Jun 242018
 
 June 24, 2018  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  12 Responses »


Ivan Aivazovsky The Ninth Wave 1849

 

Mueller’s Fruit of the Poisonous Tree (WSJ)
Refugees Now Make Up 1% Of The World’s Population (Wef)
There’s No Migration Crisis – The Crisis Is Political Opportunism (G&M)
Divided EU Leaders Convene For Emergency Talks On Migration (R.)
Italy Says ‘Arrogant’ France Could Become Main Enemy On Migration (R.)
Xi Says China Must Lead Way In Reform Of Global Governance (R.)
Turkey’s Erdogan Faces Resurgent Opposition In Twin Election Test (AFP)
Huge Anti-Brexit Demonstration Throngs Central London (G.)
Airbus Warns Of Harsh Brexit Reality With 100,000 Jobs Under Threat (Ind.)
Bitcoin Drops to $5,860, Lowest since October 2017 (WS)
The Eurozone Isn’t Ready For The Next Big Shock (Pol.eu)
Shooting The Messenger: Criminalising Journalism (G.)

 

 

Two lawyers in the WSJ warning that the FBI had so tainted the process, Mueller should at a minimum pause his investigation.

Mueller’s Fruit of the Poisonous Tree (WSJ)

Special counsel Robert Mueller’s investigation may face a serious legal obstacle: It is tainted by antecedent political bias. The June 14 report from Michael Horowitz, the Justice Department’s inspector general, unearthed a pattern of anti-Trump bias by high-ranking officials at the Federal Bureau of Investigation. Some of their communications, the report says, were “not only indicative of a biased state of mind but imply a willingness to take action to impact a presidential candidate’s electoral prospects.” Although Mr. Horowitz could not definitively ascertain whether this bias “directly affected” specific FBI actions in the Hillary Clinton email investigation, it nonetheless affects the legality of the Trump-Russia collusion inquiry, code-named Crossfire Hurricane.

Crossfire was launched only months before the 2016 election. Its FBI progenitors—the same ones who had investigated Mrs. Clinton—deployed at least one informant to probe Trump campaign advisers, obtained Foreign Intelligence Surveillance Court wiretap warrants, issued national security letters to gather records, and unmasked the identities of campaign officials who were surveilled. They also repeatedly leaked investigative information.

Mr. Horowitz is separately scrutinizing Crossfire and isn’t expected to finish for months. But the current report reveals that FBI officials displayed not merely an appearance of bias against Donald Trump, but animus bordering on hatred. Peter Strzok, who led both the Clinton and Trump investigations, confidently assuaged a colleague’s fear that Mr. Trump would become president: “No he won’t. We’ll stop it.” An unnamed FBI lawyer assigned to Crossfire told a colleague he was “devastated” and “numb” after Mr. Trump won, while declaring to another FBI attorney: “Viva le resistance.”

[..] The totality of the circumstances creates the appearance that Crossfire was politically motivated. Since an attempt by federal law enforcement to influence a presidential election “shocks the conscience,” any prosecutorial effort derived from such an outrageous abuse of power must be suppressed. The public will learn more once the inspector general finishes his investigation into Crossfire’s genesis. But given what is now known, due process demands, at a minimum, that the special counsel’s activity be paused. Those affected by Mr. Mueller’s investigation could litigate such an argument in court. One would hope, however, that given the facts either Mr. Mueller himself or Deputy Attorney General Rod Rosenstein would do it first.

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War and peace.

Refugees Now Make Up 1% Of The World’s Population (Wef)

If all the world’s refugees came together as a single nation they would collectively create one of the largest countries on Earth. According to the UNHCR, there are now almost 70 million forcibly displaced people worldwide, around 1% of the world’s population – the highest number in modern history. The number of refugees has steadily increased since 1951 but has jumped dramatically in the last 10 years. That’s mostly because of the Syrian civil war which began in 2011 and has since forced millions to flee their homes and seek refuge in neighbouring countries and in Europe. The most recent Global Peace Index, an annual report produced by Australian think tank the Institute for Economics and Peace, has found that for the fourth year in a row, overall levels of peace around the world have deteriorated.

92 countries have seen declining peace, while 71 countries have improved. Increased terrorist activity, conflicts in the Middle East and rising tensions in Eastern Europe and north-east Asia have all contributed to declining levels of peace. Even the most peaceful regions in the world according to the index – Europe, North America, Asia-Pacific, and South America – have all recorded declines. The rising number of refugees and heightened political tensions in Europe and the US have meant that even stable countries have seen their scores lowered. For instance, 23 out of 36 countries in Europe deteriorated last year. Now in its seventh year of civil war, Syria is the least peaceful country in the world, along with Afghanistan, South Sudan, Iraq and Somalia.

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But the article above talks about the highest number of refugees in history.

There’s No Migration Crisis – The Crisis Is Political Opportunism (G&M)

“Desperate times at our southern border call for desperate measures on the other side:” That was the very loud message from right-wing leaders in the United States and Europe this week. Their desperate measures shocked the world. The Trump administration’s policy requiring thousands of infants and children to be seized from their parents and held in detention left leaders and citizens aghast (and its most inhumane elements remain in place). On the other side of the Atlantic, we watched the new Italian Deputy Prime Minister Matteo Salvini order boatloads of migrant families turned back into the sea, following his call last year to deal with immigration with a “mass cleansing, street by street, quarter by quarter.”

Most reasonable people agree that these are not humane ways to deal with what these politicians call a “migration emergency.” But too many people take their word that there actually is some sort of a migration emergency. To be clear: There is no immigration crisis in 2018. Not in the United States, not in Europe, not in Canada. “It is not a migration emergency – it’s a political emergency,” William Lacy Swing, the American director-general of the International Organization for Migration, said this week. The IOM’s 8,400 staff monitor the movement of people around the world, and while they’ve identified plenty of challenges, there aren’t any overwhelming or unmanageable movements of people this year. “The overwhelming majority of migration is taking place in a regular, safe and orderly fashion,” he said.

“There is a very serious problem of communication, but what we’re seeing is that the numbers are pretty modest,” said Angel Gurria, secretary-general of the Organization for Economic Co-operation and Development. The OECD, which advises 34 countries (including the United States and Canada) on immigration policy, this week released its annual report on migration levels in OECD countries. It showed a fall in numbers to ordinary, non-crisis levels. The United States has always had movement, some of it undocumented, across its southern border. The 2018 numbers are somewhat higher than the 2017 numbers – but they’re a small fraction, less than a third, of the rate experienced in the 2000s under George W. Bush, or in the 1990s under Bill Clinton, or in the 1980s under Ronald Reagan. Since 2008, illegal crossings have fallen to lows not seen since the early 1970s.

What has risen, since 2014, has been the far smaller fraction of people on the Mexican border who are refugee claimants from Guatemala, Honduras and especially El Salvador. Those countries are experiencing crises of political and civic violence, and those fleeing have legitimate claims for asylum under the Refugee Convention, to which Washington subscribes. They are not illegal and they’re certainly not dangerous.

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No agreement seems possible anymore.

Divided EU Leaders Convene For Emergency Talks On Migration (R.)

European Union leaders gather in Brussels on Sunday in an attempt to bridge their deep divisions over migration, an issue that has been splitting them for years and now poses a fresh threat to German Chancellor Angela Merkel. Though arrivals across the Mediterranean are only a fraction of what they were in 2015, when more than a million people reached Europe, a recent opinion poll showed migration was the top concern for the EU’s 500 million citizens. Under heavy pressure from voters at home, EU leaders have been fighting bitter battles over how to share out asylum seekers in the bloc. Unable to agree, they have become more restrictive on asylum and tightened their external borders to let fewer people in.

They have given money and aid to countries in Northern Africa and the Middle East to keep people from heading for Europe. Only 41,000 refugees and migrants have made it to the EU across the sea so far this year, U.N. figures show. But the issue has in the meantime won and lost elections for politicians across the bloc from Italy to Hungary, with voters favoring those advocating a tougher stance on migration. On Saturday, French President Emmanuel Macron said France favored financial sanctions for EU countries that refuse migrants with proven asylum status. Merkel is under pressure because her longtime conservative allies, Bavaria’s Christian Social Union (CSU), have threatened to start turning away at the German border all asylum seekers already registered elsewhere in the EU unless the bloc reaches an agreement on distributing them more evenly.

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Not smart Macron.

Italy Says ‘Arrogant’ France Could Become Main Enemy On Migration (R.)

Italy on Saturday said “arrogant” France risked becoming its “No.1 enemy” on migration issues, a day before European leaders convene in Brussels for a hastily arranged meeting on the divisive topic. In answer to comments by French President Emmanuel Macron, who said migration flows toward Europe had reduced compared with a few years ago, Italy’s Deputy Prime Minister Luigi Di Maio said Macron’s words showed he was out of touch. “Italy indeed faces a migration emergency and it’s partly because France keeps pushing back people at the border. Macron risks making his country Italy’s No.1 enemy on this emergency,” Di Maio wrote on his Facebook page.

Macron said European cooperation had managed to cut migration flows by close to 80 percent and problems stemmed from “secondary” movements of migrants within Europe. “The reality is that Europe is not experiencing a migration crisis of the same magnitude as the one it experienced in 2015,” the French president said. “A country like Italy has not at all the same migratory pressure as last year. … The crisis we are experiencing today in Europe is a political crisis.” But Italy’s Interior Minister and Deputy Prime Minister Matteo Salvini said his country had faced 650,000 arrivals by sea over the past four years, 430,000 asylum requests and the hosting of 170,000 “alleged refugees” for an overall cost of more than 5 billion euros ($5.8 billion).

“If for the arrogant President Macron this is not a problem, we invite him to stop insulting and to show instead some concrete generosity by opening up France’s many ports and letting children, men and women through at Ventimiglia,” he said in a statement, referring to the northwestern Italian town at the border with France.

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Filling a void.

Xi Says China Must Lead Way In Reform Of Global Governance (R.)

China must lead the way in reforming global governance, the foreign ministry on Saturday cited President Xi Jinping as saying, as Beijing looks to increase its world influence. China has sought a greater say in global organizations such as the World Bank, the IMF and UN, in line with its growing economic and diplomatic clout. Since taking office in late 2012, Xi has taken a more muscular approach, setting up China’s own global bodies like the Asian Infrastructure Investment Bank and launching his landmark Belt and Road project to build a new Silk Road. Beijing has cast itself a responsible member of the international community, especially as President Donald Trump withdraws the United States from agreements on climate change and Iran, and as Europe wrestles with Brexit and other issues.

China must “uphold the protection of the country’s sovereignty, security and development interests, proactively participate in and show the way in reform of the global governance system, creating an even better web of global partnership relationships”, Xi said in comments reported at the end of a two-day high-level Communist Party meeting. This would help create conditions for building a modern, strong socialist country, the ministry cited him as saying at the meeting attended by officials from the foreign and commerce ministries, the military, the propaganda department and the Chinese embassy in the United States.

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Blocking the opposition from TV.

Turkey’s Erdogan Faces Resurgent Opposition In Twin Election Test (AFP)

Turks began voting Sunday in dual parliamentary and presidential polls seen as President Recep Tayyip Erdogan’s toughest election test, with the opposition revitalised and his popularity at risk from growing economic troubles. Erdogan has overseen historic change in Turkey since his Islamic-rooted ruling party first came to power in 2002 after years of secular domination. But critics accuse the Turkish strongman, 64, of trampling on civil liberties and displaying autocratic behaviour. Polling stations opened at 0500 GMT and were due to close at 1400 GMT, with the first results expected late in the evening.

Over 56 million eligible voters can for the first time cast ballots simultaneously in the parliamentary and presidential elections, with Erdogan looking for a first round knockout and an overall majority for his ruling Justice and Development Party (AKP). But both these goals are in doubt in the face of an energetic campaign by his rival from the secular Republican People’s Party (CHP), Muharrem Ince, who has mobilised hundreds of thousands in mega rallies, and a strong opposition alliance in the legislative polls. Erdogan remains the favourite to hold on to the presidency – even if he needs a second round on July 8 – but the outcome is likely to be much tighter than he expected when calling the snap polls one-and-a-half years ahead of schedule.

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It’s going to take demos ten times that size. You need millions on the streets.

Huge Anti-Brexit Demonstration Throngs Central London (G.)

At least 100,000 people took to the streets yesterday as part of the largest ever demonstration of support for a new referendum over Britain’s final Brexit deal. With more businesses poised to issue dire Brexit warnings this week and senior Tories already drawing up plans to soften Theresa May’s exit proposals, organisers of the march on Sunday said it showed Britain’s departure from the European Union was not a “done deal”. A former aide to Margaret Thatcher, several Labour MPs and pro-EU campaigners from across Britain took part in the demonstration, marking two years since the Brexit vote. Organisers said that people from every region and walk of life were among those who took part in the march down Whitehall.

Conservative supporters marched alongside Labour voters and Liberal Democrats during the protest, which saw angry denunciations of the chaos that has ensued inside government since the Brexit vote. Labour’s leadership also came under pressure at the march for refusing to back a second public vote. There were chants of “Where’s Jeremy Corbyn” from the crowd. The Labour leader was on a visit to a Palestinian refugee camp. Anger on the streets at the prime minister’s handling of the Brexit negotiations is being accompanied by a renewed push from industry to ensure that trade with Europe is not disrupted as a result of leaving. More prominent manufacturing firms are set to issue warnings about Britain’s Brexit negotiations within days, after Airbus and BMW broke cover to say they could reconsider their UK investment plans unless a Brexit deal was reached keeping Britain closely aligned with Europe.

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Reality should dawn on the British people.

Airbus Warns Of Harsh Brexit Reality With 100,000 Jobs Under Threat (Ind.)

“The dawning of reality,” is how Tom Williams, the chief operating officer of Airbus, described it, after warning that Airbus is seriously considering pulling out of the UK in the event of a no deal Brexit. It’s worth taking a moment to consider what that would mean. The firm employs 14,000 people directly in this country. It has provided 4,000 high quality apprentices over the last decade, thus supporting a flagship policy of the Government. It contributed £1.7bn to the UK exchequer in tax last year, before you consider the economic contributions of its employees, who are in well paid, unionised jobs. It is estimated that Airbus supports another 86,000 people through its supply chain, bringing the total number of jobs at risk to 100,000.

The companies in that supply chain, and their employees, further add to the tax take, and contribute to the economy. If, when, Airbus does go, if it seeks alternatives when it comes to the production of its wings, those jobs will not be replaced. Once they are gone, they are gone. Perhaps the Brextremists expect the people who held them to pick the fruit that the soft fruit industry has been warning about rotting in the fields for months? It once again puts the shockingly mendacious talk by ministers of a “Brexit dividend” to fund the NHS – even Chancellor Philip Hammond has now descended into that pit – into context. The economic damage if Airbus goes, and if other companies; car makers, and their suppliers, for example, do the same, no one will be talking about dividends. Quite the reverse.

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Wolf Richter is no fan.

Bitcoin Drops to $5,860, Lowest since October 2017 (WS)

Bitcoin dropped to $5,860 at the moment, below $6,000 for the first time since October 29, 2017. It has plummeted 70% in six months from the peak of $19,982 on December 17. There have been many ups on the way down, repeatedly dishing out fakes hopes, based on the ancient theory that nothing goes to hell in a straight line (chart via CoinMarketCap): If you’re a True Believer and you just know that bitcoin will go to $1 million by the end of 2020, as promised by a whole slew of gurus, including John McAfee – “I will still eat my dick if wrong,” he offered helpfully on November 29 – well you probably don’t need this sort of punishment. You’re suffering enough already. And I apologize. I feel your pain.

I was a true believer too a few times, and every single time it was a huge amount of fun, and I felt invincible and indestructible until I got run over by events. With 17.11 million bitcoins circulating today, if bitcoin were at $1 million today, it would amount to a market cap of $17 trillion. But new bitcoins are constantly being created out of nothing (“mined”) by computers that suck up enormous amounts of electricity. And by the end of 2020, there will be many more bitcoins, and if the price were $1 million each, the total would amount to about the size of US GDP. This doesn’t even count all the other cryptos that would presumably boom in a similar manner, amounting perhaps to half of global GDP, or something.

People who promote this brainless crap are either totally nuts or the worst scam artists. But I feel sorry for the True Believers whose fiat money got transferred and will continue to get transferred from them to others. So OK, there’s still some time left. It’s not the end of 2020 yet. And True Believers still have room for the fake hope of a $1-million bitcoin. But at the moment, bitcoin is even worse – incredibly – than one of the worst fiat currencies in the world, the Argentine peso, which has plunged “only” 35% over the period during which bitcoin plunged 70%. That takes some doing!

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France and Germany should stop trying to dictate the future. It will backfire.

The Eurozone Isn’t Ready For The Next Big Shock (Pol.eu)

The return to economic growth in the eurozone has produced a dangerous sense of complacency on the Old Continent, especially in the richer countries of the north. But Italy’s flirtation with an exit from the euro under a populist government is a stark reminder that, if left unaddressed, the deep structural weaknesses that plague the single currency could trigger an existential crisis across the EU. It would be a mistake, therefore, to believe we can drive along in business-as-usual mode, or just take a few small steps toward more European integration. This week’s Meseberg Declaration signed by Angela Merkel and Emmanuel Macron, although a step in the right direction, is part of a collective denial about what needs to be done.

You don’t need to be a populist to recognize that Europe’s monetary union is dysfunctional and in dire need of more substantial reforms than those proposed by Germany and France. To keep the single currency alive, it needs two major structural improvements. First, it needs to reduce the fragmentation in Europe’s banking system that has caused the Continent to experience more severe crises than other parts of the world — most notably in comparison to the U.S. Second, it has to develop a streamlined and legitimate decision-making process to respond quickly and boldly to the next major recession.

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Amen.

Shooting The Messenger: Criminalising Journalism (G.)

The fact that during the 10 years he was in office, the US president, Barack Obama, prosecuted more whistleblowers than all the presidents in US history combined is an indication of the increasing threat to journalism. In 2017 the head of the CIA questioned the first amendment rights which protect free speech, and the US attorney-general threatened that the WikiLeaks founder, Julian Assange, would be prosecuted (for what he was not clear). Both are acts of intimidation designed to silence. It has been argued that governments are not that concerned about most of the work that journalists do so, for most, concerns about surveillance are unnecessary. But the problem there is that, generally speaking, if governments are not worried about what journalists are doing, the journalists are not doing their jobs.

Reporting local news may be a useful social function, but the issues that arise where nations go to war, or where countries are involved in breaking the law, or plundering the treasure of other nations, are of great importance and need investigating. It is in these significant areas that journalists must be protected from the vested interests of the executive state; where the very people who make the decisions, as in the Iraq war, need to be exposed and held to account before the event, not after it. What is so disturbing is that the media has often aided and abetted governments and the intelligence agencies – who always want more access to information – as they invoked the fear of terrorism as grounds for introducing tougher surveillance laws.

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Jun 212018
 


Vincent van Gogh Avenue of Poplars at Sunset 1884

 

Short-Sellers Sense An Opportunity As China Trade Tensions Brew (R.)
The Greatest Short-Squeeze In History (ZH)
Chinese Investment In The US Drops 90% Amid Political Pressure (CNBC)
China Warns Washington’s ‘Capricious’ Trade Actions Will Hurt US Workers (R.)
China Could Strike Back At Dow-Listed Firms Over Trade: Global Times (R.)
Deutsche Bank Troubles Raise Worries About The Future Of The Eurozone (Polleit)
Greece Expects Substantive Debt Relief Conditions From Eurogroup (R.)
EU Committee Approves New Rules That Could ‘Destroy The Internet As We Know It’
Trump’s Military Drops a Bomb Every 12 Minutes, and No One Talks About It (TD)
Circle Closed: Merkel, Macron Want EU Border States To Deal With Refugees (RT)
Italian Coastguard Ship Carrying 522 Migrants Docks In Sicily (AFP)
I’ve Got Some Things to Say (Romelu Lukaku)

 

 

Something’s brewing alright…

Short-Sellers Sense An Opportunity As China Trade Tensions Brew (R.)

Escalating trade tensions between Washington and Beijing may have sent tremors across the U.S. stock market but short-sellers are taking the opportunity to boost bearish bets against U.S. companies exposed to a full-blown trade war. Planemaker Boeing, automaker General Motors, casino operator Las Vegas Sands, package delivery company FedEx and agricultural trader Bunge – companies that could feel the pain from growing trade tensions with China – have drawn a noticeable pickup in shorting activity this month, according to financial analytics firm S3 Partners.

“I think the change in short interest is directly related to the increase in trade tensions,” said Ihor Dusaniwsky, head of research at S3 in New York. Short-sellers aim to profit by selling borrowed shares with the hope of buying them back later at a lower price. On Friday, U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, and Beijing immediately vowed to respond in kind. Tensions escalated further on Monday, after Trump threatened to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated. Multinationals that rely on China for large parts of their business are seen as particularly at risk from a potential trade war.

Read more …

…but who’s going to come up on top, the shorts or the squeezers?

The Greatest Short-Squeeze In History (ZH)

A quick glance at the stock market – particularly big-tech – and once can quickly discern that “something’s up.” Every dip is met by a wall of buying, ramping the market ever higher, and ever more ignorant of the increasingly uncertain world around it.

Why? Simple… it’s a massive, unprecedented short-squeeze…

The “most shorted” stocks in America are up 20% in the last two months, almost incessantly.

While the chart above is ridiculous enough, it turns out that this is actually accelerating and is now the great short-squeeze in the history of the data…

The ‘Relative Strength Index’ of the “most shorted” stocks has never been higher and each time it has reached this level, stocks have fallen hard.

But as a reminder – amid all of this – The Dow is down for the 7th day in a row, its longest losing streak in 18 months.

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Xi needs to keep his foreign reserves at home.

Chinese Investment In The US Drops 90% Amid Political Pressure (CNBC)

Chinese acquisitions and investments in the U.S. fell 92 percent to just $1.8 billion in the first five months of this year, consulting and research firm Rhodium Group said Tuesday. Counting divestitures, net Chinese deal flow to the U.S. during that time was a negative $7.8 billion, the report said. The decline follows a sharp drop in the second half of last year as pressure from both Beijing and the Trump administration curbed a recent surge in cross-border investment. Completed Chinese deals in the U.S. hit a record $46 billion in 2016, and dropped to $29 billion in 2017, according to Rhodium. In a search for investment opportunities, Chinese companies went on an overseas buying spree in 2015 and 2016.

But now, China wants to limit capital flight and excessive leverage. The U.S. is worried about intellectual property protection and has increased scrutiny of deals on the basis of national security. The Trump administration has also threatened restrictions on investment based on a “Section 301” investigation, the same study that led to the latest tariff announcements. As a result, acquisitions worth more than $2 billion in the first five months of this year have fallen apart, Rhodium Group’s Thilo Hanemann said.

Read more …

Still negotiating.

China Warns Washington’s ‘Capricious’ Trade Actions Will Hurt US Workers (R.)

China’s commerce ministry on Thursday accused the United States of being “capricious” over bilateral trade issues, and warned that the interests of U.S. workers and farmers ultimately will be hurt by Washington’s penchant for brandishing “big sticks”. Previous trade negotiations with the United States had been constructive, but because the U.S. government is being unpredictable and challenging, Beijing has had to respond in a strong manner, commerce ministry spokesman Gao Feng said in a regular briefing in Beijing.

President Donald Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliates against his previous announcement to target $50 billion in imports. The United States has alleged that China is stealing U.S. intellectual property, a charge denied by Beijing. Washington’s accusations of forced tech transfers are a distortion of reality, and China is fully prepared to respond with “quantitative” and “qualitative” tools if the U.S. releases a new list of tariffs, Gao said. “It is deeply regrettable that the U.S. has been capricious, escalated the tensions, and provoked a trade war,” he said. “The U.S. is accustomed to holding ‘big sticks’ for negotiations, but this approach does not apply to China.”

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China will have to move.

China Could Strike Back At Dow-Listed Firms Over Trade: Global Times (R.)

China could hit back at U.S. firms listed on the Dow Jones Industrial Average if U.S. President Donald Trump keeps exacerbating tensions with China over trade, state-controlled Chinese tabloid The Global Times said on Thursday. Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if China follows through with retaliation against his previous targeting of $50 billion in imports. The Dow, which counts Boeing, Apple and Nike among its constituents, ended down 0.17 percent on Wednesday. The 30-stock share index has declined 0.25 percent year-to-date.

“If Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants,” the Global Times said in a commentary. The world’s two biggest economies seemed increasingly headed towards open trade conflict after three rounds of high-level talks since early May failed to reach a compromise on U.S. complaints over Chinese trade practices and a $375 billion trade deficit with China. Despite taking steps in self-defense, China will not stray from its path of deepening reform and opening up, said the tabloid, which is run by the People’s Daily.

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Deutsche = derivatives.

Deutsche Bank Troubles Raise Worries About The Future Of The Eurozone (Polleit)

The euro banking sector is huge: In April 2018, its total balance sheet amounted to €30.9 trillion, accounting for 268% of GDP in the euro area. Unfortunately, however, many euro banks are in lousy shape. They suffer from low profitability and carry an estimated total bad loan exposure of around €759 billion, which accounts for roughly 30% of their equity capital. Share price developments suggest that investors have lost quite some confidence in the viability of euro banks’ businesses: While US bank stocks are up 24% since the beginning of 2006, the index for euro-area bank stocks is still down by around 70%. Perhaps most notably, ’Germany’s two largest banks, Deutsche Bank and Commerzbank, have lost 85 and 94%, respectively, of their market capitalization.

With a balance sheet of close to €1.5 trillion in March 2018, Deutsche Bank accounted for around 45% of German GDP. In international comparison, this an enormous, downright frightening dimension. It is mostly the result of the bank still having an extensive (though not profitable) footprint in the international investment banking business. The bank has already started reducing its balance sheet, though. Beware of big banks — this is what we could learn from the latest financial and economic crises 2008/2009. Big banks have the potential to take an entire economy hostage: When they get into trouble, they can drag everything down with them, especially the innocent bystanders – taxpayers and, if and when the central banks decide to bail them out, those holding fiat money and fixed income securities denominated in fiat money.

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Sure.

Greece Expects Substantive Debt Relief Conditions From Eurogroup (R.)

Greece expects eurozone finance ministers to deliver on promised debt relief this week so that it can at last plan its financial future “like any ordinary country,” the government spokesman said on Wednesday. Ministers in the Eurogroup will meet in Luxembourg on Thursday to consider plans for easing the debt burden, which at 179.8% of annual Greek GDP is proportionately the greatest in the 19-nation euro zone. “We are optimistic that we are on the verge of a solution with substance,” spokesman Dimitris Tzanakopoulos said, adding that this would “have a multiplying effect on the momentum of the Greek economy.” Shut out of debt markets in 2010, Greece is set to exit its international bailout program formally in August.

The Eurogroup will discuss debt relief to ensure Athens can return to market financing after eight years of loans from euro zone governments and the IMF. “The accepted criteria for all sides is that this solution be convincing for markets and embed the creditworthiness of our country – the final act in restoring the credibility of Greece to be able to plan for the next day like any ordinary country,” Tzanakopoulos told a news briefing. The European Stability Mechanism (ESM) holds more than half of the country’s public debt and, as its biggest creditor, is keen to see Greece regain market access sustainably. EU officials have repeatedly said the meeting will be crucial to seal Greece’s financial future.

Decisions will need to be made on the use of about €40 billion that remain unspent under its third, €86 billion bailout programme which expires on Aug. 20. Greece has already received substantial debt relief during the crisis. Private creditors cut the value of their holdings of Greek government bonds by more than half in 2012. As a result Greek debt stock was cut by about €107 billion. Official creditors do not accept such “haircuts” but have eased lending terms which reduced the net present value of the loans granted to Athens, resulting in further budget savings. European creditors will probably grant frontloaded debt relief to Greece by using the funds left over in the third bailout to buy out part of the IMF loans..

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“..a tool for the automated surveillance and control of its users..”

EU Committee Approves New Rules That Could ‘Destroy The Internet As We Know It’

An EU committee has approved two new copyright rules that campaigners warn could destroy the internet as we know it. The two controversial new rules – known as Article 11 and Article 13 – introduce wide-ranging new changes to the way the web works. Article 13 has been criticised by campaigners who claim that it could force internet companies to “ban memes”. It requires that all websites check posts against a database of copyrighted work, and remove those that are flagged. That could mean memes – which often use images taken from films or TV shows – could be removed by websites. The system is also likely to go wrong, campaigners say, pointing to previous examples where automated systems at YouTube have taken down a variety of entirely innocent posts.

Smaller sites might not even be able to maintain such a complicated infrastructure for scanning through posts, and therefore might not be able to continue to function, activists claim. Some companies and sites have already had to shut down as a result of the EU’s new GDPR data rules. It has been opposed by a whole host of internet experts, many of them involved with the creation of the central technologies and services of the internet. An open letter published last week was signed by more than 70 experts, including web creator Tim Berners-Lee, Wikipedia co-founder Jimmy Wales and internet pioneer Vint Cerf. “By requiring Internet platforms to perform automatic filtering all of the content that their users upload, Article 13 takes an unprecedented step towards the transformation of the Internet, from an open platform for sharing and innovation, into a tool for the automated surveillance and control of its users,” that letter read.

The authors note that copyright is an important part of law, which exists to encourage creators to ensure their work is put out into the world. But the automatic systems being considered by the EU are not the right ways of controlling that, they argue. “We support the consideration of measures that would improve the ability for creators to receive fair remuneration for the use of their works online,” the letter reads. “But we cannot support Article 13, which would mandate Internet platforms to embed an automated infrastructure for monitoring and censorship deep into their networks.”

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They all do it.

Trump’s Military Drops a Bomb Every 12 Minutes, and No One Talks About It (TD)

There was basically a media blackout while Obama was president. You could count on one hand the number of mainstream media reports on the Pentagon’s daily bombing campaigns under Obama. And even when the media did mention it, the underlying sentiment was, “Yeah, but look at how suave Obama is while he’s OK’ing endless destruction. He’s like the Steve McQueen of aerial death.” And let’s take a moment to wipe away the idea that our “advanced weaponry” hits only the bad guys. As David DeGraw put it, “According to the C.I.A.’s own documents, the people on the ‘kill list,’ who were targeted for ‘death-by-drone,’ accounted for only 2% of the deaths caused by the drone strikes.”

Two percent. Really, Pentagon? You got a two on the test? You get five points just for spelling your name right. But those 70,000 bombs dropped by Bush—it was child’s play. DeGraw again: “[Obama] dropped 100,000 bombs in seven countries. He out-bombed Bush by 30,000 bombs and 2 countries.” You have to admit that’s impressively horrific. That puts Obama in a very elite group of Nobel Peace Prize winners who have killed that many innocent civilians. The reunions are mainly just him and Henry Kissinger wearing little hand-drawn name tags and munching on deviled eggs.

However, we now know that Donald Trump’s administration puts all previous presidents to shame. The Pentagon’s numbers show that during George W. Bush’s eight years he averaged 24 bombs dropped per day, which is 8,750 per year. Over the course of Obama’s time in office, his military dropped 34 bombs per day, 12,500 per year. And in Trump’s first year in office, he averaged 121 bombs dropped per day, for an annual total of 44,096. Trump’s military dropped 44,000 bombs in his first year in office. He has basically taken the gloves off the Pentagon, taken the leash off an already rabid dog.

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Why the EU should not be in the hands of people who need to win national elections. Not Brussels either, obviously. This is disastrous.

Circle Closed: Merkel, Macron Want EU Border States To Deal With Refugees (RT)

With no end in sight to the EU refugee crisis, Berlin and Paris look to put the burden of dealing with asylum seekers on the countries where they first register. The seeming return to ‘old rules’ is poised to split Europe further. During their meeting ahead of the EU summit, German Chancellor Angela Merkel and French President Emmanuel Macron pledged to “jointly and resolutely tackle” what they euphemistically called “secondary movements inside the EU.” An elusive wording used in the so-called Meseberg Declaration adopted by the two leaders effectively means one thing: Macron and Merkel want all the newly arrived asylum seekers and migrants to stay in the EU countries where they were first registered while their cases are being processed.

This would leave the EU southern member states to deal with the new arrivals alone. The problem, however, is that the same rules embodied in what is known as the ill-fated EU Dublin Regulation already proved to be dysfunctional at the height of the 2015 refugee crisis. “It is a de-facto return to the Dublin Agreement, which was disavowed by Merkel herself when she opened Germany’s borders for refugees back in 2015,” Evgenia Pimenova, an expert at the International Studies Center of the Moscow State Institute of International Relations (MGIMO), told RT. It seems, however, that the leaders of Europe’s two powerhouses do not have much of a choice in a situation when they face a growing opposition to the old migration policies both at home and at the European level.

This apparent attempt to save face and gain some political points without giving up on their principled stance on immigration issues, however, might lead Berlin and Paris to a situation in which they only sow seeds of further discord in a bloc, which is already beset with political differences. “It is not a revolution” in a field of migration policy, Alain Corvez, a former advisor to the French Defense and Interior Ministries, told RT. “It is only a tactical decision [aimed at dealing] with the current threats” and “pressure” that Merkel and Macron and facing “in their own countries.”

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5Star must be careful with continuing support for Salvini.

Italian Coastguard Ship Carrying 522 Migrants Docks In Sicily (AFP)

An Italian coastguard ship carrying more than 500 migrants, including dozens rescued by the US Navy off Libya last week, arrived Tuesday night at a port in Sicily, days after the new far-right interior minister banned NGO rescue ships from docking in Italy. “Diciotti ship finally lands in Pozzallo taking 522 people to safe port,” the UNHCR Italy tweeted. “They were rescued in multiple operations, 42 of them survived drowning and they need urgent medical care and psychological support,” the UN refugee agency said, adding that it was at the scene along with Italian authorities and humanitarian organisations.

A dozen very dehydrated migrants, including six children, three women and one man, had already been sent to Pozzallo and taken into care by the Italian Red Cross. It is not known whether they were part of the group of 41 migrants rescued from a vessel in distress off Libya last Tuesday by the USNS Trenton, which transferred them to the Diciotti. The crew of the US fast transport ship also spotted 12 bodies in the water but were unable to locate them during a search after the rescue, the US Navy said. A nearby ship from the NGO Sea Watch offered to help provided it could dock with the migrants at an Italian port, which the Italian authorities refused.

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Wonderful story from an unexpected source, the attacker from Manchester United and Belgium. Moving.

I’ve Got Some Things to Say (Romelu Lukaku)

I remember the exact moment I knew we were broke. I can still picture my mum at the refrigerator and the look on her face. I was six years old, and I came home for lunch during our break at school. My mum had the same thing on the menu every single day: Bread and milk. When you’re a kid, you don’t even think about it. But I guess that’s what we could afford. Then this one day I came home, and I walked into the kitchen, and I saw my mum at the refrigerator with the box of milk, like normal. But this time she was mixing something in with it. She was shaking it all up, you know? I didn’t understand what was going on. Then she brought my lunch over to me, and she was smiling like everything was cool. But I realized right away what was going on.

She was mixing water in with the milk. We didn’t have enough money to make it last the whole week. We were broke. Not just poor, but broke. My father had been a pro footballer, but he was at the end of his career and the money was all gone. The first thing to go was the cable TV. No more football. No more Match of the Day. No signal. Then I’d come home at night and the lights would be shut off. No electricity for two, three weeks at a time. Then I’d want to take a bath, and there would be no hot water. My mum would heat up a kettle on the stove, and I’d stand in the shower splashing the warm water on top of my head with a cup.

There were even times when my mum had to “borrow” bread from the bakery down the street. The bakers knew me and my little brother, so they’d let her take a loaf of bread on Monday and pay them back on Friday. I knew we were struggling. But when she was mixing in water with the milk, I realized it was over, you know what I mean? This was our life. I didn’t say a word. I didn’t want her to stress. I just ate my lunch. But I swear to God, I made a promise to myself that day. It was like somebody snapped their fingers and woke me up. I knew exactly what I had to do, and what I was going to do. I couldn’t see my mother living like that. Nah, nah, nah. I couldn’t have that.

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Jun 192018
 


Vittorio Matteo Corcos Sogni 1896

 

Threatened By The Truth – Julian Assange Anniversary (IE)
25,000 Flee As Fighting In Yemen Port City Hodeida Escalates (AP)
It’s Time To Get Enraged At What Western Imperialists Have Done To Syria (CJ)
Paul Tudor Jones Warns The Next Recession Will Be ‘Really Frightening’ (Y.)
Trump Threatens New Tariffs On $200 Billion In Chinese Goods (CNBC)
China Enters the Trade Trap (IICS)
Chasing Yield during ZIRP & NIRP Evidently Starved Human Brains of Oxygen (WS)
Why Germany Neither Can Nor Should Pay More To Save The Eurozone (Varoufakis)
Macron’s Euro Zone Reforms: Grand Vision Reduced To Pale Imitation (R.)
Hopeless European Millennials And The Populist Takeover (John Rubino)
Spain’s New Government To Remove Franco’s Remains From Mausoleum (AFP)
A Very British Disease (Coppola)
Thousands Of Public Buildings And Spaces In England Sold Off A Year (G.)
Coercion (Jim Kunstler)
Sharp Fall In Number Of People Seeking Asylum In EU (G.)

 

 

If you’re not outraged by Assange’s situation, you have no right to be outraged by anything else.

Threatened By The Truth – Julian Assange Anniversary (IE)

Today marks the sixth anniversary of Wikileaks founder Julian Assange’s effective house arrest in London. He cannot move around in public, because he fears he will be arrested and extradited to America — a daunting prospect, since a UN special rapporteur described Chelsea Manning’s treatment by that country’s justice system as torture. Assange is divisive. Hawks wish him nothing but misfortune and a stretch in jail. According to journalist John Pilger, a leaked official memo says: “Assange is going to make a nice bride in prison. Screw the terrorist. He’ll be eating cat food forever.” If you stand at the other end of the spectrum, Assange is a hero who revealed how our world really works.

Consequently, he has been relentlessly targeted. Hilary Clinton has contributed to this process, as Assange highlighted the Clintons’ links with Saudi Arabia and the multimillion donations that kingdom made to their foundation, after she, as secretary of state, sanctioned an $80bn Saudi arms deal. Assange remains, despite illegal efforts to revoke it, an Australian citizen, but he has not enjoyed the support a person who has not been charged with anything, much less convicted of anything, might expect from a democracy. These are indeed murky waters, but Assange’s ordeal reconfirms a truth: News is something someone, somewhere, does not want published. That’s why he is such a threat.

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Yes, the treatment of children on America’s borders is a disgrace. But don’t make it an echo chamber issue. Kids in Hodeida are much worse off. Where is the outrage?

25,000 Flee As Fighting In Yemen Port City Hodeida Escalates (AP)

The UN spokesman said on Monday that tens of thousands of residents have fled the fighting along Yemen’s western coastline, where Yemeni fighters backed by a Saudi-led coalition are engaged in fierce battles with Iranian-backed Houthi rebels. Stephane Dujarric, the spokesman for the UN secretary-general, told reporters on Monday that about 5,200 families, or around 26,000 people, have fled the fighting and sought safety within their own districts or in other areas in Hodeida governorate. ‘‘The number is expected to increase as hostilities continue,’’ he said. Emirati troops, along with irregular and loyalist forces in Yemen, have been fighting against Houthis for Hodeida since Wednesday.

Coalition warplanes rained missiles and bombs on Houthi positions near Hodeida airport, in the city’s south. The offensive for Hodeida has faced criticism from international aid groups, who fear a protracted fight could force a shutdown of the city’s port and potentially tip millions into starvation. About 70 percent of Yemen’s food enters via the port, as well as the bulk of humanitarian aid and fuel supplies. Around two-thirds of the country’s population of 27 million relies on aid, and 8.4 million are already at risk of starving.

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And there are more things you should be outraged by.

It’s Time To Get Enraged At What Western Imperialists Have Done To Syria (CJ)

Rumors are again swirling of an impending false flag chemical weapons attack in Syria, just as they did shortly before the highly suspicious Douma case in April. Warnings from Syrian and Russian intelligence, as well as US war ship movements and an uptick in US funding for the Al Qaeda propaganda firm known as the White Helmets, give these warnings a fair bit of weight. Since the US war machine has both a known regime change agenda in Syria and an extensive history of using lies, propaganda and false flags to justify military interventionism, there’s no legitimate reason to give it the benefit of the doubt on this one. These warnings are worth taking seriously.

So some people are understandably nervous. The way things are set up now, it is technically possible for the jihadist factions inside Syria and their allied imperialist intelligence and defense agencies to keep targeting civilians with chemical weapons and blaming the Assad government for them until they pull one off that is so outrageous that it enables the mass media to manufacture public support for a full-scale assault on Damascus. This would benefit both the US-centralized empire which has been plotting regime change in Syria for decades and the violent Islamist extremists who seek control of the region. It also creates the very real probability of a direct military confrontation with Syria’s allies, including Russia.

But the appropriate response to the threat of a world war erupting in Syria is not really fear, if you think about it. The most appropriate response to this would be unmitigated, howling rage at the western sociopaths who created this situation in the first place.

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No stabilizers.

Paul Tudor Jones Warns The Next Recession Will Be ‘Really Frightening’ (Y.)

Legendary global macro trader Paul Tudor Jones is warning that asset prices are too high. And furthermore, he’s concerned about what the next recession might look like. He shared his thoughts on Monday during a conversation with Goldman Sachs CEO Lloyd Blankfein as part of the firm’s “Talks at GS” series. The hedge fund billionaire, who rarely gives interviews or makes public comments on the markets, cautioned that across asset classes “you have to be thinking this is a highly dubious sustainable price.” Jones doesn’t think the low interest rates we have now due to easy monetary policy are sustainable over time. He said that interest rate policy is “crazy.” He further argued that the Trump administration’s stimulative fiscal policy isn’t sustainable either.

“You look at prices of stocks, real estate, anything,” he said. “We’re going to have to mean revert to a normal real rate of interest with a normal term premium that’s existed for 250 years. We’re going to have to get back to that. We’re going to have to get back to a sustainable fiscal policy and that probably means the price of assets goes down in the very long run.” In the short run, the market is “jacked up and ready to go,” he said. Blankfein added that it’s like “pouring lighter fluid on an already lit fire.” During the financial crisis, central banks had a lot of room to ease monetary policy and governments had more flexibility to push stimulative fiscal policy. Today, there’s less room and flexibility.

“The next recession is really frightening because we don’t have any stabilizers,” Jones said. “We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers.”

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“Trump is going to have to find some way to back down and let China save face..”

Trump Threatens New Tariffs On $200 Billion In Chinese Goods (CNBC)

President Donald Trump has requested the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. The new duties will go into effect “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” the president said in a statement provided by the White House late on Monday. Beijing has pledged to fight back if Trump goes ahead with the new tariffs. U.S. stock index futures fell following the news, while Asian equity markets were mixed. It’s the latest development in escalating trade tensions between the world’s two largest economies.

On Friday, the U.S. announced a 25 percent tariff on up to $50 billion of Chinese products, prompting Chinese President Xi Jinping’s administration to respond witha 25 percent tariff on $34 billion of U.S. goods. “It’s one thing to retaliate with $50 billion here and $50 billion there but when the [U.S.] president trots out another $200 billion, that’s quite concerning,” Max Baucus, former U.S. ambassador to China under President Barack Obama, told CNBC. “This reminds me little bit of an old western … If there’s a gunfight trade war, somebody’s going to get hurt,” he continued: “Trump is going to have to find some way to back down and let China save face so that both sides can back down gradually and respectfully.”

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Democracy?

China Enters the Trade Trap (IICS)

Perhaps nobody knows what President Trump will do next, including President Trump, but right now it looks like he has successfully maneuvered China into a trade trap. The goal is to slow China’s economy such that military modernization slows and its economy cannot catch up with the United States. Meanwhile, implementation of this strategy is called “Beijing’s playbook” and the whole time President Trump speaks positively about Xi Jinping and China’s help in other areas. Bloomberg: Xi to Counter Trump Blow for Blow in Unwanted Trade War “The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. China “thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now.”

This is the mistake autocrats always make about Western governments and the United States. They view the messy and inefficient political system (intentionally designed that way to protect liberty) as a weakness. They think politicians care more about elections than anything else. They see the difficulty in reaching consensus as a weakness. However, they miss the fact that democratic governments enjoy greater legitimacy. If the U.S. reaches a majority in favor of confronting China on trade, then President Trump has the far stronger political hand. Confronting China on trade raises President Trump’s popularity. His base and independent voters favor this policy. Democrats oppose him because he is Trump, but they would lose votes if the only issue in November was “Confront China on trade, yes or no?”

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“..new issuance of Treasuries “will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

Chasing Yield during ZIRP & NIRP Evidently Starved Human Brains of Oxygen (WS)

Let’s be clear: It’s not just Argentina. But Argentina is the most elegant example. The exodus of the hot money from emerging markets where cheap dollar-debts were used to fund pet projects and jack up leverage is – once again – in full swing. Cheap dollar-debt in emerging markets is an old sin that, like all old sins, is repeated endlessly. The outcome is always trouble. But during the act, it sure is a lot of fun for everyone. The exodus of the hot money is even gripping the non-basket-case emerging economies of Asia where it’s causing the worst indigestion since 2008.

Bloomberg: “Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 – withdrawing $19 billion from India, Indonesia, the Philippines, South Korea, Taiwan, and Thailand so far this year.” While emerging markets shone in the first quarter, suggesting resilience to Federal Reserve tightening, that image has shattered over the past two months. With American money market funds now offering yields around 2% – where 10-year Treasuries were just last September – and prospects for more Fed hikes, the bar for heading into riskier assets has been raised.”

“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase, told Bloomberg. “We’ve still only priced in about two thirds of the US rate increases we expect to see over the next 12 months. So the Fed is continuing to get more hawkish, but the market still hasn’t caught up.” [..] “Dollar funding of emerging market economies has been in turmoil for months now,” Patel wrote – because yeah, the era of the cheap dollar is over, and investors should have figured that out two-and-a-half years ago when the Fed started hiking rates. But the market didn’t want to believe that the Fed would actually do it. And suddenly over the past two months, it downs on these geniuses that the Fed has actually been hiking rates and will continue to do so for some time.

Patel not only blamed the QE unwind but also the simultaneous and massive issuance of new Treasury debt by the US government to fund its ballooning deficits. This new issuance of Treasuries “will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

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Excellent speech by Yanis. Read and learn. He may be the only one around with a real way to save the EU.

Why Germany Neither Can Nor Should Pay More To Save The Eurozone (Varoufakis)

[..] I wanted a Germany that was hegemonic and efficient, not authoritarian and caught up in a European Ponzi scheme. That was in 2013. Two years later, in March 2015, I wrote an article, while Greece’s finance minister, referring to the first and second bailout loans, of 2010 and 2012. Allow me to quote from it: “The fact is that Greece had no right to borrow from German – or any other European – taxpayers at a time when its public debt was unsustainable. Before Greece took on any loans, it should have initiated debt restructuring and undergone a partial default on debt owed to its private-sector creditors. But this “radical” argument was largely ignored at the time.

Similarly, European citizens should have demanded that their governments refuse even to consider transferring private losses to them. But they failed to do so, and the transfer was effected soon after. The result was the largest taxpayer-backed loan in history, provided on the condition that Greece pursue such strict austerity that its citizens have lost one-quarter of their incomes, making it impossible to repay private or public debts. The ensueing – and ongoing – humanitarian crisis has been tragic… Animosity among Europeans is at an all-time high, with Greeks and Germans, in particular, having descended to the point of moral grandstanding, mutual finger-pointing, and open antagonism. This toxic blame game benefits only Europe’s enemies.”

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More Europe at this point in time will only lead to more tension.

Macron’s Euro Zone Reforms: Grand Vision Reduced To Pale Imitation (R.)

When French President Emmanuel Macron laid out a sweeping vision for eurozone reform last September, he spoke of “rebuilding Europe”, with a common budget for the euro nations and a single minister to oversee it all. The proposals he will discuss when he sits down with German Chancellor Angela Merkel outside Berlin on Tuesday will be far less ambitious, with deep differences between the two European powerhouses. Many economists agree with Macron that fundamental reforms are needed to strengthen the eurozone and insulate the single currency — the most potent symbol of Europe’s integration — from future crises, like the 2010-13 sovereign debt contagion that nearly tore the euro apart.

But Merkel has limited room to act due to political pressure at home, and is always at pains to ensure France and Germany aren’t pushing ahead with plans that have no deep backing from the rest of the European Union. Macron and Merkel will discuss a separate budget for the 19 countries that share the single currency but much smaller than he wanted. Then there are gaps in opinion over a fund to calm bond markets in a crisis and a backstop for the banking system. “Things are going in the right direction, but the proposals we’re getting from the Germans aren’t sufficient,” said a French official who acknowledged there were deep differences between the two sides.

A German official said there were still big questions about what sort of agreement Tuesday’s meeting would produce on the budget for the euro zone. The official said Merkel’s recent political troubles over migration policy could mean she is less inclined to make concessions to the French leader. Besides the disagreement between France and Germany, it is also the nature of negotiations between the eurozone countries that grand ideas get chipped away at until a compromise is reached that satisfies all parties.

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“Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.”

Hopeless European Millennials And The Populist Takeover (John Rubino)

Europe is frequently held up as an example of how the rest of the world should behave on a variety of issues. But this comparison misses at least two things: First, “Europe” is actually a lot of different countries in a lot of different situations. Second, much of what seems to work over there only does so because it’s being financed with ever-increasing amounts of debt. For countries, as for individuals, borrowing money is fun at first but beyond a certain point becomes debilitating, as interest payments begin to crowd out everything else. That’s where a growing number of Europe’s failed states now find themselves, with overly-generous pensions and overly-restrictive labor laws making it virtually impossible to run a functioning market-based economy.

The result: Fewer good jobs and more frustrated voters – especially young ones who have seen only the downside of the current system – and the resulting rise of populist political parties that recognize the problems without offering coherent solutions, thus guaranteeing even more chaos in the future. As Today’s Wall Street Journal notes, in Italy and Greece, nearly a third of young adults not only aren’t working but aren’t enrolled in school or training. What are they doing? Apparently just sitting around and stewing about life’s injustice. As for where they’re sitting and stewing, in Greece, Italy and Spain it’s now normal for adults all the way into their 30s to live with their parents, largely because they can’t find work that pays enough to afford a house, car and other requirements of independent life.

As for Germany, which looks great by comparison, keep in mind that a big part of its economic outperformance is due to other EU countries borrowing huge amounts of money to buy German exports. When the latter run out of money – a point which is clearly coming – Germany suffers twice, once when it loses important customers and again when its banks, having lent trillions of euros to Italy, Spain, et al, have to eat those losses. But bad-mouthing Europe should not be seen as implicit praise of the US. We, like Germany, have an advantage that’s both unfair and temporary. Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.

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Starting to like Sanchez.

Spain’s New Government To Remove Franco’s Remains From Mausoleum (AFP)

Spain’s new Socialist government is determined to remove the remains of Francisco Franco from a vast mausoleum near Madrid and turn it into a place of “reconciliation” for a country still coming to terms with the dictator’s legacy. “We don’t have a date yet, but the government will do it,” Prime Minister Pedro Sanchez said late Monday during his first television interview since being sworn in on June 2 after toppling his conservative predecessor Mariano Rajoy in a confidence vote. He recalled that a non-binding motion approved last year in parliament called for Franco’s remains to be exhumed from the massive Valley of the Fallen mausoleum some 50 kilometres (30 miles) northwest of Madrid and the site turned into a “memorial of the victims of fascism”.

“Spain can’t allow symbols that divide Spaniards. Something that is unimaginable in Germany or Italy, countries that also suffered fascist dictatorships, should also not be imaginable in our country,” Sanchez added. Earlier on Monday Socialist party spokesman Oscar Puente said the mausoleum should be transformed into a “place of reconciliation, of memory, for all Spaniards, and not of apology for the dictatorship.” Franco ruled Spain with an iron fist from the end of the country’s 1936-39 civil war until his death in 1975, when he was buried inside a basilica drilled into the side of a mountain at the Valley of the Fallen, one of Europe’s largest mass graves.

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A history. “Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.”

A Very British Disease (Coppola)

The desire to judge people’s motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain’s repeated attempts to “categorise the poor”.

[..] worst of all, using rules and sanctions to compel the genuinely work-shy to work diverts attention and resources away from those who really need help. And it unfairly stigmatises the vast majority of those who are not working, or who are not working as many hours as we think they should, whether through unemployment, sickness or disability. Study after study has shown that in general, people want to work. The problem is that suitable jobs aren’t always available. And yet there remains a prevalent view, even among people who should know better, that people must be compelled to work, or to work harder, with harsh treatment. But today’s sanctions for those who won’t or can’t work are mild compared to the punishments of old: why should they be any more successful?

We would do better to concentrate our attention on helping those who genuinely want to work to find fulfilling, productive and well-paid jobs. And we should also stop trying to decide whether someone “deserves” social support. We have been trying to distinguish between the “deserving” and “undeserving” poor for eight hundred years, and we are no better able to make that judgement now than we were in the fourteenth century, or the sixteenth, or the nineteenth. It is time to give up this fruitless attempt to judge people’s motives. Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.

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Next up: sell Parliament.

Thousands Of Public Buildings And Spaces In England Sold Off A Year (G.)

More than 4,000 public buildings and spaces in England are being sold off every year, with more than 7,000 others at risk over the next five years, a charity has said. Locality says the majority of the sites being offloaded by local authorities are sold to private developers for the highest price, forever lost to communities around them. The charity wants the government to create a £200m-a-year community ownership fund for the next five years to help preserve the buildings and spaces for the use of local people. Tony Armstrong, its chief executive, said: “This is a sell-off on a massive scale. We know that many of the buildings being lost have valuable community uses.

“Everyone of us can think of a local public building or outside space we love and use, from libraries to lidos and town halls to youth centres. They are owned by the public and they’re being sold off for short-term gain to fill holes in council budgets. “Many hundreds of local community groups are stepping up and fighting for community ownership. But they urgently need support and help with startup costs if they are to compete with the commercial developers.” The Great British Sell Off report is published on Tuesday and is based on freedom of information requests sent to all 353 local authorities in England. Locality received 55 responses on the number of buildings and spaces sold between the financial years 2012-13 and 2016-17, as well as 127 replies about sites identified as surplus over the next five years, extrapolating the results to obtain national totals.

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“..if human relations are solely about power, than exercising power over others is all that matters..”

Coercion (Jim Kunstler)

Mr. Peterson laid it out nicely: identity politics assigns everyone to ethnic, racial, and sexual groups, and all the human relations among them amount to never-ending battles for political power. Nothing else matters. Individuals especially don’t matter, only the group. And no group has abused its power more than European white men. This animating idea comes out of the mid-20th century “post-structural critical theorists” Jacques Derrida and Michel Foucault, whose Marxian views emerged conveniently at a time when women and non-white people were vying for departmental chairs in the college humanities and social science programs, and thus have two generations been indoctrinated.

Well, if human relations are solely about power, than exercising power over others is all that matters. Hence, the key to identity politics: it’s all about coercion, making others do your will by threat of force and force itself. These days, the main threat is depriving heretics and apostates of their livelihood. That’s what happened to Brett Weinstein at Evergreen U in Washington State last year, and to Jordan Peterson himself at the U of Toronto, when he objected loudly and publicly to a new Canadian federal law that sought to punish citizens who refused to use the new menu of personal pronouns for the rapidly multiplying new gender categories (e.g. ze, zir, they, xem, nem, hir, nir….)

Both Weinstein and Peterson refused to be coerced and found themselves inadvertently leading a movement against the pervasive, creeping coercion of our time — which has now spread from the campuses into corporate life, with the HR departments working overtime to enforce thought among employees, because company profits are at stake (e.g. Starbucks day-off for “diversity and inclusion training”).

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Somewhat curious that the big political problems start just as the numbers fall.

Sharp Fall In Number Of People Seeking Asylum In EU (G.)

Fewer people sought asylum in the European Union last year, although numbers remain higher than before the arrival of 1 million people in 2015 triggered a political crisis that continues to divide Europe. Showing a sharp drop in asylum claims, the latest report from the EU’s asylum office was published on Monday after emergency talks in the German government over asylum policy and a bitter standoff between EU nations over a migrant rescue ship that eventually docked in Spain after being banned from Italy and Malta. The EU’s asylum office counted 728,470 applications for international protection in 2017, a 44% reduction on the 1.3m applications the previous year.

More than 1 million people entered the EU in 2015, many fleeing the war in Syria. Syria, Iraq and Afghanistan remain the most frequent countries of origin for asylum seekers, accounting for 29% of all claims. The downward trend of asylum claims continued in the first four months of 2018, the EU asylum office said, although numbers have still not returned to pre-crisis levels. About 460,000 people applied for asylum in EU countries in 2013. The fall in asylum applications reflects a sharp drop in people making the hazardous journey over the eastern Mediterranean to Greece and the central Mediterranean to Italy, although there has been an increase in people travelling from west Africa to Spain, albeit from a lower base.

Germany continues to receive more applications for asylum than any other country in Europe, with 222,560 claims in 2017, folowed by Italy, France and Greece. The UK was in fifth place, with 33,780 applications, accounting for 4.6% of all EU asylum claims. But the backlog remains high: 954,100 claims are awaiting a decision, including 443,640 in Germany, according to the EU asylum office.

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Oct 312017
 
 October 31, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , ,  5 Responses »


Salvador Dalí The persistence of memory 1931

 

A Monstrous Bubble – The Destroyer Called Amazon (Stockman)
How The Actual Magic Money Tree Works (G.)
UK Debt Averages £8,000 Per Person – Not Including Mortgages (G.)
Surge In UK Consumer Borrowing Fuels Likely Interest Rate Rise (G.)
Theresa May Faces Snap Election If Defeated By Parliament On Brexit Deal (ES)
Russia Could Hold Congress Of Syrian Peoples In Mid-November (DS)
Europhile Left Deluded On EU Reform Process (Bilbo)
Four Trajectories for Europe’s Future (Turchin)
How Europe Exported Its Refugee Crisis To North Africa (G.)
Libyan Path To Europe Turns Into Dead End For Desperate Migrants (G.)

 

 

Will Washington be swallowed whole by the swamp? Might be a good outcome. Endless articles about Trump and Russia and Mueller. But very hard to find anything neutral. Journalism has become opinionism.

Is Papadopoulos a plant? Where did he come from? Did Fusion GPS set up the Trump Tower meeting after consulting with the DNC? Isn’t there a country to run? I’m getting tired, and I’m sure I’m not the only one.

 

 

Stockman doesn’t buy it.

A Monstrous Bubble – The Destroyer Called Amazon (Stockman)

when it comes to wanton destruction we can think of no better evidence than the $63 billion market cap eruption visited upon Amazon owing to its purported “blow-out” earnings report on Friday. Except it wasn’t all that. In the year ago quarter AMZN’s pre-tax earnings came in at $491 million, which was actually alot more than the $316 million figure posted for Q3 2017. In fact, the company’s niggardly current quarter profit represented 36% plunge from prior year, but thanks to the company’s tax cut “selfie” the headline reading robo-machines didn’t even notice this rather dramatic setback. To wit, AMZN effective tax rate plunged from an aberrantly high 46.6% last year to a quite low 18.4% this year. As a result, its reported net income remained flat relative to prior year.

Stated differently, the blow-out earnings figure of $0.53 per share reported Friday was exactly the same the same $0.53 per share reported last year, but the “blow-out” part was due to the “beat” from the $0.02 street consensus. Then again, the street consensus had been for $1.91 per share only 90 days ago! As per usual, it had been “guided “down by 99% in the interim. If nothing else, this proves that the whole SEC “Fair Disclosure” (FD) is an absolute farce and that the SEC itself is an utter waste of taxpayer money. It also proves, of course, that a bevy of high priced advisors are far more efficacious at cutting tax rates than a House (of Representatives) full of Republicans foaming at the mouth about the topic. But how in the world does this kind of hyper-fiddling with accounting statement tax rates justify a market cap gain in one day ($63 billion) that exceeds the entire market cap of GM($61 billion) or Aetna ($57 billion)?

As it happened, Amazon’s LTM net income of $1.926 billion for the quarter might be a slightly better indicator of its profitability because the company’s four-quarter tax rate averaged out close to the US statutory rate, meaning that the company is being valued at 280X under normal tax rates. Moreover, even if you pro forma the results with the GOP’s vaunted 20% tax rate you would get LTM net income of $2.48 billion and a PE multiple of 217X; and for that matter, just go ahead and abolish the corporate tax entirely and AMZN’s PE at the zero bracket would still compute to 174X. We dwell on the absurdity of Amazon’s PE multiple in the first instance because there is absolutely nothing in its financial performance that warrants these massive market cap gains. Thus, way back in Q3 2014, AMZN’s operating income was $510 million. As shown below, it has been staggering around like a drunken sailor ever since – lapsing to just $347 million in the purportedly red hot quarter just ended.

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“..house prices rise to meet the amount the lender is prepared to lend, rather than being moored to wages..”

How The Actual Magic Money Tree Works (G.)

Shock data shows that most MPs do not know how money is created. Responding to a survey commissioned by Positive Money just before the June election, 85% were unaware that new money was created every time a commercial bank extended a loan, while 70% thought that only the government had the power to create new money. The results are only a shock if you didn’t see the last poll of MPs on exactly this topic, in 2014, revealing broadly the same level of ignorance. Indeed, the real shock is that MPs still, without embarrassment, answer surveys. Yet almost all our hot-button political issues, from social security to housing, relate back to the meaning and creation of money; so if the people making those choices don’t have a clue, that isn’t without consequence. How is money created? Some is created by the state, but usually in a financial emergency.

For instance, the crash gave rise to quantitative easing – money pumped directly into the economy by the government. The vast majority of money (97%) comes into being when a commercial bank extends a loan. Meanwhile, 27% of bank lending goes to other financial corporations; 50% to mortgages (mainly on existing residential property); 8% to high-cost credit (including overdrafts and credit cards); and just 15% to non-financial corporates, that is, the productive economy. What’s wrong with that? On the corporate financial side, bank-lending inflates asset prices, which concentrates wealth in the hands of the wealthy. On the mortgage side, house prices rise to meet the amount the lender is prepared to lend, rather than being moored to wages. The lender benefits enormously from larger mortgages and longer periods of indebtedness; the homeowner benefits slightly from a bigger asset, but obviously spends longer in debt servitude; the renter loses out completely.

Is there a magic money tree? All money comes from a magic tree, in the sense that money is spirited from thin air. There is no gold standard. Banks do not work to a money-multiplier model, where they extend loans as a multiple of the deposits they already hold. Money is created on faith alone, whether that is faith in ever-increasing housing prices or any other given investment. This does not mean that creation is risk-free: any government could create too much and spawn hyper-inflation. Any commercial bank could create too much and generate over-indebtedness in the private economy, which is what has happened. But it does mean that money has no innate value, it is simply a marker of trust between a lender and a borrower. So it is the ultimate democratic resource. The argument marshalled against social investment such as education, welfare and public services, that it is unaffordable because there is no magic money tree, is nonsensical. It all comes from the tree; the real question is, who is in charge of the tree?

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Why do they borrow? Is it for essentials?

UK Debt Averages £8,000 Per Person – Not Including Mortgages (G.)

More than 6 million Britons don’t believe they will ever be debt free, according to new research which has also found the average person in the UK owes £8,000 – on top of any mortgage debt. Almost a quarter of all Britons said they are struggling to make ends meet, while 62% said they were often worried about their levels of personal debt, according to research for Comparethemarket.com. Earlier this month, the price comparison website asked 2,000 adults detailed questions about their personal finances. They found that 10% of respondents had “maxed out” on a credit card, while a similar number said they had been overdrawn within the past 12 months. A third of those interviewed told researchers that they were already planning on taking on additional debt – in the form of credit cards, loans car finance and mortgages – in the next year.

Over a third said they could not see themselves ever being in a financial position to help younger family members, breaking the tradition of the “bank of mum and dad”. The results chime with a recent study by the Financial Conduct Authority which found that that 4.1 million people are already in serious financial difficulty. The survey, the biggest ever by the city regulator, concluded that half of the UK population are financially vulnerable, with 25- to 34-year-olds the most over-indebted. Shakila Hashmi, head of money at Comparethemarket.com, said: “Right now millions of Brits could be in danger of suffering from one of the longest financial hangovers in history. While it may be hard to see an end in sight, the worst thing people in debt can do right now is stick their head in the sand. As well as reining in spending, there are other ways you can reduce debt, like switching to credit cards that help you get on top of debt with interest-free periods.”

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If you borrow too much, we’ll make it costlier.

Surge In UK Consumer Borrowing Fuels Likely Interest Rate Rise (G.)

A near-double-digit increase in lending to households in the year to September has left the Bank of England on track to raise interest rates on Thursday, amid concerns that consumers are creating an unmanageable mountain of unsecured debt. The pace of annual consumer credit growth was 9.9% last month, according to figures from the central bank, as borrowing on credit cards, overdrafts and unsecured loans jumped. The consistent appetite for borrowing is likely to put further pressure on the Bank to raise interest rates this week, with other indicators such as inflation and unemployment already supporting the case for a rise. Last month the Bank said British lenders needed to hold an extra £11bn of capital to guard against consumer loans going sour, due to concerns that banks had overestimated the creditworthiness of their borrowers.

Consumer credit has rocketed since 2014 when it was running at an annual rate of 4%. Last year the annual growth rate hit 12%, with the latest September numbers creating a a consumer debt of more than £204bn. Analysts were unsure whether the increase was a sign of growing confidence among consumers or desperation as wages growth stagnated and inflation rises. Only a steep fall in car loans in recent months has stopped the overall level of consumer credit creeping back to last year’s levels. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said regulators should monitor the effects of an interest rate rise, which will increase pressure on many household finances.

“With household debt a growing concern and an interest rate rise likely as early as this week, we encourage households to exercise caution before taking on additional borrowing – and consider how they would be able to cope with repayments in the event of a shock to their income. “Millions of people will have never experienced an interest rate rise. We are concerned that a small rise, combined with high levels of borrowing, rising living costs and slow wage growth could be enough to push many households into financial difficulty,” she said.

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How Britain goes to the dogs.

Theresa May Faces Snap Election If Defeated By Parliament On Brexit Deal (ES)

Theresa May was threatened with a snap general election today if she is defeated by Parliament on her Brexit deal. Tory right wingers raised the “nuclear threat” of a forced election in what was seen as an attempt to see off calls to empower the Commons to amend the deal or call for fresh negotiations. Iain Duncan Smith, the former Conservative leader and leading Brexit-backer, said it would be on “a confidence issue” and defeat would make the Government “head towards” a general election. “It will be the most important vote of the entire Parliament and if the Government loses it you head towards that conclusion,” he told the Evening Standard. Mrs May is aiming to hammer out a leaving deal with the EU by October or November next year.

The decision on whether Parliament gets a “take it or leave it” vote or the right to amend the deal is shaping up to be the key battle of Brexit. John Whittingdale, the former Culture Secretary, claimed the vote itself would be “a vote of confidence in government” that would trigger an election if defeated. “I think for the Government to come to Parliament and say we have a deal … and for Parliament then to turn around and say, ‘well, actually, we don’t agree it’s a good deal and we’re going to throw it out’, that is a vote of confidence in government,” he told The Westminster Hour. “I can’t see how the government could say ‘oh alright then, we’ll go and have another go’. I think there would have to be a general election.”

But MPs backing a softer pro-business Brexit said Mrs May must keep Parliament involved. Nicky Morgan, the chair of the Treasury Select Committee, said: “Ministers have promised Parliament a meaningful vote. They need to keep Parliament informed and involved to avoid problems at the end. “They resisted a Parliamentary vote on Article 50 until compelled to give way. They should do all they can to avoid a repetition.” Former minister Bob Neill said the eurosceptic threat smacked of “desperation”.

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Where will the US be?

Russia Could Hold Congress Of Syrian Peoples In Mid-November (DS)

A Moscow-backed congress of all Syria’s ethnic groups could take place in Russia as soon as next month and launch work on drawing up a new constitution, the RIA news agency reported Monday, citing a source familiar with the situation. RIA said the Congress of Syrian peoples, the idea of which President Vladimir Putin first mentioned at a forum with foreign scholars earlier this month, could take place in mid-November in the Russian Black Sea resort of Sochi. According to the source, 1,000-1,300 participants from the Assad regime and pro-regime forces as well as various opposition groups will participate. The source added that representatives of various ethnic groups, including Kurds and Turkmens, and religious clergy are also expected. Special U.N. envoy for Syria Staffan de Mistura agreed to participate in the congress but set out a list of terms and conditions that have to be met before the event. Putin says the congress could be an important step toward a political settlement and could also help draft a new constitution for the country.

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Permanent austerity. Strong by Bill Mitchell.

Europhile Left Deluded On EU Reform Process (Bilbo)

The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work.

That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.

[..] here is the OECD Economic Outlook data (from 1960 to 2016) for the Greek unemployment rate, which confirms the veracity of the tweet statement (at least as far as Greek unemployment goes). The fact that the Greek unemployment averaged just 6.6% prior to the crisis (from 1960 to 2008) and has averaged 20.9% since then (2009-2016) and has been above 20% since 2012 tells me that the policy structures in place have failed badly since the GFC. That means – the austerity imposed under the Stability and Growth Pact, the lack of a federal fiscal capacity and the lack of a ‘federal sentiment’ which would have eased the way for generous funds transfers to Greece to allow it to restore domestic demand relatively quickly.

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Halting fragmentation seems futile.

Four Trajectories for Europe’s Future (Turchin)

Scenario 1. The disintegrative trends that I and others have written about are just a “blip”, a temporary set-back that will be soon overcome. The grand project of European integration will soon recover and by 2027 everybody will look back and have fun at the expense of “doomsayers”. I think that this trajectory is extremely unlikely. First, because of the shift in the social mood of the Germans, to which I referred above. Second, because all across Europe the well-being of large segments of the population is declining. To give just two examples, think of the extraordinary high unemployment rates for the young workers in countries like Spain, and of declining real wages of UK workers over the past decade.

Scenario 2. The EU continues to muddle through. Neither integrative, nor disintegrative trend dominates over the next decade, and in 2027 we are pretty much where we are now. In my opinion, this inertial scenario is more likely than the optimistic Scenario 1, but still not too likely. An equilibrium is a dynamic process, it can maintain itself only when two opposite forces cancel each other out. I don’t see any compelling signs of an integrative force that would cancel the disintegrative forces. Empirically, history doesn’t stand still. So things will either improve, or get worse. [..] my money is on the disintegrative trend prevailing (although personally I wish it was otherwise). Incidentally, the governing elites of the EU behave as though they all believe in Scenario 1 (or, at worst, Scenario 2).

Scenario 3. The next 10 years will see an increasingly fragmented European landscape. The EU will not be formally abolished, but it will increasingly lose its capacity to influence constituent countries. Led by Hungary and Poland, other small and medium-sized countries will increasingly set their national policies without much regard for Brussels. This fragmentation will be accomplished largely in a nonviolent way. Perhaps not in ten years, as it may take longer, but eventually the EU will look much like the Holy Roman Empire. This “HRE” scenario is probably the most likely, at least in my opinion.

Scenario 4. Like in the previous scenarios, the disintegrative trend will dominate, but dissolution of the EU will not be peaceful. I think (I hope) that the violent disintegration scenario is much less likely than the Scenario 3. And I know that almost nobody believes that a violent break-up is possible. Very few people remain who fought in World War II. And this is the danger. The government of Mariano Rajoy apparently can’t imagine that one result of their push to suppress the Catalonian independence movement could be a bloody civil war.


The Holy Roman Empire in 1618

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“We are creating chaos in our own backyard and there will be a high price to pay if we don’t fix it..”

How Europe Exported Its Refugee Crisis To North Africa (G.)

Something happened to the deadly migrant trail into Europe in 2017. It dried up. Not completely, but palpably. In the high summer, peak time for traffic across the Mediterranean, numbers fell by as much as 70%. This was no random occurrence. Even before the mass arrival of more than a million migrants and refugees into Europe in 2015, European policymakers had been desperately seeking solutions that would not just deal with those already here, but prevent more from coming. From Berlin to Brussels it is clear: there cannot be an open-ended invitation to the miserable millions of Europe’s southern and eastern periphery. Instead, European leaders have sought to export the problem whence it came: principally north Africa.

The means have been various: disrupting humanitarian rescue missions in the Mediterranean, offering aid to north African countries that commit to stemming the flow of people themselves, funding the UN to repatriate migrants stuck in Libya and beefing up the Libyan coastguard. The upshot has been to bottleneck the migration crisis in a part of the world least able to cope with it. Critics have said Europe is merely trying to export the problem and contain it for reasons of political expediency, but that this approach will not work. “We are creating chaos in our own backyard and there will be a high price to pay if we don’t fix it,” said one senior European aid official, who did not wish to be named.

The new hard-headed approach crystallised with the EU-Africa trust fund in November 2015, when European leaders offered an initial €2bn to help deport unwanted migrants and prevent people from leaving in the first place. Spread between 26 countries, the fund pays for skills training in Ethiopia and antenatal care in South Sudan, as well as helping migrants stranded in north Africa return home on a voluntary basis. Separately the European commission has signed migration deals with five African countries, Niger, Mali, Nigeria, Senegal and Ethiopia. These migration “compacts” tie development aid, trade and other EU policies to the EU’s agenda on returning unwanted migrants from Europe. For instance, in the first year of the compact, Mali took back 404 voluntary returnees and accepted EU funds to beef up its internal security forces and border control and crack down on smugglers.

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Europe is feeding gangs.

Libyan Path To Europe Turns Into Dead End For Desperate Migrants (G.)

UNHCR, the UN’s refugee agency, estimates that there are about 30 government-run detention centres in Libya, but that doesn’t include clandestine facilities run by traffickers and militias. Several hundred thousand migrants are thought to be in the country. “In general, conditions are really bad in these detention centers,” says UNHCR Libya chief Roberto Mignone. “At best, they are more or less functional, but serious human rights violations and sexual assaults are committed there.” UNHCR is trying to help migrants move out of the illicit detention centres and into facilities that it manages. But the agency’s freedom to operate is limited by a parlous security situation: Mignone and his staff operate out of neighbouring Tunisia, with the help of a few dozen Libyan associates.

“The security situation is very complicated and it is frustrating not to have free access to all in need. We have no overview of the militias’ or traffickers’ detention centres or prisons,” says Mignone. Since Muammar Gaddafi was ousted in 2011, Libya has served as both a magnet and a funnel for migrants desperate to start new lives in Europe. After record-breaking numbers of arrivals in Italy in 2016 and unprecedented numbers dying in the Mediterranean over the past two years, the EU signalled a new determination to head of the migration problem closer to the source with a series of deals with Libya earlier this year. One part of the strategy involved the south of the country – where more than 2,500km (1,550 miles) of desert borders with Algeria, Chad, Niger and Sudan provide multiple channels north.

A series of consultations was established between the Italian interior minister, Marco Minniti, and south Libyan mayors, who represent local groups and tribes. The deal pinpointed seven “elements” to pacify the different factions, from the Tebu to the Beni Suleiman, in the name of a common commitment to halt migrant trafficking. This project was heavily supported by Ahmed Maetig, vice-president of the Libyan presidential council, and greeted warmly in southern Libya, by the mayor of Sebha, Hamed Al-Khayali. “The project we are carrying forward now with Italy involves the development and growth of southern Libya within the framework of the fight against illegal immigration,” Khayali said.

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May 312017
 
 May 31, 2017  Posted by at 9:22 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Johannes Vermeer Woman in Blue Reading a Letter 1662-3

 

China Is The Greatest Financial Bubble in History (Rickards)
In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)
EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)
Sterling Dips After Poll Suggests Hung UK Parliament (BBC)
Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)
US Starts Shipping Weapons To Syrian Kurds (ZH)
The Plot To Overthrow Trump Is Very Real (Martin Armstrong)
‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)
Merkel Comes Out Swinging At Trump And Misses (Luongo)
After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)
Two-Thirds Of Greek Construction Jobs Have Vanished (K.)
Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)
US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

 

 

“The toxic combination of government debt, corporate debt, WMPs, and unrealistic growth expectations have set up China for the greatest market crash in history. But, not yet. As analysis will continue to prove, political forces will put off a day of reckoning until early 2018.”

China Is The Greatest Financial Bubble in History (Rickards)

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year. China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn. The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account. Paying off that debt requires growth, but the growth itself is fueled by more debt. China is now at the point where enormous new debt is required to achieve only modest new growth. This is clearly non-sustainable.

The next bubble is in investment instruments called Wealth Management Products, or WMPs. Picture this. You’re a middle-class Chinese saver and you walk into a bank. They offer you two investment options. The first is a bank deposit that pays about 2%. The other is a WMP that pays about 7%. Which do you choose? In the past ten years, bank customers have chosen almost $12 trillion of WMPs. That might be fine if WMPs were like high-quality corporate or municipal bonds. They’re not. They’re more like the biggest Ponzi scheme in history. Here’s how they work. Proceeds from sales of WMPs are loaned to speculative real estate developers and unprofitable state owned enterprises (SOEs) at attractive yields in the form of notes. So, WMPs resemble collateralized debt obligations, CDOs, the same product that sank Lehman Brothers in the panic of 2008.

The problem is that the borrowers behind the WMPs can’t pay their debts. They’re relying on further bubbles in real estate or easy credit from the government to meet their interest obligations. What happens when a WMP matures? Usually the bank customer is encouraged to rollover the investment into a new WMP. What happens if the customer wants her money back? The bank sells a new WMP to another customer, then uses those sales proceeds to redeem the first customer. The new customer now steps into the shoes of the first customer with the same pile of bad debt. That’s where the Ponzi dynamic comes in. Simply put, most of the debts backing up the WMPs cannot be repaid, which means it’s just a matter of time before the WMP market goes into a full meltdown and triggers a banking panic.

Finally, there is an infrastructure bubble. As explained in more detail below, China has kept its growth engine humming mostly with investment instead of aggregate demand from consumers. Investment is fine if it is directed at long-term growth projects that produce a positive expected return and help the broader economy grow as well. But, that’s not what China has done. About half of China’s investment in the past ten years has been wasted on “ghost cities,” white elephant transportation facilities, and prestige projects that look good superficially, but that don’t produce enough revenue or efficiencies to pay for themselves. Much of this investment was financed with debt. If the project itself is not revenue producing then the associated debt cannot be repaid, and will go into default.

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Watershed Ponzi.

In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt (ZH)

Less than a decade after various complex, synthetic, squared, cubed and so on securitized debt structures nearly brought down the financial system, here come “Sovereign Bond-Backed Securities.” Moments ago, the FT reported that in a watershed event for the European – and global – bond markets, Brussels is pressing for sovereign debt from across the eurozone to be “bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area.” Call it securitized sovereign debt. In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

The logic is simple: combine all the debt from strong and weak countries into one big pool, eliminating the outliers on both sides, then tranche it out, and sell it based on required yield returns. “Officials hope that the plans would boost demand for debt issued by governments with relatively weaker economies, and encourage banks to manage their risks better by diversifying their portfolios, while avoiding old political battles over whether the currency bloc should issue common bonds”. Why now? Because as has been Germany’s intention all along, Berlin has been hoping to create a fiscally intergrated Europe (with a shadow government in Berlin of course), call it a (quasi) “fiscal union”, and which is much more stable and resilient than the current iteration which is only as strong as its weakest link. Securitizing the sovereign debt resolves virtually all outstanding problems.

“The commission paper is the latest in a series of efforts to kick-start integration inside the eurozone. Such integration efforts have stalled since financial markets became convinced in 2013 that the European Central Bank would not allow the eurozone to break up. The last successful integration project was the creation of an EU banking union three years ago.” There is another reason why now: over the next year, the ECB’s QE, which has been instrumental to implement Draghi’s “Whatever it takes” bluff, will start hiking rates and eventually unwinding its balance sheet, the world’s biggest. That’s when the European bond market may have its next freak out moment. As a result, Brussels and Frankfurt are hoping to preempt this potential unwind by coming up with today’s “ingenious” solution.

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Brussels wants the opposite of what the people want.

EU Executive To Say Eurozone May Need Treasury, Minister, Budget (R.)

The EU executive will suggest on Wednesday the euro zone might need to issue collective debt and run a joint budget, among proposals for bolstering the single currency that echo ideas from new French President Emmanuel Macron. People familiar with the European Commission reflection paper told Reuters the scenario of a finance minister managing common revenue, spending and borrowing had been worked on for many months in Brussels, but now appears a much more likely option since centrist former banker Macron won power on May 7. German conservatives dislike an idea they say means paying for poorer neighbors. But Chancellor Angela Merkel, seeking re-election in September, has welcomed Macron’s victory and EU officials said they hoped governments might start working on a plan to forge a more cohesive euro zone from next year.

The Commission paper examines possible reforms to the bloc after the 2010-2012 sovereign debt crisis that nearly destroyed it and which triggered a wave of quick fixes for its weak spots. While some problems have been addressed, there is a lot more EU governments need to do to have an optimally functioning Economic and Monetary Union (EMU), the Commission will say. The document, part of a wider series on the future of the EU, comes as the EU is to start talks with Britain on the terms of its withdrawal – a great setback to European integration but one that will see the euro zone make up nearly four-fifths of the EU’s economy, up from two thirds today. The Commission will avoid making any clear suggestions as to the evolution of the single currency area, leaving it up to EU governments to decide which of the ideas they like. But it does say that in the later stages of deepening euro zone integration, not least because it would require politically difficult and time-consuming changes to EU treaties, the bloc could establish a euro zone treasury.

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May’s fall is swift.

Sterling Dips After Poll Suggests Hung UK Parliament (BBC)

The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May’s party would increase its majority, which is currently 17 seats. But the projection, published in the Times and based on YouGov research, suggests a possible hung parliament. Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at €1.146. The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining nearly 30 seats.

The Conservatives would still be the biggest party, but would not have an overall majority. The model is based on 50,000 interviews over a week, with voters from a panel brought together by YouGov. It uses a new “constituency-by-constituency” model for polling, which the paper says allows for big variations. According to the Times, “the estimates were met with scepticism by Tory and Labour figures.” YouGov’s chief executive, Stephan Shakespeare said the model had been tested during the EU referendum campaign, when it consistently put the winning Leave side ahead. But he added: “It would take only a slight fall in Labour’s share and a slight increase in the Conservatives’ to result in Mrs May returning to No 10 with a healthy majority.”

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Fear rules the waves. Telegraph headline today: “Tax on homes ‘to treble under Labour plans for Land Value Tax’ “

Theresa May Asks Voters To Imagine Jeremy Corbyn ‘Naked And Alone’ (M.)

Flapping Theresa May fired off a volley of insults at Jeremy Corbyn today after Labour surged in general election polls. The desperate Prime Minister even conjured up an image of the Labour leader naked in Brussels as she urged voters to consider the impact of propelling Mr Corbyn to No 10. She used a Labour legend’s quote as she mocked Mr Corbyn over what she claimed would be his weakness in tough EU divorce talks. “With his position on Brexit , he will find himself alone and naked in the negotiating chamber,” she said. “I know that’s an image that doesn’t bear thinking about but actually this is very serious.” The barb was particularly wounding for Labour by borrowing the charge from one of the party’s heroes, NHS founder Aneurin Bevan.

Urging Labour conference delegates in October 1957 not to support unilateral nuclear disarmament, he warned: “You will send a British Foreign Secretary, whoever he may be, naked into the conference chamber.” Challenged by the Mirror, Mrs May denied demeaning the office of Prime Minister with her outspoken attacks. And she was later forced to deny they showed she was getting “desperate”, saying: “It represents the difference between myself, having prepared for the negotiations, having a clear plan for the negotiations, and Jeremy Corbyn and the Labour Party who have said they would tear up the plan we have produced.” Speaking at the former railway station in Wolverhampton, Mrs May claimed her rival’s performance in the Sky News/Channel 4 TV showdown proved he could not be PM. “Despite being a Member of Parliament for 34 years, despite being the leader of the Labour Party for the last two years, he’s simply not ready to govern, and not prepared to lead,” she said.

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Some are trying to turn this into a war with Iraq.

US Starts Shipping Weapons To Syrian Kurds (ZH)

Just three weeks after reports first emerged that the Trump administration was considering arming the Syrian Kurd militia caught in the crossfire between Turkish and Syrian army forces, NBC reported that the American military has started shipping weapons and equipment to the Kurdish fighters of the Syrian Democratic Forces, also known as YPG, a key US ally on the ground in Syria. Citing an unnamed official, NBC adds that the U.S. began providing the equipment in the last 24 hours. Details were scarce, with no specifics about what weapons and supplies the US is sending the Syrian Democratic Forces or how those items are being delivered however when the report first emerged, the U.S. military announced it would provide the YDF with ammunition, rifles, armor, radios, bulldozers, vehicles, and engineering equipment.

Pentagon spokesman Eric Pahon told RT taid that this move represents the “early steps to prepare for the eventual liberation of Raqqa,” which the Islamic State has declared the capital of its self-proclaimed caliphate. “Overall, the equipment the US-led coalition will provide to the SDF includes small arms, ammunition, heavy machine guns and weapons capable of defeating specific threats our partner forces are expected to encounter as they take the fight to a desperate enemy, such as heavily-armored vehicle-borne IEDs,” Pahon said. Earlier this month US officials said that Trump had signed off on a plan “to equip Kurdish elements of the Syrian Democratic Forces” in the fight to retake the Syrian city of Raqqa from ISIS. “The SDF, partnered with enabling support from U.S. and coalition forces, are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said in a statement.

The announcement is guaranteed to send Turkey’s president Erdogan into another fit of rage. Earlier this month Erdogan condemned Trump’s decision to arm Syrian Kurds whom Turkey considers to be terrorists and an extension of outlawed Kurdish insurgents within its borders. Three weeks ago Erdogan said: “I hope very much that this mistake will be reversed immediately,” adding that “we want to believe that our allies would prefer [to] be side by side with ourselves rather than with the terror groups.” President Trump and Erdogan met earlier this month and discussed the administration’s plans to arm Kurdish militias in Syria. It was unclear what agreement the two leaders reached on this controverial move.

At the same time, Reuters reported that Syrian rebels say the United States and its allies “are sending them more arms to try to fend off a new push into the southeast by Iran-backed militias aiming to open an overland supply route between Iraq and Syria.” Rebels said military aid has been boosted through two separate channels: a program backed by the CIA, known as the MOC, and regional states including Jordan and Saudi Arabia, and one run by the Pentagon. “There has been an increase in the support,” said Tlass Salameh, head of the Jaish Usoud al-Sharqiya, one of the FSA groups backed via the CIA-backed program. “There’s no way we can let them open the Baghdad-Damascus highway,” he said.

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No doubt there.

The Plot To Overthrow Trump Is Very Real (Martin Armstrong)

There is a very REAL plot to overthrow Trump led by the political establishment and aided by the mainstream press.. This is not simply speculation – this is the real deal. Of course the Washington Post and New York Times are in full swing to get rid of Trump. No matter what it might be, the twist is always against Trump right down to the story how Sean Spicer wanted to see the Pope because he is a devote Catholic and was denied. CNN, of course, is also part of this conspiracy. You will NEVER find any positive article about Trump in mainstream media. Here is CNN and we can see that 50% of the top stories are always against Trump. We have Boehner coming out saying Trump is a disaster. This is the guy who threw people off committees if they did not vote for his agenda. The Kushner story is desperately trying to make something out of nothing.

Here we have after Flynn’s removal, Kushner suggesting setting up a direct channel for diplomatic purposes regarding Syria with the Russians. That is entirely within reason and has been done during confrontations in the past. This was only a suggestion. It was not done, yet the press twist this into somehow supporting Russia who single-handedly defeated Hillary and put Trump in office. They think if they can just keep selling that nonsense it will become a fact.. The press seems to want war with Russia and absolutely nothing else. No such link was established and the last thing you want to do is not talk to your adversary. So why is this a major story? Of yes. It’s again RUSSIA. The press created the Spanish American War. They supported the Vietnam War and kill more than 58,000 American boys, most of my high school friends died thanks to them.

Behind the Curtain, Republican Elites are conspiring to overthrow Trump (including Boehner) to protect the establishment. McCain and Graham are the worst of the lot in office. They obviously picked up the phone and called Boehner for help. The Republicans have lost it. They think this “populism” is over with Macron’s victory in France so it’s time to get rid of Trump and it will all be OK again. I have never seen such an all out effort on a massive coordinated effort to reject the people’s demand for reform. This is HIGHLY dangerous for we can very well move toward civil war. These people think getting rid of Trump and it will all be roses and raining money for them once again. They are DEAD wrong! Our model also warns that that United States can break up as a result of this by 2032-2040.

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No, Merkel has started her campaign.

‘She’s Finally Understood She Needs To Solve Europe’ (Exp.)

Attending a campaign rally ahead of the country’s elections, Angela Merkel claimed that now was the time for Europe to pay more attention to its own interests, and “take our fate into our own hands”. In an uncharacteristically bold speech, she went so far as to suggest that even the US was no longer a reliable partner to the EU – a strong statement, according to officials, who were left stunned. The words appeared to herald a change in transatlantic relations – effectively saying with Donald Trump in charge, the US-European alliance would never be the same. Mrs Merkel’s out of character appearance also signalled a strong pro-European stance to voters in Germany, as well as the wider EU, that Berlin will be playing a more activist role in the bloc. Norbert Spinrath, Europe spokesman in the Bundestag for the Social Democrats, said: “[Mrs] Merkel seems to have finally understood that she really needs to get stuck in and solve Europe’s problems.

“She has to realise that Europe is more than just fiscal consolidation — we need closer integration, we need to strengthen the currency and fight social imbalances.” The speech comes just weeks after newly elected French president Emmanuel Macron announced his plans to spearhead reforms in the Eurozone. It would be a sharp departure from her previous role as the EU’s crisis manager, with Mr Macron’s election pushing the German leader to present a more promising vision of Europe’s future. According to Jan Techau, a foreign policy analyst at the American Academy in Berlin, the speech was more for domestic audiences than those abroad, with the country’s federal elections just four months away. He adds: “It shows she is finally moving into campaign mode. “She’s switched from the international Merkel to the domestic Merkel.”

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What is Trump going to do if Corbyn wins? Or Merkel?

Merkel Comes Out Swinging At Trump And Misses (Luongo)

German Chancellor Angela Merkel will preside over the end of the European Union. Her reaction to the G-7 meeting and U.S. President Donald Trump’s refusal to endorse the Paris Agreement on Climate Change will accelerate the market’s rejection of EU policy. I’ve been warning about this for months in my articles here on Seeking Alpha. Angela Merkel is caught between two stanch nationalists whom Germany depends on: Russian President Vladimir Putin to the east and U.S. President Donald Trump to the right. Last week, I told you that Trump would clash with Merkel over Brexit at the G-7 meeting. “But, the likelihood of that is remote. If anything, there are signs that Trump is getting control of the narrative and his presence at the G-7 meeting this weekend will put the EU, specifically German Chancellor Angela Merkel in her place with respect to Brexit by backing U.K. Prime Minister Theresa May.”

And by all accounts he did that and more, forcing the G-7 to issue a four-page forward statement that outlined the lack of consensus among the participants. This is unprecedented. Trump went overseas and stood athwart the financial and political order to fulfill campaign promises. Now, Angela Merkel is forced to make campaign promises of her own. And she’s not happy about it. Merkel gave a “watershed speech” during a Christian Democratic Union (CDU) rally in Munich. From an AFP report on the speech: “Europe “must take its fate into its own hands” faced with a western alliance divided by Brexit and Donald Trump’s presidency, German Chancellor Angela Merkel said Sunday. “The times in which we could completely depend on others are on the way out. I’ve experienced that in the last few days,” Merkel told a crowd at an election rally in Munich, southern Germany. “We Europeans truly have to take our fate into our own hands,” she added.

And while these are fighting words, they also ring hollow. Merkel is in no position to drive a hard bargain with either the U.S. or the U.K. over trade. Trump went to the G-7 to put the kibosh on the EU’s intransigence over Brexit. He succeeded. Trump is winning control of the political narrative at home. He’s up in the polls, he was deferential to Israel and even handed with the Arabs in Saudi Arabia. This trip and his standing up to G-7 technocrats on behalf of his voters give him the political capital to whip his Republican majority into line on spending, taxes and budgeting. The punditry is right. This is a watershed moment. But, it was not instigated by Merkel. It was instigated by Trump. And it will be the beginning of the next wave of capital flight out of the EU.

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So much for democracy in Holland. Make that Europe. Big mistake, guys.

After A Year’s Delay, Dutch Approve Ukraine Treaty (R.)

The Dutch senate on Tuesday approved a European Union “association agreement” with Ukraine, a final hurdle to the treaty, which strengthens the former Soviet republic’s ties with Western Europe and moves it further from Moscow’s orbit. It did so following amendments made at the EU level to take into consideration the Dutch referendum vote last year against the agreement. “Today’s vote in the Dutch Senate sends an important signal from the Netherlands and the entire European Union to our Ukrainian friends: Ukraine’s place is in Europe. Ukraine’s future lies with Europe,” said EU Commission President Jean-Claude Juncker. The agreement, a treaty, had already been negotiated and approved by all EU governments and by Ukraine in 2014, and had even partially gone into effect pending ratification when it was abruptly rejected by Dutch voters in a snap referendum held in April 2016.

The Dutch vote was as much a rebuke to Prime Minister Mark Rutte and the European Union as a rejection of the treaty, which focuses mostly on trade ties. But Rutte and the European Union diplomats were forced to renegotiate parts of the treaty in order to render it palatable to Dutch parliament or risk seeing it derailed, since it cannot be ratified without support from all European Union legislatures. Ultimately the treaty was amended to underline it does not make Ukraine a candidate for EU membership, does not entitle Kiev to financial aid or military assistance from the bloc, and does not give Ukrainians the right to live and work in EU member states. The amended version passed Dutch parliament in March, and the Senate approved it Monday, both by comfortable margins.

Read more at

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Everything is left to fall apart. As billion-dollar buildings open in Brussels. Union.

Two-Thirds Of Greek Construction Jobs Have Vanished (K.)

The number of companies active in the construction sector has declined by 35.4% since 2004 as a result of the financial crisis and the considerable drop in investment in infrastructure. Worse, compared to the 401,000 employees in the sector during the third quarter of 2008 – just before the recession cycle started – construction employed just 141,800 workers at end-2016, which means that at least 64.6% of the construction workers eight-and-a-half years ago have now been forced out of the sector.

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Ironic quote of the year, from the oil industry: “There is life in deep-water yet..”

Once Costly Deep-Sea Oil Turns Cheap, to OPEC’s Dismay (BBG)

Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates. The tumbling costs present another challenge for OPEC which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100 a barrel, the group embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects.

Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in February 2016 that such producers need to either “lower costs, borrow cash or liquidate.” “There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.” The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines.

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We should start training young people for this. Send them to Africa to live with the vets and observe. Best teachers ever.

US Army Veterans Find Peace In Protecting Rhinos From Poaching (G.)

The sun has set over the scrubby savannah. The moon is full. It is time for Ryan Tate and his men to go to work. In camouflage fatigues, they check their weapons and head to the vehicles. Somewhere beyond the ring of light cast by the campfire, out in the vast dark expanse of thornbushes, baobab trees, rocks and grass, are the rhinos. Somewhere, too, may be the poachers who will kill them to get their precious horns. The job of Tate, a 32-year-old former US Marine, and the group of US military veterans he has assembled in a remote private reserve in the far north of South Africa is simple: keep the rhinos and the rest of the game in the bush around their remote base alive. The men are not mercenaries, or park rangers –they work for Tate’s Veterans Empowered To Protect African Wildlife (Vetpaw), a US-based nonprofit organisation funded by private donations.

All have seen combat, often with elite military units, in Iraq, Afghanistan and elsewhere. Though equipped with vehicles, trail bikes, assault rifles, sniper suits and radios, the most important weapons in the war against poaching, Tate believes, are the skills and experiences his team gained on successive deployments in conflict zones over the last decade and a half. “We are here for free. We are not going anywhere. Whether it is cold or hot, day or night … we want to work with anyone who needs help,” Tate says. The initiative is not without controversy. Some experts fear “green militarisation” and an arms race between poachers and gamekeepers. Others believe deploying American former soldiers to fight criminals in South Africa undermines the troubled country’s already fragile state. But the scale of the challenge of protecting South Africa’s rhinos is clear to everyone, with a rise in poaching in recent years threatening to reverse conservation gains made over decades.

[..] Tate founded Vetpaw after seeing a documentary about poaching and the deaths of park rangers in Africa. His team now work on a dozen private game reserves covering a total of around 200,000 hectares in Limpopo, the country’s northernmost province. One advantage for local landowners is the protection heavily armed combat veterans provide against the violent break-ins feared by so many South Africans, particularly on isolated rural farmsteads. The team has also run training courses for local guides and security staff. But if one aim of Vetpaw is to counter poaching, another is to help combat veterans in the US, where former servicemen suffer high levels of unemployment and mental illness. “Everyone gets PTSD when they come back from war … you are never going to get the brotherhood, the intensity again.. [There are] all these veterans with billions of dollars of training and the government doesn’t use them. I saw a need in two places and just put them together,” says Tate.

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May 242017
 
 May 24, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , ,  6 Responses »


Henri Matisse Nu Blue IV 1952

 

China Hit by First Moody’s Downgrade Since 1989 on Debt Risk (BBG)
Chinese Banks Are In Big Trouble (ZH)
American Exceptionalism – Population Growth vs Money Growth (Econimica)
Shiller: Stay In The Market, It ‘Could Go Up 50% From Here’ (CNBC)
German Police Search Daimler Facilities In Dieselgate Probe (DW)
Canada Must Deflate Its Housing Bubble (BBG Ed.)
The Violence of Austerity (OD)
IMF Wants More Realism In Eurozone Assumptions On Greece (R.)
QE Remains A Long Shot For Greece (K.)
In Germany, Syrian Man Wins Case Against Deportation To Greece (AP)
Elder Refugees Seeking Asylum in Europe Left Stranded in Greece – HRW (GR)
Tasmania Bans Super Trawlers From Its Waters (AAP)
Fossils Cast Doubt On Human Lineage Originating In Africa (R.)

 

 

Moody’s worries are the local government financing vehicles and state-owned enterprises, which are umbilically linked to the shadow banks.

You can’t run an entire economy from and in the shadows.

China Hit by First Moody’s Downgrade Since 1989 on Debt Risk (BBG)

Moody’s Investors Service cut its rating on China’s debt for the first time since 1989, challenging the view that the nation’s leadership will be able to rein in leverage while maintaining the pace of economic growth. Stocks and the yuan slipped in early trading after Moody’s reduced the rating to A1 from Aa3 on Wednesday, with markets paring losses in the afternoon. Moody’s cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances, while also changing the outlook to stable from negative. It’s “absolutely groundless” for Moody’s to argue that local government financing vehicles and state-owned enterprise debt will swell the government’s contingent liabilities, according to a response released by the Ministry of Finance. The ratings company has underestimated the capability of the government to deepen reform and boost demand, the ministry said.

It wouldn’t be the first time a rating company was behind the curve, nor is such pushback unique – U.S. Treasury officials questioned the credibility of a 2011 downgrade from Standard & Poor’s. Still, the move underscores broader doubts over whether President Xi Jinping’s government can simultaneously cut excessive leverage and steady growth, all with a twice a decade reshuffle of top party posts looming later this year. “It is a psychological blow that China will not take kindly to and absolutely speaks to the rising financial pressures,” said Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen. That said, “it doesn’t matter much in the grand scheme of things because so much of Chinese debt is held by state or quasi-state actors and minimal amounts are international investors.”

Total outstanding credit climbed to about 260% of GDP by the end of 2016, up from 160% in 2008. At the same time, China’s external debt is low by international standards, at around 12% of gross domestic product, according to the IMF, meaning that a downgrade isn’t likely to be as disruptive as it would be for nations more reliant on international funding. Overseas institutions’ holdings of onshore bonds dropped to 830 billion yuan ($121 billion) as of the end of March, from 853 billion yuan three months earlier, People’s Bank of China data show. That’s less than 1.5% of 63.7 trillion yuan of outstanding notes. Moody’s last cut China’s sovereign rating in 1989, when it downgraded the sovereign to Baa2 from Baa1, according to spokesperson, Manvela Yeung. Moody’s lowered China’s credit-rating outlook to negative from stable in March 2016, citing rising debt, falling currency reserves and uncertainty over authorities’ ability to carry out reforms.

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Starting to be painful. At some point, Beijing total control will come up empty.

Chinese Banks Are In Big Trouble (ZH)

That’s not supposed to happen… With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history. As the chart shows, the one-year Shanghai Interbank Offered Rate has exceeded the Loan Prime Rate, the first time this has happened since the latter was introduced in 2013. “This is probably just the beginning” and interbank funding costs will rise further amid the drive to reduce leverage, said Xu Hanfei at China Merchants Securities in Shanghai.

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Wonderful from Chris Hamilton.

American Exceptionalism – Population Growth vs Money Growth (Econimica)

Since 1971, and the disconnection of the dollar from a finite gold backing, the value of money (the dollar) has been determined by it’s purchasing power versus the inflation of the assets to be purchased. Thus printing more money has not necessarily created “wealth” if the assets to be purchased are rising as fast or faster than the purchasing power of the “money”. The Fed touts it’s dual mandate of full employment and stable prices…but the result in prices; not so stable. The primary global asset purchasable only in US dollars, crude oil, has told a story of wildly gyrating prices. Since the end of Bretton Woods and the subsequent Congressionally dual mandated roles bestowed on the Fed…crude oil prices have gone bezerk, twice climbing nearly 10x’s within a decade. This is the opposite of stable (particularly compared to the price stability from WWII’s end until the Fed took over).

Soooo, theoretically the growth of “money” should be linked to the growth of the population, to ensure an adequate and stable money supply exists for the growing population. In a moment I’ll show you anything but a stable money supply. But first, the chart below shows the total 25-54yr/old US population, those employed among them, and the value in dollars of all publicly traded US stocks (represented by the Wilshire 5000). Something far beyond population growth or employment growth is pushing up the value of dollar based assets, gauging by US stock markets accelerating appreciation.

With that in mind, the chart below shows the growth of M3 money (the broadest measure of US “money”) and the broader 15-64yr/old US population since 1971. The money supply has grown in excess of 20x’s (2,000%) vs. the working age population (15-64yr/olds) which has grown less than 1x (nearly 70% increase).

This results in a rising ratio of “money” on a per capita of the core population basis, as the chart below details. The total amount of “money” rose from approximately $5 thousand dollars per working age adult to todays $65 thousand dollars per adult…an increase of 13x’s (1.300%).

The annual growth of the 15-64yr/old core US population peaked in 2003 and annual core population growth has decelerated by 90% since…while annual M3 growth has doubled over the same time period. [..] The chart below from 2000 into 2017 shows the change in both core population and M3 money supply, showing the year over year change on a monthly basis…and the current fall in core population growth will continue downward, likely turning negative at times over the next year (yet another first for America).

The final chart is the growth in M3 money supply per the growth in the adult, working age population. I’m not an economist or expert on much of anything…but that doesn’t look particularly good to me (something to do with “hyper-monetization” or some such thing). All I can say is the appearance of hockey sticks typically aren’t a good or stable sign but their appearance, just like those of black swans, has become the “new normal”.

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It could also fall by 50%.

Shiller: Stay In The Market, It ‘Could Go Up 50% From Here’ (CNBC)

Nobel Prize-winning economist Robert Shiller believes investors should continue to own stocks because the bull market may continue for years. CNBC’s Mike Santoli spoke with Shiller in an exclusive interview for CNBC PRO. Santoli asked Shiller about his market outlook. “I would say have some stocks in your portfolio. It could go up 50% from here. That’s what it did around 2000, after it reached this level, it went up another 50%. So I’m not against investing in the stock market when you consider the alternatives. But I think if one wants to diversify, US is high in its CAPE ratio. You can go practically anywhere else in the world and it’s lower,” Shiller said. “We could even set a new another record high in CAPE, that’s not a forecast.”

Shiller developed the “cyclically adjusted price-to-earnings ratio” (CAPE) market valuation measure, which is calculated using price divided by the index’s average historical 10-year earnings, adjusted for inflation. The economist’s research found future 10-year stock market returns were negatively correlated to high CAPE ratio readings on a relative basis. However, even though the current CAPE ratio is at 29, which is above the 17 historical average, the economist is not calling for a market decline. “I can see it as a real possibility that stocks prices and house prices would both keep going up for years, but I’m not forecasting that by any means,” he added.

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Dragging on.

German Police Search Daimler Facilities In Dieselgate Probe (DW)

German authorities have raided several locations associated with German premium carmaker Daimler. They acted on an initial suspicion of fraud involving misleading information about emission levels. Prosecutors in the southern German city of Stuttgart confirmed Tuesday they had searched about a dozen locations associated with the maker of Mercedes-Benz cars. The raids came as a result of the company being suspected of fraud and misleading advertising in relation to the selling of diesel-powered vehicles. Prosecutors have yet to provide further details on the raids. They only said the raids were carried out by well over 200 investigators across the country, with the focus of the search in progress on locations in the states of Baden-Württemberg, Lower Saxony, Saxony and the the city state of Berlin.

The carmaker said the investigations targeted “known and unknown employees of Daimler over suspicion of fraud related to the possible manipulation of exhaust gas emissions in passenger cars with diesel engines.” Daimler executives said they were not aware of any emissions scandal, adding that they were fully co-operating with investigators. The automaker had earlier agreed with Germany’s Federal Motor Transport Authority to “voluntarily” recall 247,000 vehicles to remove “potentially problematic technology,” which Daimler said had been installed to prevent engines from being damaged. Daimler has also been in the crosshairs of prosecutors in the US where it faces a number of class-action suits by car owners who have accused the company of not being accurate in stating emissions levels for a number of its diesel-powered models.

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You don’t say.

Canada Must Deflate Its Housing Bubble (BBG Ed.)

Canada’s housing market offers a case study in a contentious economic issue: If a central bank sees a bubble forming, should it act to deflate it? In this instance, the answer should be a resounding yes. A combination of foreign money, local speculation and abundant credit has driven Canadian house prices to levels that even government officials recognize cannot be sustained. In the Toronto area, for example, they were up 32% from a year earlier in April. David Rosenberg, an economist at Canadian investment firm Gluskin Sheff, notes that it would take a decline of more than 40% to restore the historical relationship between prices and household income. Granted, the bubble bears little resemblance to the U.S. subprime boom that triggered the global financial crisis.

Although one specialized lender, Home Capital, has had issues with fraudulent mortgage applications, regulation has largely kept out high-risk products. Homeowners haven’t been withdrawing a lot of equity, and can’t legally walk away from their debts like many Americans can. Banks aren’t sitting on the kinds of structured products that destroyed balance sheets in the U.S. Nearly all mortgage securities and a large portion of loans are guaranteed by the government. That said, the situation presents clear risks. As buyers stretch to afford homes, household debt has risen to 167% of disposable income – the highest among the Group of Seven industrialized nations. This is a serious vulnerability, and a big part of the rationale behind Canadian banks’ recent ratings downgrade. The more indebted people are, the more sensitive their spending becomes to changes in prices and interest rates, potentially allowing an otherwise small shock to result in a deep recession.

What to do? Administrative efforts to curb lending and tax foreign buyers have helped but haven’t solved the problem. That’s largely because extremely low interest rates are still giving people a big incentive to borrow. The Bank of Canada has held its target rate at 1% or lower since 2009, and at 0.5% since 2015, when it eased to counteract the effect of falling oil prices. That’s a very stimulative stance in a country where the neutral rate is estimated to be about 3% or higher. One can’t help but see a parallel with the low U.S. rates and the housing bubble of the early 2000s.

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The Violence of Austerity, edited by Vickie Cooper and David Whyte, is published by Pluto Press.

The Violence of Austerity (OD)

As we move towards the general election, we are paralyzed by what is probably the biggest single issue affecting ordinary people in the country: austerity. We are unable to fully understand both the economic madness of austerity and the true scale of the human cost and death toll that ‘fiscal discipline’ has unleashed. Since coming into power as Prime Minister, Theresa May has made a strategic decision not to use the word ‘austerity’. Instead she has adopted a more palatable language in a vain attempt to distance herself from the Cameron governments before her: “you call it austerity; I call it living within our means.” The experience of countless thousands of people is precisely the opposite: people are actively prevented from living within their means and are cut off from their most basic entitlement to: housing, food, health care, social care and general protection from hardship.

And people are dying as a result of these austerity effects. In February, Jeremy Corbyn made precisely this point when he observed the conclusions of one report that 30,000 people were dying unnecessarily every year because of the cuts to NHS and to local authority social care budgets. But this is really only the tip of the iceberg. The scale of disruption felt by people at the sharp end of these benefit reforms is enormous. Countless thousands of others have died prematurely following work capability assessments: approximately 10,000 according the government’s own figures. People are dying as a result of benefit sanction which has fatal impacts on existing health conditions, such as diabetes and heart disease. Austerity is about dismantling social protection. The crisis we face in social care is precipitated by cuts to local authority funding.

In the first 5 years of austerity, local authority budgets were cut by 40%, amounting to an estimated £18bn in care provision. A decade of cuts, when added up, also means that some key agencies that protect us, such as the Health and Safety Executive and the Environment Agency will have been decimated by up to 60% of funding cuts. Scaling back on an already paltry funding in these critical areas of regulation will lead to a rise in pollution related illness and disease and will fail to ensure people are safe at work. The economic folly is that austerity will cost society more in the long term. Local authorities are, for example, housing people in very expensive temporary accommodation because the government has disinvested in social housing.

The crisis in homelessness has paradoxically led to a £400 million rise in benefit payments. The future costs of disinvesting in young people will be seismic. Ending austerity would mean restoring our system of social protection and restoring the spending power of local authorities. It would mean, as all the political parties except the Conservatives recognise, taxing the rich, not punishing the poor in order to pay for a problem that has its roots in a global financial system that enriched the elite. It would also mean recognizing that the best way to prevent the worsening violence of austerity and to rebuild the economy is to re-invest in public sector jobs.

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The Greek government is being played for fools. Given how long this has been going on, one might suggest they are.

IMF Wants More Realism In Eurozone Assumptions On Greece (R.)

The IMF needs to see more realistic euro zone assumptions about Greece’s economy and more detail on planned debt relief measures to join a bailout, IMF’s European Department head Poul Thomsen said. Thomsen said the IMF and Greece’s euro zone lenders made progress in talks on Monday, but were not yet quite there. “We still think there is a need for more realism in assumptions and more specificity,” Thomsen said on Tuesday. The euro zone and the IMF agreed on Monday that Greece would have to keep a primary surplus – the budget balance before debt servicing – at 3.5% of GDP for five years after the bailout ends in 2018. But officials said the size of the surplus afterwards was still under discussion and there were also differences on economic growth assumptions, especially that forecasts used for debt relief plans spanned dozens of years. A group of euro zone countries led by Germany wants the IMF to join the Greek bailout, now handled by euro zone governments alone, to increase credibility. The IMF says that it will only join if Greece is granted debt relief.

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Greece will be declared eligible for inclusion in the ECB’s QE only AFTER the central bank says it will taper QE.

QE Remains A Long Shot For Greece (K.)

Greece is nowhere near a swift inclusion in the ECB’s QE program, according to senior officials at domestic banks. They argue that the issue of the national debt, and securing its sustainability in a way that would satisfy the IMF too, constitutes a particularly complex problem that may well be too hard to resolve by next month’s Eurogroup. They therefore consider Greece’s entry into the ECB’s bond-buying program this summer unlikely – instead expecting it to happen after the German election in the fall, either by the end of 2017 or in early 2018. Some go as far as expressing concern as to whether Greece will make it in at all before the program ends.

While there are more and more voices within the ECB speaking in favor of concluding the program earlier, Greece would like enjoy its benefits for more than two years. Greek banks are hoping a formula will be found at the next Eurogroup, on June 15, that will allow the disbursement of the next bailout tranche while putting off any decisions on the debt. The most optimistic observers note there is a chance of Greece entering QE between July and September and next month’s Eurogroup will be crucial to this end. The ECB argues that Greece’s inclusion in the bond-buying program requires the safeguarding of the debt’s sustainability.

In this context political statements or a mere reference to a series of measures will not suffice, as they will have to constitute legally binding pledges, which is highly unlikely before the German election. Goldman Sachs stated in an analysis that this country is not likely to fulfill the terms the ECB has set to join QE before the reduction of the monthly rate of bond purchases is activated. It also highlighted the high rate of bad loans as a point of concern that might also delay the decision for Greece to enjoy the benefits of QE. Similarly, Citi estimates that without an agreement on the easing of the debt, both inclusion in QE and a return to the bond markets would be quite difficult for Greece.

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In one and the same Union, laws and rights are widely divergent. That is not a union.

In Germany, Syrian Man Wins Case Against Deportation To Greece (AP)

Germany’s highest court has upheld a complaint by a Syrian whose asylum claim was rejected because he’d already been granted asylum in Greece. The man, whose name wasn’t released, arrived in Germany in 2015. He told officials he had already been granted protection in Greece but had been living on the street there and received no support from the Greek government. The man’s claim in Germany was rejected, meaning that he risked deportation to Greece. Germany’s Federal Constitutional Court said Tuesday that a lower court had wrongly failed to take account of a lack of welfare payments for refugees in Greece and to check whether there were assurances that the man would be given at least temporary housing. Judges sent the case back to the lower court to reconsider.

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Who cares about human rights declarations when elections are coming up?

Elder Refugees Seeking Asylum in Europe Left Stranded in Greece – HRW (GR)

There are many unnecessary delays and arbitrary barriers which keep older refugees and asylum seekers stranded in Greece, unable to reunite with family members who have legal status in the EU, Human Rights Watch said on Monday. According to their publication on Monday, EU: Older Refugees Stranded in Greece, one of the main issues that older refugees face is that family reunification does not focus on reuniting an entire family, but spouses and parents with minor children who are under the age of 18. Hundreds of older refugees and asylum seekers currently in Greece who have fled war zones and persecution are waiting to learn if they will be allowed to reunite with adult family members who have been granted residency in another EU country. Although EU law provides for family reunification for older people, lack of clarity or explicit provisions governing the process means that they can remain in limbo, far from their family for prolonged periods of time.

“These older people, already victims of conflict and persecution, hoped to find protection in the EU after treacherous journeys to Greece, and to be reunited with their family,” said Bethany Brown, researcher on older people’s rights at Human Rights Watch. “Now they don’t know if they will ever see their relatives again.” While several barriers are common to all asylum seekers, they can have a more significant impact on older people. Older people have been shown, in some contexts, to have significantly higher rates of psychological distress than the general refugee population, and often suffer from health issues, injuries and violence during displacement, and frailty that can be exacerbated by time and uncertainty.

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A little piece of news. But a good one.

Tasmania Bans Super Trawlers From Its Waters (AAP)

Tasmania’s parliament has passed laws banning super trawler fishing vessels from operating in the state’s waters. Legislation was given a green light on Wednesday, with Liberal government MP Mark Shelton confirming that any future attempts to allow freezer trawler vessels would require an act of parliament. “Our bill should give recreational fishers additional comfort that any future attempt to let super trawlers into the small pelagic fishery will be met with parliamentary hurdles,” he said.

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Graecopithecus freybergi.

Fossils Cast Doubt On Human Lineage Originating In Africa (R.)

Fossils from Greece and Bulgaria of an ape-like creature that lived 7.2 million years ago may fundamentally alter the understanding of human origins, casting doubt on the view that the evolutionary lineage that led to people arose in Africa. Scientists said on Monday the creature, known as Graecopithecus freybergi and known only from a lower jawbone and an isolated tooth, may be the oldest-known member of the human lineage that began after an evolutionary split from the line that led to chimpanzees, our closest cousins. The jawbone, which included teeth, was unearthed in 1944 in Athens. The premolar was found in south-central Bulgaria in 2009.

The researchers examined them using sophisticated new techniques including CT scans and established their age by dating the sedimentary rock in which they were found. They found dental root development that possessed telltale human characteristics not seen in chimps and their ancestors, placing Graecopithecus within the human lineage, known as hominins. Until now, the oldest-known hominin was Sahelanthropus, which lived 6-7 million years ago in Chad. The scientific consensus long has been that hominins originated in Africa. Considering the Graecopithecus fossils hail from the Balkans, the eastern Mediterranean may have given rise to the human lineage, the researchers said.

The findings in no way call into question that our species, Homo sapiens, first appeared in Africa about 200,000 years ago and later migrated to other parts of the world, the researchers said. “Our species evolved in Africa. Our lineage may not have,” said paleoanthropologist Madelaine Böhme of Germany’s University of Tübingen, adding that the findings “may change radically our understanding of early human/hominin origin.” Homo sapiens is only the latest in a long evolutionary hominin line that began with overwhelmingly ape-like species, followed by a succession of species acquiring more and more human traits over time.

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May 162017
 
 May 16, 2017  Posted by at 8:25 am Finance Tagged with: , , , , , , , , , ,  1 Response »


Fred Stein Chinatown 1944

 

White House: Report Trump Shared Classified Info With Russians is ‘False’ (RT)
Trump’s Classified Disclosure Is Shocking But Legal (BBG)
The ‘Soft Coup’ of Russia-Gate (Robert Parry)
China’s Silk Road Vision: Cheap Funds, Heavy Debt, Growing Risk (R.)
China Banking Regulator Tightens Rules On WMPs, Flags More Curbs (R.)
New Zealand Housing Market Most at Risk of Bust – Goldman (BBG)
Snowden & Chomsky Lead Calls To Drop DOJ Case Against WikiLeaks (RT)
Large Hedge Funds Moved Out Of Financial Stocks In First Quarter (R.)
Ford To Cut North America, Asia Salaried Workers By 10% (R.)
How High Should Congress Let Flood Insurance Rates Rise? (USAT)
Macron Wins Merkel Backing For Bid To Shake Up Europe (AFP)
Germany Must Decide: Budget Rigour Or Europe’s Future (R.)
The Euro Area – A Simple Model Of Savings, Debt & Private Spending (Terzi)
Greek Economy Pays for Drawn-Out Talks With Return to Recession (BBG)

 

 

And here we are: The WaPo, left with almost zero credibility after so many anti-Trump and anti-Russia opinions more often than not disguised as factual reports, can only find a willing ear anymore inside its echo chamber. As usual, the WaPo article is based on anonymous sources. America is trapped inside it own narrative.

White House: Report Trump Shared Classified Info With Russians is ‘False’ (RT)

Multiple White House officials, including National Security Advisor H.R. McMaster, are refuting a Washington Post story claiming that President Donald Trump revealed highly classified information to Russian officials in the Oval Office last week. But some believe McMaster’s statement contained holes. On Monday evening, National Security Advisor McMaster called a report published earlier in the day by the Washington Post “false.” The report that went viral cited unverifiable sources, unnamed current and former US officials, who claimed that Trump disclosed to Russian Foreign Minister Sergey Lavrov and Ambassador to the US Sergey Kislyak “code-word information” relating to Islamic State during a May 10 meeting in the Oval Office at the White House.

The intelligence was reportedly from “a US partner through an intelligence-sharing arrangement” and not authorized to be shared with Russia, US allies or even within much of the US government. “I was in the room. It didn’t happen,” McMaster told reporters outside the White House. Deputy National Security Adviser Dina Powell also called the story “false” Monday. “The president only discussed the common threats that both countries faced,” Powell said. Secretary of State Rex Tillerson, who was also at the meeting, denied the allegation. McMaster told reporters that Trump did discuss civil aviation threats with Lavrov and Kislyak. [..] The Russian Embassy in DC had no comment on the media claim, according to a representative.

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Besides, the WaPo article doesn’t describe anything illegal. But it’ll take a while before that sinks in, if ever.

Trump’s Classified Disclosure Is Shocking But Legal (BBG)

Oh for the days when Donald Trump wasn’t taking the presidential daily brief – and didn’t know highly classified information that he could give to the Russians. But a bit bizarrely, Trump’s reported disclosure of Islamic State plans to two Russian officials during an Oval Office visit last week wasn’t illegal. If anyone else in the government, except possibly the vice president, had revealed such classified information that person would be going to prison. The president, however, has inherent constitutional authority to declassify information at will. And that means the federal laws that criminalize the disclosure of classified secrets don’t apply to him. If this doesn’t make much sense to you, I feel your pain.

To understand the legal structure of classification and declassification requires a brief journey into the constitutional law of separation of powers. That’s not always especially fun. But at this juncture in U.S. history, it’s essential. Not since Richard Nixon’s administration has separation of powers been so central to the fate of the republic. The authority to label facts or documents as classified rests with the president in his capacity as a commander in chief. Or at least that’s what the U.S. Supreme Court said in a 1988 case, Department of the Navy v. Egan. Justice Harry Blackmun, who wrote the opinion, said that the executive’s “authority to classify and control access to information bearing on national security … flows primarily from this constitutional investment of power in the President and exists quite apart from any explicit congressional grant.”

Blackmun’s idea that the president has an inherent right to decide who gets access to classified information seems to imply the converse: that the president has the inherent authority to declassify information, too. Although there’s no case on this point, scholars took that view during the years of the George W. Bush administration, when the president was thought to have declassified some information that was leaked to the news media by White House aide I. Lewis “Scooter” Libby. It makes sense. If it is up to the president to decide what can’t be disclosed, it should be up to him to decide what can be.

[..] If you’re following closely, you’ll have noticed an anomaly: The president can classify and declassify. But the president can’t send people to prison for disobeying his order. That requires a federal law passed by Congress, and a conviction before a judge. Thus, under the separation of powers, the president has inherent authority to fire his own employees for disclosing classified information, but lacks the power to punish them criminally without Congress and the courts. That law exists: 18 U.S. Code Section 798, if you care to look it up. It makes it a federal crime to communicate “classified information” to an “unauthorized person.” The catch is that the law defines classified information as information determined classified by a U.S. government agency, and similarly defines an unauthorized person as someone not determined authorized by the executive branch. That puts Trump in the clear insofar as he has an inherent authority to declare information unclassified.

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And Robert Parry can tell you why things like that WaPo ‘report’ get so blown up.

The ‘Soft Coup’ of Russia-Gate (Robert Parry)

I realize that many Democrats, liberals and progressives hate Donald Trump so much that they believe that any pretext is justified in taking him down, even if that plays into the hands of the neoconservatives and other warmongers. Many people who detest Trump view Russia-gate as the most likely path to achieve Trump’s impeachment, so this desirable end justifies whatever means. Some people have told me that they even believe that it is the responsibility of the major news media, the law enforcement and intelligence communities, and members of Congress to engage in a “soft coup” against Trump – also known as a “constitutional coup” or “deep state coup” – for the “good of the country.”

The argument is that it sometimes falls to these Establishment institutions to “correct” a mistake made by the American voters, in this case, the election of a largely unqualified individual as U.S. president. It is even viewed by some anti-Trump activists as a responsibility of “responsible” journalists, government officials and others to play this “guardian” role, to not simply “resist” Trump but to remove him. There are obvious counter-arguments to this view, particularly that it makes something of a sham of American democracy. It also imposes on journalists a need to violate the ethical responsibility to provide objective reporting, not taking sides in political disputes. But The New York Times and The Washington Post, in particular, have made it clear that they view Trump as a clear and present danger to the American system and thus have cast aside any pretense of neutrality.

The Times justifies its open hostility to the President as part of its duty to protect “the truth”; the Post has adopted a slogan aimed at Trump, “Democracy Dies in Darkness.” In other words, America’s two most influential political newspapers are effectively pushing for a “soft coup” under the guise of defending “democracy” and “truth.” But the obvious problem with a “soft coup” is that America’s democratic process, as imperfect as it has been and still is, has held this diverse country together since 1788 with the notable exception of the Civil War. If Americans believe that the Washington elites are removing an elected president – even one as buffoonish as Donald Trump – it could tear apart the fabric of national unity, which is already under extraordinary stress from intense partisanship.

That means that the “soft coup” would have to be carried out under the guise of a serious investigation into something grave enough to justify the President’s removal, a removal that could be accomplished by congressional impeachment, his forced resignation, or the application of Twenty-fifth Amendment, which allows the Vice President and a majority of the Cabinet to judge a President incapable of continuing in office. That is where Russia-gate comes in. The gauzy allegation that Trump and/or his advisers somehow colluded with Russian intelligence officials to rig the 2016 election would probably clear the threshold for an extreme action like removing a President. And, given the determination of many key figures in the Establishment to get rid of Trump, it should come as no surprise that no one seems to care that no actual government-verified evidence has been revealed publicly to support any of the Russia-gate allegations.

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China wants to own the new Silk Road, and to be the leader. The original one knew neither ownership nor leadership.

China’s Silk Road Vision: Cheap Funds, Heavy Debt, Growing Risk (R.)

Behind China’s trillion-dollar effort to build a modern Silk Road is a lending program of unprecedented breadth, one that will help build ports, roads and rail links, but could also leave some banks and many countries with quite a hangover. At the heart of that splurge are China’s two policy lenders, China Development Bank (CDB) and Export-Import Bank of China (EXIM), which have between them already provided $200 billion in loans throughout Asia, the Middle East and even Africa. They are due to extend at least $55 billion more, according to announcements made during a lavish two-day Belt and Road summit in Beijing, which ends on Monday. Thanks to cheaper funding, CDB and EXIM have helped to unblock what Chinese president Xi Jinping on Sunday called a ‘prominent challenge’ to the Silk Road: the funding bottleneck.

But as the Belt and Road project grows, so do the risks to policy banks, commercial lenders and borrowers, all of whom are tangled in projects with questionable business logic, bankers and analysts say. EXIM, seeking to contain risk, says it has imposed a debt ceiling for each country. CDB says it has applied strict limits on sovereign borrowers’ credit lines and controls the concentration of loans. “For some countries, if we give them too many loans, too much debt, then the sustainability of its debt is questionable,” Sun Ping, vice governor of EXIM, told reporters last week. For now, funds are cheap and plentiful, thanks to Beijing. Belt and Road infrastructure loans so far have been primarily negotiated government to government, with interest rates below those offered by commercial banks and extended repayment schedules, bankers and analysts said.

[..] 47 of China’s 102 central-government-owned conglomerates participated in 1,676 Belt and Road projects, according to government statistics. China Communications Construction alone has notched up $40 billion of contracts and built 10,320 kilometres of road, 95 deepwater ports, 10 airports, 152 bridges and 2,080 railways in Belt and Road countries. China’s central bank governor Zhou Xiaochuan is among those to warn that this reliance on cheap loans raises “risks and problems”, starting with moral hazard and unsustainability. China has been caught out before; it is owed $65 billion by Venezuela, now torn by crisis. “The jurisdictions where many of these loans are going are places that would have difficulty getting loans from Western commercial banks – their credit ratings are not very good, or the projects in question often are not commercially viable,” said Jack Yuan at Fitch in Shanghai. “The broader concern is that capital continues to be mis-allocated by Chinese banks.”

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We’ll believe it when the bankruptcies start accumulating.

China Banking Regulator Tightens Rules On WMPs, Flags More Curbs (R.)

China’s banking regulator is tightening disclosure rules on lenders’ wealth management products (WMP) as it tries to track risky lending practices in the shadow banking sector, the latest in a series of steps by Beijing aimed at defusing financial risks. The China Banking Regulatory Commission (CBRC) said in a notice late on Monday it plans to launch 46 new or revised rules this year, part of which targets risks related to shadowbanking activities. Authorities are trying to better regulate 30 trillion yuan ($4.35 trillion) of WMPs, much of it sitting off-balance sheet in the shadowbanking sector. The WMPS have been used to channel deposits into risky investments, often via many layers of asset management schemes to skirt lending and capital rules.

The CBRC will now require that banks report the underlying assets and liabilities of their WMPs, as well as all layers of investment schemes, on a weekly basis. Previously, banks were required to hand in less detailed information, and on a monthly basis. The new rules – published by a WMP management platform under CBRC – reflect regulators’ desire to have a full picture of banks’ activities, and could slow the growth of WMPs. In March, China’s newly appointment banking regulator Guo Shuqing, vowed to strengthen supervision of the lending sector, underscoring Beijing’s determination to fend off financial risks and push reforms this year. Separately, CBRC unveiled a long list of rules it aims to publish this year, many of these related to risk-management. The rules are to “ensure that (risk) does not become systemic,” CBRC said.

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Useless numbers from Goldman Sachs.

New Zealand Housing Market Most at Risk of Bust – Goldman (BBG)

New Zealand’s housing market is the most over-valued among the so-called G-10 economies and the most at risk of a correction, according to Goldman Sachs. In research published this week, the investment bank said there is about a 40% chance of a housing “bust” in New Zealand over the next two years, which it defines as house prices falling 5% or more after adjustment for inflation. The report looks at housing markets in the G-10 countries – those with the 10 most-traded currencies in the world – and finds they are most elevated in small, open economies such as New Zealand, where house prices have rocketed in recent years. In Auckland, the nation’s largest city, the average price has surged 91% since 2007 to more than NZ$1 million ($688,000).

Goldman compares house-price levels across economies using three standard metrics: the ratio of house prices to rent, the ratio of house prices to household income and house prices adjusted for inflation. “Using an average of these measures, house prices in New Zealand appear the most over-valued, followed by Canada, Sweden, Australia and Norway,” it said. “According to the model, the probability of a housing bust over the next five to eight quarters is the highest in Sweden and New Zealand at 35 to 40%.” A graph in the report shows that New Zealand’s probability of a housing bust is just above 40%, while Sweden’s is just above 35%. The risk of a bust in Australia is about 25%.

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Chelsea Manning is free as of tomorrow.

Snowden & Chomsky Lead Calls To Drop DOJ Case Against WikiLeaks (RT)

Former intelligence officers, journalists and artists are among more than 100 signatories of an open letter calling on President Trump to close the Grand Jury investigation into WikiLeaks and drop any planned charges against the whistleblower group.
The letter released Monday by the Courage Foundation includes NSA whistleblower Edward Snowden and renowned scholar and activist Noah Chomsky among the original signatories. A significant number of former personnel from US intelligence agencies are backing the letter. Among them are former senior NSA officials Thomas Drake, William Binney and Kirk Wiebe. Daniel Ellsberg, the former State and Defense Department official who released top secret Pentagon Papers in 1971 and retired FBI Special Agent and former Minneapolis Division Legal Counsel Coleen Rowley also signed the letter.

The plea to President Trump is in response to comments made by US Attorney General Jeff Sessions last month, in which he confirmed that the arrest of WikiLeaks founder Julian Assange was a “priority” for the US government. Fears are growing that charges including conspiracy, theft of government property and violating the Espionage Act are being considered against members of WikiLeaks. Several artists are also pushing the call for Trump to drop any proposed charges against the whistleblower organization. Among the big names are Oliver Stone, Ken Loach, Pamela Anderson, Patti Smith, PJ Harvey and Vivienne Westwood.

The letter acknowledges that the Obama administration prosecuted more whistleblowers than all previous presidents combined and opened a Grand Jury investigation into WikiLeaks that had no precedent. “It now appears the US is preparing to take the next step — prosecuting publishers who provide the “currency” of free speech, to paraphrase Thomas Jefferson,” the document states. “A threat to WikiLeaks’ work — which is publishing information protected under the First Amendment — is a threat to all free journalism. If the DOJ is able to convict a publisher for its journalistic work, all free journalism can be criminalized.”

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They know something you don’t.

Large Hedge Funds Moved Out Of Financial Stocks In First Quarter (R.)

Several big-name hedge fund investors trimmed their stakes in financial companies in the first quarter as hopes for immediate tax cuts and loosening of regulations after President Donald Trump’s victory in November began to fade. Adage Capital Management cut its position in Wells Fargo, which has come under fire for its sales practices, by 3.9 million shares, according to regulatory filings, while John Burbank’s Passport Capital cut its stake in the company by 947,000 shares. Third Point cut its stake in JPMorgan Chase by 28%, to 3.75 million shares, while Suvretta Capital Management sold all of its shares of Morgan Stanley, JPMorgan and Citigroup. Overall, financial companies in the S&P 500 were up 2.1% in the first quarter, compared with 5.5% for the index as a whole.

Financials significantly outperformed the broad market following Trump’s Nov. 8 election. Trump had pledged to do a “big number” on the landmark Dodd-Frank financial reform law, which raised banks’ capital requirements and restricted their ability to make speculative bets with customers’ money. The Treasury Department is still filling vacancies and will not be able to complete a review of the law by Trump’s June deadline, sources told Reuters. Quarterly disclosures of hedge fund managers’ stock holdings, in what are known as 13F filings with the U.S. Securities and Exchange Commission, are one of the few public ways of tracking what the managers are selling and buying. But relying on the filings to develop an investment strategy comes with some risk because the disclosures come out 45 days after the end of each quarter and may not reflect current positions.

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Lean and efficient, and losing sales.

Ford To Cut North America, Asia Salaried Workers By 10% (R.)

Ford plans to shrink its salaried workforce in North America and Asia by about 10% as it works to boost profits and its sliding stock price, a source familiar with the plan told Reuters on Monday. A person briefed on the plan said Ford plans to offer generous early retirement incentives to reduce its salaried headcount by Oct. 1, but does not plan cuts to its hourly workforce or its production. The move could put the U.S. automaker on a collision course with President Donald Trump, who has made boosting auto employment a top priority. Ford has about 30,000 salaried workers in the United States.

The cuts are part of a previously announced plan to slash costs by $3 billion, the person said, as U.S. new vehicles auto sales have shown signs of decline after seven years of consecutive growth since the end of the Great Recession. The Wall Street Journal reported Monday evening that Ford plans to cut 10% of its 200,000-person global workforce, but the person briefed on the plan disputed that figure. The source requested anonymity in order to be able to discuss the matter freely. Ford declined to comment on any job cuts but said it remains focused on its core strategies to “drive profitable growth”. “Reducing costs and becoming as lean and efficient as possible also remain part of that work,” it said in a statement. “We have not announced any new people efficiency actions, nor do we comment on speculation.”

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FEMA rules!

How High Should Congress Let Flood Insurance Rates Rise? (USAT)

Congress is considering dramatic changes to the National Flood Insurance Program, which has a $25 billion debt that its director says cannot be repaid. But as a Sept. 30 deadline looms for the program to be renewed, disagreements remain over how much homeowners should be forced to pay for flood insurance to make the program more solvent. If Congress can’t reach an agreement, a lapse in the Federal Emergency Management Agency’s legal authority to write new policies could disrupt real estate sales in flood-prone areas around the country.

Republican Sen. Bill Cassidy of Louisiana and Democratic Sen. Kirsten Gillibrand of New York are circulating draft legislation to renew the program, but it contains provisions – such as vouchers to help low-income homeowners keep the cost of premiums and fees from getting too high — that are not in a draft that Republicans on the House Financial Services Committee plan to release this week. Disputes also remain over how to address wrongdoing by insurance companies and affiliated contractors in the wake of Superstorm Sandy and last year’s floods in Louisiana, and whether older properties that flood repeatedly should still receive discounts. Many in Congress also want to encourage more private insurers to enter the market, but some warn the government could be left with only the riskiest properties.

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Macron has to focus on France. and will do so until well after Merkel is re-elected. Still, these new views could have prevented Brexit.

Macron Wins Merkel Backing For Bid To Shake Up Europe (AFP)

France’s new President Emmanuel Macron secured backing Monday from key ally Chancellor Angela Merkel for his bid to shake up Europe, despite scepticism in Berlin over his proposed reforms. Travelling to the German capital to meet the veteran leader in his first official trip abroad, Macron used the opportunity to call for a “historic reconstruction” of Europe. During his campaign, Macron had thrown up ideas on reforming the eurozone, noting that the currency bloc cannot go on as it is if it wanted to avoid falling prey to protest and populism. Among reforms he wants to see are setting up a separate budget for the 28-member group, as well as giving it its own parliament and finance minister. But the proposals have sent alarm bells ringing in Berlin, and initial relief about his victory against far-right leader Marine Le Pen had quickly given way to fears about his reform plans.

Finance Minister Wolfgang Schaeuble warned that such deep-reaching reforms would require treaty changes, which were “not realistic” at a time when Europe is hit by a surge of anti-euro populism. Saturday’s edition of weekly news magazine Der Spiegel featured a cover picture of Macron with the headline “expensive friend”. But at a joint press conference following their talks, Merkel adopted a conciliatory tone and offered what appeared to be a key concession. “From the German point of view, it’s possible to change the treaty if it makes sense,” she said. “If we can say why, what for, what the point is, then Germany will be ready.” Merkel’s approach underlined her view that it was crucial not only for France, but for Germany, to help Macron succeed – a point that she has repeatedly stressed.

Yet it remains to be seen if her approach would go down well in Germany, which is deeply adverse to shouldering burdens of eurozone laggards. Macron sought to bat away German fears on debt, saying he was opposed to mutualising “old debt” between eurozone countries. However, he signalled readiness to look at sharing future burdens. “I am not a promoter of the mutualisation of old debt” within the eurozone, said Macron after meeting Merkel, adding however that the joint financing of future projects should be considered. Underlining the concerns over Macron’s proposals, Germany’s biggest selling daily Bild warned ahead of the French leader’s meeting with Merkel that before seeking deeper EU integration, “France must once again be at the same level as Germany politically and economically”. “Only then can the EU be reformed or develop deeper integration,” it said.

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Ye olde ‘there is stil time’ delusion: there is still time to make Germany change its stance on the EU, in the same way that there is still time to save the planet. No, there isn’t, if you include the time it will take to turn around what has been the ‘normal’. You need a revolution, not a change.

Germany Must Decide: Budget Rigour Or Europe’s Future (R.)

After Emmanuel Macron’s victory in France’s presidential election, Germany must decide whether it wants to continue its single-minded focus on budget rigour or work with him to ensure the future of the European project, a German diplomat said. In an interview with Reuters hours before the new French president travels to Berlin to meet Chancellor Angela Merkel, Wolfgang Ischinger, chairman of the Munich Security Conference, pushed back against German politicians who have picked holes in Macron’s ideas for Europe since his election win. Among those are Finance Minister Wolfgang Schaeuble, who has come to personify Berlin’s focus on the “Schwarze Null”, or balanced budget. He has suggested Macron’s plans to create a budget and finance minister for the euro zone are unrealistic.

“My wish is that this issue is not used in the (German) election campaign, but that we have a serious discussion over the question: ‘What is more important to us? The Schwarze Null as a categoric imperative or the future of Europe?'” Ischinger said. “If compromises are necessary and make sense, then I would support compromise rather than categorical imperatives.” Mainstream parties in Germany applauded Macron’s victory over far-right leader Marine Le Pen earlier this month. But since then, conservative politicians and media have criticized his plans, suggesting they would lead to a “transfer union” in which German money would be used to pay for uncompetitive member states that are reluctant to reform. Schaeuble has suggested some of Macron’s more ambitious plans would require politically thorny changes to the EU treaty. But Ischinger, a former German ambassador to Britain and the United States, said much could be done on an intergovernmental basis.

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The illusion that the ECB can manage the EU economy.

The Euro Area – A Simple Model Of Savings, Debt & Private Spending (Terzi)

In 2010, with the first casualty (Greece) in the emergency room and the first economic adjustment programme (with financial package) approved, the Eurosystem eventually became an occasional buyer of government debt. Two years later, with three more casualties (Ireland, Portugal, and Spain) and a systemic collapse in sight, the ECB added the newly crafted Outright Monetary Transactions (OMT) to its toolbox. This meant that the ECB had formally become ready to be an unlimited, albeit conditional, outright buyer in the secondary market for Eurozone government debts. The introduction of OMTs was the way to restore systemic liquidity buffers in a monetary system that had become unsustainable, while remaining consistent with the monetary financing prohibition laid down in the Treaty.

As events during the crisis unfolded, and depending on the narrative about its causes, several different meanings have been attached to the notion of the Eurozone crisis. This has been seen, alternatively, as the unwinding of intra-euro lending and borrowing, the consequence of private credit bubbles, the product of unsustainable public debt, the failure of inadequately supervised banking and financial institutions, and, most notably, as a double-dip recession followed by an unusually weak expansion combined with a visibly inadequate policy (and political) response. Today, six years after the crisis erupted, and notwithstanding the modified ECB practice that saved the day, the Eurozone is still visibly failing to enact sustainable policies that can effectively restore economic prosperity.

Accordingly, there have been two distinct phases in the Eurozone crisis. Between 2010 and 2012 the monetary union was in jeopardy of undergoing an operational breakdown up until the change in the operational practice in the market for public sector securities, complemented by the banking union reform. Since 2012, the problems have been the continuing sluggishness of the real economy, the acute lack of demand, vulnerability to internal and external shocks, and, ultimately, the risk of a political implosion. While the ECB has successfully reclaimed one indispensable tool to operationally manage the euro, the deflationary bias of the euro area has not gone away. Effectively, Europe’s economic performance has been vastly disappointing ever since the launch of the euro.

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Greece has no way to escape recession, drawn out talks have nothing to do with it.

Greek Economy Pays for Drawn-Out Talks With Return to Recession (BBG)

Greece’s economy returned to recession in the first quarter as delays in concluding talks between the government and its creditors raised the specter of another debt drama. GDP contracted 0.1% in the first three months of the year after shrinking 1.2% in the previous quarter, the Hellenic Statistical Authority said in a statement on Monday. The seasonally adjusted contraction was 0.5% from a year earlier. Talks between creditors on easing the country’s debt load are accelerating after Greece and officials from the IMF and euro-area institutions ended a months-long impasse over the austerity measures the government needs to take. While that’s prompted a rally in Greek stocks and bonds this month, the delay has taken a toll on the economy. That cost led the government to cut its GDP growth forecast for this year to 1.8% from 2.7% on Saturday. The European Commission reduced its estimate to 2.1% last week.

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May 062017
 
 May 6, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , , ,  3 Responses »


Edouard Boubat Paris 1950

 

Think Like a Surfer in the Largest Stock Market Bubble Since 1983 (Dent)
US Student, Auto Loans Hit New All Time High Of $2.6 Trillion (ZH)
China’s War on Debt: Stocks Drop, Bond Yields Shoot Up and Defaults Rise (WSJ)
This Is Not a Bill (Jim Kunstler)
Review of Steve Keen’s Can We Avoid Another Financial Crisis? (R.)
France and Greece Heavily Disadvantaged by Euro as Germany Benefits (WE)
How the Eurozone Damaged French Politics – And The Election (Nation)
Macron Team Blasts ‘Massive Hacking Attack’ (R.)
Macron Personifies The Very Europe Whose Failure Feeds Le Pen (Zizek)
The English Language Is Losing Importance In Europe – Juncker (G.)
Germany Says No Debt Relief Being Prepared For Greece (R.)
The Forgotten History of Cinco de Mayo (IC)
Rescuers Pick Up 560 Migrants Off Libyan Coast On Thursday (R.)

 

 

Disasters as opportunities.

Think Like a Surfer in the Largest Stock Market Bubble Since 1983 (Dent)

I took up surfing in my early 30s. It didn’t last long. But I learned a tremendous amount from the experience (least of which is that I suck at surfing). Well, it’s time to think like a surfer. Your sole focus is to catch the wave. The best surfers can see the waves building, just like we can in the markets, but they only care about where the biggest, best waves will crash. That’s where you get the ride. And if you catch the biggest wave in the right place, you get the ride of a lifetime. Look at this fourth and largest wave building in the stock market. It’s the wave of a lifetime for investors, and it’s rolling onto our shores right about now… Remember, all the action comes when the wave crashes, not as it’s building. As the swell grows around you, you can go with the flow and harness the energy of the wave with little effort.

That’s when you become one with the universe, sitting there on your board, surrounded by dark water, rolling up and down as the power builds beneath you. That’s why surfers get addicted. Then, at the perfect moment, all the wave’s pent up energy releases in a roaring spray of water and power. That’s where we want YOU to be when the greatest market wave of your lifetime comes crashing to shore! That’s when the greatest profits come. That’s when the greatest innovations spring up. The smartest people (I include surfers in this group) and the greatest innovators understand this. They don’t look at a good economy as the best opportunity for success. Seeds of radical innovation only grow in the most challenging conditions.

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Private debt is far more dangerous than public debt.

US Student, Auto Loans Hit New All Time High Of $2.6 Trillion (ZH)

One month after we, and every other financial media, reported that US credit card debt had risen back over $1 trillion for the first time since January 2017, the Fed demonstrated just how meaningless such reports are when in its latest consumer credit report it revised the total stock of revolving debt back under $1 trillion for the month of March, while boosting December’s amount to $1,000.1 billion, meaning that all those “$1 trillion in credit card” debt headlines were about 4 months late. Fed screwing around with the financial reporters aside, the latest monthly report showed that total consumer credit rose by $16.4 billion, more than the $14 billion expected, an increase which was offset by a downward revision to the February consumer credit number from $15.2 billion to $13.8 billion. Revolving credit accounted for $2 billion of the increase with the rest, or $14.4 billion, in the form of auto and student loans.

And speaking of student and auto loans, the Fed also released its latest quarterly estimate for the two series as of March 31, and as one would expect, the numbers rose to new all time highs, and as of the end of the first quarter, US consumers owed $1.44 trillion in student loans, an increase of $32 billion for the quarter and $80 billion for the year, as well as $1.12 trillion in auto loans, an increase of $8 billion Q/Q and $73 billion Q/Q. This means that as of March 31, Americans owed two and a half times as much on their auto and student loans, as on their credit cards, a new all time high.

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“..since these products aren’t logged as loans or other assets on their balance sheets, banks have to set aside little or nothing for potential losses associated with them..”

China’s War on Debt: Stocks Drop, Bond Yields Shoot Up and Defaults Rise (WSJ)

A wave of regulations aimed at cutting risk in China’s financial system is rippling through the country’s markets and sending banks and companies scrambling for funds. During the past month, Chinese shares have fallen nearly 5%, draining almost half a trillion dollars out of the country’s markets. Bond yields have shot up to their highest levels in two years, and bond defaults hover at record levels. The uncertainty has also weighed on metals and commodity prices, already hurt by doubts around China’s growth momentum. The price of iron ore plunged 8% on Thursday, the daily trading limit. Investors blame the volatility on a host of measures Chinese authorities have rolled out to curb runaway debt levels, from raising the cost of short-term funds to measures that are prompting banks to unwind hidden loans and securities.

A particular target is high-risk, high-yielding investment products that banks have used to boost returns, but that regulators say may conceal dangerous amounts of risky lending. Regulators are responding to prodding from Chinese President Xi Jinping, who issued a call for financial stability ahead of a major power reshuffle later this year, and just last week warned finance officials not to miss “a single risk” or “hidden danger.” The market turbulence will test Beijing’s resolve in tackling China’s snowballing debt, especially if it looks like regulators’ crackdown is jeopardizing short-term growth. If they can withstand the short-term squeeze and continue to push it through, the effort will help put China’s economy on a sounder footing longer-term. Banks—especially small and midsize lenders—sell the risky investment products to Chinese savers, then lend the funds to outside asset managers who invest them in bonds, stocks and loans.

The lenders make money from the difference between what they pay their investment clients and what they get from the outside managers. But since these products aren’t logged as loans or other assets on their balance sheets, banks have to set aside little or nothing for potential losses associated with them. That leaves banks more exposed to risk and shows their financial position as stronger than it really is. The maneuvering also encourages leveraged purchases of securities by asset managers and enables banks to continue funding troubled customers, such as property developers with excess inventory and bloated steelmakers. Such grey-area investments reached nearly 20 trillion yuan ($2.8 trillion) at the end of last year, says Fitch Ratings, or about 26% of China’s GDP in 2016, up from less than 10% three years earlier. They now represent an average of 19% of small and midsize banks’ total assets, compared with about 1% for big state banks, according to Fitch.

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America’s unsolvable problem has been solved in dozens of countries.

This Is Not a Bill (Jim Kunstler)

The way it works now, the so-called “providers” (doctors, hospitals) refuse to post the cost of any service, and then charge whatever they feel they can extract, subject to an abstruse and dishonest ceremonial “negotiation” with the insurance company. The result: hospital and insurance executives get paid multi-million dollar salaries, doctors get to drive fine German cars, and the patient gets financially ass-raped, kicked to the curb, and eventually stuffed into the bankruptcy courts. ObamaCare did nothing to fix this. It just added more victims to the rolls and upped the price of admission for a personal financial ass-raping, so that an insured individual could go to the hospital for an emergency appendectomy and end up getting dunned for thousands of dollars — or even more if one of the hosptial’s favorite cute scams is applied, such as calling in an out-of-network anesthesiologist to knock you unconscious (in which state you are unlikely to inquire whether he/she/zhe is in-network or out).

Under the current system, a hospital can bill you $5,999 to stitch up a cut finger, mitigate a bee-sting, or wind an Ace bandage around a sprained ankle, and you’re sure not to learn the cost-of-treatment until the postman drops off the incomprehensible “explanation of benefits” from the insurance company that states in bold print on top “This Is Not a Bill,” but actually is a report of your own incipient financial ass-raping. But judging from the news reports this day, none of these issues is actually on the table in the congressional debate. I don’t believe the editors of The New York Times are necessarily “in bed” with the overpaid hospital CEOs and the insurance company fraudsters. They are simply putting up a defense of their previous psychological investment in Democratic Party ideology — in the shibboleth that ObamaCare was unquestionably a great thing because it was created under the magically empowered 44th president.

I can believe that both Democratic and Republican law-makers are not only in bed with the medical fraudsters of all categories, but are performing a particularly odious form of sadomasochistic bondage-and-discipline sex in exchange for payoffs. Note, too, that none of the aforementioned major media have reported what the medical and insurance lobbyists have paid to their rent-boys and doxies in the US capitol. Wouldn’t you like to know?

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“Money is seen as a “veil” placed over the activities of the real economy, a mere contrivance to get around the inconveniences of barter.”

Review of Steve Keen’s Can We Avoid Another Financial Crisis? (R.)

The preference for high theory and abstruse mathematical modeling meant that mainstream economics had come to rest on a number of gloriously improbable assumptions. In their models, millions of households were reduced to a single “representative agent,” a God-like being, omniscient and immortal. This unreal creature inhabited a world where peace – or equilibrium – ruled. Crises were impossible in such an Eden, unless a mischievous serpent entered from abroad. But such an outcome was naturally impossible to predict. Both Romer and Keen agree that the most serious error of modern macroeconomics is that it ignores finance. Money is seen as a “veil” placed over the activities of the real economy, a mere contrivance to get around the inconveniences of barter.

Minsky, by contrast, saw capitalism as a financial system in which millions of balance sheets and cash flows were intertwined in a highly complex fashion. Money and credit are the essence of capitalism: economic transactions can only take place after financing. The trouble is that credit is inherently unstable, prone to expand excessively and to inflate asset price bubbles, which in time collapse, causing a cascade of defaults throughout the economy. In Minsky’s world, the tail of finance wags the real economy dog. Anyone who paid serious attention to credit, as Keen did prior to 2008, could hardly have failed to notice that something was amiss. After all, credit was growing very rapidly in the United States, in Australia and across much of Europe. Keen’s own contribution at the time was to point out that it wouldn’t take a collapse of credit to cause a serious economic downturn – a mere slowdown in the rate of lending would do the job.

This prediction was vindicated in 2008, when credit growth slowed sharply but remained positive, sending the U.S. economy into a tailspin. Keen is now calling for the dominant macroeconomic models to be jettisoned and replaced by ones that take account of credit. In his book, he develops a simple credit-based macro model. The economists at the Bank for International Settlements have constructed a “financial cycle” model along similar lines. In the end, the money-free macro models appear doomed. Yet progress has been painfully slow to date. As Max Planck said, science advances one funeral at a time – failing death, retirement would do the trick.

So what of the next crisis? With his eye on credit growth, Keen sees China as a terminal case. The People’s Republic has expanded credit at an annualized rate of around 25 per cent for years on end. Private-sector debt exceeds 200 per cent of GDP, making China resemble the over-indebted economies of Ireland and Spain prior to 2008, but obviously far more significant to the global economy. “This bubble has to burst,” writes Keen unequivocally.

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Untenable, but zero movement towards addressing the issue.

France and Greece Heavily Disadvantaged by Euro as Germany Benefits (WE)

It is now incontestable that Germany benefits greatly from the Euro. The weaker members of the Euro drag down the external value of the Euro compared with the US Dollar making German exports far more competitive than they would otherwise be. Despite the relative value of the Euro being lower than would be the case if the Euro was the currency of Germany alone, the Euro’s value relative to the Dollar is still significantly higher than would be the case were the Euro the currency of an independent Greece or France.

In Purchasing Power Parity (PPP) terms the Euro in Germany is some 32% undervalued compared with the Greek Euro, greatly benefiting German exporters, but imposing a burden on Greek exporters that they must find impossible to cope with. Conversely the overvaluation facing French companies is now a clear 20% compared with German companies.

 

Brazil and Argentina suffer from overvalued currencies against the US Dollar, suggesting one reason for the serious recession suffered by South America’s biggest economies over the past year. In contrast Canada, Russia, China, Mexico, Turkey and India all have currencies between 15% and 44% undervalued against the US Dollar, suggesting that at least some of Mr Trump’s rhetoric is justified. Over time these fundamental disparities have not shrunk, they have in fact widened. The charts to the upper right show the trend of German undervaluation against the French and Greek Euro’s in Purchasing power terms.

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“Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but.”

How the Eurozone Damaged French Politics – And The Election (Nation)

[..] there is a structural problem in the eurozone, and in the EU. The ECB, the European Commission, and the IMF (which is not an independent entity but generally answers to its European directors for decisions affecting Europe), are the European authorities that have increasingly constrained the economic decision-making of European governments. We can also include the eurogroup of finance ministers, which has tormented poor Greece and helped prolong that country’s interminable economic crisis. These people have shown that they are committed to creating a different kind of Europe. This can be seen in a paper trail of thousands of pages of documents, called Article IV consultations, where the IMF and EU government finance ministries hammer out their views on economic policies. These documents represent an elite consensus which can differ greatly from public opinion within the countries.

A review of 67 of these agreements for the four years 2008 through 2011, for 27 EU countries, showed a clear pattern of policy choices: cutting government spending, including on health care and pensions; increasing labor supply; reducing public sector employment; and changes in labor law that would reduce the scope of collective bargaining. This is the economic program that any politician or political party who does not want to be labeled as “anti-Europe” must adhere to, and it can be seen in the most recent (July 2016) IMF Article IV consultation for France, as well as the Stability Program that France has agreed to with the EU. These documents see France as freezing real spending, and committing to reducing its budget deficit to zero by 2021. These commitments imply that the French government can do nothing to reduce mass unemployment, which has averaged about 10% over the past year.

Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but. With France’s real borrowing costs near zero and inflation well below target, it makes sense for France to implement an economic stimulus, for example by increasing public investment. Fears of increasing the French public debt are unfounded; annual interest payments on that debt are currently at about 1.7% of GDP, a modest burden by any historical or international comparison.

[..] Since the 2008–09 world financial crisis and recession, the project of the eurozone, and to some extent of the EU, has created a destructive feedback loop that leads directly to the kind of dysfunctional politics now unfolding in France. It is one thing to give up some national sovereignty for a common project that can raise common living standards; it is quite another to surrender a country’s most important macroeconomic decision-making (monetary, exchange rate, and increasingly fiscal policy) to unaccountable authorities who have demonstrated their commitment to a regressive agenda. The Center Left’s collaboration with this program, e.g., President Hollande’s in France, has given the Far Right opportunities not seen since the 1930s.

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Good thing everybody already knows it’s Putin again. No reasoning needed.

Macron Team Blasts ‘Massive Hacking Attack’ (R.)

French presidential candidate Emmanuel Macron’s campaign team says it has been the victim of a massive and coordinated hacking operation. A large trove of emails from the campaign of French presidential candidate Emmanuel Macron was posted online late on Friday, 1-1/2 days before voters go to the polls to choose the country’s next president in a run-off against far-right rival Marine Le Pen. Some nine gigabytes of data were posted by a user called EMLEAKS to Pastebin, a document-sharing site that allows anonymous posting. It was not immediately clear who was responsible for posting the data or whether the emails were genuine. In a statement, Macron’s political movement En Marche! (Onwards!) confirmed that it had been hacked.

“The En Marche! Movement has been the victim of a massive and co-ordinated hack this evening which has given rise to the diffusion on social media of various internal information,” the statement said. An interior ministry official declined to comment, citing French rules which forbid any commentary liable to influence an election, and which took effect at midnight French time on Friday (2200 GMT). Comments about the email dump began to appear on Friday evening just hours before the official ban on campaigning began. The ban is due to stay in place until the last polling stations close on Sunday at 8 p.m. (1800 GMT).

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Perhaps the failure of the EU is not clear enough yet everywhere.

Macron Personifies The Very Europe Whose Failure Feeds Le Pen (Zizek)

The title of a comment piece which appeared in The Guardian, the UK voice of the anti-Assange-pro-Hillary liberal left, says it all: “Le Pen is a far-right Holocaust revisionist. Macron isn’t. Hard choice?” Predictably, the text proper begins with: “Is being an investment banker analogous with being a Holocaust revisionist? Is neoliberalism on a par with neofascism?” and mockingly dismisses even the conditional leftist support for the second-round Macron vote, the stance of: “I’d now vote Macron – VERY reluctantly.” This is liberal blackmail at its worst: one should support Macron unconditionally; it doesn’t matter that he is a neoliberal centrist, just that he is against Le Pen. It’s the old story of Hillary versus Trump: in the face of the fascist threat, we should all gather around her banner (and conveniently forget how her side brutally outmanoeuvred Sanders and thus contributed to losing the election).

Are we not allowed at least to raise the question: yes, Macron is pro-European – but what kind of Europe does he personify? The very Europe whose failure feeds Le Pen populism, the anonymous Europe in the service of neoliberalism. This is the crux of the affair: yes, Le Pen is a threat, but if we throw all our support behind Macron, do we not get caught into a kind of circle and fight the effect by way of supporting its cause? This brings to mind a chocolate laxative available in the US. It is publicised with the paradoxical injunction: “Do you have constipation? Eat more of this chocolate!” – in other words, eat the very thing that causes constipation in order to be cured of it. In this sense, Macron is the chocolate-laxative candidate, offering us as a cure for the very thing that caused the illness.

[..] In the hopeless situation we are in, facing a false choice, we should gather the courage and simply abstain from voting. Abstain, and begin to think. The commonplace “enough talking, let’s act” is deeply deceiving – now, we should say precisely the opposite: enough of the pressure to do something, let’s begin to talk seriously, ie, to think! And by this I mean we should also leave behind the radical leftist self-complacency of endlessly repeating how the choices we are offered in the political space are false, and how only a renewed radical left can save us – yes, in a way, but why, then, does this left not emerge? What vision has the left to offer that would be strong enough to mobilise people? We should never forget that the ultimate cause of the act that we are caught into – the vicious cycle of Le Pen and Macron – is the disappearance of the viable leftist alternative.

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Sharp thinking. Make literally everyone incapable of understanding anything that’s said.

The English Language Is Losing Importance In Europe – Juncker (G.)

The English language is losing importance in Europe, the president of the European commission has said amid simmering tensions over the Brexit negotiations. Speaking to an audience of European diplomats and experts in Florence, Jean-Claude Juncker also described the UK’s decision to leave the EU as a tragedy. “Slowly but surely English is losing importance in Europe,” Juncker said, to applause from his audience. “The French will have elections on Sunday and I would like them to understand what I am saying.” After these opening remarks in English, he switched to French for the rest of the speech. Making a stout defence of the EU, Juncker said the UK had voted to leave the project despite historic successes and a recent uptick in economic growth. “Our British friends decided to leave the EU, which is a tragedy,” he said.

[..] It is not the first time the English language has been caught in the crossfire of the Brexit negotiations. At a recent EU summit May slapped down reports that Brexit negotiations would be conducted in French, and after the June referendum EU officials made it known they planned to downgrade the use of English in the corridors of Brussels. In reality, the Brexit talks are most likely to be conducted in French and English with simultaneous interpretation. Barnier, a former French EU commissioner who clashed with the City of London, speaks English but wants the right to negotiate in his native tongue. English is also highly unlikely to disappear as a dominant language in the EU any time soon. Not only is it an official language for the Irish and Maltese governments, but many diplomats prefer to use English as a common second language rather than French.”

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2018 at the earliest. Then again, debt relief would make Greece less of a slave, so maybe much longer or not at all.

Germany Says No Debt Relief Being Prepared For Greece (R.)

No debt relief measures are being readied for Greece, Germany’s Finance Ministry said on Thursday after the Handelsblatt business daily reported measures were under consideration. The implementation of reforms that Greece agreed to in return for aid would help ensure the sustainability of the country’s debt, the ministry said in a statement e-mailed to Reuters. “No debt relief is being prepared,” it added. Regarding possible debt measures, a clear agreement was reached in a statement by the Eurogroup of eurozone finance ministers last May. “According to that, after the full implementation of the adjustment program, there will be an assessment of whether debt measures are necessary. That still applies,” it said. Earlier, Handelsblatt reported that Greece’s international lenders were preparing possible debt relief for Athens for discussion by the finance ministers.

The European Commission, the ESM eurozone rescue fund, the ECB and the IMF had prepared various debt measures in a document to be sent to the Eurogroup for further discussion, it said, citing people familiar with the document. One option was for the ESM to take over loans paid out by the IMF. The advantage would be lower interest rates charged by the ESM. Others included extending debt maturities and having the ECB and national central banks send profits made on Greek bonds to Athens through national governments, Handelsblatt reported. An EU source told Reuters the document was originally a paper by the ESM, not all four institutions, and had been modified on the way to the version Handelsblatt saw.

“It lays down several options for the restructuring of Greek debt and specifies possibilities which were given by the Eurogroup last May. One of the options still is that ESM would take debt from IMF,” the source said. “It is not clear yet if the IMF would agree on that.” Separately, German Finance Minister Wolfgang Schaeuble said in Durban, South Africa that the EU needed to “exert pressure on national governments to implement … much-needed reforms.” “Those countries which received help under European assistance programmes, and therefore had to actually implement unpleasant reforms, and those countries which have kept to the agreed rules are among the most successful countries in the EU today,” he said. “The problem is therefore not with the rules, but with the lack of implementation of them.

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Warfare, financial or otherwise.

The Forgotten History of Cinco de Mayo (IC)

Cinco de Mayo celebrates the victory of Mexican troops over the invading French army at the Battle of Puebla southeast of Mexico City on May 5, 1862. Because the Mexican soldiers were badly outnumbered and outgunned, the unexpected triumph was a watershed in forging the country’s national identity. (Militarily it wasn’t that significant — the next year France captured the Mexican capital and installed a member of the Austrian nobility as Maximillian I, “Emperor of Mexico.”) But here’s important part for everyone else to remember today: France was invading Mexico essentially because Mexico owed France money. Mexico had borrowed enormous amounts from Europe during the Mexican-American War from 1846-8 and in a civil war from 1858-61.

By 1862 it was impossible for the government to make timely payments on the loans without starving the country, and Mexican president Benito Juárez declared that all payments on foreign debt would be suspended for two years. Getting into unsustainable debt is not something unique to Mexico; countries have done so over and over throughout history, particularly during wars. The U.S. borrowed more than we could ever repay from France and the Netherlands during the Revolutionary War, and the U.K. borrowed far beyond its means from the U.S. during World War I. When this happens, it’s far better for both the debtors and creditors to organize some kind of default rather than forcing the debtors to pay all the money back on the original terms. The advantage for debtors is obvious.

More intelligent creditors understand it’s also good for them, because they generally don’t have a choice between getting all or just some of their money back. Instead, it’s a choice between getting some of it back or much less. To understand why, imagine loaning too much money to a software engineer. If you demand that the engineer sell all their computers to make interest payments, you’re unlikely to get much more money after that. And indeed both the U.S. and U.K. defaulted to varying degrees after their wars. Likewise, in 1862 the U.K. and Spain agreed to accept less than they were formally owed by Mexico. France, however, invaded Mexico in an attempt to get all its money back, which is why French troops were there for the Battle of Puebla on May 5.

In a sense, the invasion was admirably honest. International relations are often like organized crime on a gigantic scale, but people pretend otherwise. Here there was no pretense: The loanshark’s enforcers beat the crap out of an entire country. By contrast, creditors today have institutions like the IMF, which has often functioned as a creditors’ cartel — squeezing countries until they pay back their debts. This often involves lots of people dying … but in quiet ways, without armies involved.

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The EU isn’t only giving us Le Pen, it’s presenting us with this too.

Rescuers Pick Up 560 Migrants Off Libyan Coast On Thursday (R.)

Rescuers picked up 560 migrants from unsafe boats off the coast of Libya on Thursday, Italy’s Coast Guard said, including the body of a young man who the migrants said had been shot by smugglers on the beach for his baseball cap. Italian Navy and Coast Guard boats participated in the rescues together with two humanitarian vessels, a spokesman said. The migrants were traveling on board two large rubber boats and five small wooden ones, he added. The Phoenix, a rescue ship operated by the Migrant Offshore Aid Station (MOAS), took 422 on board, plus the body of the allegedly murdered young Gambian. “According to eyewitnesses, the deceased teenager was killed by human traffickers because they wanted his baseball hat. What cruelty,” MOAS co-founder Chris Catrambone said.

“The medical team onboard the Phoenix have confirmed that the deceased teenager died from gunshot wound,” he added. MOAS doctors are also caring for another teenage boy who has a gunshot wound to the stomach, but is stable. German NGO Jugend Rettet also helped with the rescues. Separately, Doctors Without Borders said its rescue ship Prudence would arrive in the Sicilian port of Catania early on Friday with the corpses of six migrants, including five women, who it had picked up in the Mediterranean in recent days. There had been a pause of boat departures from Libya, where smugglers operate with impunity, since Easter, because of bad weather and sea conditions. But boat migrant arrivals in Italy are still up 30 percent so far this year from 2016, when a record 181,000 arrived.

Humanitarian rescue ships have come in for criticism in Italy in recent months, with Catania chief prosecutor Carmelo Zuccaro opening a fact-finding investigation into possible ties between NGOs and people-smugglers. The NGOs have strongly denied the accusations, including representatives from MOAS who testified in Italy’s parliament earlier on Thursday. They say their only mission is to save lives. Zuccaro has yet to present any evidence of illicit activities and has not opened a criminal investigation.

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Jan 302017
 
 January 30, 2017  Posted by at 10:15 am Finance Tagged with: , , , , , , , , ,  7 Responses »


Edvard Munch Vampire 1893

Canadian PM Says Québec Mosque Shooting A ‘Terrorist Attack On Muslims’ (R.)
Canada To Offer Temporary Residency To Travelers Stranded By US (R.)
Trump Immigration Order Restricted By More US Judges (R.)
Priebus Says Trump’s Immigration Ban Doesn’t Include Green Card Holders (BBG)
Theresa May Confirms UK Exempt From Trump’s ‘Muslim Ban’ (Ind.)
A Clarifying Moment in American History (Eliot A. Cohen)
US Became A Dumping Ground For The World. No More (CNBC)
The Persuasion Filter and Immigration (Adams)
Theresa May To Warn Devolved Nations: You Have No Veto On Brexit (G.)
UK and EU Heading For Economic Cold War – Italian Foreign Minister (G.)
Eurozone ‘Destruction’ Necessary For Countries To Thrive Again – Stark (Tel.)
The Dollar Will Die With a Whimper, Not a Bang (Rickards)
Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (WS)
Eurozone Bailout Fund Says Greek Public Debt Is ‘Manageable’ (R.)
Turkish Gunboat With Army Chief Sails Into Greek Waters; High Alert (K.)
Greek Fishermen Who Brave The Seas To Rescue Refugees Now Need Saving (NBC)
NASA – 30 Years Of Before And After Images Around The World (F.)

 

 

Be wary of false flags. And ponder how much Canada is ahead of anybody else on immigration.

Canadian PM Says Québec Mosque Shooting A ‘Terrorist Attack On Muslims’ (R.)

Six people were killed and eight wounded when gunmen opened fire at a Quebec City mosque during Sunday night prayers, in what Canadian Prime Minister Justin Trudeau called a “terrorist attack on Muslims”. Police said two suspects had been arrested, but gave no details about them or what prompted the attack. Initially, the mosque president said five people were killed and a witness said up to three gunmen had fired on about 40 people inside the Quebec City Islamic Cultural Centre. Police said only two people were involved in the attack. “Six people are confirmed dead – they range in age from 35 to about 70,” Quebec provincial police spokeswoman Christine Coulombe told reporters, adding eight people were wounded and 39 were unharmed.

The mosque’s president, Mohamed Yangui, who was not inside when the shooting occurred, said he got frantic calls from people at evening prayers. “Why is this happening here? This is barbaric,” he said. Prime Minister Justin Trudeau said in a statement: “We condemn this terrorist attack on Muslims in a center of worship and refuge”. “Muslim-Canadians are an important part of our national fabric, and these senseless acts have no place in our communities, cities and country.” The shooting came on the weekend that Trudeau said Canada would welcome refugees, after U.S. President Donald Trump suspended the U.S. refugee program and temporarily barred citizens from seven Muslim-majority countries from entering the United States on national security grounds.

A Canadian federal Liberal legislator, Greg Fergus, tweeted: “This is an act of terrorism – the result of years of sermonizing Muslims. Words matter and hateful speeches have consequences!” The premier of Quebec province, Philippe Couillard, said security would be increased at mosques in Quebec City and Montreal. “We are with you. You are home,” Couillard said, directing his comments at the province’s Muslim community. “You are welcome in your home. We are all Quebecers. We must continue together to build an open welcoming and peaceful society”.

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Immigration Minister Ahmed Hussen was born in Somalia.

Canada To Offer Temporary Residency To Travelers Stranded By US (R.)

Canada will offer temporary residency to any travelers stranded by U.S. President Donald Trump’s orders temporarily barring people from seven Muslim-majority countries, a senior official said on Sunday. Immigration Minister Ahmed Hussen told a news conference he did not know how many people might be eligible but said only a handful of passengers headed to the United States from Canada had been denied boarding. Trump’s decision on Friday, which also affects refugees, left many people uncertain of whether they could enter the United States. “Let me assure those who may be stranded in Canada that I will use my authority as minister to provide them with temporary residency if they need it,” Hussen said.

Liberal Prime Minister Justin Trudeau’s government has refrained from criticizing the United States, which takes 75% of Canadian exports, preferring instead to stress Canada is open to refugees. “Every country has the right to determine their policies,” said Hussen. The Canadian Council for Refugees and the Canadian Civil Liberties Association, or CCLA, called on Ottawa to withdraw from a Safe Third Country agreement with the United States, under which Canada returns asylum seekers crossing the border. “There’s a danger that the U.S. is doing blanket detentions and deportations … and not honoring asylum claims,” said CCLA Executive Director Sukanya Pillay. Such a move would be diplomatically insulting and Hussen said the pact would remain unchanged for now.

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Many many lawsuits in the pipeline. Attorneys general are getting together to challenge this. Sharp edges are already being blunted.

Trump Immigration Order Restricted By More US Judges (R.)

U.S. judges in at least four states blocked federal authorities from enforcing President Donald Trump’s executive order restricting immigration from seven Muslim-majority countries. Judges in Massachusetts, Virginia and Washington state, each home to major international airports, issued their rulings late Saturday or early Sunday, following an order on Saturday night by U.S. District Judge Ann Donnelly in New York’s Brooklyn borough. Donnelly had ruled in a lawsuit by two men from Iraq being held at John F. Kennedy International Airport. While none of the rulings struck down the executive order, the growing number of orders could complicate the administration’s effort to enforce it. Trump’s order on Friday halted immigration from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for 90 days, and stopped the resettlement of refugees for 120 days.

The new Republican president said these actions were needed “to protect the American people from terrorist attacks by foreign nationals admitted to the United States.” Condemnation of the order was swift and broad-based. Democratic politicians and civil rights groups weighed in, as well as U.S. allies who view the actions as discriminatory and divisive. Democratic attorneys general from California, New York and other states, meanwhile, were discussing whether to pursue their own legal challenges. The U.S. Department of Homeland Security on Sunday said it “will comply with judicial orders,” while enforcing Trump’s executive order in a manner that ensures those entering the United States “do not pose a threat to our country or the American people.”

Across the United States, lawyers worked overnight to help confused international travelers at airports. Activists and lawyers tracking the arrivals said some Border Patrol agents appeared to be disregarding the various court orders. “There is really no method to this madness,” Becca Heller, director of the New York-based International Refugee Assistance Project organization, told reporters on a conference call.

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Homeland Security Secretary John Kelly has confirmed this.

Priebus Says Trump’s Immigration Ban Doesn’t Include Green Card Holders (BBG)

The White House defended President Donald Trump’s executive order halting entry to the U.S. from seven predominantly Muslim Middle East countries after judges blocked parts of the plan. Republican lawmakers suggested the president’s action was too broad and potentially damaging to the U.S. Trump’s chief of staff said the immigration order doesn’t include holders of green cards, although those people could be subject to additional steps when they travel overseas. A federal judge in Boston became the latest to curb Trump’s immigration order, directing customs officials at the city’s Logan International Airport on Sunday to let passengers from the seven countries with valid visas disembark and go on their way. Trump told his almost 23 million Twitter followers on Sunday morning: “Our country needs strong borders and extreme vetting, NOW. Look what is happening all over Europe and, indeed, the world – a horrible mess!”

[..] The judges’ moves came at the end of a day when a number of students, refugees and dual citizens were stuck overseas or detained, and some businesses, including Google, warned employees from those countries not to risk leaving the U.S. Spontaneous protests erupted at a number of airports around the nation, and world leaders including London’s mayor and Canada’s prime minister joined U.S. lawmakers in crying foul. Although some U.S. visa and green-card holders were blocked from boarding flights to the U.S. on Saturday after the order was issued, “the executive order doesn’t affect green-card holders moving forward,” Reince Priebus, the White House chief of staff, said Sunday on NBC’s “Meet the Press” in what seemed to be an adjustment to the administration’s policy.

He added that green-card holders – legal permanent residents – may be subject to additional screening if they travel to one of the seven countries targeted by the order. Even U.S. citizens may be affected: “I would suspect that if you’re American citizen traveling back and forth to Libya you’re likely to be subjected to further questioning when you come into an airport.,” Priebus said.

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As is Canada.

Theresa May Confirms UK Exempt From Trump’s ‘Muslim Ban’ (Ind.)

Theresa May has confirmed most UK citizens will not be affected by Donald Trump’s “Muslim ban” in a frantic bid to prevent a broad backlash against the policy from damaging her government. Foreign Secretary Boris Johnson sought the clarification in anxious calls to senior figures in Mr Trump’s team, highlighting the political problems the ban was causing Ms May’s administration. The Prime Minister had finally told Mr Johnson and Home Secretary Amber Rudd to “make representations” to their US counterparts, after she initially refused to condemn the ban sparking an angry backlash from her own MPs and others. Her early reluctance to criticise it came after she was the first foreign leader to visit Mr Trump at the White House, where the pair were pictured holding hands and the President delighted Ms May by expressing a desire to sign a quick post-Brexit trade deal with the UK.

The clarification to Mr Trump’s plan to temporarily ban travellers coming into the US from a group of predominantly Muslim countries – Iraq, Iran, Libya, Somalia, Sudan, Syria and Yemen – confirms that the only people affected will be dual citizens of the UK and a listed country, going directly to the US from the listed country. But it is unclear if the move by ministers will be enough to quell anger over the ban, much of which was targeted at its discriminatory nature rather than the effect on Britons alone. As events unfolded on Sunday, Conservatives demanded Mr Trump be forbidden from addressing Parliament on his state visit, Labour and the Lib Dems called for the President to be banned from the country and champion athlete Sir Mo Farah launched an outspoken attack on the ban.

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“..as Lincoln put it, a perpetual story of “a rebirth of freedom”..”

A Clarifying Moment in American History (Eliot A. Cohen)

In an epic week beginning with a dark and divisive inaugural speech, extraordinary attacks on a free press, a visit to the CIA that dishonored a monument to anonymous heroes who paid the ultimate price, and now an attempt to ban selected groups of Muslims (including interpreters who served with our forces in Iraq and those with green cards, though not those from countries with Trump hotels, or from really indispensable states like Saudi Arabia), he has lived down to expectations. Precisely because the problem is one of temperament and character, it will not get better. It will get worse, as power intoxicates Trump and those around him. It will probably end in calamity—substantial domestic protest and violence, a breakdown of international economic relationships, the collapse of major alliances, or perhaps one or more new wars (even with China) on top of the ones we already have.

It will not be surprising in the slightest if his term ends not in four or in eight years, but sooner, with impeachment or removal under the 25th Amendment. The sooner Americans get used to these likelihoods, the better. The question is, what should Americans do about it? To friends still thinking of serving as political appointees in this administration, beware: When you sell your soul to the Devil, he prefers to collect his purchase on the installment plan. Trump’s disregard for either Secretary of Defense Mattis or Secretary-designate Tillerson in his disastrous policy salvos this week, in favor of his White House advisers, tells you all you need to know about who is really in charge. To be associated with these people is going to be, for all but the strongest characters, an exercise in moral self-destruction.

For the community of conservative thinkers and experts, and more importantly, conservative politicians, this is a testing time. Either you stand up for your principles and for what you know is decent behavior, or you go down, if not now, then years from now, as a coward or opportunist. Your reputation will never recover, nor should it. Rifts are opening up among friends that will not be healed. The conservative movement of Ronald Reagan and Jack Kemp, of William F. Buckley and Irving Kristol, was always heterogeneous, but it more or less hung together. No more. New currents of thought, new alliances, new political configurations will emerge. The biggest split will be between those who draw a line and the power-sick—whose longing to have access to power, or influence it, or indeed to wield it themselves—causes them to fatally compromise their values.

For many more it will be a split between those obsessed with anxiety, hatred, and resentment, and those who can hear Lincoln’s call to the better angels of our nature, whose America is not replete with carnage, but a city on a hill. This is one of those clarifying moments in American history, and like most such, it came upon us unawares, although historians in later years will be able to trace the deep and the contingent causes that brought us to this day. There is nothing to fear in this fact; rather, patriots should embrace it. The story of the United States is, as Lincoln put it, a perpetual story of “a rebirth of freedom” and not just its inheritance from the founding generation.

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Isn’t it simply the result of having the reserve currency, though?

US Became A Dumping Ground For The World. No More (CNBC)

America’s shift toward bilateral trade deals shows a total loss of faith in the ability of multilateral forums (G7 … G20) and U.N. agencies (IMF, etc.) to rebalance the world economy through effective international policy coordination. That was long time coming – a sad coda to the global economic (political) and financial order created at the Bretton Woods Conference in July 1944. It is at that time that the economic policy coordination was enshrined as one of the fundamental principles in the IMF’s Articles of Agreement, enjoining both surplus and deficit countries to balance out their external trade positions. What followed – to this day – has been an unending comedy of errors, recriminations and hypocrisy as policy coordination and rules of a sustainable free trade were shunned in pursuit of self-serving national interests.

Predictably, surplus countries refused to adjust (i.e., to reduce their surpluses by running stronger domestic demand to boost imports), extolled their “economic virtue” and continued to live off their trade partners. But deficit countries had no choice; they had to adjust (i.e., to reduce their deficits by shrinking their domestic demand and cutting down their imports) because they ran out of money and had to submit to foreign lenders demanding strict conditions with respect to the timing and magnitude of their trade adjustment. And here is the world we ended up with. Germany is currently running the world’s largest trade surplus of $300 billion. China is not very far behind with a $264 billion surplus. Japan’s $200 billion surplus is rapidly catching up with its large Asian neighbor, and a group of smaller export-driven East Asian countries is showing a steadily rising surplus of $300 billion.

These countries account for 40% of world GDP, but their combined trade surpluses of $1 trillion represent about 80% of the world’s total. In other words, nearly half of the world economy is a drag on the rest of the global demand, output and employment. Do you still wonder why the world economy is stuck in a hopelessly slow lane? With its systematic half-a-trillion dollars of quasi structural trade deficits, the U.S. accounts for 40% of the world’s total (trade deficits) and bears the brunt of what some would call beggar-thy-neighbor trade policies. In a more polished diplomatic “G something” language, you could also call that a “collateral damage” of uncoordinated global economic policies. Damage it is. Over the last two years, these trade deficits have taken an entire percentage point out of America’s sluggish economic growth.

Think also of the huge downward pressure on output and employment these deficits exerted, and continue to exert, in our import-competing industries. And think of this, too. While the surplus countries keep accumulating reserves and net foreign assets by recycling the money we pay for our imports, our trade deficits got us to a huge net foreign debt of $7.8 trillion during the first three quarters of last year – a $1 trillion increase from the same period in 2015. People carping about imaginary trade wars say that this is nothing to worry about. They believe that China, Japan and the rest of “dynamic Asia” will keep lending us the money we pay for their imports, and that they will be happy to hold $2.7 trillion of our IOUs – 46% of the total held by foreign investors – as they did at the end of last November. These, of course, are fairy tales. America’s trade problems are urgent and vitally important policy issues.

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I know people hate him, but he’s interesting.

The Persuasion Filter and Immigration (Adams)

[..] my starting point is the understanding that human brains did not evolve to show us reality. We aren’t that smart. Instead, our brains create little movies in our heads, and yours can be completely different from mine. We see that situation now. Half the country thinks President Trump is well on his way to becoming a Hitler-like dictator. But many other Americans think Trump is an effective business person with good intentions. They can’t both be right. I use the word “filter” to describe an optional way of looking at the world. A good filter is one that makes you happy and does a good job of predicting what happens next. Let’s use that standard to compare the Hitler Filter to what I call the Persuasion Filter. The Hitler filter clearly isn’t making people happy. The people watching that movie are protesting in the streets.

Meanwhile, the people who see Trump as a good negotiator looking out for the country are quite happy with the job he has done so far. The Persuasion Filter says Trump opens with a big first offer and negotiates back to something reasonable. If you don’t recognize the method, it looks crazy, random, and racist. But what about predictions? The Persuasion Filter predicting Trump would become president when the Hitler Filter thought he had no chance. Now we have another chance to test the predictive power of the Persuasion Filter. If Trump is a Master Persuader, as I have been telling you for over a year, he just solved his biggest problem with immigration and you didn’t notice. The biggest problem is that his supporters on the right want more immigration control than he can (or should) deliver while his many critics on the left want far less.

Normally when you negotiate there is only one party on the other side. But in this case, Trump is negotiating two extremes in two different directions. It’s the toughest possible situation. Best case scenario is that 40% of the country want you dead when it’s all over. Not good. So what does a President Trump do when he is in an impossible situation? According to the Hitler Filter, he does more Hitler stuff, such as being more extreme than anyone expected with his recent immigration declarations. That filter accurately predicted that he would be “worse” once elected. Sure enough, his temporary immigration ban is more extreme than most people expected. If things never get worse from this point on, we would have to question the Hitler Filter. But if things get worse still, the Hitler Filter is looking good.

Compare to the Persuasion Filter. This filter says Trump always opens with an extreme first offer so he has room to negotiate to the middle. The temporary ban fits that model perfectly. On the immigration topic alone, both the Hitler Filter and the Persuasion Filter predict that we get to exactly the point we are at today. Let’s call that a tie in terms of predictive power. The hard part is predicting what happens next. The Persuasion Filter says Trump is negotiating with his critics on the extreme right at the same time as he is negotiating with his critics on the left. He needed one “opening offer” that would set up both sides for the next level of persuasion. And he found it. You just saw it.

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Devolved: Scotland, Wales and Northern Ireland. What a mess this is going to be.

Theresa May To Warn Devolved Nations: You Have No Veto On Brexit (G.)

Theresa May is set for a bracing final round of Brexit talks with the leaders of the devolved nations before the likely triggering of article 50, with the prime minister warning her counterparts from Scotland, Wales and Northern Ireland that they can have no veto over the process. May is to see the other leaders in Cardiff on Monday at a meeting of the joint ministerial committee (JMC), the forum for soliciting views from around the UK on the process of leaving the UK. While the first ministers of Scotland and Wales, Nicola Sturgeon and Carwyn Jones, have stressed they cannot accept a hard Brexit without membership of or full access to the EU’s single market, May is set to tell them this will not be possible.

“We will not agree on everything, but that doesn’t mean we will shy away from the necessary conversations and I hope we will have further constructive discussions,” May said in comments released ahead of the meeting. Last week’s supreme court judgment on the need for MPs to vote on triggering article 50 “made clear beyond doubt that relations with the EU are a matter for the UK government and UK parliament”, May said. While the main element of the ruling was to oblige May to put the article 50 process, which will trigger departure from the EU, as a bill to parliament – a subsidiary element of the judge’s decision was that the devolved governments could not veto the process.

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Line of the day: “..We don’t need these kinds of tensions at this time of a geopolitical Jurassic Park..”

UK and EU Heading For Economic Cold War – Italian Foreign Minister (G.)

A senior Italian official has warned that the UK and the European Union are heading into an “economic cold war” over Brexit that could wreak havoc on the west and weaken the continent. Mario Giro, Italy’s deputy foreign minister, said that while many countries in the EU had said the UK’s vote to leave the EU represented a loss to the union, there were more hardliners in the EU against the UK than it appeared. “When we are among the 27 [countries within the EU, not including the UK], the hardliners are more numerous than it appears. I cannot quote a country in particular at the moment. We will see it at the beginning of the negotiation,” Giro said in an interview with the Guardian.

He added: “We are hearing more and more that there are people – economic interests – who are thinking they can inherit some economic position, thinking that they can take away from the UK some of the position of the City of London. Not Italy, of course, because we are not in that position. And this will be an economic war. Let’s say an economic cold war, and we are not in favour of it.” The statement followed remarks this month by the British prime minister, Theresa May, in which she said the UK was prepared for a “hard Brexit” if she could not negotiate a reasonable agreement with the EU over Britain’s departure. She said attempts by other EU countries to wreak vengeance on the UK would be an “act of calamitous self-harm” because the UK in turn would be prepared to radically cut taxes to attract businesses.

Italian officials have always said their top priority in Brexit negotiations would be to guarantee the rights of hundreds of thousands of Italians who lived in the UK. Giro suggested that a coming “battle of interests” – which he described as a competition between economic interests, not necessarily individual states – could have terrible consequences. “This will be a disgrace. To enter into a new era of hard competition on big money questions involving companies, this is very bad for the western world. We don’t need these kinds of tensions at this time of a geopolitical Jurassic Park,” he said, meaning that it was a world where every interest was out for itself.

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Creative destruction.

Eurozone ‘Destruction’ Necessary For Countries To Thrive Again – Stark (Tel.)

The eurozone must break up if its members are to thrive again, according to a former ECB official. Jürgen Stark, who served on the ECB’s executive board during the financial crisis, said it was time to “think the unthinkable” and work towards a “reset” of Europe that pulled power away from Brussels. The former vice-president of Germany’s Bundesbank said the creation of a two-speed eurozone, with France and Germany at its core, would help to ensure the smaller bloc’s survival. “We have to think the unthinkable. And it is already unthinkable to think about the restart of Europe, which means we have to be creative. But in order to be creative, you have to destruct [sic] something.” Mr Stark said countries such as Italy, which has seen its economy stagnate since the crisis, would be better off outside the single currency area.

“Italy was accustomed to this ongoing devaluation of the lira from the mid-Seventies until the late Nineties. Maybe they need devaluation and their own currency in order to become more competitive again,” he said. Speaking at an event organised by ETF Securities, Mr Stark said current accommodative ECB policy meant countries were likely to “muddle through” in the coming years and move closer “by coincidence”. However, he said the eurozone’s problems would resurface, regardless of the political landscape. “In the long run, in the context of a European reset, one has to discuss the issue of whether it is still appropriate to keep these countries with different economic structures and different economic performances together. There is no convergence anymore. “We have had divergence rather than convergence… from the very beginning.”

Mr Stark said Belgium, France, Luxembourg, the Netherlands and Germany “plus Austria and Finland” could form the core of a system with “staggered integration” for other countries such as Italy and Greece. While he described Marine Le Pen’s victory in French elections this year as “unlikely” due to the country’s voting system, Mr Stark said the Front National leader’s victory would also be the catalyst of a eurozone split. Mr Stark, who resigned from the ECB in 2011, said he “blamed” the central bank for allowing countries to drag their heels on reforms. “As long as the ECB gives a signal in its operations to governments that ‘we are the backstop’ and ‘we will prevent country ‘a’ or country ‘b’ from becoming insolvent’ – there will be no structural reforms,” he said.

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A correlation vs causation problem. Where the US was very strong, China is not.

The Dollar Will Die With a Whimper, Not a Bang (Rickards)

[..] the dollar and sterling seesawed over the 20 years following the First World War, with one taking the lead from the other as the leading reserve currency and in turn giving back the lead. In fact, the period from 1919–1939 was really one in which the world had two major reserve currencies — dollars and sterling — operating side by side. Finally, in 1939, England suspended gold shipments in order to fight the Second World War and the role of sterling as a reliable store of value was greatly diminished apart from the U.K.’s special trading zone of Australia, Canada and other Commonwealth nations. The 1944 Bretton Woods conference was merely recognition of a process of dollar reserve dominance that had started in 1914. The significance of the process by which the dollar replaced sterling over a 30-year period has huge implications for you today.

Slippage in the dollar’s role as the leading global reserve currency is not necessarily something that would happen overnight, but is more likely to be a slow, steady process. Signs of this are already visible. In 2000, dollar assets were about 70% of global reserves. Today, the comparable figure is about 62%. If this trend continues, one could easily see the dollar fall below 50% in the not-too-distant future. It is equally obvious that a major creditor nation is emerging to challenge the U.S. today just as the U.S. emerged to challenge the U.K. in 1914. That power is China. The U.S. had massive gold inflows from 1914-1944. Although China’s gold purchases may have fallen off recently, it has been experiencing massive gold inflows. Gold reserves at the People’s Bank of China increased to 1,842 tonnes at the end of 2016, according to the China Gold Association. That’s up 11% from the 1,658 tonnes it held in June, 2015.

But China has acquired thousands of metric tonnes since without reporting these acquisitions to the IMF or World Gold Council. Based on available data on imports and the output of Chinese mines, actual Chinese government and private gold holdings are likely much higher. It’s hard to pinpoint because China operates through secret channels and does not officially report its gold holdings except at rare intervals. China’s gold acquisition is not the result of a formal gold standard, but is happening by stealth acquisitions on the market. They’re using intelligence and military assets, covert operations and market manipulation. But the result is the same. Gold’s been flowing to China in recent years, just as gold flowed to the U.S. before Bretton Woods.

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Get your shades out. The future’s so bright.

Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (WS)

The Dow-20,000 hats have come out of the drawer after an agonizingly long wait that had commenced in early December with the Dow Jones Industrial Average tantalizingly close to the sacred number before the selling started all over again. What a ride it has been. From the beginning of 2011 through January 27, 2017, so a little more than six years, the DJIA has soared 73%, from 11,577 to 20,094. Glorious!! But when it comes to revenues of the 30 Dow component companies – a reality that is harder to doctor than ex-bad-items adjusted earnings-per-share hyped by Wall Street – the picture turns morose. The 30 Dow component companies represent the leaders of their industries. They’re among the largest, most valuable, most iconic American companies. And they’re periodically booted out to accommodate a changed world.

[..] Ah-ha, you say. It’s all the oil bust’s fault. Without the oil companies that have been ravaged by the oil bust, revenues are fine. OK, maybe not fine. Revenues without the oil bust companies are up 13% since 2011. That’s an average annual growth rate of 2.5%, barely above the rate of inflation! But the DJIA hit 20,000 with the oil majors in the average. So in looking at the relationship between aggregate revenues and stock price movements, we need to leave them in the mix. And reality looks even worse. Apple, whose revenues have skyrocketed by over 1,000% since 2006, from $19.3 billion to $216 billion, became a Dow component in 2015, replacing AT&T. And its revenues weren’t part of the 30 Dow components until 2015. So here’s what the aggregate revenues of the Dow components look like without Apple (blue columns) and without Apple but with AT&T (brown columns). A pure stagnation fest:

In both scenarios, revenues in 2016 were lower than they had been in 2008. Only 2009 and 2010 were lower. So in terms of revenues, 2016 was for the Dow components ex-Apple the worst year since 2010! And this despite the five-year binge in acquisitions! So how have the last two years been? Don’t even ask. Of the 30 companies in the Dow, 16 sported declining revenues in 2016. And 17 sported declining revenues over the two-year span since 2014! Only two of them are oil companies! This table shows that inglorious list in all its beauty:

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Deliberate torture in a sort of good cop bad cop routine.

Eurozone Bailout Fund Says Greek Public Debt Is ‘Manageable’ (R.)

Greece’s public debt can be manageable, the eurozone bailout fund said on Sunday, responding to a leaked report by the IMF that the country’s debt will explode to 275% of GDP by 2060. A spokesman for the bailout fund, the European Stability Mechanism (ESM), said the path for Greek public finances agreed between Athens and the eurozone was credible and backed by contingency measures in case of unforeseen events. “We believe that Greece’s debt burden can be manageable, if the agreed reforms are fully implemented, thanks to the ESM’s exceptionally favorable loan conditions over the long term and the recently adopted short-term debt relief measures,” the ESM said. In the document, seen by the Financial Times, the IMF calculated that Greece’s debt load would reach 170% of gross domestic product by 2020 and 164% by 2022.

But it would become explosive thereafter and grow to 275% of GDP by 2060, the paper quoted the report as saying. The spokesman said, however, that the eurozone had promised to offer Greece additional debt relief if Athens delivers on all its reform promises. “As a result, we see no reason for an alarmistic assessment of Greece’s debt situation”. The IMF has long been calling for substantial eurozone debt relief for Athens, but Germany, which faces elections this year, has been strongly opposed to such a move until after 2018, when Greece is to finish all its promised reforms. The IMF assessment of Greek debt developments may make it impossible for the Fund to join the current bailout for Greece, now shouldered only by eurozone governments, because the fund’s policy is to enter programs which in the end allow a country to cope on its own. Eurozone governments want the IMF on board, but do not seem to be ready to provide the debt relief to Greece that is necessary for the Fund to join.

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Incursions into Greek air space have become ‘normal’. Now this. Brussels better act. Or Greece will, at some point. It puts Theresa May’s fast trip to Ankara to sell more weaponry in a bleak light.

Turkish Gunboat With Army Chief Sails Into Greek Waters; High Alert (K.)

The Greek military was on high alert on Sunday after a Turkish gunboat carrying Chief of General Staff Hulusi Akar sailed into Greek waters and around the Imia islets at around 10.30 a.m. The Turkish gunboat was escorted by several assault craft carrying commandos, which also circled the islets that brought Greece and Turkey to the brink of war 21 years ago, almost to the day. Greek authorities responded to what is being viewed as Turkish provocation with warnings and dispatched the Hellenic Navy’s Krataios gunboat, which escorted the Turkish flotilla out of Greece’s territorial waters. Diplomatic officials believe the incident to be a response to a Greek Supreme Court ruling last week rejecting a request from Ankara for the extradition of eight Turkish servicemen accused of taking part in failed coup last summer. Turkish military authorities released photographs showing Akar on the gunboat, with Imia in the background.

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Bless their souls.

Greek Fishermen Who Brave The Seas To Rescue Refugees Now Need Saving (NBC)

At the height of the refugee crisis in Sept. 2015, the 63-year-old Marmarinos and the rest of the village’s fishermen gave up working to spend months saving families from the rough, cold waters. Many of them were seeking safety from the bombs falling on Syria. “Mothers, pregnant women, children,” Marmarinos recalled. “So many children, all in the waters, wet, in a horrible situation.” Pideris, 40, says the fishermen risked their own lives “because it was the humane thing to do.” He said refugees and migrants “would fall overboard, they didn’t know how to navigate, boats were left adrift, they’d lose their engines, they’d break apart and the sea would fill with people.” But today, it’s Pideris and Marmarinos who need help after a winter storm on January 9 dropped nearly two feet of snow in their village. The boat canopies couldn’t take the weight and capsized while tied up in the harbor.

The boats are the pair’s sole sources of income. Pideris said he was in shock. “I’ve been in danger at sea, fishing and helping refugees, and my boat sinks in the safety of the harbor,” he said. “My brain stopped. My heart stopped. I was the living dead.” Both vessels sat in the corrosive sea water for three days, until the roads cleared enough to bring in a crane. The electronics and engines on both vessels were destroyed and require thousands of dollars in repairs. The mayor of Lesbos says money from a humanitarian award — the Olof Palme prize, which given to the islanders for embracing migrants – will go toward the cost of repairs. Marmarinos says he’s proud “because I offered help and I see it’s coming back to me … Even if no one helped I’d still be proud and if it happens again, I’d do the same.” Marmarinos and Pideris hope to be fishing again by early next month.

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I think that’s the clearest picture of what has happened to Arctic sea ice that I’ve seen.

NASA – 30 Years Of Before And After Images Around The World (F.)

The Arctic’s sea ice has been in decline for decades as pictured above comparing September 1984 to September 2016. The total area of persistent (4 years or older) ice has declined from 718,000 square miles to 42,000 square miles in the time period above. In the above images blue/grey ice is younger whereas white ice is older.

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Jan 062017
 
 January 6, 2017  Posted by at 4:52 pm Finance Tagged with: , , , , , , ,  4 Responses »


Dorothea Lange Farm family fleeing OK drought for CA, car broken down, abandoned Aug 1936

 

Since the new year will bring yuuge and bigly changes to us all (I truly hope both the year and the changes will leave you happy), I thought I’d start off by ‘reduxing’ two articles that contain further ‘reduxes’, Russian doll style. I do this because the man the articles are about is set to play a large role in those changes, certainly where Europe is concerned. And since the changes in Europe will be weally weally bigly, they will impact the entire world.

That is to say, we must seriously doubt if the EU -or rather, what’s left of it post-Brexit-, will live to see January 1 2018 in one piece. This is hardly an exaggeration, as you may be inclined to think. As I said recently, in Europe it’s not and-and, it’s if-or: with elections in Germany, France, Holland and probably Italy coming up, they don’t all have to turn out ‘badly’ for the pro-EU camp, if just one of them goes against the EU, it may well be game over.

Therefore Beppe Grillo, leader of the Five Star movement, is a man to keep an eye on. And not just for that. The first item below, a 1998 video, is an addition to my original article from November 14 2014, and it makes clear, once more, that Beppe is no fool. Nor is he a right wing nut, or anything remotely like that. Beppe actually understands what money is, much much better than any of the politicians and economists that rule the old continent. That makes him a threat to them.

Below that video from 1998, my November 14 2014 article, which in turn cites a 2013 article. I know some things will look dated, but you’ll get it, I’m sure. I hope you also get why I repost it all: 2017 has begun.

 

Beppe Grillo: Whom does the money belong to? Who does its ownership belong to? To the State, fine, so to us, we are the State.

You know that the State doesn’t exist, it is only a legal entity. WE are the state, the money is ours.

Then tell me one thing: if the money belongs to us, why do they lend it to us?

 

 

 

From November 14 2014: That says quite something, that title. And it’s probably not entirely true, it’s just that I can’t think of any others. And also, I’m in Europe myself right now, and I still have a European passport too. So there’s two of us at least. Moreover, I visited Beppe Grillo three years ago, before his 5-Star Movement (M5S) became a solid force in Italian politics. So we have a connection too.

Just now, I noticed via the BBC and Zero Hedge that Beppe not only expects to gather far more signatures than he said he would recently (1 million before vs 4 million today) for his plan to hold a referendum on the euro, he also claims to have a 2/3 majority in the Italian parliament. Well done. But he can’t do it alone.

Martin Armstrong thinks the EU may have him murdered for this before they allow it to take place. Which is a very good reason for everyone, certainly Europeans, to come out in support for the only man in Europe who makes any sense. I know many Italians find Beppe too coarse, but they need to understand he’s their only way out of this mess.

The smear campaigns against him are endless. The easier ones put him at the same level as Nigel Farage and Marine Le Pen, the more insidious ones paint him off as a George Soros patsy. There’ll be a lot more of that. And given the success of this year’s anti-Putin campaign in Europe, and the ongoing pro-Euro one, it’s going to take a lot not to have people believe whatever they are told to.

Just take this to heart: since Italy joined the euro, its industrial production has fallen by 25%. How is that not a disaster? Meanwhile, the eurozone economy is in awful shape, and the longer that lasts, the more countries like Italy will be disproportionally affected and dragged down further. There’s a reason for that numbers such as that: it’s not like Germany and Holland lost 25% of their production.

The eurozone must end before it starts to do irreversible damage, and before it turns Europe into a warzone, a far more real and imminent risk than anyone dares suggest.

The first bit here is from Zero Hedge, and then after that I will repost a lengthy piece about Beppe that I first published on February 12, 2013.

Italy’s Grillo Rages “We Are Not At War With ISIS Or Russia, We Are At War With The ECB”

Next week, Italy’s Beppe Grillo – the leader of the Italian Five Star Movement – will start collecting signatures with the aim of getting a referendum in Italy on leaving the euro “as soon as possible,” just as was done in 1989. As Grillo tells The BBC in this brief but stunning clip, “we will leave the Euro and bring down this system of bankers, of scum.” With two-thirds of Parliament apparently behind the plan, Grillo exclaims “we are dying, we need a Plan B to this Europe that has become a nightmare – and we are implementing it,” raging that “we are not at war with ISIS or Russia! We are at war with the European Central Bank,” that has stripped us of our sovereignty.

Beppe Grillo also said today:

It is high time for me and for the Italian people, to do something that should have been done a long time ago: to put an end to your sitting in this place, you who have dishonoured and substituted the governments and the democracies without any right. Ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money. Is there a single virtue now remaining amongst you? A crumb of humanity? Is there one vice you do not possess? Gold and the “spread” are your gods. GDP is you golden calf.

We’ll send you packing at the same time as Italy leaves the Euro. It can be done! You well know that the M5S will collect the signatures for the popular initiative law – and then – thanks to our presence in parliament, we will set up an advisory referendum as happened for the entry into the Euro in 1989. It can be done! I know that you are terrified about this. You will collapse like a house of cards. You will smash into tiny fragments like a crystal vase.

Without Italy in the Euro, there’ll be an end to this expropriation of national sovereignty all over Europe. Sovereignty belongs to the people not to the ECB and nor does it belong to the Troika or the Bundesbank. National budgets and currencies have to be returned to State control. They should not be controlled by commercial banks. We will not allow our economy to be strangled and Italian workers to become slaves to pay exorbitant interest rates to European banks.

The Euro is destroying the Italian economy. Since 1997, when Italy adjusted the value of the lira to connect it to the ECU (a condition imposed on us so that we could come into the euro), Italian industrial production has gone down by 25%. Hundreds of Italian companies have been sold abroad. These are the companies that have made our history and the image of “Made in Italy”.

As Martin Armstrong asks rather pointedly…

Since the introduction of the euro, all economic parameters have deteriorated, the founder of the five-star movement in Italy is absolutely correct. The design or the Euro was a disaster. There is no fixing this any more. We have crossed the line of no return. Beppe is now calling for referendum on leaving euro. Will he be assassinated by Brussels? It is unlikely that the EU Commission will allow such a vote.

And then here’s my February 2013 article; it seems silly to try and rewrite it. There is nobody in Europe other than him who understands what is going on, and is willing to fight for it. Grillo is a very smart man, a trained accountant and an avid reader of anything he can get his hands on. The image of him as a populist loud mouthed good for little comedian is just plain false. It was Grillo who exposed the Parmalat scandal, and the Monte Dei Paschi one.

Never forget what political and behind the veil powers he’s up against in his country, and how they seek to define the image the world has of him. What Beppe Grillo does takes a lot of courage. Not a lot of people volunteer to be smeared and insulted this way, let alone run the risk of being murdered. Those who do deserve our support.

 

 

Beppe Grillo Wants To Give Italy Democracy

In the fall of 2011, The Automatic Earth was on another European lecture tour. Nicole Foss had done a series of talks in Italy the previous year, and there was demand for more. This was remarkable, really, since a knowledge of the English language sufficient to understand Nicole’s lectures is not obvious in Italy, so we had to work with translators. Certainly none of this would have happened if not for the limitless drive and energy of Transition Italy’s Ellen Bermann.

In the run-up to the tour I had asked if Ellen could perhaps set up a meeting with an Italian I found very intriguing ever since I read he had organized meetings which drew as many as a million people at a time for a new – political – movement. Other than that, I didn’t know much about him. We were to find out, however, that every single Italian did, and was in awe of the man. A few weeks before arriving, we got word that he was gracious enough to agree to a meeting; gracious, because he’d never heard of us either and his agenda was overloaded as it was.

So in late October we drove the crazy 100+ tunnel road from the French border to Genoa to meet with Beppe Grillo in what turned out to be his unbelievable villa in Genoa Nervi, high on the mountain ridge, overlooking – with a stunning view – the Mediterranean, and set in a lovely and comfortable sunny afternoon. I think the first thing we noticed was that Beppe is a wealthy man; it had been a long time since I had been in a home where the maids wear uniforms. The grand piano was stacked with piles of books on all sorts of weighty topics, politics, environment, energy, finance. The house said: I’m a man of wealth and taste.

 


Eugenio Belgeri, Raúl Ilargi Meijer, Beppe Grillo, Nicole Foss and Ellen Bermann in Genoa Nervi, October 2011

 

I don’t speak Italian, and Beppe doesn’t speak much English (or French, German, Dutch), so it was at times a bit difficult to communicate. Not that it mattered much, though; Beppe Grillo has been a super charged Duracell bunny of an entertainer and performer all his life, and he will be the center of any conversation and any gathering he’s a part of no matter what the setting. Moreover, our Italian friends who were with us – and couldn’t believe they were there – could do a bit of translating. And so we spent a wonderful afternoon in Genoa, and managed to find out a lot about our very entertaining host and his ideas and activities.

Beppe had set up his Five Star movement (MoVimento Cinque Stelle, M5S) a few years prior. He had been organizing V-day “happenings” since 2007, and they drew those huge crowds. The V stands for “Vaffanculo”, which can really only be translated as “F**k off” or “Go f**k yourself”: the driving idea was to get rid of the corruption so rampant in Italian politics, and for all sitting politicians to go “Vaffanculo”.

At the time we met, the movement was focusing on local elections – they have since won many seats, have become the biggest party on Sicily (after Beppe swam there across the Straits of Messina from the mainland) and got one of their own installed as mayor of the city of Parma.

Grillo explained that M5S is not a political party, and he himself doesn’t run for office. He wants young people to step forward, and he’s already in his sixties. Anyone can become a candidate for M5S, provided they have no ties to other parties, no criminal record (Beppe does have one through a 1980 traffic accident); they can’t serve more than two terms (no career politicians) and they have to give back 75% of what they get paid for a public function (you can’t get rich off of politics).

I found it surprising that our friends at Transition Italy and the general left were reluctant to endorse Grillo politically; many even wanted nothing to do with him, they seemed to find him too coarse, too loud and too angry. At the same time, they were in absolute awe of him, openly or not, since he had always been such a big star, a hugely popular comedian when they grew up. Grillo offered to appear through a video link at Nicole’s next talk near Milan, but the organizers refused. It was only the first sign of a lot of mistrust among Italians even if they all share the same discontent with corrupt politics. Which have made trust a major issue in Italy.

 

 

This may have to do with the fact that Grillo is a comedian in the vein of perhaps people like George Carlin or Richard Pryor in the US. On steroids, and with a much wider appeal. Rough language, no holds barred comedy turns a lot of people off. Still, I was thinking that they could all use the visibility and popularity of the man to get their ideas across; they preferred anonymity, however.

By the way, the Five Stars, perhaps somewhat loosely translated, stand for energy, information, economy, transport and health. What we found during our conversation is that Beppe Grillo’s views on several topics were a little naive and unrealistic. For instance, like so many others, he saw a transition to alternative energy sources as much easier than it would realistically be. That said, energy and environment issues are important for him and the movement, and in that regard his focus on decentralization could carry real benefits.

Still, I don’t see the present naive ideas as being all that bad. After all, there are limits to what people can do and learn in a given amount of time. And Beppe certainly has a lot to do, he’s leading a revolution, so it’s fine if the learning process takes some time. Ideally, he would take a crash Automatic Earth primer course, but language will be a barrier there. I hope he finds a way, he’s certainly smart and curious enough.

 

 

When his career took off in the late 70’s, early 80’s, Beppe Grillo was just a funny man, who even appeared on Silvio Berlusconi’s TV channels. Only later did he become more political; but then he did it with a vengeance.

Grillo was first banned from Italian TV as early as 1987, when he quipped about then Prime Minister Bettino Craxi and his Socialist Party that if all Chinese are indeed socialists, who do they steal from? The ban was later made permanent. In the early 90’s, Operation Clean Hands was supposed to have cleaned up corruption in politics. Just 15 years later, Beppe Grillo started the Five Star movement. That’s how deeply engrained corruption is in Italy, stretching across politics, business and media.

We are- almost – all of us living in non-functioning democracies, but in Italy it’s all far more rampant and obvious. There’s a long history of deep-seated corruption, through the mafia, through lodges like P5 and Opus Dei, through many successive governments, and through the collaboration between all of the above, so much so that many Italians just see it as a fact of life. And that’s what Beppe Grillo wants to fight.

Ironically, he himself gets called a neo-nazi and a fascist these days. To which he replies that perhaps he’s the only thing standing between Italy and a next bout of fascism. I’ve read a whole bunch of articles the past few days, the international press discovers the man in the wake of the general elections scheduled for February 24-25, and a lot of it is quite negative, starting with the all too obvious notion that a clown shouldn’t enter politics. I don’t know, but I think Berlusconi is much more of a clown in that regard than Grillo is. A whole lot more of a clown and a whole lot less funny.

Beppe is called a populist for rejecting both right and left wing parties, a neo-nazi for refusing to block members of a right wing group from M5S, a Jew hater in connection with the fact that his beautiful wife was born in Iran, and a dictator because he’s very strict in demanding potential M5S candidates adhere to the rules he has set. Oh, and there are the inevitable right wing people calling him a communist.

There are of course tons of details that I don’t know, backgrounds, I’m largely an outsider, willing to be informed and corrected. And this would always be much more about the ideas than about the man. Then again, I did talk to the man in his own home and I don’t have the impression that Grillo is a fraud, or part of the same system he purports to fight as some allege, that he is somehow just the existing system’s court jester. He strikes me as being too loud and too embarrassing for that. And too genuinely angry.

Moreover, I think Italy is a perfect place for a nasty smear campaign, and since they can’t very well murder the man – he’s too popular – what better option than to make him look bad?! If anything, it would be strange if nobody did try to paint him off as a demagogue, a nazi or a sad old clown.

 


Photo: AFP: Marcello Paternostro

 

After being banned from TV, Grillo went on the build one of the most visited blogs/websites in the world, and the number one in Europe. Ironically, he is now in some media labeled something of a coward for not appearing in televised election debates. But Beppe doesn’t do TV, or – domestic – newspapers. For more than one reason.

Because he was banned from TV, because of the success of the internet campaign, and because Silvio Berlusconi incessantly used “lewd” talk shows on his own TV channels to conduct politics, Beppe Grillo insists his councilors and candidates stay off TV too, and he has his own unique way of making clear why and how: When a female Five Star member recently ignored this and appeared on a talk show anyway, Grillo said “the lure of television is like the G-spot, which gives you an orgasm in talk-show studios. It is Andy Warhol’s 15 minutes of fame. At home, your friends and relations applaud emotionally as they share the excitement of a brief moment of celebrity.”. Of course Beppe was labeled a sexist for saying this.

The internet is central to Grillo’s ideas. Not only as a tool to reach out to people, but even more as a way to conduct direct democracy. Because that is what he seeks to create: a system where people can participate directly. Grillo wants to bring (back) democracy, the real thing, and he’s long since understood that the internet is a brilliant tool with which to achieve that goal. One of his spear points is free internet access for all Italians. Which can then be used to let people vote on any issue that can be voted on. Not elections once every four years or so, but votes on any topic anytime people demand to vote on it. Because we can.

Since we had our chat in that garden in Genua, Beppe Grillo and M5S have moved on to bigger pastures: they are now set to be a major force in the general elections that will establish a new parliament. Polls differ, but they can hope to gain 15-20% of the vote (Grillo thinks it could be even much more). The leader in the polls is the Socialist Party, and then, depending on which poll you choose to believe, M5S comes in either second or third (behind Berlusconi). What seems certain is that the movement will be a formidable force, carrying 100 seats or more, in the new parliament, and that they could have a lot of say in the formation of any new coalition government.

In the run-up the elections, Beppe has now traded his home for a campaign bus, going from town to town and from one jam-packed campaign event to the next on what he has labeled the Tsunami Tour, in which he, in his own words, brings class action to the people.

As was the case in the local elections, Beppe Grillo says he wants “normal” people (“a mother of three, a 23-year-old college graduate, an engineer [..] those are the people I want to see in parliament”) to be elected, not career politicians who enrich themselves off their status and influence, and who he labels “the walking dead”, and though he acknowledges his candidates have no political experience, he says: “I’d rather take a shot in the dark with these guys than commit assisted suicide with those others.” In the same vein, another one of his lines is:“The average age of our politicians is 70. They’re planning a future they’re never going to see”.

On his immensely popular website beppegrillo.it, which has quite a bit of English language content, Grillo has some nice stats and tools. There is a list of Italian parlimentarians and Italian members of the EU Parliament who have been convicted of crimes. At this moment there are 24; their number has come down, but still. There is also a great little thing named “Map of Power of the Italian Stock Exchange” that graphically shows the links various politicians have with various corporations. I remember when Grillo proudly showed it to us, that after clicking just 2-3 politicians and 2-3 businesses, the screen was so full of lines depicting connections it had become an unreadable blur.

In between all the other activities, Beppe was instrumental 10 years ago in exposing the stunning $10 billion accounting fraud at dairy and food giant Parmalat before it went bankrupt, as well as the recent scandal at the world’s oldest bank, Monte Dei Paschi Di Siena, which will cost a reported $23 billion. Corruption is everywhere in Italy, which has a large political class that is all too eager to share in the spoils. Mr. Grillo was trained as an accountant, and he understands what he’s talking about when it comes to dodgy numbers. What he needs is the power to act.

 

 

Apart from the strong stance that Grillo and M5S take against corruption and for direct representation, critics say they have few clear policy objectives, that they don’t even know what they want. Being a movement instead of a party doesn’t help. But then, these critics think inside the very old system that M5S wants to replace with one that is far more transparent and direct. It’s more than obvious that existing powers have no interest in incorporating the possibilities for improvement offered by new technologies, but it should also be obvious that people, wherever they live, could potentially benefit from a better functioning political system.

There will be many who say that no such thing can be achieved, but perhaps it not only can, but is inevitable. All it could take is for an example to show that it can work. One might argue that the only reason our current systems continue to exist in all their opaqueness is that those who stand to profit from them are the ones who get to vote on any changes that could be applied. What Beppe Grillo envisions is a system in which every one can vote directly on all relevant issues, including changes to the system itself. It’s about class action, about taking back power from corrupt existing politics. Italy looks like a good testing ground for that, since its systemic rot is so obvious for all to see. But in other western countries, just like in Italy, it could return the power where it belongs: in the hands of the people.

Radical ideas? Not really, because when you think about it, perhaps it’s the technology itself that’s radical, not the use of it. And maybe it’s the fact that we’re so stuck in our existing systems that keeps us from using our new technologies to their full potential. Just like it keeps us from restructuring our financial systems and our energy systems for that matter. We continue to have systems and institutions guide our lives long after they’ve ceased to be useful for our present day lives, as long as we’re snug and warm and well-fed. And we do so until a real bad crisis of some sort comes along and makes it absolutely untenable, often with a lot of misery and blood thrown into the equation.

Beppe Grillo wants to break that chain. And he’s got a recipe to do it. It may not be perfect or foolproof, but who cares when it’s replacing something that no longer functions at all, that just drags us down and threatens our children’s lives? Who cares? Well, the Monti’s and Berlusconi’s and Merkel’s and Obama’s and Exxon’s and BP’s and Monsanto’s of the world do, because it is the old system that gave them what they have, and they don’t want a new one that might take it away. Our so-called democracies exist to please our leaders and elites, not ourselves. And we’re unlikely to figure that one out until it’s way too late.

Unless the Italians do our work for us and vote for the Cinque Stelle in huge numbers.