G. G. Bain Police machine gun, New York 1918
“Every speculative bubble rests on some kind of a fairy tale.. And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start.”
• Every Speculative Bubble Rests On Some Kind Of A Fairy Tale (G&M)
Government bonds regarded as among the safest in the developed world have become subject to violent price swings typically associated with more speculative assets. Yields on German 10-year bunds, the benchmark for the euro zone, shot up more than 20% at one point Tuesday, in a selloff described by Goldman Sachs analysts as “vicious.” As recently as last month, the same debt reached a record-low yield of 0.05%. At the other end of the confidence scale, Greek bonds strengthened slightly, reflecting renewed optimism that the embattled leftist government could cobble together a deal with euro-zone finance ministers that would get the bailout cash flowing again into its nearly empty coffers. But deal or no deal, the chances of a Greek default remain high. And despite the efforts of European authorities to contain any fallout and safeguard the euro, a spillover to other battered members of the euro club can’t be ruled out.
“There are a lot of rotten assets out there, and ultimately you have to have a reckoning,” warned Alex Jurshevski at Recovery Partners, who advises governments and corporations on debt restructuring. Although most analysts doubt this would trigger a seismic global financial shock, the risk of contagion is more than trivial, as underscored by the current sovereign-bond rout – with a loss in value of about $450-billion across global markets in just three weeks. “There’s a lot of risk in any of the markets that have been subjected to artificial downward pressure on interest rates,” Mr. Jurshevski said. Worries about sovereign debt have been around since European nations first latched on to this instrument as a relatively low-cost way of meeting the high costs of waging wars and undertaking other expensive projects.
Within four years after the newly minted Bank of England issued such bonds in 1694, government debt ballooned to £16-million from £1.25-million. By the middle of last year, government-related debt around the world totalled $58-trillion (U.S.), a 76% increase since the end of 2007, according to a report by McKinsey Global Institute aptly titled “Debt and (not much) deleveraging.” The ratio of all debt to GDP jumped 17 %age points to a whopping 286%. Since the Great Recession, debt has been expanding faster than the economy in every developed nation on the planet, led by a huge expansion of public-sector borrowing.
“Every speculative bubble rests on some kind of a fairy tale, a story the bubble participants believe in and use as rationalization to buy extremely overvalued stocks or bonds or real estate,” Mr. Vogt argued. “And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start. I think we are very close to this pivotal moment in financial history.”
Commit to crimes and demand BAU in the same breath.
• Banks Seek Waivers Ahead Of Forex Guilty Pleas (Reuters)
Banks want assurances from U.S. regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multibillion-dollar settlements, people familiar with the matter said. In an unprecedented move, the parent companies or main banking units of JPMorgan Chase, Citigroup, RBS, Barclays and UBS are likely to plead guilty to rigging foreign exchange rates to benefit their transactions. The banks are also scrambling to line up exemptions or waivers from the Securities and Exchanges Commission and other federal regulators because criminal pleas trigger consequences such as removing the ability to manage retirement plans or raise capital easily.
In the past, waivers have generally been granted without a hitch. However, the practice has become controversial in the past year, particularly at the SEC, where Democratic Commissioner Kara Stein has criticized the agency for rubber stamping requests and being too soft on repeat offenders. Negotiating some of the waivers among the SEC’s five commissioners could prove challenging because many of these banks have broken criminal or civil laws in the past that triggered the need for waivers. Many of the banks want an SEC waiver to continue operating as “well-known seasoned issuers” so they can sell stocks and debt efficiently, people familiar with the matter said.
Such a designation allows public companies to bypass SEC approval and raise capital “off the shelf” – a process that is speedier and more convenient. Several of the people said another waiver being sought by some banks is the ability to retain a safe harbor that shields them from class action lawsuits when they make forward-looking statements. The banks involved are also seeking waivers that will allow them to continue operating in the mutual fund business, sources said. At least some of the waivers at issue in the forex probe will need to be put to a vote by the SEC’s five commissioners. No date has been set yet..
“..loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books..”
• How China’s Banks Hide Trillions In Credit Risk – Full Frontal (Zero Hedge)
There are several takeaways here. First – and most obvious – is the fact that accurately assessing credit risk in Chna is extraordinarily difficult. What we do know, is that between forced roll-overs, the practice of carrying channel loans as “investments” and “receivables”, inconsistent application of loan classification norms, and the dramatic increase in off balance sheet financing, the ‘real’ ratio of non-performing loans to total loans is likey far higher than the headline number, meaning that as economic growth grinds consistently lower, the country’s lenders could find themselves in deep trouble especially considering the fact that loan loss reserves aren’t even sufficient to cover NPLs + special mention loans, let alone defaults on a portion of the 38% of credit risk carried off the books.
The irony though is that while China clearly has a debt problem (282% of GDP), it’s also embarking on a concerted effort to slash policy rates in an effort to drive down real rates and stimulate the flagging economy, meaning the country is caught between the fallout from a shadow banking boom and the need to keep conditions loose because said boom has now gone bust, dragging credit growth down with it. In other words, the country is trying to deleverage and re-leverage at the same time. A picture perfect example of this is the PBoC’s effort to facilitate a multi-trillion yuan refi program for China’s heavily-indebted local governments. The idea is to swap existing high yield loans (accumulated via shadow banking conduits as localities sought to skirt borrowing limits) for traditional muni bonds that will carry far lower interest rates.
So while the program is designed to help local governments deleverage by cutting hundreds of billions from debt servicing costs, the CNY1 trillion in new LGB issuance (the pilot program is capped at 1 trillion yuan) represents a 150% increase in supply over 2014. Those bonds will be pledged as collateral to the PBoC for cheap cash which, if the central bank has its way, will be lent out to the real economy. So again, deleveraging and re-leveraging at the same time. This is just one of many ‘rock-hard place’ dynamics confronting the country as it marks a difficult transition from a centrally planned economy based on credit and investment to a consumption-driven model characterized by the liberalization of interest and exchange rates.
‘If you see me walking the streets of your town, then you’re probably screwed’.
• Max Keiser: ‘Britain Is The Epicentre Of Financial Fraud’ (Newsweek)
A general election, Benjamin Disraeli once observed, “inflames the passions of every class of the community. Even the poor,” he added, “begin to hope.” In 2015, Max Keiser argues, the power of global markets has rendered election fever something of an anachronism: “Tony Blair personified the shift away from democracy, towards control by bankers.” In modern politics, the prime minister “is really taking orders from finance”. “What if Miliband had won?” “There’s an impending scheme called TTIP (Transatlantic Trade and Investment Partnership, a proposed EU-US agreement) whereby all complaints – against US companies fracking in Britain, say – would go to a global tribunal, moderated by corporations. They don’t care who the prime minister is. “Why should we?” David Cameron’s role, “is being eroded to the point of insignificance”.
Keiser, 55, is a New York University graduate and former high-achieving Wall Street trader whose mischievous wit and renegade instincts have made him one of the most widely viewed broadcasters on the planet. His flagship show, Keiser Report, is carried by Russian state-funded channel RT; for that alone, some fellow-Americans consider him a traitor. But Keiser connects with a predominantly youthful audience otherwise indifferent to economics. “Rage against kleptocrats is building incrementally,” says Keiser, a tireless scourge of JP Morgan, Lehman Brothers and HSBC. “All over the world, people have had enough.” Untroubled by controversy, Keiser conducted the 2011 interview with Roseanne Barr during which she explained that a fitting reward for “banksters” would be to bring back the guillotine.
He once advised Cameron to “go back to Eton and get some of that back-stall shower pleasure”. When we first met, three years ago, just after Keiser moved to London with co-presenter and wife Stacy Herbert, he told me that the modern voter was worse off than a medieval serf. “Back then,” he said, “at least the process of theft was transparent. The barons whacked you over the head, then took all your money. The mode of larceny has changed, that’s all.” What he calls “the Thatcher-Reagan market model” has, he says, “been consigned to the dustbin. There’s no growth. There’s quantitative easing, which causes deflation. The global economy is collapsing.”
The EU, as Keiser likes to describe it, “poses as an elite club; actually it’s a leper colony where everyone’s comparing who has the most fingers left”. “Could France, say, go bankrupt?” “Absolutely. The forces killing Greece are active in France, Italy and Spain.” The EU, he says, “could be viewed as The Fourth Reich. Germany is a superpower. The Greek crisis is great for them – it keeps the euro low and German exports cheap. When countries like France go broke, EU federalisation will proceed through Berlin.”
“So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement..”
• EU Prevents Greece From Implementing Reforms: Varoufakis (EFE)
Greek Finance Minister Yanis Varoufakis said on Thursday that its European partners have prevented the Greek government from legislating many necessary reforms, and stressed that he would only sign an agreement that aims at economic sustainability, Efe news agency reported. So far, none of the many planned reforms have been implemented because the partners first wanted a broad and comprehensive agreement, and believed that any legislation would constitute a unilateral act, Varoufakis argued at a conference organised in the Greek capital by The Economist weekly.
The minister said that from the beginning, creditors rejected proposals to negotiate and regulate in parallel, an action that, in his view, would have helped to create confidence between Greece and its partners. Varufakis stressed that Greece was determined to reform everything in the country, noting that if Greece did not reform, it would sink. However, he stressed that he would not sign any agreement inconsistent with macroeconomics or unsustainable, and accepting conditions that cannot be met, such as had been down in the past. The error of the past, he explained, was that every negotiation looked only for what to do to make the next bailout payment instead of seeking solutions to pursue economic recovery.
Oh boy: “[Draghi] received a rapturous welcome from Christine Lagarde, who introduced him as “maestro” – the nickname once given to Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage.”
• Varoufakis Refuses Any Bailout That Would Send Greece In ‘Death Spiral’ (Guar.)
Greece’s embattled finance minister, Yanis Varoufakis, stepped up his war of words with eurozone policymakers on Thursday, saying he wished his country still had the drachma, and would not sign up to any bailout plan that would send his country into a “death spiral”. With Greece facing a severe cash crisis as it struggles to secure a rescue deal from its creditors, Varoufakis – who has been officially sidelined from the debt negotiations – told a conference in Athens that he would reject any agreement in which “the numbers do not add up”. Greek GDP figures, published on Wednesday, revealed that the economy has already returned to recession. “I wish we had the drachma, I wish we had never entered this monetary union,” Varoufakis said.
“And I think that deep down all member states with the eurozone would agree with that now. Because it was very badly constructed. But once you are in, you don’t get out without a catastrophe”. He also warned that a mooted proposal for a bond swap, to ease Athens’ cash-crunch, was likely to be rejected, because it struck “fear into the soul” of European Central Bank president Mario Draghi. Despite his comments Greece on Thursday offered a concession to its international lenders by pushing ahead with the sale of its biggest port, Piraeus. Greece has asked three firms to submit bids for a majority stake in the port, a senior privatisation official told Reuters, unblocking a major sale of a public asset as creditors demand economic reforms from Athens.
Draghi, who was in Washington on Thursday to deliver a lecture on monetary policy, pointedly failed to mention the ongoing Greek crisis. He received a rapturous welcome from Christine Lagarde, the managing director of the International Monetary Fund, who introduced him as “maestro” – the nickname once given to Federal Reserve chairman Alan Greenspan. “Those who know you understand that you are a man of outstanding insight, fierce determination, and above all, courage. You can call a spade a spade without putting any of your cards on the table,” she said.
“It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government..”
• Greece To Privatize Port, Airports In Concession To Creditors (Bloomberg)
Greece will continue with efforts to privatize the country’s largest port and regional airports as it seeks ways to attract investment for other state assets, Economy Minister George Stathakis said, in a government concession in talks with its creditors. The privatization process that is already underway for the Piraeus Port Authority, operator of Greece’s largest harbor, and for 14 regional airports will continue, Stathakis said today in an interview in Tbilisi, Georgia. “We’re trying to revise some elements of these privatizations in order to improve them and I think we’ll get a sensible agreement for both.” A sale of the Piraeus Port would be a reversal on the part of Greece’s Syriza party-led government, which had earlier pledged to block such moves.
As part of ongoing negotiations to unlock aid to Europe’s most-indebted nation, Greek’s European creditors have asked for more specific policy proposals in areas including labor market deregulation, a pension-system overhaul, sales tax reform and privatization of state-held assets. Still, Stathakis said the government doesn’t plan to sell other assets at the moment.The Piraeus Port sale “is part of the bailout negotiations,” and the fact that the government “agrees to privatize the port is a compromise to creditors,” government spokesman Gabriel Sakellaridis told reporters in Athens Thursday. A venture led by Fraport won the right in November 2014 to use, operate and manage the 14 regional airports after it offered €1.2 billion for 40 years and promised to pay an annual, guaranteed leasing fee of €22.9 million.
Fraport also pledged to make €330 million in investments over the next four years. Greece is talking to Fraport and a decision should be reached “very soon.” It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government such as water companies, the post office or Public Power Corp, Stathakis said. “We’re trying to work on a different model than privatizing to attract capital and investment such as for the country’s railways and other ports” and Greece is looking at “alternative options to 100% privatization.” The sale of land at Hellenikon, site of Athens’s old airport that is Europe’s largest unused tract of urban real estate, “is an issue under discussion,” Stathakis said. A venture led-by Lamda Development last year agreed to buy the property for €915 million while also committing to spend €1.2 billion on infrastructure at the site.
“..such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.”
• Varoufakis Says Debt Swap Fills Draghi’s ‘Soul With Fear’ (Reuters)
Repayment of what Greece owes to the ECB should be pushed into the future, but it is not an option because it fills ECB chief Mario Draghi’s “soul with fear”, Greece’s finance minister said on Thursday. Yanis Varoufakis said Draghi, president of the ECB, cannot risk irritating Germany with such a debt swap because of Berlin’s objection to his bond-buying program. Varoufakis first raised the idea of swapping Greek debt for growth-linked or perpetual bonds when his leftist government came to power earlier this year, But Athens has since dropped the proposal after it got a cool reception from eurozone partners.
The outspoken minister, who has been sidelined in talks with EU and IMF lenders, brought it up again on Thursday, saying €27 billion of bonds owed to the ECB after €6.7 billion worth are repaid in July and August should be pushed back. “What must be done (is that) these €27 billion of bonds that are still held by the ECB should be taken from there and sent overnight to the distant future,” he told parliament. “How could this be done? Through a swap. The idea of a swap between the Greek government and the ECB fills Mr. Draghi’s soul with fear. Because you know that Mr. Draghi is in a big struggle against the Bundesbank, which is fighting against QE. Mr. Weidmann in particular is opposing it.”
Varoufakis was referring to the ECB’s quantitative easing (QE) or bond-buying plan and Bundesbank President Jens Weidmann’s unabashed criticism of it. Varoufakis said the bond-buying plan is “everything for Mr. Draghi” but that “allowing such a swap of our own new bonds with these bonds … would feed Mr. Weidmann with excuses to create problems with the ECB’s QE.” Prime Minister Alexis Tsipras’s government stormed to power in January promising it would end austerity and demand a debt writeoff from lenders to make the country’s debt manageable. It has spoken little about debt relief in recent months as it tries to focus on reaching a deal with lenders on a cash-for-reforms deal, which has proved difficult amid a deadlock on pension and labor issues.
I have the impression Syriza is being very polite on this issue.
• Greek Government Defends Itself Over Central Bank Tensions (Reuters)
Greece’s leftist government on Thursday sought to deflect criticism over tensions with the Bank of Greece, saying it respected the bank’s independence but was free to castigate the governor for actions he took as finance minister. Governor Yannis Stournaras’s relations with the government have come under scrutiny in recent days after a newspaper accused him of undermining Greece’s talks with creditors and government officials openly criticized him on other issues. “The Greek government hasn’t opened any issue with Mr. Stournaras. If issues have surfaced, it wasn’t due to the government’s initiative,” government spokesman Gavriil Sakellaridis told reporters. “The issue of the central bank’s independence, which is fully respected by the Greek government, is above all an issue for the central bank to defend.” [..]
Stournaras was appointed central bank governor last June. Before that he was finance minister in the conservative-led government, where he spearheaded Greece’s return to the bond markets in April 2014 after a four-year exile. But he also drew criticism from anti-bailout groups for implementing harsh spending cuts demanded by the EU and IMF. Energy Minister Panagiotis Lafazanis this week was quoted as saying Stournaras’s role in winding down ATEbank – a small lender that gave loans to farmers – in 2012 was a “scandal.” “The criticism by Mr. Lafazanis towards Mr. Stournaras refers to the period that he was finance minister,” Sakellaridis said. “Obviously, today he is a central banker but there can be and should be political criticism over the period that he was a finance minister.”
Interior Minister Nikos Voutsis this week also questioned why Stournaras – who suggested Greece tap an IMF holding account to repay €750 million to the fund this week and avoid default – had not mentioned the funds earlier. The latest tensions flared when the Efimerida ton Syntakton newspaper reported over the weekend the Bank of Greece in an e-mail to journalists leaked economic data including deposit outflows during Tsipras’s first 100 days in power. Hours later, officials at Tsipras’s office called on the central bank to deny the report, saying the report, if true, “constitutes a blow to the central bank’s independence.” The Bank of Greece has denied that either Stournaras’s office or the bank’s press office sent such an e-mail.
“Now is the time for the people to join the battle..”
• Syriza Highlights ‘Red Lines’ In Negotiations, Calls On People (Kathimerini)
Even as negotiations with Greece’s creditors enter a critical phase, the political secretariat of SYRIZA has indicated that the party will not back down from its so-called red lines, reaffirming pre-election promises to protect pensioners and workers. In a statement issued late on Thursday after a stormy session of senior party cadres, the secretariat said, “the red lines of the government are also red lines of the Greek people, expressing the interests of workers, the self-employed, pensioners, farmers and young people.” Underlining the need for the debt-racked country to return to a path of growth and social justice, the statement referred to “the persistence of creditors on enforcing the memorandum program of the Samaras government” whom it accused of exercising pressure through politics and by restricting liquidity.
The fixation on austerity was “paving the way for the far-right,” it added. The secretariat stressed that the demands of creditors “cannot be accepted, adding that SYRIZA MPs and officials would continue efforts to inform the Greek people and to invite them to join “a mobilization toward the victory of democracy and dignity.” “Now is the time for the people to join the battle,” it said. The statement followed a feverish session during which Deputy Prime Minister Yiannis Dragasakis is said to have come under fire by many SYRIZA officials for making concessions to creditors. Senior SYRIZA MP and Parliament Speaker Zoe Constantopoulou was said to be among those who claimed the government has ceded too much ground from its pre-election pledges.
Excellent longish essay. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.
• Syriza and Greece: Dancing with Austerity (Village.ie)
Dimitrios Tzanakopoulos is Alexis Tsipras’ Chief of Staff. A serious Marxist theorist with an utterly coherent anti-capitalist worldview, he is at the very heart of the new government, directing the affairs of the Prime Minister’s office. He remains “optimistic that there will be a deal” with the partners. “Europe needs to ask if austerity is the future. If not, there must be a solution to these social catastrophes. SYRIZA has promised to find one and this is what we will do”. In many ways the government’s line in negotiations mirrors his Althusserian politics. It views instability as the most important threat for the ruling class and capital accumulation. The election of SYRIZA brought such instability, inserting an unpredictable and politically divergent player into decision-making in Europe.
So, the logic goes, the number one goal of European elites will be to overthrow the government. Not by violent means but by a soft coup, which they are currently attempting to execute by combination of economic strangulation and political humiliation. This instability thesis is a profound challenge to the dominant narrative of capitalism today, which sees it as a system based on risk and reward. But actually it has a long history as a critique, with even moderate figures like Keynes noting instability’s effects on the “animal spirits” of the economy. The prevalence of the word “confidence” in contemporary discourse evidences the degree to which economic and financial players value security. Therefore if they cannot overthrow SYRIZA, and if no capitulation is forthcoming, the team around Alexis Tsipras believe that European elites and the IMF will compromise.
This is because the third option, the last on the table, brings about an explosion of instability: the threat of Grexit from the eurozone. This opinion is shared by Loudovikos Kotsonopoulos, party intellectual and senior advisor in the Economy Ministry. “My prediction is that there will be a compromise. European elites fear a geopolitical realignment. It is very difficult for the European Union to suffer a defeat of such magnitude as a departure of one of its members. Until now the only direction was countries coming into the EU. If this ceased to be the only option it would have significant ramifications. I’m not sure that they can manage such a defeat, and neither are they. But they know as well that we are in trouble if we exit the euro. So it is tense. What are the sides going to give? And how can this be presented as a victory for both?”.
Dimitris Ioannou, writer for party publication Enthemata, is more sceptical about a compromise. “We come with arguments, they reject them, then they say, ‘you’re wasting time’. What does that mean? It’s just saying, agree with us. You’re wasting time between getting elected and doing what we say”.
Peanuts, but nice peanuts.
• Greece Signs EBRD Deal Worth €500 Million A Year (Reuters)
Greece signed an investment deal worth up to €500 million a year with the European Bank for Reconstruction and Development (EBRD) on Thursday, gaining a rare financial endorsement from the region for its attempts to remain solvent.The EBRD and Greece formally signed the five-year agreement at the development bank’s annual meeting in Georgia. It was approved by the bank’s shareholders in March.“It could help the country’s economic recovery significantly,” Greece’s Economy Ministry said in a statement.The ministry added it should boost the funding options of Greek businesses, especially the small and medium-sized ones that have been hit the hardest by the country’s economic crisis.
The EBRD’s decision to start lending in Greece comes after years of debate at the bank about whether a member of the world’s most advanced monetary union fits with the bank’s role of helping countries make the transition to market economies.The head of the bank, Suma Chakrabarti, has said he hopes to have the first Greek projects in place in coming months but admits Athens leaving the euro would complicate things.New EBRD forecasts on Thursday predicted Greece’s economy would stagnate this year and the bank’s staff warned if it left the euro, the situation would be far worse both for itself and the countries around it.
Congress can’t even read it unhindered. But GE, Apple, Nike and Walmart can.
• You Can’t Read The TPP, But These Huge Corporations Can (Intercept)
[..] who can read the text of the TPP? Not you, it’s classified. Even members of Congress can only look at it one section at a time in the Capitol’s basement, without most of their staff or the ability to keep notes. But there’s an exception: if you’re part of one of 28 U.S. government-appointed trade advisory committees providing advice to the U.S. negotiators. The committees with the most access to what’s going on in the negotiations are 16 “Industry Trade Advisory Committees,” whose members include AT&T, General Electric, Apple, Dow Chemical, Nike, Walmart and the American Petroleum Institute. The TPP is an international trade agreement currently being negotiated between the US and 11 other countries, including Japan, Australia, Chile, Singapore and Malaysia.
Among other things, it could could strengthen copyright laws, limit efforts at food safety reform and allow domestic policies to be contested by corporations in an international court. Its impact is expected to be sweeping, yet venues for public input hardly exist. Industry Trade Advisory Committees, or ITACs, are cousins to Federal Advisory Committees like the National Petroleum Council that I wrote about recently. However, ITACs are functionally exempt from many of the transparency rules that generally govern Federal Advisory Committees, and their communications are largely shielded from FOIA in order to protect “third party commercial and/or financial information from disclosure.” And even if for some reason they wanted to tell someone what they’re doing, members must sign non-disclosure agreements so they can’t “compromise” government negotiating goals. Finally, they also escape requirements to balance their industry members with representatives from public interest groups.
Angela needs to be careful.
• Secrets, Betrayals and Merkel’s Risky Silence in the NSA Scandal (Spiegel)
The world of politics abounds with tales of secrets and betrayals, of collective silence and the indiscretion of individuals. Tales of trust and mistrust. The shadowy world of espionage is no different — its secrets and betrayals legendary. But Sigmar Gabriel’s treachery stands out nonetheless. The German vice chancellor recently announced that Angela Merkel had twice assured him that the NSA and Germany’s foreign intelligence agency, the Bundesnachrichtendienst (BND), had never spied on German companies. In fact, in 2008 the Americans began reneging on agreements and going too far – much too far. They spied on aviation giant Airbus, among others. In August 2013, Angela Merkel had her then Chief of Staff Ronald Pofalla announce that the NSA was doing “nothing that damaged German interests.”
In fact, the Chancellery knew better. But Merkel refrained from taking action, opting instead to navigate her way through the situation by saying nothing. Nearly two years ago, after the information leaked by Edward Snowden first surfaced, she said she didn’t really know what it was all about. The message she’s been conveying ever since is that it’s all terribly technical and not all that important, really. The chancellor’s strategy had the desired effect. The public saw her as a victim. The general election in 2013 should have been dominated by the NSA spying scandal, but Merkel emerged unscathed, triumphant. Newspapers like the conservative Frankfurter Allgemeine Zeitung naively wrote that secret services just happen to spy — and, after all, we need intelligence, so what is one to do?
But the intelligence services and the US had overreached. Merkel could have told them exactly how far was too far. She could have backed their activities and at the same time made sure they didn’t get out of hand. In other words, she could have taken charge. When Merkel assumed office in 2005, she took an oath vowing to protect the German people from harm. It’s her job to protect German companies and the public when US secret services act as though Germany is not a sovereign nation. But people in power often fail to notice when the very quality that brought about their rise to the top turns into a weakness, a danger and even their ultimate undoing.
Merkel tends to lead by stealth. She doesn’t care for rhetoric and confrontation and she avoids quick decisions. These might not be bad qualities, but they don’t suit a head of government. Many of her predecessors loved nothing more than decisiveness and debate. It was why they sought power in the first place. But Merkel seems to worry that she will make enemies with plain speaking, so she chooses to remain close-lipped in crises such as this one.
“As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes.”
• Flash Crash Patsy Complained Over 100 Times About Real Market Manipulators (ZH)
Several weeks ago, when the CFTC and DOJ’s laughable attempt to scapegoat the May 2010 flash crash on the actions of a live-in-his-parents-basement UK trader, we explained “Why Sarao Is The Flash Crash Patsy: He Threatened To Expose The “Mass Manipulation Of High Frequency Nerds.” It now turns out that he not only threatened to expose the real market manipulators, but he acctually did it. More than 100 times.
Navinder Singh Sarao, the trader arrested last month on U.S. charges he manipulated futures prices and contributed to the May 2010 “flash crash,” leveled claims of similar misconduct against other traders before his arrest. Mr. Sarao complained to the Chicago Mercantile Exchange, where he traded futures contracts, more than 100 times over the past several years about traders he believed were engaging in manipulative conduct, people familiar with the matter said. His last complaint came just weeks before he was arrested on Justice Department charges, one of the people said.
Previously released documents have shown Mr. Sarao urging exchanges to target high-frequency trading practices he viewed as manipulative, but the frequency and extent of his complaints weren’t known. His complaints underscore the extent to which Mr. Sarao viewed his own trading as a legitimate counter to other high-speed traders. Mr. Sarao appears to have filed an unusually large volume of complaints. “That would be considered a high number,” said Ray Cahnman, a longtime futures trader and chairman of the proprietary trading firm Transmarket. “Most people would break down before they get to 100 because they realize the complaints aren’t going anywhere,” he said.
Sarao’s complaints got him somewhere: straight to prison. And now we know why. As for Sarao’s complaints going anywhere else: fear not, they will – just as soon as the market crashes. Because not only will the next market crash be epic, it will be blamed entirely on the same HFTs that for the past 7 years worked in tandem with the central banks – the source of all capital misallocation decisions – in the creation of the biggest asset bubble of all time.
You may know Syngenta under any one of these names: Imperial Chemical Industries, Novartis, AstraZeneca, Geigy, Sandoz, Ciba.
• Monsanto’s Syngenta Gambit Hinges On Sale Of Seed Businesses (Reuters)
U.S. seeds giant Monsanto is trying to line up buyers for assets worth up to $8 billion to appease competition authorities before making a fresh takeover approach for Swiss Syngenta, possibly within three weeks, industry sources said. Monsanto is expected to tap German chemicals group BASF, an existing joint venture partner, as it seeks a buyer for the U.S. seeds business of Syngenta, which can’t be part of its proposed takeover, sources said. The St. Louis-based group is after Syngenta for its industry-leading crop chemicals, driven by the idea that seeds and pesticides will be better sold and developed together.
Monsanto produces glyphosate, or Roundup, the world’s most widely used broad-spectrum herbicide, and has engineered a range of proprietary crops that resist it. Syngenta closely integrated its seeds and crop chemicals operations in 2011 and Monsanto is expected to unravel some of the main strategic decisions that shaped the group over the last four years – selling off seeds and merging Syngenta’s crop chemicals with Monsanto’s seeds. Global antitrust authorities are expected to demand remedies to reshape the balance of power in the crop protection industry before any combination is allowed.
Syngenta’s management will not want to be seen backing a deal that is then shot down by antitrust watchdogs, two industry sources said. Monsanto commands about a quarter of the $40 billion global seeds market while Syngenta’s own seeds business has a global market share of 8%. The Swiss group’s seeds business could be worth between $6 billion and more than $8 billion, according to analysts. It will have to be sold because authorities are expected to block Monsanto from entrenching its dominance of the U.S. soy and corn seeds market.
“Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition..”
• A Third Of Europe’s Birds Under Threat (Guardian)
One in three European birds is endangered, according to a leaked version of the most comprehensive study of Europe’s wildlife and natural habitats ever produced. The EU State of Nature report, seen by the Guardian, paints a picture of dramatic decline among once common avian species, and also warns that ecosystems are struggling to cope with the impact of human activity. Turtle dove populations have plunged by 90% or more since 1980 and could soon be placed on the International Union for the Conservation of Nature’s (IUCN) ‘red list’ of threatened species. Numbers of skylark and ortolan bunting, a songbird illegally hunted and eaten whole in France, have fallen by around half.
Of 804 natural habitats assessed by the European Environment Agency for the report, 77% were deemed to be in a poor condition, with almost a third having deteriorated since a study in 2006. Just 4% were found to be improving. The wide-ranging technical survey made use of data compiled by 27 EU countries between 2007-2012, and will be released by the European Commission later this year. “The report clearly shows that Europe’s wildlife and natural habitats are in crisis,” said Andreas Baumueller, the head of WWF Europe’s natural resources unit. “Our habitats are slowly dying and our natural capital – reflected by species such as birds and butterflies – is being put under enormous pressure from unsustainable agriculture and land use policies.”
The study finds that intensive farming and changes to natural terrain pose the greatest threat to Europe’s flora and fauna, even though biodiversity loss costs the EU an estimated €450bn per year, or 3% of GDP. Agriculture accounts for two-thirds of EU land use. The destruction or conversion of grasslands, heathlands and scrub to grow more crops – often using pesticides – has decimated many bird populations. Monoculture farming, changes in grazing regimes, and the removal of natural vegetation and landscape have added to the pressure. The report also lists changes to waterways, fragmentation of habitats and human activities such as hunting, trapping, poisoning and poaching as specific threats to birdlife.
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• Your Attention Span Is Now Less Than That Of A Goldfish (OC)
People now have shorter attention spans than goldfish — and our always-on portable devices may be to blame, a new study suggests. The study from Microsoft draws on surveys of more than 2,000 Canadians who played games online in order to determine the impact that pocket-sized devices and the increased availability of digital media and information are having on everyday life. Researchers also did in-lab monitoring, using electroencephalograms (EEGs) to monitor brain activity of 112 people. Among the findings of the 54-page study was that, thanks to our desire to always be connected, people can multi-task like never before. However, our attention spans have fallen from an average of 12 seconds in the year 2000 to just eight seconds today.
A goldfish is believed to have a nine-second attention span on average, the study says. “Canadians with more digital lifestyles (those who consume more media, are multi-screeners, social media enthusiasts, or earlier adopters of technology) struggle to focus in environments where prolonged attention is needed,” reads the study. “While digital lifestyles decrease sustained attention overall, it’s only true in the long-term. Early adopters and heavy social media users front load their attention and have more intermittent bursts of high attention. They’re better at identifying what they want/don’t want to engage with and need less to process and commit things to memory.”
Microsoft’s data is supported by similar findings released by the National Centre for Biotechnology Information and the National Library of Medicine in the U.S. Among the most concerning findings of the study is our declining ability to sustain our focus during repetitive activities: 44% of respondents said they had to concentrate really hard to stay focused on tasks, while 37% said they were unable to make the best use of their time, forcing them to work late evenings and or weekends.
