Nov 112017
 
 November 11, 2017  Posted by at 9:15 pm Finance Tagged with: , , , , , , , , ,  8 Responses »
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Jean-Léon Gérôme Truth Coming Out of Her Well to Shame Mankind 1896

 

An entire library of articles about Big Tech is coming out these days, and I find that much of it is written so well, and the ideas in them so well expressed, that I have little to add. Except, I think I may have the solution to the problems many people see. But I also have a concern that I don’t see addressed, and that may well prevent that solution from being adopted. If so, we’re very far away from any solution at all. And that’s seriously bad news.

Let’s start with a general -even ‘light’- critique of social media by Claire Wardle and Hossein Derakhshan for the Guardian:

 

How Did The News Go ‘Fake’? When The Media Went Social

Social media force us to live our lives in public, positioned centre-stage in our very own daily performances. Erving Goffman, the American sociologist, articulated the idea of “life as theatre” in his 1956 book The Presentation of Self in Everyday Life, and while the book was published more than half a century ago, the concept is even more relevant today. It is increasingly difficult to live a private life, in terms not just of keeping our personal data away from governments or corporations, but also of keeping our movements, interests and, most worryingly, information consumption habits from the wider world.

The social networks are engineered so that we are constantly assessing others – and being assessed ourselves. In fact our “selves” are scattered across different platforms, and our decisions, which are public or semi-public performances, are driven by our desire to make a good impression on our audiences, imagined and actual. We grudgingly accept these public performances when it comes to our travels, shopping, dating, and dining. We know the deal. The online tools that we use are free in return for us giving up our data, and we understand that they need us to publicly share our lifestyle decisions to encourage people in our network to join, connect and purchase.

But, critically, the same forces have impacted the way we consume news and information. Before our media became “social”, only our closest family or friends knew what we read or watched, and if we wanted to keep our guilty pleasures secret, we could. Now, for those of us who consume news via the social networks, what we “like” and what we follow is visible to many [..] Consumption of the news has become a performance that can’t be solely about seeking information or even entertainment. What we choose to “like” or follow is part of our identity, an indication of our social class and status, and most frequently our political persuasion.

That sets the scene. People sell their lives, their souls, to join a network that then sells these lives -and souls- to the highest bidder, for a profit the people themselves get nothing of. This is not some far-fetched idea. As noted further down, in terms of scale, Facebook is a present day Christianity. And these concerns are not only coming from ‘concerned citizens’, some of the early participants are speaking out as well. Like Facebook co-founder Sean Parker:

 

Facebook: God Only Knows What It’s Doing To Our Children’s Brains

Sean Parker, the founding president of Facebook, gave me a candid insider’s look at how social networks purposely hook and potentially hurt our brains. Be smart: Parker’s I-was-there account provides priceless perspective in the rising debate about the power and effects of the social networks, which now have scale and reach unknown in human history. [..]

“When Facebook was getting going, I had these people who would come up to me and they would say, ‘I’m not on social media.’ And I would say, ‘OK. You know, you will be.’ And then they would say, ‘No, no, no. I value my real-life interactions. I value the moment. I value presence. I value intimacy.’ And I would say, … ‘We’ll get you eventually.'”

“I don’t know if I really understood the consequences of what I was saying, because [of] the unintended consequences of a network when it grows to a billion or 2 billion people and … it literally changes your relationship with society, with each other … It probably interferes with productivity in weird ways. God only knows what it’s doing to our children’s brains.”

“The thought process that went into building these applications, Facebook being the first of them, … was all about: ‘How do we consume as much of your time and conscious attention as possible?'” “And that means that we need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo or a post or whatever. And that’s going to get you to contribute more content, and that’s going to get you … more likes and comments.”

“It’s a social-validation feedback loop … exactly the kind of thing that a hacker like myself would come up with, because you’re exploiting a vulnerability in human psychology.” “The inventors, creators — it’s me, it’s Mark [Zuckerberg], it’s Kevin Systrom on Instagram, it’s all of these people — understood this consciously. And we did it anyway.”

Early stage investor in Facebook, Roger McNamee, also has some words to add along the same lines as Parker. They make it sound like they’re Frankenstein and Facebook is their monster.

 

How Facebook and Google Threaten Public Health – and Democracy

The term “addiction” is no exaggeration. The average consumer checks his or her smartphone 150 times a day, making more than 2,000 swipes and touches. The applications they use most frequently are owned by Facebook and Alphabet, and the usage of those products is still increasing. In terms of scale, Facebook and YouTube are similar to Christianity and Islam respectively. More than 2 billion people use Facebook every month, 1.3 billion check in every day. More than 1.5 billion people use YouTube. Other services owned by these companies also have user populations of 1 billion or more.

Facebook and Alphabet are huge because users are willing to trade privacy and openness for “convenient and free.” Content creators resisted at first, but user demand forced them to surrender control and profits to Facebook and Alphabet. The sad truth is that Facebook and Alphabet have behaved irresponsibly in the pursuit of massive profits. They have consciously combined persuasive techniques developed by propagandists and the gambling industry with technology in ways that threaten public health and democracy.

The issue, however, is not social networking or search. It is advertising business models. Let me explain. From the earliest days of tabloid newspapers, publishers realized the power of exploiting human emotions. To win a battle for attention, publishers must give users “what they want,” content that appeals to emotions, rather than intellect. Substance cannot compete with sensation, which must be amplified constantly, lest consumers get distracted and move on. “If it bleeds, it leads” has guided editorial choices for more than 150 years, but has only become a threat to society in the past decade, since the introduction of smartphones.

Media delivery platforms like newspapers, television, books, and even computers are persuasive, but people only engage with them for a few hours each day and every person receives the same content. Today’s battle for attention is not a fair fight. Every competitor exploits the same techniques, but Facebook and Alphabet have prohibitive advantages: personalization and smartphones. Unlike older media, Facebook and Alphabet know essentially everything about their users, tracking them everywhere they go on the web and often beyond.

By making every experience free and easy, Facebook and Alphabet became gatekeepers on the internet, giving them levels of control and profitability previously unknown in media. They exploit data to customize each user’s experience and siphon profits from content creators. Thanks to smartphones, the battle for attention now takes place on a single platform that is available every waking moment. Competitors to Facebook and Alphabet do not have a prayer.

Facebook and Alphabet monetize content through advertising that is targeted more precisely than has ever been possible before. The platforms create “filter bubbles” around each user, confirming pre-existing beliefs and often creating the illusion that everyone shares the same views. Platforms do this because it is profitable. The downside of filter bubbles is that beliefs become more rigid and extreme. Users are less open to new ideas and even to facts.

Of the millions of pieces of content that Facebook can show each user at a given time, they choose the handful most likely to maximize profits. If it were not for the advertising business model, Facebook might choose content that informs, inspires, or enriches users. Instead, the user experience on Facebook is dominated by appeals to fear and anger. This would be bad enough, but reality is worse.

And in a Daily Mail article, McNamee’s ideas are taken a mile or so further. Goebbels, Bernays, fear, anger, personalization, civility.

 

Early Facebook Investor Compares The Social Network To Nazi Propaganda

Facebook officials have been compared to the Nazi propaganda chief Joseph Goebbels by a former investor. Roger McNamee also likened the company’s methods to those of Edward Bernays, the ‘father of public’ relations who promoted smoking for women. Mr McNamee, who made a fortune backing the social network in its infancy, has spoken out about his concern about the techniques the tech giants use to engage users and advertisers. [..] the former investor said everyone was now ‘in one degree or another addicted’ to the site while he feared the platform was causing people to swap real relationships for phoney ones.

And he likened the techniques of the company to Mr Bernays and Hitler’s public relations minister. ‘In order to maintain your attention they have taken all the techniques of Edward Bernays and Joseph Goebbels, and all of the other people from the world of persuasion, and all the big ad agencies, and they’ve mapped it onto an all day product with highly personalised information in order to addict you,’ Mr McNamee told The Telegraph. Mr McNamee said Facebook was creating a culture of ‘fear and anger’. ‘We have lowered the civil discourse, people have become less civil to each other..’

He said the tech giant had ‘weaponised’ the First Amendment to ‘essentially absolve themselves of responsibility’. He added: ‘I say this as somebody who was there at the beginning.’ Mr McNamee’s comments come as a further blow to Facebook as just last month former employee Justin Rosenstein spoke out about his concerns. Mr Rosenstein, the Facebook engineer who built a prototype of the network’s ‘like’ button, called the creation the ‘bright dings of pseudo-pleasure’. He said he was forced to limit his own use of the social network because he was worried about the impact it had on him.

As for the economic, not the societal or personal, effects of social media, Yanis Varoufakis had this to say a few weeks ago:

 

Capitalism Is Ending Because It Has Made Itself Obsolete – Varoufakis

Former Greek finance minister Yanis Varoufakis has claimed capitalism is coming to an end because it is making itself obsolete. The former economics professor told an audience at University College London that the rise of giant technology corporations and artificial intelligence will cause the current economic system to undermine itself. Mr Varoufakis said companies such as Google and Facebook, for the first time ever, are having their capital bought and produced by consumers.

“Firstly the technologies were funded by some government grant; secondly every time you search for something on Google, you contribute to Google’s capital,” he said. “And who gets the returns from capital? Google, not you. “So now there is no doubt capital is being socially produced, and the returns are being privatised. This with artificial intelligence is going to be the end of capitalism.”

Ergo, as people sell their lives and their souls to Facebook and Alphabet, they sell their economies along with them. That’s what that means. And you were just checking what your friends were doing. Or, that’s what you thought you were doing.

The solution to all these pains is, likely unintentionally, provided by Umair Haque’s critique of economics. It’s interesting to see how the topics ‘blend’, ‘intertwine’.

 

How Economics Failed the Economy

When, in the 1930s, the great economist Simon Kuznets created GDP, he deliberately left two industries out of this then novel, revolutionary idea of a national income : finance and advertising. [..] Kuznets logic was simple, and it was not mere opinion, but analytical fact: finance and advertising don’t create new value, they only allocate, or distribute existing value in the same way that a loan to buy a television isn’t the television, or an ad for healthcare isn’t healthcare. They are only means to goods, not goods themselves. Now we come to two tragedies of history.

What happened next is that Congress laughed, as Congresses do, ignored Kuznets, and included advertising and finance anyways for political reasons -after all, bigger, to the politicians mind, has always been better, and therefore, a bigger national income must have been better. Right? Let’s think about it. Today, something very curious has taken place.

If we do what Kuznets originally suggested, and subtract finance and advertising from GDP, what does that picture -a picture of the economy as it actually is reveal? Well, since the lion’s share of growth, more than 50% every year, comes from finance and advertising -whether via Facebook or Google or Wall St and hedge funds and so on- we would immediately see that the economic growth that the US has chased so desperately, so furiously, never actually existed at all.

Growth itself has only been an illusion, a trick of numbers, generated by including what should have been left out in the first place. If we subtracted allocative industries from GDP, we’d see that economic growth is in fact below population growth, and has been for a very long time now, probably since the 1980s and in that way, the US economy has been stagnant, which is (surprise) what everyday life feels like. Feels like.

Economic indicators do not anymore tell us a realistic, worthwhile, and accurate story about the truth of the economy, and they never did -only, for a while, the trick convinced us that reality wasn’t. Today, that trick is over, and economies grow , but people’s lives, their well-being, incomes, and wealth, do not, and that, of course, is why extremism is sweeping the globe. Perhaps now you begin to see why the two have grown divorced from one another: economics failed the economy.

Now let us go one step, then two steps, further. Finance and advertising are no longer merely allocative industries today. They are now extractive industries. That is, they internalize value from society, and shift costs onto society, all the while creating no value themselves.

The story is easiest to understand via Facebook’s example: it makes its users sadder, lonelier, and unhappier, and also corrodes democracy in spectacular and catastrophic ways. There is not a single upside of any kind that is discernible -and yet, all the above is counted as a benefit, not a cost, in national income, so the economy can thus grow, even while a society of miserable people are being manipulated by foreign actors into destroying their own democracy. Pretty neat, huh?

It was BECAUSE finance and advertising were counted as creative, productive, when they were only allocative, distributive that they soon became extractive. After all, if we had said from the beginning that these industries do not count, perhaps they would not have needed to maximize profits (or for VCs to pour money into them, and so on) endlessly to count more. But we didn’t.

And so soon, they had no choice but to become extractive: chasing more and more profits, to juice up the illusion of growth, and soon enough, these industries began to eat the economy whole, because of course, as Kuznets observed, they allocate everything else in the economy, and therefore, they control it.

Thus, the truly creative, productive, life-giving parts of the economy shrank in relative, and even in absolute terms, as they were taken apart, strip-mined, and consumed in order to feed the predatory parts of the economy, which do not expand human potential. The economy did eat itself, just as Marx had supposed – only the reason was not something inherent in it, but a choice, a mistake, a tragedy.

[..] Life is not flourishing, growing, or developing in a single way that I or even you can readily identify or name. And yet, the economy appears to be growing, because purely allocative and distributive enterprises like Uber, Facebook, credit rating agencies, endless nameless hedge funds, shady personal info brokers, and so on, which fail to contribute positively to human life in any discernible way whatsoever, are all counted as beneficial. Do you see the absurdity of it?

[..] It’s not a coincidence that the good has failed to grow, nor is it an act of the gods. It was a choice. A simple cause-effect relationship, of a society tricking itself into desperately pretending it was growing, versus truly growing. Remember not subtracting finance and advertising from GDP, to create the illusion of growth? Had America not done that, then perhaps it might have had to work hard to find ways to genuinely, authentically, meaningfully grow, instead of taken the easy way out, only to end up stagnating today, and unable to really even figure out why yet.

Industries that are not productive, but instead only extract money from society, need to be taxed so heavily they have trouble surviving. If that doesn’t happen, your economy will never thrive, or even survive. The whole service economy fata morgana must be thrown as far away as we can throw it. Economies must produce real, tangible things, or they die.

For the finance industry this means: tax the sh*t out of any transactions they engage in. Want to make money on complex derivatives? We’ll take 75+%. Upfront. And no, you can’t take your company overseas. Don’t even try.

For Uber and Airbnb it means pay taxes up the wazoo, either as a company or as individual home slash car owners. Uber and Airbnb take huge amounts of money out of local economies, societies, communities, which is nonsense, unnecessary and detrimental. Every city can set up its own local car- or home rental schemes. Their profits should stay within the community, and be invested in it.

For Google and Facebook as the world’s new major -only?!- ad agencies: Tax the heebies out of them or forbid them from running any ads at all. Why? Because they extract enormous amounts of productive capital from society. Capital they, as Varoufakis says, do not even themselves create.

YOU are creating the capital, and YOU then must pay for access to the capital created. Yeah, it feels like you can just hook up and look at what your friends are doing, but the price extracted from you, your friends, and your community is so high you would never volunteer to pay for it if you had any idea.

 

The one thing that I don’t see anyone address, and that might prevent these pretty straightforward ”tax-them-til they-bleed!” answers to the threat of New Big Tech, is that Facebook, Alphabet et al have built a very strong relationship with various intelligence communities. And then you have Goebbels and Bernays in the service of the CIA.

As Google, Facebook and the CIA are ever more entwined, these companies become so important to what ‘the spooks’ consider the interests of the nation that they will become mutually protective. And once CIA headquarters in Langley, VA, aka the aptly named “George Bush Center for Intelligence”, openly as well as secretly protects you, you’re pretty much set for life. A long life.

Next up: they’ll be taking over entire economies, societies. This is happening as we speak. I know, you were thinking it was ‘the Russians’ with a few as yet unproven bucks in Facebook ads that were threatening US and European democracies. Well, you’re really going to have to think again.

The world has never seen such technologies. It has never seen such intensity, depth of, or such dependence on, information. We are simply not prepared for any of this. But we need to learn fast, or become patsies and slaves in a full blown 1984 style piece of absurd theater. Our politicians are AWOL and MIA for all of it, they have no idea what to say or think, they don’t understand what Google or bitcoin or Uber really mean.

In the meantime, we know one thing we can do, and we can justify doing it through the concept of non-productive and extractive industries. That is, tax them till they bleed. That we would hit the finance industry with that as well is a welcome bonus. Long overdue. We need productive economies or we’re done. And Facebook and Alphabet -and Goldman Sachs- don’t produce d*ck all.

When you think about it, the only growth that’s left in the US economy is that of companies spying on American citizens. Well, that and Europeans. China has banned Facebook and Google. Why do you think they have? Because Google and Facebook ARE 1984, that’s why. And if there’s going to be a Big Brother in the Middle Kingdom, it’s not going to be Silicon Valley.

 

 

Nov 102017
 
 November 10, 2017  Posted by at 9:52 am Finance Tagged with: , , , , , , , , , ,  11 Responses »
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Edward S. Curtis A smoky day at the Sugar Bowl—Hupa c. 1923

 

Stock-Market Investors Are Starting To Freak Out About Junk Bonds (MW)
China’s New Way To Hide Debt: Call It Equity (ZH)
China To Remove Foreign Ownership Limit In Chinese Banks, Brokers (BBG)
Why Have We Built A Paradise For Offshore Billionaires? (Thomas Frank)
We Should Tax Them On Transactions – Steve Keen (RT)
Kleptocrat-Owned Media Pick Out ‘Incrimination’ To Target Russia – Keiser (RT)
‘$300 Million In Cryptocurrency’ Accidentally Lost Forever Due To Bug (G.)
Monsanto Sued By Brazilian Soybean Farmers Over GMO Seed (RT)
Monsanto In Court Again: New Herbicide Kills 3.6 Million Acres Of Crops (ZH)
Lebanon PM’s Resignation Is Not All It Seems (Fisk)
Saudi Arabia Is Blocking Aid To The World’s Worst Humanitarian Crisis
Antarctica Is Being Rapidly Melted From Below (Ind.)
Next Round Of Greek Pension Cuts To Reach Up To 18% In 2019 (K.)
EU Parliamentarians Warn Refugees May Die on Greek Islands (GR)
Facebook: God Only Knows What It’s Doing To Our Children’s Brains (Axios)

 

 

is this where it’ll all blow up?

Stock-Market Investors Are Starting To Freak Out About Junk Bonds (MW)

Wall Street bears are sounding alarms about a recent drop in non-investment-grade bonds, popularly referred to as junk bonds. The SPDR Bloomberg Barclays High Yield Bond ETF, an exchange-traded fund that tracks junk bonds, is on track to finished at its lowest level since March 24. Another well known junk-bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF also carved out late-March nadir, according to FactSet data. Both ETFs fell below their 200-day moving averages early this month, signaling that momentum in fixed-income products is bearish. Technical analysts tend to follow short- and long-term averages in an asset to help determine bullish and bearish trends. The moves for JNK and HYG, referencing their widely used tickers, come as the S&P 500 index and the Dow Jones Industrial Average have been testing fresh highs.

Normally, junk bonds and stocks are positively correlated, or move in the same direction, because junk bonds are considered a proxy for risk appetite in the market. Junk bonds had been drawing interest, particularly in an environment of ultralow bonds, with the 10-year Treasury and the 30-year Treasury bond offering yields below their historic averages, even as the Federal Reserve embarks upon efforts to lift interest rates from crisis-era levels. Bonds with the highest yields tend to be the riskiest and therefore offer a commensurate compensation in exchange for that perceived risk. Bond prices and yields move in opposition. However, a recent divergence between junk bonds and stocks, taking hold in late October, has raised eyebrows among Wall Street investors.

Read more …

This cannot end well.

China’s New Way To Hide Debt: Call It Equity (ZH)

The legacy of the soon-to-retire PBoC governor, Zhou Xiochuan, will be that in sharp contrast to his western brethren, he warned that China’s credit bubble would burst before the fact. Two weeks ago, Zhou warned during the Party Congress that China’s financial system could be heading for a “Minsky moment” due to high levels of corporate debt and rapidly rising household debt. “If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a ‘Minsky moment’. That’s what we should particularly defend against.” Perhaps sensing that nobody in the Middle Kingdom was paying attention, we noted two days ago his lengthy essay published on the PBoC website. It contained another warning that latent risks are accumulating in the Chinese system, including some that are “hidden, complex, contagious and hazardous.”

He also highlighted “debt finance disguised as equity” as a concern. Talking of which, there’s a new growth market in the gargantuan Chinese corporate debt market – we are referring to perpetual notes. Are you ready for the clever part about perpetual notes – they are debt but it’s permissible under Chinese accounting regulations to classify them as “equity” – et voila, corporate gearing has fallen. Under pressure to trim borrowings, China’s companies have found a way to reduce their lofty debt burdens – even if some of the risk remains. Sales of perpetual notes – long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature – have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system.

The bonds are so popular that issuance by non-bank firms has jumped to the equivalent of 433 billion yuan ($65 billion), more than seven times sales by companies in the U.S. “Chinese issuers love perpetual bonds because they are under great pressure to deleverage,” said Wang Ying, a senior director at Fitch Ratings in Shanghai. “Sophisticated investors should do their homework and shouldn’t be misled by the numbers in accounting books.

Read more …

China signals it needs money, badly.

China To Remove Foreign Ownership Limit In Chinese Banks, Brokers (BBG)

China took a major step toward the long-awaited opening of its financial system, removing foreign ownership limits on its banks and asset-management companies, and allowing overseas firms to take majority stakes in local securities ventures and insurers. Regulators are drafting detailed rules, which will be released soon, Vice Finance Minister Zhu Guangyao said at a briefing in Beijing on Friday. Foreign firms will be allowed to own up to 51% in securities ventures and life-insurance companies, caps that will be removed gradually over time, he said. China’s steps look poised to end years of frustration for foreign banks, who have long been marginal players in Asia’s largest economy. The announcement could be seen as a major win for U.S. President Donald Trump, whose first official visit to China was followed by a string of Sino-U.S. deals.

“This is a milestone in China’s progress of opening up its economy,” said Larry Hu at Macquarie in Hong Kong. Announcing this during Trump’s visit shows the world that “China and the U.S. are in a business and trade cooperation rather than confrontation,” Hu said. On Thursday, China’s Foreign Ministry foreshadowed the latest moves, with a statement saying that entry barriers to sectors such as banking, insurance, securities and funds will be “substantially” eased. Those comments came following a meeting between Trump and his counterpart Xi Jinping. The moves would be encouraging to foreign banks, asset managers and insurers, who have long been kept on the margins in China, the world’s second-largest economy, by various barriers. Global banks are currently limited to owning 49% of local securities joint ventures, frustrating their attempts to compete effectively with Chinese rivals.

Read more …

“This is their democracy today. We just happen to live in it.”

Why Have We Built A Paradise For Offshore Billionaires? (Thomas Frank)

It’s not enough to say, in response to the Paradise Papers revelations, that we already knew that rich people parked their money in offshore tax havens, where their piles accumulate far from the scrutiny of our government. Nor is it enough to say that we were already aware that we live in a time of “inequality.” What we have learned this week is the clinical definition of the word. What we have learned is how much the rich and the virtuous have been hiding away and where they’re hiding it. Yes, there are sinister-looking Russian capitalists involved. But there’s also our favorite actors and singers. Our beloved alma mater, supposedly a charitable institution. Everyone with money seems to be in on it. We’re also learning that maybe we’ve had it backwards all along.

Tax havens on some tropical island aren’t some sideshow to western capitalism; they are a central reality. Those hidden billions are like an unseen planet whose gravity is pulling our politics and our economy always in a certain direction. And this week we finally began to understand what that uncharted planet looks like; we started to grasp its mass and its power. Think about it like this. For decades Americans have been erupting in anger at what they can see happening to their beloved middle-class world. We think we know what the culprit is; we can see it vaguely through a darkened glass. It’s “elitism.” It’s a “rigged system.” It’s people who think they’re better than us. And for decades we have lashed out. At the immigrant next door. At Jews. At Muslims. At school teachers. At public workers who are still paid a decent wage. Our fury, unrelenting, grows and grows.

We revolt, but it turns out we have chosen the wrong political leader. We revolt again: this time, the leader is even worse. This week we are coming face to face with a big part of the right answer: it’s that the celebrities and business leaders we have raised up above ourselves would like to have nothing to do with us. Yes, they are grateful for the protection of our laws. Yes, they like having the police and the Marine Corps on hand to defend their property. Yes, they eat our food and breathe our air and expect us to keep these pure and healthy; they demand that we get educated before we may come and work for them, and for that purpose they expect us to pay for a vast system of public schools. They also expect us to watch their movies, to buy their products, to use their software. They expect our (slowly declining) middle class to be their loyal customers.

[..] Our leaders raised up a tiny class of otherworldly individuals and built a paradise for them, made their lives supremely delicious. Today they hold unimaginable and unaccountable power. We endure potholes and live in fear of collapsing highway bridges because our leaders wanted these very special people to have an even larger second yacht. Our kids sit in overcrowded classrooms in underfunded schools so that a handful of exalted individuals can relax on their own private beach. Today it is these same golden figures with their offshore billions who host the fundraisers, hire the lobbyists, bankroll the think tanks and subsidize the artists and intellectuals. This is their democracy today. We just happen to live in it.

Read more …

“So the only way we can really stop it – is by forgetting about taxing them with income. Income tax works for workers – it doesn’t work for a corporation; it doesn’t work for the wealthy.”

We Should Tax Them On Transactions – Steve Keen (RT)

Steve Keen, Professor of Economics at Kingston University says the findings of the so-called Paradise Papers haven’t been surprising as “Tax evasion by the wealthy has been going on for decades, and we’ll never stop it. “We simply have to find a way to bring tax revenue back into the government that they can’t evade. And it will always manage to evade income tax,” he told RT. Keen adds though that it won’t be easy to stop this thing from happening. Partly that’s “because we don’t understand how taxation actually works.” “We think taxation is necessary to finance government spending. In fact, the government can spend regardless of taxation – the taxation simply takes large amounts of the money out of the system that government has spent into it because if we didn’t tax, we would have a risk of inflation.”

“Once you look at it that way, what the rich are actually doing – are siphoning off money that has been created by the government, accumulating it in offshore accounts and hanging onto the wealth, which should be recycled back into the economy. So the only way we can really stop it – is by forgetting about taxing them with income. Income tax works for workers – it doesn’t work for a corporation; it doesn’t work for the wealthy. We should tax them on transactions, and then they can’t evade unless they stop having transactions. If they stop having transactions, they will stop being wealthy,” he said. RT: What are the chances of that happening? SK: It just takes politicians to understand how money is created. So I think it is almost virtually impossible. They continue spreading this myth that they have got to tax us to be able to spend, running austerity, which is unnecessary. All this fits in to actually loading the pockets of the rich. Maybe there is a connection…

Read more …

Part 2 of the article above.

Kleptocrat-Owned Media Pick Out ‘Incrimination’ To Target Russia – Keiser (RT)

Let’s talk about some numbers there. To put this into a broader context, the Tax Justice Network did a study a couple of years ago. They determined that between $21 and $31 trillion is held offshore. This means that hundreds of billions of dollars of taxes go uncollected. It means those who are paying tax are paying for the entire tax burden for various countries infrastructures, military, etc. You end up with what I would call apartheid, where you have got approximately 200,000 people in the world, who pay no tax and are able to invest without paying any tax. So they are compounding money at 20-22% a year without paying tax. So the billionaire class is escalating, we know this.

Meanwhile, the poverty levels are continuing to rise because people are being ripped off by these corrupt countries in cahoots with these billionaires, who are placing the entire cost of running a society on those who can least afford it. And into the mix comes the social uprising – more violence, because naturally, if you have everything stolen from you, you have nothing to lose, so you become violent. Now, to specifically answer your question about Russia being targeted by selectively picking out … here’s an elegant phrase – you’re trying to pick a fly poop from the pepper. So they look at this big scattershot of information, and with little tweezers, they try to pick out what they perceive to be incriminating data points.

Then they build a scenario, and then the corporations that are owned by the same people that are hiding the wealth… There are only approximately six major media companies in America. Those are owned by the same kleptocrats that are hiding all these billions of dollars. They then put that story out there to deflect and confuse the average mainstream media watcher that “oh my Gosh, Russia is involved in this scandal! Russia is involved in Black Lives Matter! Russia is involved with Hillary losing the election because she is completely inept. Russia, Russia, Russia…”

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Confidence.

‘$300 Million In Cryptocurrency’ Accidentally Lost Forever Due To Bug (G.)

More than $300m of cryptocurrency has been lost after a series of bugs in a popular digital wallet service led one curious developer to accidentally take control of and then lock up the funds, according to reports. Unlike most cryptocurrency hacks, however, the money wasn’t deliberately taken: it was effectively destroyed by accident. The lost money was in the form of Ether, the tradable currency that fuels the Ethereum distributed app platform, and was kept in digital multi-signature wallets built by a developer called Parity. These wallets require more than one user to enter their key before funds can be transferred. On Tuesday Parity revealed that, while fixing a bug that let hackers steal $32m out of few multi-signature wallets, it had inadvertently left a second flaw in its systems that allowed one user to become the sole owner of every single multi-signature wallet.

The user, “devops199”, triggered the flaw apparently by accident. When they realised what they had done, they attempted to undo the damage by deleting the code which had transferred ownership of the funds. Rather than returning the money, however, that simply locked all the funds in those multisignature wallets permanently, with no way to access them. “This means that currently no funds can be moved out of the multi-sig wallets,” Parity says in a security advisory. Effectively, a user accidentally stole hundreds of wallets simultaneously, and then set them on fire in a panic while trying to give them back. Some are pushing for a “hard fork” of Ethereum, which would undo the damage by effectively asking 51% of the currency’s users to agree to pretend that it had never happened in the first place.

That would require a change to the code that controls ethereum, and then that change to be adopted by the majority of the user base. The risk is that some of the community refuses to accept the change, resulting in a split into two parallel groups. Such an act isn’t unheard of: another hack, two years ago, of an Ethereum app called the DAO resulted in $150m being stolen. The hard fork was successful then, but the money stolen represented a much larger portion of the entire Ethereum market than the $300m lost to Parity. The lost $300m follows the discovery of bug in July that led to the theft of $32m in ether from just three multisignature wallets. A marathon coding and hacking effort was required to secure another $208m against theft. Patching that bug led to the flaw in Parity’s system that devops199 triggered by accident.

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Lawsuit after lawsuit after lawsuit. At what point will we say it’s enough?

Monsanto Sued By Brazilian Soybean Farmers Over GMO Seed (RT)

Growers in Brazil’s largest soybean producing state Mato Grosso have asked a court to cancel Monsanto’s Intacta GMO seed patent. They claim irregularities, including the company’s alleged failure to prove it brings de facto technological innovation. The Mato Grosso branch of Aprosoja, the association representing the growers, has filed a lawsuit in a federal court in Brasilia. The growers claim Monsanto’s Intacta RR2 PRO patent “does not fully reveal the invention so as to allow, at the end of the exclusivity period, for any person to freely have access to it.” That requirement “avoids that a company controls a technology for an undetermined period of time,” Aprosoja said, adding Intacta’s patent protection extends through October 2022. It cited data from consultancy Agroconsult, saying that about 53% of Brazil’s soy area was planted with Intacta technology in the 2016/17 crop cycle.

Around 40% of the crop is grown with Monsanto’s Roundup Ready seed technology (Intacta’s predecessor), and only seven% is non-GM. Brazilian farmers have been continually urging the replacement of genetically modified soybeans with non-GM seeds. Recently they asked Monsanto and other producers of pest-resistant corn seeds to reimburse them for money spent on additional pesticides when the bugs killed the crops instead of dying. Several years ago five million Brazilian soybean farmers sued Monsanto, claiming the genetic-engineering company was collecting royalties on crops it unfairly claims as its own. In 2012, the Brazilian court ruled in favor of the Brazilian farmers, saying Monsanto owes them at least $2 billion since 2004. After the legal disputes, Monsanto stopped collecting royalties linked to its first-generation Roundup Ready technology, and some farmers agreed to get a discount rate to use Intacta seeds.

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How is Monsanto not a criminal enterprise?

Monsanto In Court Again: New Herbicide Kills 3.6 Million Acres Of Crops (ZH)

[..] as the Wall Street Journal points out today, after allegedly wiping out millions of acres of farm ground across the Midwest, Monsanto once again finds itself in a familiar spot: the courtroom. Monsanto’s new version of the herbicide called dicamba is part of a more than $1 billion investment that pairs it with new genetically engineered seeds that are resistant to the spray. But some farmers say their nonresistant crops suffered after neighbors’ dicamba drifted onto their land. The agricultural giant in October sued the Arkansas State Plant Board following the board’s decision to bar Monsanto’s new herbicide and propose tougher restrictions on similar weed killers ahead of the 2018 growing season. Monsanto claims its herbicide is being held to an unfair standard.

Arkansas has been a flashpoint in the dispute: About 900,000 acres of crops were reported damaged there, more than in any other state. About 300 farmers, crop scientists and other attendees gathered in Little Rock on Wednesday for a hearing on Arkansas’s proposed stiffer dicamba controls, which Monsanto and some farmers are fighting. The proposed restrictions are subject to the approval of a subcommittee of state legislators.

As we pointed out previously, the EPA has reported that farmers in 25 states submitted more than 2,700 claims to state agricultural agencies that neighbors’ dicamba spraying shriveled 3.6 million acres of soybeans. The herbicide is also blamed for damaging other crops, such as cantaloupe and pumpkins. The massive crop damage prompted Arkansas’s Plant Board to propose the idea of prohibiting dicamba use from mid-April through the end of October to safeguard growing plants. The state has also refused to approve Monsanto’s dicamba product for use in Arkansas, saying it needs further analysis by University of Arkansas researchers.

Of course, delays didn’t sit well with Monsanto which stands to make some $350 million a year in dicamba and related seed sales according to Jonas Oxgaard, an analyst with Bernstein who described the products as “their big moneymaker.” Meanwhile, farmers are exploring their own legal options with some joining a class-action lawsuit against Monsanto and BASF, seeking compensation for damaged crops.

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Follow the money: ..the kingdom owes Hariri’s “Oger” company as much as $9bn..

Lebanon PM’s Resignation Is Not All It Seems (Fisk)

When Saad Hariri’s jet touched down at Riyadh on the evening of 3 November, the first thing he saw was a group of Saudi policemen surrounding the plane. When they came aboard, they confiscated his mobile phone and those of his bodyguards. Thus was Lebanon’s prime minister silenced. It was a dramatic moment in tune with the soap-box drama played out across Saudi Arabia this past week: the house arrest of 11 princes – including the immensely wealthy Alwaleed bin Talal – and four ministers and scores of other former government lackeys, not to mention the freezing of up to 1,700 bank accounts. Crown Prince Mohamed bin Salman’s “Night of the Long Knives” did indeed begin at night, only hours after Hariri’s arrival in Riyadh. So what on earth is the crown prince up to?

Put bluntly, he is clawing down all his rivals and – so the Lebanese fear – trying to destroy the government in Beirut, force the Shia Hezbollah out of the cabinet and restart a civil war in Lebanon. It won’t work, for the Lebanese – while not as rich – are a lot smarter than the Saudis. Every political group in the country, including Hezbollah, are demanding one thing only: Hariri must come back. As for Saudi Arabia, those who said that the Arab revolution will one day reach Riyadh – not with a minority Shia rising, but with a war inside the Sunni Wahhabi royal family – are watching the events of the past week with both shock and awe. But back to Hariri. On Friday 3 November, he was in a cabinet meeting in Beirut. Then he received a call, asking him to see King Salman of Saudi Arabia.

Hariri, who like his assassinated father Rafiq, holds Saudi as well as Lebanese citizenship, set off at once. You do not turn down a king, even if you saw him a few days’ earlier, as Hariri had. And especially when the kingdom owes Hariri’s “Oger” company as much as $9bn, for such is the commonly rumoured state of affairs in what we now call “cash-strapped Saudi Arabia”. But more extraordinary matters were to come. Out of the blue and to the total shock of Lebanese ministers, Hariri, reading from a written text, announced on Saturday on the Arabia television channel – readers can guess which Gulf kingdom owns it – that he was resigning as prime minister of Lebanon. There were threats against his life, he said – though this was news to the security services in Beirut – and Hezbollah should be disarmed and wherever Iran interfered in the Middle East, there was chaos.

[..] Of course, the real story is just what is going on in Saudi Arabia itself, for the crown prince has broken forever the great compromise that exists in the kingdom: between the royal family and the clergy, and between the tribes. This was always the bedrock upon which the country stood or fell. And Mohamed bin Salman has now broken this apart. He is liquidating his enemies – the arrests, needless to say, are supposedly part of an “anti-corruption drive”, a device which Arab dictators have always used when destroying their political opponents.

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Our friends.

Saudi Arabia Is Blocking Aid To The World’s Worst Humanitarian Crisis

Saudi Arabia is stopping food and aid from getting into Yemen, in a move that the United Nations said will be “catastrophic” for a country already facing world’s worst humanitarian crisis. Saudi Arabia shut down all access points to Yemen by air, land, and sea over the weekend, in what they say is an attempt to to curb arms trafficking from Iran to Houthi rebels after an intercepted missile landed on the outskirts Riyadh. “The Coalition Forces Command decided to temporarily close all Yemeni air, sea and land ports,” the coalition said in a statement on the Saudi state news outlet SPA. The Kingdom’s lock down means critical humanitarian aid like medical supplies, food, and water, are not getting into the country. Aid workers decried the decision, warning of “dire” consequences for a country where millions of people rely on humanitarian aid to stay alive.

“Humanitarian supply lines to Yemen must remain open,” urged Robert Mardini, the International Committee of the Red Cross’s regional director for the Near and Middle East. “Food, medicine and other essential supplies are critical for the survival of 27 million Yemenis already weakened by a conflict now in its third year.” Mardini said that shipments of chlorine tablets, used to tackle the spread of cholera, were stopped at the country’s northern border. “That lifeline has to be kept open and it is absolutely essential that the operation of the United Nations Humanitarian Air Service (UNHAS) be allowed to continue unhindered,”Jens Laerke, a spokesperson for the UN Office for the Coordination of Humanitarian Affairs (OCHA) told reporters Tuesday.

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It’s a wonder there’s any ice left.

Antarctica Is Being Rapidly Melted From Below (Ind.)

There is something mysterious and hot lurking beneath the surface of the Antarctic ice. Now Nasa says that it might have found the source of that strange heating – a “mantle plume” – or upwelling of abnormally hot rock, that lies deep beneath the surface. The heat is causing the surface of the ice to melt and crack, resulting in rivers and other disruption to Antarctica. Around 30 years ago, a scientist at the University of Colorado Denver said that there might be a mantle plume under a region of the continent known as Marie Byrd Land. That hypothesis helped explain some strange features seen on the ice, like volcanic activity and a dome. Mantle plumes are narrow streams through which hot rock rises up from the Earth’s mantle, and then spreads out under the crust. Because the material itself is hot and buoyant, it makes the crust bulge upwards.

They explain how some places – like Hawaii and Yellowstone – have huge amounts of geothermal activity despite being far from the edge of a tectonic plate. But it was also an idea that was hard to believe, since the ice above the plume is still there. “I thought it was crazy,” said Helene Seroussi of Nasa’s Jet Propulsion Laboratory, who helped the lead work. “I didn’t see how we could have that amount of heat and still have ice on top of it.” Now scientists have used the latest techniques to support the idea. The team developed a mantle plume numerical model to look at how much geothermal heat would be needed to explain what is seen at Marie Byrd Land, including the dome and the giant subsurface rivers and lakes present on Antarctica’s bedrock.

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Further guaranteeing the further demise of the country.

Next Round Of Greek Pension Cuts To Reach Up To 18% In 2019 (K.)

The recalculation of pensions paid out to people who have already retired will likely lead to major cuts for pensioners of the former Traders’ Fund (TEBE/OAEE) and the civil servants’ fund, as well as those who used to work at banks and state firms. According to data presented to the country’s creditors by the Labor Ministry, three-quarters of the recalculations have been completed, while the process is expected to finish by year-end. The cuts will be implemented from January 1, 2019, but the country’s 2.6 million pensioners should learn by how much their income will suffer by the middle of next year, as Athens has told the creditors it will inform all pensioners by June 2018.

Legally, the cuts cannot exceed 18%, even if the pensioner’s so-called personal difference – i.e. the margin between the pension they secured in the past and the amount a new pensioner would receive – is greater. The law also provides for the abolition of allowances for spouses and children, which a large share of pensioners receive. Kathimerini understands the recalculation results will lead to major cuts mainly for pensioners who had high salaries but few years of service, as well as widows.

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is there anyone is the EU left with a conscience?

EU Parliamentarians Warn Refugees May Die on Greek Islands (GR)

The EU Council and the European Commission must work urgently with Greece to prevent a humanitarian crisis this winter, according to the he Progressive Alliance of Socialists and Democrats (S&D) Group in the European Parliament. The group called for a debate in the parliament’s plenary session next week in Strasbourg. “Thousands of people seeking asylum on the Greek islands still do not have adequate protection for the coming cold months,” said S&D Group President Gianni Pittella.

“Many are still sleeping in light tents designed for summer weather, without sleeping bags, on thin mats or even on the ground. EU governments need to immediately stop sending back refugees to Greece under the Dublin mechanism; which is creating further strain on the Greek asylum system. If we do not act and refugees die from the cold, as they did last year, then their blood will be on our hands.” Pittella was also quick to stress that all EU member states must fulfill their obligations to relocate refugees from Greece. “A legal decision has been taken by the EU, and this must be fully respected. Relocation is the only way of taking these people out of limbo and allowing them to get on with rebuilding their lives.”

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‘We’ll get you eventually.”

Facebook: God Only Knows What It’s Doing To Our Children’s Brains (Axios)

Sean Parker, the founding president of Facebook, gave me a candid insider’s look at how social networks purposely hook and potentially hurt our brains. Be smart: Parker’s I-was-there account provides priceless perspective in the rising debate about the power and effects of the social networks, which now have scale and reach unknown in human history. He’s worried enough that he’s sounding the alarm. Parker, 38, now founder and chair of the Parker Institute for Cancer Immunotherapy, spoke yesterday at an Axios event at the National Constitution Center in Philadelphia, about accelerating cancer innovation. In the green room, Parker mentioned that he has become “something of a conscientious objector” on social media. By the time he left the stage, he jokingly said Mark Zuckerberg will probably block his account after reading this:

“When Facebook was getting going, I had these people who would come up to me and they would say, ‘I’m not on social media.’ And I would say, ‘OK. You know, you will be.’ And then they would say, ‘No, no, no. I value my real-life interactions. I value the moment. I value presence. I value intimacy.’ And I would say, … ‘We’ll get you eventually.'”

“I don’t know if I really understood the consequences of what I was saying, because [of] the unintended consequences of a network when it grows to a billion or 2 billion people and … it literally changes your relationship with society, with each other … It probably interferes with productivity in weird ways. God only knows what it’s doing to our children’s brains.”

“The thought process that went into building these applications, Facebook being the first of them, … was all about: ‘How do we consume as much of your time and conscious attention as possible?'” “And that means that we need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo or a post or whatever. And that’s going to get you to contribute more content, and that’s going to get you … more likes and comments.”

“It’s a social-validation feedback loop … exactly the kind of thing that a hacker like myself would come up with, because you’re exploiting a vulnerability in human psychology.”

“The inventors, creators — it’s me, it’s Mark [Zuckerberg], it’s Kevin Systrom on Instagram, it’s all of these people — understood this consciously. And we did it anyway.”

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Feb 272017
 
 February 27, 2017  Posted by at 2:04 pm Finance Tagged with: , , , , , , , , ,  21 Responses »
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Bruce Davidson Iran 1964

 

Let’s see. On February 18, I wrote an essay called “Not Nearly Enough Growth To Keep Growing”, in which I said “..the Automatic Earth has said for many years that the peak of our wealth was sometime in the 1970’s or even late 1960’s”.

That provoked a wonderfully written reaction from long-time Automatic Earth reader Ken Latta, which I published on February 23 as “When Was America’s Peak Wealth?”. Ken put peak wealth sometime in the late ’50s to early 60’s. As I said then, I really liked his definition of ‘wealth’ as being “best measured by the capacity to be utterly wasteful”. The article spawned a series of nice comments, for some reason largely by people in his age bracket (Ken’s 73).

Which is nice, but it poses as many questions as it provides answers. Like: why does the Automatic Earth have so many ‘older’ readers? Should that be a reason for worry? And also: why don’t the young react in equal numbers? Don’t younger Americans have as many ideas as the generation(s) before them about when America’s peak wealth might have occurred?

Must one have been an eye-witness to the decline to know that it happened? Do only old farts ponder these things? Are there lessons to be learned, be they personal or history-wide? Interesting, all of it, if you ask me. Do younger people not acknowledge that peak wealth is behind us, and perhaps occurred before they were even born? Me, I like history lessons, and Ken’s for sure.

Tomorrow, I’ll have another take on all this written by Charles A. Hall, Emeritus Professor at State University of New York College of Environmental Science and Forestry, Syracuse. Charlie thinks neither Ken nor myself have given nearly enough attention to the role energy plays in wealth, and the peak thereof.

But first, here’s Ken Latta’s response to the comments on his article.

 

 

Ken Latta: The responses to my article on peak wealth were so thought-provoking that a follow-up article seemed appropriate. You can’t cover the history of the world in one blog post and I appreciate the additional ideas from the commentariat.

John Day: I remember 1969 as better than 1970. That first moon landing was a real high point for all of us. Everybody thought 1971 sucked. Things were different after November 1963. LBJ was a “sonofabitch”, as he put it. It’s hard to nail a year down, but after we lost our president, things were never the same.

John Day: Reminded us of a substantial breaking point the assassination of John Kennedy represented to the flow of history. But, history has its own problems. The finer details are oh so often swamped by a popular narrative. JFK was way more beloved dead than alive. Like Trump he could draw big crowds, but he very narrowly beat Nixon. Detractors favored referring to him as weak on foreign affairs.

I clearly recall were I was when the news came in about him being shot in Dallas. I was hanging out with some of my squadron mates in our team office when our Captain came by to inform us. He was African-American and clearly disturbed by it. It was much less concerning to the enlisted ranks. He had not been popular with most of us. It was a divided nation even then. I think his mourners should not forget that JFK presided over the early stages of the Viet-Nam adventure. With Green Berets and meddling in the South Viet-Nam government’s affairs, as is our custom.

It was just another case of his bad luck really. The American War on Viet-Nam could have happened to Eisenhower. My older brother was staged in a Korean Port waiting for orders to board a troop ship for transport to what was then still usually known as French Indo-China to support the French Army in their losing battle against the Viet Minh. But, Ike was a fairly sensible man and called it off.

 

 

V. Arnold: Wow, great thread. I’m 72 and was there also; I remember it pretty much as you tell it. I’d agree with your time-line also as to when peak wealth occurred. The beginning of the downturn was very late in the 50’s/early 60’s with our war in Vietnam and then; Nixon going off the gold standard. That allowed the next chapter of crony capitalism.

I attribute an accelerating deterioration to Friedman and his Chicago School of Economics and the age of the neo-liberal. Don’t forget Reagan; I felt the effects of his union busting first hand with stagnant wages until I retired over seas in 2007. I hope to read more of your writings from time to time. Cheers.

V. Arnold: Wrote very derogatory words about Uncle Miltie Friedman and the Chicago School of Terror. For that I salute him or her. Hell is too good for Milton and his apostles.

Forget Reagan? Not as long as I live. I also remember where I was when he was declared the next president. Sitting in the nicest bar in the little mountain town of Boulder Creek, Ca, nursing a drink. The bar was crowded and broke into loud celebration at the news. All I could think of was how f**king doomed we were. How I wish I had been wrong.

 

 

Hotrod: Thank you for your thought provoking article. I sometimes look at the health of the surviving car companies after WWII as a bellwether to the shape of the economy. Hudson, Nash, Studebaker, Packard all were struggling mightily by the mid 50’s. For the farming community the peak was about 1952. After the post war demand had been met, and greatly exceeded, farming declined into a real recession during the middle and late 50’s and never was quite the same.

Since then, machinery and technology, mostly purchased on credit, has kept production up and prices down for farmers, typically at or below the cost of production. Many of these labor saving and production enhancing tools stand unused, but are still being paid for. The only exception to this situation is massive drought, or massive flooding which can temporarily insert profitability to those not affected.

Hotrod: Reminisced on the tribulations of many car makers [Hudson, Nash, Studebaker, Packard], some of them long established, in the early 1950’s. I remember that too. I think a substantial part of their problems probably stemmed from not having enough dealerships. People were traveling more and wanted reassurance that a dealer with parts and experienced mechanics would be available in the next town. I think it actually surprising that those companies lasted as long as they did. Actually Nash and I think it was Packard merged to become American Motors and lasted another three decades.

He (my assumption) also mentioned farming and its trials. Farming is not the easy route to riches. The compensation has always been that if you hadn’t pledged your feal to the Lord of a Manor or signed up to be a share cropper, you were your own boss.

The late 40’s thru early 50’s were pretty good on our farm. When I was a little tike, we had an already ancient Macormick-Deering 10-20 tractor and a team of draught horses. My eldest brother having been told of his tour of northern and central Europe under the guidance of a man named Patton, wrote to dad asking him to take the money he had been sending home and buy a new tractor. All dad could find at a local dealer was a Minneapolis-Moline as they were about the only company allowed to build tractors during the war.

Many of them were shipped to England to help the British increase their food production. That was the only brand new tractor our family has ever owned right up to this day. My nephew still has it, but it’s in bits and pieces now. By around 1950 we were fully mechanised. Shortly after dad died in 1959, my brother rented out the land got himself a factory job. The prices of equipment steadily increased. The value of crops did not.

Crop prices did increase substantially about a decade ago, but not nearly enough to pay for new equipment unless you operated a very large farm. And more recently crops have declined in value again. I think a lot of farmers are in trouble.

 

 

Patricia: I am worried. Everybody who comments here is in their 70s as I am. Is that because we have more time to reflect and write down our thoughts or is it because the youth of today aren’t interested in anything except Facebook? If that is the case then I am so glad I am at the end of my life but what about my darling grandchildren.

Patricia: Expressed concern over whether the prevalence here of geezers was due to us having too much time on our hands or the youth having no time for anything except Facebook. Based on my own family, I can say that their devotion to Facebook is tempered by addiction to gaming. I mean video not casino. I think we can say that Patricia is right on both counts.

I too feel a certain gratitude for having been born during the war years with the expectation that I may be expired before the ordure collides with the air circulator. We oldies do have a psychological quandary with regard to our descendants. Knowing as we do that it’s coming. I too have grandchildren and a great grandchild. I desperately wanted to make them aware and try to offer some guidance.

What I learned was that they are at least vaguely aware of the looming threats and don’t want to hear more about it. They know there isn’t really much they can do about it. I think they believe that when it happens they will just do what they can to deal with it. All things considered (apologies to the Canadian Broadcasting Corporation, I wonder if that program is still on) that is probably about the best attitude any of us can have.

What bothers me most about our youth is what they don’t seem to know. I’m talking about the kinds of knowledge that will likely be very useful when things get stinky. Larding debt onto the kids so they could go to college and learn computer science, physics, art history and how to be a social justice warrior was probably to their detriment.

I don’t exactly know what would be absolutely best for them to know, but I’m pretty sure it isn’t those kinds of things. I tend to believe that it will be good to know, as examples, how to shoot, how to fish, how to tell the difference between weeds and food, how to loosen rusted bolts and how to turn hemp into rope in addition to dope.

 

 

Aug 092016
 
 August 9, 2016  Posted by at 8:51 am Finance Tagged with: , , , , , , , ,  1 Response »
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Harris&Ewing Woodward & Lothrop dept. store trucks, Washington DC 1912

The Fed Is Losing Control of Global Monetary Conditions (BBG)
Are Negative Rates Backfiring? (WSJ)
Fannie And Freddie Could Need $126 Billion To Get Through A Crisis (R.)
UK Government Has Gambled Hundreds Of Millions On House Price Rises (TiM)
One In Three British Families Are A Month’s Pay From Losing Homes (G.)
Vulnerable UK Banks Still Pay Billions In Dividends To Shareholders (Ind.)
A Crisis Of Intervention (Price)
Spanish 10-Year Bond Yield Falls Below 1% for First Time (BBG)
China Leaders Head to the Beach, With Calmer Seas Ahead (BBG)
Trump Tax Cuts Would Be Costly (CNBC)
Republican Security Experts Rail Against Trump In Open Letter (BBC)
US Taxes Well Spent: Pentagon Can’t Account for $6.5 Trillion (Sputnik)
Facebook Removes Potential Evidence Of Police Brutality Too Readily (I’Cept)
More Than 60% Of Maldives’ Coral Reefs Hit By Bleaching (G.)

 

 

Libor. And by the way: The Fed never had control, just the illusion.

The Fed Is Losing Control of Global Monetary Conditions (BBG)

Libor is coming unhinged from other borrowing costs and that has real implications for the cost of money in the real world. On this basis, the U.S. has already had an interest-rate increase, according to Bloomberg View’s Mark Gilbert. While there are plenty of market participants who favor the Austrian school of economics and would welcome the removal of central banks from the rate-setting mechanism, the change in money-market conditions is something the Fed should take into account as it ponders its next move.

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They do what they’re supposed to prevent: encourage saving. Get the central banks out of the economy!

Are Negative Rates Backfiring? (WSJ)

Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries. Companies in Europe, the Middle East, Africa and Japan also are holding on to more cash. Economists point to a variety of other possible factors confounding central-bank policy: Low inflation has left consumers with more money to sock away; aging populations are naturally more inclined to save; central banks themselves may have failed to properly explain their actions.

But there is a growing suspicion that part of problem may be negative rates themselves. Some economists and bankers contend that negative rates communicate fear over the growth outlook and the central bank’s ability to manage it. “People only borrow and spend more when they are confident about the future,” says Andrew Sheets at Morgan Stanley. “But by going negative, into uncharted territory, the policy actually undermines confidence.” Going negative was a big bet by central banks faced with a sluggish recovery from the financial crisis. Whether negative rates succeed or flop has huge implications for the global economy. Japan and Europe are already doing large volumes of bond buying to spur their economies, and their central bankers have little left in their tool kits.

The U.S. Federal Reserve’s next move is likely to raise rates, but Chairwoman Janet Yellen has said negative rates could find a place in the Fed’s armory in any future crisis. The Bank of England, shaken by June’s surprise vote to leave the European Union, cut interest rates to their lowest in its 322-year history last week but said it was reluctant to go negative. BOE Gov. Mark Carney said he is “not a fan” of a policy that has negative consequences for savers and the financial system. European banks say their profitability has been hit hard by low rates. Some central bankers say it is too early to judge negative rates. “The effect won’t be seen all at once, but it will gradually become clear,” said Bank of Japan Gov. Haruhiko Kuroda in a June news conference.

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Governments should stay out of housing markets. Their only interest is make banks make money.

Fannie And Freddie Could Need $126 Billion To Get Through A Crisis (R.)

Fannie Mae and Freddie Mac, two government-controlled housing finance agencies, would need a big cash injection to weather another financial meltdown, a government regulator said on Monday. Fannie and Freddie would need as much as $126 billion in taxpayer funds to come through a serious downturn, according to a ‘stress test’ from the Federal Housing Finance Agency. The companies, which were once owned by shareholders, have drawn $187 billion from the U.S. Treasury since they were seized by the government in September 2008 as the global financial crisis tightened. Since then, as the housing market has strengthened, they have returned roughly $250 billion to the Treasury. Lawmakers have not settled on the future of two companies. The ‘stress test’ required by the Dodd Frank reform legislation of 2010 projected the companies would have to draw at least $49 billion to $126 billion in the case of a serious economic downturn.

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People are forced to use Help to Buy: it acts as an insurance policy in case homes lose value. Then the taxpayer pays.

UK Government Has Gambled Hundreds Of Millions On House Price Rises (TiM)

Taxpayers stand to lose hundreds of millions of pounds if house prices fall, thanks to a gamble the government has been making with our cash for the past three years. Some £3.59billion has been lent to first-time buyers through the Help to Buy loan scheme to help them purchase newly-built properties they may not otherwise have been able to afford, according to the latest government statistics. The scheme was launched by the former Chancellor George Osborne in 2013, in response to a stagnating housing market. It effectively lets borrowers with small deposits top them up with a government loan, worth up to 20% of the value of a new build property.

For the 81,014 buyers who have taken advantage of the scheme so far, it has been an invaluable lifeline, the difference between making that step on to the first hallowed rung of the property ladder and continuing to rent. However, the side effect of the scheme leaves taxpayer funds extremely vulnerable to losses if house prices start to fall. This is because the size of loans is not fixed, but rather is measured as a proportion of the value of the properties bought. Take, for example a first-time buyer who uses the scheme to buy a home costing £300,000. They could borrow up to 20% of the value of the property – £60,000 – using Help to Buy, and put down just a 5% deposit themselves.

However, the size of the loan remains 20% of the value of the property – regardless of how it fluctuates. So if the house increases in value by 10% to £330,000, the value of the loan will increase by 10% as well to £66,000. The taxpayer turns a profit. But if the value of the home declines by 10% to £270,000, the value of the loan will decrease to £54,000. Taxpayers will just have to suck up the £6,000 shortfall. A total of £3.59billion has been lent out so far. If the value of the homes they helped paid for drops by just 10%, the borrowers will be off the hook for as much as £359million – a cost that will be picked up by the taxpayer.

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And this is what you get when a government blows a bubble.

One In Three British Families Are A Month’s Pay From Losing Homes (G.)

More than one in three families in England are a monthly pay packet away from losing their homes, according to research by Shelter highlighting how many households have almost no savings. The housing charity found that 37% of working families would be unable to cover their housing costs for more than a month if one partner lost their job. The findings mirror government figures, which show that there are 16.5 million working age adults in the UK with no savings. Campbell Robb, the chief executive of Shelter, said: “These figures are a stark reminder that sky-high housing costs are leaving millions of working families stretched to breaking point and barely scraping by from one paycheque to the next.

“Any one of us could hit a bump along life’s road, and at Shelter, we speak to parents every day who, after losing their job or seeing their hours cut, are terrified of losing the roof over their children’s heads too.” The charity is calling for an improved welfare safety net to prevent families where someone loses a job from “hurtling towards homelessness”. The phenomenon of the working poor, those earning a regular salary, but living from one paycheque to the next with no savings to speak of, is a widespread feature in English-speaking western economies such as the UK, Canada, the US and Australia. An annual survey by US website Bankrate found that 63% of Americans have no emergency savings for necessities such as a $1,000 (£770) emergency room visit or a $500 car repair. Most turn to credit cards when financial disaster looms.

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If they didn’t, where would their share prices be?

Vulnerable UK Banks Still Pay Billions In Dividends To Shareholders (Ind.)

Three of the UK’s biggest banks have paid out billions of pounds in dividends to investors while turning a blind eye to huge capital holes in their balance sheets, researchers argue. The findings, which come in the wake of estimates the UK banking sector has an aggregate £155bn shortfall of capital, will reinforce calls for the Bank of England to take a tougher stance on the capital adequacy of the lenders it oversees and to restrict the payment of dividends. Between 2010 and 2015 HSBC paid out £37bn in dividends, Barclays paid out £6.3bn and Lloyds paid out £2.3bn according to the calculations of Sascha Steffen of the University of Mannheim, Viral Acharya of New York University and Diane Pierret of the University of Lausanne.

If this cash had been retained by the banks it could have boosted their capital buffers by an equivalent amount. The three researchers last month produced an estimate that suggested UK banks would be massively exposed and at high risk of going bust in another serious financial crisis. They found that the majority state-owned Royal Bank of Scotland, Lloyds, Barclays and HSBC could collectively need to raise another £155bn of capital to maintain a comfortable equity safety buffer in the wake of a fresh crisis based on the market value of their equity.

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Can’t say it enough: ““There is no means of avoiding a final collapse of a boom brought about by credit expansion.”

A Crisis Of Intervention (Price)

For those that already have, Mark Carney is the gift that keeps on giving. Borrowed imprudently and struggling to make those interest payments ? Worry not; the Bank of England has your back. For those that don’t have, the Bank of England is taking away your chance of ever realistically saving anything, now that interest rates have been driven down to new historic lows of 0.25%, and may go lower yet. For the asset-rich, for the 1%, for property speculators, and for zombie companies and banks, Carney is your man. For the asset poor, or for savers, or pensioners, or insurance companies, or pension funds, the Bank of England has morphed from being anti-inflationary fireman to monetary arsonist. The economist Ludwig von Mises foresaw all this, nearly a century ago.

He called it “the crisis of interventionism”. Actions have consequences everywhere (except in Keynesian and Marxist economic theory). Interfere with the free market process and inefficiency and complexity are certain to rise. More actions and interventions are required. Pretty soon the entire system becomes a Heath Robinson contraption requiring constant amendments and ad hoc fixes and bolt-on workarounds. Welcome to the modern monetary system – the last, doomed refuge of the central planner with messianic delusions of adequacy. “The essence of the interventionist policy is to take from one group to give to another. It is confiscation and distribution. Every measure is ultimately justified by declaring that it is fair to curb the rich for the benefit of the poor.”

But so warped has our monetary system become after almost a decade of furious interventionism that Mark Carney’s redistributive efforts don’t even attempt to deliver to that objective. With interest rates fast approaching the theoretical lower bound of zero, Mark Carney is curbing the prospects of the poor for the benefit of the rich. He is redistributing capital from the prudent saver and gifting it to the borrower and the speculator. A crisis of too much debt is being met with ever more urgent attempts to prime the credit pump. Mises had something to say about credit expansion, too. “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

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Right. Spain. Hasn’t had a real government in a long time now. Unemployment is sky high. So everyone wants their bonds… Not. But Draghi buys all.

Spanish 10-Year Bond Yield Falls Below 1% for First Time (BBG)

Spanish 10-year bond yields fell below 1% for the first time on record Monday, marking another milestone in the four-year rally in the nation’s securities. The drop highlights how local political risk is being offset by monetary easing by central banks across the developed world. The yield fell to as low as 0.99%, down from more than 7.75% during the euro region’s debt crisis in July 2012.

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Strange headline for an article that translates as: BUBBLE!

China Leaders Head to the Beach, With Calmer Seas Ahead (BBG)

China’s top leaders are gathering for their annual conclave at the Beidaihe beach resort having defied the doomsayers once more. Economic data in coming days are projected to confirm the stabilization in growth achieved in the first half of this year continued into July. The backdrop of calm has won China a sustained respite from the financial-market turmoil and capital outflows that accompanied the Communist leadership’s traditional beach-resort meeting last year. But the stability has come at a cost. Instead of delivering on what Premier Li Keqiang called reforms so tough they’d be like cutting “flesh,” authorities have relied on another dose of cheap credit to prop things up.

That’s added more leverage to a nation where debt is already 2.5 times the economy’s size. Behind the reluctance for a bigger economic shakeup is a desire for stability ahead of a potentially wide-ranging reshuffle of the Communist hierarchy next year, according to Credit Suisse. “Candidates will prefer to be playing it safe rather than executing substantial reforms – especially state-owned enterprise reforms,” the bank’s China analysts, led by Vincent Chan, wrote last month. State-owned enterprises offer the major lever for ramping up growth through infrastructure spending, making officials reluctant to implement wide-ranging changes.

Yet their dominance in access to capital has squeezed opportunities for the more efficient private sector, contributing to a build-up in non-performing loans. “The immediate consequences of course are a relatively becalmed economy, which seems to have some staying power,” said George Magnus, senior economic adviser to UBS. “But at what cost in the medium to longer term if there’s no change in the instability-causing policies?”

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He needs to avoid the idea that the elites will profit most. This will be thrown at him no matter if it’s true or not.

Trump Tax Cuts Would Be Costly (CNBC)

Call it a work in progress. GOP presidential candidate Donald Trump unveiled Monday the latest version of his plan to overhaul the American tax code, offering relief for everyone from parents paying for child care to the world’s largest corporations. But it remains to be seen where the money will come from to pay for those cuts. Details of the plan are still fairly sketchy, but in his speech at the Detroit Economic Club, Trump promised they would be forthcoming soon. “In the coming weeks we will be offering more detail on all of these policies,” Trump said Monday. The Trump campaign has promised that the tax plan would “benefit working families while ensuring the wealthy pay their fair share.”

But based on details of Trump’s plan released earlier in the campaign, some analysts think the biggest winners would be those at the top of the income ladder. “The proposal would cut taxes at every income level, but high-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income,” according to an analysis in December by the Tax Policy Center. Trump’s campaign said Monday the tax plan would “dramatically reduce taxes for everyone and streamline deductions, presenting the biggest tax reform since [the] Reagan [administration].” But based on the details released so far, the plan would also explode the federal budget deficit, add trillions of dollars to the national debt and substantially raise the government’s interest payments, according to several independent analysts.

Trump’s tax cuts would amount to some $12 trillion over the next decade, according to the Tax Foundation. Even after accounting for stronger economic growth, the plan would leave the government more than $10 trillion short over the next 10 years. That money would have to be made up for with more borrowing, dramatically expanding the nation’s debt. Trump also promised to ease the burden on American corporations by limiting taxes to 15 percent. The campaign has also promised to “make our corporate tax globally competitive and the United States the most attractive place to invest in the world.” Based on the latest available data, that promise should be fairly easy to keep.

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Security experts? They’re neocons. Brilliant riposte: “We thank them for coming forward so everyone in the country knows who deserves the blame for making the world such a dangerous place..”

Republican Security Experts Rail Against Trump In Open Letter (BBC)

An open letter signed by 50 Republican national security experts has warned that nominee Donald Trump “would be the most reckless president” in US history. The group, which includes the former CIA director Michael Hayden, said Mr Trump “lacks the character, values and experience” to be president. Many of the signatories had declined to sign a similar note in March. In response, Mr Trump said they were part of a “failed Washington elite” looking to hold on to power. The open letter comes after a number of high-profile Republicans stepped forward to disown the property tycoon. Mr Trump has broken with years of Republican foreign policy on a number of occasions.

The Republican candidate has questioned whether the US should honour its commitments to Nato, endorsed the use of torture and suggested that South Korea and Japan should arm themselves with nuclear weapons. “He weakens US moral authority as the leader of the free world,” the letter read. “He appears to lack basic knowledge about and belief in the US Constitution, US laws, and US institutions, including religious tolerance, freedom of the press, and an independent judiciary.” “None of us will vote for Donald Trump,” the letter states. In a statement, Mr Trump said the names on the letter were “the ones the American people should look to for answers on why the world is a mess”.

“We thank them for coming forward so everyone in the country knows who deserves the blame for making the world such a dangerous place,” he continued. “They are nothing more than the failed Washington elite looking to hold on to their power and it’s time they are held accountable for their actions.” Also among those who signed the letter were John Negroponte, the first director of national intelligence and later deputy secretary of state; Robert Zoellick, who was also a former deputy secretary of state and former president of the World Bank; and two former secretaries of homeland security, Tom Ridge and Michael Chertoff.

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Surprised?

US Taxes Well Spent: Pentagon Can’t Account for $6.5 Trillion (Sputnik)

While US lawmakers are applying pressure on the Pentagon to be more transparent about how it spends money, a new report shows that the Defense Department’s substandard bookkeeping practices make that virtually impossible. Despite a 1996 law requiring all federal agencies to conduct regular spending audits, the Pentagon has so far failed to conduct a single one. While US lawmakers have pressed the DoD to comply by September of 2017, a new inspector general’s report indicates that meeting this deadline is highly unlikely.

“Army and Defense Finance and Accounting Service Indianapolis personnel did not adequately support $2.8 trillion in third quarter adjustments and $6.5 trillion in year-end adjustments made to Army General Fund (AGF) data during FY 2015 financial statement compilation,” the report reads. In common language, the Pentagon has no idea how it spent nearly $7 trillion. This is largely due to the fact that the DoD fails to provide the “journal vouchers” for its transactions, intended to provide serial numbers and dates, for bookkeeping purposes. But the report also found that many of the Pentagon’s records were missing without explanation.

“DFAS Indianapolis did not document or support why the Defense Departmental Reporting System-Budgetary, a budgetary reporting system, removed at least 16,513 of 1.3 million records during third quarter FY 2015,” the report reads. While nothing suggests foul play, a lack of proper accounting makes it impossible to determine how much money the Pentagon spends, and on what.

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There is a huge potential for this to backfire. Facebook better watch out.

Facebook Removes Potential Evidence Of Police Brutality Too Readily (I’Cept)

As more details emerge about last week’s killing by Baltimore County police of 23-year-old Korryn Gaines, activists have directed growing anger not only at local law enforcement but also at Facebook, the social media platform where Gaines posted parts of her five-hour standoff with police. At the request of law enforcement, Facebook deleted Gaines’ account, as well her account on Instagram, which it also owns, during her confrontation with authorities. While many of her videos remain inaccessible, in one, which was re-uploaded to YouTube, an officer can be seen pointing a gun as he peers into a living room from behind a door, while a child’s voice is heard in the background. In another video, which remains on Instagram, Gaines can be heard speaking to her five-year-old son, who’s sitting on the floor wearing red pajamas.

“Who’s outside?” she asks him. “The police,” he replies timidly. “What are they trying to do?” “They trying to kill us.” Statements made by officials in the days after the incident revealed little-known details of a “law enforcement portal” through which agencies can ask for Facebook’s collaboration in emergencies, a feature of the site that remains mostly obscure to the general public and which has been criticized following Gaines’ death. It’s not the first time Facebook has become the stage on which violent encounters between law enforcement and residents play out – and it seems likely more and more such incidents will be documented on the social media hub, given that the company’s livestreaming app, Facebook Live, is only nine months old and spreading at a time when recording police has become an instinctive reflex in some communities.

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We can see the earth disappear beneath our feet.

More Than 60% Of Maldives’ Coral Reefs Hit By Bleaching (G.)

More than 60% of coral in reefs in the Maldives has been hit by “bleaching” as the world is gripped by record temperatures in 2016, a scientific survey suggests. Bleaching happens when algae that lives in the coral is expelled due to stress caused by extreme and sustained changes in temperatures, turning the coral white and putting it at risk of dying if conditions do not return to normal. Unusually warm ocean temperatures due to climate change and a strong “El Nino” phenomenon that pushes up temperatures further have led to coral reefs worldwide being affected in a global bleaching event over the past two years. Preliminary results of a survey in May this year found all the reefs looked at in the Maldives, in the Indian Ocean, were affected by high sea surface temperatures.

Around 60% of all assessed coral colonies, and up to 90% in some areas, were bleached. The study was conducted by the Maldives Marine Research Centre and the Environmental Protection Agency, in partnership with the International Union for Conservation of Nature (IUCN). It took place on Alifu Alifu Atholhu – North Ari Atoll – chosen as a representative atoll of the Maldives. Dr Ameer Abdulla, research team leader and senior adviser to the IUCN on marine biodiversity and conservation science, said: “Bleaching events are becoming more frequent and more severe due to global climate change. “Our survey was undertaken at the height of the 2016 event and preliminary findings of the extent of the bleaching are alarming, with initial coral mortality already observed. “We are expecting this mortality to increase if bleached corals are unable to recover.”

Read more …

Jul 252016
 
 July 25, 2016  Posted by at 8:54 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Theodor Horydczak Sheaffer fountain pen factory, Fort Madison, Iowa 1935

Japan’s Exports Decline for 9th Straight Month, Imports Plunge 18.8% (BBG)
Beware, Oil Bulls: Demand Is About To Fall Off A Cliff (BBG)
Peak Oil ‘Demand’ & The Duelling Narratives Of Energy Inventories (ZH)
What Happens When The Bond Bubble Finally Pops (IceCap)
With Kuroda Under Pressure To Increase Stimulus Again, Dissenters Appear (ZH)
Italy Insists There’s ‘No Banking Problem’ As Stress Tests Loom Large (CNBC)
Brexit Will Cost UK Up To $340 Billion In Lost M&A: Study (CNBC)
“Putin’s Useful Idiot”: Anyone Who Disagrees With The Establishment (ZH)
Leaked DNC Emails Reveal Inner Workings Of Party’s Finance Operation (WaPo)
Facebook Admits To Blocking Wikileaks Links In DNC Email Hack (NYP)
How Can You Join the DNC Class Action Lawsuit? (Heavy)
China Slaps Ban on Internet News Reporting as Crackdown Tightens (BBG)
Turkey Issues Arrest Warrants For 42 Journalists After Coup (AFP)
Refugee Camp Company In Australia ‘Liable For Crimes Against Humanity’ (G.)

 

 

Japan shows the exact same trend as China, huge drops in exports AND imports: world trade is collapsing. Still, Reuters’ comment today: “exports fall less than expected, offer some hope of recovery”

Japan’s Exports Decline for 9th Straight Month, Imports Plunge 18.8% (BBG)

Japan’s exports dropped again in June, with shipments down for a ninth consecutive month, underscoring the continuing challenge of reviving the nation’s economy. Overseas shipments declined 7.4% in June from a year earlier, the Ministry of Finance said on Monday. Imports slid 18.8%, leaving a trade surplus of 692.8 billion yen ($6.5 billion). Japan had a trade surplus of 1.81 trillion yen in the January-June period, the first surplus since the second half-year of 2010.

The weak exports data show that the nation’s economic recovery remains tepid and come before the Bank of Japan meets later this week to consider whether to further expand monetary stimulus. Japan’s growth is at risk as a slowdown in overseas demand and the yen’s surge this year make the nation’s products less attractive overseas and hurt the earnings of exporters. [..] Exports to the U.S. fell 6.5% in June from a year earlier, while shipments to the EU declined 0.4% and sales to China, Japan’s largest trading partner, dropped 10%.

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And this is mostly just the US.

Beware, Oil Bulls: Demand Is About To Fall Off A Cliff (BBG)

Beware, oil bulls: Just as U.S. oil production sinks low enough to drain supplies, demand is about to fall off a cliff. American gasoline consumption typically ebbs in August and September as vacationers return home, and refiners use that dip to shut for seasonal maintenance. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October. “People are looking ahead to the fall and are worried,” said Michael Lynch, president of Strategic Energy & Economic Research. “There’s more and more talk of prices going south of $40 and as a result people are going short.” Money managers added the most bets in a year on falling WTI crude prices during the week ended July 19, according to Commodity Futures Trading Commission data.

That pulled their net-long position to the lowest since March. WTI dropped 4.6% to $44.65 a barrel in the report week and traded at $44.14 at 11:53 a.m. Singapore time on Monday. With weekly Energy Information Administration data showing U.S. gasoline stockpiles at the highest seasonal level since at least 1990, refiners may shut sooner and for longer ahead of the Labor Day holiday in early September, the end of the driving season. “With gasoline supplies the highest since April, refiners may pull some projects forward,” said Tim Evans at Citi Futures Perspective. “This will take more support away the market and add to the broader problem of excess supply.”

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“..oil bulls counting on further declines are fighting history..”

Peak Oil ‘Demand’ & The Duelling Narratives Of Energy Inventories (ZH)

Crude oil inventories in the U.S. have fallen 23.9 million barrels since the end of April, but, as Bloomberg notes, oil bulls counting on further declines are fighting history. Over the past five years refiners’ crude demand has fallen an average of 1.2 million barrels a day from the peak in July to the low in October. “The rough part will be once refineries start going into maintenance,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management. “We aren’t drawing down inventories very fast and the pressure on prices will increase.”

But, as Alhambra Investment Partner’s jeffrey Snider notes, the significance of crude and gasoline inventory (and price) changes is the difference in narratives and what is supporting them. While there is a direct relationship between the steepness of contango in the oil futures curve and the amount of crude siphoned from the market to storage, it is not an immediate one. When crude prices originally collapsed starting in late 2014, twisting the WTI curve from backwardation to so far permanent contango (of varying degrees), it wasn’t until January 2015 that domestic inventories began their surge. And while oil prices rose through spring, flattening out again the futures curve and drastically reducing that contango, the spike in oil stocks didn’t actually end until almost the end of last April.

Given the “dollar’s” explicit seasonality, combined with the usual intra-year swings of crude itself, it isn’t surprising to find the process repeated almost exactly a year later. This time it happened in two separate events, the latter of which was a near replica of the start to 2015. The futures curve was pressed into deep contango after October 2015, and sure enough oil inventories spiked again in early January 2016. And like last year, though the futures curve would begin to flatten out again starting February 12, oil storage levels continued to build until the end of April.

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“Most investors today have no idea what is happening in the bond market and have exposed themselves to incredible amounts of risk.”

What Happens When The Bond Bubble Finally Pops (IceCap)

The 2008-09 crisis was caused by the private sector. Regardless of the reason or the assigned blame, far too many people and companies borrowed way too much money and when the bubble eventually popped (they always do), millions of people and companies lost an awful lot of money. The one important thing to know from those dark days is that governments were told (by the banks) that in order to save the world they had to save the banks. But what few people realise is that when they saved the banks, two things happened:

1. Tax payers and the most conservative investors from all over the world saved the banks – in other words, many who didn’t take the risk had to bailout those who took excessive risks. 2. The bailout and stimulus programs simply shifted the enormous debt crisis away from the private sector and straight onto the laps of the public sector. In other words, the bubble has shifted away from the PRIVATE sector to the GOVERNMENT sector. And when the government sector has a crisis, it is reflected in the GOVERNMENT BOND MARKET. To put this government bond market crisis into perspective, we offer our Chart 4 which shows a relative comparison to recent crises from the private sector.

To really understand how serious of a problem this is, just know that a mere 1% rise in long-term interest rates, will create losses of approximately $2 Trillion for bond investors. The fun really starts when long-term yields increase by 3%, and then 6% and then 10%. This is the point when certain government bonds simply stop trading altogether, and losses pile up at 50%-75%. When long-term rates decline, it is usually in a gradual trending manner – such as what we are experiencing today. For those of you shaking your heads in disagreement, we kindly suggest you research your history of long-term interest rates.

However, when long-term rates go higher – it is an explosive move. Long-term rates ratchet up VERY quickly making the sudden loss instant, while exponentially increasing the funding cost of the borrower. Most investors today have no idea what is happening in the bond market today and have exposed themselves to incredible amounts of risk. And more importantly, because a global crisis in the government bond market has never occurred in our lifetime – advisors, financial planners and big banks continue the tradition of telling their clients that bonds are safer than stocks. As a result, the most conservative investors in the word remain heavily invested in the bond market and are therefore smack dab in the middle of the riskiest investment they’ll ever see. Chaotic indeed.

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“Not unlike the Fed, it is clear that the BOJ is trapped in its own end game.”

With Kuroda Under Pressure To Increase Stimulus Again, Dissenters Appear (ZH)

With what little credibility it still has, the Bank of Japan is set to meet this week and likely agree on the size of yet another stimulus package for the economy. Prime Minister Abe’s main economic advisor Etsuro Honda recently detailed in an interview that the BOJ should increase its Qualitative and Quantitative Monetary Easing (QQE) program from ¥80 trillion to ¥90 trillion. In addition, there has been growing speculation regarding coordinated fiscal and monetary stimulus. The fiscal stimulus efforts are not expected to be unveiled until August, according to the WSJ. Expectations point to a “multiyear program valued at ¥20 trillion ($188 billion), including direct spending, government loans and public-private financing.”

Perhaps more interesting, this time, Kuroda may have a difficult time convincing the 8 remaining members of the monetary board. As the Journal notes, “other BOJ officials are signaling a reluctance to act, underscoring questions about whether the central bank has reached the limits of its powers to revive Japan’s economy. They note that monetary policy is already extremely accommodative, with bond yields and interest rates at or near record lows, and express doubts that additional easing would make fiscal stimulus much more effective, according to people familiar with the central bank’s thinking.” As core metrics and corporate expectations of inflation plummet, Kuroda’s promise to do “whatever it takes” to reach 2% inflation seems to be under significant threat.

Doing nothing now would “amount to an admission that the BOJ’s monetary policy has reached its limits—it wants to move, but it can’t,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. Not unlike the Fed, it is clear that the BOJ is trapped in its own end game. As Kyle Bass recently told CNBC, “The textbooks aren’t working for the academics … I fear they’re going to have to go into some sort of jubilee where the central bank just forgives the debt that they own…I don’t know what happens to the yield curve then. The unconventional policies aren’t working, so they’re going to have to go to unconventional, unconventional policies next. I don’t know where that takes them.”

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“There is no banking problem in Italy..” There’s only €360 billion in bad loans…

Italy Insists There’s ‘No Banking Problem’ As Stress Tests Loom Large (CNBC)

Top finance officials in Italy have moved to play down the issues the country’s banking industry is facing, just days ahead of crucial stress tests by the ECB. Speaking on the outskirts of a G20 finance leaders meeting in Chengdu, China, Italy’s Finance Minister, Pier Carlo Padoan, told CNBC that the Italian banks “do not need [a] rescue.” “There is no banking problem in Italy, it’s one particular case which is being dealt with … I’m confident this will be successful,” he said Sunday, highlighting issues at Monte dei Paschi (BMPS). That institution is thought to be the weakest link among lenders in the euro zone’s third-largest economy. Italian policymakers and EU officials have been trying to deal with its fragile banking system, bogged down by non-performing loans (NPLs) estimated to total €360 billion.

Reports had suggested that Matteo Renzi, the Italian prime minister, is hoping to bailout the banking sector, which would contravene EU rules. Such a solution would stand in contrast to a bondholder “bail-in,” as Italian households are heavily exposure to the asset class. These reports have since been denied. These problems in Italy have roiled stock markets in the past few weeks, alongside the uncertainty following the British vote to leave the European Union. Shares of BMPS have been particularly volatile. However, Padoan told CNBC that this particular bank had put in place a “very effective restructuring plan” and said there had been a widespread misunderstanding of the whole industry. “(Italian banks are) not more vulnerable than they used to be. They have been strengthening over time due to reforms that have been introduced by the government,” he added.

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It will cost the global economy $1.6 trillion if companies don’t go deeper into debt to buy each other… Completely empty rhetoric.

Brexit Will Cost UK Up To $340 Billion In Lost M&A: Study (CNBC)

The Brexit vote will cost the U.K. up to $338 billion in lost merger-and-acquisition (M&A) activity by 2020 and the global economy up to $1.6 trillion, law firm Baker & McKenzie said on Monday. “An active M&A market is all about confidence and credibility,” Michael DeFranco, global chair of M&A at Baker & McKenzie, said in a report. “To restore that confidence the U.K. government will need to get to grips with the enormous challenge of negotiating a new trading relationship with the EU as quickly as practically possible. Otherwise we move into more dangerous territory,” he added. The forecasts above are based on an adverse scenario where Brexit incites growing populism in mainland Europe and undermines EU support among remaining members.

In Baker & McKenzie’s central forecast, Brexit still knocks $239 billion off U.K. M&A activity by 2020 and $409 billion off global volumes. In 2017 alone, U.K. M&A transactions are seen falling by 33%. “In the last few days we have seen evidence that the M&A market in the U.K. won’t come to a crashing halt even if it won’t be at its previous pace,” Tim Gee, London M&A partner at Baker & McKenzie, said. “There are still plenty of buyers and sellers for the right deal at the right price. There are already some clear upsides — global organizations looking to acquire U.K. companies will find that a weaker pound makes U.K. valuations more attractive, although the uncertainty surrounding trade negotiations could deter the more risk averse,” he added.

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Hilarious.

“Putin’s Useful Idiot”: Anyone Who Disagrees With The Establishment (ZH)

This weekend we once again got confirmation that any time the generic narrative spectacularly falls apart, and the “establishment” is caught with its pants down (or, in the case of the DNC, engaging in borderline election fraud leading to what the FT just described as “Democrats in turmoil“) what does it do? Why blame Putin of course, and more specifically his “useful idiots”, and hope the whole thing blows over quickly.

Not convinced? Here is the proof.

 

And of course:

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So sad it’s funny. Hubris rules.

Leaked DNC Emails Reveal Inner Workings Of Party’s Finance Operation (WaPo)

In the rush for big donations to pay for this week’s Democratic convention, a party staffer reached out to Tennessee donor Roy Cockrum in May with a special offer: the chance to attend a roundtable discussion with President Obama. Cockrum, already a major Democratic contributor, was in. He gave an additional $33,400. And eight days later, he was assigned a place across the table from Obama at the Jefferson Hotel in downtown Washington, according to a seating chart sent to the White House. The 28-person gathering drew rave reviews from the wealthy party financiers who attended. “Wonderful event yesterday,” New York lawyer Robert Pietrzak wrote to his Democratic National Committee contact. “A lot of foreign policy, starting with my question on China. The President was in great form.”

The details of the high-dollar event were captured in the trove of internal DNC emails released last week by the site WikiLeaks that has riled the party as delegates gather in Philadelphia to nominate Hillary Clinton. Internal discussions of the May 18 event with Obama and other aggressive efforts to woo major donors reveal how the drive for big money consumes the political parties as they scramble to keep up in the age of super PACs. The DNC emails show how the party has tried to leverage its greatest weapon — the president — as it entices wealthy backers to bankroll the convention and other needs. At times, DNC staffers used language in their pitches to donors that went beyond what lawyers said was permissible under a White House policy designed to prevent any perception that special interests have access to the president.

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Facebook plays multiple questionable roles these days. This is an ugly one.

Facebook Admits To Blocking Wikileaks Links In DNC Email Hack (NYP)

Facebook admitted Sunday that it had blocked links to the Wikileaks trove of emails hacked from the Democratic National Committee. In a Twitter post late Saturday, WikiLeaks accused the social media giant of “censorship” and gave its followers an online workaround, saying “try using https://archive.is.” The WikiLeaks allegation followed a firestorm of controversy that erupted earlier this year when former Facebook workers admitted routinely suppressing conservative news. In response to the WikiLeaks charge, another Twitter user, @SwiftOnSecurity, chimed in that “Facebook has an automated system for detecting spam/malicious links, that sometimes have false positives,” which prompted a response from the company’s chief security officer. “It’s been fixed,” Facebook CSO Alex Stamos tweeted.

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“..retribution for monetary donations to Sanders’ campaign..” That would be some $220 million?!

How Can You Join the DNC Class Action Lawsuit? (Heavy)

With news about the WikiLeaks dump showing the Democratic National Committee working to push Hillary Clinton’s nomination rather than remaining neutral, there may be more evidence than ever for a class action lawsuit that has been filed against the Democratic National Committee. But how can you join the fraud lawsuit? There’s still time and we have all the details below. Here’s what you need to know. So far, thousands of Bernie Sanders supporters and other voters have requested to join DNC class action lawsuit, which is being led by Beck & Lee Trial Lawyers, a civil litigation firm based in Miami. The lawsuit is based on DNC internal emails hacked by Guccifer 2.0 which show the DNC was working behind the scenes to boost Clinton.

These emails show that work starting as early as May 2015, a month after Sanders had entered the race. Jared Beck told US Uncut that Article 5 Section 4 of the Democratic Party charter and bylaws requires the chair of the DNC to stay neutral during the primaries: “In the conduct and management of the affairs and procedures of the Democratic National Committee, particularly as they apply to the preparation and conduct of the Presidential nomination process, the Chairperson shall exercise impartiality and evenhandedness as between the Presidential candidates and campaigns. The Chairperson shall be responsible for ensuring that the national officers and staff of the Democratic National Committee maintain impartiality and evenhandedness during the Democratic Party Presidential nominating process.”

[..] Beck said there were six claims to the case. The first is fraud against the DNC and Wasserman Schultz, stating that they broke legally binding agreements by strategizing for Clinton. The second is negligent misrepresentation. The third is deceptive conduct by claiming they were remaining neutral when they were not. The fourth is retribution for monetary donations to Sanders’ campaign. The fifth is that the DNC broke its fiduciary duties during the primaries by not holding a fair process. And the sixth is for negligence, claiming that the DNC did not protect donor information from hackers.

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“..can only carry reports provided by government-controlled print or online media..”

China Slaps Ban on Internet News Reporting as Crackdown Tightens (BBG)

China’s top internet regulator ordered major online companies including Sina and Tencent to stop original news reporting, the latest effort by the government to tighten its grip over the country’s web and information industries. The Cyberspace Administration of China imposed the ban on several major news portals, including Sohu.com and NetEase, Chinese media reported in identically worded articles citing an unidentified official from the agency’s Beijing office. The companies have “seriously violated” internet regulations by carrying plenty of news content obtained through original reporting, causing “huge negative effects,” according to a report that appeared in The Paper on Sunday.

The agency instructed the operators of mobile and online news services to dismantle “current-affairs news” operations on Friday, after earlier calling a halt to such activity at Tencent, according to people familiar with the situation. Like its peers, Asia’s largest internet company had developed a news operation and grown its team. Henceforth, they and other services can only carry reports provided by government-controlled print or online media, the people said, asking not to be identified because the issue is politically sensitive.
The sweeping ban gives authorities near-absolute control over online news and political discourse, in keeping with a broader crackdown on information increasingly distributed over the web and mobile devices. President Xi Jinping has stressed that Chinese media must serve the interests of the ruling Communist Party.

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China, Turkey, good thing there’s the internet.

Turkey Issues Arrest Warrants For 42 Journalists After Coup (AFP)

Turkish authorities have issued arrest warrants for 42 journalists as part of the investigation into the failed coup aimed at toppling President Recep Tayyip Erdogan, television news channels said Monday. Among those targeted by the warrants were prominent journalist Nazli Ilicak who was fired from the pro-government Sabah daily in 2013 for criticising ministers caught up in a corruption scandal, NTV and CNN-Turk said. There was no indication any of the journalists had been detained so far. The government blamed the 2013 corruption scandal on the US-based cleric Fethullah Gulen who it also accuses of being behind the coup.

The Hurriyet daily said that the warrants – the first to target several members of the press in the crackdown over the failed July 15 coup bid – were issued by the office of Istanbul anti-terror prosecutor Irfan Fidan. The prosecutor said an operation was already in progress to detain the journalists but Ilicak was not found at home in Istanbul and could be holidaying on the Aegean. Provincial police there have been alerted, it said. Erdogan’s government had been under fire even before the coup for restricting press freedoms in Turkey, accusations the authorities strongly deny.

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It’s the government, parliament, all the individuals that make up these institutions, that should be held accountable.

Refugee Camp Company In Australia ‘Liable For Crimes Against Humanity’ (G.)

The company that has taken over the management of Australia’s offshore immigration detention regime has been warned by international law experts that its employees could be liable for crimes against humanity. Spanish infrastructure corporation Ferrovial, which is owned by one of the world’s richest families and the major stakeholder in Heathrow airport, has been warned by professors at Stanford Law School that its directors and employees risk prosecution under international law for supplying services to Australia’s camps on Nauru and Manus Island in Papua New Guinea.

“Based on our examination of the facts, it is possible that individual officers at Ferrovial might be exposed to criminal liability for crimes against humanity under the Rome Statute,” said Diala Shamas, a clinical supervising attorney at the International Human Rights and Conflict Resolution Clinic at Stanford Law School. “We have raised our concerns with Ferrovial in a private communication to their officers and directors detailing our findings. We have yet to hear back.” Shamas said her colleagues’ findings should be a warning to any company or country seeking to replicate Australia’s refugee policies elsewhere. “One of the things that we and our partners are concerned about is the timing of all of this,” said Shamas, who also worked in conjunction with the Global Legal Action Network.

[..] The NBIA executive director, Shen Narayanasamy, told the Guardian that Ferrovial’s complicity in the abuses on Nauru and Manus was “incredibly cut-and-dried under international law”. “There is no shadow of a doubt that gross human rights violations are occurring, no shadow of a doubt that Ferrovial is complicit,” she said. “The risk to Ferrovial is essentially the annihilation of its reputation. As a company that relies upon contracting with governments for service provision, they put at risk all of their contracts, and all of the future contracts they hope to win. They put at risk all of their ratings, all of their client relationships – people will assess that they are too controversial, too unethical to have a relationship with, and they could see large institutional investors divesting.”

NBIA links the Pacific Ocean camps to the 22 mainly European banks that fund Ferrovial’s activities, and six European and American investment funds that own shares in the company. Twenty-two mainly European banks – many of them household names – have jointly provided Ferrovial with a €1.25bn (£1bn) loan for general corporate purposes. The banks include Barclays, RBS, Santander, HSBC, Goldman Sachs, BNP Paribas, Citigroup, JP Morgan Chase – as well as Instituto de Crédito Oficial, a bank owned by the Spanish state. The other banks are Banca IMI (Intesa Sanpaolo), Banco Sabadell, Banco Popular Español, Bank of America, Bankinter, BBVA, Crédit Agricole, Deutsche, Mediobanca, Mizuho, Morgan Stanley, Société Générale, and the Royal Bank of Canada.

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