the instructions said on Friday. The Shanghai headquarters of the People’s Bank of China asked for particular vigilance against money originating in other provinces or cities in China that flowed into the FTZ en route abroad, the banking industry sources said. The guidance from the PBOC’s was the latest in a string of measures to stem surging capital outflows as the yuan currency plumbs 8-1/2 year lows against the surging U.S. dollar.

“The central bank has urged lenders to strengthen due diligence to prevent capital outflows disguised as outbound investment,” said one source, who declined to be identified because he was not authorized to speak publicly about the matter. On Wednesday it said it would crack down on capital flight and closely monitor abnormal capital flows through the FTZ. In a report on Tuesday, Capital Economics estimated that capital outflows last month were the largest since January, and posed a threat to China’s exchange rate regime. The Shanghai FTZ was launched in 2013 to promote international trade and cross-border investment, but three years later the city government is trying to balance efforts to accelerate financial reforms in the zone while preventing capital outflows.

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But of course….

ECB Says It Can Shield Eurozone From Global Finance Instability (BBG)

The ECB is confident it will be able to continue shielding the euro area from the risk of a sudden correction in asset prices, after political events such as the election of Donald Trump threaten to increase volatility in coming months. “We are certainly seeing a correction coming from the U.S.,” ECB Vice President Vitor Constancio said on Thursday in an interview with Bloomberg TV’s Matt Miller. “The ECB will continue to exert its stabilizing role, so I don’t think there will be significant contagion to Europe.” Constancio spoke on the occasion of the publication of the ECB’s twice-yearly Financial Stability Review.

The report warns that the risk of an abrupt global market correction has intensified on the back of widespread political uncertainty, posing a threat to banks, stability and economic growth. While the policies of incoming President Trump may lead to higher spending and faster inflation in the U.S., their effect on the euro area is difficult to gauge given the possibility of protectionist tit-for-tats and higher chances of populist victories in votes across the continent. “More volatility in the near future is likely and the potential for an abrupt reversal remains significant,” according to the bank. “Elevated geopolitical tensions and heightened political uncertainty amid busy electoral calendars in major advanced economies have the potential to reignite global risk aversion and to trigger a major confidence shock.”

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A similar graph of private debt would be more revealing.

The Snowball of Debt (HowMuch/VC)

With the U.S. National Debt closing in on the $20 trillion mark, there has been a lot of conversation in Washington about debt and its role in government. And most of that conversation right now revolves around President-elect Donald Trump. On one hand, the Trump campaign had early rhetoric in the Presidential campaign that the elimination of the deficit and existing government debt would be paramount if elected. The Trump administration has also been highly critical of the Federal Reserve, saying that the Fed’s policies create a “false economy”. As a result, some see Trump embracing the unique opportunity to put his stamp on how the Federal Reserve does business in early 2017.

On the other hand, even many conservative think tanks are concerned about what Trump policies mean for government debt. Rebuilding infrastructure is not cheap, and widely-cited estimates see the national debt increasing by anywhere from $5.3 trillion to $11.5 trillion over the next 10 years. While giant numbers like $20 trillion sound abstract and meaningless, converting them to debt-per-capita can make things more intuitive. The per-capita amount shows the amount of debt that exists per citizen, and makes things plain and simple. Today’s infographic from HowMuch.net, a cost information site, shows government debt-per-capita in every country in the world, including the United States.

Here are the countries where people owe the most debt per person:
Japan: $85,694.87 per person
Ireland: $67,147.59 per person
Singapore: $56,112.75 per person
Belgium: $44,202.75 per person
United States: $42,503.98 per person
Canada: $42,142.61 per person
Italy: $40,461.11 per person
Iceland: $39,731.65 per person
Australia: $38,769.98 per person
United Kingdom: $36,206.11 per person
Of course, debt-per-capita isn’t the only lens to view government debt.

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Manipulating prices with empty words. If they ever sign an agreement, it will be a hollowed out one, and it won’t last more than two weeks.

Russia to OPEC: Oil Freeze Is All You Get

Facing pressure from OPEC to make a significant output reduction, Russia reiterated its readiness to freeze oil production at current levels, arguing that the offer amounted to a cut compared with next year’s plans. A production cap would mean Russia pumping 200,000 to 300,000 barrels a day less than planned in 2017, Energy Minister Alexander Novak told reporters in Moscow on Thursday. That means a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year,” he said. OPEC, which is seeking to finalize its own supply cuts of as much as 1.1 million barrels a day next week, asked non-members to contribute by cutting daily production by about 500,000 barrels, Novak said.

OPEC reached a preliminary deal in September to reduce collective output to 32.5 million to 33 million barrels a day, compared with the group’s estimate of 33.6 million in October. Talks on individual production quotas continued this week with the aim of securing a final pact by the ministerial meeting in Vienna on Nov. 30. The group will meet lower-level OPEC officials to discuss cooperation on Nov. 28, followed by a Nov. 30 breakfast meeting between ministers and non-members, including Russia, before the ministerial summit, according to people familiar with the matter.

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Merkel’s anti-Putin stance will be used against her. Germany and Russia should always try to talk. They are too close to not talk.

Germany, 15 Other Countries Press For Arms Control Deal With Russia (R.)

Fifteen European countries have joined Germany in its push for a new arms control agreement with Moscow, saying more dialogue is needed to prevent an arms race in Europe after Russia’s actions in Crimea and eastern Ukraine, a German newspaper said. “Europe’s security is in danger,” German Foreign Minister Frank-Walter Steinmeier told Die Welt newspaper in an interview published on Friday. “As difficult as ties to Russia may currently be, we need more dialogue, not less.” Steinmeier, a Social Democrat who has been nominated to become German president next year, first called for a new arms control deal with Russia in August to avoid an escalation of tensions in Europe.

Fifteen other countries – all belonging to the Organization for Security and Cooperation in Europe – have since joined Steinmeier’s initiative: France, Italy, Austria, Belgium, Switzerland, the Czech Republic, Spain, Finland, the Netherlands, Norway, Romania, Sweden, Slovakia, Bulgaria and Portugal. The group plans to issue a joint statement on Friday and will meet again on the sidelines of a Dec. 8-9 ministerial level OSCE meeting in Hamburg that will be hosted by Germany, which now holds the rotating presidency of the OSCE. Steinmeier condemned Russia’s annexation of Crimea and its support for separatists in eastern Ukraine, saying such acts undermined delicate bonds of trust built up over decades and threatened to unleashed a new arms race.

U.S. officials are skeptical about the initiative, citing Russia’s failure to abide by existing agreements and treaties. Steinmeier also drew criticism from U.S. and NATO officials in June after warning that Western military maneuvers in eastern Europe amounted to “saber-rattling and shrill war cries” that could worsen tensions with Russia.

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I’ve said it before: it’s never a good feeling when the looses cannons make most sense. But that’s 2016 for you.

Fillon Calls Hollande’s Hardline Policy On Russia ‘Absurd’ (EuA)

In a televised debate last night (24 November) French conservative frontrunner François Fillon said Russia must be anchored to Europe, or else Moscow would couple with China, to the detriment of the continent. The debate was largely seen as the last chance for Alain Juppé, who came second in the first round of the primary elections of the conservatives last Sunday, to impress the conservative electorate and catch up on Fillon ahead of the 27 November run-off. The one-and-a-half hour debate was generally uncontroversial. One of the rare contentious exchanges was when Juppé questioned Fillon’s perceived closeness to Russian President Vladimir Putin. Putin knew Fillon when they were both prime ministers.

In an unusual televised appearance the Russian president praised him Wednesday as a “great professional” and a “very principled person”. “This must be the first presidential election in which the Russian president chooses his candidate,” Juppé said. Fillon brushed off Putin’s comments but said the West must work more closely with Russia at a time when relations are at their worst since the Cold War. “Russia is a dangerous country if we treat it as we have treated it for the last five years,” Fillon said. He said the real danger to Europe was not Russia but the economic threat of “the Asian continent”. Fillon argued that Russia should be anchored to Europe geopolitically or risk seeing Moscow forge alliances with China instead.

He called “absurd” the hardline policy of French President François Hollande with regard to Russia, saying it only made Moscow harden its positions and exacerbate its nationalist reflexes. The French conservative frontrunner said the EU would not change alliances and would not abandon its transatlantic link, but added that Paris didn’t need the permission from Washington to talk to Moscow. “What I am asking is that we sit down at a table with the Russians without asking for the agreement of the United States and that we re-establish a link, if not a relation based on confidence, which will make it possible to anchor Russia to Europe.”

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His EU pension for life will be stunning. And now he can add a German one.

EU Parliament President Martin Schulz to Step Down, Run Against Merkel (WSJ)

European Parliament President Martin Schulz said on Thursday that he would stand down in January and run in next year’s elections in Germany, where he is seen as a potential rival to Chancellor Angela Merkel. The 60-year-old, who has been a member of the European Union’s legislature for the past 22 years, said it was “not an easy decision” to quit. Mr. Schulz’s return to German politics after more than 20 years in Brussels is fueling speculation that he could lead his Social Democratic Party’s ticket at next year’s general election, to run against Ms. Merkel’s conservatives. “My commitment to the European project is unwavering. From now on I will be fighting for this project from the national level, but my values don’t change,” Mr. Schulz said.

He noted that as the largest country in the EU, Germany “bears a special responsibility” which he will strive to fulfill, as of next year, from Berlin. Mr. Schulz didn’t comment on the possibility that he could succeed Frank-Walter Steinmeier as Germany’s foreign minister after the latter vacates his post early next year to run for the largely ceremonial office of German president. The SPD has said it would decide in January who would lead it into the general election next fall. SPD officials said Sigmar Gabriel, party chairman and economics minister, had the first shot, and would have to voluntarily yield to Mr. Schulz. The two men are longtime friends.

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We play around, very much at our own peril. with systems far too complex for us to understand. We simply deny we don’t understand. And there’s something ironically stupid in the Trump team taking away funding from NASA to be used in … space exploration. That you don’t make up.

Increasingly Rapid Ice Melt Could Trigger Uncontrollable Climate Change (G.)

Arctic scientists have warned that the increasingly rapid melting of the ice cap risks triggering 19 “tipping points” in the region that could have catastrophic consequences around the globe. The Arctic Resilience Report found that the effects of Arctic warming could be felt as far away as the Indian Ocean, in a stark warning that changes in the region could cause uncontrollable climate change at a global level. Temperatures in the Arctic are currently about 20C above what would be expected for the time of year, which scientists describe as “off the charts”. Sea ice is at the lowest extent ever recorded for the time of year. “The warning signals are getting louder,” said Marcus Carson of the Stockholm Environment Institute and one of the lead authors of the report. “[These developments] also make the potential for triggering [tipping points] and feedback loops much larger.”

Climate tipping points occur when a natural system, such as the polar ice cap, undergoes sudden or overwhelming change that has a profound effect on surrounding ecosystems, often irreversible. In the Arctic, the tipping points identified in the new report, published on Friday, include: growth in vegetation on tundra, which replaces reflective snow and ice with darker vegetation, thus absorbing more heat; higher releases of methane, a potent greenhouse gas, from the tundra as it warms; shifts in snow distribution that warm the ocean, resulting in altered climate patterns as far away as Asia, where the monsoon could be effected; and the collapse of some key Arctic fisheries, with knock-on effects on ocean ecosystems around the globe.

The research, compiled by 11 organisations including the Arctic Council and six universities, comes at a critical time, not only because of the current Arctic temperature rises but in political terms. Aides to the US president-elect, Donald Trump, this week unveiled plans to remove the budget for climate change science currently used by Nasa and other US federal agencies for projects such as examining Arctic changes, and to spend it instead on space exploration.

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More power away from Merkel.

Erdogan Threatens To Open Borders To Refugees After EU Vote (AFP)

Turkish President Recep Tayyip Erdogan on Friday threatened to throw open Turkey’s borders to illegal migrants after the European Parliament voted to back a freeze in membership talks with Ankara. “Listen to me. If you go any further, then the frontiers will be opened, bear that in mind,” Erdogan told the EU in a speech in Istanbul. On March 18, Ankara and Brussels forged a deal for Turkey to halt the flow of migrants to Europe – an accord that has largely been successful in reducing numbers crossing the Aegean Sea.

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It’s a miracle we haven’t seen much moe of this kind of thing happen.

Refugees Torch Lesbos Camp After Gas Explosion Kills Two (AFP)

Angry migrants set fire to a camp on the Greek island of Lesbos after a woman and a six-year-old child died following a gas cylinder explosion, local police said. The explosion occurred while the 66-year-old woman was cooking, police said, adding that the child’s mother and four-year-old sibling were hospitalised with serious injuries. In an apparent act of rage, migrants then set fire to the Moria camp on Lesbos, causing significant damage, police said. Firefighters arrived at the scene to try to put out the flames. Ensuing clashes between migrants and police left six refugees slightly injured. Some migrants fled the camp after the blast but had since returned and calm was being restored, a police source said.

Several fires have erupted in refugee camps on the Greek islands, where some 16,000 people became stranded after the European Union signed a deal that was aimed at stemming the influx of migrants. Moria has a capacity for 3,500 people but currently houses more than 5,000. Part of the camp was badly damaged in a fire on September 19 during clashes between migrants and police, and thousands had to be moved out before returning two days later. Nearly 66,000 refugees and migrants are currently stranded in Greece, according to official figures.

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Nov 232016
 
 November 23, 2016  Posted by at 9:45 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Cyclone, Oklahoma, 1898


Dow 19,000 Is No Cause For Celebration (MW)
Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)
We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)
Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)
EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)
Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)
Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)
Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)
Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)
EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)
Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)
Sea Ice Reaches A New Low (Economist)

 

 

Arbitrary numbers.

Dow 19,000 Is No Cause For Celebration (MW)

The Dow Jones Industrial Average closed above 19,000 on Tuesday for the first time. How is this news? I’m sure you remember the spell-binding chase for the Dow to break 18,000, or those thrilling days when the Dow crossed 17,000, or hunted for 15,000. If you don’t remember those benchmark days – which occurred in December 2014 and July 2014 respectively, the latter being 14 months after the Dow had crossed 15,000 – then you also recognize that Dow 19,000 is equally no big deal, post-election rally notwithstanding. In fact, the Dow itself is no big deal. The Dow is the Kardashian of indexes – a celebrity benchmark, famous because it’s known rather than because of what it does.

Every round number on the index hits the news cycle hard, largely because there is so little real news out there. In early November, for example, people were talking about nine straight down days on the S&P 500 – the first nine-day losing streak in 36 years – as if that was somehow meaningful, even though the total decline on the index amounted to just 3.1%. (By comparison, the S&P 500’s last nine-day skid – which ended in December 1980 – shaved 9.4% off the index, according to FactSet). Tuesday’s headlines included a 13-day winning streak for the Russell 2000, its longest win streak in more than 20 years. The Russell benchmark gained roughly 15% during that stretch – an achievement largely unnoticed because it wasn’t the Dow or S&P 500.

Round numbers and little factoids are amusing and interesting, and are obvious fodder for the talking heads. Currently, the talk is whether the post-election rally can continue and if the Dow can roar on to 20,000, or if the quick rebound since the election has pushed us closer to a point of go-no-further. Focusing on the meaning of the Dow passing a landmark, however, misses the bigger point, which is that the Dow is a virtually meaningless benchmark. The Dow is important to people because it’s what they know, the staple of every market-oriented website, every radio-station market update, every newspaper’s daily business section, and the centerpiece of the 20 seconds of coverage that every national newscast guarantees the investing world each day.

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Criminal. And deadly. The ultimate pyramid scheme.

Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth (ZH)

Today Credit Suisse released its latest annual global wealth report, which traditionally lays out what is perhaps the biggest reason for the recent “anti-establishment” revulsion: an unprecedented concentration of wealth among a handful of people, as shown in its infamous global wealth pyramid, an arrangement which as observed by the “shocking” political backlash of the past few months suggests that the lower ‘levels’ of the pyramid are increasingly unhappy about.

As Credit Suisse tantalizingly shows year after year, the number of people who control just shy of a majority of global net worth, or 45.6% of the roughly $255 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2016 the number of people who are worth more than $1 million was just 33 million, roughly 0.7% of the world’s population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $6 trillion in household wealth. And inbetween is the so-called global middle class – those 1 billion people who rising anger at the status quo made Brexit and Trump possible.

[..] How about the very top? Things here are even more nuanced, with 28.9 million people whose net worth is between $1 and $5 million gradually tapering off to just 140,900 Ultra High Net Worth individuals who control more than $50 million in assets each. Of these, 50,800 are worth at least USD 100 million, and 5,200 have assets above USD 500 million. The total number of UHNW adults is about 3% higher than a year ago (4,100 individuals), and the increase has been relatively uniform across regions, except for the higher than average rise in Asia- Pacific countries (10%)

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How about a lost century?

We Could Be In A ‘Lost Decade’ Of Global Wealth Growth (CNBC)

Concerns that we are in a “lost decade” for global wealth growth have been given further credence by the latest “Global Wealth Report” released by the Credit Suisse Research Institute on Tuesday. According to the researchers, “In recent years, there has been a growing sense that the economic recovery is shallow, and has not reached all layers of society. Evidence from our global wealth database supports this view.” “While exchange rate movements sometimes obscure trends, wealth per adult and median wealth have grown well below their potential during the last nine years, compounding fears that we are in the midst of a lost decade for global wealth growth,” the paper continues.

The 1.4% rise in global wealth over the 12 month period to June 30 has only kept in line with population growth, meaning that for the first time since 2008 the wealth per adult measure has remained flat, according to the research. The paper burrows down into country level data which show that exchange rate fluctuations were the biggest drivers of changes in wealth for different nations over the period. Most notably, the 15% plunge in the British pound driven by Brexit translated to a $1.5 trillion loss for the U.K.. Meanwhile Japan’s 19% jump – which added $3.9 trillion to its wealth pile – was exactly aligned with gains in the yen as the Japanese currency bounced back from earlier weakness as its central bank was increasingly seen as running out of tools with which to force its depreciation.

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Trump will listen. But these folks must recognize why he won and they did not: they can’t command the room like he can.

Willing To Oppose Trump, Some Senate Republicans Gain Leverage (R.)

It is no surprise that Democrats in the U.S. Congress will oppose Donald Trump but the most important resistance to fulfilling the president-elect’s agenda is beginning to emerge from Republicans on Capitol Hill. A small number of influential Republicans in the Senate are threatening to block appointments to Trump’s administration, derail his thaw with Russia and prevent the planned wall on the border with Mexico. The party held onto control of the Senate at the Nov. 8 election but by only a thin margin, putting powerful swing votes in just a few hands. That empowers Republican Senate mavericks such as Rand Paul of Kentucky and Ted Cruz of Texas. Both were bitter rivals to Trump in the 2016 Republican presidential primary.

Paul, a libertarian lone wolf, says he will block Senate confirmations if Trump nominates either former New York Mayor Rudy Giuliani or former U.N. Ambassador John Bolton to be secretary of state. South Carolina’s Lindsay Graham has started publicly outlining places he might be willing to oppose Trump. He is against the Mexican border wall and is delivering warnings against Trump’s intention to revoke legal status for undocumented immigrants brought here as children – although that would not require congressional approval. Graham, a traditional Republican foreign policy hawk, strongly disagrees with Trump’s attempt to improve ties with Russia. “I am going to be kind of a hard ass” on Russia, Graham told reporters recently. “We can’t sit on the sidelines” and let cyber attacks blamed on Russia “go unanswered.”

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Accounting tricks are supposed to keep zombies alive.

EU Draft Plan Eyes New Bank Creditor Class To Bear Losses (R.)

European banks would be able to issue a new category of debt that could be wiped out in a crisis only after shares and bonds, but before more secured instruments, such as covered deposits, under a draft EU law seen by Reuters on Tuesday. The proposal aims at facilitating the building up of capital buffers for banks against losses at time when shares and bonds are losing value, forcing lenders to pay more to build the required cushions. The draft law, to be published by the European Commission on Wednesday, would create a new category of “non-preferred” debt instruments that would be bailed-in -suffer losses- only during a bank resolution, the draft text said.

The document is part of a wider legislative package aimed at reviewing EU rules on capital requirements for banks. Only debt instruments with a maturity of one year, and that are not derivatives, can be included in the new class. Lenders issuing such instruments will have to stress in contracts their ranking, which will be lower than secured debt such as covered deposits, derivatives or tax liabilities. The law is also aimed at creating a uniform ranking of bail-in-able liabilities across EU countries, which have so far applied in divergent ways new bail-in rules in force since the beginning of this year. The bail-in regime is meant to reduce costs to taxpayers in the event of a bank crisis, while increasing losses for the lenders’ creditors.

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The field is still very slow to wake up, even if more of them raise their -timid- voices.

Economists Need To Get Into The Real World, Says BOE’s Haldane (Tel.)

Economists are too detached from the real world and have failed to learn from the financial crisis, insisting on using mathematical models which do not reflect reality, according to the Bank of England’s chief economist Andy Haldane. The public has lost faith in economists since the credit crunch, he said, but the profession has failed to thoroughly re-examine its failings to come up with a new model of operating. Instead, he fears, it is still using the same failed analyses, and is still failing to speak effectively to the public. This applies to an all manner of areas, from studies of the financial meltdown to analysis of the Brexit vote. “The various reports into the economic costs of the UK leaving the EU most likely fell at the same hurdle. They are written, in the main, by the elite for the elite,” said Mr Haldane, writing the foreword to a new book, called ‘The Econocracy: the perils of leaving economics to the experts’.

The chief economist said that the Great Depression of the 1930s resulted in a major overhaul of economic thinking, led by John Maynard Keynes, who emerged “as the most influential economist of the twentieth century”. But the recent financial crisis and slow recovery has not yet prompted this great re-thinking. “Thus far at least, the present crisis has yet to spawn a Keynes for the twenty-first century. And nor have we witnessed any great leap forward analytically. Perhaps it is simply early days,” he said. “Salvation for the economics profession probably lies not among existing academic and policymaking dinosaurs, like me, but among the new generation of students of the discipline.” For now, economists need to focus on reviewing their models, accepting a diversify of thought rather than one solid orthodoxy, and on communicating more clearly.

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A bit hard to convey what Dmitry means in a news overview, you’ll have to read the article.

Of Dunces, Fools, Drones and Heroes (Dmitry Orlov)

Some time ago I posted three T-shirt designs, with no explanation as to why. “Here are some shirts,” I wrote, “reasonably priced, in all styles and colors, free shipping on orders over 100 USD, yadda-yadda.” Just as I expected, a few people got it, and a few of those ordered some shirts. The rest had no idea; some even confessed to that in the comments. That was a test. It was a success. Now that all eight of the planned designs are available, I offer the full explanation and rationale behind this, my latest humanitarian intervention/fundraising effort.

In all my travels and conversations, I have proven to myself beyond all doubt that the decision on who to talk to should have nothing to do with race, age, class, gender, ethnicity, nationality, IQ, profession/trade, educational level, criminal record, party affiliation, gang/militia membership, religious persuasion, military training/rank, drinking/drug habits and whatever else you might try to use to categorize people. Categorizing people based on their public attributes just doesn’t work. So, in determining who is worth talking to, all we have to go on is gut feeling, first impressions and happy accidents. But is this, I ask you, in any way optimal? No, it is not!

That is why I decided to step in and help. The eight designs may have some artistic merit, but they are not exactly art; in fact, they should be regarded as precision mental calibration instruments. Each design features a simple nautical motif consisting of a circle and the 16 compass points. Around the circle is a tag line. Inside the circle is a fish. The tag line is a pun about the fish. Confused? Read on! Each of the designs is a cognitive test. As you walk around wearing one of these shirts, looking for people worth talking to, you can apply specific methods, explained below, to interpret the way they react to your shirt. You can then make an objective determination as to whether a particular person is worth talking to. The determination is based on that staple of business consultants, Four-Quadrant Analysis.

In this case, the two dimensions being mapped are:
x-axis: Did the person get it? (No | Yes)
y-axis: Did the person laugh? (No | Yes)

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Yeah, bring in the old guard. The return of Monti. That’ll work miracles.

Renzi’s Party Wants Early Election in Italy If Referendum Lost (BBG)

Prime Minister Matteo Renzi’s party would seek early elections in Italy by the summer of 2017 if he loses a referendum on constitutional reform, according to a senior official. Lorenzo Guerini, deputy-secretary of Renzi’s Democratic Party, said in an interview that the group would try to reform the electoral system and then push for a fresh ballot if the “No” campaign wins on Dec. 4. He declined to say whether the premier would stay on to lead that effort or honor his promise to resign after a defeat, but he insisted Renzi would remain leader of the biggest party in parliament. “If there is the political will, we can work over a brief period on a new electoral law, and have elections with a new electoral law soon, by the summer of 2017,” Guerini said in his Rome office.

“If there are not the political conditions and the electoral reform is used as an excuse for a weak government surviving, we’re not interested.” Both the euro and Italian bonds have fallen this month amid concern that a rising populist mood will derail Renzi’s plans for reform and put another crack in the European project. The insurgent Five Star Movement is aiming to capitalize on a “No” vote to force Renzi out and wants another referendum, this time on Italy’s membership of the euro area. With Five Star just behind the Democratic Party in the polls, part of the Italian establishment is looking to hold off another vote until the current parliamentary term ends in February 2018.

Mario Monti, who headed a technocratic government between 2011 and 2013, said he expected there to be no early ballot whatever happens and said Italy should prioritize stability rather than rushing into another vote. “In case the ‘No’ were to win, I would expect first of all Mr Renzi to stay on after all,” Monti said Tuesday in an interview with Bloomberg Television’s Francine Lacqua. “If he at all costs wanted to leave, I would expect the president of the republic to form a new government with a new prime minister, but very much from the same center-left political spectrum which is now the Renzi majority.”

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I’m waiting till Putin takes revenge for the Russian jet downed last year. The West is too weak to take on Erdogan.

Erdogan Says EU Lawmakers’ Vote On Turkish Membership ‘Has No Value’ (R.)

Turkish President Tayyip Erdogan said on Wednesday that a vote by the European Parliament on whether to halt EU membership talks with Ankara “has no value in our eyes” and again accused Europe of siding with terrorist organizations. “We have made clear time and time again that we take care of European values more than many EU countries, but we could not see concrete support from Western friends … None of the promises were kept,” he told an Organisation of Islamic Cooperation (OIC) conference in Istanbul. “There will be a meeting at the European Parliament tomorrow, and they will vote on EU talks with Turkey … whatever the result, this vote has no value in our eyes.”

Leading members of the European Parliament on Tuesday called for a halt to EU membership talks with Turkey because of its broad purges in the wake of a failed July coup. More than 125,000 people – including soldiers, academics, judges, journalists and Kurdish leaders – have been detained or dismissed over their alleged backing for the putsch, in what opponents, rights groups and some Western allies say is an attempt to crush all dissent.

Erdogan said on Tuesday the measures had significantly weakened the network of U.S.-based cleric Fethullah Gulen, whose followers are accused of infiltrating state institutions over several decades and carrying out the coup attempt. Erdogan, and many Turks, were angered by the Western response to the putsch, viewing it as more concerned about the rights of the plotters than the gravity of the events themselves, in which more than 240 people were killed as rogue soldiers commandeered fighter jets and tanks. He has also repeatedly accused Europe of harboring members of the Kurdistan Workers Party (PKK) militant group, which has waged a three-decade insurgency against the Turkish state and is deemed a terrorist organization by the EU and United States.

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Get so sick of this. More reforms will be called for. Rinse and repeat.

EU Finance Ministers To Discuss IMF, Greek Debt (Kath.)

Finance ministers of core European Union countries are expected to meet later this week in Berlin to discuss the possible concessions Brussels could offer to secure the participation of the IMF in Greece’s third international bailout, paving the way for debt talks. Government officials suggest that the IMF, which has yet to decide whether to join Greece’s third bailout, is to blame for the slow process of talks between Greece and its creditors. In a media briefing on Tuesday, government spokesman Dimitris Tzanakopoulos acknowledged that the differences between Greece and its creditors remain too great for an agreement on all prior actions to be reached by the December 5 Eurogroup meeting and said that Athens was aiming for a political agreement by that time.

There is enough time until December 5 for agreements to be reached in talks on labor laws, fiscal issues and the overhaul of the Greek energy sector, Tzanakopoulos said, noting that the government has shown the political will necessary to achieve a breakthrough by the deadline. However, he said, this political will does not include “a willingness for new austerity measures and concessions on matters of principle such as labor rights.” Elaborating, government sources said authorities will not retract their demands for the restoration of collective labor contracts. If all differences have not been bridged by December 5, Greece’s creditors should issue a political decision and make good on their pledge to launch talks on debt relief, Tzanakopoulos said.

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Denouncing the CON21 accord is not the worst of things. Because it doesn’t achieve a thing.

Trump: ‘Open Mind’ On Quitting Climate Accords (AFP)

US President-elect Donald Trump said Tuesday he has an open mind about pulling out of world climate accords and admitted global warming may be in some way linked to human activity. “I think there is some connectivity. Some, something. It depends on how much,” he told a panel of New York Times journalists. Asked whether he would make good on his threat to pull the United States out of UN climate accords, he said: “I’m looking at it very closely. I have an open mind to it.” But he said he was also wanted to see how much the Paris climate accord “will cost our companies” and its impact on US competitiveness.

The Republican billionaire businessman has called climate change a “hoax” perpetrated by China and threatened to pull out of the agreement on limiting greenhouse gas emissions. The accord was reached in Paris in December 2015 after negotiations involving 195 countries. The worldwide pact to battle global warming took effect on November 4. The agreement sets a goal of limiting the rise in global temperatures to two degrees Celsius (3.6 degrees Fahrenheit) over pre-industrial revolution levels. The United States, the second biggest emitter of greenhouse gases after China, ratified the accord in early September, with strong backing from President Barack Obama.

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What are you going to do about it?

Sea Ice Reaches A New Low (Economist)

Measuring sea ice is difficult. Not only does it only appear in the most remote, inhospitable parts of the world, it is constantly either melting or forming. Since 1979, satellites have made the job easier, but they can give a misleading picture. Using satellite images to tot up the total area of sea ice risks mistaking surface melt for open water during the summer melting season. Scientists at the National Snow and Ice Data Center (NSIDC) in Colorado instead measure sea-ice extent by dividing the images into grids and counting any squares with more than 15% ice concentration as “ice covered”. Sea-ice extent is always larger than sea-ice area, but this method eliminates melt-season inaccuracies.

Scientists are interested in sea ice as a marker -and amplifier- of climate change. Its bright surface reflects 80% of the sunlight that hits it back into space. When it melts, the uncovered dark ocean surface absorbs 90% of the sunlight, which heats it up, causing more ice to melt. In recent years, the melting season in the Arctic has been ending later in the year, leading to less time for new ice to form. As a consequence, the total sea-ice extent in September 2016 was over 3m km2. smaller than in September 1980, although not as small as in September 2012, the worst year on record.

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Nov 132016
 
 November 13, 2016  Posted by at 9:56 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »
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Andy Thomas: Grand Ol’ Gang


Stupid Americans Elect An Absurd and Dangerous President (Spiegel)
Trump Adviser Scaramucci Takes Aim at Conservatives’ Budgetary Restraint (BBG)
Trump’s Truthful Heresy On Globalization And Free Trade (Steve Keen)
Clinton Blames FBI’s Comey For Her Defeat In Call With Donors (R.)
Sidney Blumenthal: Right-Wing FBI Agents Took Down Hillary In Coup D’État (ZH)
NY Times Publisher Vows To ‘Rededicate’ Paper To Reporting Honestly (Fox)
President Trump: How & Why… (Jonathan Pie)
Putin Aide: Trump Could Build Confidence With NATO Pullback (AP)
S&P Predicts Hard Brexit And Fresh Downgrade For UK (G.)
Obama: Greeks ‘Need Hope’ (Kath.)
Erdogan: If 3 Million Refugees March To Europe, EU Won’t Know What To Do (TM)
US To Accept Refugees That Australia Refuses To Resettle (BBC)

 

 

Just trying to make friends.

Stupid Americans Elect An Absurd and Dangerous President (Spiegel)

Although Trump will become the democratically elected 45th president of the United States on January 20, he remains a dangerous man. He is dangerously indifferent, unbalanced and inexperienced — and he is dangerously racist. Trump believes in the superiority of the white race, and if he implements the worst of his campaign promises, he will not be the first elected leader to do so. In other words, 60 million Americans acted stupidly. They cast their votes for xenophobia, racism and nationalism, the end of equal rights and social conscience, for the end of climate treaties and health insurance. Sixty million people followed a demagogue who will do little for them. And yet… this election goes deeper than that.

It says more than that, and all of us, including the media, politicians and civil societies, and unfortunately the entire West, which is now threatened, would be wise to pay far closer attention. Those who have lived in New York or experienced dinner conversations in Georgetown and debates at Harvard University’s Kennedy School of Government, know how brilliantly intelligent and worldly Americans can be. But these are closed circles – ones that are unfortunately nowhere near as open as they like to claim, inaccessible as they are to the vast majority of Americans who could never afford access. Once you get outside such circles, such cosmopolitan thinking isn’t nearly as widespread.

Those who have traveled recently from the East Coast to the West Coast, and witnessed the neglect and deterioration of entire towns and cities in states like Georgia, Alabama and Louisiana, have seen with their own eyes that connections have been severed in American society. Those who have seen what the disappearance of the steel industry has done and what the computer chip has wrought is familiar with the widespread frustration among the white working class, a group that has been left behind. Harvard University and Akron, Ohio, or Wall Street and Birmingham, Alabama, no longer have anything in common when 0.1% of society possesses 90% of the wealth. This is when the American dream is dead and when hate thrives – hate for immigrants, women, the media, and hate for anything that seems elitist or is simply different.

This doesn’t justify the hate – it simply explains it. The tragedy here is that Clinton offered ideas to fight the roots of this hatred, ideas like a higher minimum wage and investments in infrastructure and education. It is tragic because it was too late for credible plans. Trump had no ideas, but he sensed that the left-behinds yearn for strength. After Barack Obama’s victories, the pundits said that demographic change meant that no US election could be won again without the Latino vote. But Trump gave the Latinos a big fuck you, insinuating that the left-behinds are superior. His words were as crude as those spoken in Germany 80 years ago.

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“Business people like Mr. Trump understand you can grow yourself out of excessive debt.”

Trump Adviser Scaramucci Takes Aim at Conservatives’ Budgetary Restraint (BBG)

Don’t expect President-elect Donald Trump to adhere consistently to traditional Republican economic policy, or even to positions Trump staked out during his election campaign. That’s the message in an opinion piece written in the Financial Times by Trump economic adviser Anthony Scaramucci that took a swipe at the budgetary discipline promoted for years by fiscal conservatives in the U.S. and Europe. It may point to a coming rift between the new executive branch and the Republican-controlled Congress. “Mr. Trump is a different type of leader not burdened by rigid ideology,” Scaramucci said. “He is not dogmatic about policy positions. Rather, he has set bold targets from which to begin negotiations.”

Scaramucci ran though some of Trump’s previously-announced plans, including a proposal for a 10-percent one-off repatriation fee for companies. Trump would “ideally” like to see corporate tax rates cut to 15% from 35%, he said, adding that even a reduction to equal the U.K. rate of 20% would add nearly $600 billion to U.S. GDP. Founder of the investment firm SkyBridge Capital, Scaramucci, 52, was named on Friday to the executive committee of Trump’s transition team. The 16-person list also includes Dune Capital CEO Steve Mnuchin, who was finance chairman of Trump’s campaign; Reince Priebus, chairman of the Republican National Committee; and three of the president-elect’s children.

Scaramucci said global economies are still battling deflation largely because of a movement toward fiscal austerity that followed the 2008-2009 global economic crisis. “While easy-money monetary policies have exacerbated the income divide, central bankers handcuffed by political dysfunction have had little choice but to provide extraordinary accommodation,” he said. “Business people like Mr. Trump understand you can grow yourself out of excessive debt.”

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Steve illustrates his view with an excellent critique of David Ricardo, but I have no space for that here. Read the article.

Trump’s Truthful Heresy On Globalization And Free Trade (Steve Keen)

Dear President Trump, Nothing shuts a loud party down faster than the neighbours bashing the door in. You have just done that to the Washington Party, which—regardless of whether the President has been a Republican or a Democrat—has been the party of Globalisation and Free Trade ever since the 1970s. You declared that this party might have been good for the Washington and Wall Street elites, but it’s been bad for their neighbours, “the forgotten people” of America who once made up its manufacturing workers. So forget it folks, the party’s over. Go home. You’re right. Plenty of people will try to convince you that globalization and free trade could benefit everyone, if only the gains were more fairly shared.

The only problem with the party, they’ll say, is that the neighbours weren’t invited. We’ll share the benefits more equally now, we promise. Let’s keep the party going. Globalization and Free Trade are good. This belief is shared by almost all politicians in both parties, and it’s an article of faith for the economics profession. You are right to reject it. It’s a fallacy based on a fantasy.. [..] the gains from trade for everyone and for every country that could supposedly be shared more fairly simply aren’t there in the first place. Specialization is a con job—but one that the Washington elite fell for (to its benefit, of course). Rather than making a country better off, specialization makes it worse off, with scrapped machinery that’s no longer useful for anything, and with less ways to invent new industries from which growth actually comes.

Excellent real-world research by Harvard University’s “Atlas of Economic Complexity” has found diversity, not specialization, is the “magic ingredient” that actually generates growth. Successful countries have a diversified set of industries, and they grow more rapidly than more specialized economies because they can invent new industries by melding existing ones. My favourite example here is sailboards. To invent them in the first place, it helps to have local industries producing both surfboards and sails. Of course, specialization, and the trade it necessitates, generates plenty of financial services and insurance fees, and plenty of international junkets to negotiate trade deals. The wealthy elite that hangs out in the Washington party benefits, but the country as a whole loses, especially its working class. Forget it folks, the party’s over. Go home.

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It couldn’t have been her own fault, could it?

Clinton Blames FBI’s Comey For Her Defeat In Call With Donors (R.)

Hillary Clinton blamed FBI director James Comey for her stunning defeat in Tuesday’s presidential election in a conference call with her top campaign funders on Saturday, according to two participants who were on the call. Clinton was projected by nearly every national public opinion poll as the heavy favorite going into Tuesday’s race. Instead, Republican Donald Trump won the election, shocking many throughout the nation and prompting widespread protests. Clinton has kept a low profile since her defeat after delivering her concession speech on Wednesday morning. Clinton told her supporters on Saturday that her team had drafted a memo that looked at the changing opinion polls leading up to the election and that the letter from Comey proved to be a turning point.

She said Comey’s decision to go public with the renewed examination of her email server had caused an erosion of support in the upper Midwest, according to three people familiar with the call. Clinton lost in Wisconsin, the first time since 1984 that the state favored the Republican candidate in a presidential election. Although the final result in Michigan has still not been tallied, it is leaning Republican, in a state that last favored the Republican nominee in 1988. Comey sent a letter to Congress only days before the election announcing that he was reinstating an investigation into whether Clinton mishandled classified information when she used a private email server while secretary of state from 2009 to 2012.

Comey announced a week later that he had reviewed emails and continued to believe she should not be prosecuted, but the political damage was already done. Clinton told donors that Trump was able to seize on both of Comey’s announcements and use them to attack her, according to two participants on the call.

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Blumenthal’s the Clinton ally that Obama told her to stop conferring with. He’s rumored to be the main reason she set up her private server, in order to keep talking to me regardless, and keep it all secret.

Sidney Blumenthal: Right-Wing FBI Agents Took Down Hillary In Coup D’État (ZH)


After weeks/months of the Hillary campaign bashing Trump for “irresponsibly” questioning the legitimacy of the election process, Clinton-insider, Sid Blumenthal, is apparently making the media rounds in Europe attributing her loss to a “coup d’etat” organized by “a cabal of right-wing agents of the FBI in the New York office attached to Rudy Giuliani.” “It was the result of a cabal of right-wing agents of the FBI in the New York office attached to Rudy Giuliani, who was a member of Trump’s campaign.”I think it’s not unfair to call it a coup. Yeah, a coup d’etat.” Of course, Blumenthal is well known within Clinton world for his wild conspiracy theories as John Podesta pointed out he is “lost in his own web of conspiracies.” “Sid is lost in his own web of conspiracies. I pay zero attention to what he says.” It would probably be pointless to highlight for Sydney that there would never have been an FBI investigation had Hillary not blatantly violated multiple federal laws for her “convenience”…details.

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If the NYT had actually “reported on both candidates fairly”, the change wouldn’t have been necessary. Then again, the Dems are blaming the press for having been biased AGAINST HER! Anything goes.

NY Times Publisher Vows To ‘Rededicate’ Paper To Reporting Honestly (Fox)

The publisher of The New York Times penned a letter to readers Friday promising that the paper would “reflect” on its coverage of this year’s election while rededicating itself to reporting on “America and the world” honestly. Arthur O. Sulzberger Jr., the paper’s embattled publisher, appealed to Times readers for their continued support. “We cannot deliver the independent, original journalism for which we are known without the loyalty of our subscribers,” the letter states. New York Post columnist and former Times reporter Michael Goodwin wrote, “because it (The Times) demonized Trump from start to finish, it failed to realize he was onto something. And because the paper decided that Trump’s supporters were a rabble of racist rednecks and homophobes, it didn’t have a clue about what was happening in the lives of the Americans who elected the new president.

Sulzbergers letter was released after the paper’s public editor, Liz Spayd, took the paper to task for its election coverage. She pointed out how its polling feature Upshot gave Hillary Clinton an 84% chance as voters went to the polls. She compared stories that the paper ran about President-elect Donald Trump and Clinton, where the paper made Clinton look functional and organized and the Trump discombobulated. Spayd wrote, “Readers are sending letters of complaint at a rapid rate. Here’s one that summed up the feelings succinctly, from Kathleen Casey of Houston: “Now, that the world has been upended and you are all, to a person, in a state of surprise and shock, you may want to consider whether you should change your focus from telling the reader what and how to think, and instead devote yourselves to finding out what the reader (and nonreaders) actually think.”

She wrote about another reader who asked that the paper should focus on the electorate instead of “pushing the limited agenda of your editors.” “Please come down from your New York City skyscraper and join the rest of us.” Sulzberger—who insisted that the paper covered both candidates fairly- also sent a note to staffers on Friday reminding the newsroom to “give the news impartially, without fear or favor.” “But we also approach the incoming Trump administration without bias,” he said.

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Jonathan Pie is a spoof news reporter played by actor Tom Walker. Not a bad rant. h/t Nicole

President Trump: How & Why… (Jonathan Pie)

In case you missed it, I shot my bolt early this week & went viral in the process.

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Stop blaming Russia for NATO making up a reason to continue to exist.

Putin Aide: Trump Could Build Confidence With NATO Pullback (AP)

Vladimir Putin’s spokesman says one way Donald Trump could help build confidence with Russia after he becomes president would be to persuade NATO to slow down its expansion or withdraw its forces from Russia’s borders. Dmitry Peskov said in an interview with AP that this “would lead to a kind of detente in Europe.” But unfortunately, he said, Russia now sees “NATO’s muscles … getting bigger and bigger and closer and closer to Russian borders.” At a NATO summit in July, the Western alliance said it is building up positions in Poland, Estonia, Latvia and Lithuania in response to what it sees as escalating tensions with Russia. The United States is sending 1,000 troops to Poland next year. Trump has praised Putin as a strong leader and suggested that the U.S. could abandon its NATO commitments, which include mutual defense in case of attack.

The president-elect says NATO was created to confront a threat — the Soviet Union — that no longer exists and has called the alliance “obsolete” and a bad deal for America. He argues that the U.S. gets too little out of decades-old security partnerships like NATO, which is anchored in Europe but traditionally led by the United States. Peskov, who is considered one of Putin’s closest aides, called NATO “an instrument of confrontation.” When its forces are being enlarged and deploying closer and closer to Russia’s borders, he said, “we do not feel ourselves safe.” “Of course, we have to take measures to counter,” Peskov said. As “confidence-building measures” to reduce U.S.-Russia tensions in a Trump presidency “let’s say slow down or withdrawal of NATO’s military potential from our borders potentially would ease this situation,” he said.

It’s highly unusual for Peskov to travel abroad separately from Putin, but he is chairman of the board of the Russian Chess Federation and came to New York to attend Friday’s opening of the world championship match between Russia’s Sergei Karyakin and Norway’s Magnus Carlsen. The organizers invited Trump to attend but he did not show up. On other global issues, Peskov said in an interview Thursday at the venue for the championship that there is no possibility of “a breakthrough” to end the more than five-year Syria conflict unless the so-called moderate opposition is separated from “terrorist groups” including the Nusra Front and Islamic State extremists. The U.S. was supposed to do this under a Russia-U.S.-brokered cease-fire, but Peskov said Washington, unfortunately, was unable to do so. The cease-fire collapsed in September as the Syrian army launched an offensive on rebel-held eastern Aleppo under the cover of Russian warplanes.

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Within a year lots of Britons will realize that being out of the EU is a blessing.

S&P Predicts Hard Brexit And Fresh Downgrade For UK (G.)

Britain is in store for a hard Brexit that will hit the UK economy and lay bare the deep divisions in British society, a leading ratings agency has warned. In a bleak assessment of the UK’s prospects following the EU referendum, Standard & Poor’s said Britain was a diminishing global economic power on the verge of losing the ability to freely export goods and services to the EU. S&P said the UK was at risk of a further downgrade, following its unusual decision to slash the rating by two notches from the top AAA rating to AA, following the 23 June referendum. Moritz Kraemer, S&P global ratings chief sovereign credit officer, described that downgrade as “an extraordinary rating action, underlining the unprecedented step that is Brexit”.

He added: “Far from healing festering wounds, as was then PM David Cameron’s intention, the referendum has deepened and laid bare the schisms in British society. “Most of the economic impact will hit Britain itself. The second-round effect on the world economy is likely to be more limited, as the UK economy accounts for a small and shrinking share of global GDP.” The agency cited data from the International Monetary Fund, which suggested the UK’s share of the world economy will shrink from about 5% in 1980 to just over 3% in 2020. Kraemer said: “It is hard to fathom how a rather hard Brexit can be avoided unless both sides become much more flexible than they appear today. Nothing today suggests that a common quest for compromise will overcome the gulf that now looks as wide as the English Channel.”

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He could do much more, or have done at least, and all there is is words.

Obama: Greeks ‘Need Hope’ (Kath.)

You have played an important role in making sure that Greece remains in the eurozone and have repeatedly stated that it should get serious debt relief. Why did you do this and what should the way forward be in terms of promoting reforms, dealing with the debt issue and the strengthening of European institutions? How can the US help Greece in this, in practical terms? Is this going to be a priority during your visit to Berlin? Greece is a democracy, and the future of Greece will be decided by the Greek people. I have strongly supported efforts to keep Greece in the eurozone because I share the view of the vast majority of Greeks that this outcome is in Greece’s best interest. I believe that European integration is one of the greatest political and economic achievements of modern times, with benefits for EU members, the United States and the entire world.

Europe is our largest economic partner and we have a profound economic interest in a Europe that is stable and growing. Without question, Greece had to take steps to reform its economy, and I want to commend the Greek government, including Prime Minister Tsipras, and the Greek people for the very difficult and painful steps they’ve taken to show that Greece is working to help itself. The Greek budget is now in surplus and Parliament has passed tough reforms that will help make the Greek economy more competitive.

But there’s still clearly more to be done. My visit will therefore be an opportunity to reaffirm US support for reforms that improve the business climate, ensure that the imbalances that caused the crisis don’t re-emerge, and lay the foundation for a stronger economic recovery that helps improve the daily lives of the Greek people. I am a strong believer that to make reforms sustainable, people need hope. The IMF has said that debt relief is crucial to put Greece’s economy on a sustainable path and set the stage for a return to prosperity. This is why I will continue to urge Greece’s creditors to take the steps needed to ensure the country is well placed to return to robust economic growth, including by providing meaningful debt relief. Getting that done would not only fuel the Greek economic recovery, it would also show that Europe can make its economy work for everyone.

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How many times have I said the refugee deal would backfire on the EU?

Erdogan: If 3 Million Refugees March To Europe, EU Won’t Know What To Do (TM)

In yet another veiled threat to the European Union, President Recep Tayyip Erdogan said that Turkey currently hosts 3 million refugees and that if they were to march to Europe, the EU would not know what to do with them. In an interview with the Qatar-based Al Jazeera TV, Erdogan said the 3 million refugees in Turkey could march to Europe, without explaining how they might do that. In a progress report released earlier this week, the EU severely criticized Turkey for backsliding in democracy but praised its efforts to contain refugees inside the country. Criticizing Europe for not accepting even 100 or 500 refugees, Erdogan brought to mind the EU’s promise to give Turkey 3 billion euros in June in addition to another 3 billion.

“As far as I can remember, until now the EU has only given Turkey 250-300 million euros”, Erdogan said. The EU has been criticized for not taking any concrete action against Turkey despite growing despotism in the country for the sake of a refugee deal that was agreed earlier this year. Following a further crackdown on media and the opposition last week, several EU politicians called for a suspension of accession talks with Turkey until the rule of law is restored. Erdogan’s veiled threat to Europe came amid increasing criticism from the continent. Meanwhile, Galip Ozturk, the owner of one of the largest passenger bus fleets in Turkey, wrote on Twitter on Friday that he is ready to transport migrants to the EU border upon Erdogan’s orders.

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Aussies are good at cattle trade?!

US To Accept Refugees That Australia Refuses To Resettle (BBC)

Australia and the US have reached a resettlement deal for asylum seekers held in offshore detention centres in Papua New Guinea and Nauru. Under the agreement, the migrants there will be assessed and the most vulnerable will be resettled in the US. About 1,200 people are being held in the asylum centres on Manus Island in Papua New Guinea and on Nauru island. Australia’s policy of sending migrants who arrive by boat to offshore facilities has been criticised. Announcing the deal with the US on Sunday, Prime Minister Malcolm Turnbull said the resettlement process would be gradual. “US authorities will conduct their own assessment of refugees and decide which people are resettled in the US,” he said.

He did not say how many refugees would be relocated, but said that women, children and families would be prioritised. The agreement, to be administered with the United Nations refugee agency UNHCR, is available only to those currently in the processing centres. “It is a one-off agreement. It will not be repeated,” Mr Turnbull said. US Secretary of State John Kerry confirmed the arrangement, adding that his country was “very engaged” with the UNHCR and helping refugees “there and in other parts of the world”. Refugees who are eligible for asylum in the US but reject it would be offered a 20-year Nauru visa instead.

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Oct 162016
 
 October 16, 2016  Posted by at 11:30 am Finance Tagged with: , , , , , , , ,  4 Responses »
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‘Papa says they won’t hurt us’

 


RBS ‘Dash For Cash’ Scandal: 500 Firms Suing Bank Turn On Regulator (Herald)
Scrambled Brexit Communications Worry UK Bankers (BBG)
Fresh British Veg ‘Could Be Wiped Out By Brexit’ (Sky)
Athens Protests Victoria Nuland Statement On Treaty Of Lausanne (Kath.)
Trump’s Refusal To Accept Intelligence Briefing On Russia Stuns Experts (WaPo)
Russia Slams ‘Unprecedented’ US Threats Over Cyber Attacks (AFP)
Builder-in-Chief: Erdogan’s Real-Estate Dream Drifts to Syria (BBG)
Amy Goodman Faces Prison for Reporting on Dakota Access Pipeline (Nation)
On The Brink, But Africa’s Reviled Vultures Vital In Fight Against Disease (G.)

 

 

“..the bank and its senior executives had no scruples about effectively looting cash and assets from business customers..”

RBS ‘Dash For Cash’ Scandal: 500 Firms Suing Bank Turn On Regulator (Herald)

A group of almost 500 businesses suing the Royal Bank of Scotland for allegedly destroying their firms and seizing their assets is threatening legal action against the Financial Conduct Authority if it does not immediately publish its long-awaited report into the scandal. The central allegation of the so-called “Dash for Cash” scandal was that firms – in some cases healthy ones – were preyed on by RBS which effectively bankrupted the companies, bought the assets and made a profit from their suffering. RBS denies the allegations. David Stewart, spokesman for the RBS GRG Business Action Group, said:“Unless the FCA gives an immediate commitment to publishing the Section 166 report, we will initiate judicial review proceedings against them.” The FCA, the financial regulator, launched a probe into the Dash for Cash scandal in January 2014.

The report, produced by consultants Promontory and Mazars, was handed to the FCA in late summer but the regulator only confirmed receipt on October 5. “We understand the S166 report recommends a compensation scheme for affected firms,” said Stewart. “It is essential that this scheme is independent and judicial, with full redress for consequential losses, and that it is not overseen by the FCA. We have no confidence in the regulator, given its previous compensation schemes have failed so many victims.” The FCA stated: “There are a number of steps for the FCA to complete before we are in a position to share our final findings, which will include an assessment of all relevant material, of which the skilled person’s report is one. This has been a complex and lengthy review – it is therefore important that we do not rush the final stages of this process.”

[..] Kalvin Chapman, a partner at lawyers Muldoon Britton, said the Dash for Cash email sent out by RBS regional director Rhydian Davies on October 9, 2008 proves that the bank and its senior executives had no scruples about effectively looting cash and assets from business customers of RBS, NatWest and Ulster Bank. “It only cared about scalping customers and bleeding them dry,” said Chapman.

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Yay! More finger pointing opportunities. Blame thy neighbor!

Scrambled Brexit Communications Worry UK Bankers (BBG)

A British bank executive recently approached Prime Minister Theresa May’s office with a question. The Treasury said it was the point of contact for discussing Brexit issues. The Department for Exiting the European Union said the same thing. Who was right? Neither, he was told. Talk to us instead. That story, retold by a banker who asked to remain anonymous, is symptomatic of industry complaints about engaging with May’s government as it begins pulling Britain out of the European Union. May has already put financiers on notice that they’re losing their privileged perch in policy making considerations, so the communications confusion only serves to deepen their anxiety.

“The government needs to develop a more strategic and joined-up approach around financial services,” said Andrew Gray, head of Brexit for U.K. financial services at PricewaterhouseCoopers in London. “There are a number of different government departments seeking to get their voices heard on Brexit, and that’s resulting in some rather mixed messages being delivered.” The portrait of bungled communications, which could prompt banks to accelerate the movement of highly paid jobs from London, emerged from interviews with government officials, bankers and lobbyists. Financial services account for almost 12% of the economy, more than 1 million jobs and over 60 billion pounds ($73 billion) of annual tax revenue.

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In case you still weren’t clear on what’s wrong with Britain: “This is good work, normal work for us,” he said with a smile. “It is not hard.” but “It’s unskilled labour so [locals] do not want to do that kind of work.”

Fresh British Veg ‘Could Be Wiped Out By Brexit’ (Sky)

A leading farmer has warned that British vegetables will disappear from supermarket shelves if post-Brexit immigration controls prevent thousands of Eastern Europeans from working in the UK. Guy Poskitt, who grows 80,000 tons of carrots and parsnips a year in Yorkshire, says it is impossible to find enough British labourers to do the work. Last year the number of EU nationals in the UK rose by an estimated 180,000 but the Government is committed to reducing total immigration to the tens of thousands. “If you took migrant workers out of the supply chain you would within five days have no fresh British produce on the supermarket shelves,” Mr Poskitt claimed.

He told Sky News he pays agencies £9.50 per hour for temporary labourers and that without workers from Eastern Europe the industry would collapse. “[My business] would have to close; we could not serve our customers without the availability of migrant workers,” he said. Picking pumpkins from a nearby field for supply to major supermarkets, a group of Czech labourers said they are puzzled about why some people say they are no longer welcome. “I take home £50 or £60 a day here but just £30 for work in Prague,” said 21-year-old Patrick Dumka, as he stood in the muddy field that is his workplace for nine hours a day. He picks more than 1,000 pumpkins during each shift in all weathers, taking just an hour’s rest in a makeshift shelter, and joked that the British are too lazy to do the work.

“This is good work, normal work for us,” he said with a smile. “It is not hard.” Mark Straw whose firm Abbey Personnel Services supplies labourers to Yorkshire farms claims there is no alternative to Eastern European labour. From his office in Selby he hires and transports 200 Eastern Europeans to work each day, and says locals will not take the jobs on offer in agriculture. “It’s outdoor, it’s physical, you would say that there are little prospects for advancement,” he explained. “It’s unskilled labour so [locals] do not want to do that kind of work.”

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You do realize that a Hillary vote is a vote for Nuland, right?! Secretary of State has been mentioned for her.

Athens Protests Victoria Nuland Statement On Treaty Of Lausanne (Kath.)

Greek Ambassador to the USA Theocharis Lalacos has lodged a complaint with US Assistant Secretary of State Victoria Nuland in reaction to the US State Department’s response to a question on the Treaty of Lausanne. Questioned by a Greek journalist earlier this month about Turkish President Recep Tayyip Erdogan’s controversial comments on the 1923 peace pact which set the borders of modern Turkey, the State Department issued a written statement urging Athens and Ankara to work together in order to maintain good-neighborly relations and safeguard peace in the region. Diplomatic sources said the Greek ambassador protested to Nuland that the vague statement issued by the US State Department had caused unnecessary concern among the Greek public.

Lalacos suggested that US officials should instead have urged all sides to respect international law, according to the same sources. He allegedly said that the Lausanne Treaty concerns all states in the region, and not just Greece. Sources said Nuland vowed to investigate the issue further. “In Lausanne, we gave away the islands that you could shout across to,” Erdogan said on September 29, referring to Greek islands located in the Aegean Sea close to the Turkish coastline.

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CIA and NSA are not be doubted. Nobody ever did before. They don’t have to present any proof either. And they’re fully impartial at all times.

Trump’s Refusal To Accept Intelligence Briefing On Russia Stuns Experts (WaPo)

Former senior U.S. national security officials are dismayed at Republican presidential candidate Donald Trump’s repeated refusal to accept the judgment of intelligence professionals that Russia stole files from the Democratic National Committee computers in an effort to influence the U.S. election. The former officials, who have served presidents in both parties, say they were bewildered when Trump cast doubt on Russia’s role after receiving a classified briefing on the subject and again after an unusually blunt statement from U.S. agencies saying they were “confident” that Moscow had orchestrated the attacks. “It defies logic,” retired Gen. Michael Hayden, former director of the CIA and the National Security Agency, said of Trump’s pronouncements.

Trump has assured supporters that, if elected, he would surround himself with experts on defense and foreign affairs, where he has little experience. But when it comes to Russia, he has made it clear that he is not listening to intelligence officials, the former officials said. “He seems to ignore their advice,” Hayden said. “Why would you assume this would change when he is in office?” Several former intelligence officials interviewed this week believe that Trump is either willfully disputing intelligence assessments, has a blind spot on Russia, or perhaps doesn’t understand the nonpartisan traditions and approach of intelligence professionals.

[..] During the second presidential debate, Trump ignored what a U.S. government official said the candidate learned in a private intelligence briefing: that government officials were certain Russia hacked the DNC. That conclusion was followed by a public and unequivocal announcement by the Office of the Director of National Intelligence and the Department of Homeland Security that Russia was to blame.

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Crazy US allegations will come home to roost. And bite.

Russia Slams ‘Unprecedented’ US Threats Over Cyber Attacks (AFP)

The Kremlin on Saturday slammed Washington for its “unprecedented” threats against Moscow over an alleged series of cyber attacks and vowed to respond. Last week, Washington formally accused the Russian government of trying to “interfere” in the 2016 White House race through cyber attacks on American political institutions. And on Friday, US Vice President Joe Biden told NBC a “message” would be sent to Russian President Vladimir Putin over the alleged hacking, with the channel saying the CIA was preparing a retaliatory cyber attack “designed to harass and ’embarrass’ the Kremlin leadership.” Kremlin spokesman Dmitry Peskov immediately denounced Biden’s remarks, saying Moscow would take precautions to safeguard its interests in the face of the increasing “unpredictability and aggressiveness of the United States”.

“The threats directed against Moscow and our state’s leadership are unprecedented because they are voiced at the level of the US vice president,” RIA Novosti news agency quoted him as saying. “To the backdrop of this aggressive, unpredictable line, we must take measures to protect (our) interests, to hedge risks.” And Kremlin aide Yuri Ushakov vowed Moscow would respond to any US cyber attacks, saying such threats were “borderline insolence”, the news agency said. In the NBC interview, excerpts of which were released late Friday, Biden said Washington would respond “at the time of our choosing and under the circumstances that have the greatest impact.” Earlier this week Russian Foreign Minister Sergei Lavrov shrugged off the US allegations, telling CNN the hacking claims were “flattering” but baseless, with not a “single fact” to prove it.

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How Erdogan plans to conquer Kurdish land.

Builder-in-Chief: Erdogan’s Real-Estate Dream Drifts to Syria (BBG)

Turkey’s president looks at northern Syria and sees what others don’t: a massive real estate project. Recep Tayyip Erdogan, whose army is attempting to clear 5,000 square kilometers in northern Syria of Islamic State, talks about building entire cities when his soldiers’ work is done. In regular addresses, he describes a future in which refugees return home to Turkish-built apartment blocks supplemented by Turkish-built schools and social facilities. That may be the only way to get some of the nearly 3 million Syrians in Turkey to return home and begin reconstructing their country, he says. Erdogan’s vision points to a long-term commitment to carve out an area under Turkish influence, free from jihadists and Kurdish groups, making this operation one of its largest foreign interventions since the collapse of the Ottoman Empire.

To achieve it, Turkey needs to overcome daunting security risks, financing and logistical challenges, not to mention political battles with other parties including Russia, Iran and a Syrian regime hostile to Turkey’s meddling. “Erdogan has engaged the country in a very long adventure,” said Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara. “Turkey will have to maintain its troops there for years to come if it wants to keep that area off limits to hostile groups.” If successful, the plan could offer a boon to Turkish contractors. He already has one volunteer: the state agency known as TOKI, a colossus responsible for building about 10% of Turkey’s housing units every year.

“We have a problem at our doorstep,” Ergun Turan, TOKI’s president, said in an interview in Ankara on Sept. 20. “If our state asks us to, we will do it. And we’ll do it with ease.” In a bid to drum up support for Turkey’s deeper involvement, Erdogan is making the case that resettling refugees would mitigate the politically fraught issue of migration to Europe. EU leaders turned to Turkey for help last year after almost a million people streamed across its land and sea borders into Greece. “Refugee problems will go away automatically when the Syrian people get the opportunity to live on their own lands in safety,” Erdogan said in Ankara last month.

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There’s a lot of shameful and shameless America out there.

Amy Goodman Faces Prison for Reporting on Dakota Access Pipeline (Nation)

This Monday afternoon, as the sun hits its peak over Mandan, North Dakota, the award-winning journalist, and host of Democracy Now!, Amy Goodman will walk into the Morton County–Mandan Combined Law Enforcement and Corrections Center and turn herself in to the local authorities. Her crime: good, unflinching journalism. Goodman had the audacity to commit this journalism on September 3, when she was in North Dakota covering what she calls “the standoff at Standing Rock”: the months-long protests by thousands of Native Americans against the Dakota Access Pipeline. The $3.8 billion oil pipeline is slated to carry barrel after barrel of Bakken crude through sacred sites and burial grounds of the Standing Rock Sioux tribe, and tribe members fear it could pollute the Missouri River, the source not only of their water but of millions of others’, should the pipe ever rupture.

Their protests, which began in April and ballooned through the summer months, represent the largest mobilization of Native American activists in more than 40 years—and one of the most vital campaigns for environmental justice in perhaps as long. Goodman’s arrival at the main protest site, the Sacred Stone Spirit Camp, was significant. At the time, not a single one of the major broadcast networks had sent a reporter to cover the Standing Rock mobilization; none had even bothered to mention it on the air. But there was Goodman, standing at the edge of a grassy plain that was in the process of being churned into gullies of dirt, reporting on one of the most significant stories of the day. Clutching a large microphone, she captured the scene as hundreds of protesters tried desperately to stop a crew of bulldozers from tearing up the earth—the earth, they said, that belongs to nobody—only to be confronted by a force of private security contractors wielding attack dogs and pepper spray.

“People have gone through the fence, men, women, and children,” Goodman reported, her voice taut, then rising, louder and more intense. “The bulldozers are still going, and they’re yelling at the men in hard hats. One man in a hard hat threw one of the protesters down…!” As Goodman narrated, a security contractor, burly in a deep blue shirt, could be seen belly-flopping a man onto the ground. Protesters streamed in to help him, stumbled over mounds of newly churned dirt, faced off with contractors whose faces were hidden behind oversized sunglasses. The scene was full of movement. Overhead, a helicopter hovered, circled, while back on the ground, protesters began to report burning eyes, and dogs—dogs lurching at protesters, dogs straining against their leashes, dogs with mouths open, mouths biting.

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Mankind is a real smart species. We’ll kill everything here and then fly to Mars.

On The Brink, But Africa’s Reviled Vultures Vital In Fight Against Disease (G.)

Vultures are rarely viewed as the poster boys and girls of the natural world. They have repulsive eating habits and are strikingly ugly. Nevertheless, they play a critical role in maintaining the ecological health of many parts of the world. Vultures consume animal carcasses more effectively than any other scavengers and because their digestive juices contain acids that neutralise pathogens such as cholera and rabies they prevent diseases spreading. They act as dead-end hosts for numerous unpleasant ailments. But many ecologists are now warning that vultures across the planet are under serious threat thanks to habitat loss, deliberate and accidental poisoning, and use of the birds’ body parts as traditional medicine cures.

All these risks will be emphasised by British photographer Charlie Hamilton James in a series of images that will be shown as part of the Wildlife Photographer of the Year exhibition, which opens at the Natural History Museum this week. His photographs of vultures – and the growing environmental risks that threaten to wipe them out – have won Hamilton James the exhibition’s wildlife photojournalist of the year award. “I like underdogs,” he said last week. “That is why I like vultures. The trouble is that vultures are now under such stress in the wild – for several reasons. They are facing a massive catastrophe yet they do so much for the environment and do so much to contain disease.”

Vultures are one of the fastest declining groups of animals in the world. In India, all nine species of the bird are threatened with extinction, largely through the indiscriminate use of diclofenac, a common anti-inflammatory drug administered to livestock but which is lethal for the vultures that eat the corpses of cattle. “There is now a real danger that a disease like rabies will spread because there are hardly any vultures left to clean up corpses left in the open,” Hamilton James said.


Cape vultures at their artificial nesting cliff at the VulPro facility in Magaliesburgcorrect, South Africa. Photograph: Charlie Hamilton James

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Oct 022016
 
 October 2, 2016  Posted by at 10:25 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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DPC Belle Isle Park Aquarium, Detroit 1905


Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)
US Government Deficit Numbers are a BIG Lie (WS)
Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)
‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)
Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)
Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)
How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)
Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)
Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)
Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)
Czech President Calls For Deportation Of Economic Migrants (Pol.)
Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

 

 

John Hempton doesn’t leave much of the NYT story standing.

Some Comments On The NYT Story About Donald Trump’s Tax Returns (Hempton)

The New York Times has published a story (including extracts) about Donald Trump’s tax returns over two decades ago. The money-quote is this: “Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years…” According to the NYT the losses came … through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan. There is an issue here. Donald Trump did not repay all the debt associated with those investments.

Either the loss is a real loss and the Donald was really was out of pocket by $916 million (in which case he has legitimate NOLs) or the loss was passed on to someone else by The Donald defaulting on debt – in which case Donald Trump should be assessed for income from debt forgiveness. After all if the debt is forgiven it is not Donald Trump’s loss. The loss is borne by the person who lent Donald money and did not get it back. That – clearly stated by example – is why most income tax systems assess debt forgiveness as income. I do not know whether Donald Trump had the wherewithal in 1995 to bear $916 million of losses personally. But I doubt it. (If he did his financial career is different from what is popularly accepted.)

So the alternative is the debt was forgiven in some way. But then the story the New York Times is running is wrong – because the $916 million of losses would not have survived the debt forgiveness and hence would have wiped out his NOLs and thus he would not be allowed to shelter his income for the next 18 years. Unless that is there is an avoidance scheme the New York Times has not worked out. Those schemes go by the name of “debt parking”. Here is how debt parking works. Suppose the debtor (in this case The Donald) is going to get his debt cancelled for (say) 1c in the dollar. When he gets the debt wiped out the debtor (ie The Donald) will have to report assessable income equal to the debt wiped out (in this case 99% of $916 million).

The alternative though is for the debtor to set up a dummy party. The dummy party might be his wife or children or some company or trust set up by them or more likely some completely opaque offshore trust. And that dummy party goes and buys the debt for say 1.1 cents in the dollar. Then they just sit there. They don’t force the debtor (ie The Donald) to repay. They don’t make a profit or loss on the debt. And because the debtor never has his debt forgiven he never gets the assessment on debt forgiveness and he gets to keep his NOLs even though the losses did not come out of his pocket. Every tax system worth its salt has some rules on “effective debt forgiveness” to prevent debt parking. And – from my experience which is now over twenty years old – none of them work entirely.

Now if Donald really has all those tax losses its pretty clear that the debt must be parked somewhere. There is a vehicle out there (say an offshore trust or other undisclosed related party effectively controlled by Donald Trump) – which owns over $900 million in debt and is not bothering to collect it. I do not have the time or energy to find that vehicle. But it is there. Now that this blog has gone public journalists are going to look for it. There is a Pulitzer prize for whoever finds it. Just give me a nod at the acceptance ceremony.

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“What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?”

US Government Deficit Numbers are a BIG Lie (WS)

Remember when the US government had “surpluses” in the years 1998-2001? Well, yes, according to the Office of Management and Budget, those four years produced a combined $559 billion in “surpluses”: So did the debt fall by that amount? Nope. The debt continued to rise each year, as the government continued to borrow more and more money though it had a “surplus”: over the four years of “surpluses,” the government added $394 billion to its debt, as the scary chart below shows. But that was then and this is now. Now, the hole through which money disappears has gotten a lot bigger. In Fiscal 2016, the government ran a deficit of $590 billion, per the latest estimate of the Office of Management and Budget. Last year, the deficit was $438 billion. So combined over $1.0 trillion.

But it borrowed an additional $1.7 trillion to pay for $1.0 trillion in deficit spending. What happened to the $700 billion that it borrowed and that were not officially spent? It disappeared. Is it just a timing difference that averages out over the years? Nope. Since 2003, the government deficits published by the Office of Management and Budget amounted to $9.26 trillion. So the Treasury should have had to borrow that much to make up the difference. But over the same period, the national debt rose by $13.3 trillion. Meaning, $4.04 trillion had gone up in smoke. This chart shows the official deficits (red columns) and the increase in outstanding debt (blue columns) each year:

The $4 trillion was borrowed and the bonds were issued and the amounts are still outstanding, but the proceeds from the bond sales went out the door, off the books! We’ve all heard the stories of how the Pentagon’s books are sordid fiction [..] But that’s a different – and additional – matter. [..] With the missing $4 trillion, I’m talking about money that the government borrowed but never spent officially, that it never acknowledged even existed. This $4 trillion is on top of all the internal shenanigans at various departments, including the Department of Defense. What happened to the $700 billion in real money that the government borrowed over the past two fiscal years but never officially spent? What happened to the $4 trillion that the government borrowed but never officially spent since 2013? Where did this money go?

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6 out of the 13 charged were/are Deutsche execs. And yes, it’s derivatives again, i.e. attempts to hide losses from the books. Same practice, and same time period, as Goldman’s dealings with the then Greek government.

Six (Ex-)Deutsche Bank Executives Charged in Monte dei Paschi Probe (BBG)

Six current and former managers of Deutsche Bank – including ex-asset and wealth management head Michele Faissola – along with former executives at Nomura Holdings and Banca Monte dei Paschi di Siena were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market. A judge in Milan approved a request by prosecutors to try 13 bankers on charges over separate derivative transactions Paschi arranged with the securities firms, said a lawyer involved in the case, who attended the closed-door hearing Saturday, where the decision was announced.

The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale. Deutsche Bank’s shares have slumped 49% in Frankfurt this year, swinging wildly last week on news that hedge-fund clients withdrew some funds. Monte Paschi has dropped 84% this year amid concern it will struggle to restore profitability and strengthen its finances.

The charges culminate a three-year investigation by prosecutors that showed Monte Paschi used the transactions to hide losses, leading to a misrepresentation of its accounts between 2008 and 2012. The deals came to light in January 2013, when Bloomberg News reported that Monte Paschi used derivatives struck with Deutsche Bank to mask losses from an earlier derivative contract dubbed Santorini.

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Between refugees and banks, Merkel has sure screwed up.

‘Merkel Cannot Afford To Bail Out Deutsche Bank’ (R.)

German Chancellor Angela Merkel cannot afford to bail out Deutsche Bank given the hard line Berlin has taken against state aid in other European nations and the risk of a political backlash at home, German media wrote on Saturday. The government denied a newspaper report on Wednesday that it was working on a rescue plan for Germany’s biggest bank, as its shares went into a tailspin fueled by a demand for up to $14 billion from U.S. authorities for misselling mortgage-backed securities before the financial crisis. Germany, which has insisted Italy and others accept tough conditions in tackling their problem lenders, can ill afford to be seen to go soft on its flagship bank, the Frankfurter Allgemeine wrote. “Of course Chancellor Merkel doesn’t want to give Deutsche Bank any state aid,” it wrote in a front-page editorial.

“She cannot afford it from the point of view of foreign policy because Berlin is taking a hard line in the Italian bank rescue.” The Sueddeutsche Zeitung wrote that Merkel would be breaking a promise to taxpayers if she were to bail the bank out, which could spell disaster for her re-election bid next year as the anti-immigration AfD party gains ground. The AfD is already benefiting from a backlash against Merkel’s open-door refugee policy, making huge gains in two regional elections last month and hitting an all-time high of 16% support in an opinion poll last week. “A state aid package would drive voters into the arms of the AfD,” the Sueddeutsche wrote in an editorial. “Domestic political considerations make it unlikely that Berlin would play this joker. Even more unlikely is that the European Commission would agree. The political risk would be simply too high.”

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Before the end of March 2017, she said this morning.

Theresa May To Propose ‘Great Repeal’ Bill To Unwind EU Laws (G.)

Theresa May will set Brexit in motion on Sunday , unveiling plans for a ‘great repeal bill’ to enshrine all EU regulations in UK law as soon as Brexit takes effect. In opening speeches at Conservative party conference in Birmingham, May and the Brexit secretary, David Davis, will announce the government’s plan to repeal the 1972 European Communities Act, the law that binds EU law to the British statute book, and new legislation to transpose EU legislation into British law, in its entirety, That law will only come into force on the day Britain leaves the EU, with future governments then able to unpick those laws as desired. The bill is set to be brought forward in the next parliamentary session, but will not take effect until after the formal two-year process of leaving the EU, which begins when the government triggers article 50.

In an interview in which the prime minister repeated her decision not to hold a general election before 2020, May told the Sunday Times: “We will introduce, in the next Queen’s speech, a ‘great repeal’ bill that will remove the European Communities Act from the statute book. “This marks the first stage in the UK becoming a sovereign and independent country once again. It will return power and authority to the elected institutions of our country. It means that the authority of EU law in Britain will end.” The prime minister has rejected calls from some Eurosceptic quarters to immediately repeal the 1972 act, saying the country needed “maximum security, stability and certainty for workers, consumers, and businesses, as well as for our international allies”.

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A nice read, but it misses out entirely on the fact that stupefication starts in universities -if not before-, not afterwards.

Stupefied: How Organisations Enshrine Collective Stupidity (Aeon)

Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average raw intelligence will have been carefully crafted through years at the world’s best universities. After emerging from their selective undergraduate programmes and competitive graduate schools, these new recruits hope that their jobs will give them ample opportunity to put their intellectual gifts to work. But they are in for an unpleasant surprise. Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses.

After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on ‘boring’ and ‘pointless’ routine work. After a few years of dull tasks, they hoped that they’d move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows.

Those who did insist on carefully thinking through their client’s problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them. [..] For more than a decade, we’ve been studying dozens of organisations such as this management consultancy, employing people with high IQs and impressive educations. We have spoken with hundreds of people working for engineering firms, government departments, universities, banks, the media and pharmaceutical companies. We started out thinking it is likely to be the smartest who got ahead. But we discovered this wasn’t the case.

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To repeat once again: the EU is a criminal organization.

How Brussels Is Obstructing The Prosecution Of Corruption Cases In Greece (IE)

For a good eight years now, politicians, pundits and ordinary citizens have been quarreling over the merits (or lack thereof) of economic policies imposed on Greece by its lenders, notably the EU Commission. Was austerity beneficial or catastrophic? Did “reforms” help or hamper employment and growth? But while such issues are inherently contentious, the third and latest bailout agreement also provides for far less controversial policies. “Upgrade the fight against corruption”! “Strengthen the independence of institutions”! “De-politicise” the state! Insulate “financial crime and corruption investigations from political intervention”! All these are straight quotes from the third bailout agreement. Who would object to any of that?

Well, the EU, via its main institutions, does. Even the author of the bailout agreement, the EU Commission, seems to be quite allergic to all of the above, at least when it involves its own people. From the Commission’s spokespersons to the president of Eurogroup himself, a crowd of EU officials have been, at least twice in the recent months, actively and proactively doing their best to stop Greek judges from delivering on their job description: prosecuting corruption cases and financial crime. In August 2016, EU Commission spokesman Margaritis Schinas reiterated the need for Greece “to depoliticise” its administration. Schinas was referring to the controversial prosecution of the former head of the Greek statistics authority Andreas Georgiou.

In a yet new twist in the “Greek Statistics” saga, Greece’s Supreme Court had reopened a criminal case against Georgiou for allegedly inflating the government’s budget data between 2010 and 2015 and thus overstretching the need for additional austerity measures. Mr. Georgiou had been appointed head of ELSTAT, the statistical authority, in 2010 in an attempt by the government and the country’s lenders to restore credibility to Greek statistics. The revelation in late 2009 that the fiscal deficit had been grossly underestimated had largely triggered the start of the euro crisis. Since Georgiou took over, the quality of Greece’s reported data was hailed by the country’s lenders and Eurostat as “reliable” and “accurately reported”, but contested by other ELSTAT board members, including academics and statisticians.

This led to a nasty and lengthy spat between the two sides and to the eventual prosecution of Mr. Georgiou despite huge political pressure (by Greek and international political actors) to dismiss the case. The case’s reopening provoked the immediate and angry reaction of Brussels. In an interview with Bloomberg TV, Jeroen Dijsselbloem said that the prosecution of Mr. Georgiou was “a big mistake”. Head of Eurostat, Marianne Thyssen, told reporters that Georgiou effectively had no case to answer. Brussels retaliated by threatening Greece to postpone the reimbursement of the next installment

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Turley will never be an EU member. And if Merkel tries to push through visa-free travel, she’ll blow up the EU AND her own country.

Erdogan Says Turkey In ‘Endgame’ Over EU Membership (AFP)

President Recep Tayyip Erdogan on Saturday warned that Turkey had reached the “end of the game” over its decades-long EU membership bid, saying it was time for Brussels once and for all to make clear if it wanted Ankara as a member. In a hard-hitting speech marking the opening session of parliament, Erdogan also told Brussels it needed to allow Turks visa-free travel to the bloc by October, as per a previous agreement to decrease migrant flows. Relations between the EU and Turkey have strained in the wake of the July 15 failed coup, with EU officials among the most vocal critics of the relentless crackdown against the alleged plotters and supporters “If the EU is going to make Turkey a full member, we are ready. But they should know that we have came to the end of the game,” Erdogan said in a televised speech in Ankara.

“There is no need to beat around the bush or engage in diplomatic acrobatics. “It’s their (the EU’s) choice to continue the path with or without Turkey. They should not hold us responsible,” he added. Erdogan said that October would be an important month in Turkey’s relations with the European Union and that “it is necessary” that visa-free travel for Turks to the Schengen Area comes into force this month. Under a March deal, Turks were to gain visa-free travel in exchange for Ankara helping reduce the flow of migrants to Europe. However the visa plan as stumbled over Turkey’s anti-terror laws. Turkey’s bid to join the EU dates back to the 1960s with formal talks starting in 2005. So far, only 16 chapters of the 35 chapter accession process have been opened for Turkey.

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Afraid he himself will be sued. But then, so are many Americans.

Erdogan Slams US Congress Over Saudi 9/11 Law (AFP)

Turkish President Recep Tayyip Erdogan condemned Saturday a US Congress vote to override Barack Obama’s veto of a bill allowing 9/11 victims to sue Saudi Arabia, saying he expected the move to be reversed as soon as possible. Relations between Ankara and Riyadh have tightened considerably in the past months as they pursue joint interests in Syria. Erdogan had just the day earlier hosted Saudi Crown Prince Mohammed bin Nayef for talks at his palace. “The allowing by the US Congress of lawsuits to be opened against Saudi Arabia over the 9/11 attacks is unfortunate,” Erdogan said in a speech for the opening of parliament.

“It’s against the principle of individual criminal responsibility for crimes. We expect this false step to be reversed as soon as possible,” he added. Families of 9/11 victims have campaigned for the law, convinced the Saudi government had a hand in the attacks that killed almost 3,000 people. Fifteen of the 19 hijackers were Saudi citizens, but no link to the government has been proven. The Saudi government denies any ties to the plotters. Obama called the vote a “dangerous precedent” while Saudi Arabia warned it risked having “disastrous consequences”.

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Western Europe has utterly failed to see how different eastern European, formerly Soviet-block, nations are from them.

Hungary Votes On Government’s Rejection Of EU Refugee Quotas (AP)

Hungarians were voting Sunday in a referendum called by Prime Minister Viktor Orban’s government to seek support for its opposition to any future, mandatory EU quotas for accepting relocated asylum seekers. The government’s position is expected to find wide support among voters, though there was uncertainty whether turnout would exceed the 50% plus-one-vote threshold needed for the referendum to be valid. The referendum asks: “Do you want the European Union to be able to prescribe the mandatory settlement of non-Hungarian citizens in Hungary even without the consent of Parliament?” Orban has argued that “No” votes favor Hungary’s sovereignty and independence. If that position secures a majority of ballots, Hungary’s parliament would pass legislation to bolster the referendum’s goal whether or not turnout was sufficient for a valid election, he said.

Orban also said he would resign if the “Yes” votes won, but the vow was seen mostly as a ploy to boost turnout by drawing his critics to the polls. “The most important issue next week is for me to go to Brussels, hold negotiations and try with the help of this result — if the result if appropriate— achieve for it not to be mandatory to take in the kind of people in Hungary we don’t want to,” Orban said after casting his vote in an elementary school in the Buda hills. Orban, who wants individual EU member nations to have more power in the bloc’s decision-making process, said he hopes the anti-quota referendums would be held in other countries. “We are proud that we are the first” he said. “Unfortunately, we are the only ones in the European Union who managed to have a (referendum) on the migrant issue. I would be happy to see other countries to follow.”

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“..Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt..”

Czech President Calls For Deportation Of Economic Migrants (Pol.)

Czech President Milos Zeman has called for economic migrants arriving in Europe to be deported to “empty places” in North Africa or “uninhabited Greek islands.” “I am for deportation of all economic migrants,” Zeman said. “Of course I respect the cruelty of civil war in Syria, Iraq, and so on. But we do not speak about those people, we speak about economic migrants.” “We are in Greece, and Greece has plenty of uninhabited islands, and big foreign debt. So if you have ‘hotspots’ in Greek islands, this would be a sort of payment of foreign debt,” Zeman told the FT in an interview published on Sunday. He added that he is “sure there is a strong connection between the wave of migrants and the wave of jihadis … And those people who deny this connection are wrong.” The Czech president has been condemned for making Islamophobic remarks in the past.

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It was Germany that last year declared Dublin null and void. They will say that was only temporaray, but regulations like this are not light switches that selected parties can flick on and off when it suits them.

Greece is already little more than a greatly impoverished holding pen for the unwanted, and it threatens to fall much deeper into the trap. That’s why the Automatic Earth effort to support the poorest people is not just still needed, but more now than ever. We will soon start a new campaign to that end. In the meantime, please do continue to donate through our Paypal widget in amounts ending in $.99 or $.37.

Germany Interior Minister Urges Athens To Implement Dublin Rules (Kath.)

Germany Interior Minister Thomas de Maiziere has repeated his call for Greece to implement the so-called Dublin regulations, which state that migrants must seek asylum in the EU member-state they first arrived in. Due to deficiencies in Greece’s asylum processing system and the large number of migrants and refugees arriving in the country, Berlin has suspended deportations back to Greece since 2011. “The EU has since then provided financial and other support for Greek efforts, and given a lot of money to improve these conditions,” de Maiziere told Kathimerini. “That is why I would like to see the Dublin Convention implemented again,” he said. The German minister said Berlin recognized the burden shouldered by Greece in recent years. “But we still need a strategy to restore the legal situation,” he said, adding that the issue would be discussed at a meeting of interior ministers in October.

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Sep 302016
 
 September 30, 2016  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 30 2016
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NPC Auto races, Rockville Fair, Montgomery County, Maryland 1923


Deutsche Bank Shares Fall Below €10 First Time Ever; Commerzbank Down 6% (CNBC)
Gundlach: The Market Will Keep Pushing Deutsche Lower Till It’s Bailed Out (ZH)
Deutsche Bank Hedge Fund Clients Reduce Derivatives Exposure (BBG)
Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks (BBG)
U.S. Stocks Retreat as Deutsche Bank Woes Hit Financial Shares (BBG)
Germany Under Pressure To Show It’s Ready To Rescue Deutsche Bank (CNBC)
Deutsche Bank Exposes Europe’s Capital Shortfall (BBG)
Commerzbank To Axe Nearly 10,000 Jobs (R.)
ING, Largest Dutch Lender, To Announce Thousands Of Job Cuts (BBG)
China Factories Limp Along, Japan Inflation Goes Backwards (R.)
‘This Is Just The Start’: China’s Passion For Foreign Property (G.)
More Wealth, More Jobs, Just Not for Everyone (NYT)
Trump Isn’t All Wrong About The Fed (WSJ)
Society Goes Through Painful, Cathartic Change – Dave Collum (CR)
Iceland’s Pirates Head For Power On Wave Of Public Anger (R.)
Erdogan Disputes 1923 Treaty Of Lausanne, Athens Responds (Kath.)

 

 

How can Merkel NOT bail out/bail in Deutsche over the weekend?

Deutsche Bank Shares Fall Below €10 First Time Ever; Commerzbank Down 6% (CNBC)

Shares of Deutsche Bank fell 7% at the start of the European trading session Friday, amid capital concerns following a proposed settlement by the U.S. Department of Justice and a report that some hedge funds were reducing their exposure to the embattled bank. The German lender’s stock has been on wild ride in recent weeks and dipped below 10 euros a share on Friday morning, a new record low for its European-listed shares. By 9.30 a.m. London time the stock had pared some losses to trade around 5.7% lower. The German DAX was down 1.7% and the banking sector as a whole in Europe was down 3%.

Rival German lender Commerzbank saw its shares fall 6.5% after announcing job cuts on Thursday and a plan to cut its dividend. Other European lenders like Unicredit, Barclays and Credit Agricole also saw hefty losses as the session progressed. The cost of insuring Deutsche Bank’s debt against default jumped by 21 basis points on Friday, according to data from Markit, and trading in Deutsche Bank’s so-called “CoCo” bonds – widely-watched contingent convertible bonds – set a new record low, according to Dow Jones. These bonds are converted into equity once a specified event has occurred (if the bank were to undergo a precautionary recapitalization, for instance).

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Vigilantes wake up.

Gundlach: The Market Will Keep Pushing Deutsche Lower Till It’s Bailed Out (ZH)

With stunned investors reliving memories of the 2008 crisis as Deutsche Bank, a bank that is half the size of its host, Germany, seemingly on the precipice, and with Angela Merkel vowing as recently as this weekend not to bailout the bank, the market felt paralyzed: should it BTFD as it always has every time in the past 7 years, or should it wait for more clarity from the bailouters-in-chief before allocating capital to another riskless transaction, which may well be the next Lehman brothers. Not helping matters was Jeffrey Gundlach, who as part of his weekly chat with Reuters’ Jennifer Ablan said that should tread lightly carefully when trading Deutsche Bank shares because a government bailout is not out of the question. The problem is how does one get to it. “I would just stay away.

It’s un-analyzable,” Gundlach said about Deutsche Bank shares and debt. “It’s too binary.” Gundlach said investors who are betting against shares in Deutsche Bank might find it futile. Maybe, but not if they cover their shorts before the max pain point, something which the market – where equity/CDS pair trades now allow a “go for default” strategy – will actively seek out. “The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be.” What happens then? “One day, Deutsche Bank shares will go up 40%. And it will be the day the government bails them out. That jump will happen in a minute,” Gundlach said. “It is about an event which is completely out of your control.”

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Trigger?

Deutsche Bank Hedge Fund Clients Reduce Derivatives Exposure (BBG)

Amid mounting concern about Deutsche Bank’s ability to withstand pending legal penalties, about 10 hedge funds that do business with the German lender have moved to reduce their financial exposure. The shares slumped. The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person familiar with the situation who declined to be identified talking about confidential client matters.

Deutsche Bank’s New York-listed shares fell 6.7% to a record low of $11.48 on Thursday. “In any given week, we experience ebbs and inflows,” said Barry Bausano, the bank’s chairman of hedge funds. “And this week is no different; it goes on all the time.” He declined to comment on net flows. While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, the hedge funds’ move highlights concern among some counterparties about doing business with Europe’s largest investment bank. Deutsche Bank’s stock and debt have been under pressure after the U.S. Justice Department this month requested $14 billion to settle an investigation into residential mortgage-backed securities. The bank has said it expects to negotiate that lower, as other Wall Street banks have.

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“The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24% this year..”

Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks (BBG)

Even before the opening bell in New York, Thursday looked like a grim day for some of the giants of global banking. But few expected the barrage of bad news that soon hit on both sides of the Atlantic – a rat-a-tat-tat of job cuts, scandal and financial worry that sent bank shares tumbling and left many investors wondering just where or when the pain would end. It began in Germany, where long-struggling Commerzbank unveiled yet another plan to regain its footing, this time by cutting one in five of its employees. In Washington, came still more blistering attacks on John Stumpf, whose grip atop embattled Wells Fargo, the largest U.S. mortgage lender, remains tenuous amid the uproar over a scandal involving unauthorized accounts.

And then, back in Germany, came the bombshell: revelations that some hedge funds were moving to reduce their financial exposure to Deutsche Bank, now the biggest worry in global finance. Before Stumpf left the U.S. House chambers after more than four hours of grilling, news broke his bank would be hit with more penalties after improperly repossessing cars owned by U.S. soldiers. “While each has unique challenges, the overwhelming thing that has happened to the banks is they’re forgetting their purpose, while complexity is increasing opportunity for errors,” said Jon Lukomnik at the Investor Responsibility Research Center Institute in New York.

Eight years after the financial crisis, the global banking industry is groping for a way forward. Global regulators have sought to make banks look more like boring utilities, but that road has proven steep. Emboldened by an international populist groundswell, they continue to dole out fines and penalties, and firms are scrambling for ways to make money as trading volumes decline and capital requirements become more stringent. The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24% this year, while the KBW Bank Index of 24 U.S. lenders has slid 4.6%, led by Wells Fargo’s 18% decline.

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Brewing.

U.S. Stocks Retreat as Deutsche Bank Woes Hit Financial Shares (BBG)

U.S. stocks fell as banks retreated amid growing concern that Deutsche Bank’s woes will spread to the global financial sector. Health-care shares sank on speculation tighter regulations will crimp profits. Financial shares erased gains and tumbled 1.5% after a Bloomberg News report that signaled growing concern among some Deutsche Bank clients roiled markets. A number of funds that clear derivatives trades with Deutsche withdrew some excess cash and positions held at the lender, according to an internal bank document seen by Bloomberg. Johnson & Johnson and Pfizer fell more than 1.7%, pacing declines among drug companies. The S&P 500 Index slid 0.9% to 2,151.13 at 4 p.m. in New York, after falling as low as 2,145, the level that marked the bottom of a selloff on Monday.

The Dow Jones Industrial Average declined 195.79 points, or 1.1%, to 18,143.45, and the Nasdaq Composite Index lost 0.9%. About 7.7 billion shares traded hands on U.S. exchanges, 17% more than the three-month average. “There’s some problems in the financial industry now,” Brian Frank at Frank Capital said. “There’s no fear and no volatility in the stock market so something like Deutsche Bank could make people say, maybe we shouldn’t be trading at such high valuations. It doesn’t make it easier for U.S. banks, especially with what’s going on with Wells Fargo.” The S&P 500 trades at 18.4 times forecast earnings, the highest since 2002. The main U.S. equity benchmark slipped below its average price during the past 50 days on Thursday, while erasing its climb for the month. Stocks fluctuated earlier amid a gain in energy shares sparked by the first output-reduction decision by OPEC in eight years.

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Make or break for Merkel’s career?!

Germany Under Pressure To Show It’s Ready To Rescue Deutsche Bank (CNBC)

German officials could be about to find themselves in an uncomfortable position: Being called on to show they’re ready to rescue a bank in a part of the world where such operations are considered taboo. Deutsche Bank came under intensified market fire Thursday, the latest salvo being a Bloomberg report that a small number of hedge funds are trimming their sails at the German bank. [..] Shares tumbled more than 7% in mid-afternoon trading. The plunge took the broader market down as well. Consequently, market talk intensified that it’s becoming time for the German government step in and assure investors that it will be at the ready to stabilize both Deutsche and the broader system — much along the lines of what U.S. officials had to do during the 2008 financial crisis.

“They’re going to probably have to say that they would be willing to put funds into the bank,” said banking analyst Christopher Whalen at Kroll Bond Rating. “It’s exactly like what (former Treasury Secretary Henry) Paulson did with Citi … It’s a very analogous situation. Hopefully, the German government will take a page from that particular book and look at how the U.S. responded.” In a statement, Deutsche Bank pointed out that it is financially stable: “Our trading clients are amongst the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the U.S. and the progress we are making with our strategy”

As Citigroup teetered in late-2008 and early-2009, Paulson’s Treasury stepped in with two cash injections to keep the financial contagion from spreading after Lehman Brothers failed on Sept. 15, 2008. The highly unpopular bailouts kept Citi afloat as fear spread about further implosions in the financial system. However, the European corporate culture is different, particularly when it comes to banking. Bailouts are considered anathema, and German officials in recent days have signaled an unwillingness to step in. “The Germans have to stop talking about this publicly unless they say, ‘Yep, we got ’em, there is no issue here,'” Whalen said. “The concern is that the statements they did make were not helpful.”

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Delusional: “From 2009 through 2015, Deutsche Bank paid out about €5 billion in dividends, a significant chunk of the €19 billion in equity it raised. ”

Deutsche Bank Exposes Europe’s Capital Shortfall (BBG)

Less than a decade after the financial crisis, Deutsche Bank is in trouble again, with investors speculating about whether the German government will have to rescue one of the world’s largest financial institutions. The sad thing is how easily this predicament could have been avoided. This time around, Deutsche Bank isn’t dealing with an unforeseen market meltdown or sovereign-debt crisis. Rather, the proximate cause of distress is the U.S. Justice Department’s threat to fine the firm $14 billion for decade-old transgressions involving U.S. mortgage-backed securities – more than double what the bank has set aside to cover such legal costs. Concerns about capital adequacy have sent the stock price to record lows, and the German government says it won’t provide a financial safety net.

The episode illustrates Europe’s failure to learn an important lesson from the last crisis: The largest banks must have plenty of loss-absorbing equity capital, so that even after suffering a hit, their balance sheets are strong. Otherwise, governments risk finding themselves choosing between a taxpayer-backed rescue and the potentially devastating repercussions of letting a systemically important financial institution go bust. Instead of using the post-crisis years to build up irreproachable equity capital buffers, however, European banks have given back hundreds of billions of euros to shareholders in the form of dividends and share repurchases. From 2009 through 2015, Deutsche Bank paid out about €5 billion in dividends, a significant chunk of the 19 billion in equity it raised.

Today it is among the most thinly capitalized banks in Europe, with tangible equity amounting to less than 3% of assets – an astonishingly thin layer. Even if Germany genuinely wanted to let Deutsche Bank fail, it couldn’t credibly threaten to do so. The institution is arguably Europe’s most systemically risky, with assets amounting to more than half of Germany’s total annual gross domestic product. Making an example of Deutsche Bank could lead to a devastating contagion. [..] The euro region desperately needs better-capitalized banks, not only to avoid disaster but to help heal its faltering economy. If the near-death experience of one of the world’s largest institutions can’t spur European officials to action, it’s hard to imagine what could.

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It’s not just Deutsche…

Commerzbank To Axe Nearly 10,000 Jobs (R.)

Commerzbank is to cut nearly 10,000 jobs and suspend its dividend as part of a wide-ranging restructuring plan. Germany’s second biggest lender after Deutsche Bank said on Thursday it expected restructuring costs of €1.1bn as it combined business operations and cut costs to offset the impact of low loan demand and negative ECB interest rates amid a shift to digital banking. The revamp will come at a heavy cost for staff as Commerzbank slashes 9,600 of its 45,000 full-time positions – almost one in five jobs. The move is a more drastic reduction than at Deutsche Bank, which is axing about 10% of staff but suggests deeper cuts may be needed.

Commerzbank plans to merge its business with medium-sized German firms with its corporate and markets operations, while also scaling back trading activities in investment banking. That move is expected to prompt a writedown of about €700m in the third quarter, leading to a quarterly net loss. Commerzbank expects to turn a small net profit in full-year 2016, down from €1.1bn last year. The bank will concentrate on two customer segments in future: private and small business customers and corporate clients, with the restructuring expected to lift net return on tangible equity to at least 6% by the end of 2020 from 4.2% last year. Commerzbank aims to add 2,300 jobs in areas where business was growing, which would ease the net reduction to 7,300.

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…and it’s not just German banks either.

ING, Largest Dutch Lender, To Announce Thousands Of Job Cuts (BBG)

ING, the largest Netherlands lender, will announce thousands of job cuts at its investor day on Monday, Dutch newspaper Het Financieele Dagblad reported Friday, citing unidentified people with knowledge of the matter. The reorganization will result in more central management and may generate billions of euros in savings, the paper said. The bank employs about 52,000 people, according to its website. ING sees opportunities in Belgium, the Netherlands, Germany and Poland, Het Financieele Dagblad said. The lender has doubts about its presence in Turkey, where it lacks scale, according to the report. CEO Ralph Hamers has transformed ING into a bank focused on Europe and is seeking to expand lending to consumers and companies outside its home market as record-low interest rates and regulatory demands to bolster capital threaten to erode profit.

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How to lose all credibility in just a few words: “”Given the modest acceleration in growth that we forecast and the many downside risks around these forecasts, it seems overly optimistic to suggest that the global economy has reached “escape velocity”,” said Barclays economist David Fernandez.”

China Factories Limp Along, Japan Inflation Goes Backwards (R.)

China’s factory sector struggled to gain speed in September while Japanese inflation went backwards in August despite the best efforts of policymakers, underscoring the limits of stimulus in reviving world growth. Friday’s unflattering figures bookmarked a week in which the IMF warned it would likely downgrade forecasts for the U.S. economy, and the World Trade Organization slashed its outlook for global trade flows. That was unwelcome news for markets spooked by troubles at Deutsche Bank, whose U.S. shares took a hammering on reports some hedge funds had reduced financial exposure to Germany’s largest lender. The bank said the “vast majority” of its clients remained supportive, but the situation still drew comparisons to the 2008 failure of Lehman and the resulting global financial crisis.

There was at least some evidence that China, the world’s second largest economy, had stabilized, if only because of a burst of government spending and a red-hot housing market. The Caixin measure of manufacturing activity (PMI) edged up a tenth of a%age point to 50.1, led by output and new orders. While the move was marginal, it was only the second time the index had reached positive territory since February 2015. The U.S. economy also looked to have bounced back in the third quarter, while a string of data showed Europe weathered Britain’s Brexit vote better than many had feared. All of which encouraged Barclays to nudge up its 2017 call for global growth to 3.5%, from an expected 3.1% this year. Yet a true lift-off still seems remote.

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Getting all giddy about foreigners buying up your country is something I’ll never understand. But it’s not going to happen either. This is simple forward projecting with blinders.

‘This Is Just The Start’: China’s Passion For Foreign Property (G.)

[..] many real-estate agents and property experts in east Asia believe a new wave of investment is just getting under way, as mainland investors develop a taste for international real estate, including postcodes up and down the UK. “Our thesis – and this is supported by quite a lot of evidence – is that in many ways the international Chinese investment journey is probably just starting,” says Charles Pittar, CEO of Juwai.com, a website that aims to pair mainland buyers with property developers in places such as Australia, the US and the UK. Pittar’s company, which lists 2.5 million properties and calls itself China’s largest international real-estate website, estimates that in 2014, Chinese outbound investment into residential and commercial property was more than $50bn.

“I guess the key is: what is it going to become?” Pittar says. “Our view is that … it could be growing to somewhere around $200bn [annually] over the next 10 years.” And Britain, despite its decision to leave the EU, is expected to be one of the key focuses, he adds. “The UK market, particularly post-Brexit, is really picking up.” Pittar traces mainland China’s hunger for overseas property back to the turn of the century, just before China’s entry into the World Trade Organisation signalled the latest phase of its integration into the global economy. But the outflow of money has gathered pace over the past decade, and is set to grow further as middle-class investors from second- and third-tier cities get in on the game.

“It’s a big market now, but it is likely to be anywhere from two to four times the size in 10 years’ time,” Pittar says. “The exciting thing about China is that there are 168 cities with more than a million people. So this is just such a huge market.”

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Curious. A good strong damning piece on globalization, but the NYT dare not draw the inevitable conclusions. They leave that to Trump, presumably.

More Wealth, More Jobs, but Not for Everyone (NYT)

When Dan Simmons started working at the mill 38 years ago, talk centered on how to make steel. These days, he spends his days at a job for which he feels little prepared — de facto social worker. Mr. Simmons is the president of the Steelworkers Local 1899, which represents 1,250 workers at the Granite City plant. On a recent morning, only about 375 of his people are employed. He sits at his desk inside the brick union hall, greeting laid-off workers who arrive seeking help. One man wants guidance scanning online job listings. Another has hit a snag with his unemployment benefits. A night earlier, Mr. Simmons took a call on his cellphone from the niece of a high school classmate, a laid-off millworker. He had shot himself to death, leaving behind two children.

Trade Adjustment Assistance, a government program started in 1962 and expanded significantly a dozen years later, is supposed to support workers whose jobs are casualties of overseas competition. The program pays for job training. But Mr. Simmons rolls his eyes at mention of the program. Training has almost become a joke. Skills often do not translate from old jobs to new. Many workers just draw a check while they attend training and then remain jobless. A 2012 assessment of the program prepared for the Labor Department found that four years after completing training, only 37% of those employed were working in their targeted industries. Many of those enrolled had lower incomes than those who simply signed up for unemployment benefits and looked for other work.

European workers have fared better. In wealthy countries like Germany, the Netherlands, Sweden and Denmark, unemployment benefits, housing subsidies and government-provided health care are far more generous than in the United States. In the five years after a job loss, an American family of four that is eligible for housing assistance receives average benefits equal to 25% of the unemployed person’s previous wages, according to data from the OECD. For a similar family in the Netherlands, benefits reach 70%. Yet in Europe, too, the impacts of trade have been uneven, in part because of the quirks of the EU. Trade deals are cut by Brussels, setting the terms for the 28 member nations. Social programs are left to national governments. “You’re pursuing trade and liberalization agreements at the EU level, and then leaving to the individual member countries how to deal with the damage,” said Andrew Lang at the LSE.

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“..the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days.”

Trump Isn’t All Wrong About The Fed (WSJ)

The press spends a lot of energy tracking the many errors in Donald Trump’s loose talk, and during Monday’s presidential debate Hillary Clinton expressed hope that fact checkers were “turning up the volume” on her rival. But when it comes to the Federal Reserve, Mr. Trump isn’t all wrong. In a looping debate rant, Mr. Trump argued that an increasingly “political” Fed is holding interest rates low to help Democrats in November, driving up a “big, fat, ugly bubble” that will pop when the central bank raises rates. This riff has some truth to it. Leave the conspiracy theory aside and look at the facts: Since the Fed began aggressive monetary easing in 2008, my calculations show that nearly 60% of stock market gains have come on those days, once every six weeks, that the Federal Open Market Committee announces its policy decisions.

Put another way, the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days. This is a sign of dysfunction. The stock market should be a barometer of the economy, but in practice it has become a barometer of Fed policy. My research, dating to 1960, shows that this stock-market partying on Fed announcement days is a relatively new and increasingly powerful feature of the economy. Fed policy proclamations had little influence on the stock market before 1980. Between 1980 and 2007, returns on Fed announcement days averaged 0.24%, about half as much as during the current easing cycle.

The effect of Fed announcements rose sharply after 2008 when the Fed launched the early rounds of QE, its bond purchases intended to inject money into the economy. It might seem that the market effect of the Fed’s easy-money policies has dissipated in the past couple of years. The S&P 500 has been moving sideways since 2014, when the central bank announced it would wind down its QE program. But this is an illusion. Stock prices have held steady even though corporate earnings have been falling since 2014. Valuations—the ratio of price to earnings—continue to rise. With investors searching for yield in the low interest-rate world created by the Fed, the valuations of stocks that pay high dividends are particularly stretched. The markets are as dependent on the Fed as ever.

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Interview with Automatic Earth reader Collum: “We should have hung a few in the town square, but instead the Obama Department of Justice punished shareholders and savers.”

Society Goes Through Painful, Cathartic Change – Dave Collum (CR)

I was non-political throughout college and much of my adult life, focusing on chemistry and family. It is probably only in the last 15 years that I’ve started hiking up my pants and bitching about the government. Now I am relatively outspoken because I sense existential risk in the American Experiment. We have an interventionist central bank—a global cartel of interconnected central banks actually—that is determined to use untested (read: flawed) models to try to repair an economy that was hurt by their policies and would fix itself if the Fed would just get out of the way. I think these guys are what Nassim Taleb calls I-Y-I (intellectual-yet-idiot). They will continue with their experiments until the system finally breaks in earnest. They will blame the unforeseeable circumstances.

The social contract on the home front is faltering badly. When the system started to fail in ’09, we stitched up a putrid wound without cleansing it. We needed reform of a highly flawed banking system corrupted by poor incentives. In the 1930s, the Pecora Commission rounded up scoundrels (including the head of the New York Stock Exchange) and threw them in prison. We should have hung a few in the town square, but instead the Obama Department of Justice punished shareholders and savers. A scandal at Wells Fargo emerging just this week, for example, led to a token fine while leaving some wondering if Wells Fargo is too corrupt to exist in its current form. It is not the government’s job to break up these institutions, nor should it save them.

We have stirred up a mess in the Middle East that seems to be washing up on our shores. (This weekend there were a half dozen attacks that appeared highly correlated to all but those in the politicized press.) Our policy in Syria is incomprehensible. The refugee crisis in Europe is our doing, and it is spreading. Fear of Trump seems odd given that the current neocons in liberal garb are stunningly militaristic. I think they are war crimes. Meanwhile, these I-Y-I’s insist on poking Putin in the eye with a stick as part of a policy that appears to be designed to take us to the brink of far greater armed conflict. People are now mad, and it shows in the chaotic election. We are guaranteed to elect a president that half the populace finds repugnant. It’s hard to imagine that the post-election temperament will improve. Change is in the air.

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Anything ‘traditional’ in politics is now suspect.

Iceland’s Pirates Head For Power On Wave Of Public Anger (R.)

A party that hangs a skull-and-crossbones flag at its HQ, and promises to clean up corruption, grant asylum to Edward Snowden and accept the bitcoin virtual currency, could be on course to form the next Icelandic government. The Pirate Party has found a formula that has eluded many anti-establishment groups across Europe. It has tempered polarizing policies like looser copyright enforcement rules and drug decriminalization with pledges of economic stability that have won confidence among voters. This has allowed it to ride a wave of public anger at perceived corruption among the political elite – the biggest election issue in a country where a 2008 banking collapse hit thousands of savers and government figures have been mired in an offshore tax furor following the Panama Papers leaks.

[..] Opinion polls show support for the party running at over 20%, slightly ahead of the Independence Party, which shares power with the Progressive Party. The left-leaning party is part of a global anti-establishment typified by Britain’s vote to leave the European Union. But their platform is far removed from the anti-immigration policies of UKIP, France’s National Front and Germany’s AfD, or the anti-austerity of Greece’s Syriza. Iceland’s gross income per capita was almost $50,000 in 2015, according to the World Bank, well above the $34,435 EU average – though still 20% below a 2007 peak. Immigration levels are low compared with many other European countries. Helped by a tourism boom, economic growth this year is expected to hit 4.3% and the latest data shows a seasonally adjusted unemployment rate of 3.1%.

There appears little appetite among the public or any party leader for economic radicalism. The Pirate Party has not set out detailed plans, but has made clear that it would not deviate far from current policies in the next government term. “We will not be doing any dramatic things in this regard, we will carry on with the lifting of capital control. We are not going to make any dramatic changes in the financial sector,” said Jonsdottir. There is little sign of business or investor panic. “Regarding the economic stability, looking at the long term, they can’t do any worse than what has been done so far,” said Jon Sigurdsson, CEO of prosthetics maker Ossur, one of Iceland’s biggest companies, referring to the banking crisis.

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I’ve said it before, his overconfidence will get him. He now wants to redraw Turkey’s borders. And not just with Greece. Turkey’s borders with Syria hold a mich bigger prize.

Erdogan Disputes 1923 Treaty Of Lausanne, Athens Responds (Kath.)

Turkish President Recep Tayyip Erdogan caused displeasure in Athens on Thursday by indicating that Ankara “gave away” Aegean islands to Greece under the Treaty of Lausanne in 1923, the pact that defined the borders of modern Turkey following the collapse of the Ottoman Empire. In a speech to regional officials in Ankara, Erdogan appeared to express his regret for the border decisions imposed by the pact. “Some tried to deceive us by presenting Lausanne as victory,” he said. “In Lausanne, we gave away the islands that you could shout across to,” he said, referring to Greek islands located in the Aegean Sea close to the Turkish coastline. Reacting to Erdogan’s comments, a Greek Foreign Ministry source remarked that “everyone should respect the Treaty of Lausanne,” noting that it is “a reality in the civilized world which no one, including Ankara, can ignore.”

The same source indicated that the Turkish leader’s comments were likely geared for domestic consumption. While making clear his displeasure with the Treaty of Lausanne, Erdogan indicated during his speech that those who attempted a coup against Turkey in July would have imposed a far worse state of affairs. “If this coup had succeeded, they would have given us a treaty that would have made us long for Sevres,” he said, referring to the pact that preceded the Treaty of Lausanne in 1920, abolishing the Ottoman Empire. “We are still struggling about what the continental shelf will be, and what will be in the air and the land. The reason for this is those who sat at the table for that treaty. Those who sat there did not do [us] justice, and we are reaping those troubles right now,” he said..

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Aug 172016
 
 August 17, 2016  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Harris&Ewing Buying Army surplus food sold at fish market 1919


Global Central Banks Dump US Debt At Record Pace (CNN)
The $6 Trillion US Public Pension Sinkhole (MW)
UK Dividends at Risk as Pension Holes Deepen (BBG)
Japan Official Threatens Action If Yen Rises Too Sharply (WSJ)
Bank Of Japan Buying Sends Nikkei 225 To Highest In 18 Years (ZH)
The “Housing Crisis” in San Francisco Strangles Demand (WS)
Chinese Investors Are Largest International Buyers Of US Real Estate (Forbes)
Australia Central Bank Governor In Complete Bubble Denial (BI)
“Racketeering Is Ruining Us” (Kunstler)
Iceland Prepares To End Currency Controls (Tel.)
‘I Want You Back,’ Cries East Europe as Emigrant Tide Erodes GDP (BBG)
Tsipras Revives Greek Bid To Seek Wartime Reparations From Berlin (Kath.)
Turkey To Free 38,000 From Prisons To Make Space For Alleged Coup Plotters (AP)
German Officials Say Erdogan Supports Militants (DW)

 

 

Concerted effort to relieve the USD?

Global Central Banks Dump US Debt At Record Pace (CNN)

Global central banks are unloading America’s debt. In the first six months of this year, foreign central banks sold a net $192 billion of U.S. Treasury bonds, more than double the pace in the same period last year, when they sold $83 billion. China, Japan, France, Brazil and Colombia led the pack of countries dumping U.S. debt. It’s the largest selloff of U.S. debt since at least 1978, according to Treasury Department data. “Net selling of U.S. notes and bonds year to date thru June is historic,” says Peter Boockvar, chief market analyst at the Lindsey Group, an investing firm in Virginia. U.S. Treasurys are considered one of the safest assets in the world. A lot of countries keep their cash holdings in U.S. government bonds.

Many countries have been selling their holdings of U.S. Treasuries so they can get cash to help prop up their currencies if they’re losing value. The selloff is a sign of pockets of weakness in the global economy. Low oil prices, China’s economic slowdown and currencies losing value are all weighing down global growth, which the IMF described as “fragile” earlier in the year. Despite all the selling by these countries, private demand for the bonds has sky rocketed. Demand is so high that the U.S. can afford to pay historically low interest rates. The 10-year U.S. Treasury hit a record low of 1.34% earlier this year, before bouncing back to about 1.58%, currently.

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Nice try, but I’m not so sure a different way of accounting would make the hole itself any smaller.

The $6 Trillion US Public Pension Sinkhole (MW)

U.S. state and local employee pension plans are in trouble — and much of it is because of flaws in the actuarial science used to manage their finances. Making it worse, standard actuarial practice masks the true extent of the problem by ignoring the best financial science — which shows the plans are even more underfunded than taxpayers and plan beneficiaries have been told. The bad news is we are facing a gap of $6 trillion in benefits already earned and not yet paid for, several times more than the official tally. Pension actuaries estimate the cost, accumulating liabilities and required funding for pension plans based on longevity and numerous other factors that will affect benefit payments owed decades into the future.

But today’s actuarial model for calculating what a pension plan owes its current and future pensioners is ignoring the long-term market risk of investments (such as stocks, junk bonds, hedge funds and private equity). Rather, it counts “expected” (hoped for) returns on risky assets before they are earned and before their risk has been borne. Since market risk has a price — one that investors must pay to avoid and are paid to accept — failure to include it means official public pension liabilities and costs are understated. The current approach calculates liabilities by discounting pension funds cash flows using expected returns on risky plan assets. But Finance 101 says that liability discounting should be based on the riskiness of the liabilities, not on the riskiness of the assets.

With pension promises intended to be paid in full, the science calls for discounting at default-free rates, such as those offered by Treasurys. Here’s the problem: 10-year and 30-year Treasurys now yield 1.5% and 2.25%, respectively. Pension funds on average assume a 7.5% return on their investments – and that’s not just for stocks. To do that, they have to take on a lot more risk – and risk falling short. Much debate focuses on whether 7.5% is too optimistic and should be replaced by a lower estimate of returns on risky assets, such as 6%. This amounts to arguing about how accurate is the measuring stick. But financial economists widely agree that the riskiness of most public pension plans liabilities requires a different measuring stick, and that is default-free rates.

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“It’s happening to pension schemes but will feel like it’s happening to the whole company.”

If these companies cut dividends, investors will sell their shares. But they also will if and when true pensions deficits become public. Can’t win.

UK Dividends at Risk as Pension Holes Deepen (BBG)

Workers have long fretted about funding gaps in U.K. companies’ retirement plans. Now investors are starting to join them. Since the U.K.’s June 23 vote to leave the European Union, pension deficits have swelled as record-low U.K. government bond yields have reduced returns on fund investments. That has added to pressure on companies facing gaps in their retirement funding, including telecommunications provider BT, grocer Tesco and military contractor BAE. With little prospect of higher returns after the Bank of England cut interest rates this month, companies may have to reduce dividend payments to raise pension contributions and close funding gaps. That means investors, who have been insulated from the U.K.’s pension crisis, could feel the effects.

“There is no doubt that shareholders of companies with major pension deficits will be concerned,” said Raj Mody, who heads PricewaterhouseCoopers’ pension consulting group. “It’s happening to pension schemes but will feel like it’s happening to the whole company.” Companies in the FTSE 100 paid around five times as much in dividends as they provided in contributions to defined-benefit pension plans last year, a report published Tuesday by consultant Lane Clark & Peacock showed. Through July 31 the FTSE 100 companies’ combined pension deficits – the amount by which liabilities outstrip assets – increased to £46 billion ($59.7 billion) from £25 billion a year earlier, Lane Clark said. Total pension liabilities of the 350 largest U.K. companies as a percentage of market capitalization rose to 40% in June, the highest level in the last 10 years except during the global financial crisis, according to Citigroup.

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Like what? QE?

Japan Official Threatens Action If Yen Rises Too Sharply (WSJ)

Japan’s top currency bureaucrat issued a fresh warning Wednesday over the soaring yen, saying the government would have to act should it rise too sharply. “If there are excessively sharp movements, we will have to take action,” Vice Finance Minister for International Affairs Masatsugu Asakawa told reporters at the ministry’s headquarters. The comment was likely a veiled threat of direct intervention in the currency market to force lower the yen — a step increasingly seen as undesirable manipulation among wealthy economies. The remark followed the yen’s surge Tuesday beyond the 100 mark against the dollar. A higher yen reduces Japanese manufacturers’ repatriated profits and undermines a positive growth cycle sought by Prime Minister Shinzo Abe. The dollar rose against the yen following Asakawa’s remark. Japan last intervened to undercut the yen in 2011.

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Abe and Kuroda are a success story.

Bank Of Japan Buying Sends Nikkei 225 To Highest In 18 Years (ZH)

Having noted the farcical share ownership of The Bank of Japan (biggest shareholder in 55 companies) as Kuroda's ETF-buying goes to '11', we thought it interesting that the distortion caused by these "pick a winner" purchases has sent Japan's Nikkei 225 to its richest relative to Japan's Topix index in 17 years. As Bloomberg notes, Japan’s two major equity benchmarks have moved mostly together over the years. That changed this month following the latest meeting by the Bank of Japan, which boosted its purchases of exchange-traded funds as part of its easing program.

The BOJ’s heavier allocation to ETFs tracking the Nikkei 225 has helped push the gauge to its highest level versus the Topix index in 18 years.

 

Which – as we noted previously – leaves one big question… just how will the BOJ ever unwind its unprecedented holdings of not only bonds, which are now roughly 100% of Japan's GDP, but also of stocks, without crashing both the bond and the stock market. And then we remember, that the BOJ will simply never unwind any of its "emergency" opertions just because nobody actually thought that far, plus the whole point of the exercise is hyperinflation or bust, as the sheer lunacy of Japan's authorities is exposed for the entire world to see, leading to the terminal collapse of faith in the local currency. With every passing day, we get that much closer to said terminal moment.

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Time for a hole new approach to housing. It should be a basic right, not some financial bet.

The “Housing Crisis” in San Francisco Strangles Demand (WS)

Here’s the other side of central-bank engineered asset price inflation, or “healing the housing market,” as it’s called in a more politically correct manner: San Francisco Unified school district, which employs about 3,300 teachers, has been hobbled by a teacher shortage. Despite intense efforts this year – including a signing bonus – to bring in 619 new teachers to fill the gaps left behind by those who’d retired or resigned, the district is short 38 teachers as of Monday, when the school year started. Others school districts in the Bay Area have similar problems. For teachers, the math doesn’t work out. Average teacher pay for the 2014-15 school year was $65,000. And less after taxes. But the median annual rent was $42,000 for something close to a one-bedroom apartment.

After taxes and utilities, there’s hardly any money left for anything else. A teacher who has lived in the same rent-controlled apartment for umpteen years may still be OK. But teachers who need to find a place, such as new teachers or those who’ve been subject of a no-fault eviction, are having trouble finding anything they can afford in the city. So they pack up and leave in the middle of the school year, leaving classes without teachers. It has gotten so bad that the Board of Supervisors decided in April to ban no-fault evictions of teachers during the school year. Yet renting, as expensive as it is in San Francisco, is the cheaper option. Teachers trying to buy a home in San Francisco are in even more trouble at current prices. And it’s not just teachers!

This aspect of Ben Bernanke’s and now Janet Yellen’s asset price inflation – and consumer price inflation for those who have to pay for housing – is what everyone here calls “The Housing Crisis.” As if to drive home the point, so to speak, the California Association of Realtors just released its Housing Affordability Index (HAI) for the second quarter. It is based on the median house price (only houses, not condos), prevailing mortgage interest rate, household income, and a 20% down payment. In San Francisco, the median house price – half sell for more, half sell for less – is $1.37 million. According to Paragon Real Estate, if condos were included, the median price would drop to $1.2 million.

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Wonder what Trump thinks about this.

Chinese Investors Are Largest International Buyers Of US Real Estate (Forbes)

Over the past five years, Chinese buyers spent about $17 billion on U.S. commercial real estate while spending roughly $93 billion on homes in the U.S. over the same period. Last year they paid about $832,000 per U.S. home in high profile cities like New York, Chicago, Miami, Los Angeles, Las Vegas and San Francisco. The Society indicated that Chinese purchase of residential property is primarily motivated by a desire for second homes; primary residences for those moving to the U.S. on EB-5 investor visas or as rental or resale investments. Concerns about the stability of the renminbi exchange rate have accelerated the pace of Chinese commercial investment abroad since the middle of 2015.

Motivations aside, China’s interest in investing in the U.S. has legs that carry implications for our enterprises and communities alike. When coupled with the 100 million mainland Chinese travelers expected to visit the U.S. annually by 2020 it’s clear the U.S. travel and hospitality industry and business community at large need to prepare for a changing landscape. For the travel and hospitality industry, it won’t be long before we see mainland Chinese hoteliers exporting their national lodging brands to the U.S. and other countries to complement the high-profile global brands in which they’ve invested. As their countrymen increasingly travel the world, just like generations of Americans and Europeans before them, they will want to stay in hotels with which they’re familiar back home.

Soon, it will be commonplace to find hotel brands developed by hoteliers like Jinling Hotels & Resorts or Jin Jiang International Holdings sitting side by side U.S. brands like Hilton, Sheraton, Hyatt or Marriott in cities throughout the U.S. Across the country, already more than 100,000 Americans get their weekly paychecks from a company based in China. That number will grow exponentially in coming years. As mainland Chinese investors continue to buy U.S. companies and brands and establish their own enterprises here, they will be eager to become members and leaders of the local chamber of commerce, to join the neighborhood PTA, represent their companies on area social and charitable boards and so on—just as our nationals who work and live abroad do in the countries in which they reside.

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And so is the author of this piece. Stunning. The heading is mine.

Australia Central Bank Governor In Complete Bubble Denial (BI)

The surge in property prices, especially in Sydney and Melbourne has made home owners extremely wealthy but cruelled the prospect of home ownership for many who aren’t already in the market. That’s especially true for younger Australians. That is causing some intergenerational issues in housing, which is a bigger question than “is there a housing bubble or not” according to RBA governor Glenn Stevens in the full transcript of his interview with the Australian and Wall Street Journal. Stevens acknowledged “it’s always been hard to be that cohort that’s trying to enter the market. There’s always been a hurdle. It may be getting worse, though part of this is – I mean, there’s a lot of things happening here”.

One of things that’s happening, Stevens believes, is that a chunk of the wealth home owners think they are sitting on in their house will prove ephemeral. That’s because if they want their children to own a home then they are going to have to give them some of that cash to do so. Here’s Stevens: “I think that a lot of people of my generation are actually going to find themselves, if they haven’t already, helping their children into the housing market because that may be almost the only way that their children can enter the Sydney market, anyway, and be not too far from mum and dad. And I suspect that will happen a lot, and that, of course, means that for people of my age, that the wealth we think we have in our house, actually, we don’t have quite as much as we thought because we’re going to have to give some of it to the next generation.”

He acknowledged that for renters locked out of the property market this could mean the issue perpetuates into the next generation. But his point about the shared wealth of families is also an important one for the future. It suggests for many children of those with property, who feel locked out of the market, the problem of home ownership can be self-curing. That’s because, as Stevens notes, older Australians can share their wealth now. [..] With the nuclear family shrinking, and the number of children and grandchildren on average reduced from a generation or two ago, there is likely to be a large number of younger Australians coming into some serious wealth when their parents or grandparents pass on. It could take a decade or two, but ultimately younger Australians could end up the longest living and richest generation in the nation’s history.

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“..oil priced at over $75 a barrel in today’s dollars tends to crush economies, and oil priced under $75 a barrel in today’s dollars tends to crush oil companies.”

“Racketeering Is Ruining Us” (Kunstler)

The disorders in politics that we’re seeing now are really expressions of the larger disorders in our economic life and our financial life. That just happens to be the avenue that the expression is coming out of. Another point I’d like to make is that the reason that people are against Hillary or dumping on Hillary or don’t like her, is because she’s a poster child for racketeering. I encourage people who are talking about our circumstances and people who are interested in the news and election, to use the word racketeering to describe what’s going on in this country. You really need the right vocabulary to understand exactly what’s going on.

Racketeering is just pervasive in all of our activities. Not just in politics but in things even like medicine and education. Obviously the college loan scheme is an example of racketeering. Anybody who has to go to an emergency room with a child whose broken their finger or something, is going to end up with a bill for $20,000. You know why? Because of medical racketeering. And so, these are really efforts to money-grub by any means necessary, often in ways that are unethical and probably illegal. Let’s use that word racketeering to describe our national situation. And let’s remember by the way, the activities of the central banks is just another form of racketeering. Using debt issuance and attempting to control interest rates in order to conceal our inability to generate the kind of real wealth that we need to continue as a techno-industrial society.

Societies have a really hard time understanding what they’re doing, articulating the problems that they face and coming up with a coherent consensus about what’s happening, and coming up with a coherent consensus about what to do about it. Combine that with another quandary, the relationships between energy and the dead racket for concealing real capital formation. I like to reduce it to one particular formula that is pretty easy for people to understand. It’s a classic quandary: that oil priced at over $75 a barrel in today’s dollars tends to crush economies, and oil priced under $75 a barrel in today’s dollars tends to crush oil companies. There is no real sweet spot between those two places. We’re ratcheting between them and each one of them entails a lot of destruction. That’s a terrible quandary that we’re in and it’s being expressed in banking and finance…and the people in charge of those things don’t really know what else to do except continue the deformation of institutions and instruments.

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Strong.

Iceland Prepares To End Currency Controls (Tel.)

Iceland plans to significantly ease capital controls for individuals and companies, marking the end of a regime that was described as the crutch for the Icelandic economy following the 2008 crisis. The Finance Ministry plans to put forward legislation on Wednesday to pave the way for the removal of capital controls for Icelanders who have been living with the restriction for eight years. The recommendations will mean that outward foreign direct investment will be unrestricted, but still subject to confirmation by the central bank.

Investment in foreign currency financial instruments will also be allowed and individuals will be authorised to buy one piece of property abroad each calendar year, irrespective of purchase price. Requirements, under penalty of law, to repatriate any foreign currency obtained abroad will also be eased and individual households will be given authorisation to buy foreign currency for travel. Iceland’s finance ministry said that next January the current ceiling on foreign investments will be raised. It is estimated that the changes in the bill will lead to a reduction of about 50-65pc in the number of requests for exemptions from the Foreign Exchange Act, which will speed up the processing time.

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The flipside of Soros.

‘I Want You Back,’ Cries East Europe as Emigrant Tide Erodes GDP (BBG)

Eastern Europe is borrowing a line from the Jackson 5 as it bids to turn a tide of emigration that’s eroding its economic prospects and compounding an already-gloomy demographic outlook. “I want you back” is the slogan Latvia has chosen to lure home citizens who’ve upped sticks to Europe’s west in search of more job opportunities and higher salaries. Poland’s Return program offers tips on jobs, housing and health care, while Romania is teaming up with private business, offering scholarships and hosting employment fairs to tempt back talented citizens. The campaigns have gained fresh impetus after the Brexit vote threw into doubt the future status of foreign workers in the U.K.

“The diaspora living abroad represent a huge untapped potential for their countries of origin,” said Rokas Grajauskas, an economist at Danske Bank who’s based in the Lithuanian capital of Vilnius. Stints abroad can be beneficial, instilling new skills and ways of thinking, he said. The hunt for greener pastures isn’t new. The Soviet collapse prompted an unprecedented outflow of eastern Europeans to the wealthier west, with EU membership and the 2008 financial crisis triggering further waves. The Baltic region suffered most over the past decade, the latest Eurostat data show. Making matters worse, much of the continent is grappling with low birth rates and aging populations.

Losing workers to other countries has already cost 21 central and eastern Europe nations an average of about 7 percentage points of GDP, according to the IMF, which predicts a hit of as much as 9 percentage points over the next 14 years should current trends continue. It recommends the EU maintain funding to ease migration pressures, and that countries improve labor-market conditions and engage with their diaspora abroad. As governments belatedly heed that last piece of advice, they may well recall other lines from the Jackson 5’s 1969 hit song. “I was blind to let you go,” the group sang. “I need one more chance.”

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Report due in 3 weeks.

Tsipras Revives Greek Bid To Seek Wartime Reparations From Berlin (Kath.)

Greece’s leftwing Prime Minister Alexis Tsipras on Tuesday revived the country’s bid to seek war reparations over Nazi atrocities in Greece. “We will go all the way, first diplomatically and then legally, if necessary,” Tsipras said during events marking the World War II massacre in the village of Kommeno, in Arta, northwestern Greece. More than 300 people were executed on August 16, 1943 at the village which was then torched by German forces. The findings of an intra-party committee which was set up to look into Greek claims for German war reparations are expected to be submitted to Parliament in early September. The committee wrapped up its probe on July 27.

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I bet you there are coup plotters among those 38,000.

Turkey To Free 38,000 From Prisons To Make Space For Alleged Coup Plotters (AP)

Turkey has issued a decree paving the way for the conditional release of 38,000 prisoners in an apparent move to make jail space for thousands of people who have been arrested after last month’s failed coup. The decree allows the release of inmates who have two years or less to serve of their prison terms and makes convicts who have served half of their term eligible for parole. Some prisoners are excluded: people convicted of murder, domestic violence, sexual abuse or terrorism and other crimes against the state. The measures would not apply for crimes committed after 1 July.

The justice minister, Bekir Bozdag, said the move would lead to the release of 38,000 people, adding it was not a pardon or an amnesty but a conditional release of prisoners. The government says the coup attempt on 15 July, which led to at least 270 deaths, was carried out by followers of the movement led by the US-based Muslim cleric Fethullah Gülen who have infiltrated the military and other state institutions. Gülen has denied any prior knowledge or involvement in the coup but Turkey is demanding that the US extradite him.

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Greece lives in fear. Because Merkel can’t give Turkey visa-free travel amid reports like this.

German Officials Say Erdogan Supports Militants (DW)

Citing a classified document from the Interior Ministry to representatives of the Left party on Tuesday the German public broadcaster ARD reported, that members of the government consider Turkey’s regime a supporter of militant groups in the Middle East. German officials appear to have publicly acknowledged, if in a classified document, President Recep Tayyip Erdogan’s weapons support for militants fighting the regime of Bashar al-Assad in Syria, which Turkish journalists have reported in the past. “Especially since the year 2011 as a result of its incrementally Islamized internal and foreign policy, Turkey has become a central platform for action for Islamist groups in the Middle East,” the German officials said, according to ARD.

German security officials also said Erdogan had an “ideological affinity” with Egypt’s Muslim Brotherhood, ARD reported. Suppressed under Hosni Mubarak’s dictatorship, the movement went on to produce Egypt’s first democratically elected president, Mohammed Morsi. Despite the “affinity,” Erdogan has been publicly at odds with the Muslim Brotherhood in the past though he has since also criticized current Egyptian President Abdel-Fattah el-Sissi, who overthrew Morsi in a 2013 coup. Neither the United States nor the EU considers the Muslim Brotherhood a terror organization. The German officials also said Erdogan supported Hamas, the democratically elected governing party in the Gaza Strip.

Turkey’s president has said as much in the past, having told the US news host Charlie Rose, that “I don’t see Hamas as a terror organization.” Though the United States and EU do list Hamas as a prohibited group, nations such as Norway, Switzerland and Brazil do not. “It is a resistance movement trying to protect its country under occupation,” Erdogan added in the 2011 interview, referring to the Israeli state, with which Turkey also enjoys diplomatic ties.

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